Subba Rao, J.
1. The question for decision in this appeal is whether when the Income-taxOfficer in his discretion assessed an association of persons to income-tax, theAppellate Assistant Commissioner in appeal or the Income-tax Appellate Tribunalin further appeal can set aside that order and direct him to assess the membersof that association individually.
2. The facts lie in a small compass and they are as follows : The assesseeconsisted of several persons combined together for the purpose of purchasingcoal in order to supply the same to customers for domestic purposes and othersmall scale industries. For the assessment year 1948-49 the Income-tax Officerlevied tax upon the total income in the hands of the said association ofpersons. The assessee claimed that in the circumstances of the case it shouldnot be assessed to tax as an association of persons, but the proportion of theincome in the hands of each of the members of the association might be assessedto tax instead. As the Income-tax Officer did not comply with this request, theassessee preferred an appeal to the Appellate Assistant Commissioner, but itwas dismissed. On a further appeal to the Income-tax Appellate Tribunal, theTribunal held that though the Income-tax Officer had the power to assess theincome of the association of persons as such or in the alternative on theindividual members thereof in respect of their proportionate share in theincome, it (the Tribunal) had no power under the Act to direct the Income-taxOfficer to exercise his power in one way or the other. The following questionwas referred to the High Court of Allahabad under s. 66(2) of the IndianIncome-tax Act, 1922 :
'If in pursuance of s. 3 of the Indian Income-taxAct the Income-tax Officer levies the income-tax in respect of the total incomeof the previous year of an association of persons upon the said association ofpersons as a collective unit, whether the Tribunal is competent to direct theIncome-tax Officer to levy the income tax proportionately upon the individualmembers of the said association of persons in respect of the proportionateincome of each of the members consisting the said associating of persons'.
3. A Division Bench of the High Court held that the Appellate Tribunal hadpower to set aside the Income-tax Officer's assessment against the associationand to give consequential and ancillary directions to the said Officer toassess the individuals.
4. Learned counsel for the Revenue contends that under the Indian Income-taxAct, 1922, hereinafter called the Act, the Income-tax Officer has no option butto assess the total income of the association of members, though theindividual's share in the income may be added to his individual income for thepurpose of ascertaining his total income. He further argues that even if theIncome-tax Officer has the option to assess to income-tax the association ofpersons on its total income or the individual members thereof in respect oftheir proportionate share of the income, if he had exercised the option in oneway or other neither the Appellate Assistant Commissioner in appeal nor the Income-taxAppellate Tribunal in further appeal has power to direct the Income-tax Officerto exercise his discretion in a different way; and for this conclusion he seeksto draw strength from his further submission that no appeal lies at theinstance of the association of persons when they are assessed as one unit onthe ground that the Officer should have assessed the individual members of thesaid association.
5. At the outset it will be convenient to read the relevant provisions ofthe Act.
6. Section 3. Charge of Income-tax :
Where any Central Act enacts that income-tax shall becharged for any year at any rate or rates, tax at that rate or those ratesshall be charged for that year in accordance with, and subject to theprovisions, of, this Act in respect of the total income of the previous year ofevery individual, Hindu undivided family, company and local authority, and ofevery firm and other association of persons or the partners of the firm or themembers of the association individually.
7. Section 14. (2) The tax shall not be payable by an assessee -
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(b) if a member of an association of persons other than a Hindu undividedfamily, a company or a firm; in respect of any portion of the amount which heis entitled to receive from the association on which the tax has already beenpaid by the association.
8. 30. (1) Any assessee objecting to the amount of income assessed undersection 23. ..................................... or the amount of tax determinedunder section 23. ......................... .................... or denying hisliability to the assessed under this Act.............................. mayappeal to the Appellate Assistant Commissioner against the assessment oragainst such refusal or order :
Section 31. (3) In disposing ofan appeal the Appellate Assistant Commissioner may, in the case of an order ofassessment, -
(a) confirm, reduce, enhance orannul the assessment, or
(b) set aside the assessmentand direct the Income-tax Officer to make a fresh assessment after making suchfurther inquiry as the Income-tax Officer thinks fit or the Appellate AssistantCommissioner may direct, and the Income-tax Officer shall thereupon proceed tomake such fresh assessment and determine where necessary the amount of taxpayable on the basis of such fresh assessment.
x x x x x x
9. (4) Where as the result of an appeal any change is made in the assessmentof a firm or association of persons or a new assessment of a firm orassociations of persons is ordered to be made, the Appellate AssistantCommissioner may authorise the Income-tax Officer to amend accordingly anyassessment made on any partner of the firm or any member of the association.
