appeal filed by assessee and cross objection filed by Department are taken and heard together and dispose of by common order for sake of convenience. appeal of assessee relates to asst. yr. 1979-80 and arise out of order of CIT (A), Bhopal, dt. 2nd Nov. 1982. only point for consideration in this appeal is regarding status of AOP adopted by ITO and confirmed by CIT (A). brief facts of case are as under: assessee is carrying on business of horse breeding. Earlier it was being carried out by Nawb Rashid-ur-Zafar Khan. After his death in 1961, business was looked after by his widow Begum Suraiya Rashid and his two sons Nadir Rasheed and Yawar Rasheed and his two daughters Mrs. Mahabano Ali and Mrs. Nilofar Khan. After death of Nawab Saheb entire property including business was inherited by widow and her four children as her co-heirs. shares were specified according to Muslim, Law, according to which Begum Suraiya Rasheed got 6/48 share. Both sons got 14/48 share eaten of two daughters got 7/48 share each. After death of Nawab Saheb, Bhopal Stud & Agricultural Farm (P) Ltd. was incorporated on 11the Dec. 1962. aforesaid company has gone into liquidation w.e.f. 28th Sept. 1968. Again, for first time income from livestock breeding was taxed from asst. yr. 1976-77. said income is shown according to their individual shares in income-tax returns of all five co-heirs for three asst. yrs. 1976- 77 to 1978-79, alongwith their other incomes like property income, foreign income etc. This has been accepted in assessments for all these three years completed by ITO. income of Bhopal Stud & Agricultural Farm (P) Ltd., which carried on business of horse breeding was included in individual returns of all five co-shares during all aforesaid three years. No separate assessment of Bhopal Stud & Agricultural Farm (P) Ltd was made for asst. yrs. 1977-78 and 1978-79. For asst. yr. 1976-77, notice under s. 148 of IT Act, 1961 ( Act ) was given and assessment of Bhopal Stud & Agricultural Farm (P) Ltd. was reopened and assessment order was passed in status of AOP. last determined income in that year was divided in same ratio between all five co-heirs. In that order it has been specifically written that Department has made assessment of members individually. It cannot be assess in amount of and AOP. aforesaid assessment order for asst. yr. 1976-77 was passed under s. 143(3), read Wight s. 147 (a), of Act on 26th Feb., 1980. During assessment year in question, ITO has assessed assessee in status of AOP under s. 143 (3), read with s. 144B, of Act. Since, same has been confirmed by CIT (A), assessee is in appeal before us. arguments of learned counsel for assessee are tow-fold. Relying on decision of Orissa High Court in case of CIT vs. Belpahar Refractories Ltd. (1981) 128 ITR 610 (Mad). It is submitted by learned counsel for assessee that when income loss of assessee is assessed in hands of individual members during asst. yr. 1976-77 to 1978-79, there is no reason for change of decision on part of ITO when facts of case are same and no fresh facts have come to light of ITO by which he can change his earlier decision. As laid down by their Lordships of Orissa High Court in aforesaid case though rule of res judicata is not applicable in income-tax proceedings and each year s assessment is separate, there are two exceptions to rule, namely, earlier decision on same question cannot be reopened unless that decision is arbitrary or perverse or arrived at without due enquiry. second limitation is that effect of revising earlier decision should not lead to injustice and Court may prevent assessing authority from doing something which would be unjust and inequitable. He further relied on decision of Patna High Court tin case of Kaniram Ganpat Rai vs. CIT (1941) 9 ITR 332 (Pat), where their Lordships of Patna High Court have held that though ITO was not bound by rule of res judicate of estoppel by record, yet he could reopen matter of assessment only if fresh facts came to light, which, on investigation, would entitle officer to come to conclusion different from that of his predecessor. In support of his aforesaid contention, he further relied on decision of Madhya Pradesh High Court in case of CIT vs. Bhilai Engg., Corpn. (P) Ltd. (1982) 133 ITR 678 where their Lordships of Madhya Pradesh High Court have held that though principle of res judicata has no application to proceedings under Act and finding reached for one particular assessment year cannot be held to be binding in assessment proceedings for subsequent year, yet this general rule is subject to qualification that finding reached in assessment proceedings for earlier year, after due enquiry, would not be reopened in subsequent year if it is not arbitrary or perverse, and if no fresh facts are found in subsequent year. This is on principle that there should be finality and certainty in all litigation s including litigation s arising out of Act. Relying on aforesaid decision so various High Courts, learned counsel submitted that principle of res judicate would be applicable to facts of this case as and fresh facts have come to light of ITO after passing assessment order for asst. yr. 1976-77 to 1978-79 and that there order passed by ITO resulted in injustice to assessee. Alternatively, he argued that assessments of he individuals for assessment year in question have been finalised on 30th March 1982 and assessment of A O P has been made on 24th April 1982. assessments of individual members have been made after including income from business of Bhopal Stud & Agricultural Farm (P) Ltd., subject to rectification. Income from horse breeding, which is also business income has been divided between members seam ratio. This has not been treated as business of AOP. assessment of members when done earlier, in which income of stud has been taxed, same according to him cannot be taxed again in case of AOP. For aforesaid proposition, he relied on decision of Calcutta High Court tin case of CIT vs. C. Ratan & Co. & S.N. Agrwalla (1981) 128 ITR 129 39 (Cal). brief facts of aforesaid case decided by Calcutta High Court are as under: "R and Co., firm entered into contract with A, individual, to carry on business each having half share. This was claimed to be joint venture which was accepted by ITO the respective shares were assessed in hands of firm as well as. A. For asst. yr. 1963-64 and 1964-65, ITO sought to assess firm as AOP. AAC cancelled assessment and this was upheld by Tribunal on ground that income earned by firm and had already been assessed much earlier than date when it was assessed in hands of AOP and that inclusion of share in assessment of firm was under s. 143 (3) and so regular assessment . On reference, it was contended by Revenue that in assessment of firm, share from AOP was taken only for purpose of rate pending assessment of AOP which meant that it was not actually assessed.: On aforesaid facts, it was held by their Lordships of Calcutta High Court that in view of finding arrived at by Tribunal, assessment of assessee in status of AOP was invalid. In support of aforesaid contention, learned counsel for assessee relied on several other decisions, namely, case of Ramanlal Madanlal vs. CIT (1979) 116 ITR 657 (Cal) and Ch. Atchaiah vs. ITO (1979) 116 ITR 675 (AP). He further argued that assessment made in status of AOP is not correct. It cannot be assessed as AOP as per ratio laid down by Supreme Court in case of CIT vs. Indira Balkrishna (1960) 39 ITR 546 (SC). In aforesaid case, their Lordships of Supreme Court have held that word associate meanest to join in common purpose, or to join in action . Therefore, AOP as used in s . 