Law: Income Tax Act, 1922

Section: 44

Section 177 of the Income-tax Act, 1961 [Corresponding to section 44 of the Indian Income-tax Act, 1922] - Association dissolved or business discontinued - A group of persons formed an association to carry on business in liquor contracts - Contracts came to an end on 30-9-1949 and group was dissolved - Thereafter, ITO issued a notice to one of members of group to file return and assessed group under section 23(4) of 1922 Act - Whether every person who was at time of discontinuance or dissolution a member of group was by express terms of section 44 of 1922 Act liable to be assessed jointly and severally in respect of income, profits and gains of group and was also liable for amount of tax payable - Held, yes - Whether all members who were sought to be assessed must be individually served with notice of assessment, and those not served would not be bound by assessment and therefore, a notice to appropriate person under section 63(2) of 1922 Act would be sufficient to enable authority to assess to tax association - Held, yes FACTS A group of persons formed an AOP to carry on the business in liquor contracts obtained from the former State of Hyderabad. With the end of 30-9-1949, the contracts came to an end. The business was then discontinued, and the group was dissolved. The group did not make a return of its income pursuant to the general notice under section 22(1). The ITO issued a notice under section 34 calling upon 'B'-one of the members of the group-to file a return of income of the group, but 'B' failed to file the return on the due date. The ITO then assessed the taxable income of the group under section 23(4), and determined tax payable. Attempts made by the income-tax department to recover the tax from 'B' having proved unsuccessful, on 13-3-1954, the ITO issued a notice of demand addressed to 'R'-another member of the group. The latter then applied under section 27 for cancellation of the assessment. The application was rejected by the ITO. In appeal to the AAC, the order was set aside and the ITO was directed to cancel the order of the assessment under section 23(4) and to make a fresh assessment after giving an opportunity to 'R' to file a return and…

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