1. I find it convenient to pass a consolidated order in the case of Alok Nursing Home and two persons, namely, Dr. Narendra Prasad and Dr.
(Mrs.) Leela Prasad associated with the same association. These appeals have come up for hearing before me as Third Member as a result of difference of opinion amongst the Members of the Division Bench who originally heard these appeals.
2. The relevant facts briefly stated are that Dr. Narendra Prasad is a Doctor by profession. His wife Dr. (Mrs.) Leela Prasad is a doctor (PHD) by virtue of educational qualification. She is in the teaching profession and employed as a Professor in a teaching college. A building was constructed at Khazanchi Road, Patna which was originally shown as exclusively belonging to Dr. (Mrs.) Leela Prasad. There was a search operation Under Section 132 of the I.T.Act, 1961 in the residential premises of Dr. Narendra Prasad/ Dr. (Mrs.) Leela Prasad and at Alok Nursing Home. After the search, Dr. Narendra Prasad and Dr.
(Mrs.) Leela Prasad approached the Settlement Commission for settlement of dispute. It was pleaded before the Settlement Commission that Alok Nursing Home was owned by Dr. Narendra Prasad and Dr. (Mrs.) Leela Prasad in equal proportion and not exclusively by any one of them. The Settlement Commission accepted the claim and directed the assessment of rental income as well as other income in the hands of the two individuals. The assessments for assessment year 1982-83, 1983-84 and 1984-85 were made accordingly on the directions of the Settlement Commission. It is observed from the order of the Settlement Commission that for assessment year 1982-83 and 1983-84, income from the Nursing Home was disclosed only on account of lodging and no other receipts have been shown. However, for assessment year 1984-84, the income has been shown from lodging as well as from other service. For assessment years 1982-83 and 1983-84, the income from lodging has been divided between the two co-owners and assessed accordingly. For assessment year 1984-85, the income from lodging as well from other activities has been divided amongst the two persons in the ratio of 50:50. The husband and wife disclosed the income from the Nursing Home for the subsequent assessment years also in the ratio of 50:50. The A.O. had accepted the returns filed by the two assesses without any objection. However, in assessment year 1995-96, the A.O. was of the view that since the business of Alok Nursing Home is carried on by two persons and the profit and loss shared in the ratio of 50:50, Alok Nursing Home is assessable as a separate unit of assessment in the status of AOP. He, accordingly, issued a notice Under Section 148 dated 12.9.1997 which was served upon Dr. Narendra Prasad as member of A.O.P. Since no return was filed in response to the notice Under Section 148, a notice Under Section 142(1) was issued and the assessee was also informed as to how the department was thinking that the AOP's income had escaped assessment. However, no return was filed. The A.O., accordingly, passed an ex parte order Under Section 144/147 on 12.11.1997 in the case of Alok Nursing Home in the status of an A.O.P. The individual assessments in the case of husband and wife were also completed and the share income from the Nursing Home disclosed by them was assessed as a protective measure. The Ld. C.I.T.(A) allowed the appeal of the assessee mainly on the reasoning that the factual existence of the A.O.P. has not been established. Therefore, he deleted the addition of Rs. 8,26,186/- by canceling the assessment which was the income as per the income and expenditure statement of M/s. Alok Nursing Home.
3. Revenue appealed to the Tribunal against the decision of the C.I.T.(A). The Ld. Accountant Member of the Bench proposed an order allowing the appeal of the Revenue and supporting the order of the A.O.in the case of M/s. Alok Nursing Home as well as in the case of the husband and wife associated with the said Nursing Home. However, the Ld. Judicial Member differed with the view expressed by the Ld.
Accountant Member and proposed an order dismissing the appeal of the Revenue.
4. I have been nominated as Third Member in regard to the point of dispute between the Members of the Division bench. I have heard the parties and perused the records including the respective orders passed by the Ld. Accountant Member as well as Ld. Judicial Member.