3 of Act, means association in which two or more persons join in common purpose or common action, and as words occur in section which imposes tax on income, association must be one object of which is to produce income, profits or gains. Their Lordships further held that co-widows succeeded as co-heirs to estate of their deceased husband and took as joint tenants with rights of survivorship and equal beneficial enjoyment they were entitled as between themselves to equal share of income. Though they took as joint tenants, no one of them had right to enforce absolute partition of estate against others so as to destroy their right of survivorship. But they were entitle to obtain partition of separate portions of property so that each might enjoy her equal share of income accruing therefrom. As there w s no finding that three widows had combined in joint enterprise to produced income, and as they had done no act which had helped to produce income, it could not be held that they had status of AOP within meaning of s. 3. If aforesaid proposition of law is applied to facts of case, learned counsel for assessee contended that there is no such agreement or any willingness to join together by heirs of deceased to earn profits and, therefore, assessee cannot be assessed in status of AOP. leaned Departmental Representative , on other hand, relied on order of lower authorities. We have carefully considered facts and circumstances of case and submissions on either side. We will first take up first argument of learned counsel for assessee whether principle of res judicate applies to facts of this case. As seen from records, that stud business was carried out by Bhopal Stud & Agricultural Farm (P) Ltd., which was incorporated in year 1962, aforesaid company has admittedly gone into liquidation w.e.f. 30th Sep. 1968. Therefore, facts as they stood earlier to year 1968, are not very relevant to decide dispute under consideration before us. In fact, records do not reveal as to how income of stud business has been assessed from year 1968 till asst. yr. 1976-77. For first time from asst. yr. 1976-77 to 1978-79, income from aforesaid business was assessed in hands of members individually according to their shares as per Muslim Law. In year under consideration before us, main point to be considered by us is whether any fresh facts have come to light of ITO, after completing assessments for earlier years, namely, for asst. yrs. 1976-77 to 1978-79, On perusal of entire records, it can be safely concluded that no fresh facts have come to knowledge of ITO at time of making assessment for assessment year in question. In case decided by their Lordships of Orissa High Court in Belpahar Refractories Ltd. s case (supra), their Lordships held that rule of res judicata does not apply to assessment proceedings, but there are two exceptions to rule, namely, earlier decision not he same question cannot be reopened unless that decision is arbitrary or perverse or arrived at without due enquiry. second limitation is that earlier decision should not cause injustice to assessee. Their Lordships of Madhya Pradesh High Court in Ghilai Engg. Corpn. (P) Ltd. s case (supra), have further held that finding reached in assessment proceedings for earlier year, after due enquiry, would not be reopened in subsequent year if it is not arbitrary of perverse, and if no fresh facts are found in subsequent assessment year. As already pointed out by us that from facts on record, it is clear that no fresh facts, have come to knowledge of ITO and decision of ITO is neither arbitrary nor perverse and has been arrived at after due enquiry. We are, therefore, of opinion that ratio laid down by their Lordships of Madhya Pradesh and Orissa High Courts is applied to facts of this case, rule of res judicata clearly applies and Ito is not justified in deviating from earlier decision taken by him and assess assessee in status of AOP. ratio laid down by their Lordships of Madhya Pradesh High Court is based purely on principle that there should be finality and certainty in all litigation s including litigation s arising out of Act. We do not accept second argument of learned counsel for assessee that when assessment of members when done earlier, in which income of stud has been taxed then same income not be taxed again in case of AOP, as it is seen from records that though assessments of individuals have been finalised on 30th March 1982 after including income from business of Bhopal Stud & Agricultural Farm (P) Ltd., aforesaid assessments were made subject to rectification. aforesaid assessments not being final, we are of opinion that ratio laid down by Calcutta High Court in C. Ratan Co. & S. N. Agarwalla s case (supra) can be easily distinguishable from facts of this case. third argument of learned counsel for assessee is his reliance on case of Supreme Court in case of Indira Balkrishna (supra). On perusal of order of ITO, it is seen that ratio down by their Lordships of Supreme Court has been made us of ITO in favour of Revenue. But on close reading of dictum laid down by their Lordships of Supreme Court, we are of opinion that aforesaid ratio is more in favour of assessee than of Revenue. Their Lordships of Supreme Court, in aforesaid case, have held that AOP must be one in which two or more persons join in common purpose or common action and object which is to produce income, profits or gains. From aforesaid ratio, it is clear that there should be either agreement or willingness between two or more persons by which they join together to earn income. In case under consideration before us, Begum Suraiy Rasheed, wife of Nawab Sahed and his two sons and two daughters inherited property of deceased as co-heirs and by operation of law they became entitled to business of stud farm. It is, therefore, clear law they became entitled to business of stud farm. It is, therefore, clear that abovesaid persons have come together as result of legal provision and not according to their willingness or agreement. We are, therefore, of opinion that ratio laid down by Supreme Court in aforesaid case is more in favour of assessee, and ITO is not justified in assessing assessee in status of AOP. We therefore, do not agree with order passed by CIT (A) in confirming order passed by ITO. In result, appeal filed by assessee is allowed. C.O. No. 14 (Indore) of 1983 cross-objection filed by Revenue is against order of CIT (A) dt. 2nd Nov. 1982. In cross objection Revenue has taken ground that learned CIT (A) erred in considering issue whether in hands of members share should be before or after deduction of income-tax., as this point does not arise in case of AOP nor any prejudice is caused AOP. Further, CIT (A) erred in directing that share to be assessed in hands of members, would be out of total income as reduced by income-tax of AOP. Since same ground has been taken by Revenue in IT Appeal No. 2 5 5 (Indore) of 1983, cross-objection is treated as infructuous and is, therefore, dismissed. N. Y. TAMHANE, A. M.: I have studied order of my learned senior brother. On facts which have been found in paragraph No. 5 there can be no dispute. I accept facts as stated by my learned senior brother. However, it is with most sincere regrets that I am unable to agree with my leaned senior brother with conclusion particularly in law, on first and third submission made by assesses. Even though it is not necessary to restate facts, I will recapitulate them briefly. In his lifetime, Nawab Saheb among his other activities, carried on activities under name and style of Bhopal stud & Agricultural Farm (P) Ltd. Nawab Sahib died sometime in 1961. On his