Sabyasachi Mukharji, J.
1. This reference relates to the assessment of a partnership firm of M/s. Ganpatrai Sagarmal for the assessment year 1958-59, for which the previous year was Diwali year 2013-14 Diwali. The assessed-firm was originally started by two partners, viz., Sagarmal and Rameshwarlal, who carried on business under a deed of partnership dated 10th January, 1946. By a deed dated 6th November, 1949, the two partners transferred their firm's business to an entity consisting of themselves and others. Thereafter the business was carried on by them and others, referred to as donees or trustees. Sagarmal had six annas share in the said business. He died on the 15th April, 1955, leaving a will dated 29th November, 1954. After his death, a fresh document of partnership was executed on 13th January, 1956, by Rameshwarlal, his mother, Smt. Mahadevi, and his wife, Smt. Gayatri Devi, representing their minor son, Kanhaiyalal. For the assessment year under reference, an assessment was originally made on an association of persons. That assessment order, a copy of which was handed Over to us and which is not disputed by the Revenue, described the status of the assessee as an association of persons and the name of the assessee as follows :
'Rameshwarlal Lohariwalla & Others,Trustees to the Estate of Ganpatrai Sagarmal,12, Armenian Street, Calcutta.'
2. The ITO, who passed the said assessment order on the 11th December, 1959, observed that the profits of that year had been divided amongst the settlors and beneficiaries and no profits had been allocated to the charity fund. Thereafter, he computed the total income at Rs. 1,11,160 and observed, inter alia, as follows :
'No demand is raised in this case as the beneficiaries will be assessed directly under Section 41(2) of the I.T. Act. The allocation of the total income amongst the beneficiaries is made as under :
NameBusinessInterestDividend NetDividend Gross
Rs.Rs.Rs.Rs.1.RameshwarlalLohariwalla25,24420,4564,9997,1772.Smt. Mahadevi12,6227,1312,4993,5883.Kanaiyalal Lohariwalla2,62218,7322,4993,588
3. It appears that thereafter there was a dispute in connection with some other years of assessment which came up for consideration before this court and the decision is reported in the case of Ganpatrai Sagarmal (Trustees) for Charity Fund v. CIT : 47ITR625(Cal) , where, after setting out the relevant clauses of the alleged trust deed, the Division Bench of this court observed that in order to constitute a gift to charity the ownership of the property must be transferred to the trustees unless the settlor alone was the trustee. The Division Bench found in that case that the settlors were not the sole trustees and there was no transfer of property. The document, according to the Division Bench, only showed that at some date in the past, the two partners had agreed that the entire properties of the business should be transferred to themselves and others as trustees but the deed did not record that such transfer was ever effectuated. The Division Bench went on to observe that it was not enough under Section 4(3)(i) of the Indian I.T. Act, 1922, that the income from the property was held for charitable or religious purposes but the property itself should be held under a trust or other similar obligation for religious or charitable purposes. It was further observed that one-fourth of the profits of the business of the firm was not exempt from tax under Section 4(3)(i) and as the property remained the property of the settlor, Section 16(1)(c) of the 1922 Act applied and the entire income from the business was chargeable in their hands, that by the document the partners had merely indicated their intention to set apart one-fourth of the income for charitable purposes and that the proviso to Section 16(1)(c) did not apply as there was no provision for retransfer of income directly or indirectly by the settlors. Following the said decision, it was held that the assessment on that trust or an assessment on the beneficiaries, qua beneficiaries under Section 41(2) of the Indian I.T. Act, 1922, could no longer subsist. The ITO, therefore, under Section 148 of the I.T. Act, 1961, took steps for reopening the assessment on the assessee-firm for the assessment year 1958-59. By his order passed under Section 143(3) of the Act read with Section 148 of the Act, he made an assessment on the assessee in the status of an 'unregistered firm' on a total income of Rs. 1,10,160. The ITO observed in his order, inter alia, as follows :
'There is no new deed of partnership executed after the death of Sagarmal on the 15th April, 1955, and there is no application filed to register any such deed. The status is, therefore, taken as U.R.F.'
