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1969 DIGILAW 245 (ALL)

L. Satish Chand v. Income Tax Officer

1969-08-29

T.P.MUKERJEE, V.G.OAK

body1969
JUDGMENT V.G. Oak, C.J. - These are two connected references u/s 66 of the Indian Income Tax Act, 1922 (hereafter referred to as the Act). Satish Chand and Kishan Chand are two partners of a registered firm, Messrs. Satish Chand Kishan Chand. The Income Tax Officer Kanpur, passed two separate assessment orders against Satish Chand and Kishan Chand on their shares of income from the firm. These assessment orders were confirmed in appeal by the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal, Allahabad. The two assessees applied to the Tribunal u/s 66 of the Act for reference to the court on the ground that a partner of a firm could not be assessed to Income Tax without prior assessment of the firm itself. In each case the Tribunal has referred the following question of law to this court : "Whether it was legal to assess the applicant's share income from the firm, Messrs. Satish Chand Kishan Chand, prior to raising a separate assessment on the firm ? " 2. This question has been considered by different High Courts. In J.C. Thakkar Vs. Commissioner of Income Tax, Central, Bombay, AIR 1955 Bom 340 , it was held by the Bombay High Court that the assessment of a partner of an unregistered firm on his share of the profits in the firm is not illegal on the ground that the unregistered firm of which he is a partner has not been first assessed to tax. 3. Similarly, in MESSRS. HAZARI RAM MOHAN RAM Vs. COMMISSIONER OF Income Tax, U.P., (1962) 46 ITR 766 , it was held by this court that in the assessment of a partner of an unregistered firm as an individual the share of the partner in the income of the firm may be determined and added to the income of the partner without making a separate assessment on the firm itself. 4. In (1966) 60 ITR 95 (SC) it was held by the Supreme Court that partners of an unregistered firm might be assessed individually or they might be assessed collectively in the status of an unregistered firm. The Income Tax Officer could not, however, seek to assess the one income twice--once in the hands of the partners and again in the hands of the unregistered firm. 5. In Joti Prasad Agarwal and Others Vs. The Income Tax Officer could not, however, seek to assess the one income twice--once in the hands of the partners and again in the hands of the unregistered firm. 5. In Joti Prasad Agarwal and Others Vs. Income Tax Officer (B) Ward Mathura, AIR 1959 All 456 , it was held by this court that once the income of an association was charged to Income Tax in the hands of the members individually and the assessment of members remained valid, there could be no fresh assessment of the income in the hands of the association. 6. Mr. P. N. Pachauri, appearing for the assessee, relied upon a decision of the Supreme Court in M.M. Ipoh and Others Vs. Commissioner of Income Tax, Madras, AIR 1968 SC 317 . In that case it was held that primarily the return of income would be made by an association, where the association earned the income, and the Income Tax Officer could also call upon the association to submit a return of its income, and would ordinarily proceed to assess tax on the return so made. But, for diverse reasons, assessment of the income of the association may not be possible or such assessment may lead to evasion of tax. It would be open to the Income Tax Officer then to assess the individual members of the shares received by them. 7. Mr. Pachauri urged that if an Income Tax Officer wishes to depart from the normal procedure, he must give reasons in support of the abnormal procedure. The decision of the Supreme Court relied upon by Mr. Pachauri does not go to the length of laying down that an assessment order against a partner would be illegal on the short ground that no special reason for following a particular procedure is indicated in the assessment order. 8. There is nothing in the decision of the Supreme Court in M. M. Ipoh v. Commissioner of Income Tax to shake the authority of the decision of this court in Hazari Ram Mohan Ram v. Commissioner of Income Tax. We, therefore, hold that it is open to an Income Tax Officer to proceed to assess an individual on his income from a firm without first making an assessment against the firm itself. 9. In each of the two connected cases we answer the question referred to this court in the affirmative, and against the assessee. We, therefore, hold that it is open to an Income Tax Officer to proceed to assess an individual on his income from a firm without first making an assessment against the firm itself. 9. In each of the two connected cases we answer the question referred to this court in the affirmative, and against the assessee. In each case the assessee shall pay the Commissioner of Income Tax, U. P., Rs. 100 as costs of the reference.