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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 ..... ber 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 respondent moved the High Court at Allahabad under article 226 of the Constitution for quashing the said notice on two grounds, namely, (i) the income in respect of which the return had been called for had already been assessed in the hands of the individual members of the family and, therefore, the said income could not be assessed again as that of the Hindu undivided family; and (ii) the Hindu undivided family had ceased to exist, that the partition of the family was recognised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or the members of the association individually. Section 14: (1) The tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family where such sum has been paid out of the income of the family..... Section 2. (9): person includes a Hindu undivided family and a local authority. Section 22. (1): The Income-tax Officer shall, on or before the 1st day of May in each year, give notice, by publication in the press and by publicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income and total world income assessable for the said year ending 31st March 1956." In the counter-affidavit filed by the Income-tax Officer in the High Court, it was stated that he had reason to believe, in consequence of information in his possession, that income, profits or gains chargeable to income- tax had escaped assessment. His information was that, notwithstanding the compromise decree, the members of the family were living together, had joint mess and the business was run by the respondent. In short, the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 association individually, no such option is conferred on him thereunder in the case of a Hindu undivided family, as its existence excludes the liability of its members in respect of the income of the former received by the latter. It was then forcibly brought to our notice that the said view would be subversive of the doctrine of "double taxation". It was said that as the orders of assessment on the individual members of the said family had become final, if the Income-tax Officer was permitted to assess the Hindu undivided fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments 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. This implies that the charge is to be levied on an income only once. Whether it is to be charged in the hands of one person or another can certainly be determined under section 3 and other relevant provisions of the Income-tax Act. Section 3 is clear enough to indicate that the same income cannot be charged repeatedly in the hands of different persons or in the hands of the same person." In that case there was no question of suppression of the fact of the existence of an association of persons when the members were individually assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed 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 advanced on the question of the validity of what are called "protective or precautional assessments". Reference was made to Jagannath Hanumanbux v. Income-tax Officer [1957] 31 I.T.R. 603 and to the decision of this court in Lalji Haridas v. Income-tax Officer [1961] 43 I.T.R. 387. (S.C.). In the former, the validity of protective assessment was approved; and in the latter, this court, though the question of assessment was raised, did not express its final opinion thereon. This court held that when there was a doubt as to which person among two was liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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