RAJENDRA BABU, J. ( 1 ) THESE are three references made under section 256 (1) of the Income Tax Act, 1961 (hereinafter called the Act) by the Income-Tax Appellate Tribunal (Tribunal for short) relating to the assessments of the applicant for 3 years. Assessments were made for the assessment year 1971-72 on 11-11-1971; for the assessment year 1972-73 on 31-3-1973 and for the assessment year 1973-74 on 25-11-1973 in the status of an individual. The income-Tax Officer (hereinafter referred as the I. T. O) got the information that the applicant who is carrying on transport business was the real owner of the trucks standing in the name of his two brothers Ibrahim M. Mokashi (Ibrahim) and Ahmed Sabeer M. Mo'kashi (Sabeer) and hence the correct income taxable in his hands had escaped on ac- individual. count of not declaring his income truly and correctly. The I. T. O. initiated on that ground action under Section 147 (a) of the act by issue of a notice to the applicant for re-assessment in the status as individual. The I. T. O. completed the re- assessment proceedings holding that trucks bearing No. MEL 5389 and MYL 5428 belong to the applicant though apparently they are shown to be owned by his two brothers -Ibrahim and sabeer. The applicant preferred 3 appeals against the orders of re-assessment for the 3 years on various grounds. The Appellate Assistant Commissioner of Income-Tax (hereinafter called the AAC) held that the applicant and his brothers have together carried on the business by pooling their resources agreeing to share the profits and the two brothers of the applicant were his employees or benamidars. He also held that they were all joint proprietors of the same business. He rejected the contentions raised in relation to the validity of the action initiated under Section 47 of the Act. Having come to the conclusion, the AAC observed:"7. . . . THAT the business jointly organised and conducted attracted assessment in their hands as an Association of persons. In this view of the matter the status will be - and is hereby - altered from 'individual to AOP'. The requirements of law, rules and natural justice in this regard have also been fully and properly complied as the same eminent and learned representatives have represented all the three cases and are now before me. "finally, he ordered as follows:"14. . . The requirements of law, rules and natural justice in this regard have also been fully and properly complied as the same eminent and learned representatives have represented all the three cases and are now before me. "finally, he ordered as follows:"14. . . THE ITO is directed to give effect to this order by varying in the status as AOP, assessing the business income and levying the tax directly for all the years concerned upon the AOP itself and taking the appropriate equal shares in the absence of specification or of evidence to the contrary in the case of the members". ( 2 ) THE applicant appealed to the tribunal against the order, inter-alia, urging the following grounds: (i) Change of status from that of an individual to that of an association of persons (AOP); and, (ii) The I. T. O. invalidly initiated the proceedings Under Section 147 (a) of the Act amongst certain other grounds. ( 3 ) THE Tribunal having dismissed the appeal, the applicant sought for a reference and at his instance the following questions have been referred to us; (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the re-assessment proceedings under Section 147 were validly initiated? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the appellate authorities could convert an order of re-assessment made by the income-Tax Officer in respect of an individual assessee pursuant to re-assessment proceedings commenced in his case as an individual and consequent upon a return filed by him in his individual capacity into that of a re-assessment in the status of an Association of Persons of which the said individual was a member? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there existed an Association of persons consisting of Sri A. S. M. Mokashi and his two brothers? (4) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that an assessment made in the status of an individual could be converted into that of an Association of Persons by the Appellate Assistant Commissioner, without giving the concerned persons an opportunity of being heard in respect of such proposed action. ( 4 ) ON the first question, the contention raised on behalf of the assessee is that the i. T. O. had reopened the assessment (i) on grounds which were non-existent and (ii) that he had not recorded that the applicant had failed to disclose fully and truly all materials necessary for assessment, and hence initiation of action under Section 147 of the Act is invalid. It was submitted, that there was no warrant for the I. T. O. to proceed on the basis that the applicant had admitted before the Excise Authorities that all the trucks belong to him even though some of them were purchased in his brothers names. ( 5 ) ON a perusal of the entire statement of the applicant before the Excise Authorities, it cannot be said that the I. T. O. could not have drawn the inference that the trucks belong to him although some were purchased in his brothers' names. It is clear from the said statement that the applicant had given his savings to his brothers for the purchase of lorries, although it is also stated that, in addition, they had themselves raised finance on their own for the purchase of the lorries; but it cannot be ruled out that the inference drawn by the I. T. O. is impossible and no reasonable man could have drawn such an inference taking a overall view of the matter. Hence we have to hold that the I. T. O. initiated the action under Section 147 of the act on relevant materials. Even a bare perusal of the reasons recorded by the I. T. O. before issuing notice under Section 148 of the Act will clearly reveal that the I. T. O had recorded that there was no disclosure of true and correct income of the applicant for the relevant years which has resulted in escapement of the income from the tax-net. Therefore, there is not substance in the contention raised on behalf of the applicant and we have to hold that the Tribunal was right in its conclusion on this question. Hence we answer the first question in the affirmative and against the applicant. ( 6 ) THE second question relates to the direction given by the AAC to assess the applicant in the status of AOP while disposing of the appeal. Hence we answer the first question in the affirmative and against the applicant. ( 6 ) THE second question relates to the direction given by the AAC to assess the applicant in the status of AOP while disposing of the appeal. It was submitted on behalf of the applicant that for the assessment years 1971-72 to 1973-74 in the proceedings for original assessment, the applicant was treated as an individual and the initiation of proceedings under Section 147 of the Act by issue of notice under Section 148 of the Act and the completion of the re-assessment proceedings also treated the applicant as an individual and not as representing AOP; and when the question of status was not at all the subject-matter of dispute before the AAC, he could not have directed assessment of the applicant as representing AOP. In reply, learned counsel for the Revenue submitted that the powers of AAC in disposing of an appeal are co-extensive with that of the i. T. O. and under the scheme of the Act, it was permissible for the I. T. O to alter the status in the course of the assessment proceedings and the status could be a subject-matter of an appeal under Section 246 and hence AAC had powers to give directions as was done in these cases, which the i. T. O is bound to implement after following the due procedure. He further submitted that in the 1922 Act, if a return is filed in one status the same could not be altered by the i. T. O and treating the status different from the one returned although he had powers to take any other action under other provisions such as calling upon the assessee to file a return in the correct status and on his failure to do so, to proceed in accordance with law for exparte assessment. The present scheme is that if the I. T. O is not satisfied with the status as shown in the return, it was permissible for him to serve a notice under Section 143 (2) or 139 (2) of the Act and complete the proceeding in that status. However, under section 143 (1) of the Act, if an assessment had been completed in a wrong status, it was permissible for the I. T. O to set it right by resorting to procedure under Section 143 (2) of the Act. However, under section 143 (1) of the Act, if an assessment had been completed in a wrong status, it was permissible for the I. T. O to set it right by resorting to procedure under Section 143 (2) of the Act. Inasmuch as, the status also could be the subject-matter of appeal, the aac could deal with this aspect of the matter and since his powers being co-extensive with that of the I. T. O, what could have been done by him, the appellate authority could do, that is, to assess applicant in the correct status. These contentions cannot be dealt with except by reference to Section 252 of the act. A reading of the same will disclose that in disposing of an appeal the AAC has powers co-terminus or co- extensive with that of the I. T. O and he can traverse the whole range of assessment order as held by the supreme Court in C. I. T. v Mcmllan and Co. , (1958) 33 I. T. R. 182; ; C. I. T. v Shapoojari pallonji Mistry, (1962) 44 I. T. R. 89.) C. I. T v kanpoor, (1964) 53 I. T. R. 255 ). and CJ. T. v hardutray Chamanria. (1967) 66 I. T. R. 443) therefore, in view of the clear statement of the law made in these decisions, the AAC can do what the I. T. O can do and can also direct him to do what he has failed to do. It may, however, be noted that however wide the appellate powers of the AAC may be, they are subject to certain limitations. The scope of Section 147 of the Act is that it is permissible for the Revenue if the assessment had taken place in wrong hands resulting in escapement of income from the tax-net, to bring the same to tax by initiating proceedings against that person. If a notice is issued to an assessee as an individual when the correct status is of an AOP and re-assessment proceeding completed on AOP will be invalid hi view of the law enunciated (65 i. T. R. 607.) in C. I. T v Adinarayana Murthy. The law enunciated in this case still holds good for re-assessment proceeding because the foundation for re-opening an assessment is the issue of a notice under Section 148 of the Act to the assessee concerned. The law enunciated in this case still holds good for re-assessment proceeding because the foundation for re-opening an assessment is the issue of a notice under Section 148 of the Act to the assessee concerned. Section on 147 deals with two situations where income chargeable to tax has escaped assessment as a result of (i) assessee not filing return at all or (ii) the previous assessment is based on a return which does not disclose true and correct income. Where assessment has been done in wrong hands it would be a case of the assessee not filing a return in the correct status and will fall within the first category. In the first situation what the I. T. O does is to assess for the first tune; while in the second situation, the I. T. O reopens and reassesses in place of the assessment already made. Hence the notice that could be issued as required under Section 148 (1) of the Act and the reasons that could be recorded as required under Section 148 (2) of the Act, in the two cases will be entirely different and will have bearing upon the status of the assessee in respect of whom the assessment is sought to be reopened. Hence we are clear in our mind that if notice under Section 148 is issued to a wrong person, re-assessment cannot be completed by merely changing the status to that of a correct person. Whatever may be the situation in relation to the original assessment, in the case of reassessment, the principle laid down in adinarayana Murthi's case (65 I. T. R. 607) still holds good and the contention to the contrary viz. , to depend upon the scheme of the Act in relation to the powers of the I. T. O to change the status in certain cases of original assessment would be wholly irrelevant and misleading. Thus the I. T. O. has no jurisdiction to change the status of an assessee in reassessment proceedings. The result is that what the I. T. O could not validly do the AAC cannot do it in an appeal. Hence the AAC in the instant case, has no jurisdiction to direct the I. T. O to bring to tax in the hands of the applicant in the status of aop instead of