1972 (1) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notice under section 34 of the Indian Income-tax Act, 1922.
2. Assessment of deemed dividend under section 23A.
3. Limitation period for issuing notice under section 34(3), second proviso.
4. Binding nature of directions given by the Appellate Assistant Commissioner.
5. Definition and scope of the term "any person" in section 34(3), second proviso.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 34 of the Indian Income-tax Act, 1922:
The petitioner, Messrs. Hungerford Investment Trust Ltd., challenged the notice issued under section 34 for the assessment years 1949-50, 1950-51, and 1951-52. The Income-tax Officer issued the notice to Turner Morrison & Co. Ltd., agents of Hungerford Investment Trust Ltd., for the year 1949-50, and directly to Hungerford Investment Trust Ltd. for the years 1950-51 and 1951-52. The petitioner argued that the notice was invalid as it was time-barred and not properly served.

2. Assessment of Deemed Dividend under Section 23A:
The Income-tax Officer assessed the deemed dividend under section 23A in favor of Hungerford Investment Trust Ltd. for the relevant assessment years. The Appellate Assistant Commissioner set aside these assessments against Turner Morrison & Co. Ltd., directing the Income-tax Officer to make direct assessments on the non-resident company, Hungerford Investment Trust Ltd. The petitioner contended that the Appellate Assistant Commissioner could not direct fresh assessments on the non-resident company merely because the assessments on the resident company as agents were invalid.

3. Limitation Period for Issuing Notice under Section 34(3), Second Proviso:
The petitioner argued that the proceedings were time-barred under section 34(3), second proviso. The respondent countered that the notice was issued in pursuance of a direction by the Appellate Assistant Commissioner in reassessment proceedings, and thus, there was no time limit under section 34(3), second proviso. The court referred to the Supreme Court's interpretation in S. C. Prashar v. Vasantsen Dwarkadas, which held that the second proviso to section 34(3) is ultra vires if it authorizes assessment or reassessment of any person other than the assessee after the limitation period.

4. Binding Nature of Directions Given by the Appellate Assistant Commissioner:
The respondent asserted that the directions and order of the Appellate Assistant Commissioner were binding on both Hungerford Investment Trust Ltd. and Turner Morrison & Co. Ltd., as the latter was the agent of the former. The court noted that the Appellate Assistant Commissioner had directed the Income-tax Officer to make direct assessments on the non-resident company, Hungerford Investment Trust Ltd., as the assessments on the resident company as agents were invalid and barred by limitation.

5. Definition and Scope of the Term "Any Person" in Section 34(3), Second Proviso:
The petitioner argued that the term "any person" in section 34(3), second proviso, should not apply to Hungerford Investment Trust Ltd. as it was not a party to the appeal by Turner Morrison & Co. Ltd. The court referred to the Supreme Court's interpretation in Income-tax Officer, "A" Ward, Sitapur v. Murlidhar Bhagwan Das, which confined the term "any person" to those intimately connected with the assessment of the year under appeal. The court concluded that Hungerford Investment Trust Ltd., being a non-resident company assessed through its agent, Turner Morrison & Co. Ltd., fell within the scope of "any person" as defined by the Supreme Court.

Conclusion:
The court held that Hungerford Investment Trust Ltd. was liable to be assessed through its agent, Turner Morrison & Co. Ltd., and the directions given by the Appellate Assistant Commissioner were valid. The petitioner's arguments were dismissed, and the rule was discharged with no order as to costs. All interim orders were vacated, and the operation of the order was stayed for eight weeks.