1967 (4) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction to complete assessments based on voluntary returns.
2. Constitutionality of the second proviso to section 34(3) of the Indian Income-tax Act, 1922.
3. Applicability of the second proviso to section 34(3) to the assessee's case.

Detailed Analysis:

1. Jurisdiction to Complete Assessments Based on Voluntary Returns:
The court examined whether the revenue had jurisdiction to complete the assessments for the years 1950-51, 1951-52, and 1952-53 based on the voluntary returns filed by the assessee. Initially, the Income-tax Officer did not consider these returns and instead initiated proceedings under section 34(1)(a) of the Indian Income-tax Act, 1922. The court found that the assessment orders for these years were invalid, as previously held by Rajagopalan and Srinivasan JJ. in T.C.No. 150 of 1960. The Tribunal subsequently canceled the assessments for these years. However, the revenue issued a notice stating that the original assessment proceedings were still alive by virtue of the second proviso to section 34(3) of the Act.

2. Constitutionality of the Second Proviso to Section 34(3):
The assessee contended that the second proviso to section 34(3) was unconstitutional and violated Article 14 of the Constitution of India. The court referred to the Supreme Court's decision in Prashar v. Vasantsen Dwarkadas, which held that the proviso was invalid to the extent it authorized the assessment of any person other than the assessee. However, the court noted that this decision primarily addressed cases involving utter strangers to the earlier proceedings. The court emphasized that the proviso was still applicable to persons intimately connected with the earlier proceedings, as indicated by subsequent Supreme Court rulings and decisions of this court.

3. Applicability of the Second Proviso to Section 34(3) to the Assessee's Case:
The court considered whether the assessee was intimately connected with the earlier proceedings involving his uncle, who represented the Hindu undivided family (HUF). The court found that the uncle's representation created a sufficient nexus between the earlier proceedings and the assessee. The court cited the Supreme Court's interpretation in Income-tax Officer v. Murlidhar Bhagwan Das, which clarified that the expressions "finding" and "direction" in the proviso referred to necessary findings for giving relief in the assessment of the year in question. The court concluded that the assessee was not an utter stranger to the earlier proceedings and that the proviso was applicable to him.

The court dismissed the writ petitions, holding that the revenue had jurisdiction under the proviso and that the proviso was not unconstitutional in the context of the assessee's case. The court emphasized that the proviso's application was limited to persons intimately connected with the earlier proceedings, and the assessee fell within this category. Therefore, the revenue's actions were upheld, and the writ petitions were dismissed with costs.