5. The assessment is mainly relying upon the order of the Settlement Commission for assessment years 1982-83, 1983-84 and 1984-85 as also upon the decision of the C.I.T.(A). The learned counsel for the assessee contended that in this case the department bad all along accepted that the Nursing Home was owned by husband and wife in equal proportion and that its income was assessable in the individual hands separately in the same ratio. The income of the Nursing Home was never assessed separately in the hands of A.O.P. or any other status. The decision of the Settlement Commission was for assessment years 1982-83 to 1984-85. So, however, the Income-tax Department accepted the decision upto the assessment year 1994-95 and that the income from the Nursing Home has all along been assessed in the hands of the co-owners in the ratio of 50:50. No separate assessment has been made in the name of M/s. Alok Nursing Home. The Department having accepted the claim of the assessee for several years, according to the learned counsel, it was not open to it to take a different view in the assessment year 1995-96 and subsequent years. In this connection reliance was placed on the decision of the Supreme Court in the case of Radhasoamy Satsang v.C.I.T. [193 I.T.R. 321(SC)]. Relying upon the said decision it was contended that since there was no change in facts in the year under appeal as compared with the earlier years and since the Income-tax Department has accepted the claim of the assessee that the income of the Nursing Home is assessable separately in the hands of the two persons individually in the ratio of 50:50, it was not open to the Department to make an assessment in the hands of the A.O.P. when there is no change in facts or in law. The learned counsel pointed out that the wife, Viz., Dr. (Mrs.) Leela Prasad is not a doctor by profession.
She is an educationalist employed in a teaching college. Therefore she was not contributing her skill and experience in running of the Nursing Home. Dr. Narendra Prasad is admitted a doctor by profession but employed in a Hospital and also makes his services available to the patients in the Nursing Home. Since the Nursing Home is owned by husband and wife in equal proportion, the income derived therefrom was rightly disclosed in the hands of two individuals and there does not exist any association of persons which could be assessed separately under the provisions of the Income-tax Act. The learned counsel contended that existence of the association of persons has not been established by the Revenue and as such the issue of notice Under Section 148 and assessment of the Nursing Home in the status of A.O.P.is unwarranted and has rightly been cancelled by the C.I.T.(A). It was accordingly, pleaded that the view of the Ld. Judicial Member may be followed and the appeals of the Revenue dismissed.
6. The Ld. Departmental Representative, on the other hand, contended that the order of the Settlement Commission related to assessment years 1982-83 to 1984-85 and since the said decision is binding upon the Revenue for such assessment years, the same has been followed by the department. Subsequently, the assessee had filed the returns disclosing share income from the Nursing Home and the same got assessed upto the assessment years 1994-95. In the year 1995-96, the A.O. on consideration of the facts and circumstances of the case and he legal aspect was satisfied that the income of the Nursing Home is to be assessed in the status of A.O.P. He, accordingly, issued a notice Under Section 148 to the assessee calling for the return of income. Since the assessee did not file the return in the name of M/s. Alok Nursing Home, assessment was completed Under Section 144. So, however, the income disclosed by the assessee in the statement of accounts was not disturbed and the income assessed as disclosed. The assessment in the hands of the individuals has been made on protective basis. The Ld.
Departmental Representative contended that the principles of estoppels do not apply in this case in so far as there is no direction by the Settlement Commission for assessment year 1995-96. The order of the settlement is binding for the assessment years 1982-83 to 1984-85 only.
The Revenue has never decided as to whether AOP is assessable or not.
This is an omission by the Revenue authorities. So, however, the assessee does not get any legal right to capitulate on the mistakes committed by the department. According to the Ld. Departmental Representative, the principles of estoppels do not apply against the statutory provision. It was pointed out that the Nursing Home is being run in an organized manner and the activities are being carried on, on behalf of the two persons who are also co-owners of the building etc.
The profits and gains are also distributed amongst the co-owners in equal proportion. The activities of the Nursing Home are not carried on by the husband and wife individually but are being carried on, on their behalf by their employees. Relying upon the decision of the Supreme Court in the case of Meera & Co. v. C.I.T. [224 I.T.R. 636 (SC)], it was contended that since the business was carried on behalf of the husband and wife, the income derived from the activities was assessable in the status of A.O.P. It was, accordingly pleaded that the decision of the C.I.T.(A) may be reversed and that of the A.O. restored.