death, his heirs were his widow Begam Suraiya Rasheed, his two sons and two daughters. five heirs received property left by Nawab Seheb. Sometime in 1962, private limited company was incorporated. This company Bhopal Stud & Agricultural Farm (P) Ltd., as its name suggests, took over agricultural farm and stud that started in his lifetime by Nawab Saheb. This private limited company carried on business activities for some five years and w.e.f. 30th Sept. 19658, limited company was liquidated. On limited company closing down business, Begum Suraiya Rashed and her four children continued activities that were earlier carried on under name and style of Bhopal Stud & Agricultural Farm (P) Ltd. facts as brought to our notice disclose that for first time in accounting year ended 31st March 1976 relevant for asst. yr. 1976-77 all five heirs returned their shares in such activities as per Muslim Law. For asst. yrs. 1976-77 to 1978-79 each of five heirs was assessed on individual share of activity of Bhopal Stud & Agricultural Farm (P) Ltd. so returned. For asst. yr. 1979-80 on 30th Aug. 1979, ITO received return disclosing income of nil, return being filed by AOP name indicated being Bhopal stud & Agricultural Farm (P) Ltd. Bhopal. Now, on these facts, as noted by my senior brother, assessee s three objections against assessment as made in terms of order dated 27th April 1982 and as confirmed by CIT (A) in terms of his order dt. 2nd Nov. 1982 were three first objection is based on principles of res judicata, second is based on assessee s submission that, assessment of individuals have been finalised on 30th March 1982 after including income from business of Bhopal Stud & Agricultural Farm (P) Ltd. and as such. ITO had exercised option of assessing individuals separately. third argument was based on Supreme Court s decision case of Indira Balkishna (supra). Since I have stated earlier that my senior brother has held that second argument is against assessee, one need not examine assessee s submissions thereon. Inasmuch as after great deliberation, I am not in position to agree with my senior brother s conclusion on first and third submissions made by assessee, I will proceed to examine two in some details. As one understands it, more important of two objections is third objection, viz., understands it, more important of two objections is third objection, viz., assessee s objection based on decision of Supreme Court in case of Indira BalkrishnaI (supra). Shri Chhajed, as observed by my senior brother, has argued that, "the assessment made in status of AOP is not correct. It cannot be assessed as AOP as per ratio laid down by Supreme Court in case of Indira Balrishna (supra). In aforesaid case, their Lordships of Supreme Court have held that word associate means to join in common purpose, or to join in action . Therefore, AOP , as used in s. 3, means association in which two or more persons join in common purpose or common action, and as words occur in section which impose tax on income. association must be on object of which is to produce income, profits or gains. Their Lordships further held that con-widows succeeded as co-heirs to estate of their deceased husband and took as joint tenants with rights of survivorship equal beneficial enjoyment; they were entitled as between themselves to equal share of income. Though they took as joint tenants, no one of them had right to enforce absolute partition of estate against other so as to destroy their right of survivorship . But they were entitled to obtain partition of separate portions of property so that each might enjoy her equal share of income accruing therefrom. As there was no finding that three widows had combined in joint enterprise to produce income, and as they had done no act which had helped to produce income, it could not be held that they had status of AOP within meaning of s. 3. If aforesaid proposition of law is applied to facts of case, learned counsel for assessee contended that there is no such agreement or any willingness to join together by heirs of deceased to earn profits and, therefore, assessee cannot be assessed in status of AOP [Latter part of para 3]. Now, on these submissions, my senior brother has observed in paragraphs No. 7 of order But on close reading of dictum laid down by their Lordships of Supreme Court, we are of opinion that aforesaid ratio is more in favour of assessee that of Revenue. Their Lordships of Supreme Court, in aforesaid case, have held that AOP must be one in which two or more person join in common purpose or common action and object of which is to produce income, profits, or gains. From aforesaid ratio is clear that there should be either agreement or willingness between two to more persons by which they join together to earn income. In case under consideration before us, Begum Suraiya Rasheed, wife of Nawab Rashid-ur-Zafar Khan, and his tow sons and two daughters inherited property of deceased as co-heirs and by operation of law they became entitled to business for stud farm. It is, therefore, clear that aforesaid persons have come together as result of legal provision and not according to their willingness or agreement. We are, therefore, of opinion that ratio laid down by Supreme Court in aforesaid case is more in favour of assessee, and ITO is not justified in assessing assessee in status of AOP." In Indira Balkrishna s case (supra), towards end Supreme Court has observed: "In In re. B. N. Elias (1935) 3 ITR 408 Derbyshire, C. J., rightly point out that word associate means, according to Oxford Dictionary to join in common purposed, or to join in action . Therefore, AOP must be one in which two or more persons join in common purpose or common action, and as words occur in section which imposes tax on common action, and as words occur in section which imposes tax on income, association must be one object of which is to produce income, profit or gains. This was view expressed by Beaumount, C. J. in CIT vs. Lakshmidas Devidas (1937) 5 ITR 548, at page 589 and also in In re. Dwarkanath Harishchandra Pitale (1937) 5 ITR 716. In In re, B. N. Elian s case (supra), costello, J., put test in more forceful language. He said: It may well be that intention of legislature was to hit combinations of individuals who were engaged together in some joint enterprises but not in law constitute partnerships.... When we find.....that there is combination of persons formed for promotion of joint enterprise then I think no difficulty arises whatever in way of saying that these persons did constitute association " We think that aforesaid decision correctly lay down crucial test for determining what is AOP within meaning of s. 3 of IT Act, and they have been accepted and followed in number of later decisions of different High Courts to all of which it is unnecessary to call attention. It is, however, necessary to add some words of caution here. There is no formula of universal application as to what facts, how many of them and of what nature, are necessary to come to conclusion that there is AOP within meaning of s. 3, it must depend on particular facts and circumstances of each case as to whether conclusion can be drawn or not." [Emphasis, italicized, in print supplied]. Now, in case in Indira Balkrishna (supra), it would be proper to recollect that Court was concerned with Department s action in making effort to assessee con-widows as AOP. Court has observed: " It in necessary to clear ground by stating what is position of co- widows in Mitakshara succession and what are findings arrived at by Tribunal. position of co-widows is well settled. They succeed as co-heirs to estate of