4. The assessee went up in appeal before the AAC and contended, firstly, that the initiation of the proceedings was bad in law and void ab initio and as such the assessment should be cancelled. Secondly, it was urged that while the original assessments were not yet cancelled or set aside by any competent authority, the framing of assessments of the income from the same source only in a different status under Section 147 and computing the total income at the same figure was merely a question of duplication which was not at all admissible or allowable under law. It was then contended that when an amount of income was assessed in the hands of three persons separately, the mere fact that the said income should be assessed in the hands of a firm was neither any reason nor escapement of income within the meaning of Section 147 of I.T. Act, 1961, and, as such the proceedings under the said section were void and illegal. It was, however, urged that after fully and carefully applying his mind to the facts and circumstances of the case, the ITO had found that the material income belonged to a trust and it would not be a case of escapement of income within the meaning of Section 147 of the I.T. Act, 1961, even if the ITO later on formed the opinion that the said income belonged to the firm. Lastly, it was urged that the business styled as Ganpatrai Sagarmal having been found by the Revenue to be belonging to a trust and such finding having been given effect to by assessing the income of the said business in the hands of the trust and such assessment having become final and conclusive, and, which assessment was subsisting till then, the ITO should not be heard to say that the said business and the said income belonged to the firm.
5. The AAC repelled this contention. He stated in his order, inter alia, as follows :
'From the facts of the case enumerated above, it is but evident that the so-called trust was not a valid one and there was never any transfer of property from the firm to the alleged trust. This fact has, in effect, come to light only after the judgment of the hon'ble High Court was available on 25-1-62. There being no valid trust, there could be no beneficiary, no charity, no settlor or donor and consequently the fate of all assessments made on such non-existent persons can be easily guessed and so also the fate of the demands raised on person on the basis of such assessments. After the judgment of the hon'ble court, the position is very clear. It is very clear that the firm, M/s. Ganpatrai Sagarmal, continued to exist as usual, the income of M/s. Ganpatrai Sagarmal escaped assessment for failure of the firm to file its return of income for all these years and proceedings under Section 148 were called for in this case. The action of the Income-tax Officer in initiating proceedings under Section 147(b) was, therefore, quite valid, lawful, just and most reasonable. I, therefore, uphold the action of the ITO in this respect for all the years under appeal.'
6. The assessee, thereafter, went up in further appeal before the Appellate Tribunal and contended, inter alia, that the original assessment had been made on the basis of merely computing the income in the hands of the association of persons for the purpose of being worked out in the hands of the respective persons, who were entitled to the income beneficially. Attention of the Tribunal was drawn to Section 41 of the Act. The Tribunal, after considering the rival contentions, observed, inter alia, as follows :
'As the property remained with the donors, they were free to constitute themselves into a firm which they have done under the document dated 13-1-56. There was thus a firm which was in existence for the year under consideration. Even though the status is taken as association of persons originally, still in view of the clarification of the correct legal position obtained from the High Court's judgment and taking it along with the partnership deed dated 13-1-56, the Income-tax Officer could reasonably believe that income had escaped assessment in the hands of the entity as such. It was, therefore, possible for him to take the High Court's judgment as constituting information and to proceed accordingly to invoke Section 147(b). We are thus satisfied that there was information which came to the possession of the Income-tax Officer after the original assessment. That information showed that the original assessment was not the proper one and that income could be assessed directly in the hands of the firm as such. It is clear that as a result of the firm being taken as taxable, there is escapement of assessment as the taxable entity, being the firm, tax would have to be collected from it as its income had escaped assessment. As there is no such collection of tax from it, the Income-tax Officer could, in other words, take the view that income had escaped assessment. We would, therefore, uphold the application of Section 147(b).
On behalf of the assessee it was pointed out that Section 147(b) cannot be applied because the original assessment had been made with reference to the same income on the association of persons and the ITO's attempt is merely to change the status to get a different tax effect. We are not persuaded by that submission. The way in which the ITO looked at the facts was found to be wrong after the High Court's judgment read with the partnership deed dated 13-1-1956. Thus, as far as this year was concerned, there was a firm in existence and the firm had not been taxed. He could, therefore, proceed against the firm as such.
It was pointed out for the assessee that the original assessment had been worked out in the hands of the respective beneficiaries and that the ITO having exercised his choice, cannot now go back on it. It is true that an option is available to the ITO, to tax the beneficiaries or the trustees, under Section 41. In order that this provision should apply, there must be a trust. As a result of the High Court's judgment it is clear that there was no trust. Therefore, there was no question of any choice being exercised by the ITO under Section 41. He did not tax any partner as such on the footing that he had a choice between taxing a firm and the partners.'
7. Under these circumstances, there was an application before the Tribunal for reference under Section 256(1) of the I.T. Act, 1961. The Tribunal having declined to refer any question of law, as directed by this court under Section 256(2) of the Act, the following question has been referred to this court :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the reassessment has been made as per law in the status of an U.R.F. while once the respective members have been assessed and also taxed directly for their respective incomes ?'
