Law:

Section:

Section 184 of Income-tax Act, 1961 (Corresponding to section 26A of Indian Income-tax Act, 1922) – Firm – Assessed as such – Assessment years 1960-61 and 1961-62 – Whether in case of unregistered firm, where partners of firm have been subjected to assessment, in respect of same year and same income, firm can not be assessed - Held, yes FACTS For the relevant assessment years the ITO completed assessment on the assessee-firm in the status of unregistered firm after rejecting applications under section 26A of 1922 Act. On appeal, the AAC allowed the assessee to raise the additional ground and held that the ITO having chosen to assess the partners separately in their respective share income, the assessments made on the assessee-firm in the status of an unregistered firm were not valid in law. On revenue's appeal, the Tribunal rejected the contention against allowing additional ground by the AAC but set aside the AAC's order with the direction to consider the other grounds of appeal against the assessee and decide the appeals afresh. On reference : HELD It was the propriety of the aforesaid decision of the Tribunal which was the subject matter of challenge in the question referred. In the charging provisions of the statute, partners of the firm as such have been treated as separate assessable units in order to avoid the mischief of double taxation. It has, therefore, to be seen that one income does not suffer taxation at the hands of two taxable units. In the case of unregistered firms as in the instant case where the partners of the firm had been subjected to assessment in respect of the same year in respect of the same income, the firm could not be assessed. The ITO was aware that there was a firm and he was aware that this firm was being assessed by another ITO, and was also aware that said assessment had not taken place. With this knowledge the revenue chose to assess other partners. Now in the case of the subsequent year two of the partners were assessed by the same officer having jurisdiction over the firm. The liability to be taxed in certain contingency depends upon the substantive provisions of the IT Act, in this case under section 3 of the 1922 Act and…

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