their deceased husband and take as joint tenants with rights of survivorship and equal beneficial enjoyment; they are entitled as between themselves to equal share of income. Though they take as joint tenants, no one of them has right to enforce absolute partition of estate against others so as to destroy their right of survivorship. But they are entitled to obtain partition of separate portions of property so that each may enjoy her equal share of income accruing therefrome. Tribunal found that widows in this case did not exercise their right to separate possession and enjoyment and they chose to manage property jointly, each acting for herself and others and receiving income of property which they were entitled to enjoy in equal shares " [Emphasis, italicized, in print supplied]. Later Supreme Court has observed: "The High Court, however, rightly pointed out that only property which widows could have managed jointly was immovable property which fetched income of about Rs. 11,000 and as to that property, AAC had held that s. 9(3) applied. There was no appeal by Department against that finding and it was not open to Tribunal to go behind it. Even on merits Tribunal was wrong in thinking that respective shares of widows were not definite and ascertainable. They and equal share in income viz., one-third each, and provisions of s. 9(3) clearly applied in respect of immovable property. With regard to shares, dividends, and interest on deposits there was no finding of any act of joint management. Indeed, main item consists of dividends and it is difficult to understand what act of management widows performed in respect thereof which produced or helped to produce income. On contrary, statement of case shows that assesses filed lists of shares, copies whereof are marked Annexure C and form part of case, which showed that share stood separately in name of each one of three widows and this was not denied by Department. It was on these facts that test which Supreme Court approved later and referred to by me earlier, Court concluded by observing: "Coming back to facts found by Tribunal, there is no finding that three widows have combined in joint enterprise to produce income. only finding is that they have not exercised their right to separate enjoyment, and except for achieving dividends and interest jointly, it has been found that they have done no act which as helped to produce income in respect of share and deposits. On these findings it cannot be held that three widows had status of AOP within meaning of s. 3 of Indian IT Act. " [Emphasis, italicized, in print supplied]. There is clear distinction in rights of co-widows under Hindu Law as it stood in accounting year relevant for asst. yrs. 1950-51 and 1951-52 and position of heirs in Muslim Law. It is unnecessary to state that Supreme Court did not notice any finding of Tribunal that three widows had combined in joint enterprise to produce income. In fact of present case, on death of Nawab Saheb in1961, had t h e five heirs continued activities as they were being earlier carried on without more, certainly it could be said that five heirs could not be termed as on AOP under Act. However, some of these five heirs took steps to incorporate private limited company which was so incorporated on 11th Dec. 1962. To this private limited company, all five heirs transferred assets and liabilities of activities five heirs were caring on after death of Nawab Saheb till such time of transfer of assets the liabilities to limited company. From 12th Dec. 1962 till 27th Sept. 1968 (the private limited company went into liquidation w.e.f. 28th Sept. 1968), private limited company was carrying on business. After company was liquidated, on finds that it could not be that Muslim Law brought these five persons together. They came together by their own act (sic) be operation of any law which could give to erstwhile shareholders profit which limited company owned, that transfer by limited company to five heirs of assets and liabilities of erstwhile business carried on by private limited company, was not act over which they had no control. To receive such assets and liabilities, if any, of undertaking of limited company (sic) activities jointly was conscious act of five heirs. It is this concious act of five heirs which takes assessee s case out of principles laid down by Supreme Court in Indira Balkrishna s case (supra). As I understand it, to these facts aptly apply observations in B. N. Elias, In re (1935) 3 ITR 408 (Cal) by Supreme Court and italicised in paragraph No. 6 above and reproduced once again for emphasis: "......when we find.......that there is combination of persons formed for promotion of joint enterprise...then I think no difficulty arises whatever in way of saying that.....these persons did constitute association..... One has now to turn to firs argument taken by assessee based on principles of res judicata. On this issue, in paragraph No. 5 of order, my senior brother observed: "On perusal of entire records it can be safely concluded that no fresh facts have come to knowledge of ITO at time of making assessment year in question." above statement is absolutely correct. decision given by Supreme Court in Indira Balkrishna s case (supra) was given as early as 14th April. 1982. It is undisputed fact that between primary facts of three years relevant for asst. yr. 1976-77 to 1978-79 both years inclusive on one hand and facts of year under consideration on other hand, there i s difference whatsoever. However, if on earlier occasion. ITO did not appreciate principles laid down by Supreme Court in Indira Balkrishna s case (supra), properly and has made assessment on incorrect understanding of law, issue is whether ITO must be required to persist in making that mistake of law. My senior brother has not referred to leasing Indian case on question of res judicata, that case of H. A. Shah & Co. vs. CIT (1956) 30 ITR 618 (Bom) decided by Bombay High Court. Chief Justice, Chagla has observed: "....It may be said that even though first Tribunal may take into consideration all facts, still its decision may be so erroneous as to justify subsequent Tribunal in not adhering to that decision. In case like this, which indeed must be extreme case, it could be said that decision of first Tribunal was perverse decision, and if decision of first Tribunal was either arbitrary or reverse it would justify second Tribunal in departing from decision arrived at by first Tribunal....." Now, if any, understanding of Supreme Court decision in Indira Balkrishna s case (supra) be correct, assessee s case does not come within rule of Indira Balkrishna s case (supra). Once if it be correct that assessee s case does not come within rule of Indira Balkrishna s case (supra), decision by ITO for three years 1976-77 to 1978-79, both years inclusive, of necessity, has to be called to be so erroneous as to justify subsequent Tribunal in not adhering to that decision it is unnecessary to state that assessments properly made can be reopened when there is retrospective amendment of Act. Now, on this issue, first leading case is that of Supreme Court in M. K. Venkatachalam, ITO vs. Bombay Dyeing & Mfg. Co. Ltd. (1958) 34 ITR 143 (SC). It will be recollected that was case where on retrospective amendment of particular provision, Supreme Court has upheld ITO s action rectifying assessment. As far as reopening is concerned, leading case is that of Bombay High Court in case of CIT vs. Bai Navajbai N. Gamadia (1959) 35 ITR 793 (Bom). In case, ITO had finalised assessment for year 1952-53 on 29th Aug. 1952. On 24th May 1953, s. 4(3) (i) of Act was amended with