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TMI Blog1979 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited. Smt. J.H., Kum. J.J., and the two minors entitled to equal shares in the income from M/s. J.E. as is brought out in the various assessment orders, M/s. J.E., took on lease a plot of land and then built storage tanks and godowns and let them out to various parties. No attempt was made apparently to assess M/s. J.E. as one unit of assessment for the asst. yrs. 1967-68, 1968-69, 1969-70 and 1970-71. We find, however, that some of the members of this group were assessed individually on their share of income from the said estate for the asst. yrs. 1967-68 to 1970-71. For example Smt. J.H., was assessed for the asst. yr. 1969-70 on 28th Dec., 1969. Similarly, J.J., was assessed for the asst. yr. 1967-68 on 21st Dec., 1971 and for the asst. yr. 1969-70 on 21st Dec., 1971. For the asst. yr. 1970-71 P.J., was assessed on 18th March, 1972. V.J., was assessed for the asst. yr. 1969-70 on 30th March, 1972 and for asst. yr. 1970-71 on 23rd March, 1974. These details are just given in order to highlight the departmental inaction or its failure to assess M/s. J.E., as one unit of assessment for these years. 3. For the asst. yr. 1973-74, the assessee filed a voluntary return under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment when the same income was already assessed in the hands of the members of the association for these years as well. It was then contended that the AAC was not correct in not accepting the contention that the status of the assessee was that of tenants in common and not that of a firm. The assessee also denied liability to be assessed to interest under s. 139 and under s. 217. The issues relating to various disallowances were given up before us in the assessee's appeals. 7. The first point that Shri Chunilal Karsondas assiduously canvassed before us was that the assessments were made in the case of the members of M/s. J.E., before the assessments were made on M/s. J.E., itself as one unit of assessment for the years under appeal. For this purpose, he relied upon the decisions in the following cases to say that the exercise of the option made by the ITO under s. 4 with regard to the assessments of the members of M/s. J.E., would make the subsequent assessments made on M/s. J.E., invalid: 1. R. Dhandayutham Others(1), 2. Blue Mountain Engg. Corpn.(2), 3. Pure Nitchitpur Colliery's Co.(3), 4. Ch. Atchaiah(4), 5. Ramanlal Madanlal(5), 6. Murlidhar Jhawar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treat the assessee's income as business income. It was admitted that some attempts were made by the members to draw up a partnership deed and file even belated claims for registration. However, it was pointed out that the main stand of the assessee was that it was not a firm but was only an AOP in which the various members had defined shares. He submitted that under s. 26(2) of the IT Act, 1961, the members of the association were liable to be assessed in respect of their respective shares separately and that the entire income from the Estate was 'income from property'. Lastly, he attacked the assessments as invalid as calculation of tax was not found in the assessment orders themselves. For this purpose, he relied on the Jammu Kashmir High Court decision (110 ITR 217). 9. On the other hand, Shri N.K. Vohra, the learned Departmental Representative, contended that though the assessments on the members of the association had been made prior to the assessments raised on the association, the subsequent assessments made on the association cannot be held to be illegal in view of the following decisions:- 1. In the case of Mahendra Kumar Agarwalla (10), 2. In the case of Jupite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or they might be assessed collectively in the status of an unregistered firm. The ITO could not, however, seek to assess the same income twice, one in the hands of the partners and later on in the hands of the unregistered firm. This decision was given after constructing the provisions of s. 3 of the Indian IT Act, 1922. In doing so, the Supreme Court specifically referred to its earlier decision in the case of Kanpur Coal Syndicate(13), wherein it was held that s. 3 of the Old Act expressly treated as association of persons and the individual members of an association as two distinct and different assessable entitles, on the terms of s. 3 of the Old Act, the tax can be levied on either of the said two entities according to the provisions of the Act. The principle was extended to the case of partners of an unregistered firm in Murlidhar Jhawar's(6) case by the Supreme Court. 12. When the IT Act, 1961 came into force, s. 3 of the Old Act was recast and appeared as s. 4 as below: s.3 of the Indian IT Act, 1922. "3. Charge of Income-tax. where any Central Act enacts that income-tax shall be charged for any year at any rate or income rates tax at that rate or those rates shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to have an option to assess either the unregistered firm or the individual members thereof and that the assessment of a firm, after a partner has been assessed on his share of income from the firm, would not be legal. A decision to the same effect was delivered by the Pata High Court in the case of Pure Nichitpur Colliery Co.(3). Here also, it was held that the ratio of the Supreme Court decision in Murlidhar Jhawar's(6) case continued to be applicable to the New Act and that once an option was exercised by the ITO of taxing the share income in the hands of the partners, he had no jurisdiction to tax the total income of the unregistered firm in its hands. No doubt, another Bench of the Patna High Court delivered a contrary decision four days later but obviously the attention of that Bench of the High Court was not drawn to the decision in the case of Pure Nichitpur Colliery Co. (3). 14. The Calcutta High Court has recently taken the same view. It has referred to the Andhra Pradesh High Court decision (116 ITR 675) and agreed with the Madras, Patna (101 ITR 79) and Andhra Pradesh views in this matter. We may also refer to the observations of the Supreme Court in the case of Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars. The same has not been done. The question of validity of notices issued under s. 148 for the asst. yrs. 1971-72 and 1972-73 is again linked up with the proper status under which the assessee is assessable. 18. As regards the head of income under which the rental receipts from the godowns and the oil storage tanks are assessable, we again find that the matter has not been approached from a proper angle. It is now settled law that the owner of a property is liable to be assessed under the head 'income from property' even if there are indicia of business or trade about the manner of earning the income from that property. Reference may be made to the Supreme Court decision (42 ITR 49). In the case of Pandyan Bank Ltd (14), it was held by the Madras High Court that income from letting out the business premises can only be treated under the head "income from property " though the act of letting out was regarded as a part of the business of the assessee. In the case of Rampur Industries Lts (15), the Allahabad High Court held that the rental income from unused godowns was assessable as "income from property". Income from property is a specific head of charge and rents or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do find some substance in the arguments of the Departmental Representative that the AAC reduced the income to Rs. 10,000 without sufficient grounds in support of his view. As pointed out by the Departmental Representative the net receipts for the asst. yr. 1971-72 exceeded Rs. 56,000 and those for the asst. yr. 1973-74 exceeded Rs. 1,00,000. The AAC should have found some more materials for basing his estimate on as low a figure as Rs. 10,000 for the asst. yr. 1972-73. The AAC, therefore, decided this issue rather abruptly. As regards the question of interest under s. 139 and 217, the issue is appealable since the assessee was denying its liability to be assessed to interest (108 ITR 961). Since we have decided to cancel the assessments, naturally no interest would be payable either under s. 139 or under s. 217. We would have considered it proper to send the matter back on some issues to the AAC. However, as stated above we have already taken a decision holding the assessments in question to be illegal. It would not, therefore, be necessary to send the matter back now. We have considered it necessary to give out findings on the various issues raised by the assessee and the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X
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