# CJ.T v. Kanpur Coal Syndical•

- **Citation:** [1964] 8 S.C.R. 85
- **Court:** Supreme Court of India
- **Decided:** 1964-04-30
- **Case number:** Civil Appeal No. 673 of 1963
- **Bench:** K. Subba Rao, J. C. Shah, S. M. S!Kri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/cj-t-v-kanpur-coal-syndical-3281
- **Pages:** 9

## Headnote

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 several persons
combined
together for the purpose of purchase of coal and its supply to customers
for domestic purposes and other small scale industries. The assesseo
claimed that it should not be assessed to tax as an association of persons,
but the proportion of the income in the hands of each members of
the association might be assessed to tax instead. The Income-tax Officer
refused this request and an appeal to the Appellate Assistant Commissioner was dismissed. The Income-tax Appellate Tribunal, on a further
appeal. held that though the Income-tax Officer had power to assess
income of the association of persons as such or in the altematiye on
the individual members thereof in respect of their proportionate sharo
fn the income, the tribunal had no power under the Act to direct tho
Income-tax Officer to exercise his power in one way or other. On a
196'
Lal orul Co.
Y.
s. s. Gadill
Sltah J.
1964
April, 30.
1964
CJ.T.
v.
Kanpur Coal
Syndical•
86
SUPREME COURT REPORTS
[rg64]
reference, the High Court held that the Appellate Tribunal had power
to set aside the Income-tax Officer's assessment against the usocia1io4
and to give consequential and ancillary 'directions to the said officer to
assess individuala.
HBLD:-(i) Section 3 of the Income-tax
Act impliedly gives an
option to an appropriate authority to assess the total income of either
the association of persons or the members of such association individually.
Commissioner of
Income-tax v.
Reddy
Mallaram,
(1964)
SI
I.T.R. 285 (S.C.) followed.
(ii) 3uch an assessee has a right to appeal under s. 30 of the Act
against the order of the Incom.,.tax Officer assessing the association of
persons instead of the members individually.
(iii) The Appellate Tribunal has jurisdiction to give directions to
the appropriate authority to cancel the assessment made on the associ.a·
lion of persons an'd to give appropriate directions to the authority concerned to make fresh
assessment on the members of that associationa
individually. The phraseology used both ins. 31 ands. 33 does not restrict
the powers of the Appellate Ass:stant Commissioner or the Appellate
Tribunal; both have the power of such direction.

## Text

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 several persons
combined
together for the purpose of purchase of coal and its supply to customers
for domestic purposes and other small scale industries. The assesseo
claimed that it should not be assessed to tax as an association of persons,
but the proportion of the income in the hands of each members of
the association might be assessed to tax instead. The Income-tax Officer
refused this request and an appeal to the Appellate Assistant Commissioner was dismissed. The Income-tax Appellate Tribunal, on a further
appeal. held that though the Income-tax Officer had power to assess
income of the association of persons as such or in the altematiye on
the individual members thereof in respect of their proportionate sharo
fn the income, the tribunal had no power under the Act to direct tho
Income-tax Officer to exercise his power in one way or other. On a
196'
Lal orul Co.
Y.
s. s. Gadill
Sltah J.
1964
April, 30.
1964
CJ.T.
v.
Kanpur Coal
Syndical•
86
SUPREME COURT REPORTS
[rg64]
reference, the High Court held that the Appellate Tribunal had power
to set aside the Income-tax Officer's assessment against the usocia1io4
and to give consequential and ancillary 'directions to the said officer to
assess individuala.
HBLD:-(i) Section 3 of the Income-tax
Act impliedly gives an
option to an appropriate authority to assess the total income of either
the association of persons or the members of such association individually.
Commissioner of
Income-tax v.
Reddy
Mallaram,
(1964)
SI
I.T.R. 285 (S.C.) followed.
(ii) 3uch an assessee has a right to appeal under s. 30 of the Act
against the order of the Incom.,.tax Officer assessing the association of
persons instead of the members individually.
(iii) The Appellate Tribunal has jurisdiction to give directions to
the appropriate authority to cancel the assessment made on the associ.a·
lion of persons an'd to give appropriate directions to the authority concerned to make fresh
assessment on the members of that associationa
individually. The phraseology used both ins. 31 ands. 33 does not restrict
the powers of the Appellate Ass:stant Commissioner or the Appellate
Tribunal; both have the power of such direction.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 673
of 1963.
Appeal from the judgment and decree dated September
22, 1960, of the Allahabad High Court in Income-tax Miscellaneous Case No. 188 of 1953.
S. K. Kapur and R. N. Sachthey, for the appellant.
Veda Vyasa and Naunit Lal, for the respondent.
