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TMI Blog1965 (12) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1922, hereinafter called the Act, to the respondent as the karta of a Hindu undivided family for the assessment year 1955-56. The facts may be briefly stated. Up to the assessment year 1952-53, the respondent, Bachulal Kapoor, was assessed to income-tax as karta of the Hindu undivided family consisting of himself, his wife and a minor son. In a suit filed by the wife and the son of Bachulal Kapoor against him, a compromise was effected between the parties and on October 20, 1952, a compromise decree was passed. On January 18, 1954, the Income-tax Officer, A-Ward, Lucknow, passed an order accepting the claim under section 25A by the respondent that the family was partitioned. For the assessment years 1953-54, 1954-55 and 1955-56, the members of the family were assessed as individuals. On March 24, 1960, the Income-tax Officer issued a notice under section 34 of the Act to the respondent as the karta of the Hindu undivided family requiring him to file a return within the prescribed time of his world income on the ground that the respondent's income chargeable to tax for the assessment year 1955-56 had escaped assessment and also was under-assessed. Thereupon, the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice thereunder. The argument of Mr. C.P. Lal, learned counsel for the respondent, may be put thus: the Income-tax Officer had assessed the same income assessable for the year 1955-56 in the hands of the individual members of the family and the assessments made on them had become final. Having elected to assess the individuals as separate entities, the Income-tax Officer had no jurisdiction under the Act to assess the same income in the hands of a separate assessable entity, namely, the Hindu undivided family. He also relied upon the principle of avoidance of double taxation alleged to underlie the scheme of the Act in respect of the same income. On the question argued before us, the following provisions of the Act will be relevant: Section 3: Where any Central Act enacts that the income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay any tax in respect of any sum which he receives as a member of that family out of the income of that family. If the said Hindu undivided family has escaped assessment for any year, the Income- tax Officer, subject to the conditions laid down in section 34(1) of the Act, may issue a notice thereunder calling upon the said Hindu undivided family to submit a return of its income for that year and proceed to assess it in terms thereof. It is manifest from a combined reading of the said provisions that the Income-tax Officer can issue a notice to a Hindu undivided family under section 34 of the Act on the ground that it has escaped assessment. The impugned notice under section 34(1) of the Act issued to the respondent reads thus: Whereas I have reason to believe that your income assessable to income-tax for the assessment year 1955-56 has (a) escaped assessment, (b) been under-assessed, I, therefore, propose to reassess the said income that has (a) escaped assessment, (b) been under-assessed. I hereby require you to deliver to me not later than 30th March, 1960, or within 35 days of the receipt of this notice, a return in the attached form of your total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the option to do one or other of the two alternatives open to an officer assumes knowledge on his part of the existence of two alternatives. If the case of the revenue be true, the Income-tax Officer at the time he assessed the individual members of the family had no knowledge that a united joint family existed; he presumably proceeded on the basis that the said family had really ceased to exist under the terms of the compromise decree. This is, therefore, not a case of election between two alternative units of assessment, but an attempt to bring to tax the income of an assessable entity which had escaped assessment. That apart, under section 3 of the Act, in the matter of assessment, there is no question of any election between a Hindu undivided family and a member thereof in respect of the income of the family. If a Hindu undivided family exists, under section 3 of the Act the Income-tax Officer has to assess it in respect of its income. Indeed, under section 14(1) of the Act, any part of the income received by its members cannot be assessed over again. While section 3 confers an option on the Income-tax Officer to assess either the association of persons or the members of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Incometax [1951] 20 I.T.R. 540 ruled that the provisions of section 34 of the Income-tax Act could not be rendered inapplicable merely because income which was alleged to have escaped from the assessment of a particular person was included in the income of another person. The Allahabad High Court in Jothi Prasad Agarwal v. Income-tax Officer, B-Ward, Mathura [1959] 37 I.T.R. 107, 111 held that, once the income of an association of members was charged to income-tax in the hands of the members individually and the assessments of the members remained valid assessments, there could be no fresh assessment of the income in the hands of the association. That conclusion was arrived at on a construction of section 3 of the Act. Therein, Bhargava J., speaking for the court, observed: ...the income, which was earned by the association, was assessed and charged to tax in the hands of the members of the association individually under one of the alternatives provided under section 3 of the Income-tax Act...Section 3 of the Act, which is the main charging section, only talks of charging the income of certain persons and does not talk of income-tax being charged on persons. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against another person, the Allahabad High Court held that action under section 34 of the Act could be initiated against him in respect of the same income previously taxed on the ground that it had escaped assessment in his hands. These cases, except Jothi Prasad Agarwal's case [1959] 37 I.T.R. 107 accept the principle that the Income-tax Officer has jurisdiction to initiate proceedings under section 34 of the Act, if the conditions laid down therein are complied with, against a person on the ground that the income, though it has been assessed in the hands of another, has escaped assessment in his hands. They do not deal with the connected question, how the adjustments will have to be made to avoid double taxation of the same income. The only question that arises at the time the Income-tax Officer proposes to take proceedings under section 34 of the Act is, whether the income has escaped assessment or has been under-assessed in the hands of the person against whom the said proceedings are initiated. At that stage, the question of resolving the conflict between the proposed assessment and an earlier assessment made on a wrong person does not arise. Some argument was advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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