Bhagwan Das Sita Ram Vs. Commissioner of
Income-Tax [1984] INSC 51 (5 March 1984)
MUKHARJI, SABYASACHI (J) MUKHARJI, SABYASACHI
(J) TULZAPURKAR, V.D.
CITATION: 1984 AIR 993 1984 SCR (3) 100 1984
SCALE (1)492
ACT:
Income-tax Act, 1922-s. 22 and s. 23 read
with second proviso to sub-s. (3) of s. 34-Interpretation of-When assessment
can be made after a period of four years from assessment year-Assessment
proceedings commence by filing of voluntary return-On expiry of four years
proceedings are suspended but proceedings and returns do not become invalid.
Bar of limitation lifts in case of direction
by Tribunal- When and on whom Tribunal can issue direction.
Words and Phrases-"any person" in
second proviso to sub-s. (3) of s. 34-Scope of must be a Person who would be
liable to be assessed for whole or part of income that went into assessment of
the year under appeal.
HEADNOTE:
A bigger Hindu undivided family (HUF) had
filed income- tax returns for the assessment years 1946-47 to 1949-50.
When the assessment was being done the bigger
(HUF) made a claim under s. 25A of the Income Tax Act, 1922, that the said HUF
was partitioned on 19.5.1945. While this claim was pending, the appellant along
with a smaller HUF (hereinafter referred to as the assessee) which had come
into being on partition of the bigger HUF, filed voluntary returns on
18.11.1950 for the assessment years 1946-47 to 1949-50 under s.22(1) of the
Act. The bigger HUF's claim partition, which was rejected by the Income Tax
Officer and the Appellate Assistant Commissioner, was accepted by the Appellate
Tribunal on 31.8.1954. While disposing of the appeals of the bigger HUF against
the assessment orders, the Tribunal gave a direction on 28.10.1954 that
assessments be made on the bigger HUF after accepting partition. After the
claim of partition was accepted the Income-tax Officer sent notices to the
assessee for initiating proceedings against him under s.34(1) (b). In response
to the notices the assessee filed fresh returns on 12.4.1955. Rejecting the contention
of the assessee that the time for making assessment under s.34 had expired, the
Income-tax Officer completed assessments under s. 23(3) read with s. 34 on .
8.9.1955. The assessee's appeal was rejected by the Appellate Assistant
Commissioner and the Appellate Tribunal. The assessee filed a writ petition in
the High Court which was allowed and the assessment orders were quashed on
30.3.1960. The High Court observed that as voluntary returns filed by the
assessee were pending no proceeding could be taken under s. 34.
Thereafter the Revenue attempted to assess
the assessee on the basis of voluntary returns originally filed on 18.11.1950
by relying upon the order of the Tribunal dated 23.10.1954 in the bigger HUF's
case and invoking second proviso to s. 34(3). The assessee filed a writ
petition and that was dismissed. The Income-tax Officer completed assessment
under s. 23(3) on 31.5.1962. In appeal the Appellate Assistant Commis- 101
sioner held that no valid assessment could be made on 31.5.1962 and this view
was confirmed by the Appellate Tribunal. A reference was made to the High Court
on the question whether on the facts and circumstances of the case, valid
assessment could be made on 31.5.1962 for the assessment years 1948-49 and 1949
50 on the basis of voluntary returns of income filed under s. 22(1) of the Act.
The assessee contended that since a return
exhausted itself after expiry of four years from the end of the assessment year
to which it related, no assessment could be made on the basis of voluntary
return, it could be done under s. 34 only if 2nd proviso to sub-s. (3) of s. 34
applied. By majority a full Bench of the High Court answered the question in
the affirmative in favour of the revenue. Hence these appeals.
The two questions which arose were: (1)
whether the assessment could be made under s. 23(3) on the basis of voluntary
returns filed or action should have been taken under s. 34 with the help of the
second proviso to sub-s. (3) of s. 34; and (2) whether the Tribunal could give
a finding or direction in respect of the assessee.
Dismissing the appeals, HELD :
On Question No. (1) The High Court was right
in taking the view that assessments could be made on the basis of voluntary
returns already filed by the assessee. Sub-s. (3) of s. 34 provides a period of
limitation of four years for assessment under s. 23 of the Act. If the
assessment proceedings commence by filing of voluntary returns, as indeed these
do, on the expiry of the period of four years from the end of the year in which
the income, profits or gains were first assessable, such proceedings are
suspended or interrupted. But neither the proceedings nor the returns become
invalid. Since the order was passed by the Tribunal giving direction, the bar
of limitation provided by s. 34(3) was lifted and the assessments could be made
without any bar of limitation.