7. I have given my careful consideration to the rival contentions. In order to arrive at a fair conclusion about the point of dispute involved in this case, I consider it necessary to ascertain the following factors on the basis of which final conclusion can be arrived at: (i) The first and foremost issue involved in this case is as to whether there exists an A.O.P. which could be assessed to tax in respect of the income of the Nursing Home; (ii) If the A.O.P. exists, whether the Revenue has any option to assess its members individually and not the A.O.P. (iii) Whether the order of the Settlement Commission for assessment years 1982-83 to 1984-85 debars assessment of A.O.P. when it is silent on that issue; (iv) Whether the department of Revenue is estoppelled to proceed in this case in accordance with law because of its failure to act in accordance with law in earlier years.
8. I, accordingly, proceed first to consider as to whether there exists an A.O.P. for running of M/s. Alok Nursing Home. It is not disputed that the Nursing Home was originally claimed to be the sole proprietary concern of Dr. (Mrs.) Leela Prasad. However, on the basis of search in the premises of Dr. Narendra Prasad and Dr. (Mrs.) Leela Prasad, the Department wanted to assess the income of the Nursing Home in the hands of Dr. Narendra Prasad. So, however, it was pleaded before the Settlement Commission that before conversion of the building into the Nursing Home, the fund belonging to the wife of Dr. Narendra Prasad was utilized for its acquisition. It was pointed out that the moneys had been withdrawn by Dr. Prasad's wife from her G.P.F. A/c. and loans had been taken from Bihar State Housing Federation. On the basis of the evidence produced before the Settlement Commission, it was decided as under:- "6. In his counter reply, Shri L.N. Rastogi, Advocate stated that a dilapidated building together with land was initially purchased in 1975 by the lady's own resources which had been properly explained from her earnings and her stridhan in the form of gifts etc.
received at the time of her marriage. The investment in the property had been shown at Rs. 4,07,000/- upto the assessment year 1984-85 and Rs. 1 lakh has already been agreed to be surrendered towards the real cost of construction from the applicant's resources upto 31.3.1989 in addition to the loans of Rs. 1,49,000/- shown initially in the lady's name but now admitted to be the husband's income because of surrender. The ownership of the nursing home and the income therefrom should reasonably be divided between the husband and the wife. Shri Rastogi stated that considering all the aspects of the case, the applicant offered that the net professional income subject to depreciation bet calculated as follows:Assessment year Rs. It was clarified that this should cover the following surrender already made during the hearing:-i) Loans should for investment in the nursing home : 1,49,000/-ii) Additional investment in the construction of nursing home : 1,00,000/-iii) Credit in the bank a/c of Shri Alok Abhijit, applicant's son : 25,000/-iv) Additional household expenses which were admitted to : 50,000/- have been understated.v) Additional amount invested in house property 50,000/- in Kankarbagh, Patna The applicant also offered that the income from nursing home and the rental income offered in the computation of Dr. (Mrs.) Leela Prasad upto 31.3.1984 be taxed in equal proportions in the hands of the applicant and his wife." "8. As a result, the net professional income of the applicant should be taken subject to depreciation at Rs. 1,72,000/-, Rs. 2,32,000/- and Rs. 2,70,000/- respectively for the assessment years 1982-83, 1983-84 and 1984-85. As regards ownership of the nursing home we accept that both the husband and the wife own the same in equal proportions and, therefore, the rental income and the other income shown from nursing home in these three assessment years would be taxed in equal proportions in the hands of the appellant and his wife. The first floor of the building is used for residence of the applicant and his family. Interest on the loan taken by the wife and not surrendered in the case of the applicant would be deducted from the income of Dr. (Mrs.) Leela Prasad and not the income from nursing home before division of the same in equal proportion between the husband and the wife. The annual letting value of the AOP is being taken at 7% of the cost of construction, after taking into consideration the provisions of the Bihar (Lease, Rent and Eviction) Control Act, 1992 and the Rules made thereunder. The total income for each of the assessment year would be as per Annexures I, II and III to this order." 