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PETITIONER: S. SANKAPPA AND OTHERS

       Vs.

RESPONDENT: THE INCOME-TAX OFFICER, CENTRAL CIRCLE II,BANGALORE

DATE OF JUDGMENT: 14/12/1967

BENCH: BHARGAVA, VISHISHTHA BENCH: BHARGAVA, VISHISHTHA SHAH, J.C. RAMASWAMI, V.

CITATION:  1968 AIR  816            1968 SCR  (2) 674  CITATOR INFO :  RF         1973 SC1010  (2)  RF         1977 SC 459  (1,6)  RF         1991 SC1322  (23)

ACT: Income  Tax Act, 1922, ss. 23, 35-Income Tax Act, 1961,  ss. 155 297(2) (a) -Whether proceedings on issue of notice under s.  35  (5)  of  the  Act  of  1922  for  rectification  are proceedings  for assessment within the meaning of s.  297(2) (a) of the Act of 1961.

HEADNOTE: During  the assessment ’years 1958-59, 1959-60 and  1960-61, two  firms in which the six appellants were partners,  filed returns declaring themselves to be registered firms and also presented  applications for registration of the firms  under s. 26A of the Income-tax Act, 1922.  The Income-tax  Officer refused registration of the firms and assessed the income of the  firms, treating them as unregistered.  The  assessments of the six appellants were also made, so that their  incomes from  the  two  firms  were  included  in  their  individual assessments  as  if  they had received  the  income  in  the capacity of partners in unregistered firms.  Appeals made by the  firms  against  the order  refusing  registration  were allowed  by  the Appellate Assistant Commissioner  -and,  in pursuance  of the appellate orders, the Income  Tax  Officer passed a consolidated order on 20th December, 1966, revising the  assessments  of the firms for all these  years  on  the basis  that they were registered firms and also  apportioned the   income  of  the  firm,;  between  the  six   partners. Subsequently, the Income Tax Officer issued notices under s. 155  of the Income Tax Act, 1961, proposing to  rectify  the individual  assessments of the six appellants in respect  of each of the three assessment years, whereupon the appellants challenged  the validity of the notices by  writ  petitions. It  was  conceded  before the High Court on  behalf  of  the Income  Tax  Officer  that  as  the  rectification  proposed related  to assessment years when the Income Tax Act,  1922, was  applicable, proceedings for rectification could not  be taken  under s. 155 of the 1961 Act but only under s.  35(5) of the 1922 Act in view of the provisions of Is. 297 (2) (a)