the individual. The result is that what the I. T. O could not validly do the AAC cannot do it in an appeal. Hence the AAC in the instant case, has no jurisdiction to direct the I. T. O to bring to tax in the hands of the applicant in the status of aop instead of the individual. ( 7 ) WE will now approach the problem on hand from a different angle. The applicant who was appellant before the AAC was only an individual and the question of his status was never in doubt, and at all stages including the stage of original assessment, the stage of notice under Section 148 of the act and completion of proceedings under section 147 of the Act, he was treated as an individual. Never before any of the authorities he was treated in the status of aop at all, much less before the AAC. In that background it has to be seen whether the AAC can give a finding and direction as to in whose hands the income in question could be assessed and brought to' tax. This aspect has been in a way dealt with by the (120 I. T. R. 14.) Supreme Court in rajendranth v C. I. T. Pathak, J. (as His lordship then was) speaking for the court held that "finding and direction" in Section 153 (3) of the Act were limited in meaning and scope. In that context it was observed that a finding given in an appeal revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of a particular assessee and a particular year. To be a necessary finding it must be directly involved in the disposal of the case. The supreme Court further illustrated the matter thus: It is possible in order to give a direction hi respect of A, a finding in respect of B may be called for; where the facts show that the income could belong to A or B or and to no one else; a finding that that it belongs to B or does not belong to B would be determinative of the issue as to whether it could be taxed as 'a' s income. A finding in respect of B is initially involved as a step in the process of reaching the ultimate finding in respect of A; if, however, as to A' s liability could be directly arrived at without necessitating a finding in respect of B, then a finding hi respect of B was an incidental finding and it was not a finding necessary for the disposal of the case pertaining to A. In the case on hand AAC has reached the conclusion that the transport business was not that of the applicant alone, but incidentally found the same to be that of aop. Hence to give a finding that it was the income of the AOP and to bring to tax the income in its hands is not a finding or direction necessary for the disposal of the case, in view of the categorical and clear ratio of the decision of the Supreme Court referred to above. More so, when the AAC was not dealing with a case of AOP at all and which was not before him in any manner. Having realised that AOP was not before him in any manner, the AAC adopted a very strange reasoning that rules of natural justice were complied with by reason of representation of the same counsel in respect of the three individuals (who constituted aop) though in their individual status. Such a course is too naive to merit acceptance. Therefore the only conclusion we have to draw on the second question is that the tribunal was wrong in holding that the appellate authority could convert an order of reassessment made by the ITO in respect of the individual pursuant to reassessment proceedings commenced as such to that of a aop. Hence we answer the second question in the negative and in favour of the assessee. So far as the third question is concerned, the AAC and the Tribunal have thoroughly examined the facts of the case and come to the conclusion that there existed an AOP consisting of the applicant and his two brothers. The approach of the AAC and the tribunal cannot be said to be wrong in any manner and hence we agree with the finding of the Tribunal on this question. Hence we answer the third - question in the affirmative and against the applicant. The approach of the AAC and the tribunal cannot be said to be wrong in any manner and hence we agree with the finding of the Tribunal on this question. Hence we answer the third - question in the affirmative and against the applicant. The fourth question is in relation to the direction of the AAC that an assessment made in the status of an individual could be converted into that of a AOP without hearing the AOP and in the absence of the AOP. The manner in which the AAC has approached this aspect of the matter has already been adverted to by us while dealing with the second question. The AAC took the view that rules of natural justice was complied with by representation of the same counsel in respect of the three individuals who constituted AOP. The order of the aac does not disclose that any indication was given to the learned counsel or in any other manner the AOP was made known that the status of the applicant would be changed to that of AOP and assessment of the income made in their hands. It is clear from the manner in which the proceeding had gone on before the AAC that AOP had no opportunity of being heard. In this context, reliance was placed by the learned counsel for the Revenue on the decision in the case of P. Vasudeva Setty v Commr. of Income tax (65 ITR 172.) to contended that in making an assessment in respect of one person, assessment would also be made in respect of another person. In that case what was considered and held was that the assessment made is in respect of a AOP or a firm or a body of individuals and if the AAC set aside or gives direction in respect of its income, the income of the person or members of a firm or association or the body of individuals would also get altered and directions could be given in that respect. Therefore we are of the view that the said decision has no application to the facts of the case at all. Hence we hold that the AAC could not have converted the status of the applicant to that of AOP without giving an opportunity of being heard to all the concerned persons on that matter. Therefore we are of the view that the said decision has no application to the facts of the case at all. Hence we hold that the AAC could not have converted the status of the applicant to that of AOP without giving an opportunity of being heard to all the concerned persons on that matter. Our answer in the result, to the fourth question is in the negative and in favour of the applicant. --- *** --- .