IMPORTANT POINT
According to present Income Tax Act, 1961, the right person is to be taxed and merely because a wrong person is taxed, it does not operate as a bar to taxing the right person under Section 148.

Headnote:Income Tax Act, 1961-Section 148-Taxation of income escaping assessment-Capital Gain on compensation for land acquisition-Wrongly assessed earlier as individual income-Notice under Section 148 to assess as income of association of persons-Writ petition against- Allowed by High Court on the ground that Income Tax Officer had an option like old 1922 Income Tax Act to tax the income and once he exercised it, he cannot change it-Appeal by Revenue that Income Tax Officer has no such option like one he had under old 1922 Income Tax Act; how he can tax the "right person" where a "wrong person" was taxed under Section 148-Whether correct ? (Yes)-Appeal allowed.
Held : In our opinion, the contention urged by Dr. Gauri Shankar merits acceptance. We are of the opinion that under the present Act, the Income Tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is nor precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambigous. Section 183 shows that where the Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law * but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer [Income Tax Officer] has taxed the said income in the hands of another person contrary to law. (Para 7)
Held consequently : For the above reasons, the appeal is allowed. The judgment of the High Court is set aside. We must make it clear that we have pronounced only upon one question referred to above. We have not expressed ourselves on any other contention urged by the assessee before the Income Tax Officer or for that matter before the High Court. It is open to the assessee to urge these contentions before the Income Tax Officer, if he is so advised, according to law. There shall be no order as to costs. (Para 19)

JUDGMENT

B.P. Jeevan Reddy, J.-This appeal is directed against the judgment of the Andhra Pradesh High Court allowing the writ petition filed by the respondent and issuing a writ of prohibition restraining the appellant (respondent in the writ petition) from taking any action pursuant to the notice dated March 17, 1972 issued under Section 148 of the Income Tax Act, 1961 [1961 Act].

2. The respondent in this appeal, Sri Atchaiah, and another person, Sri Kondal Reddy, purchased an extent of 454.11 acres in a village in Medak District in Andhra Pradesh from Sri Ikramuddin and Smt. Azizunnisa Begum under a sale deed dated October 20, 1962 for a consideration of Rupees seventy five thousand. Even prior to the execution of the sale deed, the said lands had been notified for acquisition under the Land Acquisition Act. The respondent and Kondal Reddy appeared before the Land Acquisition Officer claiming compensation. By award dated February 4, 1964, the Land Acquisition Officer determined the compensation at Rs. 1,38,794.12 annas which amount was received by the respondent and Kondal Reddy on December 4, 1964, in equal shares. At their instance, a reference was made under Section 18 of the Land Acquisition Act. The learned District Judge enhanced the compensation by Rs. 3,95,026.00 (according to the appellant, the figure is Rs. 4,17,477/-). The enhanced compensation was also shared between the respondent and Kondal Reddy in equal proportion.

3. In the assessment proceedings relating to Assessment Year 1965-66, the Income Tax Officer included a sum of Rs. 35,397/-treating it as the capital gain, in the income of the respondent. (This figure was arrived at after deducting the amount contributed by the respondent towards the purchase of the said lands.) Again, in the assessment relating to Assessment Year 1968-69, the enhanced compensation falling to the share of respondent was brought to tax as capital gain. Sri Kondal Reddy was also taxed in the same manner for both the said assessment years.

4. On February 18, 1972 the Income Tax Officer issued a notice to both the respondent and Kondal Reddy under Section 148 of the Income Tax Act stating that he has reason to believe that income chargeable to tax for the Assessment Year 1964-65 has escaped assessment. He called upon them to file a return. On April 3, 1972, the respondent and Kondal Reddy filed a "Nil" return. On August 3, 1972, the Income Tax Officer gave a notice to both of them stating that in the return filed by them they have not mentioned the status in which the return was filed. The Income Tax Officer proposed to tax them as an Association of Persons and bring the entire profit made by them as capital gain in the hands of such Association of Pesons. The respondent and Kondal Reddy raised certain objections to the proposed assessment but finding that the Income Tax Officer was inclined to proceed with the assessment, they approached the Andhra Pradesh High Court by way of a writ petition questioning the aforesaid notice dated February 19, 1972.

5. The main contention urged by the respondent was that the Income Tax Officer having assessed the share of each of them in their respective individual hands, has no jurisdiction to assess the same income as the income of and in the hands of the Association of Persons aforesaid. Having exercised the discretion vested in him to assess them individually with respect to their shares, it was contended, it was not open to him to assess them as an Association of Persons with respect to the very same income. Certain other contentions were also raised with respect to the validity of the impugned notice with which objections, however, we are not concerned herein. The High Court accepted the respondent s contention. It rejected the contention urged by the learned standing counsel for the Revenue that the decisions relied upon by the respondent-writ petitioner were all rendered with reference to the provisions

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1995 Supreme(SC) 1308

IMPORTANT POINTAccording to present Income Tax Act, 1961, the right person is to be taxed and merely because a wrong person is taxed, it does not operate as a bar to taxing the right person under Section 148.

Cases Referred (6)

IMPORTANT POINT
According to present Income Tax Act, 1961, the right person is to be taxed and merely because a wrong person is taxed, it does not operate as a bar to taxing the right person under Section 148.