R.S.PATHAK, J. - (1.) THE assessee is a partnership firm consisting of three partners, Girdhari Lal, Laxman Prasad and Ram Dulari Devi. For the assessment year 1958-59 the Income-tax Officer took separate assessment proceedings against Girdhari Lal and Ram Dulari Devi in their individual status and included therein the share of each from the profits of the assessee-firm. THE share was taken in accordance with the return filed by each partner and a remark was added that the amount would be rectified later under section 35 of the Income-tax Act, 1922, when the correct share was determined in the assessment of the assessee-firm. THE share was brought to tax in the assessment of each individual partner. Subsequently, the Income-tax Officer took assessment proceedings against the assessee-firm for the assessment year 1958-59 and made an assessment order against it treating it as an unregistered firm. Before the Appellate Assistant Commissioner the assessee-firm contended that, as the Income-tax Officer 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 off the assessee-firm. THE contention did not find favour with the Appellate Assistant Commissioner. In second appeal, the Income-tax Appellate Tribunal took the view that the Income-tax Officer 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. Accordingly, the Tribunal dismissed the appeal. At the instance of the assessee, the Tribunal has referred the following question for the opinion of this court : Whether it is legal to make an assessment on an unregistered firm, after some of its partners have already been already been assessed to tax on their share income from the firm ?
(2.) SRI R. L. Gulati, appearing for the revenue, has raised an objection to the general terms in which the question has been framed and has urged that the question as framed does not arise out of the appellate order of the Tribunal and this court, treating it as a question of academic importance, should return the reference unanswered. We are unable to accept the contention of the learned counsel. While it is true that the language in which the question is couched tends to the abstract, it must be remembered that the question has been framed by reference to a set of facts found by the Tribunal in appeal and now set out in the statement of the case. If, as is the case here, it is possible to relate the question to those facts and define the scope of the question by reference to them we must do so and not decline to answer the question. The objection is rejected. Sri P. N. Pachauri, learned counsel for the assessee, urges that in as much as the Income-tax Officer proceeded at the outset to tax the profits falling to the share of the partners in their individual assessments, it must be inferred that he had opted in favour of taxing the profits in the hands of the assessee. Having exercised that option and charged the profits to tax accordingly, Mr. Pachauri argues, it was not open to the Income-tax Officer to tax these profits in the hands of the assessee. Section 3 of the Act provides : 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 charged 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 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 individually. The provision charges to tax the total income of the previous year of an individual and of the groups mentioned therein. An option is given in respect of charging to tax the total income of a firm and of an association of persons. 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 and in the case of an association of persons either in the hands of the association or in the hands of its individual members. A firm and its partners are treated as mutually distinct and different assessable entities. So also are an association of persons and its individual members. The option has been made available only in respect of a firm or an association of persons. It is not available in respect of other groups specified in the provision. There is a chain of decisions laying down that, it the Income-tax Officer opts in favour of charging the profits in the hands of the individual partners of the former members of the association, it is not open to him to tax the profits again in the hands of the firm or the association of persons. This court held in Joti Prasad Agarwal v. Income-tax Officer, B-Ward, Mathura, that, if the option is exercised in favour or assessing the profits in the hands of the individual members of an association of persons, the profits cannot be brought to tax in the hands of the association as such. And the view taken by the Supreme Court in Commissioner of Income-tax v. Raja Reddy Mallaram can be explained only on the hypothesis that the income of an association of persons can be charged to tax either in the hands of the association or in the hands of its individual members. Shah J., who spoke for the court, observed :
(3.) THE unit of assessment in respect of the income earned by the association is either the association or each individual member in respect of his share in the income. This is so when the association is existing and after it is dissolved as well. The question fell to be considered by the Supreme Court in Commissioner of Income-tax v. Kanpur Coal Syndicate also, and the law was clearly laid down in the following terms :;