1984 (3) TMI 346 - SC - Income Tax

Held that assessment could be made under section 23(3) on the basis of voluntary returns filed or action should have been taken under section 34 with the help of the second proviso to sub-section (3) of section 34

Summary

Issues Involved:
1. Validity of assessments made on 31st May, 1962, for the assessment years 1948-49 and 1949-50.
2. Whether the Tribunal's direction for assessment was applicable to the present assessee.
3. Interpretation of "any person" under the second proviso to sub-section (3) of section 34 of the Indian Income-tax Act, 1922.

Detailed Analysis:

1. Validity of Assessments Made on 31st May, 1962:
The primary issue was whether valid assessments could be made on 31st May, 1962, for the assessment years 1948-49 and 1949-50 based on voluntary returns filed under section 22(1) of the Indian Income-tax Act, 1922, on November 18, 1950. The High Court of Allahabad had previously ruled in favor of the Revenue, and this decision was upheld by the Supreme Court. The court noted that the voluntary returns filed by the assessee initiated assessment proceedings, and section 34 did not apply as long as these proceedings were pending. The High Court referenced the decision in CIT v. Ranchhoddas Karsondas and other cases, concluding that assessments could be made on the basis of voluntary returns already filed by the assessee.

2. Tribunal's Direction for Assessment:
The second issue was whether the Tribunal could give a direction for assessment in respect of the present assessee. The court referred to the decision in ITO v. Murlidhar Bhagwan Das, which clarified that the expression "any person" must be confined to persons intimately connected with the assessments of the year under appeal. The High Court held that the direction given by the Tribunal was valid as it pertained to the assessment years 1948-49 and 1949-50, during which the partition of the bigger HUF was in question. The Tribunal was competent to give such directions, and the assessments were thus valid.

3. Interpretation of "Any Person":
The court examined whether the expression "any person" under the second proviso to sub-section (3) of section 34 included the present assessee. It was argued that only those intimately connected with the assessment of the bigger HUF, such as partners or members of the HUF, could be included. The court found that the present assessee, a smaller HUF formed after the partition of the bigger HUF, was indeed intimately connected with the assessment of the bigger HUF. The income in question could only belong to either the bigger HUF or the smaller HUF, making the present assessee liable for assessment. The court referred to the decisions in Rajinder Nath v. CIT and CIT v. Vadde Pullaiah & Co., supporting the view that the present assessee fell within the scope of "any person" as explained in Murlidhar Bhagwan Das.

Conclusion:
The Supreme Court upheld the majority judgment of the High Court, concluding that the assessments made on 31st May, 1962, were valid and that the Tribunal's direction for assessment was applicable to the present assessee. The expression "any person" included the present assessee, who was intimately connected with the assessment of the bigger HUF. The appeals were dismissed with costs.