[106 G-H, 107 A] Commissioner of Income-tax
Bombay City II v. Ranchhoddass Karsondas, 36 I.T.R. 569; Estate of the late
A.M.K.M. Karuppan Chettiar v. Commissioner of Income-tax, Madras, 72 I.T.R.
403; and Commissioner of Income-tax Madras v. M.K.K.R. Muthukaruppan Chettiar,
78 I.T.R. 69, referred to On question No. (2) The High Court rightly answered
the question in favour of the revenue on the view that the Tribunal was
competent to give the direction in respect of the present assessee.
[108 E-G] Second proviso to s. 34(3)
authorises directions to be given by the Tribunal in respect of the assessee or
any person beyond four years as provided in s. 34(3) of the Act.
As explained in Income-tax Officer v.
Murlidhar Bhagwandas, "any person" in respect of whom such direction
could be given must be 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. The court must turn 102 to s. 31 of the Act to ascertain who is that
person other than the appealing assessee who might be affected by the orders
passed by the appellate authority. 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 of members of such Hindu undivided family or the individual,
as the case might be.
These instances are only illustrative and not
exhaustive.
The expression "any person" in its
widest amplitude might take in any person connected or not with the assessee,
whose income for any year had escaped assessment; but this construction cannot
be accepted, for the said expression was necessarily circumscribed by the scope
of the subject-matter of the appeal or revision, as the case might be. So
therefore the person must be one who would be liable to be assessed for the
whole or any part of the income that went into assessment of the year under
appeal or revision (Emphasis supplied). Therefore, "any person" in
sub-section (3) of s. 34 must be confined to person intimately connected in the
aforesaid sense with the assessments of the years under appeal. [701 C-S, 108
A-F] Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das, 52 I.T.R.
335; Rajinder Nath v. Commissioner of Income-tax, Delhi, 120 I.T.R. 14;
Commissioner of Income- tax, Central, Calcutta v. National Taj Traders, 121
I.T.R.
535; and Commissioner of Income-tax, Andhra
Pradesh v. Vadde Pullaiah & Co., 89 I.T.R. 240, referred to.
The facts in the instant case show that
income can belong either to the bigger Hindu undivided family or to the smaller
Hindu undivided family, the present assessee alongwith another smaller H.U.F.
and to no one else.
Therefore a finding that it belongs or it
does not belong to the bigger Hindu undivided family which had disrupted on
partition would determine the issue whether it could be taxed in the hands of
the present assessee. Judged in the light of the test laid down in Murlidhar
Bhagwan Das case and as pointed out in Rajinder Nath's case, it appears that
the present assessee can be said to be a person who would be liable to be
assessed for the whole or part of the income that went to the assessment of the
bigger Hindu undivided family in years under appeal and is a person intimately
connected with the assessments of the bigger Hindu undivided family. The income
in this case cannot be the income of both bigger Hindu undivided family and the
present assessee, it must be either of these two. Therefore, the directions
given in the appeals filed by the bigger Hindu undivided family would be
applicable to the present assessee. [111 A-D] Commissioner of Income-tax,
Gujarat v. Shantilal Punjabhai, 57 I.T.R. 58, distinguished.
Commissioner of Income-tax, Punjab, Jammu
& Kashmir and Himachal Pradesh v. S. Raghubir Singh Trust, 123 I.T.R. 438
referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 1168-69 (NT) of 1973.
Appeal by Special leave from the Judgment and
Order dated 103 the 3rd January, 1973 of the Allahabad High Court in I. T.
Ref. No. 450 of 1969.
S.C. Manchanda and M. J.P. Malhotra for the
Appellant.
S.T. Desai, B.B. Ahuja and Miss A. Subhashini
for the Respondent.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. These appeals by certificate granted by the High Court
of Allahabad under Section 66A(2) of the Indian Income-Tax Act, 1922, arise out
of judgment delivered and order passed on 3rd January, 1973 by the High Court
of Allahabad in Income-tax Reference No. 450 of 1965.
