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Gora Chand Sen Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 138 of 1981
Judge
Reported in[1985]154ITR435(Cal)
ActsIncome Tax Act, 1961 - Section 26
AppellantGora Chand Sen
RespondentCommissioner of Income-tax
Appellant AdvocateSukumar Bhattacharjee and ;R.N. Saha, Advs.
Respondent AdvocateS.K. Mitra and ;R.C. Prosad, Advs.
Cases ReferredEaswaran v. Sixth
Excerpt:
- .....the assessee and that the income-tax officer was justified in law to have taken half share of the property income in the hands of the assessee ?'2. the question relates to the assessment years 1970-71 and 1972-73. the property in question situated at alipore was jointly owned by shri l. c. sen and sri g. c. sen. it is not in dispute that they owned the property in equal shares, i. e., 50% each. the shares are thus definite and ascertainable under section 26 of the i.t. act. the ito, however, assessed the income from this property in the status of an association of persons. in normal course they paid the taxes for the years as and when the demands were raised. subsequently while dealing with the individual assessment of the two sens, the ito had taken into account and included the share.....
Judgment:

Satish Chandra C.J.

1. The Tribunal has submitted the statement of the case and has referred the following question of law to this court for our opinion :

'Whether, on the facts and in the circumstances of the case, the Tri-was right in holding that Section 26 of the Income-tax Act, 1961, did apply to the facts of the case of the assessee and that the Income-tax Officer was justified in law to have taken half share of the property income in the hands of the assessee ?'

2. The question relates to the assessment years 1970-71 and 1972-73. The property in question situated at Alipore was jointly owned by Shri L. C. Sen and Sri G. C. Sen. It is not in dispute that they owned the property in equal shares, i. e., 50% each. The shares are thus definite and ascertainable under Section 26 of the I.T. Act. The ITO, however, assessed the income from this property in the status of an association of persons. In normal course they paid the taxes for the years as and when the demands were raised. Subsequently while dealing with the individual assessment of the two Sens, the ITO had taken into account and included the share of their income from the aforesaid property. The assessee felt aggrieved and went up in appeal. The AAC held that for the years in question, 1970-71 and 1972-73, since the ITO had exercised his option and made the assessment in the status of an association of persons, he could not change his option subsequently. Hence, for these two years, the ITO should have included the income from the property in question in their individual assessment only for rate purposes. The matter went up to the Tribunal. The Tribunal held that since the shares were definite and ascertainable, Section 26 was attracted and the income from such property could not be assessed in the status of an association of persons. It could be assessed only in the status of an individual. The Tribunal held that the AAC erred in directing that the income should be assessed in the individual's case only for rate purposes. The appeal was allowed and the order of the ITO was restored. It was, however, observed that in order to avoid double assessment, the order passed in the status of an association of persons be set aside.

3. It has not been disputed that the property in dispute was owned by the two Sens in equal shares. Therefore, the shares were definite and ascertainable within the meaning of Section 26 of the I.T. Act. Section 26 provides that 'Where property consisting of buildings or buildings and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with Sections 22 to 25 shall be included in his total income'. This statutory provision is mandatory. It positively prohibits assessment in the status of an association of persons and directs that the share of such person in the income from the property shall be included in his individual total income. In this view, the ITO in reality had no option in the matter. He had no jurisdiction to assess such persons in the status of an association of persons. He could assess them only in their individual status as directed by Section 26. The proceedings for assessment undertaken in the status of an association of persons were illegal and without jurisdiction.

4. Learned counsel for the assessee has invited our attention to the case of Easwaran v. Sixth ITO : [1969]72ITR263(Mad) , CIT v. Dhandayutham : [1978]113ITR602(Mad) and Ch. Atchaiah v.. ITO : [1979]116ITR675(AP) . These cases are distinguishable. None of them considered the effect of Section 26 of the I.T. Act. They proceeded on the basis that the ITO has option to assess the income either in the hands of an individual or in the hands of a firm or a HUF or association of persons. In that event, they laid down how the options are to be exercised and the consequence of the exercise thereof.

5. In the present case, the mandatory provisions of Section 26 have to be considered. They leave no choice or option to the ITO. Hence, these cases are not applicable. We may incidentally mention that the assessee had himself raised the objection that he should have been assessed in the status of an individual and not in the status of an association of persons.

6. We, therefore, answer the question of law referred to us in the affirmative, in favour of the Department and against the assessee. There will, however, be no order as to costs.

7. To avoid double taxation of the same income, we direct that the Commissioner of Income-tax shall forthwith cancel the assessments made in respect of the income now in dispute in the status of an association of persons and make adjustment or refund of the tax paid thereunder.

Suhas Chandra Sen, J.

8. I agree.


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