10. From the aforesaid aforementioned portion of the order of the Settlement Commission, it is evident that the admitted position b the assesses as well as department is that the Nursing Home property is jointly owned by Dr. Narendra prasad and his wife Dr. (Mrs.) Leela Prasad in equal proportion. It is also not disputed that for assessment years 1982-83 to 1984-85 the income from the Nursing Home was disclosed by Dr. (Mrs.) Leela Prasad as her own income and the Settlement Commission decided that the rental income and income from Nursing Home in assessment years 1982-83 to 1984-85 be assessed in equal proportion in the hands of the appellant and his wife. Assessments of assessment years 1982-83 to 1984-85 have been made as per the decision of the Settlement Commission. Subsequently, Dr. Narendra Prasad and his wife Dr. (Mrs.) Leela Prasad have been filing the return of income in which 50% of the Nursing Home income is also reflected in the return as share income from the Nursing Home. From the computation of income forming part of the order of the Settlement Commission, it is observed that for assessment years 1982-83 and 1983-84 the income from the Nursing Home was disclosed only on account of lodging and in assessment year 1984-85 the income from Nursing Home has been shown on account of lodging as well as on account of the other receipts. After assessment year 1994-95, the A.O. has been accepting the returns filed by the two individuals and there has never been an effort or a suggestion for assessment of Alok Nursing Home in the status of A.O.P. A notice Under Section 148 was issued for assessment year 1995-96 calling for the return in the name of Alok Nursing Home in the status of A.O.P. for the first time. The issue that assumes importance in this case is as to whether the A.O. had any material in his possession on the basis of which he could have reasons to believe that the income in the hands of the Association of Persons had escaped assessment. In this connection, it would be necessary to consider as to whether the running of the Nursing Home, viz., Alok Nursing Home by the two individuals can be said to be an Association of Persons. Dr.(Mrs.) Leela Prasad claims that she is not actively involved in the running of the Nursing Home.
Dr. Narendra Prasad also claims that he is providing professional services to the Nursing Home for which he is remunerated. In order to decide this issue it will be relevant to refer the statement of accounts of Alok Nursing Home which forms part of the record. For assessment year 1995-96, i.e. as on 31.3.1995, the balance sheet of the Nursing Home is reproduced hereunder:-CAPITAL & LIABILITIES SCHEDULE AMOUNT(Rs.) AMOUNT(Rs.)--------------------- -------- ----------- -----------OWNER CAPITAL ACCOUNT 'A' 784,809.90SECURED LOANS 'B' 462,168.65UNSECURED LOAN 'C' 800,000.00CURRENT LIABILITIES & PROVISIONS 'D' 224,316.06FIXEDASSETS 'E' 1,796,938.00CURRET ASSETS, LOANS & ADVANCE 'F 474,356.61 Profit & Loss Account for the year ended 31.3.1995 is also relevant which is reproduced hereunder:- PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31^ST MARCH, 1995INCOME SCHEDULE AMOUNT(Rs.) AMOUNT(Rs.)------ -------- ----------- ------------NURSING HOME CHARGES 3,839,830.00CONSULTATION CHARGES 304,615.00RENT RECEIVED 25,000.00INTEREST ON BANK DEPOSITS 22,172.30 47,172.30TOTAL 4,191,617.30BANK INTEREST AND CHARGES 82,224.74DEPRECIATION 'E' 404,658.70ADMINISTRATIVE & OTHER EXPENSES 'F' 3,121,188.12SUB-TOTAL....
3,608,071.56NET PROFIT TRANSFERED TO OWNERS 'A' 583,545.74TOTAL....
4,171,617.30 The owner's capital account as on 31.3.1995 is also relevant which is reproduced hereunder:- SCHEDULE FORMING PART OF THE BALANCE SHEET & PROFIT/LOSS ACCOUNT SCHEDULE 'A' - OWNERS CAPITAL ACCOUNT AS ON 31^ST MARCH, 1995PARTICULAR DR. NARENDRA PRASAD DR. LEELA PRASAD TOTAL-----------------------------------------------------------------------------------Opening Balances as on 01.04.94 2,18,554.78 617,235.34 835,790.00Professional fee credited 180,000.00 0.00 180,000.00Profit for the year 291,772.87 291,772.87 583,545.74Sub-total 690,327.65 909,008.21 1,599,335.86Less: Withdrawals during the year 441,902.57 372,623.39 814,525.96Balance as on 31.03.95 248,425.08 536,384.82 784,809.90 The details of the administrative and other expenses are also on record, a perusal of which reveals that a sum of Rs. 1,80,000/- has been paid as fee to the Chief Consultant, who incidentally is Dr.
