Tax already levied on an association of persons bars a second assessment of the same income on its individual members.

Where tax on the income of an association of persons has already been collected at source and retained without any order of refund, the Income-tax authorities cannot assess the individual members on their respective shares of the same dividend income for that assessment year. The charging scheme under section 3 of the Indian Income-tax Act, 1922 permits assessment either of the association or of the members, but that statutory option is exhausted once one assessable entity has been charged in respect of the same income. Deduction at source followed by assessment without repayment is treated as a levy on the first assessed entity, barring a second assessment on the same income.

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Issues: Whether, after the association of persons had been assessed and tax had already been deducted at source from its dividend income without any order for refund, the Income-tax Officer could still assess the individual members on their respective shares from that association for the same assessment year.

Analysis: The charging scheme under section 3 of the Indian Income-tax Act, 1922 gives the income-tax authorities an option to assess either the association of persons or the individual members, but that option is exhausted when a charge is made on one assessable entity in respect of the same income. The assessment process may culminate in a charge or stop short of it, but where tax has already been collected at source and is not directed to be refunded, the association must be treated as having suffered payment of tax to that extent. Deduction at source is a method of tax collection which, when followed by an assessment order that does not order repayment, amounts to levy on the first assessed entity. Once that levy has occurred, the same income cannot be subjected again to assessment in the hands of the individual members.

Conclusion: The individual members could not be assessed on their shares from the association of persons in respect of the same dividend income.

Ratio Decidendi: Where tax on the income of one assessable entity has already been levied and retained without refund, the statutory option to assess a different assessable entity for the same income is exhausted.

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