TMI Blog1998 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... sable income of Turner Morrison and Company Ltd. was deemed to have been distributed as dividends among its shareholders for the assessment years 1949-50, 1950-51 and 1951-52. The dividend deemed to have been so received by the appellant-company as a shareholder 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tober 26, 1961, three notices were issued on the appellant-company by the Income-tax Officer for the three assessment years. The appellant-company challenged these notices by filing a writ petition before the Calcutta High Court being Writ Petition No. 1 of 1962. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, if the Income-tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to income-tax has escaped assessment for any year, 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity to pay tax was discovered by one method would be proceeded against at any time and no limitation would apply in their case and in the case of others the limitation laid down by sub-section (1) of section 34 would apply. Referring to the distinction made by the High Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 Assistant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In appeal, the Appellate Assistant Commissioner held that the assessee, namely, the association of persons, consisting of all the heirs of Zahur Bux was not liable to be taxed in respect of the business. He held that the business had been gifted to two sons, Mohd. Shakoor and Mohd. 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was deemed dividend accruing to the appellant-company as provided under section 23A. For the assessment year 1949-50, the assessment was made on Turner Morrison and Company Ltd. as agents of the appellant-company. Whether we look upon Turner Morrison and Company Ltd. as an independent 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 appella ..... 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