Double taxation barred where partners were already assessed on the same income, so the firm could not be taxed again.

An unregistered firm could not be assessed again on income that had already been assessed in the hands of its partners. Although the firm and the partners are distinct assessable units, the income-tax statutes do not permit the same income to be taxed twice. Once the revenue had, with knowledge of the relevant position, assessed the partners on their share income, a further assessment on the firm was barred. The Calcutta HC also held that the rectification provision did not authorise reassessment of the firm in these circumstances. The assessments on the firm were therefore unsustainable.

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Issues: Whether the assessments made on an unregistered firm were valid when the same income had already been assessed in the hands of its partners.

Analysis: The charging provisions under the relevant income-tax enactments treat the firm and the partners as distinct assessable units, but that does not permit the same income to be taxed twice. Once the revenue, with knowledge of the firm's existence and the relevant assessment position, chose to assess the partners on their share income, the firm could not again be assessed on the same income. The fact that different income-tax officers dealt with the partner and the firm did not alter the substantive bar against double taxation. The court also rejected reliance on the rectification provision as authority to re-assess the firm after the partners had already been taxed on the same income.

Conclusion: The question was answered in the negative. The Tribunal was not correct in holding that the AAC was unjustified in annulling the assessments, and the assessments on the firm could not be sustained.

Final Conclusion: The reference was decided in favour of the assessee on the ground that the same income could not be taxed again in the hands of the unregistered firm after assessment of the partners.

Ratio Decidendi: Where the revenue has already assessed the partners of an unregistered firm on the same income, it cannot assess the firm again on that income, because the statute does not permit double taxation of one income in the hands of two assessable units.

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