TMI Blog1995 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... llage in Medak District in Andhra Pradesh from Sri Ikramuddin and Smt. Azizunnisa Begum under a sale deed dated October 20, 1962, for a consideration of rupees seventy-five thousand. Even prior to the execution of the sale deed, the said lands had been notified for acquisition under the Land Acquisition Act. The respondent and Kondal Reddy appeared before the Land Acquisition Officer claiming compensation. By award dated February 4, 1964, the Land Acquisition Officer determined the compensation at Rs. 1,38,794.12 annas which amount was received by the respondent and Kondal Reddy on December 4, 1964, in equal shares. At their instance a reference was made under section 18 of the Land Acquisition Act. The learned District Judge enhanced the compensation by Rs. 3,95,026 (according to the appellant the figure is Rs. 4,17,477). The enhanced compensation was also shared between the respondent and Kondal Reddy in equal proportion. In the assessment proceedings relating to the assessment year 1965-66, the Income-tax Officer included a sum of Rs. 35,397, treating it as the capital gain, in the income of the respondent. (This figure was arrived at after deducting the amount contributed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1961 Act. The High Court found that the position under the present Act is no different from the position under the 1922 Act notwithstanding the difference in the language employed in the relevant provisions of the 1961 Act. The High Court opined that even under the present Act, the Income-tax Officer has an option to assess either the association of persons as a unit or the members thereof individually and that having exercised the option to assess the members of the association of persons as individuals, he cannot seek to tax the association of persons with respect to the very same income. The High Court also rejected an alternative contention put forward by the Revenue, viz., inasmuch as the previous assessments in individual capacity were made for the assessment year 1965-66 and because the impugned notice is for the assessment year 1964-65, the Income-tax Officer is not precluded from taxing the income in the hands of the association of persons. This argument was rejected by the High Court holding : " In our view, there is a fallacy in this argument. When making an assessment, the Income-tax Officer exercised his option and chose to assess the individual, but he did so for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can, and he must, tax the right person and the right person alone. By " right person ", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression " wrong person " is obviously used as the opposite of the expression " right person ". Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Section 183 shows that where Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law, but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer [Income-tax Officer] has taxed the said income in the hands of another person contrary to law. We may proceed to elaborate. Section 3 of the Indian Income-tax Act, 1922, as amended by the Indian Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of a firm or an association of persons, the income-tax shall be charged either on the firm or the association of persons or on the partners of the firm or on the members of the association of persons individually. It is evident that this option was to be exercised by him keeping in view the interests of the Revenue. Whichever course was more advantageous to the Revenue, he was entitled to follow it. In such a situation, it was generally held that once the Income-tax Officer opted for one course, the other course was barred to him. But no such option is provided to him under the present Act. Section 4 extracted hereinabove says that income-tax shall be charged on the total income " of every person " and the expression " person " is defined in clause (31) of section 2. The definition merely says that the expression " person " includes, inter alia, a firm and an association of persons or a body of individuals whether incorporated or not. There are no words in the present Act which empower the Income-tax Officer or give him an option to tax either the association of persons or its members individually or for that matter to tax the firm or its partners individually. If it is the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to make the assessment under sub-section (1) of section 182 as if the firm were a registered firm ; and, where the procedure specified in this clause is applied to any unregistered firm, the provisions of sub-sections (2), (3) and (4) of section 182 shall apply thereto as they apply in relation to a registered firm." It may be mentioned that section 183 corresponded to section 23(5)(b) of the 1922 Act. The 1922 Act not only provided an option to the Income-tax Officer in the matter of firms and associations of persons under section 3, but also expressly enabled him to assess an unregistered firm as a registered firm [section 23(5)(b)], if by doing so, more tax accrued to the State. The 1961 Act has omitted the first option, while retaining the second. In this connection, it would be relevant to notice the relevant provisions of the draft Bill proposed by the Law Commission in its XIIth Report, which constitutes the basis for the 1961 Act. Clause (27) of section 2 of the draft (definition of " person ") did expressly provide an option similar to the one contained in section 3 of the 1922 Act. Clause (27) read thus : " (27) 'person' includes --- (i) an individual, (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 604 have taken the view which we have taken. On the other hand, the Madras High Court in CIT v. Blue Mountain Engineering Corporation [1978] 112 ITR 839 and the Patna High Court in its earlier decision in CIT v. Pure Nichitpur Colliery Co. [1975] 101 ITR 79 have taken the opposite view. The Andhra Pradesh High Court first expressed the other view, then in Choudry's case [1986] 158 ITR 224 (AP), it took the view which we have taken and then again in B. R. Constructions' case [1993] 202 ITR 222 (AP) [FB], it has gone back to the other view and reiterated the view taken in the judgment under appeal. In Ramanlal Madanlal v. CIT [1979] 116 ITR 657, Sabyasachi Mukharji J., speaking for a Bench of the Calcutta High Court, recognised the distinction in the language employed in section 3 of the 1922 Act and section 4 of the present Act, but that was a case of an unregistered firm where the Income-tax Officer had, assessed the incomes in the hands of the partners individually. In such a situation, the learned judge hold the Income-tax Officer cannot, at the same time, bring the unregistered firm to tax in respect of the very same income. Section 183 was also referred to in that connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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