Under the Income-tax Act, 1961, the assessing authority is not prohibited from proceeding against an unregistered firm which has escaped assessment, even if two of its partners have already been assessed separately in respect of their shares of income from the partnership business.

KULWANT SINGH TIWANA, J.

1. The question formulated for reference under section 256 (2) of the Income-tax Act referred to this court is as under :

"Whether, on the facts and in the circumstances of the case, the assessment of the assessee as unregistered firm was valid when two of its partners had already been assessed separately in respect of their shares of income from the partnership business ?"

The facts giving rise to this reference are that firm Rodamal Lal Chand of Baba Bakala has five partners. Out of them Lal Chand and Sohan Lal were assessed to income-tax on February 5, 1968, in their individual capacity in respect of their income from the firm for the assessment year 1963-64. The Income-tax Officer simultaneously proceeded to assess the firm, vide separate order dated 26th March, 1968, for the same year. The assessee-firm raised an objection that when the partners have been assessed in their individual capacity for their share income in the firm, the firm could not be legally assessed separately. Their appeals before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal failed. The assessee-firm then approached this court. On a direction from this court the above-quoted reference was made under section 256 (2) of the income-tax Act.

2. The argument put forward on behalf of the assessee-firm is the same which was advanced before the Income-tax Appellate Tribunal that once the partner was assessed in his individual capacity for the income from the firm then the firm cannot be assessed again. This argument seems to be inspired from the provisions of the Indian Income-tax Act, 1922 (hereinafter referred to as "the old Act"), wherein section 3 provided for a choice to the assessing authority in such cases in the following terms :

"Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates, tax at the 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 income-tax Act, 1961 (hereinafter called "the new Act), which has drastically changed the old Act contains the charging section 4 in place of section 3 of the old Act. The relevant portion of section 4 is as under :

"(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-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 or previous years, as the case may be, of every person ......"

Unlike its counterpart in the old Act, section 4 of the new Act does not contain in its body the description of the assessable entities. It only prescribes "the person" for the purpose of tax, which has been further described and classified n section 2 (31) of the new Act and is in the following terms :

"person includes (i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses".

At serial No. (iv) of section 2 (31) above "firm" is mentioned as a taxable entity. It includes registered as well as unregistered firm. The counsel for the parties are agreed on this point that after the refusal by the Income-tax Officer to register this firm for the assessment year under reference, firm Rodamal Lal Chand is an unregistered firm.

4. The description of "person" in section 2 (31) of the new Act makes no distinction between a firm or its partners, association of persons, or body of individuals, whether incorporate