TMI Blog1973 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... eghraj Pokarmal had also three sons, Onkarmal, Banarsilal and Beniprasad; and Hanumandas Sewakram had four sons, Kedarnath, Banarsidas, Durgaprasad and Harkisondas. Though the firm consisted of 3 undivided Hindu families the income-tax assessment till the year 1939-40 was on all the sixteen individuals. From 1939-40 to 1941-42 the Income-tax Officer assessed these 13 persons not as individuals but as three Hindu undivided families on the basis of a settlement 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time-barred under section 34 before that section was amended in 1953 with retrospective effect from April 1, 1952 ? " Along with these 11 appeals one more appeal by Onkarmal Meghraj regarding the assessment year 1943-44 also was heard by the Tribunal and in that case also the second question was referred to the High Court. Before the High Court a contention was raised on the basis of the provisions of the Indian Income-tax (Amendment) Act, 1959 (1 of 1959), 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 tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment under section 34 being in respect of the assessment year 1944-45, the action to be taken under section 34 would be barred. The same view was taken in the case of the solitary appeal of Onkarmal Meghraj for the assessment year 1943-44. Even in respect of Narayandas, Meghraj and Hanumandas it observed that although they were undoubtedly parties to the proceedings in which the findings or orders were given, and the second proviso to section 34(3) would not be 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 conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose hands the income was assessed by the Income-tax Officer. These were Narayandas Pokarmal, Meghraj Pokarmal and Hanumandas Sewakram. In these cases the settlement between the department and the parties earlier was on the basis that there was partial partition in the Hindu undivided families. It has already been mentioned that before the year 1939-40 the various partners of the firm had been assessed in their individual capacities. Therefore, the appeals filed by Narayandas 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 interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er order of " No Assessment " made by the Income-tax Officer in their cases does not affect this situation. But, as far as the other eight persons are concerned, they did not have anything further to do after the Income-tax Officer in spite of their filing returns as individuals made an order of " No Assessment ". They were not before the Appellate Assistant Commissioner or the Tribunal. They were not assessees nor were they intimately connected with the assessee that 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s barred under the 1922 Act at the date when the new Act came into force. It was held that section 297(2)(d)(ii) of the 1961 Act was applicable only to those cases where the right of the Income-tax Officer to reopen an assessment was not barred under the repealed Act. This decision is broadly in line with the opinion of Das and Kapur JJ. in Prashar's case . The decision of this court relied upon by the appellant, in Income-tax Officer v. T. S. Devinatha Nadar which was a case 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 recti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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