April 30, 1964. The Judgment of the
Court
was
delivered by
Subba Rao 1.
SUBBA RAo, J.-The question for decision in this appeal
is whether when the Income-tax Officer in his discretion
assessed an association of persons to income-tax, the Appellate Assistant Commissioner iii appeal or the Income-tax
Appellate Tribunal in further appeal can set aside that order
and direct him to assess the members of that association
individually.
The facts lie in a small compass and they are .as follows:
The assessee consisted of several persons combined together
for the purp<ise of purchasing coal in order to supply the
8 S.C.R
SUPREME COURT REPORTS
same to customers for domestic purposes and other small
scale industries.
For the
assessment
year 1948-49 the
Income-tax Officer levied tax upon the total income in the
hands of
the said
as,ociation of persons.
The assessee
claimed that in th.: drcumstances of the case it should not
be assessed to ,ax as an association of persons, but the proportion of the income in the hands of each of the members
of the association might be assessed to tax instead. As the
Income-tax Officer did not comply with this request, the
assessee preferred an appeal to the Appellate Assistant Commissioner, but it was dismissed.
On a further appeal to the
Income-tax Appellate Tribunal, the Tribunal held that though
the Income-tax Officer had the power to assess the income
of the association of persons as such or in the alternative on
the individual members thereof in respect of their proportionate share in the income, it (the Tribunal) had no power
under the Act to direct the Income-tax Officer to exercise
his power in one way or other.
The following question was
referred to the High Court of Allahabad under s. 66 (2) of
the Indian Income-tax Act, 1922:
"If in pursuance of s. 3 of the Indian Income-tax Act
the Income-tax Officer levies the income tax in
respect of the total income of the previous year
of an association of persons
upon
the· said
association of persons as
a collective unit,
whether the Tribunal is competent to direct the
Income-tax Officer to levy the income tax proportionately upon the individual members of the
said association of persons in respect of the proportionate income of each of the members consisting the said association of persons."
A Division Bench of the High Court held that the Appellate
Tribunal had power to set aside the Income-tax Officer's
assessment against the association and to give consequential
and ancillary directions to the said
Officer to assess the
individuals.
Learned counsel for the Revenue contends that under the
[ndian Income-tax Act 1922, he reinafter called the Act the
Income-tax Officer h;s no option but to
assess the total
1964
Cl.T.
v.
Kanpur Coal
Syndicate
Subba Rao I.
1964
CJ.T.
v.
Kanpur Coal
Syndicate
Subba Rao I.
88
SUPREME COURT REPORTS
[1g64]
income of the association of members, though the individual's share in the income may be added to his individual
income for the purpose of ascertaining his total income. He
further argues that even if the Income-tax Officer has the
option to assess to income-tax the association of persons on
its total income or the individual members thereof in respect
of their proportionate share of the income, if he had exercised
the option in one way or other neither the Appellate Assistant Commissioner in appeal nor the Income-tax Appellate
Tribunal in further appeal has power to direct the Incometax Officer to exercise his discretion in a different way; and
for this conclusion he seeks to draw
strength from
his
further submission that no appeal lies at the instance of the
association of persons when they are assessed as one unit on
the ground that the Officer should have assessed the individual members of the said association.
At the outset it will be convenient to read the relevant
provisions of the Act.
Section 3. Charge of Inoome-tax:
Where any Central Act enacts that income-tax shall
be charged for any year at any rate or rates,
tax at that rate or those rates shall be charged
for that year in accordance with, and subject
to the provisions, of, this Act in respect of the
total income of the previous year of every individual, Hindu undivided family, company and
local au~ority, and of every firm and other
association of persons or the part;1ers of the
firm or the members of the association individually.
Section 14. (2) The tax shall not be payable by an
asses see--
•
•
•
•
*
*"
(b) if a member of an association of persons other
than a Hindu undivided family, a company or
a firm, in respect of any portion of the amount
which he is entitled to receive lrom the association on which the tax has already been paid by
the association.
8 S.C.R
SUPREME COURT KEPORTS
Section 30. ( 1) Any assessee objecting to the amount
of income assessed under section 23 ................... .
. . . . . . . . . . . . . . . . . . . . . . . . . . or the amount of tax determined under section 23 .......................... · ·
................ or denying his liability to be assessed .
under this Act ....................... may appeal to
the Appellate Assistant Commissioner against the assessment
or against such refus.al or order:
Section 31. (3) In disposing of an appeal the Appellate
Assistant Commissioner may, in the case of an order of
assessment,-
( a) confirm, reduce, enhance or annul the assessment, or
(b) set aside the assessment and direct the Incornetax Officer to make a fresh assessment
after
making such further inquiry as the Income-tax
Officer thinks fit or the Appellate Assistant
Commissioner may direct, and the Income-tax
Officer shall thereupon proceed to make such
fresh assessment and determine where necessary
the amount of tax payable on the basis of such
fresh assessment.
x
x
x
x
x
x
( 4) Where as the result of an appeal any change is
made in the assessment of a firm or association
of persons or a new assessment of a firm
or
associations of persons is ordered to be made,
the Appellate Assistant Commissioner may
authorise the Income-tax Officer to
amend
accordingly any assessment
made
on
any
partner of the firm or any
member · of the
association.