10. 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 person,partners of firm or members of association individually. The section,therefore, does not in terms confer any power on any particular officer toassess one of the persons described therein, but is only a charging sectionimposing the levy of tax on the total income of an assessable entity describedtherein. The section expressly treats an association of persons and theindividual members of an association as two distinct and different assessableentities. On the terms of the section the tax can be levied on either of thesaid two entities according to the provisions of the Act. There is no scope forthe argument that under s. 3 the assessment shall be only on the association ofpersons as a unit though after such assessment the share of the income of amember of that association may be added to his other income under s. 14(2) ofthe Act. This construction would make the last words of the section, viz.,'members of the association individually' a surplusage. This argumentis also contrary to the express provisions of s. 3, which mark out the membersof the association individually as a separate entity from the association ofpersons. Income of every person whether he is a member of an association or notis liable to the charge under the head 'every individual'. Section14(2)(b) only says that if such an individual happens to be a member of anassociation of person which has already been assessed, the tax would not bepayable in respect of the share of his income again. That under the Act an assessmentcan be made on an association of persons as a unit or, alternatively, on theindividual members thereof in respect of their respective shares of the incomewas assumed by this Court in Commissioner of Income-tax v. Raja Reddy Mallaram : [1964]51ITR285(SC) . We, therefore, hold that s. 3 impliedly gives anoption to an appropriate authority to assess the total income of either theassociation of persons or the members of such association individually.
11. The next question is whether the said option is given only to theIncome-tax Officer and is denied to the Appellate Assistant Commissioner andthe Appellate Tribunal. Under the Act the Income-tax Officer, after followingthe procedure prescribed, makes the assessment under s. 23 of the Act. Doubtlessin making the assessment at the first instance he has to exercise the optionwhether he should assess the association of persons or the members thereofindividually. It is not because that any section of the Act confers anexclusive power on him to do so, but because it is part of the process ofassessment; that is to say, he has to ascertain who is the person liable to beassessed for the tax. If he seeks to assess an association of persons as anassessable entity, the said entity can object to the assessment, inter alia, onthe ground that in the circumstances of the case the assessment should be madeon the members of the association individually. The Income-tax Officer mayreject its contention and may assess the total income of the association assuch and impose the tax on it. Under s. 30 an assessee objecting to the amountof income assessed under s. 23 or the amount of tax determined under the saidsection or denying his liability to be assessed under the Act can prefer anappeal against the order of the Income-tax Officer to the Appellate AssistantCommissioner. It is said that an order made by the Income-tax Officer rejectingthe plea of an association of persons that the members thereof shall beassessed individually does not fall under one or other of the three headsmentioned above. What is the substance of the objection of the assessee Theassessee denies his liability to be assessed under the Act in the circumstancesof the case and pleads that the members of the association shall be assessedonly individually. The expression 'denial of liability' iscomprehensive enough to take in not only the total denial of liability but alsothe liability to tax under particular circumstances. In either case the denialis a denial of liability to be assessed under the provisions of the Act. In onecase the assessee says that he is not liable to be assessed to tax under theAct, and in the other case the assessee denies his liability to tax under theprovisions of the Act if the option given to the appropriate officer under theprovisions of the Act is judicially exercised. We, therefore, hold that such anassessee has a right of appeal under s. 30 of the Act against the order of theIncome-tax Officer assessing the association of members instead of the membersthereof individually. If an appeal lies, s. 31 of the Act describes the powersof the Appellate Assistant Commissioner in such an appeal. Under s. 31(3)(a) indisposing of such an appeal the Appellate Assistant Commissioner may, in thecase of an order of assessment, confirm, reduce, enhance or annul theassessment; under clause (b) thereof he may set aside the assessment and directthe Income-tax Officer to make a fresh assessment. The Appellate AssistantCommissioner has, therefore, plenary powers in disposing of an appeal. Thescope of his power is conterminous with that of the Income-tax Officer. He cando what the Income-tax Officer can do and also direct him to do what he hasfailed to do. If the Income-tax Officer has the option to assess one or otherof the entities in the alternative, the Appellate Assistant Commissioner candirect him to do what he should have done in the circumstances of a case. Unders. 33(1), an assessee objecting to an order passed by an Appellate AssistantCommissioner under s. 28 or s. 31 may appeal to the Appellate Tribunal within60 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 anopportunity of being heard, pass such orders thereon as it thinks fit, andshall communicate any such orders to the assessee and to theCommissioner.' Under s. 33(5), 'Where as the result of an appeal anychange is made in the assessment of a firm or association of persons or a newassessment of a firm or association of person is ordered to be made, theAppellate Tribunal may authorise the Income-tax Officer to amend accordinglyany assessment made on any partner of the firm or any member of theassociation'. Under this section the Appellate Tribunal has ample power toset aside the assessment made on the association of persons and direct theIncome-tax Officer to assess the individuals or to direct the amendment of theassessment already made on the members. The comprehensive phraseology used bothin s. 31 and s. 33 of the Act does not countenance the attempt of the Revenueto restrict the powers of the Appellate Assistant Commissioner or of theAppellate Tribunal; both of them have power to direct the appropriate authorityto assess the members individually instead of the association of persons as aunit.
12. We, therefore, hold, agreeing with the High Court, that the AppellateTribunal has jurisdiction to give directions to the appropriate authority tocancel the assessment made on the association of persons and to giveappropriate directions to the authority concerned to make a fresh assessment onthe members of that association individually. The answer given by the HighCourt to the question propounded is correct.
13. In the result, the appeal fails and is dismissed with costs.
14. Appeal dismissed.