Narendra Prasad, professional fee to other doctors is Rs. 5,20,300/-, salary and honorarium to ordinary staff is Rs. 2,84,680/-, nursing charges is Rs. 3,26,597/-, contribution towards EPF of Rs. 23,888/- has also been made, chemicals and other consumables have also been debited under the head 'Administrative and other expenses'. The sum total of administrative expenses is Rs. 31,21,188/-. From the statement of account itself it is evident that the income from the Nursing Home is not merely income on account of providing accommodation to the patients but is an organized activity of providing residential and medical care and treatment to the patients under the supervision of doctors, nursing and other staff. In the light of these facts, it is not difficult to visualize that organized activities are being carried on for running of the Alok Nursing Home for the purpose of earning profits and gains. Dr.
Narendra Prasad has acted as Chief Consultant of the Nursing Home and for rendering his services to the Nursing Home, a separate fee of Rs. 1,80,000/- has been paid to him. This amount is deducted in working out the profit derived on account of running of the Nursing Home. On these facts whether the association of person exists or not, it will be necessary to consider some of the relevant decisions which may be helpful in deciding the issue.
11. An Association of Persons, as the name suggests, must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes tax on income, the association must be one the object of which is to produce income, profits or gains. This was held by their Lordships of the Supreme Court in the case of C.I.T. v. Indira Balkrishna [(1960) 39 I.T.R. 546 (SC)].
In the case of G. Murugesan & Bros. v. C.I.T. [(1973) 88 I.T.R. 432 (SC)], their Lordships of the Supreme Court held that when two or more individuals voluntarily combine together for a certain purpose, it gives rise to an association of persons. In the case of N.V. Shanmugham & Co. v. C.I.T. [(1971) 81 I.T.R. 310 (SC)], their Lordships of the Supreme Court held that the word "associate" means to join in common purpose or to join in an action. Therefore, the words "association of persons" as used in Section 3 of the Act means an association in which two or more persons join in a common purpose or common action and as the words occur in a section which imposes a tax on income, the association must be one, the object of which is to produce income, profits or gains. In this case before the Supreme Court, there was a dispute amongst the erstwhile partners of the firm. Receivers were appointed for carrying on the business on behalf of the partners. If was contended before the Supreme Court that for purposes of Section 3 of the I.T. Act, an association of persons must mean an association in which two or more persons voluntarily join in common purpose or common action. It was further contended that for a business to be carried on by an association of persons, there must be a unity of control and unity of management. As no such unity existed amongst the erstwhile partners of the firm, it cannot be said that the Receivers represented an association of persons. Their Lordships of the Supreme Court repelled the contention on behalf of the assessee and held - "But in fact the business was continued in pursuance of the orders of the court. All the owners of the business including the persons who objected to the continuance of the business were given, month by month, some amounts from the proceeds of the business. It was not said that any of them declined to receive the same. That means all of them acquiesced in the continuance of the business." Their Lordships further held - "It is not denied that the business was carried on by the receivers on behalf of the erstwhile firm and that considerable profits were earned from the business. The control and the management of the business was in the hands of the receivers. That control and management was a unified one. The receivers had joined in a common purpose and they acted jointly. When they did so they acted on behalf of the persons who were the owners of the business. The receivers did not and could not have represented the individual interest of the various owners of the business. If the had done so there would have been chaos in the business. The profits to which those owners lay claim and which they were not averse to pocket, were earned on behalf of an 'association of persons'." Their Lordships further held - "Liability to tax depends upon the earning of profits by a unit and not upon the ultimate division of the profits." 12. In the case of Mohammed Noorullah v. C.I.T. [(1961) 42 I.T.R. 115 (SC)], one Oomer Sahim used to carry on business of manufacture and sale of Spade Clover brand beedies. After his death his minor son and his widow and four children by her who were all minors at the date of the death of Oomer Sahib, carried on the business. Noorullah through his next friend applied to sue in forma pauperis and during the pendency of those proceedings, two Advocates of the High Court were appointed joint receivers of the properties of the deceased on March 17, 1943. On May 10, 1943, the widow of the deceased filed a suit for partition and also applied for the continuance of the joint receivers.
The receivers as per the court order continued the business as before.
