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TMI Blog1985 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... tered firm and the assessment year in question is 1961-62. The assessee-firm filed its return for the year under reference declaring an income of Rs. 52,110. Shri Manaklal Porwal, a partner of that firm, had also filed an individual return of income. The ITO came to the conclusion that the assessee-firm was not a genuine firm and the business of the firm, in fact, was exclusively that of Shri Manaklal Porwal. The ITO, therefore, assessed the income which was earned in the name of the assessee-firm in the hands of Shri Manaklal Porwal (Individual) and passed the following order on January 31, 1965 : " Firm is not genuine. Income of the firm to be assessed in the hands of Shri Manaklal Porwal. Hence, firm's case is filed." Shri Manaklal Porwal went in appeal against his individual assessment. The AAC found that the Bombay Bench " B " of the Appellate Tribunal had held that the firm of M/s. Manaklal Porwal was a genuine firm, vide its order dated December 5, 1966, passed in I.T.A. No. 11925/1964-65. The AAC followed the aforesaid order and recorded a finding that Shri Manaklal Porwal could only be assessed in respect of his 1/4th share from the said firm as per allocation of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act was barred by limitation and was otherwise invalid. He, therefore, opined that s. 150 has neither any application nor Explanation 3 to s. 153 could be invoked in the case and further that s. 153 had nothing to do with the time-limit for initiating the proceedings under s. 147 of the Act. The Revenue went in appeal and the Tribunal held in its order dated February 28, 1977, that the assessment in this case was reopened by the ITO under s. 147(b) rather than under s. 147(a) of the Act and that the view of the AAC that it was reopened under s. 147(a) was not correct. The Tribunal addressed itself to the question whether reopening of the proceedings under s. 147(b) of the Act was valid and within limitation. While considering this question, it overruled the objection of the assessee-firm that there was no assessment of the firm for the assessment year 1961-62 as the proceedings were only ordered to be filed by the ITO. It rejected the contention of the assessee-firm that reopening of the assessment under s. 147(b) was barred by limitation. According to the Tribunal, the bar of limitation was saved by Explanation 3 to s. 153 read with s. 150 of the Act. A contention was also raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is clear that the ITO had gathered information from the order dated March 13, 1969, of the AAC which was passed in the case of Shri Manaklal Porwal (Individual) that income in the case of the firm, M/s. Manaklal Porwal, had escaped assessment. It may be mentioned here that in CIT v. Ayodhyakumari (D.B.C.I.T. Ref. No. 29 of 1971, decided on February 3, 1984 [1985] 154 ITR 604), a Division Bench of this court to which one of us (S. K. Mal Lodha J.) was a party, after considering various authorities, held as under (p. 611): " Section 147 of the Act deals with reassessment. Section 147 empowers the ITO to assess income which escaped assessment in the relevant year, on the fulfilment of the requisite conditions laid down under cl. (a) or cl. (b) of s. 147. It is not necessary for the ITO to specify in the notice which is issued under s. 147 of the Act that whether he is issuing under cl. (a) or cl. (b) of s. 147. Section 147 empowers the ITO to reopen an assessment already made. That jurisdiction and power can be exercised by him if the necessary conditions laid down in cl. (a) or cl. (b) of s. 147 are satisfied. " The Division Bench followed the view taken in Mriganka Mohan S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciples which would apply to determine the applicability of s. 34(1)(b) to the following categories of cases (headnote) : " (1) Where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer; (3) where the information is derived from an external source of any kind: such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment; and (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record or the facts disclosed thereby or from other enquiry or research into facts or law. " A. Raman Co.'s case [1968] 67 ITR 11 (SC) and Kalyanji Mavji Co.'s case [1976] 102 ITR 287 (SC) were noticed in CIT v. D. S. Bottlewala [1978] 115 ITR 441 (Bom), wherein the Tribunal held that what was proposed to be done was on the basis of a mere change of opinion and s. 34(1)(b) was not applicable. On a referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the assessee-firm cannot avail of that case. From the facts narrated hereinabove, it is clear that the ITO on the basis of the AAC's order dated March 13,1969, came to know that the assessee-firm was genuine. This information was conveyed from the aforesaid order and it attracts the third test laid down in Kalyanji Mavji Co.'s case [1976] 102 ITR 287 (SC), viz., that the information that the assessee-firm is genuine was derived from the order dated March 13, 1969, of the AAC. The order dated March 13, 1969, of the AAC, in our opinion, constitutes information within the meaning of s. 147(b) of the Act. The further question is whether the ITO could take recourse or resort to s. 150 and