TMI Blog1974 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... 1966-67 were issued on the 31st March, 1971, and the notices in respect of the assessment years 1967-68, 1968-69 and 1969-70 were issued on the 3rd of December, 1971. There is a colliery in Jharia which is known as " Central Sulunga Colliery ". One Sri Arjun Agrawalla was the owner of the said colliery. On the 1st January, 1953, Sri Arjun Agrawalla executed a deed of gift in respect of the said colliery in the names of petitioner, Sri Mahendra kumar Agrawalla, and his brother, Sri Yogendra Kumar Agrawalla. According to the petitioner, by the deed of gift he was given half share in the colliery whereas his brother, Sri Yogendra Kumar Agrawalla, was given the remaining half share. It appears that even after the execution of the deed of gift by Sri Arjun Agrawalla, the Central Sulunga Colliery continued to be assessed to income-tax as an " association of persons " till the assessment year 1956-57. It further appears that on the 18th of February, 1958, the petitioner and his brother made an application before the Inspecting Assistant Commissioner of Income-tax, Southern Range, Ranchi, for treating them as tenants-in-common and assessing them as " individuals ". The learned Inspectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction came to an end when he made the assessment against the petitioner and his brother. (4) The requisite conditions to reopen the assessment being not present, the Income-tax Officer had no jurisdiction to issue the impugned notices. (5) The Commissioner of Income-tax mechanically granted sanction for issuing the notices without applying his mind and as such the notices are invalid. (6) The notices under section 148 having not been validly served, no reassessment proceeding can be started on the basis of the notices (annexure " 3 " to the writ application). Before dealing with the contentions which have been raised on behalf of the petitioner, I would briefly indicate the stand which has been taken by the respondents. In the counter-affidavits, which have been filed on behalf of the respondents in the ten cases, an assertion has been made to the effect that the assessee to whom the notices have been issued as the " association of persons " is M/s.Central Sulunga Colliery Company, Jharia, and not its members, Sri Mahendra Kumar Agrawalla and Sri Yogendra Kumar Agrawalla, because M/s. Central Sulunga Colliery Company did not file any return of its income for the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise and it is immaterial whether their shares are specific and definite or whether there is any scheme of management or not ". It was further submitted that " if the persons so interested come to an arrangement, express or tacit, by which they divide the income at a point of time before it emanates from the source, then the association ceases ; otherwise it continues to be an " association ". It was held by the Supreme Court that the test suggested by learned counsel for the revenue was neither conclusive nor determinative of the question before it. In that case the facts were as follows. The co-widows of a Hindu governed by the Mitakshara law inherited the estate of the deceased which consisted of immovable properties, shares, money lying in deposit and share in a registered firm. The question was whether the widows could be assessed in the status of an " association of persons " within the meaning of section 3 of the Indian Income-tax Act, 1922, in regard to the income derived from the properties inherited by them. The Appellate Tribunal had found that they had not exercised their right to separate enjoyment and that except for receiving the dividends from the shares and the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also stated in the counter-affidavits that though the petitioner has been filing his returns in the status of " individual " from the assessment year 1956-57, he has shown half share from the firm of M/s. Central Sulunga Colliery Company. It has been stated in paragraph 8 of the counter-affidavit that one Sri H. L. Varma was taken as a partner. A reference has been made in that connection to the Appellate Assistant Commissioner's order dated November 21, 1966, in Appeal No. 62/CCD/65-66 in the case of Shri Mahendra Kumar Agrawalla for the assessment year 1964-65. The relevant portion of the order reads as follows : " As per a letter dated 29-3-1958 Shri H. L. Varma was taken as a partner in the above firm by Shri. B. L. Agrawalla who is the father and guardian of the appellant. One of the terms embodied in the said letter was as under : ......You will be paid a fixed profit of Rs. 1,500 yearly as your share only when there is a profit in the business........" It was submitted before us on behalf of the revenue that the above extract from the order of the Appellate Assistant Commissioner clearly shows that the business was being run on behalf of the minors by their fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be proper for this court to express any final opinion on the question when all the materials are not available. The next point which falls for consideration is whether the Income-tax Officer can legally assess M/s. Central Sulunga Colliery as an " association of persons " having already assessed the petitioner and his brother, Yogendra Kumar Agrawalla, in the status of individuals. It was submitted on behalf of the petitioner that once the income of the association was charged to income-tax in the hands of the members individually and the assessment of the members remained valid assessments, there could be no fresh assessments of the income in the hands of the association because that would amount to double taxation of the same income. In support of this contention learned counsel relied on the decisions in Joti Prasad Agarwal v. Income-tax Officer, Commissioner of Income-tax v. Kanpur Coal Syndicate and Commissioner of Income-tax v. Murlidhar Jhawar and Purna Ginning and Pressing Factory. In Joti Prasad Agrawal's case, one of the points which was raised was that under section 3 of the Indian Income-tax Act, 1922, income-tax was chargeable for a particular year in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act." The new section 4 imposes income-tax upon " every person " in respect of his income. The definition of "person" has been given in section 2(31). According to that definition, " person " includes an " individual " as well as " an association of persons or a body of individuals, whether incorporated or not ". It was submitted on behalf of the revenue that the decisions relied upon by the petitioner were based on the language of section 3 of the Indian Income-tax Act, 1922, which gave the option to the Income-tax Officer to assess either the association of persons or the members of the association individually but no such option having been given to him under section 4 read with section 2(31) of the Income-tax Act, 1961, the Income-tax Officer has jurisdiction to initiate a proceeding under section 147 and to issue a notice under section 148 if the association of persons ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssable entity which had escaped assessment. Subba Rao J. (as he then was) observed as follows : " That apart, under