In due course a preliminary decree for partition was passed. The question that came up for consideration of the Hon'ble Supreme Court was the status in which the income of the business was to be taxed.
Their Lordships held that the income was the income of a business which was carried on as a single business by the consent of all the parties.
The mere fact that a suit was pending at the time for the administration of the estate of the deceased or for the separation of the shares of the co-heirs did not affect the incidence of taxation.
13. In the case of Meera & Co. v. C.I.T. [(1997) 224 I.T.R. 635 (SC)], the business was carried on by widow on her behalf and on behalf of minor children. The issue considered by the Hon'ble Supreme court wazs as to the status in which the assessee was to be assessed after the death of the individual. Their Lordships held that when the minors along with their mother formed a body to generate income, the levy of tax Under Section 4 of the I.T. Act was on that body. The mother could not insist that the income of the joint venture must be assessed separately on the minors and her, even when a joint business was carried on.
14. Let me now consider the facts of this case in the light of the principles of law laid down by their Lordships of the Supreme Court referred to above. It is not disputed that the Nursing Home is jointly owned by Dr. Narendra Prasad and his wife Dr. (Mrs.) Leela Prasad. It is also not disputed that the income is distributed amongst the husband and wife in equal proportion. It is not also disputed that the husband and the wife have admitted to be the joint owners of the business. From the statement of accounts quoted elsewhere in this order it becomes abundantly clear that the business of the Nursing Home is not only to provide lodging facilities to the patients but also organized treatment and other services for which qualified doctors, nurses and other staff have been appointed by the organization. In the light of the principles laid down by the Hon'ble Supreme Court quoted above, it is not material as to whether Dr. (Mrs.) Leela Prasad and or Dr. Narendra Prasad actively participated or not in carrying on the business of running the Nursing Home. From the facts on record it is evident that Dr. Narendra Prasad provided his professional services to the Nursing Home at the salary of Rs. 1,80,000/- which was separately paid to him in addition to the profit derived from the running of the Nursing Home activities.
The business having been carried on on behalf of the owners of the Nursing Home, the mere fact that there does not exist a written agreement between the parties for carrying on such business will not, in my view, deter the finding that the business has been carried on on behalf of the joint owners in an organized manner which constitutes a joint business. Since Dr. Narendra Prasad and his wife Dr. (Mrs.) Leela Prasad are established to have joined together for a common cause, i.e.
earning of profits and gains from running of the Nursing Home, it gives birth to an association of persons which in the meaning of Section 4 of the Act. Thus, in my considered view, there exists as association of persons, which is a separate assessable entity under the provisions of the Income-tax Act, 1961.
15. Now I proceed to consider as to whether the A.O. had the option to assess only the individual members in respect of the respective shares they received from the association of persons instead of assessing the association of persons. It this connection, reference to Section 4 of the I.T.Act, 1961 would be relevant. It reads as under:- "4.(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly." From the plain reading of the charging section quoted above, it is evident that the charge is in respect of the total income of the previous year of every person. The person is also defined Under Section 2(31) of the Act which reads as under:- (v) an association of persons or a body of individuals, whether incorporated or not, (vii) every artificial juridical person, not falling within any of the proceeding sub-clauses." The above definition of person is inclusive definition and it is note worthy for the purpose of present controversy that a company is also included in the definition of person as also an association of persons.
16. Section 3 of the Indian Income-tax Act, 1922 provided that in respect of the total income of an association of persons the tax shall be charged either on the association of persons or on the members of the association of persons individually. Though the section expressly treated an association of person and individual members of the association as different assessable entities, the language of Section 3 was such that it gave an option to the A.O. to levy tax on either the association of persons or the members of the association individually.
On the terms of Section 3 of the 1922 Act, it was held that if anyone or more members of an association of persons had already been assessed to tax in respect of his or their share income, assessment thereafter could not be made on the association itself because the option to the ITO exhausted with the assessment of the member or members. The decision of the Supreme Court in the case of C.I.T. v. Kanpur Coal Syndicate [(1964) 53 I.T.R. 225, 228 (SC)] is relevant for this proposition of law. Similar was the position in the case of the firm which was sought to be assessed as unregistered firm. However, in 1956 there was an amendment in Section 23(5) of the 1922 Act by virtue of which both firm as well as its individual partners were made exigible to tax in the manner provided therein. As a result thereof, an assessment could well be made on the registered firm even after the individual partners had been assessed on their respective share income.
