TMI Blog1962 (5) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 34 of the Income Tax Act for the assessment years 1946-47, 1947-48, 1948-49 and 1940-50 were bad in law, as they were made after the expiry of the period of four years from the end of the assessment years in question instead of from the date of the filing of the return on November 18, 1950 ? The facts giving rise to this reference are that there was a bigger Hindu undivided family, Messrs. Nathuram Jawaharlal. Up to the assessment year 1945-46 this bigger Hindu undivided family used to be assessee to Income Tax as a unit. During the assessment year 1946-47 an application was made under section 25A claiming that a disruption had taken place in the family with effect from May 19, 1945. It was further alleged that on disruption of the bigger Hindu undivided family two smaller Hindu undivided families had come into existence, namely, Jawaharlal Mani Ram, which is applicant in this reference, and Bhagwandas Sitaram. The Income Tax Officer did not accept the claim and rejected the application by order dated October 4, 1950. It may be stated that about a month after this date, on November 18, 1950, the applicant filed four returns of its income for the four assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to have issued a direction to the Income Tax Officer to make fresh assessments as against the smaller units including the applicant in this reference. The direction is quoted in the order of the Appellate Assistant Commissioner dated January 3, 1957, in appeals against assessments subsequently made against the applicant under section 34, and is to the following effect : Fresh assessment should be made, one for the period May 19, 1945, up to which the Hindu undivided family was in existence and the other on the component units, namely, Messrs. Jawaharlal Maniram and Bhagwan Das Sita Ram. In pursuance of this direction the Income Tax Officer took the sanction of the Commissioner of Income Tax for initiating proceeding under section 34 against the smaller units. The sanction was accorded and thereupon on March 4, 1955, notices were issued by the Income Tax Officer to the smaller unit, namely, Jawaharlal Maniram (the applicant before us) and in pursuance of the notice returns were filed on July 6, 1955, and assessments completed on September 8, 1955. Against the assessment orders the applicant went up in appeal to the Appellate Assistant Commissioner and raised the point tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly with effect from August 31, 1954, and, as from that date a four year period had not expired until September 8, 1955, when the assessment orders were made under section 34, the assessments were not barred by limitation. The third ground on which the Tribunal rejected the contention was that the assessments, having been made by the Income Tax Officer in Pursuance of the directions contained in the order of the Tribunal, the period of limitation provided in section 34(3) did not apply and assessments could be validly made even after the expiry of four years from the end of the assessment years in question. The Tribunal, therefore, confirmed the assessments. The applicant thereupon asked the Tribunal for a statement of the case to this court which the Tribunal did and thus the reference has come to this court. So far as the first two grounds upon which the Tribunal maintained the assessments are concerned, Sri Gopal Behari, learned counsel for the department, did not make any attempt to support the judgment of the Tribunal. He did not argue that, as there was default in filing returns under section 22(1) and even though returns had been filed under section 22(3), action under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular case was that three returns had been filed, two by the smaller units and one a blank return by the bigger Hindu undivided family. A claim was also made before the Income Tax Officer under section 25A that a disruption had taken place in the Hindu undivided family and that on account of that disruption income of the family became assessable not in the hands of the bigger family but in the hands of the two smaller units. Upon a consideration of the entire facts and circumstances and taking into consideration the returns that had been filed, the Income Tax Officer first passed the order that no disruption had taken place and rejected the claim to disruption. Thereafter, he proceeded to pool the entire income which had been separately returned by the two smaller units and assessed the total income in the hands of the bigger Hindu undivided family. The question is whether it would be a proper inference from what the Income Tax Officer did that he ignored the returns filed by the applicant as well as the other smaller unit and did not act upon them and they were still pending. We are clearly of the view that in the circumstances it is wrong to say that the returns had not been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34(1)(a) and 34(1)(b). Section 34(1)(a) dealt with cases of default by the assessee either by omission or failure on his part to make a return of his income under section 22 or by omission or failure to disclose fully and truly all material facts necessary for the assessment. Section 34(1)(b) dealt with cases where there were no such omission or failure and it was in these words : If notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to Income Tax have escaped assessment..... It will be noticed that the requirement in sub-section (b) was whittled down and was not as rigorous as the requirement prior to 1948 when a discovery had to be made of escape of income by the Income Tax Officer in consequence of definite information in his possession. Changes were also made regarding the provision relating to limitation. The provision for limitation was made in sub-section (3) and the second proviso to that sub-section was substituted for the proviso to sub-section (2) of the unamended sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the amendment of 1948, namely, that the Income Tax Officer should in consequence of