COMMISSIONER OF INCOME TAX MADRAS Vs. R DHANDAYUTHAM

JUDGEMENT

(1.) FOUR persons by name, Dhandayutham, Subramaniam, Govindan and Mahalakshmi Ammal purchased certain vacant lands for Rs. 80, 000 on October 9, 1960. On October 17, 1960, they agreed to sell the said lands to a co-operative society for a sum of Rs. 1, 58, 725 resulting in a profit, which was assessable in the assessment year 1962-63. On February 29, 1964, a part of the land was sold and one of them was assessed on a sum of Rs. 17, 617 as his share of the capital gains arising from the said transaction. In the course of the assessment order the Income-tax Officer stated as follows : "i am adopting the figure furnished by the assessee provisionally, subject to revision later on receipt of correct share of capital gains, from the 6th Income-tax Officer, Circle-II, Coimbatore."

(2.) THIS assessment was made on February 29, 1964. The income-tax Officer who was assessing the association of persons, consisting of the said four persons, had earlier served a notice under section 139 (2) of the act, in February, 1963. A nil return was filed on behalf of the association on december 19, 1963, claiming that no income was liable to be assessed as there was no intention to sell the land and that the sale was forced under a threat of compulsory acquisition. The Income-tax Officer rejected the claim of the assessee and brought to tax a sum of Rs. 79, 325 as business profit arising from the sale of the association. On appeal, the Appellate Assistant commissioner confirmed the assessment and the association filed a further appeal to the Tribunal. One of the contentions taken before the Tribunal and accepted by it was that the department, having earlier assessed one of the members, Subramaniam, individually on his share income, could not later on assess the unit consisting of the four persons as "association of persons" on the whole of its income. Against this conclusion of the tribunal two questions were set out in the application for reference as follows : " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessment made on the association of persons after the assessment had been made earlier in the case of one of the members thereof was without a legal sanction " (2) Whether, on the material available before the tribunal, its conclusion that the Income-tax Officer exercised his option to assessee the members of the association individually, could be said to be reasonable and valid in law ""