Distinct taxable entities under income tax law allow separate assessment of an unregistered firm despite partner assessments.

A firm and its partners are distinct taxable entities under the Income-tax Act, 1961, because section 4 read with section 2(31) treats the firm as a separate person. The earlier option under the old Act to proceed either against the firm or the partners individually is not carried forward, so the assessing authority is not barred from separately assessing an unregistered firm merely because two partners have already been assessed on their share income. The machinery provisions must operate within the scope of the charging provision, and the omission of the former election reflects a deliberate legislative change.

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Issues: Whether, under the Income-tax Act, 1961, an unregistered firm can be separately assessed when two of its partners have already been assessed individually on their share income from the partnership business.

Analysis: The old Act contained a charging provision that gave the assessing authority an option to proceed against the firm or the partners individually, but the new Act replaced that scheme. Under section 4 of the Income-tax Act, 1961, read with the definition of "person" in section 2(31), a firm is itself a distinct taxable entity and the charging provision does not preserve the earlier election between the firm and its partners. The Court held that the machinery provisions must operate within the framework of the charging section, and that the omission of the former option in the new Act shows a deliberate change in legislative policy. The earlier authorities under the old Act were therefore not controlling, while the view that no such election remains available under the new Act was accepted.

Conclusion: The firm could be separately assessed notwithstanding prior individual assessments of two partners; the question was answered in the affirmative, against the assessee and in favour of the Revenue.

Final Conclusion: The reference was disposed of by upholding the validity of the assessment of the unregistered firm under the new Act even after assessment of the partners on their respective share income.

Ratio Decidendi: Under the Income-tax Act, 1961, a firm and its partners are distinct taxable entities, and the Act does not confer an option on the assessing authority to treat prior individual assessment of partners as barring separate assessment of the firm.

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