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TMI Blog1973 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... nt between them and the department. Thereafter, all the sixteen persons were to be individually assessed. Nevertheless, the Income-tax Officer proceeded to make the assessment as though the three Hindu undivided families still continued. The members of the Hindu undivided families disputed this and the Income-tax Appellate Tribunal by an order dated July 31, 1953, relating to the appeals by the three families for the assessment year 1943-44, directed that the assessment had to be made on each individual partner. In respect of the year 1944-45 the Income-tax Officer had meanwhile assessed the three Hindu undivided families as Hindu undivided families by declaring the cases of the individuals as cases of " No Assessment ". These assessments were set aside by the Appellate Assistant Commissioner who followed the directions given by the Tribunal in respect of the year 1943-44 on March 9, 1954. After the receipt of the orders of the Appellate Assistant Commissioner the Income-tax Officer issued notices under section 34 to all the 13 persons in April, 1954, after obtaining the Commissioner's approval. By that time the Indian Income-tax (Amendment) Act, 1953, which among other things am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that notices issued and the action taken in the present cases could not be called in question on the ground that the period prescribed in that behalf had expired. The High Court thereupon called for a supplementary statement of the case. That was forwarded by the Tribunal annexing thereto such record as was indicated by the High Court in its order calling for the, supplementary statement. The High Court thereupon framed a further question as follows : Whether section 4 of the Income-tax (Amendment) Act, (1 of 1959) 1959, was applicable to any one or more of these assessments? " The High Court held against the department on this question. This was not argued before us and we need not, therefore, spend any further time over it. For the purpose of deciding whether section 34(3) applied, the High Court went into the question whether the notices in these cases were issued under clause (a) or clause (b) of section 34(1). After considering all the facts and circumstances relevant to the determination of the question the High Court came to the conclusion that the notices issued should be deemed to have been issued under section 34(1)(b). This was based upon the proposal made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inapplicable but it could be applied only within the period of limitation that had expired before 1st April, 1952. In the result the High Court answered two of the questions in the affirmative. The Commissioner of Income-tax has, therefore, filed these 12 appeals. It appears to us that the conclusion reached by the High Court in respect of the question whether clause (a) or clause (b) of section 34(1) applies is correct. Neither the proposal submitted by the Income-tax Officer to the Commissioner for taking action under section 34 nor the sanction of the Commissioner nor the notices issued in these cases nor the returns filed by the parties nor even the assessment orders of the Income-tax Officer point to the conclusion that action was either contemplated or taken under clause (a). It has to be kept in mind that all the eleven persons had filed their returns in their status as individuals. The facts that seven of them filed as smaller Hindu undivided families makes no difference to this fact. The larger Hindu undivided family of Narayandas, Meghraj and Hanumandas was neither in existence nor did it file a return as such. Indeed, from the year 1930 it never existed. The assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andas Pokarmal, Meghraj Pokarmal and Hanumandas Sewakram cannot represent the seperated members of the family. These three persons, however, were parties to the said proceedings. They had filed their returns as individuals and because they had been assessed as Hindu undivided families, had carried the matter up on appeal. In respect of the other eight persons who also filed returns as individuals the direction issued by the Appellate Assistant Commissioner in the appeals filed by Narayandas, Onkarmal and Hanumandas cannot be said to apply to them as there was no Hindu undivided family and they were not members of a Hindu undivided family. The words " any person " in the second proviso to section 34(3) has been interpreted by this court in Income-tax Officer v. Murlidhar Bhagwan Das , as any person intimately connected like members, of a Hindu undivided family, partners of a firm or individuals forming an association of individuals because in such cases though they are not so nomine parties they could be deemed to be represented by the Hindu. undivided family, partnership or association before the relevant income tax authority. Such is not the case with regard to these individuals b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the Hindu undivided family as there was no Hindu undivided family. Therefore, the second proviso to section 34(3) is not applicable in their cases. The right of the Income-tax Officer to assess these persons can be upheld only if the notice under the substantive part of section 34 can be said to be a valid notice. The assessment year being 1944-45, the notice under section 34 issued in April, 1954, was beyond the period of, 4 years under section 34(1)(b) which we have held applies to them. For the reasons just set forth the second proviso to section 34(3) does not apply to them. That raises the question whether that proviso could be applied without reference to any period of limitation. It is a well-settled principle that no action can be commenced where the period within which it can be commenced has expired. It is unnecessary to cite authorities in support of this position. Does the fact that the second proviso says that there is no period of limitation make a difference ? The first thing to be noticed is that that provision was given retrospective effect only from April 1, 1952, though the Income-tax (Amendment) Act came into effect from May 24, 1953. Where it is intended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se under section 35(5), which was introduced into the Income-tax Act by the 1953 amendment at the same time as the amendment to section 34 does not really affect this position. This court observed : " As we have already said, sub-section (5) becomes operative as soon as it is found on the assessment or reassessment of the firm or on any reduction or enhancement made in the income of the firm that the share of the partners in the profit or loss of the firm had not been included in the assessment of the partner or if included was not correct. The completion of the assessment of the partner as an individual need not happen after April 1, 1952. The completed assessment of the partner is the subject-matter of rectification and this may have preceded the above-mentioned date. Such completion does not control the operation of the sub-section. In the result we find ourselves unable to concur in the decision or the reasoning in Atmala Nagaraj's case ." The position can, therefore, be said to have been satisfactorily established that the effect of the amendment of section 34 in 1953 is not to enable the Income-tax Officer to take action under that section where the period mentioned there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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