The following question of law had been
referred to the High Court for consideration under Section 66(1) of the Income-
Tax Act, 1922 by the Appellate Tribunal, Allahabad Bench, Allahabad:
"Whether, on the facts and in the
circumstances of the case, valid assessments could be made on 31st May, 1962,
for the assessment years 1948-49 and 1949-50 on the basis of voluntary returns
of income filed under Section 22(1) of the Indian Income-Tax Act, 1922 on
18.11.1950? The matter came up before a Division Bench of the High Court and as
there was a previous bench decision of that Court in the case of Sool Chand Ram
Sewak v. Commissioner of Income-tax, U.P. which supported the revenue's case
and as the division bench before whom this case came was unable to accept that
view, the division bench referred the case to a larger Bench. This reference
thereafter came before a Full Bench consisting of Gulati, H. N. Seth &
C.S.P. Singh, JJ.
Gulati and C. S. P. Singh, JJ. answered the
question in the affirmative in favour of the revenue and against the assessee.
Seth J. however, was in favour of assessee. In view of the majority the
question was answered in favour of the revenue and in affirmative.
104 Before we deal with the question in
controversy, it will be necessary to note some of the relevant facts. There
were originally four appeals for the assessment years 1946- 47, 1947-48,
1948-49 and 1949-50. As the appeals for the assessment years 1946-47 and
1947-48 were withdrawn by the revenue, we are now concerned with appeals for
the assessment years 1948-49 and 1949-50.
The present assessee is a branch of a bigger
Hindu undivided family known as Nathu Ram Jawahar Lal, Jhansi.
The bigger Hindu undivided family of M/s
Nathu Ram Jawahar Lal was partitioned on 19th May, 1945, and the present
assessee along with another smaller H.U.F. came into existence and the said
bigger H.U.F. had made a claim in respect of the partition under Section 25A of
the Indian Income-Tax Act, 1922. While this claim was pending the present
assessee filed voluntary returns under Section 22(1) of the Act for the
assessment years 1946-47 to 1949-50 on 10th November, 1950. The said claim of
partition by the bigger H.U.F. was rejected by the Income-tax Officer and also
by the Appellate Assistant Commissioner. The said H.U.F. thereafter, filed
appeals to the Appellate Tribunal in respect of the order under claim of
partition under Section 25A of 1922 Act which by its order dated 31st August,
1954 accepted the claim under Section 25A of 1922 Act, and the Tribunal passed
orders on that basis in the appeals relating to the assessment orders in
respect of the bigger H.U.F. on 28th October, 1954. The Income-tax Officer,
thereafter, initiated proceedings under Section 34 of the Income-tax Act of
1922 for assessing the smaller Hindu undivided family, the present assessee in
view of the fact that the claim for disruption of the bigger H. U. F. had been
accepted by the Tribunal. The present assessee filed fresh returns of income on
12.4.1955 in response to notices under Section 34 of 1922 Act. The returns
originally filed were under Section 22(1) and were filed on 18th November,
1950. The assessee's objection regarding the validity of the assessments being
made under Section 34 on merits as well as on the point that time for making
the assessment under Section 34 had already expired, were rejected by the
Income- tax Officer. He, therefore, completed the assessments on 8.9.1955 under
Section 23(3) read with Section 34 of the Income-tax Act, 1922. The assessee
could not get any decision in his favour either from the Appellate Assistant
Commissioner or from the Tribunal and being aggrieved by these orders, filed a
Writ Petition to the High Court of Allahabad challenging the validity of the
Appellate 105 orders. The assessee was successful in the Writ and, therefore,
the appellate orders were quashed by the High Court. The revenue having failed
in its attempt to complete the assessee's assessments under Section 34, made
another attempt to assess the assessee on the basis of the voluntary returns
originally filed by the assessee on 18.11.1950 by relying upon the order of the
Tribunal dated 28.10.1954 and invoking the provisions of 2nd proviso to Section
34(3). The said assessments which were completed on 31st May, 1962 were the
subject matters of appeals before the Tribunal.
The point before the Tribunal was whether
valid assessments could be made for the assessment years under consideration on
31st May, 1962 on the basis of the returns filed under Section 22(1) of the Act
of 1922 on 18th November, 1950. The Appellate Assistant Commissioner by his
order held that no valid assessments could be made on 31st May, 1962.
