1998 (2) TMI 5 - SC - Income Tax

Appellant a non-resident company having its registered office at Singapore - appellant-company owned 100 per cent. shares in a company incorporated in India - held that appellant-company is covered b the expression assessee or any person in the second proviso to section 34(3).

Summary

Issues Involved:
1. Jurisdiction of the Appellate Assistant Commissioner under section 31.
2. Validity of notices issued under section 34 of the Indian Income-tax Act, 1922.
3. Applicability of the second proviso to section 34(3) regarding limitation.

Detailed Analysis:

1. Jurisdiction of the Appellate Assistant Commissioner under section 31:
The appellant-company contended that the Appellate Assistant Commissioner had no jurisdiction to direct the Income-tax Officer to make assessments on the appellant-company under section 31. The court examined whether the directions given were within the scope of section 31, which allows the Appellate Assistant Commissioner to set aside assessments and direct fresh assessments. The court concluded that the directions given by the Appellate Assistant Commissioner were valid as they pertained to the income of the appellant-company, which was intimately connected with the original assessment proceedings.

2. Validity of notices issued under section 34:
The Income-tax Officer issued notices for the assessment years 1949-50, 1950-51, and 1951-52 to Turner Morrison and Company Ltd. as agents of the appellant-company. The appellant-company argued that these notices were beyond the period prescribed by section 34 of the Indian Income-tax Act, 1922. The court analyzed the provisions of section 34(1)(a) and (b) and the associated limitations. It was determined that the notices were valid as they were issued in consequence of the Appellate Assistant Commissioner's directions, which are covered under the second proviso to section 34(3).

3. Applicability of the second proviso to section 34(3) regarding limitation:
The appellant argued that the second proviso to section 34(3) did not apply as the directions were to assess a stranger to the original assessment proceedings. The court referred to the precedent set by the Constitution Bench in S. C. Prashar v. Vasantsen Dwarkadas, which held that the proviso does not apply to strangers. However, the court also considered the case of ITO v. Murlidhar Bhagwan Das, which clarified that "any person" in the proviso includes those intimately connected with the assessee. The court concluded that the appellant-company was not a stranger but was intimately connected with the assessment proceedings against Turner Morrison and Company Ltd., thus falling within the scope of "any person" under the second proviso to section 34(3).

Conclusion:
The Supreme Court dismissed the appeals, holding that the directions given by the Appellate Assistant Commissioner were valid under section 31, and the notices issued under section 34 were not barred by limitation due to the applicability of the second proviso to section 34(3). The appellant-company was considered intimately connected with the original assessment proceedings, and thus the notices were valid. The High Court's dismissal of the writ petition was upheld. The appeals were dismissed with costs.