retrospective effect On 24th May 1953, s. 4(3) (i) of Act was amended with retrospective effect from 1st April 1952. Thereupon, ITO initiated reassessment proceedings under s. 34 (1)(b) of Act. Bombay High Court held, that knowledge of that amendment was sufficient in law to constitute receipt of information within meaning of s. 34 (1) (b) and receipt of such information was sufficient for ITO to have reason to believe that income of assessee for year 1952-53 had escaped assessment. Now in instant case, even if my understanding of Supreme Court in Indira Balikrishna s case (supra) be correct, ITO would not be justified to reopen assessment for years 1976-77 to 1978-79 because at time ITO made those assessments, Supreme Court had already given decision. However, for assessment under consideration, viz., 1979-80, ITO is making assessment for first time and issue is whether assessment, which is being made for first time, cannot be made in consonance of law. Merely because earlier assessments were incorrectly made. For reasons given above, with deepest regret, I am unable to agree with my learned senior brother regarding decision on first and third arguments advanced by Shri Chhajed. Accordingly, I will decide two arguments against assessee. On that basis, in my understanding it follows that there being difference, it is necessary to refer case to Hon ble President under s. 255 (4) of Act. Order G. KRISHNAMURTHY, SR. VICE PRESIDENT (AS THIRD MEMBR): assessee in this matter is Bhopal Stud and Agricultural Farm assessed in status of AOP. assessee came into existence according to ITO s version, to carry on business of breeding of good variety of horses for use in races. stud farm, it was stated was started by late Nawab Rashiduzafer Khan till his death in 1961. After his death business was stated to have been carried on by his widow Begum Suraiya Rasheed and his two sons Nadir Rasheed and Yowor Rasheed and his two daughters Mrs. Mahagbano Ali and Mrs. Nilofar Khan. After death of Nawab entire property including stud farm was inherited by widow and her four children as co-heirs. According to Muslim Law Shares of widow and her children were specified. widow got 6/48 share, sons got 14/48 share each and daughters got 7/48 share each. After death of Nawab Private Limited Company was formed to carry on house breeding business and name of Company was Bhopal Stud and Agricultural Farm P. Ltd. This was incorporated on 11th Dec. 1962. After being in existence for about 5 years, this company went into liquidation w.e.f. 28th Sept. 1968. Upto period of liquidation income that arose by carrying on of this horse breeding business was assessed in hands of Company. It appears that there was no assessment on horse breeding business between 1968 i.e. after liquidation of Company, and 1975 and first assessment was made for asst. yr. 1976-77 on individual shares of five co-heirs. For asst. yr. 1977-78 and 1978-79 again income from horse breeding was assessed in individual hands of co-heirs, according to their shares alongwith their other incomes like property, foreign income etc. As income of horse breeding was assessed in hands of individuals, as per their shares, Bhopal Stud and Agricultural From was not assessed to tax as entity. For first time for asst. yr. 1976-77 notice under s. 148 was given to Bhopal Stud & Agricultural Farm to assess income of horse breeding in status of AOP. Now for asst. yr. 1979-80, assessee filed return in name of Bhopal Stud and Agricultural Farm showing nil income. There was no notice issued under s. 148 for this year and return filed by assessee showing nil income appears to be voluntary. In support of claim that there was no income accruing to Bhopal Stud & Agricultural Farm assessable in its hands as separate entitle, argument addressed were that under Muslim Law shares of heirs were specified in property left by Nawad and each one of them got property and income attributable thereto in accordance with those shares and assessment must be made only in case of individuals and their share of income, which was being done in earlier years and not in hands of one entity aggregating whole as belonging to or accruing to or arising in hands of that entity. In order that entity can be taxes, there must be violation on part of all members to come together and to carry on business. In this case there was no such violation as members were otherwise entitled to specific shares of income according to their personal law. formation of company and subsequent liquidation did not alter their position of personal law their rights vis-a-vis their personal law, k reliance was placed on assessment made on individual members on their shares of income in earlier years and it was emphasised that no change had come this year to deviate from assessments made in past. These arguments did not prevail with ITO. His first point was that rule of re sjudicata does not apply to proceedings because each year is independent and separate unit. decision taken in one year is not applicable in second year. If in earlier years ITO exercised option to assess members individually in place of entity, that option did not bind successor officer s discretion to assess income in hands of AOP. Relying upon letter that assessee wrote to ITO, ITO observed that there was coming together of all members to carry on activity for profit with common objective of earning profit. Thus BOI has come into existence. There was no question of compulsion of law forcing these members to come together. When assess carries on regular business and income was shares. it was implicit in it that members decided to come together because business could not be carried on without common consent. (He therefore held that income was earned by AOP called Bhopal Stude & Agricultural Farm and assessed income shown by P&L A/c by making suitable adjustments in its hands allocated income among members according to their respective shares as per their personal law. ITO also observed that if there was no AOP there was atleast BOI and for this view he placed reliance on 106 ITR 131. Aggrieved by this treatment, assessee preferred appeal before CIT (A), before whom same contentions were reiterated which were again rejected by him. new point taken up before him was that it was Royal Western Indian Turf Club Ltd. and institution situated at Bombay, which controls and organises racing activities of Country and unless one becomes member of that bulb, he would not be recognised as horse breader and all co- heirs got themselves registered with that club separately and hence income of entity now sought to be assessed as AOP should be allocated between members. This argument did not find favour with CIT (A). Aggrieve by this decisions, there was second appeal before Tribunal. Before Tribunal, also same arguments were addressed. After concluding hearing members could not agree to conclusion. ld. Judicial Member held that there was some amount of force in argument of assessee. Department having assessed individual members on their respective shares in earlier years should not have departed from that procedure without any valid reason to seek to assess income in hands of entity as AOP. He relied very kly upon decision of Madhya Pradesh High Court in case CIT vs. Bhilai Engineering Corporation P. Ltd. (1982) 133 ITR 687 (MP) decision of Orissa High Court in CIT vs. Belpahar Refractores Ltd. (1981) 22 CTR (Ori) 155: (1981) 128 ITR 610 (Ori) and that of Bombay High Court in H. A. Shah & Co. vs. CIT (1956) 30 ITR 618 (Bom). He has given several other reasons which may be discussed at appropriate time but main conclusion reached by him was as