T.P. Mukerjee, J. - (1.) THIS is a case stated under Section 66(1) of the Income-tax Act, 1922, hereinafter referred to as "the Act", for the opinion of this court on the following question of law : " Whether it is legal to assess an unregistered firm after assessing the share income from the firm in the hands of one of the partners ?"
(2.) THE facts lie with a short compass. THE assessee, the applicant before us, is an unregistered firm carrying on business, in the supply of stores to the military department on contract. THEre were two partners, Kallu Mal and J.P. Srivastava, whose shares where equal. THE assessment of the firm for the assessment year 1959-60 was completed on September 17, I960, but before that one of the partners, namely, Kallu Mal, had already been assessed on his share income from the firm. THE assessee appealed to the Appellate Assistant Commissioner against the assessment made by the Income-tax Officer on September 17, 1960, and one of the grounds raised in the appeal was that partner, Kallu Mal, having already been assessed in respect of the share income from the firm, the Income-tax Officer was not competent again to proceed to assess the firm itself. On behalf of the assessee, reliance was placed on a decision of this court in the case of Soil Prasad Agarwat v.Income-tax Officer, [1959] 37 I.T.R. 107, but the Appellate Assistant Commissioner held that the decision was distinguishable and he overruled the contention of the assessee. THE assessee thereupon appealed to the Appellate Tribunal and raised the same question again. THE Tribunal also rejected the contention of the assessee. In coming to the conclusion that it is open to the Income-tax Officer to assess the partners of an unregistered firm as well as the firm itself, the Tribunal relied on a decision of this court in the case of Hazari Ram Mohan Ram v. Commissioner of Income-tax, 1962 46 ITR 766. In this connection the Tribunal observed as follows: "In Hazari Ram Mohan Ram v. Commissioner of Income-tax the Allahabad High Court has held that the partner of an unregistered firm may be assessed without making a separate assessment on the firm itself. Later on, if modification of the partner's assessment becomes necessary by subsequent assesment of the firm, action can be taken under Section 35{5) of the Act. THE Allahabad High Court, therefore, has clearly accepted the principle that the firm may be assessed even though earlier a partner's share in the firm has been assessed in his hands individually. We, therefore, reject this contention of the assessee." At the instance of the applicant-firm the Tribunal has referred the question of law for the opinion of this court as set out above. An answer to the question referred will be found in the clear language of Section 3 of the Act, which is the charging section. Section 3 runs as follows : ''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 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."
(3.) THE charging section quoted above imposes tax on the total income of six different assessable entities, viz., (i) every individual, (ii) Hindu undivided family, (iii) company, (iv) a local authority, (v) every firm or the partners of the firm and (vi) other association of persons or the members of the association individually. THE word "or" underlined above has clearly been used in a disjunctive sense, which means that the tax is leviable either on the firm or its partners individually but not on both and, similarly, the charge may be imposed either on the association of persons or its members but not on both simultaneously. This has been made clear by the Supreme Court in the case of Commissioner of Income-tax v. Kanpur Coal Syndicate, 1964] 53 I.T.R. 225 (S.C) : "THE section (Section 3) expressly treats an association of persons and the individual members of association as two distinct and different assessable entities. On the term of the section the tax can be levied on either of the said two entities according to the provisions of the Act." This case was again referred to by the Supreme Court in its decision in the case of Commissioner of Income-tax v. Murlidhar Jhawar and Purna Ginning and Pressing Factory, [1966] 60 I.T.R. 93, 97 (S.C.). At page 97, Shah J., speaking for the court, said ; "The same principle would apply to the case of assessment of partners individually of an unregistered firm. The partners may be assessed individually or they may be assessed collectively in the statue of an unregistered firm : the Income-tax Officer cannot however seek to assess the one income twice--once in the hands of the partners and again in the hands of the unregistered firm." ;