Section 3 imposes a tax upon a person in respect of his total
income.
The persons on whom such tax can be imposed
are particularized therein, namely, Hindu undivided family,
company, local authority, firm, association
of
persons,
partners of firm• or members
of
association
individually.
The section, therefore, does not in terms confer
any power on any particular officer to assess one of the
1964
CJ.T.
v •
Kanpur Coal
Syndicate
Subba Rao J.
1964
CJ.T.
v.
Kanpur Coal
Synd(cate
Subba Rao J.
SUPREME COURT REPORTS
persons described therein, but is only a charging
section
imposing the levy of tax on the total income of an assessable
entity described therein.
The section expressly treats
an
association of persons and the individual members of an
association as two distinct and different assessable entities.
On the terms of the section the tax can be levied on either
of the said two entities according to the provisions of the
Act.
There is no scope for the argument that under s. 3
the assessment shall be only on the association of persons
as a unit though after such assessment the
share of
the
income of a member of that association may be added to his
other income under s. 14 ( 2) of the Act.
This construction
would make the last words of the section, viz., "members of
the association individually" a surplusage.
This argument
is also contrary to the express provisions of s. 3, which m1rk
out the members of the association individually as a separate
entity from the association of persons.
Income of
every
person whether he is a member of an association or not is
liable to the charge under the head "every individual".
Section 14 ( 2 )(b) only says that if
such
an individual
happens to be a member of an association of persons which
has already been assessed, the tax would not be payable in
respect of t)ie share of his income again.
That under the
Act an assessment can be made on an association of persons
as a unit or, alternatively, on the individual members thereof
in respect of their respective shares of the income was assumed by this Court in Commissioner of Income-tax v. Raja
Reddy Mallaram(').
We, therefore, hold that s. 3 impliedly gives an option to .an appropriate authority to assess the
total income of either the association of persons or the
members of such association individually.
The next question is whether the said option is given only
to the Income-tax Officer and is denied to the Appellate
Assistant Commissioner and the Appell.ate Tribunal.
Under
the Act the Income-tax Officer, after following the procedure prescribed, makes the assessment under s. 23 of the
Act.
Doubtless in making the
assessment at the
first
instance he has to exercise the option whether he should
assess the association of persons or the members thereof
(1) [1964] 51 I.T.R. 285 (S.C.)
8 S.C.R.
SUPREME COURT REPORTS
91
individually. It is not because that any section of the Act
confers an exclusive power on him to do so, but because it
is part of the process of assessment; that is to say, he has to
ascertain who is the person liable to be assessed for the tax.
If he seeks to assess an association of persons as an assessable entity, the said entity can object to the assessment, inter
alia, on the ground that in the circumstances of the case the
assessment should be made on the members of the association individually.
The Income-tax Officer may reject its
contention and may assess the total income of the. association as such and impose the tax on it.
Under s. 30 an
assessee objecting to the amount of income assessed . under
s. 23 or the amount of tax determined under the said section
or denying his liability to be assessed under the Act can
prefer an appeal against the order of the Income-tax Officer
to the Appellate Assistant Commissioner. It is said that an
order made by the Income-tax Officer rejecting the plea of
an association of persons that the members thereof shall be
assessed individually does not fall under one or other of the
i:hree heads mentioned above.
What is the substance of the
objection of the assessee?
The assessee denies his !~ability
to be assessed under the Act in the circumstances of the case
and pleads that the members of the association shall be
assessed only individually.
The expression "denial of liability" is comprehensive enough to take in not only the total
denial of liability but also the liability to tax under particular circumstances.
In either case the denial is a denial of
liability to be assessed under the provisions of the Act. In
one case the assessee says that he is not liable to be assessed
to tax under the Act, and in the other case the assessee denies
his liability to tax under the provisions of the Act if the
option given to the appropriate officer under the provisions
of the Act is judicially exercised.
We, therefore. hold that
such an assessee has a right of appeal under s. 30 of the
Act against the order of the Income-tax Officer assessing
the association of members instead of the members thereof
individually. If an appeal lies, s. 31 of the Act describes
the powers of the Appellate Assistant Commissioner in such
an appeal. Under s. 31 (3)(a) in disposing of such an
appeal the Appellate Assistant Commissioner may, in the
case of an order of assessment, confirm, reduce, enhance or
1964
C.l.T.
v.
