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Issues Involved:
1. Validity of the assessment made under section 34(1)(b) of the Income-tax Act, 1922. 2. Whether the observation of the Appellate Assistant Commissioner constituted a finding or direction justifying action under section 34. Detailed Analysis: 1. Validity of the Assessment under Section 34(1)(b): The primary issue was whether the returns filed by the assessee as an individual were pending without any orders passed on them, and if there were orders made, whether they were non est due to the lack of communication to the assessee. The court examined whether the notings of the Income-tax Officer amounted to orders under section 23(3). The Income-tax Officer had noted "N.A." (nil assessment) on the returns filed by the assessee as an individual, indicating that the income declared as individual income actually belonged to the joint family. The court held that the notings were intended to close the returns and constituted valid orders under section 23(3). The power to assess under section 23 includes determining the quantum of income, which can be nil if the officer finds that the income does not belong to the individual. The court supported this conclusion with the precedent set in M.CT. Muthuraman v. Commissioner of Income-tax, where similar facts led to a similar conclusion. 2. Communication of Orders and Their Validity: The court addressed the argument that the orders were non est due to the lack of communication to the assessee, which allegedly deprived him of his rights under section 33A(2). The court concluded that failure to serve notices of the orders did not render them invalid. The scheme of the Act, including sections 29, 24(3), 23(5) and (6), and 27, indicates that service of notice is not a condition for the validity of an order. The orders did not impose any tax liability on the assessee or contain any prejudicial findings. Therefore, the lack of communication did not affect their validity. The court, however, emphasized that it is desirable for the revenue to serve notice of such orders to ensure fairness and avoid complaints. Conclusion: The court answered the first question against the assessee, affirming the validity of the assessments under section 34(1)(b). Consequently, it found it unnecessary to answer the second question, as the orders under section 34 were made within the four-year limitation period. The revenue was entitled to its costs, with counsel's fee set at Rs. 250. The judgment upheld the Income-tax Officer's actions and clarified the scope of his powers under section 23(3) of the Income-tax Act, 1922.
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