It appears that on 28th October, 1950,
relating to the assessment years 1946-47 to 1949-50 in case of bigger Hindu
undivided family, M/s Nathu Ram Jawaharlal, Jhansi, order was passed by the
Tribunal in the appeal relating to the assessments pending before it. It should
be noted that originally on the basis that the bigger H.U.F. had not been
disrupted assessments for these years had been made and appeals relating to
those assessments were pending before the Tribunal. The Tribunal disposed of
these appeals by the order dated 28th October, 1954 and the Tribunal in the
said order had observed, inter alia, as follows;
"The assessments for those years were
(have) necessarily to be set aside with the direction that fresh assessments
should be made, one for the period 19.5.1945 upto which the Hindu undivided
family was in existence and the others on the component Hindu undivided
families, namely M/s Jawaharlal Mani Ram and Bhagwan Das Sita Ram." The
Tribunal in the instant appeal out of which the reference was made to the High
Court and out of which these appeals arise, after discussing the relevant facts
and the provisions of law confirmed the order of the Appellate Assistant
Commissioner and dismissed the appeals. As mentioned hereinbefore after the
Tribunal had directed the assessments should be made on the component units of
the bigger Hindu undivided family, after partition was accepted, namely, the
assessee and Jawaharlal Mani Ram, the Income-tax Officer instead 106 of
proceeding on the basis of the voluntary returns already filed by the assessee
proceeded to take action under Section 34(1) (b) of the Act of 1922 and
completed the assessments for all the four years on September 8,1955. The
assessee appealed against these assessments to the Appellate Assistant
Commissioner of Income-tax, but before the appeals were taken up for hearing,
the assessee moved the High Court of Allahabad under Article 226 of the
Constitution. On March 30, 1960, the High Court quashed the assessment orders
on the ground that as voluntary returns filed by the assessee were pending, no
proceeding could be taken under Section 34 of the Act, 1922. Thereafter the
Income-tax Officer initiated proceedings on the basis of the voluntary returns.
The assessee again filed a writ petition
praying for quashing the proceedings on the ground that revenue could not
proceed against it on the basis of the voluntary returns. This petition was
rejected by the High Court and thereafter the Income-tax Officer proceeded to
complete the assessments under Section 23(3) and passed assessment orders on
31st May, 1962, in respect of the four years.
The first question, is, whether the
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. It is well-settled that when a return of
income is filed by the assessee voluntarily under Section 22(1) of the Act,
1922, assessment proceedings commence against him and Section 34 does not come
into play at all so long as the assessment proceedings remain pending. But it
was contended that a return exhausted itself after the expiry of four years
from the end of the assessment year to which it related. After the expiry of
that period, no assessment was possible on the basis of the voluntary return.
In such a case assessment was possible under Section 34, if the case was
covered by the second proviso to Section 34(3).
The High Court was of the opinion that
sub-section (3) of Section 34 provides a period of limitation of four years for
assessment under Section 23 of the Act, 1922. If the assessment proceedings
commence by filing of voluntary return, as indeed these do, on the expiry of
the period of four years from the end of the year in which the income, profits
or gains were first assessable, such proceedings are suspended or interrupted.
But neither the proceedings nor the returns become invalid. The High Court
referred to the provisions of Section 34(3) and was of the view that since the
order was passed by the Tribunal giving direction, the bar or limitation was
lifted and 107 the assessments could be made without any bar or limitation.
Reference was made to the decision of this
Court in the case of Commissioner of Income-tax Bombay City II v. Ranchhoddass
Karsondas, and in the case of Estate of the late A.M.K.M. Karuppan Chettiar v.
Commissioner of Income-tax, Madras and Commissioner of Income-tax Madras v.
M.K.K.R. Muthukaruppan Chettiar.
The High Court, on the basis of these
decisions, was of the view that assessments could be made on the basis of
voluntary returns already filed by the assessee. We are of the opinion that the
High Court was right.
The next question is whether it was open to
the Tribunal to give a finding or direction in respect of the present assessee.
Reliance was placed on the decision of this Court in Income-tax Officer,
A-Ward, Sitapur v.
Murlidhar Bhagwan Das. There, this court
after referring to the expression "any person" in the 2nd proviso of
sub- section (3) of Section 34 of 1922 Act observed at page 346 of the report
as follows.