Kanpur Coal
Sylulicate
Subba Rao/.
1964
C.1.1'.
v.
Kanpur Coal
Syndicate
Subba Rao J.
SUPREME COURT REPORTS
[1g64J
annul the assessment; under cl. (b) thereof he may set ,aside
the assessment and direct the Income-tax Officer to make a
fresh
assessment.
The Appellate Assistant Commissioner
has, therefore, plenary powers in disposing of an appeal.
The scope of his power is coterminous with .that of
the
Income-tax Officer.
He can do what the Income-tax Officer
can do and also direct him to do what he has failed to do.
If the Income-tax Officer has the option to assess Jne or
other of the entities in the alternative, the Appellate As.~ist
ant Commissioner can direct him to do what he should have
done in the circumstances of a case.
Under s. 33(1 ), an
assessee objecting to an order passed by an Appellate Assistant Commissioner under s. 28 or s. 31 may appeal to the
Appellate Tribunal within 60 days of the date on which
such order is communicated to him.
Under s. 33( 4 ), "The
Appellate Tribunal may, after giving both parties to the
appeal an opportunity of being heard, pass such
orders
thereon as it thinks fit, and shall communicate any such
orders to the assessee and to the Commissioner." Under
s. 33 ( 5), "Where as the result of an appeal ~ny change is
made in the assessment of a firm or association of persons
or a new assessment of a firm or association of persons is
ordered to be made, the Appellate Tribunal may authorise
the Income-tax Officer to amend accordingly any assessment
made on any partner of the firm or any member of the
association".
Under this section the
Appellate Tribunal
has ample power to set aside the assessment made on the
associatien of persons and direct the Income-tax Officer to
assess the individuals or to direct the amendment of the
assessment already made on the members.
The comprehensive phraseology used both in s. 31 and s. 33 of the Act
does not countenance the attempt of the Revenue to restrict
the powers of the Appellate Assistant Commissioner or of
the Appellate Tribunal; both of them have power to direct
the appropriate authority to assess the members individually
instead of the association of persons as a unit.
We, therefore, hold, agreeing with the High Court, that
the Appellate Tribunal has jurisdiction to give directions to
the appropriate authority to cancel the assessment made on
the association of persons and to give appropriate directions
,--
i"'
8 S.C.R.
SUPREME COURT REPORTS
93
to the authority concerned to make a fresh assessment on the
members of that as~ociation individually.
The answer given
by the High Court to the question propounded is correct.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.
KETTLEWELL BULLEN AND CO.
v.
COMMISSIONER OF INCOME-TAX, CALCUTTA
(K. SuB!lA RAo, J. C. SHAH ANDS. M. S1KRI, JJ.)
Income-tax-Compensation received for surrendering managing agency-
]/ capital or revenue-Test-lncome .. tax ... tct, 1922 (11 of 1922),
ss. 2(6c), 10, 12.
By an agreement \vith the Fort Willi:in1 Jute Company in 1925 the
appellant company becm1e its Managing Agent.
The terms, inter .ilia,
were that the appellant or its successors, unless they chose to resign,
were to continue as l\1anaging Agent until they ceased to hold certain
shares in the capital of the company and were on that account re1noved
by a resolution of the company or their tenure of office was determined
by the winding U? _of the company.
On termination of the agency, the
Managing Agent was to get such reasonable compensation as was agreed
upon bet\'leen the !\1a0aging Agent and th~ comvany.. Besides
this
managing agency the appellant held five other man<iging agencies.
In
1952, the appellant by tn agreement with ~T/s. Mugneeram Bangur &
Co., agreed to relinquished the managing agency of the ·Fort William Jute
Co., Ltd., in their favour in consideration of M/s. ~1ugneeram Bangur
and Co. taking over the shares held by the appellant, procuring repayfl1ent
of loans advanced by the appellant to the Fort William Jute Con1p:.1ny
and further procuring that the Fort William Jute Company will pay com ..
pensation to the appellant. The appellant intimated the members of the
latter company that it would be in the best interest of the share-holders
to terminate the appellant's agency which would otherwise continue till
1957 and that .M/S. Mugneeratn Bengur & Co. had agreed to reimburse
the Fort William Jute Co. Ltd. for payment of Rs. 3,50,000 as compensation to the appeIIant.
The
arrangement
with
M/s.
Mugneeram
Bangur & Co. was accepted
by the Fort William Jute Co.
and the
appellant tendered
resignation.
M/s. Mugneeram
Bangur and
C9.
1964
Cl.T.
v
Kanpur Coal
Syndicate
Subba Rao }.
1964
May I.