HEERALAL KHUSHALCHAND BOTHRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee to answer the following questions of law, namely :

(2.) FOR the assessment years 1968-69 and 1969-70, the assessee filed returns in the status of a firm but the Income-tax Officer refused registration to the assessee as a firm and the assessments were made in the status of " association of persons ". The assessee appealed to the Appellate Assistant Commissioner against the refusal of registration. During the pendency of that appeal, on February 11, 1972, the assessee disclosed additional income earned in the business in the name of Rajkumar, a member of the family, describing the same as a revised return. The Income-tax Officer reopened the assessments for both the years under Section 147 of the Act and the income from business carried on in the name of Rajkumar, a member of the family, was estimated and added to the income of the assessee. In the quantum appeals, some relief was given by the Appellate Assistant Commissioner, In the meantime, the Income-tax Officer initiated penalty proceedings under Section 271(1)(c) of the Act and issued show-cause notices to the association of persons. The Income-tax Officer rejected the explanation given in reply by the association of persons and levied penalties of Rs. 3,000 and Rs. 5,000, respectively, for the two assessment years. The assessee's appeals to the Appellate Assistant Commissioner were allowed and the penalties were cancelled. On further appeal by the Revenue to the Tribunal, imposition of penalties by the Income-tax Officer was restored but the amount of penalties was reduced to Rs. 2,500 and 4,000, respectively, for the two assessment years.

(3.) WE now take up the aforesaid first question. There is no dispute that the identity of the natural persons constituting the association of persons and the firm which was subsequently granted registration on appeal by the Appellate Assistant Commissioner is the same. The contention of the assessee has been that fresh notices should have been issued to the firm which was subsequently granted registration and not to the association of persons only, since the association of persons and the firm are different assessees according to the definition of " person " given in Section 2(31) of the Income-tax Act, 1961. On this basis, the assessee contended that imposition of penalty without issuing fresh notice to the firm after it had been granted registration is illegal. This contention has been rejected by the Tribunal and the same is reiterated on behalf of the assessee before us.