"The expression "any person"
in its widest connotation may take in any person, whether connected or not with
the assessee, whose income for any year has escaped assessment; but this
construction cannot be accepted, for the said expression is necessarily
circumscribed by the scope of the subject-matter of the appeal or revision, as
the case may be. That is to say, that person must be 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. If so construed, we must turn to section
31 to ascertain who is that person other than the appealing assessee who can be
liable to be assessed for the income of the said assessment year. A combined
reading of section 30(1) and Section 31(3) of the Act indicates the cases where
persons other than the appealing assessees might be affected by orders passed
by the Appellate Commissioner. Modification or setting aside of assessment made
on a firm, joint Hindu family, association 108 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 co-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." The High Court was of the view that "any person" would
include the person 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. In that view of the matter, the majority judgment of the High Court
on this aspect was in favour of the revenue. Then on the question whether the
direction for the assessment could be given in respect of any other year, other
than the year in which the partition took place, it was contended that
direction could be given only for the assessment year 1946-
47. Majority judgment of the High Court found
no force in that contention. As this question arose directly for the assessment
years 1948-49 and 1949-50 in respect of which the appeals came before the
Tribunal in which the directions had been given, the High Court was of the view
that it was necessary for the Tribunal to give a finding with regard to the
partition of the family and the ownership of the income in both the appeals.
The Tribunal was thus competent to give the direction. In that view of the
matter, the two learned judges of the Allahabad High Court were of the opinion
that assessments were valid and answered the question in favour of the revenue.
Referring to the said decision which has been mentioned in the majority
judgment, Seth J. however was of the view that the direction given by the
Tribunal in this case did not authorise the assessment on the smaller Hindu
undivided family. Seth J. was further of the view that such direction could
only have been given in the year in which disruption of the bigger H.U.F. took
place. In that view of the matter, Seth J. expressed dissent as mentioned
hereinbefore. We are of the opinion that the majority of the learned judges of
the High Court were right. Second proviso to Section 34(3) of the Indian
Income-tax Act, 1922 authorised directions to be given by the Tribunal in
respect of the assessee or any person beyond four years as provided in Section
34(3) of 1922 Act.
109 As noted before the expression "any
person" in respect of whom such direction could be given was explained by
this Court in Income-tax Officer, A-Ward Sitapur v. Murlidhar Bhagwandas
(supra). As mentioned in the passage quoted above from the said decision, if so
construed then the Court must turn to Section 31 of 1922 Act to a certain who
is that person other than the appealing assessees might be affected by the
orders passed by the appellate authority.
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 such Hindu undivided family or the individual,
as the case might be. It was therefore argued that it was only those types of
assessees mentioned by this Court in the passage noted above were the 'persons'
who could be "any person" other than the appealing assessee who can
be said to be liable to be assessed and in respect of whom direction might be
given, otherwise such directions or provision for such directions if the
provision is so read would be ultra vires article 14 of the Constitution. We
must make it clear that this Court had itself made it clear categorically in
the passage quoted above that the instances given in the above passage were
only illustrative passage meaning thereby that the instances were not
exhaustive. This Court made it clear that the expression "any person"
in its widest amplitude might take in any person connected or not with the
assessee, whose income for any year had escaped assessment; but this
construction could not be accepted, for the said expression was necessarily
circumscribed by the scope of the subject- matter of the appeal or revision, as
the case might be. So therefore the person must be one who would be liable to
be assessed for the whole or any part of the income that went into assessment
of the year under appeal or revision (Emphasis supplied). Therefore, this Court
observed that "any person" in sub-section (3) of Section 34 must be
confined to a person intimately connected in the aforesaid sense with the assessments
of the years under appeal.
Reference may be made to the decision of this
Court in the case of Rajinder Nath v. Commissioner of Income-tax, Delhi, where
the I.T.O. treated two buildings as belonging to a firm comprised of a father
and his two major sons as partners and in the assessments on the firm for the
assessment years 1955-56 and 1956-57 and he estimated the cost of construction
of the buildings at a higher figure than that 110 disclosed and brought to tax
the excess as income in the hands of the firm. On appeal, the A.A.C. found that
the money advanced for the construction of the buildings had been debited in
equal shares to the father and two major sons and a minor son and held that the
firm was not the owner of the properties and delected the addition. The A.A.C.
also observed that the I.T.O. was free to take action to assess the excess in
the hands of the co-owners. The I.T.O. thereupon issued notices under Section
147(a) of the I.T. Act, 1961 and reopened the assessments of the individual assessees
(the co-owners) and included therein the proportionate shares of the additions
on account of the estimated excess of the cost of construction. On appeal, the
A.A.C. held that Section 147(a) could not apply but upheld the assessments
under Section 153(3) (ii) of 1961 Act. On further appeal, the Tribunal held
that Section 153(3) (ii) could not apply because there was neither a finding
nor a direction in the earlier order of the A.A.C. and further that A.A.C.
could not convert the assessments made under Section 147(a) into those under
Section 153(3) (ii). On a reference of the questions, (i) whether the A.A.C.
