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Issues: Whether the Income-tax Officer had an option to assess the income either in the hands of the association of persons or in the hands of its members individually, and whether that option had been exercised so as to make the assessment on the association of persons invalid.
Analysis: The applicable legal framework treated an association of persons and its members as separate assessable entities. Under the earlier statutory regime and the corresponding provisions of the Income-tax Act, 1961, the assessing authority could proceed either against the association as a unit or against the members individually in respect of their respective shares. The record showed that one member's assessment had been revised and another member's assessment had been completed and allowed to attain finality. That conduct indicated a conscious choice by the Income-tax Officer to proceed against the members individually rather than to assess the association as such. Once that election was made and acted upon, the same income could not again be brought to tax in the hands of the association of persons.
Conclusion: The Income-tax Officer had exercised the option to assess the members individually, and the assessment on the association of persons was not sustainable. The answer to the referred question is therefore in favour of the assessee and against the Revenue.
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