TMI Blog1961 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Meyyappa each filed returns showing his share income from the M.S.S. Firm. But the Income-tax Officer declined to give effect to that partition and included the income of both the assessee and Meyyappa in the assessment of the Hindu undivided family. The Appellate Assistant Commissioner allowed the appeals preferred by the Hindu undivided family and upheld the claim based on partition. That was confirmed on further appeal by the Tribunal in its order dated September 22, 1956, and the Tribunal recorded: .......we wholeheartedly endorse the decision of the Appellate Assistant Commissioner that the shares in the Ipoh vilasam belong only to the two members, at any rate, after December 29, 1948, in the manner claimed. The accrued profits from this business after that date, accordingly, can no longer be assessed in the hands of the assessee family. We are not now concerned with the assessment year 1949-50. This reference relates to the assessment year 1950-51 and the four years that followed, that is, up to 1954-55. In each of the five years, the assessee submitted a return, which included his share of the income of the M.S.S. Firm. All these returns were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Tribunal under section 66(1) of the Act, and the question referred to this court ran: Whether the reassessments under section 34 for all the assessments 1950-51 to 1954-55 are valid? The challenge to the validity of the assessment in each of the five years was rested principally on the plea that recourse to section 34 was not permissible. That the assessee was not assessed on the income that he returned for assessment in the relevant assessment years was undeniable. The assessee filed those returns voluntarily for the first three assessment years. The returns for 1953-54 and 1954-55 were filed in response to notices issued under section 22(2) of the Act. It was the same income that was subsequently assessed to tax after initiating proceedings under section 34(1). Though the notices were issued under section 34(1)(a), it should be obvious that, if at all the provisions of section 34(1) could be invoked, it was only section 34(1)(b) that could apply. It was no fault of the assessee that he was not assessed earlier. The contention of the learned counsel for the assessee was that the assessment proceedings with reference to the returns filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re closed with the entry N.A. . Thereafter, the finality of the termination of those assessment proceedings could be vacated only by recourse to section 34, as this was not a case for the application of section 35. That the orders terminating the assessment proceedings were not apparently communicated to the assessee did not affect the legality of those orders or their finality. Nor was the legality or finality of that order affected by the absence of a specific notice to the assessee under section 23(2) of the Act before the returns were in effect rejected. We are unable to accept the contention of learned counsel for the assessee that the Income-tax Officer had no jurisdiction to terminate the assessment with the entry N.A. and without issuing notices prescribed by section 23(2) of the Act. We are therefore unable to accept his contention that the order N.A. must be treated as non est in law. The assessments for 1953-54 and 1954-55, thus lawfully terminated, could be reopened and a reassessment made only after the issue of notices under section 34(1) of the Act. As we have pointed out above, the assessee's case fell within the scope of section 34(1)(b). The content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as pending when the notices were issued under section 34(1) of the Act. We have therefore to examine the question whether the assessee's case came within the scope of the proviso. For the assessment year 1950-51, the appeal preferred by the Hindu undivided family was disposed of on September 22, 1956, in which it was found that the income in question which belonged to the assessee could not be taxed in the hands of the Hindu undivided family. The issue of the notice under section 34(1) on April 24, 1957, was subsequent to that. The appeal preferred by the Hindu undivided family with reference to the assessment year 1951-52, in which, again, there was a similar finding, was disposed of by the Appellate Assistant Commissioner on March 11, 1957, and the issue of the notice under section 34(1) for that year was on April 24, 1957. With reference to the assessment year 1952-53, the notice under section 34(1) preceded the disposal of the appeal preferred by the Hindu undivided family. The notice was issued to the assessee on September 7, 1957, and reassessment completed on March 27, 1958. But the appeal was disposed of by the Appellate Assistant Commissioner only on November 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 1949-50. Each assessment year was a unit by itself, and, factually, in this case, there was an appeal by the Hindu undivided family in each of the relevant years. Whether the second proviso in section 34(3) applied to the assessee has to be decided with reference to the appellate order in the assessment proceedings of the Hindu undivided family for each of the years separately. The position we thus reach is that the second proviso in section 34(3) saved the assessment proceedings of 1950-51 and 1951-52 from the bar of limitation imposed by section 34(1)(b). But then, it also removed the bar imposed by section 34(3). What section 34(3) prohibits is an order of assessment after the expiry of the four years prescribed. If nothing supervenes, that ban, in effect, terminates the assessment. But, if the ban to assessment is removed under the second proviso in section 34(3) the assessment proceedings must be treated as pending all through even after the expiry of the four years. The assessment proceedings that commenced with the voluntary submission of the returns by the assessee must therefore be deemed to have been pending when notices were issued under section 34( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be viewed as ineffective in law as there was no escape from assessment at all. Learned counsel pointed out that, in each of the years, the assessee had offered the income for assessment in the returns submitted by him. Of course, while assessment proceedings are pending and an assessment is permissible in law, there can be no question of any escape from assessment. If, however, the assessment proceedings have lawfully terminated and the income has not been assessed, it would be a case not only of non-assessment as explained in Rajendranath Mukherjee v. Commissioner of Income-tax [1934] 2 I.T.R. 71 (P.C.), but also a case of escape from assessment, though the assessee himself was not to blame for that escape from assessment. We do not consider it necessary to pursue this question further, as we are resting our decision on the ground that the assessment proceedings for 1950-51 and 1951-52 were pending on the date the notices were issued under section 34(1). The assessment proceedings must be treated as pending as the assessee's case came within the scope of the second proviso with reference to 1950-51 and 1951-52, and it was that pendency that barred action under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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