Appeal No 673 of 1963
Appeal from the judgment and decree dated September 22 1960 of the Allahabad High Court in Income tax Mis cellaneous Case No 188 of 1953
section K Kapur and R N Sachthey for the appellant
Veda Vyasa and Naunit Lal for the respondent
April 30 1964
The Judgment of the Court was delivered by SUBBA RAo J
The question for decision in this appeal is whether when the Income tax Officer in his discretion assessed an association of persons to income tax the Appel late Assistant Commissioner in appeal or the Income tax Appellate Tribunal in further appeal can set aside that order and direct him to assess the members of that association individually Me facts lie in a small compass and they areas follows Me assessee consisted of several persons combined together for the purpose of purchasing coal in order to supply the 87 same to customers for domestic purposes and other small scale industries
For the assessment year 1948 49 the Income tax Officer levied tax upon the total income in the hands of the said association of persons
The assessee claimed that in the circumstances of the case it should not be assessed to tax as an association of persons but the proportion of the income in the hands of each of the members of the association might be assessed to tax instead
As the Income tax Officer did not comply with this request the assessee preferred an appeal to the Appellate Assistant Com missioner but it was dismissed
On a further appeal to the Income tax Appellate Tribunal the Tribunal held that though the Income tax Officer had the power to assess the income of the association of persons as such or in the alternative on the individual members thereof in respect of their propor tionate share in the income it the Tribunal had no power under the Act to direct the Income tax Officer to exercise his rower in one way or other
The following question was referred to the High Court of Allahabad under section 662 of the Indian Income tax Act 1922 If in pursuance of section 3 of the Indian Income tax Act the Income tax Officer levies the income tax in respect of the total income of the previous year of an association of persons upon the said association of persons as a collective unit whether the Tribunal is competent to direct the Income tax Officer to levy the income tax proportionately upon the individual members of the said association of persons in respect of the proportionate income of each of the members consisting the said association of persons
 A Division Bench of the High Court held that the Appellate Tribunal had power to sat aside the Income tax Officer s assessment against the association and to give consequential and ancillary directions to the said Officer to assess the Individuals
Learned counsel for the Revenue contends that under the Indian Income tax Act 1922 he reinafter called the Act the Income tax Officer has no option but to assess the total 88 income of the association of members though the indivi dual s share in the income may be added to his individual income for the purpose of ascertaining his total income
He further argues that even if the Income tax Officer has the option to assess to income tax the association of persons on its total income or the individual members thereof in respect of their proportionate share of the income if he had exercised the option in one way or other neither the Appellate Assistant Commissioner in appeal nor the Income tax Appellate Tribunal in further appeal has power to direct the Incometax Officer to exercise his discretion in a different way and for this conclusion he seeks to draw strength from his further submission that no appeal lies at the instance of the association of persons when they are assessed as one unit on the ground that the Officer should have assessed the individual members of the said association
At the outset it will be convenient to read the relevant provisions of the Act
Section 3
Charge of Income tax Where any Central Act enacts that income tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be chareed for that year in accordance with and subject to the provisions of this Act in respect of the total income of the previous year of every indi vidual Hindu undivided family company and local authority and of every firm and other association of persons or the partners of the firm or the members of the association individually
Section 14
2 The tax shall not be payable by an assessee b if a member of an association of persons other than a Hindu undivided family a company of a firm in respect of any portion of the amount which he is entitled to receive from the associa tion on which the tax has already been paid by the association
89 Section 30
1 Any assessee objecting to the amount of income assessed under section 23      or the amount of tax determined under section 23 under this Act may appeal to the Appellate Assistant Commissioner against the assessment or against such refusal or order Section 31
3 In disposing of an appeal the Appellate Assistant Commissioner may in the case of an order of assessment a confirm reduce enhance or annul the assessment or b set aside the assessment and direct the Incometax Officer to make a fresh assessment after making such further inquiry as the Income tax Officer thinks fit or the Appellate Assistant Commissioner may direct a id the Income tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment
x x x x x x 4 Where as the result of an appeal any change is made in the assessment of a firm or association of persons or a new assessment of a firm or associations of persons is ordered to be made the Appellate Assistant Commissioner may authorise the Income tax Officer to amend accordingly any assessment made on any partner of the firm or any member of the association
Section 3 imposes a tax upon a person in respect of his total income
The persons on whom such tax can be imposed are particularized therein namely Hindu undivided family company local authority firm association of persons partners of firm or members of association individually
The section therefore does not in terms confer any power on any particular officer to assess one of the 90 persons described therein but is only a charging section imposing the levy of tax on the total income of an assessable entity described therein
The section expressly treats an association of persons and the individual members of an association as two distinct and different assessable entities
On the terms of the section the tax can be levied on either of the said two entities according to the provisions of the Act
There is no scope for the argument that under section 3 the assessment shall be only on the association of persons as a unit though after such assessment the share of he income of a member of that association may be added to his other income under section 142 of the Act
This construction would make the last words of the section viz members of the association individually a surplusage
This argument is also contrary to the express provisions of section 3 which mark out the members of the association individually as a separate entity from the association of persons
Income of every person whether he is a member of an association or not is liable to the charge under the head  every individual
Section 142 b only says that if such an individual happens to be a member of an association of persons which has already been assessed the tax would not be payable in respect of the share of his income again
That under the Act an assessment can be made on an association of persons as a unit or alternatively on the individual members thereof in respect of their respective shares of the income was assumed by this Court in Commissioner of Income tax vs Raja Reddy Mallaram1