8. Before us, it was first contended, with reference to the deed dated 13th January, 1956, that the trust was considered to be invalid on the ground that there was no valid trust. It was submitted that the donors were capable of constituting a trust by transferring the property and, in fact, by the document dated 13th January, 1956, they have done so. We are, however, unable to accept this contention urged on behalf of the assessee. We are unable to accept this contention firstly because from the order of the Income-tax Appellate Tribunal, it appears to us that this contention in this form had not been urged before the Tribunal and the Tribunal had no occasion to consider this question. Secondly, it appears that the parties have, in subsequent years, proceeded on the basis of a firm. That would be apparent from the decision in the case of Rameshwarlal Lohariwala v. CIT : 126ITR209(Cal) . There, we were concerned with whether the present deed, which was described as a partnership deed, showed that the minors should be legally liable for the losses and as such whether Section 64(ii) of the I.T. Act, 1961, was attracted or not. There, both the Revenue as well as the assessee proceeded that S and R were two partners of a firm each of them having a six annas share and the remaining one-fourth share was allotted to charity. S made a will on 29th November, 1954, which provided, inter alia, that upon his death his six annas share in the profits of the firm should go to his wife, M, and his minor grandson,K, son of R, in equal shares and the minor,K, being represented by his mother as guardian, that a credit balance of Rs. 1,80,000 in his personal account in the firm should be transferred in equal shares to the accounts of his wife, M, and his grandson, K, and that in the event of the firm incurring any loss in any year it would be reimbursed out of the sum which was to be transferred to the personal account of K. S died on the 15th April, 1955, and a fresh partnership deed was executed among the surviving partner, R, S's widow, M, and G, the mother of the minor K, as his natural guardian. The deed provided that the six annas share of S in the firm would be taken in equal shares by M and K and that in the event of any loss occurring the loss should be made good half by R, one-fourth by M and the remaining one-fourth by reimbursement out of the amount transferred to the personal account of K from the account of the deceased, S, as per the terms of his will. In the assessment proceedings of R, the assessee, the Appellate Tribunal held that the share income of the minor, K, should be included in the income of his father, R. When the reference came up before us we held that the provisions of the partnership deed showed that the minor would not be liable for the losses as it clearly provided for payment of the minor's share of the loss out of a separate fund and the partnership deed read in the background of the will of S clearly indicated that the minor was only being admitted to the benefits of the partnership, that in the management of the business of the firm the minor was not being given a part and that the minor was not made a full partner. Therefore, there was a valid partnership deed and the inclusion of the minor's income in the income of the assessee was clearly by virtue of Section 64(ii) of the 1961 Act. For the reasons that we have indicated the point having not been taken specifically before the Tribunal and secondly that the point which required both consideration on the aspect of law as well as examination on fact having not been agitated before the Tribunal and consequently from the conduct of the parties, it appears, they treated it as the firm, in our opinion, this aspect cannot be allowed to be agitated at this stage as was sought to be urged by the assessee.
9. Next question that requires consideration in this matter is whether the assessment having been done on the beneficiaries under Section 41(2) qua beneficiaries, could, therefore, be now reassessed on the same persons qua partners of an unregistered firm. Learned advocate for the assessee emphasised and emphasised very greatly on the aspect that assessment on the same persons qua partners and assessment qua beneficiaries would really amount to double taxation which should be avoided. He relied in this connection on a decision in the case of Ramanlal Madanlal v. CIT : 116ITR657(Cal) . In that case, up to the assessment year 1964-65 the assessee-firm had been granted registration and had been taxed as a registered firm. For the assessment years 1965-66, 1966-67 and 1967-68 the returns of the total income of the firm were filed subsequent to the assessments of the individual partners and no application under Section 184(7) of the I.T. Act, 1961, for a continuance of the registration for any of the assessments in question was made. The ITO completed the assessment of the firm for the said three years in the status of an unregistered firm. On an appeal to the AAC, the assessee-firm had disputed the validity of the assessments and contended that the assessment was bad in law inasmuch as the partners had already been assessed to tax and, therefore there, could not be two assessments over the same income. The AAC, relying on the decision in the case of CIT v. Murlidhar Jhawar and Puma Ginning & Pressing Factory : 60ITR95(SC) , held that once the ITO had exercised his option and assessed the partners individually he could not thereafter assess the same income in the hands of the assessee as an unregistered firm. On further appeal, the Appellate Tribunal held that the ITO had acted upon the returns filed by the partners under the belief that the assessee would in those assessment years continue to have the benefit of registration and that the AAC was not justified in his decision that the ITO was wrong in taxing the income of the firm again, when its partners had already been assessed to tax over the same income individually. When the matter came up before us, we held that under the provisions of the 1922 Act, in the light of decided cases, in the case of an unregistered firm, once the partners had been assessed, the firm could not be assessed and vice versa. The question was whether the same position prevailed in respect of an unregistered firm under the 1961 Act prior to the amendment by the Taxation Laws (Amendment) Act, 1970. The only difference, material for the purpose, was that between the language of Section 3 of the 1922 Act and Section 4 of the 1961 Act. The scheme of taxation in respect of partners and the firm or the members of an association of persons remained otherwise the same. The partners of an unregistered firm, until the amendment by the Taxation Laws (Amendment) Act, 1970, were considered to be distinct assessable units both under the 1922 Act and the 1961 Act.