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of the Act of 1961.  The High Court dismissed the petitions. In -appeal to this Court it was contended, inter alia,  that proceedings  for rectification under s. 35(5) of the Act  of 1922 cannot be held to be proceedings for assessment  within the  meaning of that expression used in s. 297(2)(a) of  the Act of 1961, and therefore under that provision of law,  the Act  of  1922  could not be resorted to  by  the  Income-tax Officer   in  order  to  rectify  the  assessments  of   the appellant; that, in any case, the provisions of s, 35(5)  of the Act of 1922 are not attracted. because proceedings under that  section,  can only be taken when it is  found  on  the assessment  or reassesment of a firm that the share  of  the partner  in  the  profit or loss of the firm  has  not  been included  in the assessment of the partner or, if  included, is  not  correct, and, in the present cases,  there  was  no assessment or reassessment of the firms when the  income-tax Officer,  in pursuance of the appellate order, proceeded  to pass orders rectifying the assessments-of the firms under s. 35(1) of the Act of 1922; as there was no fresh  computation of  income  the  proceedings sought to  be  taken  were  not proceedings for assessment. HELD : Dismissing the appeal 675 (1)  the word "assessment" is used in the Income-tax Act  in a number of provisions in a comprehensive sense and includes all  proceedings, starting with the filing of the return  or issue  of  notice and ending with determination of  the  tax payable  by  the assessee., When proceedings are  taken  for rectification of assessment to tax either under s. 35(1)  or s.  35(5)  of  the  Act of 1922, they must  be  held  to  be proceedings  for  assessment.   In  proceeding  under  those provisions,  what the Income-tax Officer does is to  correct errors in, or rectify orders of assessment made by him,  and orders   making  such  correction  or  rectifications   are, therefore  clearly part of the proceedings  for  assessment. [678 B, G-H] The  orders passed under s. 35(1) by the Income-tax  Officer on  20th December, 1966 were all orders altering  assessment orders made in the proceedings for assessment of the  firms, while, under the impugned notices the Income-tax Officer was proposing  to rectify orders made for computation of  income and imposition of tax under the charging section in the case of individual partners.  Clearly, therefore, in these cases, s.  297(2)  (a) of the Act of 1961  permits  the  Income-tax Officer to proceed in accordance with the provisions of  the Act  of  1922  and he had rightly proposed  to  take  action tinder s. 35(5) of the Act of 1922. [679 E-G] Abraham v. Income-tax Officer, 41 I.T.R. 425; Kalawati  Devi Harlalka  v. The Commissioner of Income-tax, West  Bengal  & Ors,  Civil  Appeal No. 1421 of 1966  decided  on  1-5-1967, relied on. M,  M.  Parikli,  Income,   Officer,  Special  Investigation Circle  "B" Ahmedabad v. Navanagar Transport and  Industries Ltd. and Another, 63 I.T.R. 663, distinguished. The  provisions of s. 23 and other relevant sections of  the Act of 1922 clearly show that proceedings for assessment  of a  firm consist of computation of the income of  the  firms, determination of tax payable by the firms, apportionment  of the income of the firm between its partners in the case of a registered firm and, in appropriate cases, imposition of tax on  the  firm  after including the share of  the  income  of certain partners in, the income of the firm, even though the firm  is registered.  The proceedings for assessment of  the firm are not completed until all these steps have been taken by  the Income-tax Officer, and each of those steps must  be

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held  to be a step in the proceedings for assessment of  the firm.  Consequently, when the Income-tax Officer passed  the orders  dated 20th December 1966 and apportioned the  income of the firms between the various partners, the orders  which be  made were clearly orders in proceedings  for  assessment and  it was in order to give effect to these orders  in  the individual  assessment,  of the partners that  the  impugned notices were issued.  The first condition precedent that the proceedings  under s. 35(4) are to be taken on the basis  of information  derived  from  orders  of  assessment  or   re- assessment of the firm was, thus clearly satisfied. [682  B- E] V.   S.  Arulanandam  v. Income-tax Officer,  Tuticorin,  43 I.T.R. 511, it p. 517: distinguished. The  second  condition precedent was also satisfied  as  the share of each partner in the profit or loss of the firm  was not  included  in  the assessment of  the  partner  for  the purpose  of  assessment  of that share  to  tax.   Inclusion contemplated  by  s. 35(5) is for assessment to tax  of  the share.  In fact, the inclusion was for the, limited purposes of  determining  the exemption to which  the  partners  were entitled  under s. 14(2)(a) and for determining the rate  of tax  payable in the separate assessments under s,  16(1)(a). When  the  assessments of the unregistered  firms  were  set aside, the individual partners ceased to be entitled to  the benefit of L2Sup.C.1/68---13 676 s. 14(2)(a), and    s.  16(1) (a) also become  inapplicable. What was required to be done  was to add the income of  each partner in his individual assessment and then impose tax  on it in accordance with s. 23(5) (a) (ii) of the Act of  1922. Thus, this was a clear case where the inclusion of the share of  the income of the partner in his  individual  assessment was not correct. [683 F-H 684 B-C]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  1664  to 1681 of 1967. Appeals  front the judgment and order dated August  30,  31, 1967 of the Mysore High Court in Writ Petitions Nos. 354  to 371 of 1967. K.   Srinivasan and R. Gopalakrishnan for the appellants (in all the appeals). C.   K.  Daphtary  Attorney-General, S. K.  Aiyar and R.  N. Sachthey, for the respondent (in all the appeals). The Judgment of the Court was delivered by Bhargava,  J. These eighteen appeals have been filed by  six persons,  some of whom were partners in a firm  called  "The Lalitha Silk Throwing Factory", some in another firm  called "The Srinivasa Textiles", and some in both these firms.  The appeals  brought up to this Court under certificate  -ranted by the High Court of Mysore are against the judgment of  the High  Court dismissing eighteen writ petitions by these  six appellants  praying  for  quashing  notices  issued  by  the Income-tax  Officer,  Bangalore,  purporting  to  be   under section 155 of the Income-tax Act No. 43 of 1961,  proposing to  rectify the assessments of the appellants in respect  of the  assessment years 1958-59, 1959-60 and  1960-61.   Thus, the  notices challenged are three notices for each of  these assessment years in respect of each of the six appellants  , so that there were 18 petitions before the High Court.   The High  Court decided all the petitions by a  common  judgment

