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TMI Blog1959 (3) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... the 30th September, 1947. On the 15th of January, 1946, the wife of the Petitioner purchased a house by means of a registered sale deed for a total price of ₹ 19,500, out of which ₹ 500 had been paid as earnest money on the 20th December, 1945, and the balance of ₹ 19,000 was paid on the 15th January, 1946, at the time of execution of the sale deed. The opposite party, receiving information of this document, issued a notice under section 34(I)(a) of the Income-tax Act on the 27th March, 1952, to the petitioner in respect of his assessment for the year 1947-48, and, following up that notice, he made a fresh assessment on the 25th February, 1953, by adding a sum of ₹ 12,800 to the income which was originally assessed under the assessment order dated 30th September, 1947. The Petitioner obected to this reassessment of his income under section 34 for the year 1947-48, but that objection was disregarded. The petitioner then went up in appeal. The Appellate Assistant Commissioner of Income-tax, by his order dated 20th July, 1955, accepted the appeal and deleted the addition which had been made in the income for the assessment year 1947-48. He further gave directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment year 1946-47. So that, ordinarily, a notice under section 34(I)(a), in order to be in time, had to be served on or before the 31st of March, 1955. On the other hand, the notice now impugned was issued on the 4th January, 1956, long after that period of limitation had expired. In these circumstances, on behalf of the opposite party, reliance was placed on the second proviso to section 34(3) of the Income-tax Act which is 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 give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A. It was urged on behalf of the opposite party that, if this proviso applied to the notice dated 4th January, 1956, and to the further proceedings for assessment or reassessment to be taken in pursuance of it, the limitation on the period for issue of notice or for passing an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of recording findings is limited to matters which he is called upon to decide when passing an order in appeal in conformity with the details laid down in section 31(3). Any order passed by him, which is beyond the scope of section 31(3), would be an order without jurisdiction and, similarly, any finding recorded by him, which is not necessary for the purpose of making an order covered by section 31(3), would be a finding without jurisdiction. Further, when applying the second proviso to section 34(3) of the Income- tax Act, the Income-tax Officer is only competent to take into account orders which are in conformity with the provisions of section 31(3) and findings which are necessary for passing those orders. Orders, which are outside the scope of section 31(3) or findings which are not at all necessary for making such orders, cannot be taken into account by the Income-tax Officer for the purpose of relying on the second proviso to section 34(3) which we are now considering. Shri Gopal Behari, learned counsel for the opposite party, in this connection, urged before us that the word finding had nowhere been defined in the Income-tax Act, nor had its sccope been indicated and we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal to record a finding or a direction which affected a third party. Clearly, this doubt could arise only because a finding or a direction affecting a third party would not be necessary for properly disposing of an appeal under section 33 when the Income-tax Appellate Tribunal would be confining its jurisdiction to deciding matters arising in the appeal before it and would be limited to passing orders of the nature indicated in section 31. It is true that, in that case, the learned Chief Justice did not further pursue the line indicated by this view and preferred to base his decision on a different consideration altogether. The argument before the learned Chief Justice had mainly centered round the contention that the proviso was ultra vires article 14 of the Constitution to the extent that it affected proceedings against any person other than the assessee. The learned Chief Justice proceeded to examine this contention on the assumption that a finding affecting a person other than the assessee could be recorded and came to the conclusion that, if so, the proviso offended against article 14 so far as it affected third parties. It appears to us that, if the aspect about the power o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e where the Appellate Assistant Commissioner of Income- tax interferes with an order canceling the registration of a firm under sub-section (4) of section 23 or refusing to register a firm under sub-section (4) of that section. If the registration has been refused or cancelled by the Income-tax Officer, the Appellate Assistant Commissioner of Income-tax may allow the appeal and direct registration of the firm. The result of that order would be that the income of the firm whose registration was cancelled or refused, which must have been assessed to tax in the hands of the firm itself, will subsequently, on the appeal being allowed have to be assessed to tax in accordance with sub-section (3) of section 23 of the Income-tax Act in the hands of the partners. Thus, as a result of the decision in the appeal against an order under section 23(4) of the Income-tax Act in which the assessee appellant would only be a firm, the effect of the appellate order would have to be given by assessing tax on the share of each partner in the income of the firm in the assessment proceeding of that partner. Such partners would only be covered by the expression any person as they cannot be held to be as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting persons other than that assessee. In such cases, however, the persons, who are affected by the finding or direction in the order of the Appellate Assistant Commissioner of Income-tax, are only such persons who are not only intimately connected with the assessee but who are according to the provisions of the Income-tax Act, in the matter of there assessment, affected by the orders passed in the proceeding for the assessment of the assessee. A partners assessment can often depend on the assessment of the firm. Similarly, a shareholders liability to tax on deemed dividends depends on the proceedings taken against the firm under section 23A. It is cases of these types where the expression any person can be applied appropriately if the meaning of the expression finding of direction in the order is considered after taking into account the scope of the jurisdiction of the Appellate Assistant Commissioner of Income-tax in the light of the provisions contained in section 31. In this view, further, there can be no finding or directions in an order by an Appellate Assistant Commissioner of Income-tax which would affect the rights of total strangers, who can be described as third part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year relevant to the assessment year 1946-47, was not before him for decision nor was it a point on which it was essential for him to