Court rules against Income Tax Officer assessing income in joint hands of AOP after individual assessment

The court held that the Income Tax Officer could not assess the same income in the joint hands of an association of persons (AOP) after having assessed it individually. The notice issued under section 148 of the I.T. Act was deemed invalid as the ITO had already assessed the individual members. Additionally, the court determined that the relevant assessment year for the income in question could not be changed by the ITO. As a result, the writ petition was allowed, the impugned notice was quashed, and another related judgment was dismissed.

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Issues Involved:
1. Jurisdiction to assess income in joint hands after individual assessment.
2. Validity of notice u/s 148 of the I.T. Act.
3. Relevant assessment year for the income in question.

Summary:

Issue 1: Jurisdiction to Assess Income in Joint Hands After Individual Assessment
The petitioner contended that the Income Tax Officer (ITO) had no jurisdiction to assess the same income in their joint hands after having assessed it individually. The court held that once the ITO exercised his option to assess the tax on individual members of an association of persons (AOP) in respect of their respective shares, he could not later assess the same income in the hands of the AOP. This principle was supported by precedents such as CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95 (SC) and other relevant cases. The court found no distinction under the new I.T. Act of 1961 that would alter this principle.

Issue 2: Validity of Notice u/s 148 of the I.T. Act
The petitioner argued that the notice u/s 148 was invalid as the ITO did not record or communicate his reasons for issuing it. The court noted that the notice merely stated that the ITO had reason to believe that income chargeable to tax had escaped assessment. Since the ITO had already exercised his option to assess the individual members, the AOP could not be considered the assessee for the same transaction. Therefore, the notice was deemed invalid.

Issue 3: Relevant Assessment Year for the Income in Question
The petitioner argued that the relevant assessment year was not 1964-65. The court observed that the ITO had assessed the individual for the year 1965-66 because the amount was received on December 4, 1964. The court held that the ITO could not change the assessment year to 1964-65 to reassess the same income in the hands of the AOP after having exercised his option for the individual in 1965-66.

Conclusion:
The writ petition (W.P. No. 5856/72) was allowed, and the impugned notice was quashed. The court did not address other contentions raised by the petitioner due to the resolution of the main issues.

Separate Judgment:
W.P. No. 338/73, relating to a notice dated March 17, 1972, in the personal assessment of the petitioner, was dismissed with costs as no serious arguments were presented by the petitioner's counsel.

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