Statutory option to tax firm or partner requires conscious election; provisional partner assessment did not invalidate firm assessment.

Under the Indian Income-tax Act, 1922, the assessing authority could tax either the firm or its partners on firm income, but a double assessment could arise only if that statutory option was consciously exercised one way. The earlier assessment of the partner was provisional and expressly left open for rectification, while the firm's assessment order did not show awareness of a prior final assessment on the same income. On those facts, the Tribunal found that the option had not been exercised against the firm, so the firm's assessment remained valid and was not invalidated by the partner's earlier assessment.

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Issues: Whether, for the assessment year 1961-62 governed by the Indian Income-tax Act, 1922, the Income-tax Officer had exercised the statutory option to tax the partner so as to invalidate the subsequent assessment of the firm on the same income.

Analysis: Under section 3 of the Indian Income-tax Act, 1922, the assessing authority had an option to tax either the firm or the partners in respect of firm income, but once that option was actually exercised one way, the same income could not again be brought to tax in the other hands. The earlier assessment of the partner merely accepted his return for the time being and expressly stated that it would be rectified on receipt of the report from the officer concerned. The firm assessment order did not show awareness that the partner had already been assessed on his share income, and the Tribunal found that the relevant option had not been exercised by the Income-tax Officer.

Conclusion: The assessment of the firm was valid and was not invalidated by the earlier assessment of the partner. The question was answered in favour of the Revenue.

Final Conclusion: The appeal succeeded and the High Court's contrary answer was set aside, leaving the firm assessment undisturbed.

Ratio Decidendi: Under the Indian Income-tax Act, 1922, the option to tax either a firm or its partners is exercised only when the assessment order and surrounding facts clearly show a conscious election by the Income-tax Officer; absent such exercise, assessment of the firm is not invalid merely because a partner's income was provisionally assessed.

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