information in his possession have reason to believe that income, profits or gains chargeable to Income Tax have escaped assessment. So far as the language of the proviso is concerned, it has already been pointed out above that materially the language continued to be the same even after the amendment of 1948, namely, that the period of four years limitation provided for assessment or reassessment under section 34 where the escape of income was not due to any omission or default on the part of the assessee, did not apply where the reassessment was made in pursuance of an order under section 31 etc. These words continued in the section as amended by the Act of 1948 until the 1st of April, 1952. The period of four years from the end of the assessment years 1946-47 and 1947-48 expired on March 31, 1951, and March 31, 1952, respectively, i.e., prior to any change having been made in these words, namely, assessment made in pursuance of an order under section 31... It follows that so far as these two assessment years are concerned those words will have to be considered and interpreted. So far as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in an order in making the assessment of the smaller Hindu undivided family that action could be taken without any bar of limitation operating in view of the provision of the amended proviso. So far as the first two years are concerned the question may arise whether, even if the action was taken in pursuance of the order of the Tribunal, the assessment made for the first time against the smaller Hindu undivided family can be considered to be reassessment within the meaning of that word as used in the proviso prior to its amendment by the amending Act of 1953. The reassessment had to be made in pursuance of an order under section 31 or section 33. Section 31, when it speaks of the powers of the Appellate Assistant Commissioner uses the following language in sub-section (3)(b) : set aside for assessment and direct the Income Tax Officer to make a fresh assessment... It will be noticed that the words used are a fresh assessment and not reassessment . It follows that the word reassessment in the proviso must included a fresh assessment as provided in section 31(3)(b). In order words the word reassessment has not been necessary used in the sence of including an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so merely removes the bar of limitation in cases of assessment or reassessment under section 23 and 34 or contemplates a different kind of a assessment altogether, namely, an assessment made in pursuance of or in consequence of a direction contained in an appellate order. If the view is taken that an assessment had in any case to be one either section 23 or under section 34 before the question of removal of the bar limitation under the proviso can arise, then, the conditions for making an assessment or a reassessment under section 23 or under section 34 would first have to be complied with before the question of the removal of the bar can arise. If, on the other hand, the assessment or reassessment made in pursuance of an appellate order is a different kind of assessment than an assessment or reassessment made under section 23 and 34 no question of compliance with the conditions of section 23 or section 34 would arise. The question may be looked at first from the point of view that it is fresh or a new kind of assessment altogether independent of the provisions of section 23 or section 34. Under the system of hierarchy of courts in this country including proceeding under the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed prior to 1948 from the language used thereafter was that the information should lead to the discovery that income had escaped assessment. The word discovery had now been omitted and replaced by the words reason to believe . It will not be of much use citing or discussing many authorities on the interpretation of the words as they occurred prior to 1948, because in most of these authorities the word information has been interpreted more in the light of the words definite and discovery than independently by itself and without taking colour from them. It is now settled that the word information is not confined to information as to facts and also includes information as to the state of law or as to a new ruling or a new interpretation of the law or a new statute. We need cite only the Supreme Court case in Chatturam Horilram Ltd. v. Commissioner of Income Tax. It has also been held that a judgment of the Privy Council or of a High Court interpreting relevant law constitutes information. The question arises whether, if such judgment constitute information within the meaning of that section, a judgment of the Income Tax Appellate Tribunal or even of the Appellate Assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces could be included in such sources from which information could be derived. We are clearly of the view that there is no justification in principle to confine the external sources of information to information derived from a judgment of the Privy Council or the Supreme Court or a High Court. If information can be derived properly from those sources and such information will constitute information for the purposes of section 34, it is not possible to exclude similar information derived from other sources, namely, the Income Tax Appellate Tribunal or the Appellate Assistant Commissioner. It might be said that the external sources should be such as cannot be characterised as departmental authorities, such as the Privy Council, the Supreme Court and the High Court, but we do not agree. It is well known that departmental authorities are merely the Appellate Assistant Commissioner of Income Tax and the Income Tax Officer. These two authorities as under the Finance Department of the Government of India. The Income Tax Appellate Tribunal is not under the Finance Department but under a different department, viz., the Law Department. On this ground also information derived from the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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