( 1 ) AT the instance of the Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad, the Income-tax Appellate Tribunal, Hyderabad, made this reference under section 256 (1) of the Income-tax Act, 1961, for the opinion of the High Court on the following question of law :"whether, on the facts and in the circumstances, the assessment made on the assessee for the assessment year 1968-69 was valid. "

( 2 ) WHEN this reference came up before a Division Bench of this court, it referred the case to a Full Bench to resolve the difference of opinion expressed by two Division Benches in Ch. Atchaiah v. ITO [1979] 116 ITR 675 and Choudhary Brothers v. CIT [1986] 158 ITR 224. It, however, added these two questions for the opinion of the Full Bench :" (1) Under what circumstances can one Division Bench differ from the view of an earlier Division Bench; and (2) Under what circumstances can the doctrine of per incuriam be applied by a co-ordinate Division Bench for not following the earlier binding precedent of another Division Bench. "

( 3 ) FIRST, we shall take up the question referred to this court by the Income-tax Appellate Tribunal. Here it would be appropriate to notice the facts giving rise to the said question. The assessee is a firm carrying on business in contracts. Its status was that of a registered firm till the assessment year 1967-68. As no declaration under section 184 (7) in Form No. 12 was filed, the Income-tax Officer assessed the assessee as an unregistered firm for the assessment year 1968-69. Before the completion of assessment of the assessee, the assessments of some of the partners, taking their share income from the assessee into account, were completed, so the assessment of same income in the hands of the assessee was questioned before the Appellate Assistant Commissioner. It was urged before the appellate authority that the Income-tax Officer would be deemed to have exercised his option of assessing the income in the hands of the partners and as such he could not have assessed the same income over again in the hands of the assessee, an unregistered firm. The appeal was rejected. On further appeal, the Income-tax Appellate Tribunal accepted the said contention of the assessee and allowed the appeal. The Commissioner then got the above said question of law referred to the High Court.

( 4 ) SRI S. R. Ashok, learned standing counsel for the Revenue, has contended that whatever might have been the position under section 3 of the Indian Income-tax Act, 1922, now under section 4 of the Income-tax Act, 1961, no option is available to the assessing authority either to assess the unregistered firm or its members, therefore, the assessing authority is competent to assess the unregistered firm after completing the assessment of the partners in regarded to their share income.

( 5 ) SRI. Y. Ratnakar, learned counsel for the assessee, contended that the Income-tax Act, 1961, did not depart from the position under the 1922 Act, and that the scope of the charging sections under both the Acts continued to be the same; the 1961 Act substituted the word "person" for the taxable entities mentioned in section 3 of the 1922 Act and separately defined "person" in section 2 (31) which does not alter the position.

( 6 ) IN the light of the contentions raised before us by learned counsel for the parties, we shall consider the question referred to us by the Tribunal. It is now well-settled, in view of the judgments of the Supreme Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 and CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95, that, if the Income-tax Officer exercised an option and assessed the share income in the hands of the partners of an unregistered firm or members of the association, he cannot assess the same income in the hands of the unregistered firm or the association of persons. But those decisions were rendered on the interpretation of section 3 of the Indian Income-tax Act, 1922 (hereinaf

Click Here to Read the rest of this document