stated above that assessment in hands of AOP was uncalled for and it is also wrong in light of decision of Supreme Court in CIT vs. Indira Balkrishna (supra). ld. Accountant members, on other hand, took country view. He held that on facts of this case vary decisions on which ld. Judicial Member placed reliance to support his view, actually supported view convassed for Department, namely, raising assessment in status of AOP because there was common purpose and object for all members to come together to carry on business what purpose to gain common advantage, namely, gain. What ld. Accountant Member pointed out was that if ITO did no properly appreciate principle of law as explained by Supreme Court in one year, ITO is not to persist in making that mistake of law in subsequent years and it is open to him to correct that mistake. For this view he placed reliance on decision in case of H. A. Shah & Co. reported in (1956) 30 ITR 618 (Bom). He was also of opinion that after limited company, which was formed on 11th Dec. 1962 by co-heirs, went into liquidation on 28th Sept. 1968, it was not Mohamden law that brought these five persons together but it their own violation, by operation of Company Law. Since Members could not agree on conclusion, they have formulated following points of difference for reference to President under s. 255(4) of IT Act.: Whether on facts on record, ITO, having assessed legal heirs of Nawab Rashid-Ur-Zafer khan individually according to their shares as per Muslim Law of Income from stud business of asst. yr., 1976-77 to 1978- 79 can deviate from his original stand and assess them as AOP contrary to ratio laid down by their Lordships of Madhya Pradesh High Court in CIT vs. Bhilal Engineering Corporation P. Ltd. (supra) Orissa High Court in CIT v.s Belpahar Refractcories Ltd. (supra) and Bombay High Court in H. A. Shah & Co. vs. CIT (supra). Whether, on facts, assessee s case is covered by decision of Supreme Court in case of CIT vs. Indira Balkrishna reported at (supra). president has assigned this case to me as third Member for my opinion. I have heard parties at great length. Shri Firoze B. Andhyarujina appearing for assessee submitted that it is erroneous to adhere to view that principle of res judicata has no application to proceedings under I T Act. It is subject to qualification, namely, that finding reached in one assessment year after due enquiry would not be reopened in subsequent year if it is not arbitrary or perverse and if no fresh facts come to light in subsequent assessment year. Thus principle of res judicata yields to principles of finality, namely, that in all litigation not excluding income-tax litigation, finality and certainty must be reached. This is how Madhya Praadesh High Court explained principle of res judicata in case of CIT vs., Bhilai Engg. Corporation P. Ltd. (supra) and it was placing greatest reliance on that decision and urging that it was binding on us that he submitted that ITO having assessed individuals on their shares in earlier years should not have deviate from that view to assessthe income combined it together in hands of AOP on plea that there was no AOP that came into being by violation of members without establishing such violation more particularly when facts obtaining this year were similar to facts obtaining in earlier years. All facts that were present in year under reference was also present in earlier years. Nothing new has happened in assessment year except change in view. According to Madhya Pradesh High Court, decision reached in earlier years can only be reopened in subsequent year if one of those four test laid down by it are satisfied i.e. decision in year if one of those four test laid down by it are satisfied i.e. decision in earlier year must not have been reached after due enquiry or decision was perverse or arbitrary or fresh facts come to light. None of these conditions existing it is not open to ITO to merely change opinion same set of facts. Such departure would violate principle of finality and certainty which High Court observed must be protected and preserved. More or less to same effect was decision of Orissa High Court in CIT vs. Belpahra Refractories Ltd. (supra). Orissa High Court has further pointed out that there was another limitation, namely, that effect of revision earlier decision should not lead to injustice and that Court would prevent assessing authority from doing something which would be unjust and unequitable. Proceeding on these lines of arguments, learned counsel for assessees urged that no new fact having come into existence, Department is not justified to change procedure of assessment adopted in earlier years so consistently and continuously. It was further submitted that it was Muslim Law that governed devolution of shares even after liquidation of Company. Dealing with view expressed by ld. Accountant Member, that it was company law that applied and not Muslim Law, ld. advocate urged that personal law of parties governs devolution of shares at every point of time and not company law. There is nothing in company law which stipulated manner and method in which shares of shareholders and their rights inter se should be distributed on dissolution of Company. distribution of these rights had to be done inaccordance with rights of shareholders subject only to condition, if any, laid down by Memorandum and Articles of Association of Company. Otherwise it is personal law that governs distribution of share sand it was pursuant to personal law that shares were taken by co-heirs in manner in which they were dividing income and holding property even prior to formation of Company. This position was accepted by Revenue in intervening assessment years, when all partners were sharing income by appointing some common Manager. It is now well settled that such circumstances would not necessarily lead to conclusion that all of them have joined together as AOP for purpose of carrying on business. He placed reliance on decisions in cases of S. R. Y. Sivaram Prasad Bahadur vs. CIT (1971) 82 ITR 527 (SC), G. Murugasan & Bros. vs. CIT 1973 CTR (SC) 279: (1973) 88 ITR 432 (SC), C. M. Aleemulla Khan vs. Commr. of Agrl. IT (1984) 42 CTR (Kar) 10: (1984) 148 ITR 696 (Kar), CIT vs. Deghamwala Estates (1980) 14 CTR (Mad) 284: (1980) 121 ITR 684 (Mad), CIT vs. T.V. Suresh Chandran & Ors. 91979) 13 CTR (Ker) 366: (1980) 121 ITR 985 (ker), Indira Balakrishna vs. CIT (supra). Commr. of Agrl. IT. vs. Raja Ratan Gopal (1966) 59 ITR 728 (SC) and lastly on CIT vs. V. H. Sheth & Others (1984) 41 CTR (Bom) 380: (1984) 148 ITR 169 (Bom). For Revenue, ld. Departmental Representative relying very kly on order of ld. accountant Member submitted that was being carried on by assessee was only business and all members have joined together to carry on that business. If they are sharing profits in particular manner, that profit sharing ratio can only be said to be as dictated by personal law to which they belonged and that did not mean that these co-heirs have not come together to carry on business. Their conduct of formation of company, carrying on business, throw Company, dissolution of company and carrying on business thereafter by coming together, all point to same direction that there was common object of carrying on this business with view to earn profits and income If ITO in earlier years had not applied his mind to these aspects, it does not mean that mistake committed by him on misapplication of law should be allowed to perpetrate. ITO has got option under law either to assess individual member of association or association as such and this option is available to him to be exercise