LexM. M. IPOH & ORS. versus COMMISSIONER OF INCOME·TAX, MADRAS
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A B M. M. IPOH & ORS. v. COMMISSIONER OF INCOME·TAX, MADRAS July 26, 1967 IJ. C. SHAH. s. M. SiKRI AND v. RAMASWAMI, JJ.J 65 Income-tax Act, 1922. s. 3-Whether violati11e of A rt. 14 of the Constitution-Quasi-Judicial function of Income-tax Officer in assess- ~ng income to tax a-nd dutu to prevent evasion-If constitute sufficient guidance-Individuals minor and firm trading together-Whether association of persons-Whether doctrine of res judicata applies to finding in assessment proceedings in one 11ear in relation to proceed- C ing for another 1}ear-'Whether determi.nati.on a!ld declarrttion neces- sary as to who is principal officer of an associatwn of persons before assessment proceedings take place. The Karta of a Hindu undivided family was assessed to income- tax from year to year until the assessment year 1953-54 either. as an individual or as the Karla. But later, the Income-Tax Officer issu- ed notices to him under s. 34(1) of the Income-tax Act, 1922, for the assessment years 1951Ji2 to 1953-54 and under s. 22(2) for the years D 1954-55 to 1956-57 for assessment of the ineome as having been re- ceived by an association of persons consisting of the Karta and his minor son in 1951-52. and the Karla, his minor son and a firm in the years 1952-53 to 1956-57, and assessed the income received as income and associations of persons. The Appellate Assistant Commissioner and the Tribunal. in appeals filed before them. substantially cgn- firmed the order of the Income-tax Officer. The High Court. upon a reference. held that the in"Oille for the assessment year 1951-52 did E not accrue to an association of persons. but confirmed the view taken by the Income-tax Officer in respect of the income for the years 1952- 53 to 1956-57. The Karla then moved the High Court under Art. 226 of the Con- stitution and contended that s. 3 of the Income-tax Act, 1922, inves- ted the Income-tax Officer with arbitrary and unguided power to assess the income of an association of persons in the hands either F of the association or of the persons constituting that association and it therefore offended Art. 14 of the Constitution. The High Court rejected the petitions. · In appeals to this Court against the decisions ·p~ the Hi'gh Court in the writ petition and the reference under s. 66 of the In- come·tax Act. HELD: (i) S. 3 of .the Income-tax Act, 1922, was not violative G of Art. 14 ?f the Constit.ution. The duty of the Income-tax Officer 1s to admm1ster the provJS1on~ of the Act in the interests of public revenue, and to prevent evasion or escapement of tax legitimately d~e. to t~e State. Though an executive Officer engaged in the ad- m1mstrat1on of the Act. the function of the Income-tax Officer is fundamentally quasi-judicial. His decision to bring to tax either the income of the association collectively or the shares of the mem- bers of the association separately is not final: it is subject to appeal B to the Appellate Assistant Commissioner and to the Tribunal The natu~e of the authority exercised by the Income-tax Officer in ~ pro- ceedmg to asse~ t.o. tax income. and his duty to prevent evasion or es~apement of hab1ht~ to pay tax legitimately due to the State. con- stitute adequate enuc<:ation of nrinciplce and policy for the "Uidance of the Income-tax Offirer. [72R-H] · C• ' l./P(N)lSCT 66 SUPltE'llli: COURT REPORTS [1968) 1 S.C.B. Sura; MaUJ Mohta & Co. v. A. V. Visvanatha Sas11,; and An.-. A (1954) 26 I.T.R. 1, distinguished. Shri Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar and Ors. (1959] S.C.R. 279. Jyoti Pershllld v. The Admtnietrator for the Union Territory of Delhi. fl962J 2 S.C.R. 125 and Commissioner of Income-ta.r U.P. v. Kanpur Coa Syndicate, (1964) 53 I.T.R. 225. re- ferred to. There is no force in the contention that s. 23A of the Income-tax B Act, as it was incorporated by Act 21 of 1930 laid down certain prin- ciples for the guidance of the Inoome Tax Officer in exercising his .option, but since the repeal of that secthn by Act 7 of 1939, the dis- cretion vested in the Income-tax Officer to select either the income of the asoociation or the individual member is unfettered. By the repeal of s. 23A(l) the essential nature of the power Qf. the Income- tax Officer was not altered. He remained as before under a duty to C administer the Act, for the benefit of public revenue, but his powers were to be exercised judicially and so as to avoid double taxat
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