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and,  conscequently in these appeals, all of them are  being dealt with together. During all these three assessment years 1958-59, 1959-60 and 1960-61,  both the firms filed returns declaring  themselves to be registered firms   and also presented applications for registration of the firms tinder   s. 26A of the  Income-tax Act No. 11 of 1922. The Income-tax Office            refused registration  of  the firms and assessed the income  of  the firms,  treating them as unregistered.  The  assessments  of these  six appellants were also made, so that their  incomes from  the  two  firms  were  included  in  their  individual assessments  as  if  they had received  the  income  in  the capacity of partners in unregistered firms.  The firms  went up  in appeal against the order,, of the Income-tax  Officer refusing  registration.  These appeals were allowed  by  the Appellate Assistant Commis- 677 sioner  by an order dated 26th November, 1966 in respect  of the Lalitha Silk Throwing Factory, and 14th December,  ’1966 in  respect of Srinivasa Textiles.  The Income-tax  Officer, in  pursuance  of  the  appellate  order  of  the  Assistant Commissioner,  passed  a  consolidated  order  revising  the assessments  of the firms for all these years on  the  basis that  they  were registered firms and also  apportioned  the income   of   the   firms  between   these   six   partners. Subsequently,  the notices impugned in these petitions  were issued  on.  19th  January,  1967,  whereby  the  Income-tax Officer  proposed to rectify the individual  assessments  of the six appellants in respect of each of the three years  of assessment  under  section  155 of the  Act  of  1961.   The appellants in the writ petitions challenged the validity  of these  notices,  but  the  High  Court  dismissed  the  writ petitions and, consequently, the appellants have come up  in these appeals before us. It  was  conceded  before the High Court on  behalf  of  the Income tax Officer that proceedings for rectification of the assessments  of the appellants could not be taken  under  s. 155   of   the  Act  of  1961,  because,   admittedly,   the rectifications related to assessments of tax for  assessment years  when  the  Act  of  1922  was  applicable,  so   that proceedings could only be taken under s. 3 5 (5 ) of the Act of 1 922 in view of the provisions of s. 297 (2) (a) of  the Act of 1961.  Before us, learned counsel for the  appellants urged that .proceedings for rectification under s. 35(5)  of the  Act  of  1922  cannot be held  to  be  proceedings  for assessment within the meaning of that expression used in  s. 297(2) (a) of the Act of 1961, so that, under that provision of  law,  the Act of 1922 could not be resorted  to  by  the Income-tax  Officer in order to rectify the  assessments  of the  appellants.   On the same basis, it was  further  urged that, in any case, the provisions of s. 35(5) of the Act  of 1922  are  not  attracted, because  proceedings  under  that section can only be taken when it is found on the assessment or  reassessment of a firm that the share of the partner  in the profit or loss of the firm has not been included in  the assessment  of the partner or, if included, is not  correct; and,  in  the  present cases, there  was  no  assessment  or reassessment  of the firms when the Income-tax  Officer,  in pursuance   of   the  order  of  the   Appellate   Assistant Commissioner  granting registration to the firms,  proceeded to pass orders rectifying the assessments of the firms under s.  35 ( 1 ) of the Act of 1922 on 20th December, 1966.   It was  urged  that  no  fresh computation  of  income  of  the partners  is sought to be made in pursuance of  the  notices issued and, similarly, no fresh computation of the income of

