TMI Blog1975 (4) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... the compensation according to the petitioner to Rs. 3,95,026, but according to the respondent to Rs. 4,17,477. According to the petitioner this amount was shared by him and Kondal Reddy as follows: Rs. Petitioner 2,08,739 Kondal Reddy 1,86,288 The ITO, C--Ward, Special Circle II, Hyderabad, in his assessment order for the year 1965-66 assessed the petitioner to capital gains in a sum of Rs. 35,397. It is stated that the petitioner along with Kondal Reddy purchased the lands and according to the statement given by the petitioner he invested a sum of Rs. 34,000 approximately towards his share. The assessee's share of compensation was Rs. 69,397 and hence the assessee derived a net capital gain of Rs. 35,397 which is taxable under s. 41(2) of the Act. After the district judge enhanced the compensation the petitioner's share of the enhanced compensation in his hands was assessed to tax for the assessment year 1968-69. Similarly, the share of Kondal Reddy was also assessed in his hands for the relevant years. On February 18, 197 2, the ITO, F--Ward, Circle I, issued a notice addressed to the petitioner and Kondal Reddy, in which he stated that he had reason to believe that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioner before the authorities in his individual assessment and after considering the entire material before him the officer exercised his discretion by assessing the income in the individual hands of the petitioner and Kondal Reddy. The provisions of s. 147 are not complied with. Lastly, it is urged that the relevant assessment year is not 1964-65. Another notice was issued under s. 148 of the Act on March 17, 1972, in the personal assessment of the petitioner. The petitioner has filed W.P. No. 338/73 for the issue of a writ of prohibition or other appropriate writ restraining the respondent from taking any action on that notice also. The grounds urged are practically the same as those in W.P. No. 5856/72. The main contention urged on behalf of the assessee by Sri Panduranga Rao is that having exercised his option to assess the tax on the members of the association of persons as individuals in respect of their respective shares of the profits made, it is not open to the ITO to seek to assess the same income in the hands of the association. In the order of assessment dated March 10, 1970, the ITO clearly says that the assessee, along with Kondal Reddy, purchased the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories was an association of persons. Under the present Act, instead of enumerating the categories in the body of the section, it is stated that the income will be charged on every person and in the definition of "person" in section 2(31) the various categories of persons are enumerated. In our view, this change in the wording of the section does not affect the legal position and all the decisions under the old Act referred to above are applicable even to-day under the present Act. As observed by the Supreme Court in CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95 an association of persons and the individual members of an association are two distinct and different assessable entities and under s. 3 of the Indian I.T. Act, 1922, the tax can be levied on either of the said two entities. The ITO cannot seek to assess the one income twice--once in the hands of the partners and again in the hands of the association. This principle holds good even under the present Act. The learned standing counsel for the income-tax department was unable to give any valid reason why the said principle does not apply under the Act of 1961. The learned income-tax coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither the association of persons or the members of the association individually, no such option is conferred on him thereunder in the case of a HUF, as its existence excludes the liability of its members in respect of the income of the former received by the latter." The above decision of the Supreme Court has no application to the facts of this case where we are concerned with the assessment of an association of persons in respect of which we have already held that even under the new Act there is an option to assess either the association as a unit or the members individually. It is true, in the above decision, the Supreme Court gave a direction that if the assessment proceedings initiated under s. 34 culminated in the assessment of the HUF, appropriate adjustments had to be made by the ITO in respect of the tax realised by the revenue on that part of the income of the family assessed in the hands of the individuals. But that direction was given because the original assessment in the hands of the individuals was contrary to the provisions of the Act. In a case of association of persons, if the officer exercises his option and assesses the tax in the hands of the members individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has described the income arising therefrom as capital gains, in the head-note, but brought it to tax under sec. 41(2) of the Income-tax Act. I have not followed what the Income-tax Officer had in his mind. The present Income-tax Officer assured me that the matter was being re-looked into and he had nothing to say in support of the inclusion in the present assessment. In my view, there is no proper basis for including this amount either as capital gain or as profit under sec. 41(2). As the matter is being looked into once again, the addition of Rs. 35,397 is deleted." It is seen that the deletion is because the ITO said that the matter was being looked into once again and the AAC found there was no basis for including the amount either as capital gains or as profit under s. 41(2). We do not read the order as saying that the ITO either did not exercise his option of taxing the individual member and not the association or that he was wrong in doing so. We have also perused the grounds of appeal filed before the AAC. The only ground relating to this item was that the income had arisen regarding the transaction pertaining to agricultural land at Ramachandrapuram and it should not be ..... 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