Law: Income Tax Act, 1961

Section: 251

Section 251 of the Income-tax Act, 1961 [Corresponding to section 31(3) of Indian Income-tax Act, 1922] - Commissioner (Appeals) - Powers of - Assessment years 1950-51 to 1952-53- Pending suit for dissolution of assessee-firm, one partner carried on business of firm - ITO assessed firm in assessment years in question in status of 'association of persons' - AAC annulled assessments and directed ITO to assess income as income of partner's family - Tribunal set aside direction of AAC holding that partner was stranger to assessment proceedings - High Court held that order of AAC directing assessment of partner's family was unwarranted and could relate only to partner in his individual capacity - Whether when question referred to High Court only related to assessment of income in hands of partner after annulling assessment of firm, High Court exercising advisory jurisdiction was incompetent to make inquiry into power of AAC to make impugned direction - Held, yes FACTS 'B', 'D' and 'J' were partners in a firm. 'J' filed suit for dissolution of the firm. During pendency of the suit 'B' severed his connection with the business and thereafter the business was carried on by 'D' alone. 'D' filed returns in different capacities. The ITO assessed firm in the three years of assessment in the status of 'an association of persons'. The AAC directed that the income in the three assessment years be assessed in the hands of the family of 'D', apparently in the view that 'D' represented the HUF of which he was a member. The Tribunal set aside the direction to assess the income of the firm in the hands of 'D' personally, for in their view 'D' was a stranger to the proceeding for assessment. The High Court held that the order of the AAC directing assessment of 'the family of 'D' was clearly unwarranted and could relate only to 'D' in his individual capacity. On appeal to the Supreme Court : HELD 'D' had submitted the returns, and 'D' appealed against the order of assessment. He could, in the circumstances of the case, not be called a stranger to the assessment. The income earned by the assessee was assessed to tax as income of an association of persons, of which on the finding of…

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