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TMI Blog1998 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... der for the assessment years 1949-50, 1950-51 and 1951-52 was sought to be subjected to income-tax by the Income-tax Officer under section 34 of the Indian Income-tax Act, 1922. In the past an assessment had been made on Turner Morrison and Company Ltd. as agents for the appellant-company on a total income which was returned as nil. In view of the above order under 23A, the Income-tax Officer sought approval of the Commissioner of Income-tax under section 34 to tax the appellant-company as an assessee in respect of the assessment years 1949-50, 1950-51 and 1951-52. After obtaining the approval of the Commissioner of Income-tax under section 34, the Income-tax Officer issued a notice for the assessment year 1949-50 to Turner Morrison and Company Ltd. as agents of the appellant-company on March 24, 1954. A return was filed pursuant to the notice by Turner Morrison and Company Ltd. as agents of the appellant-company for the assessment year 1949-50. The status of the company in the return was described as non-resident and the income was the dividend deemed to be received under section 23A by the appellant-company from Turner Morrison and Company Ltd. On October 29, 1954, the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A learned single judge of the Calcutta High Court (see [1976] 102 ITR 314) by his order dated January 31, 1972, dismissed the writ petition, holding that the assessment proceedings against the appellant-company were validly commenced by notices dated October 26, 1961. The appeal of the appellant-company before a Division Bench of the Calcutta High Court (see [1984] 146 ITR 73) was also dismissed by its judgment and order dated August 13, 1982. Hence, the present appeals have been filed before us. The appellant-company contends that the Appellate Assistant Commissioner had no jurisdiction to give directions under section 31 to the Income-tax Officer to make the assessments on the appellant-company. Therefore, the notices which have been issued against the appellant-company on October 26, 1961, are beyond the period prescribed by section 34 of the Indian Income-tax Act, 1922. According to the appellant-company, since the direction given by the Appellate Assistant Commissioner is not covered by section 31, the second proviso to section 34(3) lifting the embargo, of limitation in such cases is not attracted. The Appellate Assistant Commissioner by his order dated November 29, 1960 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, or has been underassessed he can serve on the assessee a notice and proceed to assess or re-assess such income as specified in that section. The period prescribed at the material time for issuing notice was eight years in the cases falling under section 34(1)(a) and four years for cases falling under section 34(1)(b). The second proviso to section 34(1), at the material time, provided that the Income-tax Officer shall not issue a notice after the expiry of two years from the relevant assessment year if the person on whom the assessment or reassessment is to be made in pursuance of the notice is a person deemed to be the agent of a non-resident person under section 43. The second proviso to section 34(3), however, at the material time provided as follows : "Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to given effect to any finding or direction contained in an order section 31, section 33, section 33A, section 33B, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in that case on a somewhat narrower ground, this court observed that so far as assessees were concerned, there might be a rational ground for distinction because the appeal proceedings, etc., might take a long time and the assessee being a party to the appeal could not complain of such delay. Therefore, an assessee did not occupy the same position as strangers. This court, therefore, held that the proviso, in so far as it affected strangers, must be held to be ultra vires as violating article 14 of the Constitution of India. The same Bench delivered another judgment on the same day in CIT v. Sardar Lakhmir Singh [1963] 49 ITR 70 (SC) in which it affirmed its finding in S. C. Prashar's case [1963] 49 ITR 1(SC). In the case of S. C. Prashar [1963] 49 ITR 1 (SC), the assessee before the Tribunal was Vasantsen Dwarkadas as representing his deceased father. The Tribunal in appeal held that the income in question should be deleted from Dwarkadas's income. If the Income-tax Officer can include the same in the income of the firm of Purshottam Laxmidas (of which Dwarkadas was a partner) he is at liberty to do so. He can then apportion the income of Purshottam Laxmidas amongst the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Commissioner. Modification or setting aside of assessment made on a firm, a joint Hindu family, an association of persons, for a particular year may affect the assessment for the said year on a partner or partners of the firm, member or members of the Hindu undivided family or the individual, as the case may be. In such cases though the latter are not eo nomine parties to the appeal, their assessments depend upon the assessments on the former. The said instances are only illustrative. It is not necessary to pursue the matter further. We would, therefore, hold that the expression 'any person' in the setting in which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal". Therefore, if the person against whom notices are issued under section 34 pursuant to a direction given by the Appellate Assistant Commissioner under section 31, is a person intimately connected with the original assessee, the period of limitation will not apply to a notice issued against him under section 34, and he would be covered by the phrase "assessee or any other person" under the second proviso to section 34(3). The princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Bashir. He set aside the order of the Income-tax Officer but directed him to assess the income from various sources in the hands of the respective persons to whom they arose. The Income-tax Officer thereafter issued notices to the two brothers. This court held that the directions which were given by the Appellate Assistant Commissioner did not fall within the scope of the second proviso to section 34(3) and, therefore, the subsequent notices which were issued by the Income-tax Officer were barred by limitation. The brothers to whom the business was gifted were strangers to the assessment proceedings against an association of persons consisting of the heirs of Zahur Bux. In the present case we have to consider whether the appellant-company is a stranger to the assessment proceedings against Turner Morrison and Company Ltd. as laid down in the case of S. C. Prashar [1963] 49 ITR 1 (SC) or whether the appellant-company can be said to be intimately connected with the assessee, Turner Morrison and Company Ltd. as laid down in the case of Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC). The notices for the assessment years 1950-51 and 1951-52 were sent to the appellant-company itself. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessee or otherwise, the assessment was clearly in respect of the income of the appellant-company deemed to arise by virtue of section 23A in India for that assessment year. Therefore, the appellant-company was directly concerned with the assessment proceedings and the appeal arising in those assessment proceedings before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner directed, for reasons set out in his order, that the assessments should be made on the appellant-company itself and not on its agent. This direction cannot be considered as a direction to assess a stranger. In fact as the original assessment proceedings pertain to the income of the appellant-company, in any view of the matter, the appellant-company must be considered as intimately connected with the assessment proceedings in which the Appellate Assistant Commissioner gave the impugned directions. The appellant-company is, therefore, covered by the expression "assessee or any person" in the second proviso to section 34(3). In the case of Murlidhar Bhagwan Das [1964] 52 ITR 335 this court gave illustrations of persons who might be considered as intimately connected with the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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