TMI Blog1975 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... f persons as well as the individual members thereof, but on the matter being taken up to the Tribunal, it was held that the individual members could not be assessed separately in respect of the income which was assessed in the hands of the association of persons. That position was accepted by the department as far as the assessment year was concerned. As far as assessment year 1960-61 is concerned, the Income-tax Officer, by his order dated 23rd February, 1961, proceeded to determine the total income of the association of persons but, at the end of his order, stated as follows: "Assessed under section 23(3). No demand, as the shares of the co-owners are definite and they are assessed separately." On the same day, the same Income-tax Officer proceeded to pass an assessment order, also under, section 23(3), in respect of the four assessees as members of that association of persons, and directed that, after giving credit for the tax deducted at source demand notice was to issue. The four assessees preferred appeals to the Appellate Assistant Commissioner who set aside the orders of the Income-tax Officer on the basis of the Tribunal's order for the earlier year, viz., assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise from the Tribunal's order in the present case which does not deal with it. As far as the second proposition of Mr. Kaka is concerned, there is no warrant for the submission contained therein that the option to assess the association or the individual should have been exercised before the assessment of the association was made under section 23(3). The option which the Income-tax Officer has exercised is implicit in the terms of section 3 of the Indian Income-tax Act, 1922, which is the charging section. As laid down by the Supreme Court in the case of Commissioner of Income-tax v. Kanpur Coal Syndicate [1964] 53 ITR 225 at page 228, it is "in making the assessment in the first instance" under section 23 that the Income-tax Officer has to exercise that option as "part of the process of assessment". In that case, which is the leading case on the subject of exercise of option, the Supreme Court has laid down that section 3 of the 1922 Act impliedly gives an option to the appropriate authorities to assess the total income and levy the tax on one or other of the assessable entities. There is, therefore, no substance in Mr. Kaka's submission that once the Income-tax Officer exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm or the members of the association individually". As laid down by the Supreme Court in the case of Commissioner of Income-tax v. K. Adinarayana Murthy [1967] 65 ITR 607, 611, the scheme of the Act treats these as separate "units of assessment". As already stated above, it is section 3 that has been construed by the Supreme Court in Kanpur Coal Syndicate's case [1964] 53 ITR 225 as implying an option on the part of the income-tax authorities to assess any one of these assessable entities or units of assessment, and not to levy tax for the same income on more than one of the entities or units of assessment mentioned in section 3. Section 23(3) provides that, after hearing the parties, the Income-tax Officer is to pass an order in writing assessing the total income of the assessee and determining the sum payable by him on the basis of such assessment; and section 29 provides that when tax is due in consequence of such an order, a notice of demand in the prescribed form specifying the sum payable by the assessee is to issue. In the present case, however, it is an admitted position that almost the whole of the income of the association of persons was from dividends on which tax ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18(5) of the Indian Income-tax Act, 1922, in my opinion, leaves no room for doubt whatsoever that the effect of such deduction is that it amounts to payment of tax by the assessee concerned. No authority is, in my opinion, needed to clarify that position which emerges from the very terms of section 18(5). If, however, authority be needed, reference may be made, in that connection, to the judgment of the Calcutta High Court in the case of Commissioner of Income-tax v. Clive Insurance Co Ltd. [1972] 85 ITR 531, which was followed by this court in its decision in the case of Commissioner of Income-tax v. Tata Sons P. Ltd. [1974] 97 ITR 128 (Bom). Though the question that was before the respective courts in the said two cases arose in the context of section 49D of the Indian Income-tax Act, 1922, these cases are, in my opinion, authorities for the proposition that when tax is deducted at source, it amounts to payment of tax by the assessee concerned. In this connection, it may be pointed out that the procedure for taxing an assessee may be said to pass through three stages. The first stage is what may be called "assessment", a term which is used in different sections of the Act in slig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x has admittedly been deducted at source and paid over to the Central Government. Though the assessment order does not determine the tax payable by the association of persons and purports to state that the members of the association were to be "directly taxed to tax in their assessments", it fails to direct repayment of the tax already deducted at source on the dividend income of the association. There has, therefore, been a payment of tax pro tanto by the association. Neither the fact that the Income-tax Officer has stated in the concluding part of his order that no demand notice is to issue, nor the reason given by him for not issuing that demand notice, can change that position for the simple reason that, as already stated above, the issuing or the not issuing of a demand notice is a mere matter of procedure, though, of course, it has certain legal consequences. I hold that the Income-tax Officer having levied tax as aforesaid on the association of persons, it was no longer open to that officer to charge the members of that association in respect of the same dividend income, as he purported to do. I take the view that if an Income-tax Officer is to exercise the option which he h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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