Alternative assessable entities under income-tax law allow appellate cancellation of an association assessment and fresh member assessment.

The Indian Income-tax Act, 1922 treated an association of persons and its individual members as distinct assessable entities, allowing assessment of the total income of either. A challenge that the wrong assessable entity was chosen fell within the statutory right of appeal where liability to be assessed was denied. The Appellate Assistant Commissioner and the Appellate Tribunal had broad powers to confirm, reduce, enhance, annul or set aside the assessment and direct a fresh assessment, with consequential adjustments. Those powers extended to cancelling assessment of the association of persons and requiring assessment of the individual members.

---

---

Issues: Whether, where the Income-tax Officer assesses an association of persons as a unit, the Appellate Assistant Commissioner or the Appellate Tribunal can set aside that assessment and direct assessment of the individual members instead.

Analysis: Section 3 of the Indian Income-tax Act, 1922 treats an association of persons and its individual members as distinct assessable entities and permits assessment of the total income of either. Section 30 gives an assessee a right of appeal against an assessment where liability to be assessed under the Act is denied, which includes a challenge that the wrong assessable entity was chosen. Section 31 confers plenary powers on the Appellate Assistant Commissioner to confirm, reduce, enhance, annul, or set aside the assessment and direct a fresh assessment, and the scope of that power is coextensive with that of the Income-tax Officer. Section 33 gives the Appellate Tribunal similarly wide powers to pass such orders as it thinks fit and to authorise consequential amendment of related assessments.

Conclusion: The appellate authorities have jurisdiction to direct cancellation of the assessment on the association of persons and to require a fresh assessment on the individual members.

Ratio Decidendi: Where the statute treats an association of persons and its members as alternative assessable entities, appellate powers expressed in broad terms extend to directing assessment of the correct entity and making consequential adjustments.

---