10. Therefore, according to us, one income in the hands of two assessable units should not normally be made to suffer taxation twice unless the clear intention of the Legislature was there to tax the same income twice. The next principle that had to be borne in mind was that, according to us, though in fiscal law the charging section was the most important provision, the said charging section must be understood and construed in the light of the machinery provided, in order that the charge might be effectuated. Bearing the said principle in mind and having regard to the intention of Parliament in introducing the change, as there had been no substantial change in the machinery provided for taxation under the Act of 1961, the partners of an unregistered firm as well as the firm itself could not be taxed twice. We held, accordingly, that in the case of an unregistered firm and its partners there could not be simultaneous taxation. Further, it was not so much a question whether the ITO could have exercised an option or not to assess the individual partners in the expectation that the firm would apply for a continuance of registration. There being an assessment on the partners, the liability of the firm to be assessed did not exist according to us. If that was the opinion, then the further question whether the ITO could have exercised any option did not arise. In those circumstances, we held that the ITO was not right in taxing the income in the hands of the assessee, an unregistered firm, for the relevant assessment years when the partners had already been assessed to income tax over the same income individually. In that decision we had considered most of the relevant decisions including the decision of the Supreme Court in the case of ITO v. Bachu Lal Kapoor : 60ITR74(SC) . We had also considered two of our unreported decisions, namely, the decision in the case of Hindusthan Mill Stores Supply Co. v. CIT, which has subsequently been reported in : 116ITR681(Cal) , as also the decision in the case of Ballabhdas Ishwardas, which has also been reported in the same volume : 116ITR685(Cal) , to both of which our attention was again drawn by learned advocate for the assessee. Learned advocate for the assessee also sought some support from the decision in the case of the ITO v. Bachu Lal Kapoor : 60ITR74(SC) . That decision, however, proceeded entirely on a different basis. We proceeded on the basis that while an HUF was there, the individuals constituting the said HUF could not be assessed as such. That principle is not attracted in this instance. Learned advocate for the revenue sought to urge that what was previously done was a compendious assessment on the trust which, not being pressed, what is proposed to be done was another compendious assessment on an unregistered firm. Learned advocate for the assessee is right in saying that under the scheme of Section 4 where the shares of the beneficiaries are definite, assessment under Section 41(2) could not be strictly called a compendious assessment on the trust.
11. It would be rather appropriate to describe such an assessment as one on the beneficiaries through the medium of the trustee. While it is true that we adhere to the principle that unless absolutely warranted by the express language of a statute, a statute should not be so construed as to permit double taxation, and that is a principle, in our opinion, fundamental in fiscal laws not depending on the technical rule of exercising any right of option as we have tried to indicate in the decision in the case of Ramanlal Madanlal v. CIT : 116ITR657(Cal) , yet the basic assumption of the applicability of this principle depends on a subsisting valid assessment. If the assessment made on an individual or a group of beneficiaries or partners be set aside or reopened on the ground that the said assessment was on a wrong, or illegal or improper basis, then if that reopening is not challenged as it was not challenged in the other case and a fresh assessment is made on the same persons or association of persons or the same individuals in different capacities then there is no double taxation, because double taxation principle can be attracted only where two assessments subsists simultaneously. If one assessment is gone or is treated to have gone because of the operation of some legal principle and the same income is subjected to tax in the hands of the same individual in another capacity or in the hands of some other person, as the case may be, then the principle of double taxation is not attracted. The three cases which we had to decide were not cases where the assessment was sought to be reopened under Section 148 of the I.T. Act, 1961, or under Section 34 of the 1922 Act. In this case the reopening is not under challenge by any question before us. If that is the position, then, in our opinion, this principle of double taxation cannot be attracted as is sought to be done. In that view of the matter, the Tribunal, in our opinion, was right in the conclusion they arrived at. Learned advocate for the Revenue, however, sought to draw some support from the decision of the Supreme Court in the case of Y. Narayana Chetty v. ITO : 35ITR388(SC) . That decision was in the context of a different controversy and we do not think that much help would be obtained from a detailed analysis of the said decision for the purpose of adjudication of the controversy before us.
12. In the premises, the question is answered in the affirmative and in favour of the Revenue.
13. In the facts and circumstances of the case, parties will pay and bear their own costs.
Sudhindra Mohan Guha, J.
14. I agree.