every year de novo and he is not bound by exercise of option in one year to be followed in another year. assessee filed return in this case showing nil income in hands of assessee. It is then open to ITO to exercise on basis of return filed as to whether association has earned any income or did it really earn nil income. If in course of this examination, he finds that there was association carrying on business, he is duly bound under law to assessthat association in status of AOP and at that stage he is not to look back to previous position of assessment. He placed reliance on decisions in cases of Punjab Cloth Stores vs. CIT 1978 CTR (Del) 257: (180) 121 ITR 604 (Del) and Mahendra Kumar Agarwalla vs. ITO (1975) CTR (Pat) 33: (1976) 103 ITR 688 (Pat). I have carefully considered matter. It has not been easy task to arrive at proper conclusion as matter is fraught with difficulties. On death of late Nawab, who originally started that stud farm, co-heirs got this property in specified shares according to Muslim Law and held it so. Except during period when stud farm was being carried on as company, income from stud farm was being assessed to tax in hands of heirs according to their personal law never assessment was made in status of AOP combining income of all these co-heirs. In view of this fact question now is whether it is open to Department to change that view. Nothing new has happened in this year in sense that no new fact has come to light nor any evidence. whether on same set of facts Department is entitled to change view is question. In case that arose before Madhya Pradesh High Court, applicability of principle of res judicata to income tax proceedings had come up for consideration. There for asst. yr. 1973-74 assessee was granted relief under s. 80-J of IT, 1961. Th ITO found that assessee made substantial expansion by installation of new plant and machinery and by construction of new building in accounting year relevant to asst. yr. 1973-74. However, for asst. yr. 1974-75 and 1975-76, ITO declined to grant relief under s. 80J on ground that expansion of existing undertaking did not make it new undertaking on appeal. AAC and on further appeal Tribunal granted relief to assessee on ground that it was not open to ITO to take different view for subsequent years from that taken for asst. yr. 1973-74. question that was posed before Madhya Pradesh High Court was whether ITO can take such view and answer to this question depended upon application of principle of res judicate. High Court held that since on fresh material was brought in assessment proceeding for years 1974-75 and 1975-76 which would show that finding reached by ITO in earlier assessment year was wrong. action of ITO in not following earlier view was erroneous, while explaining legal position and principle of res judicata Justice G. P. Singh, Chief Justice of Madhya Pradesh High Court observed: "It is contended by learned counsel for Department that principle of res judicata has no application to proceeding under IT Act and findings reached for one particular assessment year cannot be held to be binding in assessment proceeding for subsequent year. As general rule, there can be no dispute with this principle. But this general rule is subject to qualification that finding raced in assessment proceedings for earlier year would not be reopened in subsequent year if it is not arbitrary or perverse, has been arrived at after due enquiry and if no fresh facts are placed in subsequent assessment year. This is only principle that there should be finality and certainty in all litigation s including litigation s arising out of IT. Act (See Burnmahshell Refineries Ltd. vs. G. B. Chand (1976) 61 ITR (Bom) and CIT vs. Dlmia Dadri Cement Ltd. (1970) 77 ITR 410 (P&L)." It therefore clear that it not in every case that principle of res judicata can be said to have no application to proceedings under IT Act. On finding reached for one particular assessment year it could not be held to be binding in assessment proceedings for subsequent assessment year. But this general rule is subject to certain qualifications. Those qualifications have been detailed above in extract quoted from judgment. It is common ground that none of these circumstances exist in case before us. I have not heard Departmental Representative urging that decision reached in earlier years to assess individuals on their respective shares was decision reached without due enquiry nor I have him arguing that decision was arbitrary or perverse and certainly there was no fresh material. In order that principle of finality and certainty in litigation should be protected, same view taken by ITO for earlier years should also have been taken for this year and he should no have deviated without first establishing one or all of above criteria. This is not as if this is solitary view expressed by Madhya Pradesh High Court in above case but this was also view taken by Bombay High Court as well as Punab and Haryana High Court and also by Orissa High Court in CIT vs. Belpaher Refractories Ltd. (supra) Dealing with this principle of res judicata Justice R. N. Mishra, Chiuef Justic of Orissa High Court, as he then was speaking, Court Observed: "We do not think it appropriate to differ from view expressed on earlier occasion particularly when it is same dispute in one and same setting. It is true that rule of res judicata in terms does not apply to setting. It is true that rule of res judicata in terms does not apply to assessment proceedings, but two exceptions have usually been indicated, namely, earlier decision on same question cannot be reopened unless that decision is arbitrary or perverse or arrived at without due enquiry. second limitation is that effect of revision earlier decision should not lead to injustice and Court may prevent assessing authority from doing something which would be unjust and inequitable." Therefore on same set of facts if assessing authority is doing something which would be unjust and inequitable Court must come to rescue of assessee by preventing assessing authority form doing injustice. I may also add that this general principle of res judicata arising in Civil Law is written into IT Act also particularly in s., 147 (B). Under s. 147 (b) ITO can reopen assessment only when new facts come to his knowledge whereby he comes to conclusion that income liable to tax has escaped assessment. This section does not give him power as now interpreted by various High Court and Supreme Court repeatedly on mere change of opinion. Thus s. 147 (b) and its interpretation by Courts is nothing but application of principle of res judicata. No new facts come into light on mere change of opinion ITO cannot change his view and reopen assessment. In other words, he is bound by decision that is taken in earlier years. I am therefore of opinion that ITO having assessed legal heirs of late Nawab individually according to shares as specified in Muslim law for asst. yrs. 1976-77 to 1978-79 cannot deviate from that stand and assess them as on AOP. There being no new facts coming light this deviations is contrary to ratio laid down by Madhya Pradesh High Court in CIT vs. Bhalai Engineering Corporation P. Ltd. (supra) and Orissa High Court in CIT vs. Belphar Refractories Ltd. (supra) and Bombay High Court in Indira Balakrshna (supra). In fact it is very principle laid down in this case by Bombay High Court that was followed subsequently by Orissa High Court and Madhya Prades High Court. I may also add that on question that there were no new facts coming to knowledge of ITO there was absolute agreement between learned Members. while ld. Judicial