These appeals are filed by revenue against order of AAC, dated 15-7-1983, annulling assessment of AOP of Shri B.T. Burud. 2. departmental representative invited our attention to basic facts. ITO who had jurisdiction over persons who are not hitherto assessed, got information that four persons, namely, Shri B.T. Burud, S.B. Burud, B.T. Bohra and R.B. Bohra, had entered into agreement for purchase of certain lands admeasuring 5 acres and 12 gunthas near Nasik on 1-7-1971. For acquiring these lands, above parties had invested Rs. 70,000. Later on, these lands were divided into plots with certain changes and were ultimately sold realising profits which, according to assessee, were Rs. 21,790 for 1974-75 and Rs. 22,900 for 1975-76. With this information, ITO issued notices under section 148 of Income-tax Act, 1961 (' Act '), to AOP on 28-9-1977. Notices were served on 5-10-1977 and in response, AOP filed nil returns. returns were duly processed and resulted in assessment dated 31-3-1982. objections taken before ITO are summarised in para 3 of ITO's order and ITO's reply is contained in paras 4 to 6 of order. first contention was that assessee had no intention of doing business in land and second contention was that AOP cannot be assessed since some members were already assessed on capital gains derived as above. Consequently, notice under section 148 is void. 3. departmental representative then explained how objections of assessee had no force. ITO has examined duly location of land, factum of investment, application to town planning authorities and asked Collector, Nasik, to give his finding that entire idea was conceived as adventure in nature of trade. departmental representative further explained that there is no question of any exercise of any option because no such option was exercised by ITO. If by chance some other ITO completed member's assessments then this does not amount to exercise of option to assess members direct. Exercise of option involves knowledge about existence of such option. It has to be exercised, if at all, only after examining various pros and cons of such option. ITO, passing orders under section 143(1) of Act and assessing what members called short-term capital gains, cannot be said to have in fact exercised such option of assessing members direct. In this respect, AAC has erred in holding that in fact option has been exercised by ITO. 4. Referring to case law on subject, Shri Walvekar submitted that reliance of AAC in case of CIT v. R. Dhandayutham [1978] 113 ITR 602 (Mad.) is not correct. There is also contrary view expressed in number of judgments, in particular as follows: Rodamal Lalchand v. CIT [1977] 109 ITR 7 (Punj. & Har.), Mahendra Kumar Agrawalla v. ITO [1976] 103 ITR 688 (Pat.), Punjab Cloth Stores v. CIT [1980] 121 ITR 604 (Delhi), Sudsons Construction Co. v. Addl. CIT [1983] 140 ITR 634 (Delhi). Shri Walvekar specially referred to case of Jain Bros. v. Union of India [1970] 77 ITR 107 (SC). Shri Walvekar admitted that Bombay High Court judgment in CIT v. V. H. Sheth [1984] 148 ITR 169 has actually referred to Board's circular and held that once member is assessed, AOP cannot again be assessed. He, however, explained that in this judgment fact that option war, actually exercised, was never in dispute. Shri Walvekar admitted that there were certain Board's instructions referred to in above judgment, as also in Laxmichand Hirjibhai v. CIT [1981] 128 ITR 747 (Guj.). Shri Walvekar, however, submitted that Board's circulars have possibly been withdrawn. Accordingly, it was submitted that AAC erred in annulling assessments in manner done by him. 5. In reply, Shri Gadgil invited our attention to pages 1 and 2 of his paper book and showed how all facts were disclosed by members. Shri Burud had appeared before ITO and given detailed statement along with return. H e was actually assessed on short-term capital gains of Rs. 6,170 and Rs. 5,433, respectively, attributable to sale of impugned lands of AOP. As seen from order sheet, although assessment is marked under section 143(1), actually assessment was framed under section 143(3) after proper application of mind. For 1975-76, there were no capital gains assessed as assessee had claimed relief under section 54D of Act and this claim was accepted under section 143(1). For 1976-77, though not quite relevant, ITO has in fact made assessment on members. Regarding Shri Bohra, Shri Gadgil pointed out that assessments were made under section 143(1) on 23- 10-1975 for each of years in question. 10-1975 for each of years in question. 