Explanation 3 to s. 153 of the Act, for, it was contended on behalf of the assessee-firm that reopening of the assessment under s. 147(b) of the Act was barred by limitation. Section 149 of the Act provides for time-limit for notice in regard to cases falling under s. 147(b) of the Act. It is provided in s. 149 of the Act that no notice shall be issued after the expiry of four years from the end of the relevant assessment year. We have already stated that the assessment proceedings f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee or any person in consequence of or to give effect to any finding or direction contained in an order under sections 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act." The expression " any person " as used in s. 153(3)(ii) of the Act was considered by the Tribunal. The Tribunal has noticed ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) and Daffadar Bhagat Singh and Sons v. ITO [1969] 71 ITR 417 (SC) in this connection. In Murlidhar Bhagwan Das' case [1964] 52 ITR 335 (SC), the Supreme Court held that the expression " any person " occurring in the second proviso to s. 34(3) of the old Act refers to one who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. It was further held that the person should be intimately connected with the proceedings in which the findings were given. Murlidhar Bhagwan Das' case [1964] 52 ITR 335 (SC) was applied in Bhagwan Das Sita Ram (HUF) v. CIT [1984] 146 ITR 563 (SC). In Bhagwan Das Sita Ram's (HUF) case, a larger HUF was one. A claim was made by the larger HUF that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income that went into the assessment of the larger HUF in the years under appeal and was intimately connected with the assessments of the larger HUF. The income could not be the income of both the larger HUF and the appellant. Directions given by the Tribunal in the appeals filed by the larger HUF would be applicable to the appellant. The directions were clearly within the contemplation of the second proviso to s. 34(3) and the appellant, the smaller HUF, was one of the persons clearly contemplated by s. 34(3). The assessability of income and the quantum of the income of the appellant was linked up with the assessability of the larger HUF; if the larger HUF was liable to be assessed if there was no disruption, then there was no income of the smaller HUF. The income in the hands of smaller HUF could then not have been liable to be assessed. If, on the other hand, it was the other way, viz., that there was a valid partition, the larger HUF no longer existed and the smaller HUF would be liable to be assessed. Whether the income of the smaller HUF, viz., the appellant, was liable to be taxed was so intimately or inextricably linked up with the question of assessability of the large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the principles laid down in Vadde Pullaiah and Co.'s case [1973] 89 ITR 240 (SC), are fully applicable. The bar of limitation was saved by the Explanation 3 to s. 153 read with s. 150 of the Act. The decision of the Tribunal that proceedings were validly initiated under s. 147(b) read with s. 150 and Explanation 3 to s. 153 of the Act is correct. Question No. 2: The contention of the learned counsel for the assessee-firm is that the order dated January 31, 1965, which has been reproduced above does not amount to an order of assessment of the firm. It is not a determination order, for, before passing this order, the procedure laid down under s. 143 of the Act was not followed inasmuch as neither any notice was issued nor was assessment completed within the time provided therein and so, this cannot be said to be an assessment in the eye of law. In this connection, he referred to CIT v. M. K. K. R. Muthukaruppan Chettiar [1970] 78 ITR 69 (SC), wherein it was held that the order of the ITO was not an order terminating the proceedings with the result that there was no disposal of the voluntary returns submitted by the respondent family for the assessment years 1950-51 to 1952-53. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case, was taken there on the ground that the order " N. A. " was no order at all and the returns being pending, the proceedings under s. 34(1)(b) would be without jurisdiction. Dealing with this objection, it was held as under (p. 659): "We are of opinion that the proceedings for 1953-54 and 1954-55 were lawfully terminated by the ITO. It is true that s. 23 does not in express terms provide for closing the assessment proceedings with an order that no assessment would be levied. Though the assessee had offered an item of income for assessment as his, the ITO came to the conclusion that it was the Hindu undivided family that was liable to be assessed on that income and not the assessee. It was a conclusion, whether it was right or wrong, that he had jurisdiction to reach ; and once he reached that conclusion, he could not tax the assessee. In Esthuri Aswathaiah v. ITO, Mysore State [1961] 41 ITR 539, their Lordships of the Supreme Court pointed that the order 'no proceeding ' terminated the assessment proceedings, and that it should be construed as meaning that the assessee had no assessable income ...The assessment proceedings that commenced with the returns filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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