The Appellate Assistant Commissioner and the Appellate Tribunal have the power to direct the Income-tax Officer to assess the individual members of an association of persons instead of the association as a unit.

Judgment

K. SUBBA RAO, J.

( 1 ) THE question for decision in this appeal is whether when the Income-tax officer in his discretion assessed an association of persons to, income-tax, the Appellate Assistant Commissioner in appeal or the Income-tax Appellate Tribunal in further appeal can set aside that order and direct him to assess the members of that association individually.

( 2 ) THE facts lie in a small compass and they are as follows. The assessee consisted of several persons combined together for the purpose of purchasing coal in order to supply the same to customers for domestic purposes and other small scale industries. For the assessment year 1948-49 the Income-tax officer levied tax upon the tota1 income in the hands at the said association of persons. The assessee claimed that in the circumstances of the case it should not be assessed to tax as an association of persons, but the proportion of the income in the hands of each of the members of the association might be assessed to tax instead. As the Income-tax Officer did not comply with this request, the assessee preferred TO an appeal to the Appellate Assistant Commissioner, but it was dismissed. On a further appeal to the Income-tax Appellate Tribunal, the Tribunal held that though the Income-tax officer had the power to assess the income of the association of persons as such or in the alternative on the individual members thereof in respect of their proportionate share in the income, it (the Tribunal) had no power under the Act to direct the Income-tax officer to exercise his power in one way or other. The following question was REFERRED TO to the High Court of Allahabad under S. 66 (2) of the Indian Income-tax Act, 1922:"if, in pursuance of S. 3 of to Indian Income-tax Act the Income-tax Officer levies the income-tax in respect of total income of the previous year of an association of persons upon the said association persons as a collective unit, whether the Tribunal is competent to direct the Income-tax Officer to levy the income-tax proportionately upon the individual members of the said association of persons in respect of the proportionate income of each of the members consisting the said association of persons. "a Division Bench of the High Court held that the Appellate Tribunal had power to set aside the Income-tax Officers assessment against the association and to give consequential and ancillary directions to the said Officer to assess the individuals.

( 3 ) LEARNED counsel for the Revenue contends that under the Indian Income-tax Act, 1922, hereinafter called the Act, the Income-tax Officer has no option but to assess the total income of the association of members, though the individuals share in the income may be added to his individual income for the purposes of ascertaining his total income. He further argues that even if the Income-tax Officer has the option to assess to Income-tax the association of persons on its total income or the individual members thereof in respect of their proportionate share of the income, if he had exercised the option in one way or other neither the Appellate Assistant. Commissioner in appeal nor the Income-tax Appellate Tribunal in further appeal has power to direct the Income-tax Officer to exercise his discretion in a different way; and for this conclusion he seeks to draw strength from his further submission that no appeal lies at the instance of the association of persons when they are assessed as one unit on the ground that the Officer should have assessed the individual members of the said association.

( 4 ) AT the outset it will be convenient to read the provisions of the Act. section 3. 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 f