Similarly under the Income-tax Act, 1961, the option of assessing either AOP or its members under the I.T.Act, 1922 is not available to the A.O. The position of law relating to the option available to the A.O. of assessing, either the association of persons or the individual members, was explained by their Lordships of the Supreme Court in the case of I.T.O. v. Ch. Atchaiah [(1996) 218 I.T.R. 239 (SC)], wherein the distinction between the provisions of 1922 Act and the provisions under 1961 Act is explained. It has been held by their Lordships that under the 1961 Act even in the case of collective entities, the I.T.O.has no option to assess either such entity itself or its individual constituents. Thus, it is abundantly clear that the association of persons being recognized as an entity in itself is separately assessable to tax dehorse the assessment of the individual members. As per the scheme under the 1961 Act, the individuals, HUFs, shareholders of companies or others being partners of a firm or members of an association of persons are also separately assessable to tax besides the assessment of company, firm or AOP. In the case of the registered firm as per the law as existed prior to the change in the scheme of taxation of firms from assessment year 1993-94, the tax was payable by the firm on its total income and its partners were also separately assessable to tax in respect of the share income from the firm. In the case of unregistered firm, whereas the firm was to be assessed entity, share income of the partners from unregistered firm was to be included in their individual assessments for rate purposes only. It is thus evident that the taxation of collective entities and individual entities is provided separately under the provisions of the Act of 1961 and it is, therefore, necessary to examine the other provisions of the Act relating to the association of persons and its members for determining the issue involved in this appeal.
17. At this stage, it would be relevant to refer to Section 167B which is quoted hereunder:- "167B.(1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate : Provided that, where the total income of any member of such association or body is chargeable to tax at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the association or body at such higher rate.
(2) Where, in the case of an association of persons or body of individuals as aforesaid [not being a case falling under Sub-section (1)],-- (i) the total income of any member thereof for the previous year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to tax in the case of that member under the Finance Act of the relevant year, tax shall be charged on the total income of the association or body at the maximum marginal rate.
(ii) any member or members thereof is or are chargeable to tax at a rate or rates which is or are higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total income of the association or body which is or are relatable to the share or shares of such member or members at such higher rate or rates, as the case may be, an the balance of the total income of the association or body shall be taxed at the maximum marginal rate.
Explanation.--For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter."] 18. It is evident from the language of Section 167B quoted above that the Legislature has ensured levy of tax on association of persons at maximum rate under various circumstances. It thus becomes evident that the Legislature has treated an association of persons as a separate assessable entity dehorse the members of the association of persons.
The association of persons being a separate assessable entity is obliged to file the return of income and also pay taxes as per the provisions of the Act. Section 139(1) makes it obligatory for the association of persons to file the return of income within the prescribed time if its income exceeds the maximum amount which is not chargeable to income-tax. The assessment in the case of an association of persons is required to be made under the provisions of the Act, such as Section 143 or 144 and/or 147.
19. As pointed out elsewhere in this order, the Supreme Court in the case of I.T.O. v. Ch. Atchaiah [(supra) held that there is difference between Indian Income-tax Act, 1922 and the Income-tax Act, 1961 in regard to the option of the A.O. to assess the association of persons or its members individually. Whereas under the Income-tax Act, 1922 there was an option with the A.O. to either assess the association of persons or its members individually, under the Income-tax Act, 1961 there is no such option with the A.O. The association of persons under the Income-tax Act, 1961 is a unit of assessment and the I.T.O. shall have to make an assessment in respect of the profits and gains derived by it and even if the members of the association have been assessed separately, that will not be a bar to assessment of association of persons. Thus the issue as to whether the A.O. has any option not to assess the association of persons when its existence is established and when the members have been assessed individually, the issue is covered by the decision of the Supreme Court referred to above. In assessment year 1995-96 as well as in assessment year 1997-98, the assessment of the members has been made on protective basis. On the authority of the decision of the Supreme Court in the case of I.T.O. v. Ch. Atchaiah (supra), even if the assessment in the case of members of the association of persons had been made by the A.O. in respect of the share income from the association of persons, it would not be a bar for the A.O. to assess the association of persons separately as a unit of assessment.