was justified in holding that the provisions of Section 147(a) were not
applicable, and (ii) whether the provisions of Section 153 (3) (ii) were not
applicable, the High Court held that the provisions of Section 153(3) were
applicable observing that the A.A.C's finding that the properties did not
belong to the firm and, therefore, the excess amount of the cost of
construction could not be regarded as the income of the firm was a finding
which was necessary for the disposal of the firm's appeal and as a corollary it
was held that the buildings belonged to the co-owners and this necessitated the
"direction" to the I.T.O. that he was free to assess the excess in
the hands of the co-owners. Dealing with this contention, Pathak J. who
delivered the judgment of this Court observed at page 20 of the report:
"The expression "another
person" in the Expln.
would include persons intimately connected
with the person in whose case the order is made in the sense explained by this
Court in Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC). It is one thing for the
partners of a firm to be required to explain the source of a receipt by the
firm, it is quite another for them in their individual status to be asked to
explain the source of amounts received by them as separate individuals. On such
opportunity being provided it would have been open to the assessees to show
that the excess alleged over the disclosed cost of construction did not
constitute any taxable income. The finding contemplated in Expln.
3, it will be 111 noted, is a finding that
the amount represents the income of another person." In the instant case
before us, applying the test observed in that case this was a case where the
facts showed that income can belong either to the bigger Hindu undivided family
or to the smaller Hindu undivided family, the present assessee along with
another smaller H.U.F. and to no one else. Therefore a finding that it belongs
or it does not belong to the bigger Hindu undivided family which had disrupted
on partition would determine the issue whether it could be taxed in the hands
of the present assessee. Judged in the light of the test laid down in Murlidhar
Bhagwan Das (supra) and as pointed out in Rajinder Nath's case, it appears to
us that the present assessee can be said to be a person who would be liable to
be assessed for the whole or part of the income that went to the assessment of
the bigger Hindu undivided family in years under appeal and is a person
intimately connected with the assessments of the bigger Hindu undivided family.
The income in this case cannot be the income of both bigger Hindu undivided
family and the present assessee, it must be either of these two. We are,
therefore, of the opinion that directions given in the appeals filed by the
bigger Hindu undivided family would be applicable to the present assessee.
On behalf of the assessee it was contended
that only the categories of persons referred to in Sections 30(1) and 30(3) of
1922 Act would be governed by the said expression "any person"
Sub-section (3) of Section 31, inter alia, authorises the Appellate Assistant
Commissioner in case of an order cancelling registration of a firm under sub-section
(42) of Section 23 or refusing to register a firm under sub-section (4) of
Section 23 or Section 26A or to make fresh assessment or to confirm such order,
or cancel it and direct the Income-tax officer to register the firm or to make
a fresh assessment, as the case may be, or in the case of an order under
sub-section (2) of Section 25 or sub-section (1) of Section 23A or sub-section
(2) of Section 26 or Section 48, 49 or 49F, confirm cancel or vary such order.
It also authorises in case of an order under sub-section (1) of Section 25A to
confirm such order or cancel it and either direct the Income-tax officer to
make further inquiry and pass a fresh order or to make an assessment in the
manner laid down in sub-section (2) of section 25A. The other cases were cases
of orders under Section 28 or sub-section (6) of Section 44E or sub-section (5)
of Section 44F or sub-section (1) of Section 46, 112 or in case of an appeal
against a computation of loss under Section 24, confirm or vary such
computation, or in case of an appeal under sub-section (1A) of Section 30
decide that the person is or is not liable to make the deduction and in the
latter case direct the refund of the sum paid under sub- section (6) of Section
18.
While on these provisions it is material to
refer to sub-section (4) of Section 33 which authorises the Tribunal after
giving both parties an opportunity of being heard to pass such orders thereon
as it thinks fit and to communicate any such orders to the assessee and to the
Commissioner.
The contention on behalf of the assessee is
that though the Appellate Tribunal has wide powers as indicated in sub- section
(4) of Section 33 but the amplitude of that power is curtailed by other
provisions. It was contended that read with sub-section (3) of Section 34, as
assessment order could not be passed after the expiry of four years from the
end of the year in which the income, profits or gains were first assessable and
is view of the fact that here in the instant case voluntary returns for the
years under question had been filed by the assessee within time, after four
years no direction could be given by the Tribunal. It was, secondly, contended
that the present smaller Hindu undivided family was not intimately connected
with the assessment of the bigger Hindu undivided family as contemplated by the
observations of this Court in Income-tax Officer v.