Member mentioned in his order categorically that on perusal of records, it could be safely concluded that no fresh facts came to knowledge of ITO at time of making assessment for assessment year in question, ld. Accountant member in his differing order had endorsed this statement by saying that it was absolutely correct. Thus members were ad ldem on question that there were no new facts coming to t h e knowledge of ITO. point made out by learned Accountant Member was that ITO had in earlier years mis-appreciated law and came to erroneous conclusion and that conclusion he was entitled to rectify in subsequent years. He seemed to be of opinion that leading decision of Supreme Court in case of Indira Balakrishna (supra) was not properly appreciated both by ITO and ld Judicial Member. According to leaned Accountant Member principle laid down by Supreme Court in case Indira Balakrishna (supra) did not apply to assessee s case. In view of that, decision reached by ITO for earlier must be held to be erroneous. He has not discussed in his order applicability or otherwise of rule enunciate by Madhya Pradesh High Court in CIT vs. Bhilai Engg. Corporation P. Ltd. (supra) nor of Orissa High Court in CIT vs. Belpahar Refractories Ltd. (supra) but referred to Bombay High Court decision in H. A. Shah & Company vs. CIT (1956) 30 ITR 618 (Bom) for different purpose. In view of binding nature of Madhya Pradesh High Court decision and in view of fact that there was agreement between ld. Members that no new facts had come to knowledge of ITO, Madhya Pradesh High Court decision would be applicable and according to that authority ITO cannot be permitted to change his view. On question number 1 therefore I am in agreement with view expressed by ld. Judicial Member. On question number 2, I had to first notice facts before Supreme Court in case of CIT vs. Indira Balakrishna (supra) and law enunciated by Supreme Court to decided whether that view applied or not to facts of case before me. One Balkrishan Purshottam Purani died on 11th Nov. 1974 leaving behind him three widows and two daughters, one of widows was Indira Balkrishna. These widows as legal heirs inherited estate of deceased which consisted of immovable properties, shares of joint stock companies, money lying in deposits and shares in partnership firms. For asst. yrs. 1950-51 and 1951-52, ITO issued notices to legal heirs of Balkrishna Purushottam Purani pursuant to which returns were filed under heading legal heirs of Balkrishna Purushottam Purani in one case and in name of estate of Balkrishna in another. ITO took status of assessee as on AOP and made assessments on that footing. On appeal pint taken up was that three widows should have been assessed separately and not accept this point. Tribunal held that assessment in status of AOP was correct. On reference view taken by Tribunal was reversed and it was held that assessment should not be made in statute of AOP. Approving view taken by High Court, Supreme Court held in this case that association means to join in common purpose or to join in action. Therefore AOP must be one in which two or more persons join in common purpose or common action and as words occurr in section, which imposes tax on income, association must be one object of which is to produce income profits or gains. They found on facts that three widows have not combined in joint enterprises to produce income. Supreme Court held that in absence of any finding that three widows continued together in joint enterprise to produce income, they could not be jointed together to assess as AOP. There is no finding recorded in categorical way that co-heirs have come together to join for common purpose of earning income by carrying on business of stud farm and on other hand Members agreed that no new facts have come to light so that ITO could deviate from view taken in earlier years. view taken in earlier year was that co-heirs should be assessee separately on their respective shares, which means that there was no joining together of togetherness of purpose of producing income which means that there is no association of these persons to form AOP whiting meaning of IT Act as explained by Supreme Court in Indira Balkrishna s case (supra). From this point of view there is no coming together of these co- heirs to carry on business and it could be said that case is covered by decision of Supreme Court in case of Indira Balkrishna (supra). If there is coming together of these persons to produce income, then also it can be said that case is covered by decision of Supreme Court case of Indira Balkrishna (supra). If there is coming together is of these persons to produce income, then also it can be said that case is covered by decision of Supreme Court in Indira Balkrishna (supra). point of difference as framed by ld. brothers was such that answer to this question can be given only on facts found and admitted, on facts found and admitted principle laid down by Supreme Court cannot apply because there was no coming together of co-heirs. Indeed it is to be mentioned, that property was held by co-heirs in shares specified in Muslim law. Since property was thus held, they are to share income in that proportion. To share that income from that property, question of co-heirs coming together to produce income may not be said to arise. If property is held by two or more persons in specified shares, they held property as tinants-in-common and that position in law continues to govern in regard to sharing of income and when such income is shared, question of AOP as explained by Supreme Court in Indira Balkrishna may not arise. My answer to second question therefore, is that on facts assessee s case can be said to be covered by decision of Supreme Court in Indira Balkrishna (supra) in sense that they cannot be assessed as AOP because proof that all co-heirs have come together to carry on business was lacking. In view that I am taking I felt it unnecessary to refer to case law that where mentioned before me at time of hearing . Although all these case of Supreme Court in CGT vs. RT. Valsaual Amma 1972 CTR (SC) 291: (1971) 82 ITR 828 (SC), G. Murugesan & Bros. vs. CIT vs. CIT 1973 CTR (SC) 279: (1973) 88 ITR 432 (SC) only repeat principle laid down in Indira Balkrishna (supra). I would like to add that in G. Murugesan & Bors. Supreme Court laid down further test to find our whether there is AOP or not and i.e. that for forming AOP members of association must joint together for purpose of producing income and AOP can be formed only when two or more persons voluntarily combine together for certain purpose. important rule laid down by Supreme Court is that valition on part of members of association is essential ingredient. Here there is no such violation nor is there need for it at all except obligation created by operation of and compulsion of personal law. Futther Kerala High Court has applied this view in case of CIT vs. T.V. Suresh Chandram & Ors. (supra) I do not want to dwell much upon order of ld. Accountant Member (supra) I do not want to dwell much upon order of ld. Accountant Member on question of application of principle laid down by Supreme Court in Indira Balkrishna s case but all I would say is that principle laid down in Indira Balkrishna s case by Supreme Court does not apply to facts of case before me as stated earlier in sense that for lack of proof to show that to co-hires came together voluntarily to form AOP to produce Income. They are dealing with property inherited by them. Now matter will go before regular bench for decision according to majority opinion. *** MISS GITABEN HASMUKHLAL SHAH v. WEALTH-TAX OFFICER