record a finding before appropriately deciding the appeal before him. The only material point for his consideration was whether this income was earned by the petitioner in the previous year for the assessment year 1947-48. If it was not so, there was no need at all for the Appellate Assistant Commissioner of Income- tax to go into further questions, such as this question whether it was income of such a nature as to be liable to income-tax, or whether it was income earned by the petitioner or by someone else, of whether it was income earned in the previous year relevant to the assessment year 1946-47. These were all questions which were beyond the scope of his jurisdiction when deciding the appeal of the petitioner relating to the assessment year 1947-48. Consequently, for the purpose of applying the proviso to section 34(3), the Income-tax Officer was entitled only to take into account the finding recorded by the Appellate Assistant Commissioner of Income-tax that this sum of ₹ 12,800 was not the income of petitioner for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some other year, and, amongst those some other years, would be included the assessment year 1946-47. Thus a remote connection between the notice issued under section 34 and the finding recorded by the Appellate Assistant Commissioner of Income-tax does exist, but we are unable to accept the view that such a remote connection by itself can satisfy the requirement that the action taken must be in consequence of the finding. The action, which the Income-tax Officer took in the proceedings for the assessment year 1947-48 itself so as to delete the amount in accordance with the direction of the Appellate Assistant Commissioner and to reduce the tax assessed accordingly, would certainly be action taken in consequence of the order of the Appellate Assistant Commissioner but, in order to take this action for a different year, the Income-tax Officer had to rely not merely on the finding of the Appellate Assistant Commissioner of Income-tax but on other facts of circumstances. Under section 34(I)(a) of the Income-tax Act, this notice could be issued against the petitioner by the Income-tax Officer only if he had reason to believe that, by reason of the omission of failure on the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to justify his belief that the requirements of this provision of law were satisfied. The issue of the notice did not automatically or directly follow from the finding which was recorded by the Appellate Assistant Commissioner of Income-tax. in fact, the finding recorded by the Appellate Assistant Commissioner may have been a reason why the Income-tax Officer thereafter started looking for material on the basis of which he could come to believe that the provisions of section 34(I)(a) were applicable to the assessment of the petitioner for the assessment year 1946-47. The actual applicability of section 34(I)(a) to the assessment of the petitioner for the year 1946-47 did not arise as a result of the finding recorded by the Appellate Assistant Commissioner. It appears to us, therefore, that the present notice dated 4th January 1956, issued to the petitioner cannot be said to be action taken by him in consequence of or to give effect to the finding or direction contained in the order under section 31 passed by the Appellate Assistant Commissioner on 20th July, 1955. This view of ours, though not directly supported is in line with various decisions in which the expression in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n my opinion that means, whether death in fact resulted from the injury. If it did in fact, it makes no matter how improbable or how unnatural the result may have been. The question whether one event results from another involves an examination of the chain of causation. There must be no break in the chain. If there is a break, then the final event is not the result of the initial event. But the break must be an actual effective break, a novus actus interveniens, from which a new chain of causation commences. To constitute an actual effective break in the chain, the predominant and really efficient cause of the final event must be the new act intervening. Otherwise there is no such break in the chain as to prevent the final event from being the result (though an improbable result) of the initial event. It appears to us that an application of these remarks of Collins, M.R., to the expression in consequence of , which, as we have said above, has been equated with as a result of leads to the same view which we have expresses above. In the present case, there was clearly a break between the finding of the Appellate Assistant Commissioner of Income- tax in respect of one assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad to interpret an insurance policy where the insurance money was payable if the death was not due to intervening cause. The learned judge held: The expression new cause intervening was the same as other cause intervening and meant some new and independent cause which might, together with the original cause, produce certain results. This decision was upheld in appeal and the appellate judgment is reported in Etherington v. Lancashire and Yorkshire Accident Insurance Co [1909] 25 T.L.R. 287. These remarks indicated again that, in order that an act should be the consequence of some earlier incident, there should be no intervention of an intermediate incident which itself does not flow from the original incident. In the case before us, if the issue of the notice under section 34 for the year 1946-47 could have followed the finding of the Appellate Assistant Commissioner without the intervention of any new facts or circumstances and as a result of only those facts and circumstances which themselves directly flowed from the competent finding of the Appellate Assistant Commissioner of Income-tax, it could have been held that the action of issuing the notice was the consequence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that relief, he may have to submit to proceedings for re-assessment of his income for the assessment year 1946-47. The proceedings for assessments are onerous. The Income-tax Officer who is to take proceedings, has refuse to accept the plea of the petitioner and, if we do not entertain his petition and grant him the relief sought, he would have to incur expenses undergo all the inconvenience of going again through those proceedings for that assessment. He may also have to pay the tax assess as a result of those proceedings before he can subsequently obtain relief from the Appellate Assistant Commissioner of Income-tax or the income-tax Appellate Tribunal or from this court. It appears to us that, in such a case, it is appropriate for us to exercise our powers under article 266 of the constitution so as to relieve him of unnecessary hardship and harassment, so that we consider that, on the view taken by us above, the petitioner should be granted the relief which he has prayed for. As a result, we allow this petition and quash the notice dated 4th January, 1956, issued against the petitioner under section 34(1)(a) of the Income-tax Act. Since we are quashing the notice which auto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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