Murlidhar Bhagwan Das (supra), this direction
was of no use and the assessment made on the basis of this direction cannot be
availed of.
We are unable to accept this contention.
Firstly it must be observed that the Tribunal passed the orders and gave its
direction in respect of the years concerned. These years were the subject
matters of appeal before the Tribunal in the case of bigger H.U.F. It was
contended that these direction were given subsequent to the order under Section
25A and could not affect position thereafter. We are a unable to accept this
position also. As mentioned hereinbefore, the order under Section 25A was
passed in August, 1954. The bigger Hindu undivided family had applied for order
under Section 25A regarding the disruption of the Hindu undivided family, the
Income-tax Officer rejected that prayer. The assessee appealed there from. In
August, 1954, this order was set aside by the Tribunal and it was held that the
bigger Hindu undivided family had been disrupted.
In as much as the income liable to be
assessed on the smaller Hindu undivided family would arise only on the
disruption of the larger Hindu 113 undivided family, this direction was proper.
The order under Section 25A declares the status of the family and the smaller
Hindu undivided family became liable to be assessed as a result of disruption
of the bigger Hindu undivided family. The assessment orders however were passed
based on the previous order under section 25A but these orders were passed for
all these four years and the assessments under appeal for all these four years
were pending before the Tribunal in disposing of which the Tribunal gave the
direction to make the assessments on the smaller Hindu undivided family.
Therefore no question arises as to whether for subsequent periods directions
could have been given.
This is a direction clearly within the
contemplation of sub- section (3) of Section 34. Secondly, we are of the
opinion that the smaller Hindu undivided family is one of the persons which was
clearly contemplated by sub-section (3) of Section 34 in the facts and
circumstances of this case. The assessability of income and the quantum of the
same of the present assessee was linked up with the assessability of the bigger
Hindu undivided family if the bigger Hindu undivided family was liable to be
assessed if there was no disruption then there was no income of the smaller
Hindu undivided family. The income in the hands of smaller Hindu undivided
family could then not have been liable to be assessed. I on the other hand it
was the other way that there was a valid partition, the bigger Hindu undivided
family no longer existed and the smaller Hindu undivided family would be liable
to be assessed. From that point of view it clearly comes within the ratio of
the observation of this Court in Income-tax officer v. Murlidhar Bhagwan Das
(supra). Furthermore looked at from another point of view, though the Karta
represented the bigger Hindu undivided family, all the members of the bigger
Hindu undivided family, including those who were members of the smaller Hindu
undivided family were parties though not one nomine for all practical purposes,
because they were liable as members of the family for the amount assessed. In
that view of the matter, we are of the opinion that this direction was quite
valid and would be applicable.
The observations of this Court in the case of
Commissioner of Income-tax Central, Calcutta v. National Taj Traders are in
consonance with the conclusions reached by us. Tulzapurkar, J. explained in the
said decision the situations in which directions could be given under Section
33B of the Income-tax Act, 1922 where 114 there was no express provision like
sub-section (3) of Section 34. In our opinion in the facts of this case, the
present assessee can be said to be "any person" as indicated in
Murlidhar Bhagwan Das (supra) in Section 34(3) of 1922 Act.
The view taken by us is also in consonance
with the observation of this Courts in the case of Commissioner of Income-tax,
Andhra Pradesh v. Vadde Pullaiah & Co.1 Reference was also made to a Bench
decision of the Bombay High Court in the case of Mathuradas B. Mohta v. Commissioner
of Income-tax, Poona, and a decision of this Court in the case of Commissioner
of Income-tax, U.P. v. Mohd. Shakoor Mohd. Bashir. But in view of the facts and
circumstances of the instant case before us, it is not necessary to deal with
the said decisions.
On behalf of the assessee, reliance was placed
on a decision of the Division Bench of Gujarat High Court in the case of
Commissioner of Income-tax, Gujarat v. Shantilal Punjabhai. There an individual
Shantilal was a member of the Hindu undivided family and also a partner of a
firm. The Income-tax officer found that the assessee was the nominee of the
Hindu undivided family in the said firm, and, therefore, included the share of
profits the assessee in the said firm, in the total income of the Hindu
undivided family.