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the  firms was made when the Income-tax Officer  passed  his orders on 20th December, 1966 to give effect to the decision of    the   Appellate   Assistant   Commissioner    granting registration  to the firms.  No fresh computation of  income being  involved,  it must be held that the  proceedings  now sought to be taken are not 678 proceedings  for assessment, and, similarly, no  proceedings for assessment or reassessment were taken by the  Income-tax Officer  when he passed his orders on 20th  December,  1966. This  submission, in our opinion, has been rightly  rejected by the High Court, because it has already been explained  by this Court that the word "assessment" is used in the Income- tax  Act in a number of provisions in a comprehensive  sense and  includes all proceedings, starting with the  filing  of the return or issue of notice and ending with  determination of  the  tax  payable  by  the  assessee.   Though  in  some sections, the word "assessment" is used only with  reference to computation of income, in other sections it has the  more comprehensive meaning mentioned by us above.  Reference  may be made to the decision of this Court in Abraham v.  Income- tax  Officer(1).   The  same  principle  has  been  recently reiterated  in  the case of Katawati Devi  Harlalka  v.  The Commissioner  of Income-tax, West Bengal & Ors.  (-)  where. dealing  with the word "assessment" used -in s. 297  of  the Act of 1961, the Court held               "It is quite clear from the authorities  cited               above  that the word ’assessment’ can  bear  a               very  comprehensive meaning it can  comprehend               the  whole  procedure  for  ascertaining   and               imposing  liability  upon  the  taxpayer.   Is               there  then anything in the context of S.  297               which  compels  us to give to  the  expression               ’procedure  for the assessment’  the  narrower               meaning  suggested by the learned counsel  for               the  appellant  ? In our view, the  answer  to               this  question  must be in the  negative.   It               seems to us that s. 297 is meant to provide as               far  as possible for all  contingencies  which               may  arise out of the repeal of the 1922  Act.               It deals with pending appeals, revisions, etc.               It   deals  with   non-completed   assessments               pending  at the commencement of the  1961  Act               and   assessments   to  be  made   after   the               commencement  of the 1961 Act as a  result  of               returns of income filed after the commencement               of the 1961 Act," It   is   clear  that,  when  proceedings  are   taken   for rectification of assessment to tax either under s. 35(1)  or s. 35(5) of the Act of 1922, those proceedings must be  held to be proceedings for assessment.  In proceeding under those provisions,  what the Income-tax Officer does is to  correct errors in, or rectify orders of assessment made by him,  and orders  making  such  corrections  or  rectifications   are, therefore, clearly part of the proceedings for assessment. (1)  41  I.T.R.  425.  (2) Civil Appeal  No.  1421  of  1966 decided on 1.5.1967. 67 9 The   main stay of the argument of learned counsel  for  the appellants against this view was the decision of this  Court in  M. M. Parikh, Income-tax Officer, Special  Investigation Circle "B", Ahmedabad v. Navanagar Transport and  Industries Ltd. and Another(1) in which case the Court was dealing with the question whether an order imposing additional  super-tax under  s. 23A of the Act of 1922 was an order of  assessment

