Law: Income Tax Act, 1961

Section: 187

Law: Income Tax Act, 1961

Section: 187

Section 187(1) of the Income-tax Act, 1961 - Firm - Change in constitution of - Assessment year 1964-65 - Whether while making assessment under section 187(1), ITO should apply first proviso and apportion income of previous year relative to firm between partners entitled to receive same in that year, however, omission to do so will not be reflected upon validity of order of assessment on firm - Held, yes FACTS The assessee-firm filed the instant petition challenging an order of the ITO made under section 187(1) relating to the assessment year 1964-65 on the ground that the ITO had failed to apportion the profits of the firm as between its partners as reconstituted since the death of one of the partners on 18-1-1963 and said omission was fatal to the assessment order itself. HELD The first proviso to section 187(1) says that the income of the previous year shall, for the purpose of inclusion in the total income of the partner, be apportioned between the partners, who, in such previous year, were entitled to receive the same. The second part of the proviso provides that if the tax assessed upon a partner cannot be recovered from him, it shall be recovered from the firm as constituted at the time of making the assessment. It is clear that while making an assessment under the main part of sub-section (1), the ITO should apply the first proviso and apportion the income of the previous year relating to the firm between the partners entitled to receive the same in that year. But the omission to do so will not be reflected upon the validity of the order of assessment on the firm. That order is independently made on the firm and its validity does not depend upon the apportionment of the income as between the partners. The scheme of the section is that when the income is apportioned as between the partners, the tax assessed upon a partner will, in the first instance, be recovered from him and it is only when he fails to pay the tax or when it is not possible to recover from him that the liability of the firm to be proceeded against for the same will arise. But that is not to say that when an order is made against the firm, that cannot be enforced against the firm. If the…

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