20. That leaves me to consider is as to whether the order of the Settlement Commission relating to assessment years 1982-83 to 1984-85 accepting the proposal of assessing the income derived from the Nursing Home in the hands of Dr. Narendra Prasad and his wife Dr. (Mrs.) Leela Prasad in the ratio of 50:50 is a bar for assessment of A.O.P. This issue is also more or less covered by the decision of the Supreme Court in the case of I.T.O. v. Ch. Atchaiah (supra), referred to above, in so far as the Settlement Commission did not consider the assessability of the association of persons as such. The order of the Settlement Commission, which relates to assessment years 1982-83 to 1984-85 only, provides for assessment of the individual members, but it does not specifically debar the assessment of association of persons. Therefore, the order of the Settlement Commission does not come in the way of the assessment of the association of persons as such even for assessment years 1982-83 to 1984-85. Moreover, in subsequent years, i.e. after 1984-85, there is neither any order of the Settlement Commission nor any order of the A.O. to the effect that the association of persons does not exist. The fact of the matter is that the income of the Nursing Home has been assessed in the individual hands in the ratio of 50:50. As held by the Hon'ble Supreme court in the case of I.T.O. v.Ch. Atchaiah (supra), even the assessment in the same assessment year in the hands of individual members will not debar the A.O. to assess the association of persons separately. To my mind, the mere fact that in earlier years only the members of the association of persons have been assessed to tax in respect of the share income will not preclude the A.O. from assessing the association of persons in the years under appeal.
21. In my considered view, there being sufficient evidence on record to establish that the activities of Alok Nursing Home are being carried on in an organized manner on behalf of its owners viz., Dr. Narendra Prasad and his wife Dr. (Mrs.) Leela Prasad, there is an association of persons in existence for carrying out such activities. Since the association of persons is an independent unit of assessment under the provisions of the Income-tax Act, the A.O. was duty bound to assess the same in accordance with law. Therefore, the issue of notice Under Section 148 in the name of the association of persons was justified for making the assessment in the hands of the association of persons.
22. The contention advanced on behalf of the assessee that the Revenue having assessed the individual owners separately in earlier years and the Settlement Commission also having decided so, the Income-tax Department was estoppelled to assess the income in the hands of the A.O.P. is bereft of substance. Firstly, there is no estoppel against the Statute. Their Lordships of the Supreme Court in the case of C.I.T.v. B.N. Bhattachargee [(1979) 118 I.T.R. 461 (SC)] held that the statutory power cannot be nullified by the doctrine of estoppel. It was further held by their Lordships of the Supreme Court that "where public duties cast by statute are involved, private parties cannot prevent their performance by invoking estoppel." 23. In this case, there is either a decision of the Settlement Commission or of the Revenue authorities about the existence or non-existence of the association of persons. In fact, to my mind, there is non-application of mind. In the absence of any decision about the existence or non-existence of the association of persons, it is futile to even plead that the principles of estoppel are applicable against the Revenue. As already pointed out, even the assessment on the individual members of the association of persons separately does not debar the I.T.O. to assess the association of persons, as held by the Hon'ble Supreme Court in the case of I.T.O. v. Ch. Atchaiah (supra).
The claim of the assessee that the Revenue was estoppel from assessing the A.O.P. is thus devoid of any merit. It, therefore, concur with the view of the Ld. Accountant Member and hold that the assessment on the association of persons made by the A.O. on the disclosed income is perfectly in order in accordance with law and no interference is warranted. The decision of the C.I.T.(A) is contrary to law and the facts on record. The same deserves to be set aside and the order of the A.O. deserves to be restored. I hold accordingly.
24. As far as the assessments of Dr. Narendra Prasad and his wife Dr.
(Mrs.) Leela Prasad are concerned, the same are required to be modified as the mere declaration of income by the individual members in their assessment does not bind them to be assessed in respect of that income, which is found to be assessable in the hands of the association of persons. The share income of the members has got to be treated for the purpose of taxation in their respective assessments in accordance with provisions of Section 67A and other provisions of law and the A.O.shall have to give consequential effect in the assessments of the individual members.
25. Let this order be placed before the regular Bench for passing the consequential order in accordance with the majority view.