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and  held to the contrary.  The decision in that  case  does not,  in our opinion, support the submission made on  behalf of  the appellants in the present cases.  It  was  explained there  that, under s. 23A of the Act of 1922, there  was  no computation of income or determination of tax imposed by the charging  section.   That section by  itself  empowered  the Income-tax Officer to impose the super-tax by his own order, and an order imposing such a tax could not be held to be  an order  of  assessment.  Further examples of  similar  orders were  cited  in that case and reference was made  to  orders under  ss.  18A(l), 35(9), 35(10) and 35(11) of the  Act  of 1922.   After  referring  to  these  provisions,  the  Court clearly  indicated the reason for holding  that  proceedings under  those provisions were not proceedings for  assessment of tax by stating :               "The salient feature of these and other orders               is  that the liability to pay tax  arises  not               from  the charge created by statute, but  from               the order of the Income-tax Officer." In  the present cases the orders, which have been  rectified or  are  being taken up for rectification,  are  all  orders under   which   there   was  assessment   of   incomes   and determination  of the charge to tax in accordance  with  the charging  sections.  The orders passed under s. 3 5  (1)  by the  Income-tax  Officer  on 20th December,  1966  were  all orders  altering assessment orders made in  the  proceedings for  assessment  of  the firms,  while  under  the  impugned notices  the  Income-tax  Officer is  proposing  to  rectify orders made for computation of income and imposition of  tax under  the  charging  section  in  the  case  of  individual partners.   Clearly, therefore, in these cases, s.  297  (2) (a)  of the Act of 1961. permits the Income-tax  Officer  to proceed in accordance with the provisions of the Act of 1922 and he has Tightly proposed to take action under s. 35(5) of the Act of 1922 on. the basis of rectifications made in  the assessment-,  of  the firms under s. 35 (1) of that  Act  on 20th  December,  1966 in pursuance of the  appellate  orders granting registration to the firms. The second point raised by learned counsel was that, in  any case, the orders actually made by the Income-tax Officer  on 20th  December, 1966 in the cases of these firms  cannot  be held  to  be  orders of assessment,  because  all  that  the Income-tax Officer did (1)  63 I.T.R. 663. 680 and was required to do in order to give effect to the orders of    the   Appellate   Assistant   Commissioner    granting registration  was  to re-calculate the tax  payable  by  the firms  under s. 23 (5) (a) of the Act of 1922, and  such  an order would not be an order of assessment at all.  Copies of the  orders actually passed by the Income-tax Officer  under s. 3 5 (1) in the cases of both the firms have been produced before us.  They show that the orders consist of two  parts. In  the  first part, the tax payable by the  firms  was  re- calculated on the basis that the firms were registered firms and  refund was allowed, because a larger amount of tax  bad been   assessed   and  realised,  treating  the   firms   as unregistered.   In the second part, the share income of  the assessee  firms was allocated between the various  partners. It  appears to us that this composite  order  re-determining the   tax  payable  by  the  firms  directing   refund   and apportioning  the income of the firms between  the  partners can  be  held  to be nothing other than  an  order  made  in proceedings for assessment of the firms. Under  the  Act of 1 922, the assessment of a firm  is  made

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tinder s. 23 (5) which is as follows               "23(5).   Nothwithstanding anything  contained               in               the   foregoing subsections, when the assessee               is a firm               and   the  total income of the firm  has  been               assessed under               sub-section  (1),  sub-section  (3)  or   sub-               section (4), as the case may be.--               (a)   in the case of a registered firm,               (i)   the  income-tax  payable  by  the   firm               itself shall be determined; and               (ii)  the total income of each partner of  the               firm,  including  therein  his  share  of  its               income,  profits  and gains  of  the  previous               year, shall be assessed and the sum payable by               him  on the basis of such assessment shall  be               determined :               Provided that if such share of any partner  is               a  loss it shall be set off against his  other               income  or  carried  forward and  set  off  in               accordance with the provisions of section 24 :               Provided   further  that  when  any  of   such               partners  is  a  person not  resident  in  the               taxable territories, his share of the  income,               profits  and  gains  of  the  firm  shall   be               assessed or ’the firm at the rates which would               be  applicable  if  it were  assessed  on  him               personally,  and  the  sum  so  determined  as               payable shall be paid by the firm;               681               provided   also  that  it’  at  the  time   of               assessment  of  any partner  of  a  registered               firm,  the  Income-tax Officer is  of  opinion               that the partner is residing in Pakistan,  the               partner’s  share  of the income,  profits  and               gains of the him shall be assessed on the firm               in  the  manner laid down  in  the  preceding,               proviso  and the sum so determined as  payable               shall be, paid by the firm; and               (b)   in the case of an unregistered firm, the               Income-tax Officer may, instead of determining               the  sum payable by the firm itself,  -proceed               to assess the total income of each partner  of               the firm, including therein, his share of  its               income,  profits  and gains  of  the  previous               year,  and determine the tax payable  by  each               partner  on the basis of such assessment,  if,               in  the  Income-tax  Officer’s  opinion,   the               aggregate amount of the tax. including  super-                             tax, if any, payable by the partners u nder such               procedure would be greater than the  aggregate               amount which would be payable by the firm  and               the   partners  individually,  if   separately               assessed; and where the procedure specified in               this  clause  is applied to  any  unregistered               firm, the provisos to clause (a) of this  sub-               section shall apply thereto its they apply  in               the case of a registered firm." It  will  be noticed that., under  this  provision,  various orders  have to be made by the Income-tax Officer.   In  the case  of  a registered firm, the Income-tax  Officer,  after computing  the income, has to determine the tax  payable  by the firm itself, and provision is made that, thereafter, the