We therefore hold that section 3 impliedly gives an option to an appropriate authority to assess the total income of either the association of persons or the members of such association individually
The next question is whether the said option is given only to the Income tax Officer and is denied to the Appellate Assistant Commissioner and the Appellate Tribunal
Under the Act the Income tax Officer after following the proce dure prescribed makes the assessment under section 23 of the Act
Doubtless in making the assessment at the first instance he has to exercise the option whether he should assess the association of persons or the members thereof 1 196451 ITR 285 SC 91 individually
It is not because that any section of the Act confers an exclusive power on him to do so but because it is part of the process of assessment that is to say he has to ascertain who is the person liable to be assessed for the tax
If he seeks to assess an association of persons as an assessable entity the said entity can object to the assessment inter alia on the ground that in the circumstances of the case the assessment should be made on the members of the association individually
The Income tax Officer may reject its contention and may assess the total income of the association as such and impose the tax on it
Under section 30 an assessee objecting to the amount of income assessed under section 23 or the amount of tax determined under the said section or denying his liability to be assessed under the Act can prefer an appeal against the order of the Income tax Officer to the Appellate Assistant Commissioner
It is said that an order made by the Income tax Officer rejecting the plea of an association of persons that the members thereof shall be assessed individually does not fall under one or other of the three heads mentioned above
What is the substance of the objection of the assessee The assessee denies his liability to be assessed under the Act in the circumstances of the case and pleads that the members of the association shall be assessed only individually
The expression denial of liability is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances
In either case the denial is a denial of liability to be assessed under the provisions of the Act
In one case the assessee says that he is not liable to be assessed to tax under the Act and in the other case the assessee denies his liability to tax under the provisions of the Act if the option given to the appropriate officer under the provisions of the Act is judicially exercised
We therefore hold that such an assessee has a right of appeal under section 30 of the Act against the order of the Income tax Officer assessing the association of members instead of the members thereof individually
If an appeal lies section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal
Under section 31 3 a in disprosing of such an appeal the Appellate Assistant Commissioner may in the case of an order of assessment confirm reduce enhance or 92 annul the assessment under cl
b thereof he may set aside the assessment and direct the Income tax Officer to make a fresh assessment
The Appellate Assistant Commissioner has therefore plenary powers in disposing of an appeal
The scope of his power is coterminous with that of the Income tax Officer
He can do what the Income tax Officer can do and also direct him to do what he has failed to do
If the Income tax Officer has the option to assess one or other of the entities in the alternative the Appellate Assistant Commissioner can direct him to do what he should have done in the circumstances of a case
Under section 3 3 I  au assessee objecting to an order passed by an Appellate Assistant Commissioner under section 28 or section 31 may appeal to the Appellate Tribunal within 60 days of the date on which such order is communicated to him
Under section 334 The Appellate Tribunal may after giving both parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit and shall communicate any such orders to the assessee and to the Commissioner Under section 335 Where as the result of an appeal any change is made in the assessment of a firm or association of persons or a new assessment of a firm or association of persons is ordered to be made the Appellate Tribunal may authorise the Income tax Officer to amend accordingly any assessment made on any partner of the firm or any member of the association
Under this section the Appellate Tribunal has ample power to set aside the assessment made on the association of persons and direct the Income tax Officer to assess the individuals or to direct the amendment of the assessment already made on the members
The comprehensive phraseology used both in section 31 and section 33 of the Act does not countenance the attempt of the Revenue to restrict the powers of the Appellate Assistant Commissioner or of the Appellate Tribunal both of them have power to direct the appropriate authority to assess the members individually instead of the association of persons as a unit
We therefore hold agreeing with the High Court that the Appellate Tribunal has jurisdiction to give directions to the appropriate authority to cancel the assessment made or the association of persons and to give appropriate directions 93 to the authority concerned to make a fresh assessment on the members of that association individually
The answer given by the High Court to the question propounded is correct
In the result the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
Income tax was assessed upon the total income in the hands of the respondent assessee an association of several persons combined together for the purpose of purchase of coal and its supply to customers for domestic purposes and other small scale industries
The assessee claimed that it should not be assessed to tax as an association of persons but the proportion of the income in the hands of each members of the association might be assessed to tax instead
The Income tax Officer refused this request and an appeal to the Appellate Assistant Commissioner was dismissed
The Income tax Appellate Tribunal on a further appeal
held that though the Income tax Officer had power to assess income of the association of persons as such or in the alternative on the individual members thereof in respect of their proportionate share in the income the tribunal had no power under the Act to direct the Income tax Officer to exercise his power in one way or other
On a 86 reference the High Court held that the Appellate Tribunal had power to set aside the Income tax Officer s assessment against the association and to give consequential and ancillary directions to the said officer to assess individuals
HELD i Section 3 of the Income tax Act impliedly gives an option to an appropriate authority to assess the total income of either the association of persons or the members of such association individually
Commissioner of Income tax vs Reddy Mallaram followed
ii Such an assessee has a right to appeal under section 30 of the Act against the order of the Income tax Officer assessing the association of persons instead of the members individually
iii The Appellate Tribunal has jurisdiction to give directions to the appropriate authority to cancel the assessment made on the association of persons and to give appropriate directions to the authority concerned to make fresh assessment on the members of that associations individually
The phraseology used both in section 31 and section 33 does not restrict the powers of the Appellate Assistant Commissioner or the Appellate Tribunal both have the power of such direction