LAXMICHAND HIRJIBHAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case, at the instance of the assessee, the following two questions have been referred to us for our opinion :

(2.) AGAINST the decision of the AAC, the revenue went in appeal before the Income -tax Appellate Tribunal. The Tribunal examined the legal position and came to the conclusion that, in view of the difference in language between s. 3 of the Indian I.T. Act of the 1922 and s. 4 and s. 2(31) of the I.T. Act of 1961, the circular issued by the Board and the decision in Murlidhar Jhawar's case : [1966]60ITR95(SC) , which was rendered in the context to the 1922 Act, would not apply in the context of the 1961 Act. As regards the circular dated August 24, 1966, referred to above, the Tribunal was of the view that this circular merely stated the legal position and could not be construed as in the nature of directions as contemplated under s. 119 of the new Act of 1961. The Tribunal, in the view that it took, allowed the appeal, set aside the order of the AAC and restored the matter to the file of the AAC with a direction that he should dispose of the other grounds urged in the appeal in accordance with law.

(3.) IN CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory : [1966]60ITR95(SC) , what happened was that three partners who carried on business in groundnut, cotton and cotton seed, were each assessed to tax on a third share in Rs. 51,280, computed as profits of the business for the assessment year 1954 -55. Thereafter, the ITO assessed them in the status of an unregistered firm computing the income of the joint venture at Rs. 80,925. The Tribunal held that the ITO had the option to assess the individual parties to the joint venture and, he having exercised that option, it was not open to him thereafter to reassess the same income collectively in the hands of the three parties to the joint venture in the status of an unregistered firm. It was held by the Supreme Court on these facts that the partners of an unregistered firm might be assessed individually or they might be assessed collectively in the status of an unregistered firm the ITO could not, however, seek to assess the same income twice -once in the hands of the partners and again in the hands of the unregistered firm. Thus, this decision of the Supreme Court is based on the well -settled position in law that the same income cannot be subjected to income -tax twice. Income in that particular case was sought to be taxed, once in the hands of the partners and thereafter again in the hands of the unregistered firm.