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share  in  the income of the firm of each partner is  to  be included in his total income for purposes of his  individual assessment  to tax.  It is true that the Income-tax  Officer assessing  the firm may not be the same Officer who  may  be dealing with the individual assessment of the partners  and, in  any case, even if he be the same Officer, the proceeding for  assessment  of  the partners has to  be  treated  as  a separate   proceeding;  but  it  is  also  clear  that   the proceedings for assessment of the firm under this section do not  come to an end merely on computation of the  income  of the firm and determination of the tax payable by the firm on that  income.   The Income-tax Officer, who deals  with  the assessment of the firm, has also to apportion the income  of the  firm,  in the case of a registered  firm,  between  its partners  and  the notice of that apportionment  has  to  be given   under  s.  23  (6)  ’by  him  to  the  firm.    This apportionment   is  clearly  treated  as  a  part  of   ’the proceeding  for assessment of the firm and that is  why  the notice is to be given to the firm.  The second proviso to s. 30 (1) also clarifies this position by laying down that  the right  or  appeal in respect of the apportionment is  to  be exercised by the 682 partners  by filing appeals against the order of  assessment of  the  firm and not against orders made in the  course  of subsequent proceedings for the individual assessments of the partners  themselves.  The second proviso to s. 23  (5)  (a) also brings out this position.  In certain cases, after  the apportionment  of  the income of the  registered  firm,  the share  of a particular partner, who is not resident  in  the taxable territories, is to be assessed to tax also as if  it is the income of the registered firm.  All these  provisions clearly  show  that  proceedings for assessment  of  a  firm consist   of  computation  of  the  income  of   the   firm, determination  of tax payable by the firm, apportionment  of the income of the firm between its partners in the case of a registered firm and, in appropriate cases, imposition of tax on  the  firm  after including the share of  the  income  of certain partners in the income of the firm, even though  the firm  is registered.  The proceedings for assessment of  the firm are not completed until all these steps have been taken by the Income-tax Officer, and each one of those steps  must be  held to be a step in the proceedings for  assessment  of the firm.  Consequently, when the Income-tax Officer  passed the  orders  dated 20th December, 1966 and  apportioned  the income of the firms between the various partners, the orders which  he  made  were  clearly  orders  in  proceedings  for assessment  and  it  was in order to give  effect  to  these orders in the individual assessment of the partners that the impugned notices were issued.  The first condition precedent that  the proceedings under s. 35(5) are to be taken on  the basis  of information derived from orders of  assessment  or re-assessment of the firm was, thus, clearly satisfied. In this connection, learned counsel drew our attention to  a decision  of the Madras High Court in V. S.  Arulanandam  v. Income-tax Officer, Tuticorin(l), where that Court,  dealing with section 35(5) of the Act of 1922, held :-               "The respondent relied at one stage on section               35(5)  of the Act.  It should be obvious  that               the petitioner’s case did not come within  the               scope  of  section  35  (5).   There  was   no               reassessment  of the income of the  firm;  nor               was there an appeal against the assessment  of               the  firm.   The only appeal of the  firm  was               against  the order of the  Income-tax  Officer