6. Relying on case law, Shri Gadgil referred to following: R. Dhandayutham's case, Ch. Atchaiah v. ITO [1979] 116 ITR 675 (AP) and CIT v. C . Ratan & Co. and S.N. Agarwalla [1981] 128 ITR 39 (Cal.) as also following judgments in favour of assessee: CIT v. Pure Nichitpur Colliery Co. [1975] 101 ITR 79 (Pat.), CIT v. Blue Mountain Engg. Corpn. [1978] 112 ITR 839 (Mad.), Ramanlal Madanlal v. CIT [1979] 116 ITR 657 (Cal.), Laxmichand Hirjibhai's case and CIT v. Karkhana Zinda Tilismath [1980] 123 ITR 814 (AP). While admitting that contrary view has been taken in following cases, viz., Mahendra Kumar Agrawalla's case, Punjab Cloth Stores' case, Jupiter Foundry & Machines (Knives) v. CIT [1977] 109 ITR 92 (Punj. & Har.) and Deccan Bharat Khandsari Sugar Factory v. CIT [1980] 123 ITR 802 (AP), Shri Gadgil laid more stress on fact that in case of V.H. Sheth, Bombay High Court has decided issue and this decision would be binding on us. 7. Without prejudice, Shri Gadgil submitted that on merits, if above preliminary objection is held against assessee, matter has to be sent back as AAC has not examined on merits various contentions regarding adventure in nature of trade, etc. 8. In his rejoinder, Shri Walvekar pointed out that case law relied upon Ch. Atchaiah's case has been overruled by later judgment in Punjab Cloth Stores' case. 9. On examination of various facts, we hold that in this case, in fact, no option of type canvassed on behalf of respondent has, in fact, been exercised. As pointed out by departmental representative, exercise of option involved assumption of existence of such option. ITO has merely taxed short-term capital gain, which assessee offered for assessment. He could not, by his unilateral action, have deprived ITO having proper jurisdiction over AOP of framing proper assessment. Supreme Court in M.M. Ipoh v. CIT [1968] 67 ITR 106 observed as under: " Under Indian Income-tax Act, 1922, primarily return of income would be made by association of persons where association has earned income and Income-tax Officer would also call upon association to submit return of its income and would ordinarily proceed to assess tax on return so made. But for diverse reasons, assessment of income of association may not be possible or it may be that such assessment may lead to evasion of tax. It would be open to Income-tax Officer then to assess individual members on shares received by them. duty of Income-tax Officer is to administer provisions of Act in interests of public revenue, and to prevent evasion or escapement of tax legitimately due to State. Though executive officer, engaged in administration of Act, function of Income-tax Officer is fundamentally quasi-judicial. Income-tax Officer's discretion to bring to tax either income of association collectively or shares of members of association separately is not final; it is subject to appeal to Appellate Assistant Commissioner and to Tribunal, Exercise of this power is from its very nature contemplated to be governed not by considerations arbitrary but judicial. nature of authority exercised by Income-tax Officer in proceeding to assess to tax income, and his duty to prevent evasion or escapement of liability to pay tax legitimately due to State, constitute adequate enunciation of principles and policy for guidance of Income-tax Officer in exercising his option. . . ." It is also now settled law that appellate authority has jurisdiction as well duty to correct all errors in proceedings under appeal and to issue, if necessary, appropriate direction to authority against whose decision appeal is preferred to dispose of appeal or any part of matter afresh unless forbidden from doing so by statute---Kapurchand Shrimal v. CIT (1981) 131 ITR 451 (SC). 10. Applying above principles, we find no material to hold that ITO has in fact exercised alleged option of assessing members directly. All that has happened is that ITO, having jurisdiction over members, has accepted contention that certain short-term capital gains are assessable. From this, it cannot be said that AOP did not exist or that it did not carry on any business. This finding could have been given, at all, only by ITO. Even assuming for sake of argument that ITO has exercised any such option, it is duty of appellate authorities, as mentioned above, to give finding as to whether such option if exercised, is correctly exercised. From facts above, we hold that in fact no such option has been exercised. AAC, therefore, fell into error in annulling assessments. In case law, relied upon by Shri Gadgil, there was no dispute about actual exercise of option. Hence, that case law is not applicable to facts of this case. 11. Accordingly, we hold in interest of justice that matter should be sent back to AAC, who should examine main question, viz., whether there was AOP doing business. 12. AAC should also examine alternative contention regarding existence of adventure in nature of trade, etc., of AOP after hearing both sides. Accordingly, order of AAC is set aside for fresh disposal on lines given above. 13. Appeals are treated as partly allowed. *** INCOME TAX OFFICER v. BABULAL TULSIRAM BURUD