Law:

Section:

Section 155 of the Income-tax Act, 1961 [Corresponding to section 35(5) of Indian Income-tax Act, 1922] - Rectification of mistakes - Other amendments - Assessment year 1958-59 - ITO assessed some of partners of assessee-firm individually for their share of profits from firm, subject to rectification under section 35 when correct share would be determined in firm's assessment of assessee-firm, ITO treating it as an unregistered firm and brought whole of its profit to tax - Whether section 35(5) is a provision merely for correcting share of profit of partner included in his individual assessment and this provision did not in terms nor by implication envisage a power in ITO to tax profits in hands of individual partners and also in hands of firm - Held, yes - Whether it was not open to ITO to charge profits to tax in hands of assessee after having charged them to tax in hands of some of its partners - Held, yes FACTS Assessee-firm was consisting of three partners. For the relevant year the ITO took separate assessment proceedings against two of the partners in their individual status and included therein the share of each from the profits of the assessee-firm. The ITO added a remark in the assessment order that the amount would be rectified later under section 35 of 1922 Act when the correct share was determined in the assessment of the assessee-firm. Subsequently, the ITO took assessment proceedings against the assessee-firm and made an assessment order against it treating it as an unregistered firm. In appeal before the AAC, the assessee-firm contended that as the ITO had already taxed the share income in the hands of two of the partners, it was not open to him to proceed to assess the profits again in the hands of the assessee-firm. The contention did not find favour with him. In second appeal, the Tribunal took the view that the ITO was entitled to tax the profits in the hands of the assessee-firm and thereafter grant relief to the individual partners who had paid the tax on their separate assessments. On reference : HELD The income of a firm may be charged to tax either in the hands of the firm or in the hands of its individual partners. A firm and its…

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