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             refusing  registration under section 26A.   In               fact,  the finality of the assessment  of  the               firm  dated  November 11, 1954, was  left  un-               touched  all  through, an aspect to  which  we               shall have to advert again." Reliance  was placed on this comment, because in  that  case also  the  firm, of which the assessee was  a  partner,  was first refused (1)  43 I.T.R. 511, at p. 517. 683 registration and the assessment of the partner was sought to be  rectified when, subsequently, registration of  the  firm was  allowed.   The  facts  of  that  case  were,   however, different.   In  that  case,  there  was  no  assessment  or reassessment  of  the  firm  subsequent  to  the  grant   of registration.   The  petition filed by the assessee  in  the High  Court  under  Art. 226  of  the  Constitution  against proceedings  of  rectification  sought to be  taken  by  the Income-tax Officer was allowed on two grounds.  One was that the  Income-tax  Officer  had given no  opportunity  to  the assessee before completing the proceedings of  rectification under s. 35.  The other was that the income of the firm  had already  been taxed as the income of the  unregistered  firm and  there could be no second assessment of the same  income in  respect of the assessee’s share in his assessment  until the  assessment  of that income to tax in the hands  of  the firm was set aside.  What was thus set aside was the attempt to tax the same income twice.  It was in these circumstances that  the  Court observed that there was no  scope  for  the applicability of s. 3 5 (1) or s. 3 5 ( 5 ) of the Act of  1 922.   Section 35(5) did not apply, because, in fact,  there was no assessment or reassessment of the income of the  firm subsequent to the order granting registration.  The finality of  the assessment of the firm had been left  untouched  and while that order remained intact, the provisions of s. 35(5) could  not  possibly be attracted.  In the case  before  us, after  registration of the firms was allowed in appeal,  the Income-tax Officer in the proceedings for assessment of  the firms  proceeded further to make a fresh assessment  of  the tax payable by the firms and also to apportion the income of the  firms between various partners, so that the  income  of the firms no longer remained taxed as income of unregistered firms,  and liability arose of the partners to be  taxed  in their assessments in respect of their shares of the  income. Clearly, in these circumstances.s. 35(5)     was     rightly applied. The  last  point urged by learned counsel was  that,  in  s. 35(5)  of  the  Act of 1922, there  is  a  second  condition precedent,  on the existence of which alone proceedings  for rectification  can be taken under it and that  condition  is that it should be found that the share of the partner in the profit  or  loss of the firm had not been  included  in  the assessment of the partner, or, if included, was not correct: and  there  was no such finding in the present  cases.   The share  of each partner was not included for the  purpose  of assessment of that share to tax.  Inclusion contemplated  by s.  35(5)  is  for  assessment to tax  of  the  share.   The inclusion  was for only two limited purposes.   One  purpose was of determining the exemption to which the partners  were entitled  under s. 14(2) (a) of the Act of 1922.  The  other purpose  was  for  determining the rate  at  which  tax  was payable in the separate assessments of the partners under s. 16 (1 ) (a) of 684 that  Act.  The shares of the income of  the  partners  were

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never  included for the purpose of bringing those shares  of income to tax in their ]individual assessments.  The tax was actually  imposed in the assessment of the firms  themselves treating  it as the income of unregistered firms.  When  the assessments  of the unregistered firms were set  aside,  the individual partners ceased to be entitled to the benefit  of s.  14(2) (a), and s. 16(l.) (a) also  became  inapplicable. What  was required to be done was to add the income of  each partner in his individual assessment and then impose tax  on it  in accordance with s. 23(5)(a)(ii) of the Act  of  1922. must, this was a clear case where the inclusion of the share of  the income of the partner in his  individual  assessment was  not correct.  If the submission made on behalf  of  the appellants  be  accepted,  a  curious  result  would  ensue, because  the liability of the firms to pay tax on the  basis that they were unregistered firms would stand vacated, while the shares of the partners in the firms would not be brought to  tax in their individual assessments under s. 23 (5)  (a) (ii)  .  so  that  the income would  escape  charge  to  tax altogether.  It is clear that s. 35(5) of the Act of 1922 is enacted  precisely to meet situations of the type  that  has come up in the present cases, so that when the imposition of the  tax on the firm as an unregistered firm is  set  aside, tax  can  be  imposed on the shares of  the  income  of  the partners in their individual assessments by rectifying  them under  s.  35(5)  of the Act  of’  1922.   This  submission, consequently. has no force. The appeals fall and are dismissed with costs.  There ,,hall be fee. R.K.P.S. Appeals dismissed. 685