Law:

Section:

Section 4 of the Income-tax Act, 1961 - Association of persons - Assessable as - Assessment year 1986-87 - Documents and records seized from residential premises of two assessees during search showed that said two persons were engaged in contract work for slaughter tapping and sale of rubber trees from two rubber estates - Assessing Officer assessed income from two contracts of slaughter tapping in hands of AOP consisting of two assessees - Commissioner (Appeals) upheld assessment order, but on second appeal, Tribunal set aside same holding that there was nothing to indicate intention of members of AOP to carry on business together - Whether when accounts seized from assessees had proved beyond doubt that both assessees undertook business together; carried on business together; and shared profit, status of said AOP needed not be proved through an agreement - Held, yes - Whether, therefore, order of Tribunal was to be reversed and assessment confirmed in first appeal was to be reconfirmed - Held, yes FACTS The residential premises of the two assessees had been searched. Records and documents seized during search showed that both the assessees were engaged in contract work for slaughter tapping and sale of rubber trees from two estates, namely, 'V' Estate and 'M' Estate. A notice under section 147 was issued for income escaping assessment in the hands of AOP constituted by the two assessees. However, both the assessees filed individual returns denying the existence of AOP. Therefore, separate assessments were made as a protective measure in the hands of both the persons. However, when individual assessments were contested in first appeals, the concerned assessees reported that income should be assessed in the hands of an AOP consisting of two assessees. While considering appeal filed by the AOP against income escaping assessment, the Commis- sioner (Appeals) noticed that contrary to the statement made before the Commissioner (Appeals), based on which individual assessments of two assessees had been cancelled by the first appellate authority, the assessees had not offered the income for assessment in the hands of an AOP. Therefore, the Commissioner (Appeals)…

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