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TMI Blog1968 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1922 (hereinafter called " the Act "). About the same time, each of the individual coparceners, on the basis that the joint family was divided, filed for the assessment years 1953-54 and 1954-55 individual returns on March 31, 1954, and December 21, 1954, respectively. Separate files were opened for the assessees, the erstwhile karta and the other coparceners, for those two years and the receipt of the returns of income was recorded therein. The claim of the Hindu undivided family to record the partition under section 25A was rejected by the Income-tax Officer by his order dated March 27, 1958, in these words : " I have held that the family did not become divided on January 1, 1952. Club with 22B." (It may be noted that " 22B " refers to the assessment file of the Hindu undivided family). He eventually made the assessment on the undivided family. Against the order of the Income-tax Officer under section 23(3) and section 25A, the Hindu undivided family went in appeal to the Appellate Assistant Commissioner, who set aside the order of the Income-tax Officer on the ground that the assessee had not been granted sufficient opportunity. Against this order of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked to " redo them according to law ". He however did not express any views on the third contention regarding the quantum of income, as he was setting aside the assessments. Against this order, the assessees appealed to the Tribunal, before which it was contended, inter alia : (1) that both the assessments were barred by limitation, and therefore the orders passed by the Income-tax Officer were illegal ; and (2) that the second proviso to section 34(3) was not applicable as the Appellate Assistant Commissioner was not entitled to give the direction which he did. The Tribunal dealing with the first objection pointed out that the assessees had filed their individual returns under section 22(1) of the Act during the financial years 1953-54 and 1954-55, respectively, that under the substantive provisions of section 34(3), the assessments based on those returns should have been completed at the latest by March 31, 1958, and March 31, 1959, respectively, that the assessments were completed only in 1962 and that they were therefore barred by limitation. It was contended before the Tribunal by the department that the four-year limitation would not apply, if the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be noticed that in so far as the order passed under section 25A in the joint family assessment accepting the partial partition and directing the Income-tax Officer to consider the income from the assets which were allotted in the partial partition in the individual assessments of the coparceners is concerned, the finding in respect thereof has become conclusive as there was no appeal by the department as against that order. In this reference, the question, as we have said earlier, is whether the second proviso to section 34(3) is applicable. Section 34(3) and the second proviso are as follows : Section 34(3) : " No order of assessment or reassessment, other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or all order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1A) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable : .... Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghubar Dayal J. Das J., no doubt, gave expression to the view that the second proviso to section 34(3) would be invalid entirely, i.e., even in relation to proceedings taken as against an assessee who was a party to the previous preceding in which a finding or direction was given, but nonetheless, found it unnecessary to go so far for the purpose of disposal of the case before him. In fact, he had held that by the time the second proviso was added by an amendment on April 1, 1952, the right to reopen the assessment had become time-barred and, therefore, the amendment could not revive it. At page 14 he said : " Therefore, I am clearly of the view that on April 30, 1954, the Income-tax Officer had no jurisdiction to issue the notice which he did on the firm purushottam Laxmidas under the second proviso to sub-section (3) of section 34, because the time limit fixed by subsection (1), of section 34 had expired long before the said proviso came into effect and the proviso does not in express terms or by necessary implication revive a remedy which has been lost before April 1, 1952. " In view of this finding, with which the other two judges agreed, the view expressed by him on the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pending, upheld the plea of the assessee that they had become divided even prior to that year and set aside the assessment for that year. On November 27, 1953, the Income-tax Officer proceeded to assess Lakhmir Singh on the basis of his return made fo the year 1946-47. Although such an assessment was made more than four years after March 31, 1947, it was argued that the second proviso to section 34(3) would save the assessment from the bar of limitation. Das, Kapur and Sarkar JJ. by the majority judgment, held that the assessment was invalid, though they have given different reasons. Das and Kapur JJ. held that the assessment was invalid because it had become barred even before the second proviso to section 34(3) came into force on April 1, 1952. Sarkar J., is already pointed out, held that Lakhmir Singh was a stranger in the assessment proceedings in which his father was sought to be assessed for the year 1945-46. Hidayattullah and Raghubar Dayal JJ. took a contrary view. In Murlidhar Bhagwan Das case Subba Rao J. (as he then was), delivering the judgment of the majority, consisting of himself, Sinha C.J., and Rajagopala Ayyangar J., Mudholkar and Raghubhar Dayal JJ, dissentin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Appellate Commissioner. Modification or setting aside of assessment made on a firm, joint Hindu family, 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 onomine 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." It would appear from the judgment of Mudholkar J. in Murlidhar Bhagwan Das's case that Prashar's case was also cited before the Supreme Court. Though it was not referred to specifically by Subba Rao J., there can be little doubt that that case also was considered, because Mudholkar J., at page 354, said : " As regards the other decision relied upon, it is sufficient to point out that the majority of the learned judges h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elat C.J. said that, in so far as the case before them was concerned, there were no separate and distinct assessment proceedings, one in respect of the assessee in his status as an individual and the other in respect of the Hindu unidivided family. The assessment proceeding, in respect of the assessee, Shantilal, were in respect of his income arising from his self-acqured and separate property. The assessment proceedings against the Hindu undivided family were proceedings against the entire entity, and was on the income derived by the Hindu undivided family from the property or business of that Hindu undivided family. In that assessment, the income accruing or arising from the separate property of the assessee, Shantilal, could not be assessed, as the business carried on by the assessee, Shantilal, was not the business of the Hindu undivided family. The Income-tax Officer held that Shantilal was the nominee of the Hindu undivided family meaning thereby that the business belonged to the Hindu undivided family and it was that conclusion of the Income-tax Officer which wits reversed by the Tribunal, the Tribunal holding that the department had failed to prove that the assessee, Shanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted a Hindu undivided family and not a firm, and had also refused registration under section 26A. On appeal, the Appellate Assistant Commissioner by his order dated August 11, 1959, allowed registration of the partnership firm under section 26A, and he further held that the business belonged to the firm and therefore its income must be excluded from that of the family. The Income-tax Officer was directed to assess the income of the business in the hands of the firm. The Income-tax Officer issued fresh notice to the appellants under section 22(4) and 23(2) of the Act. The appellant refused to comply with these notices and moved the Inspecting Assistant Commissioner of Income-tax for giving a direction that the assessment should not be proceeded with owing to the statutory bar created by section 34(3) of the Act. As the income-tax authorities did not accede to the request of the appellants a petition under articles 226 and 227 was filed in the High Court. The High Court dismissed the petition on the ground that, in view of the decision of the Supreme Court in Murlidhar Bhagwan Das case, the second proviso to section 34(3) would be applicable because the members of the appellant-fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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