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Commissioner of Income-tax, Andhra Pradesh, Hyderabad Vs. Bharat Trading Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Ref. No. 75 of 1963
Judge
Reported inAIR1969AP3
ActsIncome Tax Act, 1922 - Sections 3 and 34
AppellantCommissioner of Income-tax, Andhra Pradesh, Hyderabad
RespondentBharat Trading Co.
Appellant AdvocateC. Kondaiah, Standing Counsel
Respondent AdvocateK. Madhava Reddy, Adv.
Excerpt:
direct taxation - assessment - sections 3 and 34 of income-tax act, 1922 - petitioner sought assessment of respondent - assessment of an association of person (respondent) already made on individual basis - assessment in such manner is valid under section 3 of act - assessment made on individual basis cannot be reopened latter to reassess on ground of association of persons - held, assessment good in eyes of law. - - - whether on the facts and in the circumstances of the case, the assessment made on the association of persons as such, is bad in law' six persons constituted themselves into an association of persons for carrying on business in turmeric.p. jaganmohan reddy, c.j.1. the income-tax appellate tribunal has , at the instance of the commissioner of income-tax, referred under sec. 66(1) of the indian income-tax act, 1922, the following questions viz.-'whether on the facts and in the circumstances of the case, the assessment made on the association of persons as such, is bad in law'six persons constituted themselves into an association of persons for carrying on business in turmeric. for the assessment year 1950-51, for which the previous year is diwali year ended on 21-10-49 an assessment was made under sec. 23 (3) read with sec. 34 of the act on 31-1-56 on the association of persons. but it turned out that the notice was wrongly issued and, in fact, the income-tax officer intended to reopen the assessment for the year 1950-51......
Judgment:

P. Jaganmohan Reddy, C.J.

1. The Income-tax Appellate Tribunal has , at the instance of the Commissioner of Income-tax, referred under Sec. 66(1) of the Indian Income-tax Act, 1922, the following questions viz.-

'Whether on the facts and in the circumstances of the case, the assessment made on the association of persons as such, is bad in law'

Six persons constituted themselves into an association of persons for carrying on business in turmeric. For the assessment year 1950-51, for which the previous year is Diwali year ended on 21-10-49 an assessment was made under Sec. 23 (3) read with Sec. 34 of the Act on 31-1-56 on the association of persons. But it turned out that the notice was wrongly issued and, in fact, the Income-tax Officer intended to reopen the assessment for the year 1950-51. The Appellate Assistant Commissioner set aside the assessment on 31-10-56 and there after proper notices were issued. It was contended before the Income-tax Officer that he had no jurisdiction to reopen the assessment and then assess the association of persons when he had in fact assessed five out of six persons individually in respect of the share of each them earned by the association of persons. This contention was negatived by the Income-tax Officer. In appeal, the Appellate Assistant Commissioner upheld that contention on the ground that once individuals were assessed, the option must be deemed to have been exercised by the Income-tax Officer, and thereafter the association of persons cannot be assessed. The Tribunal confirmed the view taken by the Appellate Assistant Commissioner.

2. It was argued before the Tribunal that the Appellate Assistant Commissioner was wrong in so holding because it was not shown by the assessee that the Income-tax Officer had consciously exercised the option to assess the individuals instead of the association of persons. The Tribunal has stated that there was no material placed before it from which it could come to that conclusion. There is absolutely no doubt that under Sec. 3 of the said Act, the Income tax Officer could either assess the income of an association of person. If the Income-tax Officer assessed the individuals, he could not later claim to assess the association of persons, but it may be that in some cases, he would not be aware that there was an association of persons consisting of several individuals because those individuals may have been assessed by different income-tax Officers and at different places. In the circumstances, it is for the Income-tax Officer who proposes to reopen the assessment to show that the previous Income-tax Officers did not consciously exercise the option with the knowledge that an association of persons consisting of these individuals existed. That there is no such material on record cannot be gainsaid. Neither before the Appellate Assistant Commissioner nor before the Tribunal did the Department place any evidence to show that the Income-tax Officers who had assessed the individuals constituted an association of persons. The Tribunal has stated in its order that there was no material before them to show what was the true position. On identical facts, their Lordships of the Supreme Court in Commissioner of Income-tax, Bombay South v. Murlidhar Jhawar and Purna Ginning and Pressing Factory, : [1966]60ITR95(SC) , negatived an attempt made by the Income-tax Officer to reopen the assessment. In that case, their Lordships observed that the Income-tax Officer who made the assessment under challenge did not state that when the first assessment was made, the facts which had a bearing on the true relationship between the three parties were not placed, and it was not even argued before the Appellate Assistant Commissioner and the Tribunal that these facts were not placed before the Income-tax Officer. In that case, the Tribunal held, relying upon J. C. Thakkar v. Commissioner of Income-tax, : [1955]27ITR658(Bom) and Joti Prasad Agarwal v. Income-tax Officer, B. Ward, Mathura, : [1959]37ITR107(All) , that once the option is exercised for assessing the individual partner and including his share of profits in the firm in his assessment, it is not open to the department to assess the same income as income of the unregistered firm. The reasoning and the observations of their Lordships of the Supreme Court in the case cited above equally apply to the facts and circumstances of this case.

3. In this view, we answer the question in the affirmative and in favour of the assessee with costs. Advocate's fee Rs. 250. assessee with costs, Advocate's fee Rs. 250.

4. Answered accordingly.


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