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1965 (5) TMI 44 - PUNJAB HIGH COURT

1965 (5) TMI 44 - PUNJAB HIGH COURT - [1966] 61 ITR 408 - Income-Tax Reference No. 53D of 1962 - Dated:- 4-5-1965 - A. N. Grover And S. K. Kapur, JJ. For the Commissioner : H. Hardy with D. K. Kapur and S. P. Agarwal For the Assessee : A. N. Kirpal with B. N. Kirpal JUDGMENT S. K. Kapur, J. Firm Ganeshi Lal Sham Lal (hereinafter referred to as the assessee) was a Hindu undivided family, assessed as such up to the assessment year 1946-47. In the present reference we are concerned with the assessm .....

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the total disruption of the assessee with effect from the 10th of July, 1945. After the said order was passed under section 25A, assessments were made on some of the coparceners of the erstwhile Hindu undivided family for the assessment years 1947-48 onwards. The two coparceners put forth a claim before the Income-tax Officer that the business styled Hariram Shriram which was previously being carried on by the assessee was after the disruption carried on by them as partners in pursuance of an ag .....

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ded family was really subsisting and the order under section 25A was ineffective and bad in law having been obtained by misleading the Income-tax Officer. He also issued a notice to the assessee under section 22(2) with respect to the assessment year 1952-53. In compliance with the notices issued by the Income-tax Officer under section 34 of the said Act for the assessment year 1947-48 and under section 22(2) for the assessment year 1952-53, the assessee filed returns for each of the two years u .....

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clusion that the firm, Ganeshi Lal Sham Lal, had not disrupted on the 10th of July, 1945, but had continued till 10th May, 1952. He accordingly made an assessment on the Hindu undivided family for each of the said two years. The assessee challenged these assessments before the Appellate Assistant Commissioner, inter alia, on the ground that proceedings under section 34 were without jurisdiction inasmuch as the order passed by the Income-tax Officer under section 25A of the said Act was subsistin .....

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ether the family had or had not disrupted on 10th of May, 1952, should have been first investigated by the Income-tax Officer. He accordingly set aside the assessments made by the Income-tax Officer and directed him to complete the assessments de novo after passing proper orders under section 25A of the Act. The assessee, aggrieved by the order of the Appellate Assistant Commissioner, filed an appeal before the Income-tax Appellate Tribunal. It was contended there that it was never the assessee& .....

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sed in the hands of the coparceners of the family who carried on business as firm, Hariram Shriram, and (b) the Income-tax Officer having himself recognised the disruption of the Hindu undivided family under section 25A it was no longer open to him to reconsider whether the said order had been properly passed or not as the succeeding Income-tax Officer could not sit in judgment over the order passed by his predecessor and review the same. The Tribunal accordingly held that the proceedings under .....

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predecessor under section 25A of the Indian Income-tax Act?" Mr. Hardy, the learned counsel for the appellant, contends that section 34 is wide enough to enable an Income-tax Officer to tax the escaped income by disregarding or ignoring an order under section 25A and that an Income-tax Officer can, in view of section 34, consider the fresh materials brought before him and set aside an order under section 25A obtained by concealment of certain material facts. He further submits that on the b .....

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, escaped assessment in a particular year. It gives no general power to review an order like an order under section 25A, which in its very nature, is effective for all the subsequent years. Let us then take, for instance, a case where in the year 1952-53 an Income-tax Officer gets an information that the order under section 25A was obtained during the assessment proceedings for 1948-49 by misrepresentation. He may issue a notice, in the assessment year 1952-53, under section 34 with respect to t .....

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apply in those circumstances to the assessment year 1952-53. Could it have been intended by the legislature that he may, for the assessment year 1948-49, reopen the assessment under section 34 and make a fresh assessment in disregard of the order under section 25A but yet he must, with respect to the year 1952-53, make an assessment recognising the order under section 25A as valid? When confronted with this situation, Mr. Hardy submitted that it would be open in such circumstances to the Income .....

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y be taken under section 34 in a subsequent year although no individual notice under section 22(2) may have been served on the assessee in the relevant assessment year, but where an assessee who has not been served with an individual notice under section 22(2) voluntarily files a return even after the expiry of the assessment year, no proceedings can be taken under section 34. Similarly no proceedings under section 34 can be taken if an assessee files a return in response to a notice under secti .....

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takes resort to a most unusual procedure of first making an assessment under section 23 and then reopening the same under section 34, it may be said with considerable force that all the information on which action was sought to be taken under section 34 was in the possession of the Income-tax Officer at the time of making the assessment under section 23 and, therefore, section 34 was not applicable. We would, however, not express our final views on the question of applicability of section 34 in .....

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on 34, an assessee chooses to file a return for the subsequent assessment years subject to his claim that the family had disrupted earlier and an order passed under section 25A recognising the disruption. Again, with respect to such assessment years, section 34 would not be applicable with the result that the order under section 25A may be ignored or reviewed for the assessment year 1948-49 and not for the subsequent years, unless a power to review inheres in an Income-tax Officer. In these circ .....

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only within two years. That may be so but the same result would follow if such an information is received by an Income-tax Officer after the expiry of the period of limitation prescribed for the applicability of section 34. Mr. Kirpal, the learned counsel for the assessee, submits that the moment the order under section 25A is passed, the Hindu undivided family ceases to be an assessee for the purpose of the said Act and, consequently, no action under section 34 can be taken. He further draws ou .....

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ts since we are of the view that no power exists under section 34 to ignore or nullify an order made under section 25A and proceedings under section 34 must be taken on the footing that a valid order under section 25A subsists till the same is set aside by the Commissioner in exercise of powers under section 33B. We would, however, like to point out that an order under section 25A has to be passed only once and remains effective for subsequent years unless set aside in accordance with law. By vi .....

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is no decision of any court one way or the other on this point. Mr. Hardy, however, sought assistance from the decision of their Lordships of the Supreme Court in Lakshminarain Bhadani v. Commissioner of Income-tax [1951] 20 I.T.R. 594 (S.C.). In that case a Hindu undivided family was assessed to income- tax for the year 1939-40. In 1944 the Income-tax Officer felt that certain income of the family taxable in 1939-40 had escaped assessment. In the meanwhile the family had become divided and an .....

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