section 3 of the Act, in the matter of assessment, there is no question of any election between a Hindu undivided family and a member thereof in respect of the income of the family. If a Hindu undivided family exists, under section 3 of the Act the Income-tax Officer has to assess it in respect of its income. Indeed, under section 14(1) of the Act, any part of the income received by its members cannot be assessed over again. While section 3 confers an option on the Income-tax Officer to assess either the association of persons or the members of the association individually, no such option is conferred on him thereunder in the case of a Hindu undivided family, as its existence excludes the liability of its members in respect of the income, of the former received by the latter." From the above observation it is absolutely clear that under section 3 of the Indian Income-tax Act, 1922, the Income-tax Officer had an option to assess either the association of persons or the members of the association individually but there was no such option in the case of a Hindu und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the association. Thus, under clause (v) of section 86 the income received by the member from the association is eligible for rebate. In view of the decision of the Supreme Court referred to above, if the assessment proceedings initiated under section 147 of the Income-tax Act, 1961, would culminate in the assessment of the association of persons, appropriate adjustments will have to be made by the Income-tax Officer in respect of the tax realised by the revenue for that part of the income of the association which has been assessed on the members of the association. There will, therefore, be no question of double taxation in respect of the same income to the prejudice of the petitioner. The Income-tax Act, 1961, came into force on the 1st of April, 1962. The provisions of the Income-tax Act, 1961, therefore, became applicable from the assessment year 1962-63. As the provisions of the Income-tax Act, 1922, were applicable in respect of the assessment years 1960-61 and 1961-62, it has to be held that the Income-tax Officer has no jurisdiction now to assess M/s. Central Sulunga Colliery as an association of persons because he had exercised his option to assess its members, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, or (ii) the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year in question. It was submitted by learned counsel appearing for the petitioner that there was no material before the Income-tax Officer to show that the income chargeable to tax had escaped assessment for the various years due to the failure on the part of the petitioner and his brother to disclose fully and truly all the material facts necessary for their assessment for the years in question. That may be so but the fact that separate returns on behalf of M/s. Central Sulunga Colliery as association of persons had not been filed for the assessment years in question is not in dispute. Thus, there was an omission or failure on the part of the assessee to make a return under section 139 for the years in question. The only question which is in dispute is whether M/s. Central Sulunga Colliery constituted an association of persons during the years in question. As I have already held, it is a pure question of fact which is to be decided by the Income-tax Officer after due enquiry. I must, however, observe that in view of the facts stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he records of the case it is found that Sri Yogendra Kr. Agrawalla and Sri Mahendra Kr. Agrawalla have been shown as equal partners of M/s. Central Sulunga Colliery. But there is no separate file of the aforesaid firm, rather income of the colliery was computed and it was allocated among the two aforesaid partners in equal shares and assessed separately although there does not exist any partnership deed or any agreement to that effect. I am of opinion that in the absence of any partnership deed M/s. Central Sulunga Colliery should have been assessed as " A.P. " and share of the members of the " A.P. " should have been allocated to their respective files. On going back to the history of the case it is found that Shri Arjun Agrawalla gifted Central Sulunga Colliery to his two minor nephews, Sri Mahendra Kumar Agrawalla and Yogendra Kumar Agrawalla, by a deed of gift executed on 1-1-53 who took the colliery in equal shares without executing any partnership deed among themselves. Evidently the status of Central Sulunga Colliery should have been taken as " A.O.P. " instead of allocating the shares of income from the said colliery to the separate owners. The colliery is being worked out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer has served a notice of his intention of treating him as the principal officer thereof." It was submitted on behalf of the petitioner that Sri R. P. Sinha was admittedly not a member of the association. He was neither the secretary nor treasurer nor manager nor agent of M/s. Central Sulunga Colliery. The Income-tax Officer having not served notices of his intention of treating him as the principal officer of the association, he could not be deemed to be a principal officer under clause (b) of section 2(35) of the Income-tax Act, 1961. In my opinion, it is not necessary to go into those questions and to refer to the decisions cited by the learned counsel appearing for the petitioner. In the instant cases though the notices in respect of the assessment years 1960-61, 1961-62, 1962-63, 1963-64, 1964-65 and 1965-66 were received by Sri R. P. Sinha, Sri Yogendra Kumar Agrawalla, a member of the association, accepted those notices and acted upon them. It appears that in pursuance of those notices he made applications for time to enable them to reply. As a sample, the application which he sent for the assessment year 1962-63 (annexure " D-3 " to C.W.J.C. No. 1645 of 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may refer in this connection to the two decisions of the Bombay High Court in the case of K. C. Tiwari Sons v. Commissioner of Income- tax and in the case of Commissioner of Income-tax v. Bhanji Kanji's Shop. In the case of K. C. Tiwari Sons, there was a procedural irregularity in serving the notice inasmuch as notice was served on the manager who had no written authority to accept service. It was held in that case that the mode of service of notice or requisition provided in section 63(1) of the Indian Income-tax Act, 1922, was not exhaustive and it was permissible to have the notice effected in a way other than the two modes mentioned in section 63(1). It was further held that if the assessee admits that he has received the notice and asks for adjournment, the assessee cannot subsequently be allowed to plead that there was no valid and legal service. In the case of Commissioner of Income-tax v. Bhanji Kanji's Shop, a notice under section 34(1)(a) of the Indian Income-tax Act, 1922, was served on a temporary agent of an assessee, who was not an authorised agent for receipt of notice on behalf of the assessee. The assessee filed a return in pursuance of the notice and an order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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