TMI Blog1963 (11) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ot served with the notice of assessment must fail. The second question will be answered as follows : " The applicant was liable for the amount of tax payable under the order of assessment. " Appeal allowed. - - - - - Dated:- 20-11-1963 - Judge(s) : A. K. SARKAR., M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by SHAH J.---Baba Gowd, P. V. Rajareddy and Rajareddy Mallaram formed an association of persons called " Nizamabad Group Liquor Shops " --- called for the sake of brevity " the Group ". For the Fasli year 1358, i.e., October 1, 1948, to September 30, 1949, the Group carried on business in liquor contracts obtained from the former State of Hyderabad. With the end of Fasli year 1358, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of assessment under section 23(4) having already been made in the case there could be no occasion to issue a fresh notice to Rajareddy Mallaram or to make a fresh assessment, but somewhat inconsistently with that opinion, the Tribunal directed that the Appellate Assistant Commissioner do consider whether Rajareddy Mallaram had been prevented by sufficient cause from making the return. At the instance of Rajareddy Mallaram the following two questions were referred to the High Court of Andhra Pradesh by the Tribunal : " (1) On the facts and in the circumstances of the case, was the order of assessment made by the Income-tax Officer under section 23(4) on September 30, 1953, bad in law? (2) If the answer to the above question i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts income, after serving a notice upon one and not all the members of the Group, could be enforced against members of the Group who were not served. The material part of section 44 of the Indian Income-tax Act (in so far as it dealt with the liability of discontinued associations) before it was amended by section 11 of the Finance Act (XI of 1958) with effect from April 1, 1958, stood as follows : " Where any business, profession or vocation carried on by a ...... association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution ... a member of such association shall, in respect of the income, profits and gains of the. . . association, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case the court was concerned with the assessment of a firm of which the business was discontinued because of the dissolution of the firm, by the death of one of the partners. But section 44 as it stands amended by Act 7 of 1939 applies to discontinuance of the business of associations of persons as well as of firms, and the question which directly fell to be determined in that case was whether penalty for concealing the particulars of income or for deliberately furnishing inaccurate particulars of income in the return could lawfully be imposed after discontinuance of the business. It is true that the validity of the order assessing the firm was not expressly challenged, though at the date of the order of assessment the firm stood dissolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. Under Chapter IV of the Income-tax Act an association of persons may be assessed as a unit of assessment, or the individual members may be assessed separately in respect of their respective shares of the income, but the Act contains no machinery for assessing the income received by an association, in the hands of its members collectively. The unit of assessment in respect of the income earned by the association is either the association or each individual member in respect of his share in the income. This is so when the association is existing, and after it is dissolved as well. There can be no partial assessment of the income of an association, limited to the share of the member who is served with notice of assessment. For the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of such assessment, the procedure is that applicable for assessment of the income of the association as if it had continued. A notice to the appropriate person under section 63(2) would, therefore, be sufficient to enable the authority to assess to tax the association. The plea that the respondent not having been served personally with the notice of assessment is not liable to pay the tax assessed cannot therefore be sustained. Counsel for the respondent then contended that the original assessment made under section 23(4) was invalid, because notice of assessment was not served upon the Group in the manner provided by section 63(2) of the Indian Income-tax Act, Baba Gowd who was served with the notice not being the principal officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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