OMMISSIONER OF INCOME-TAX, U.P., LUCKNOW vs. KANPUR COAL SYNDICATE

CIVIL APPEAL No. 673/1963Supreme Court[1964] 8 S.C.R. 8530 April 1964Bench: 3 JudgesAuthor: K. SUBBA RAO, J.C. SHAH, S.M. SIKRI9 pages
AI SummaryDismissed

What were the facts?

The assessee, an association of persons formed for purchasing and supplying coal, was assessed to income tax as a collective unit for the assessment year 1948-49. The assessee requested to be assessed on the proportionate share of income of each individual member instead. The Income-tax Officer (ITO) refused this request. The assessee appealed to the Appellate Assistant Commissioner (AAC), who dismissed the appeal. The Income-tax Appellate Tribunal (ITAT) held that while the ITO had the power to assess either the association or its members individually, the Tribunal itself lacked the power to direct the ITO to exercise this option in a specific way. The High Court, on reference, held that the ITAT had the power to set aside the assessment on the association and issue consequential directions to the ITO to assess the individuals.

What did the Supreme Court hold?

The Supreme Court held that Section 3 of the Income-tax Act, 1922, implicitly grants an option to the appropriate authority to assess either the association of persons as a whole or its members individually. Consequently, an assessee has a right of appeal under Section 30 against an order assessing the association when they sought assessment on individual members, as this constitutes a denial of liability to be assessed under the specific circumstances. The Court further held that the Appellate Assistant Commissioner (under Section 31) and the Appellate Tribunal (under Section 33) possess plenary powers in appeal. These powers are co-extensive with those of the Income-tax Officer, meaning they can confirm, reduce, enhance, annul, or set aside an assessment and direct the Income-tax Officer to make a fresh assessment. Therefore, both the AAC and the ITAT have the jurisdiction to direct the Income-tax Officer to cancel an assessment made on an association and to make a fresh assessment on the individual members. The appeal was dismissed.

What were the issues?

1. Whether Section 3 of the Income-tax Act, 1922, implies an option for the appropriate authority to assess either an association of persons as a unit or its members individually, and if so, does such an assessee have a right of appeal under Section 30 against an assessment made on the association when they sought assessment on individual members? - Assessee's contention: The assessee argued that Section 3 provides an option, and when this option is exercised in a manner contrary to the assessee's preference (i.e., assessing the association instead of individuals), it constitutes a denial of liability to be assessed under the Act, thus granting a right of appeal. They relied on the principle that appellate authorities have powers co-extensive with the original authority. - Revenue's contention: The Revenue contended that the ITO has no option but to assess the total income of the association. Even if an option exists, neither the AAC nor the ITAT has the power to direct the ITO to exercise his discretion differently. They further argued that no appeal lies at the instance of the association when assessed as a unit, on the ground that individual members should have been assessed.

Which sections of the Income-tax Act were involved?

Section 3,Section 14(2)(b),Section 30,Section 31,Section 33

AI-generated summary — verify with the full judgment below

8 S.C.R. SUPREME COURT REPORTS commencement of the amending Act. The Legislature has given to s. 18 of the Finance Act, 1956, only a limited retrospective operation i.e., upto April 1, 1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is exrressiy mentioned, nor to authorise the Income•tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided, become barred.

The appeal fails and is dismissed with costs. Appeal dismissed. COMMISSIONER OF INCOME-TAX, U.P., LUCKNOW v. KANPUR COAL SYNDICATE (K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.) Income Tax-Assessment on Association of persons or on members indi· vidually-Option to appropriate authority-Right of appeal, whether such assessee has--Powers of Tribunal and Appellate Assistanl Commissioner in Appeal-Income-tax Act, 1922 (11 of 1922), n. 3, 14(2) (b) 30, 31 and 33. Income-tax was assessed upon the total income in the hands of tho respondent-assessee, an association of seve

The order continues below.

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