COMMISSIONER OF INCOME-TAX, BOMBAY, SOUTH POONA versus MURLIDHAR JHAWAR & PURNA GINNING AND PRESSING FACTORY, DHARMABAD

Citation: [1966] 3 S.C.R. 219 · Decided: 07-01-1966 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

cites 2 · see the full citation network in Lexace

Judgment (excerpt)

220 
SUPREME COURT RBPOllTS 
[1966] 3 S.C.R. 
Appeal from the judgment and order, dated July 4, 1962 of 
A 
the Bombay High Court in IJicome-tax Reference No. 46 of 
1960. 
A. V. Viswanatha Sastri, N. D. Karkhanis, R.H. Dhebar and 
R. N. Saclzthey, for the appellant. 
Bishan Narain, B. R. L. Iyengar, S. K. Mehta and K. L. 
B 
Mehta, for the respondent. 
The Judgment of the Court was delivered by 
Shah, J. In the account year ending November 6, 1953 
Murlidhar Jhawar, Pannalal Lahoti and Govindbai carried on 
business in groundnut, 
cotton and cotton-seed. 
In the year 
C 
of assessment 1954-55 the Income-tax Officer, Nanded, brought 
10 tax a third share in Rs. 51,280 computed as profits from the 
business in the hands of each of the three parties, and thereafter 
he called upon Murlidhar to submit a return of the "income of 
the joint venture" on the footing that the parties thereto con-
D 
stiluled an unregistered firm. 
Murlidhar complied with the 
requisition and submitted in November 1957 a return, 1 but later 
applied 10 withdraw it by application dated December 18, 1957. 
The Income-tax Officer rejected the application for withdrawal 
of return and completed the assessment of the three parties to 
the join I venture under s. 23 (3) of the Income-tax Act, t 922 in 
E 
!he status of an unregistered firm and computed the income of tl1e 
join! venture at Rs. 80,925. In appeal to the Appellate Assistant 
Commissioner the order passed by the Income-tax Officer was 
confirmed. 
In second appeal, the Income-tax Appellate Tribunal 
set aside the order of the Appellate Assistant Commissioner. The 
Tribunal held that the Income-tax Officer had the option to 
F 
assess the individual parties to the joint venture, and he having 
exercised that option it was not open to him there!tfter to reassess 
the same income colleclively in the hands of the three parties to 
the joint venture in the status of an unregistered firm. 
Bui on a 
concession made by counsel for the three parties, the Tribunal 
directed that the assessment be "rectified so as to restore the status 
G 
quo ante." 
The Tribunal submiued a statement of the case and referred 
1he following question to the High 
Court of Judicature 
at 
Bombay: 
"Whether on the facts and in the circumstances of 
the case the assessment of the unregistered firm was 
proper and legal, the two partners of this partnefship 
ff 
,
• 
•
•
' 
,l 
~ 
~ 
' 
• 
\ 
1 
" 
). 
~ 
t 
\ 
A 
B 
c 
f) 
C. I. T. V. M. J.P. FACTORY (Shah,],) 
221 
having been assessed in respect of their shares of 
income from this partnership business ? " 
The High Court recorded an answer in the negative. With certi-
ficate granted by the High Court, this appeal has been preferred. 
Under s. 3 of the Indian Income-tax Act, 
income-tax 
is 
charged in respect of the total income of the previous year of 
every individual, 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 indivi-
dually. 
This 
Court in Commissioner of Income-tax, U.P. v. 
Kanpur Coal Syndicate(') observed at p. 228 : 
"The section ( s. 3) expressly treats an association 
of persons and the individual members of an associa-
tion 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." 
The same principle would apply to the cases of assessment of 
partners individually of an unregistered firm. 
The partners may 
be assessed individually or they may be assessed collectively in 
the status of an unregistered firm : the Income-tax Officer cannot 
E 
however seek to assess the one income twice--once in the hands 
of the partners and again in the hands of the unregistered firm. 
Mr. Viswanatha Sastri for the Department contends that the 
Income-tax Officer making the first assessment of the three parties 
to the joint venture was not informed that the three parties con-
F 
stituted an unregistered firm and therefore the Income-tax Officer 
was in law competent to assess the entity which was in truth liable 
to be assessed to tax, and in making the earlier order of assessment 
he cannot be deemed to have exercised an option which pre-
cluded him from assessing the income of the three parties as an 
unregistered firm. 
It is true as pointed out by this Court in a 
G recent judgment: Income-tax Officer, 
A-Ward, Lucknow v

Excerpt shown. Read the full judgment & AI analysis in Lexace.