TMI Blog1974 (7) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years 1951-52 and 1952-53, Bhagwandas filed returns of his personal income declaring his status as that of resident and ordinarily resident and he was accordingly assessed by the Income-tax Officer at the ordinary rates applicable to a resident and ordinarily resident. After the initial orders of assessment were made the Income-tax Officer came to know that Bhagwandas had left for the United Kingdom for higher medical studies on August 31, 1949, and was out of India till December 2, 1958. In the opinion of the Income-tax Officer, Bhagwandas should have been assessed in the status of a non-resident and at the maximum rate because he had not filed the requisite declaration prescribed by section 17(1) of the Act. Since the original assessments were not made on that footing the Income-tax officer reopened the assessments of Bhagwandas under section 34. Pursuant to the notices issued under section 34, Bhagwandas filed two returns showing his status as that of a non-resident. In the course of these reassessment proceedings Bhagwandas also filed a declaration as required by section 17(1). Such declaration was filed on January 20, 1960. Since the declaration was filed much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia, contended before the Tribunal on behalf of the assessee that under the order and direction of the Appellate Assistant Commissioner dated March 20, 1961, the Income-tax Officer was directed to assess the firm in respect of the share of Bhagwandas who was a non-resident in accordance with the second proviso to section 23(5)(a). It was urged on behalf of the assessee that the assessments made by the Income-tax Officer as confirmed by the Appellate Assistant Commissioner were invalid on a number of grounds. it was, inter alia, urged that as action was taken in the present case to initiate reassessment proceedings in view of the provisions of section 34(1)(a), the Income-tax Officer ought to have obtained the permission of the Commissioner of Income-tax for taking action under the said section but such permission was not obtained by him for any of the two years. Even an alternative contention was urged that if initial initiation of reassessment proceedings against Bhagwandas was commenced after obtaining such permission such permission enured to the benefit of the assessee pursuant to the order and direction given on March 20, 1961. It was also contended that for commencement of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer assessed the firm instead of the partners thereof individually the same income cannot be reassessed in the hands of the partners. This was a case of association of persons but the principle therein laid down has been applied also to the case of a firm and its partners The first question that we have to decide in the present reference is who is the assessee against whom reassessment proceedings are initiated by the Income-tax Officer pursuant to the order and direction of the Appellate Assistant Commissioner dated March 20, 1961. The argument of Mr. Hajarnavis on behalf of the revenue is that if regard be had to the provisions of section 23(5) of the Act it is quite clear that the reassessment proceedings pursuant to the directions are commenced against the individual partner, Bhagwandas, and the entire approach of the Tribunal was erroneous in having proceeded on the footing that the assessment was against the firm of M/s. Naraindas Dwarkadas. His submission was that if reassessment proceedings pursuant to the order of the Appellate Assistant Commissioner are initiated against Bhagwandas the contentions which found favour with the Tribunal for setting aside the order of reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to do two things : first to compute or 'assess' a person's total income and then to determine the sum payable as tax... In the normal case the person whose income is being computed is the person who pays the tax and for that case these sub-sections also provide for the Income-tax Officer taking the second step and determining the sum payable as tax. But the case of a firm is specially dealt with by sub-section (5). This sub-section only comes into operation after the total income of the firm has been computed or 'assessed' under one of the earlier sub-sections. It draws a distinction between registered and unregistered firms. In the case of a registered firm, the firm itself does not pay income-tax and, therefore, the sub-section directs that the sum payable by the firm shall not be determined, but that each partner's share of the firm's income shall be included in the assessment or computation of the total income of that partner. Thereupon, the sum payable by that partner as tax is to be determined on the basis of that assessment which includes his share of the firm's income." As observed by their Lordships of the Privy Council, undoubtedly the word "assess", "asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entity liable to pay tax is the firm. Thus, there is no scope for ambiguity or different meanings being attached to any of these expressions. The effect of the proviso is merely this : As ordinarily in the case of a registered firm, the share of a partner in the income, profits and gains of the firm are to be assessed in his individual return, that provision is not applicable or attracted when such a partner is a non-resident partner in the taxable territories. In the case of such a non-resident partner, the share of such a partner in the income, profits or gains of the firm has to be assessed on the firm itself and the rate at which the computation is to be made is on the footing that assessment is made on such non-resident partner personally. Thus, even though in some cases different meanings may be applicable to the words "assess", "assessment" or "assessee", so far as the present case is concerned, if regard be had to the substantive provisions of section 23(5)(a) read with the second proviso to clause (a) it is quite apparent that it is the firm which is the assessee, it is the firm whose income is being assessed, it is the liability of the firm to pay tax though in the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax department of that partner. It is not a notice on the firm itself nor is the firm given any intimation that reassessment proceedings are proposed to be initiated against the firm. It is well-known that a firm being a collective body consisting of partners may be represented by all or any one of the partners of the firm, but a firm does not represent a partner. Thus, in our opinion, the Tribunal was right in taking the view that the notices which have been served for both the assessment years on March 2, 1961, are on the individual non-resident, Bhawandas Naraindas, and not upon. the firm of M/s. Naraindas Dwarkadas. This finding itself, in our opinion, is sufficient to answer the question referred to us and we do not consider it necessary to go into the other grounds which the Tribunal was persuaded to go into. As in the present case proceedings for reassessment are adopted against the firm of Messrs. Naraindas Dwarkadas without a proper notice as contemplated by section 34, the entire proceedings are ab initio void and orders in reassessment proceedings passed as a result of such notices are also liable to be set aside. In the result, our answer to the question referred to u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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