1972 PLP 117 (PTD)

V. G. OAK, C. J.‑

The following two questions have been referred to this Court by the Income‑tax Appellate Tribunal, Allahahad: "(1) Whether the assessment of the firm, after the share income had been taxed in the hands of the partners, was valid ? (2) Whether the assessment proceedings for the year 1956‑57 could be validly initiated against the firm after its dissolu tion?" Messrs Hari Om Company, Kanpur (a dissolved firm) is the assessee. 1956‑57 is the assessment year. In the first instance, the Income‑tax Officer assessed the partners of the firm individually. Thereafter, he proceeded to assess the firm as such. The firm raised an objection that the assessment of the firm was not permissible in law after the assessment of the individual partners. This contention was overruled by the Income‑tax Officer. The firm applied for registration. That claim was rejected. The Income‑tax Officer proceeded to make the assessment on the footing that it was an unregistered firm. The firm challenged these decisions by the Income‑tax Officer. On the question of registration the firm succeeded before the Tribunal. The Tribunal permitted registration of the firm. On the question of assessment, the assessee's appeal was dismissed by the Appellate Assistant Commissioner. When the question of assessment went up before the Tribunal upon further appeal, the assessee raised two questions. The first question was that the assessment of the firm was not permissible after separate assessment of the partners in their individual capacity. Secondly, it was urged before the Tribunal that the assessment proceed ings for the year 1956‑57 could not be validly initiated against the firm after its dissolution. Both these contentions raised by the assessee were rejected by the Tribunal. The assessee's appeal was therefore, dismissed. The assessee applied for reference to this Court under section 66(1) of the Indian Income‑tax Act, 1922. The Tribunal has, therefore, referred the two questions quoted above to this Court. On the first question, Mr. Gopal Behari, appearing for the Department, points out that the Tribunal ordered registration of the firm. Mr. Gopal Behari, therefore, urged before us that the case should be disposed of on the footing that a registered firm has been assessed. Reliance was placed upon section 23(5)(a) of the Act. It was pointed out by Mr. Gopal Behari that in the case of a registered firm it is permissible to assess the partners in addition to the assessment of the firm as such. Mr. Gopal Behari suggested that this case should be disposed of under section 23(5)(a) of the Act. The Tribunal observed in its appellate order: "Taking the first contention, Shri Gulati conceded that if the firm is ultimately registered, the assessee would have no serious grievance. But the Department has not accepted the Tribunal's order granting registration. The assessee is, therefore, obliged to press this ground before us." That observation in the appellate order indicates that, in spite of the decision by the Tribunal directing registration of the firm, the Department was for some reason not prepared to proceed on the footing that the firm was entitled to registration. In the first instance, the Income‑tax Officer made the assessment on the footing that the firm was unregistered. The assessee's appeal was successively dismissed by the Appellate Assistant Commissioner and the Tribunal. We must, therefore, assume that the Tribunal dealt with the case on the footing that the Tribunal was dealing with the case of assessment of an un registered firm. We shall, therefore dispose of the reference on the footing that we are dealing with a situation where an unregistered firm has been assessed after the assessment of the partners in individual capacity. In Joti Prasad Agarwal v. Income‑tax Officer, B‑Ward, Mathura ((1959) 37 I T R 107), it was held by this Court that, once the income of the association was charged to income‑tax in the bands of the members individually and the assessments of the members remained valid assessments, there could be no fresh assessment of the income in the hands of the association. That decision of this Court was quoted with approval by the Supreme Court in Commissioner of Income‑tax v. Murlidhar Jhawar and Purna Ginning and Pressing Factory ((1966) 60 I T R 95 (S C)). It was held by the Supreme Court that the partners of an unregistered firm might be assessed individually or they might be assessed collectively in the status of an unregistered firm. The Income‑tax officer could not, however, seek to assess the one income twice once in the hands of he partners and again in the hands of the unregistered firm. This point came up for consideration before this Court in Girdhari Lal Laxman Prasad v. Commissioner of Income‑tax ((1968) 70 I T R 853). It was held in that case that it is not legal to make an assessment on an unregistered firm after some of its partners have already been assessed to tax on their share income from the firm. In view of the decisions of this Court, and the decision of the Supreme Court in the case of Murlidhar Jhawar, the first question must be answered in favour of the assessee and against the Department. Mr. P. N. Pachauri, appearing for the assessee, did not press the second question. We need not, therefore, answer this question. Our answer to the first question referred to this Court is in the negative. We give no answer to the second question. Parties shall bear their own costs in this reference.