The decision proceeded on the basis that the
Income-tax Act did not contemplate two different assessees in the same
assessment year for the same taxable income. In that case the assessee was also
an assessee in his own right. In that case the Court had observed at page 80 of
the report that there were two 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 undivided family. The assessment proceedings in respect of
the assessee, Shantilal, were in respect of his income arising from his
self-acquired and separate property. The assessment proceedings against the
Hindu undivided family, were proceedings against the entire entity, and though
the assessee, Shantilal, was a member of the family, the assessment was on the
income derived by the Hindu undivided family from the property or business of
the said Hindu undivided family. In that 115 assessment, the income accruing
and arising from the separate property of the assessee, Shantilal could not be
assessed, as the business carried on by the asseseee, 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 was reversed by the Tribunal. The Tribunal
holding that the revenue had failed to prove that the assessee, Shantilal was
the nominee of the family, in other words, that the income arising from the
firm's business was the income of the Hindu undivided family. The direction
given by the Tribunal was on the question which was between the revenue and the
Hindu undivided family and the only finding that could be given by the Tribunal
was between the two parties, namely, the Hindu undivided family and the revenue
and not between the revenue and the assessee. Shantilal, who was not an
assessee nor a party to those assessment proceedings. Therefore, if any action
had to be taken in consequence of the finding or the direction given by the
Tribunal, that action could be taken not against the assessee, Shantilal, but
against the Hindu undivided family. As would be apparent, the facts of that
case were entirely different.
Here in the instant case the proceeding
against the assessee in the present case could be taken only if there was
disruption of the Hindu undivided family. Therefore in the assessment of Hindu
undivided family. viz. if the bigger Hindu undivided family was considered to
be an existing entity then in such a case the assessment against the present
assessee could not be sustained. If on the other hand the assessment on the
bigger H.U.F. could not be sustained because there was disruption of the family
as contended for by the bigger Hinud undivided family then only the present
assessee could be assessed. In that view of the matter, we are of opinion that
the present assessee can be said to be. a person other than the appealing
assessee would be affected by the order concerned and would come within the
meaning of "any person" as explained by this Court in the case of
Income-tax officer v. Murlidar Bhagwan Das (supra).
Decision of this Court in the case of
Commissioner of Income-tax, Punjab, Jammu & Kashmir and Himachal Pradesh v.
S. Raghubir Singh Trust was relied on behalf of the assessee. There the res-
116 pondent trust created by R. filed its return of income for the assessment
year 1954-55. Holding that the trust was invalid, the Income-tax officer
assessed the income of the trust in the hands of R.R. carried the matter in
appeal and other proceedings and ultimately the High Court held that the trust
was valid and the income was the income of the trust and not of R. The I.T.O.
issued a notice on 19th September, 1961, under Section 34(1)(b) of the Indian
I.T. Act, 1922, to reopen the assessment of the trust. The trust claimed that
the notice was barred by limitation. The Tribunal accepted the claim and held
that trust was a stranger to the proceedings for the assessment of R and the
second proviso to Section 34(3) did not save the reassessment proceedings
initiated against the trust from the bar of limitation and the High Court, on a
reference, agreed with the Tribunal. On appeal to this Court it was held,
affirming the decision of the High Court, that even though the finding of the
High Court that the income belonged to the trust and not to R was a finding
necessary for disposing of the reference in favour of R and it was a
"finding", but the trust was a stranger to the assessment proceedings
of R. and not "any person" within the meaning of the second proviso
to Section 34(3) and, therefore, the second proviso to Section 34(3) was not
attracted and the reassessment proceedings against the trust were barred by
time. That decision must be understood in the facts of that case. The settler
and the trust cannot be said so intimately connected as to come within the
ratio of Murlidhar Bhagwan Das's case. The Court found that assessee trust
could not be said to be intimately connected with the assessment of Raghubir
Singh. As a result of the trust deed failing, there may be numerous situations
viz., there might be resulting trust or it might be that the trust property
would go to other beneficiaries. It is not necessary for us to explore or
explain those possibilities. But in the facts of this case, we are of the
opinion that whether the income of the smaller Hindu undivided family, namely
the present assessee is liable to be taxed is so intimately or inextricably
linked up with the question of assessability of bigger Hindu undivided family,
which again is dependent upon the question whether there was disruption of
bigger Hindu undivided family and that being the very subject-matter of appeals
in the four years in which this direction had been given, we are of the opinion
that directions given in this case are valid and would save the assessments
against the assessee for the two years in question.
In the aforesaid view of the matter, we are
of the opinion that 117 the majority of the learned judges of the High Court
were right in their conclusions and the question was correctly answered by the
majority of the learned judges of the High Court. The appeals therefore fail
and are dismissed with costs.
H.S.K. Appeals dismissed.
Back
