1974 (9) TMI 21 - HC - Income Tax

Court allows writ applications for assessment years 1960-61 and 1961-62. Dismisses others. No costs.

Mahendra Kumar Agrawalla Versus Income-Tax Officer And Others

Mahendra Kumar Agrawalla Versus Income-Tax Officer And Others - [1976] 103 ITR 688, 1975 CTR 33 Issues Involved:1. Capacity of minors to form an 'association of persons'.2. Legality of assessing individuals after previously assessing them as an 'association of persons'.3. Jurisdiction of the Income-tax Officer to issue notices under section 148.4. Requisite conditions for reopening assessments.5. Validity of the Commissioner's sanction for issuing notices.6. Validity of service of notices under section 148.Detailed Analysis:1. Capacity of Minors to Form an 'Association of Persons':The petitioner argued that minors cannot form an 'association of persons' because they are incapable of exercising volition to associate themselves to produce income. The court referred to the Supreme Court's definition in Commissioner of Income-tax v. Indira Balkrishna, stating that an 'association of persons' must involve two or more persons joining in a common purpose or action to produce income. The court noted that whether minors can form such an association is a factual question. The court found that the colliery was managed as a single unit, implying a joint enterprise, and the petitioner failed to show that the minors did not join in a common action under their father's guardianship.2. Legality of Assessing Individuals After Previously Assessing Them as an 'Association of Persons':The petitioner contended that the Income-tax Officer cannot reassess the same income as an 'association of persons' after having assessed it individually. The court distinguished between the Indian Income-tax Act, 1922, and the Income-tax Act, 1961. Under the 1961 Act, the Income-tax Officer does not have the option to choose between assessing an association or its members individually. The court cited the Supreme Court's decision in Income-tax Officer, 'A' Ward, Lucknow v. Bachu Lal Kapoor, stating that if an assessment on an association is made, appropriate adjustments must be made to avoid double taxation.3. Jurisdiction of the Income-tax Officer to Issue Notices Under Section 148:The petitioner argued that the Income-tax Officer had no jurisdiction to issue the notices as his jurisdiction ended after the initial assessment. The court held that under the 1961 Act, the Income-tax Officer is competent to initiate proceedings under section 147 if the income of an assessable unit has escaped assessment. The court allowed the writ applications for the assessment years 1960-61 and 1961-62, as the 1922 Act applied, and the officer had already exercised his option to assess the members individually.4. Requisite Conditions for Reopening Assessments:The petitioner claimed that the conditions for reopening assessments were not met. The court examined the notice under section 148 and the counter-affidavits, concluding that the Income-tax Officer had reasonable grounds to believe that income had escaped assessment due to the failure to file returns for the association. The court found that the belief was based on reasonable grounds and not mere suspicion, thus validating the notices.5. Validity of the Commissioner's Sanction for Issuing Notices:The petitioner alleged that the Commissioner mechanically granted sanction without applying his mind. The court, satisfied with the counter-affidavits and the detailed letter from the Income-tax Officer to the Commissioner, found that the Commissioner had considered the facts before granting the sanction. Therefore, the court held that the sanction was not granted mechanically.6. Validity of Service of Notices Under Section 148:The petitioner argued that the notices were not validly served as they were delivered to unauthorized individuals. The court noted that the petitioner and his brother acted upon the notices, filing applications and accepting the notices' validity. Citing Bombay High Court decisions, the court held that procedural irregularities in serving notices do not invalidate the proceedings if the notices were acted upon. Thus, the court found no merit in the petitioner's contention regarding the invalid service of notices.Conclusion:- Allowed: C.W.J.C. No. 1647 of 1971 (assessment year 1960-61) and C.W.J.C. No. 1643 of 1971 (assessment year 1961-62).- Dismissed: C.W.J.Cs. Nos. 1644, 1645, 1646, 1648, and 1649 of 1971, and C.W.J.Cs. Nos. 1222, 1223, and 1224 of 1972.- No order as to costs in any of the applications.The judgment was concurred by both judges, with no separate judgments delivered.