TMI Blog1964 (9) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... , the father, as an individual, and the son, as the karta of his family, submitted voluntary returns of their respective incomes to the Income-tax Officer, Tiruchirapalli District, with reference to the three years 1950-51, 1951-52 and 1952-53. They put forward the partition arrangement entered into between them during the year of account relative to the first of the assessment years mentioned above. The Income-tax Officer refused to accept the partition ; he treated Karuppan Chettiar's returns for the three years as one made on behalf of the Hindu undivided family of which he was the karta, as he, according to the officer, continued to be the karta. The total income of the two assessees was assessed in the hands of Karuppan Chettiar as the karta of the family. The returns filed by Muthukaruppan Chettiar on behalf of the family, consisting of himself and his minor sons, were then taken up and the Income-tax Officer, relying on his own finding about the non-division of the main family in the other case, closed the file with an endorsement of no assessment. Neither in the case of Karuppan Chettiar nor in that of his son, did the officer make any protective assessment on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so fall under section 34(1)(a) and that, independent of section 34, there would be a power in the Income-tax Officer to proceed to reassess the two assessees by virtue of the finding reached by the Appellate Assistant Commissioner in regard to the partition effected between the two assessees under section 25A(2). Learned counsel for the department did not support the order of the Tribunal either on the footing that section 34(1)(a) applied to the case or that the order under section 25A(2) itself would confer jurisdiction upon the Income-tax Officer to make an assessment without there being an order of remand or independently of the proceedings being initiated under section 34. The substantial question for consideration in the present case, therefore, is, whether the second proviso to section 34(3) will save the assessments from the bar of limitation. Section 34 provides for a contingency where the income of an assessee had escaped assessment. There are two classes of cases dealt with by it : (i) where there had been an omission or failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment: vide section 34( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of the bar of limitation, if their assessments were to be reopened on the ground that the income had escaped assessment. In S. C. Prashar v. Vasanisen Dwarkadas [1956] 29 ITR 857 , the Bombay High Court took the view that no valid distinction could be drawn between persons with regard to whom a finding or direction was given by the appellate authority and persons with regard to whom no such direction or finding was given, and that, therefore, the second proviso would have to be struck down as ultra vires. This decision went up on appeal to the Supreme Court in Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC). The learned judges, by a majority, held that, in so far as the second proviso to section 34(3) authorised the assessment or reassessment of any person, other than the assessee, beyond the period of limitation specified in section 34, in consequence of or to give effect to a finding or direction given in an appeal, etc., violated the provisions of article 14 of the Constitution and was, therefore, invalid to that extent. It will be noticed that the view of the Bombay High Court was that the provision in the second proviso to section 34(3) was void even in it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view of the majority of the judges in Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC) will have to prevail. Das J., no doubt, gave expression to the view that the second proviso to section 34(3) would be invalid entirely, i.e., even in relation to proceedings taken as against an assessee who was a party to the previous proceeding in which a finding or direction was given. But this view was only in the nature of obiter dictum, as the learned judge himself found it unnecessary to go so far for the purpose of the disposal of the case before him. But even so, that observation will be entitled to utmost respect and we would have followed the same but for the fact that the later decisions of the Supreme Court proceeded on the footing that the majority decision in that case should be taken as only invalidating the proviso to the extent of its operation against third parties to the proceedings. We may, in this connection, refer to the case decided along with Prashar's case (supra), namely, Commissioner of Income-tax v. Sardar Lakhmir Singh [1963] 49 ITR 70 (SC). In that case the assessee, Lakhmir Singh, and his father, who once constituted a Hindu undivided family, filed separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiate proceedings against the son, who was not a party to the appeal. In other words, the family having been divided, the father could not have represented the son in the proceedings in which he was described as the karta of the family. The son, in such a case, would be a third party to the proceedings initiated against the father, albeit the father was stated to be the karta of the family, and, therefore, the second proviso to section 34(3) was held not to save the bar of limitation against him. The rule laid down by the majority of the judges of the Supreme Court in Prashar's case (supra ) was applied by the Bombay High Court in M.P. Thakar v. S. P. Pande [1965] 56 ITR 552 , even in regard to the assessee himself. With great respect, we are unable to share this view. As we pointed out earlier, the observation of Das J. in Prashar's case (supra) that the second proviso to section 34(3) would be invalid even against the assessee was a mere obiter and the Supreme Court, in later cases, has understood that case as merely laying down that the second proviso to section 34(3) would be invalid only against third parties. In regard to actual parties to the assessment, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of the proviso renders it really unnecessary to consider the vires of the second proviso to section 34(3), as the section itself was not intended to cover those cases. In the judgment above mentioned the Supreme Court has limited the application of the proviso to the year, the assessment of which formed the subject of appeal before the appellate authority. They observed : ...we hold that the said proviso would not save the time-limit prescribed under sub-section (1) of section 34 of the Act in respect of an escaped assessment of a year other than that which is the subject-matter of the appeal or the revision, as the case may be. It is implicit in the observation above mentioned that the second proviso would be valid so far as the escaped assessment of the year, which formed the subject-matter of the appeal before the appellate authority. The question then is, whether such a finding can lift the bar of limitation on the assessment of other persons of the category enumerated in the observation of Subba Rao J., to which we have just now made reference. If the assessee, in whose appeal the appellate authority gave a finding, had a representative capacity, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty to the appeal in which the Appellate Assistant Commissioner gave a finding that he could not be assessed as the karta of a Hindu undivided family. That finding necessitated the assessment of income received by him as an individual. The proceedings initiated against him on March 2, 1957, will, therefore, be valid. It is true that the proceedings before the Appellate Assistant Commissioner were taken as if he was the karta of an undivided Hindu family, but no such family existed at that time. Karuppan Chettiar could have only represented himself in those proceedings. Indeed the original return on the basis of which the finding in appeal was given was filed by him only as an individual. Learned counsel for the assessee submitted that, inasmuch as a Hindu undivided family is a distinct unit of assessment, Karuppan Chettiar, in his individual capacity, could not be deemed to have been a party before the Appellate Assistant Commissioner. Reliance in this connection was placed on the observations of Sarkar J. in Commissioner of Income-tax v. Sardar Lakhmir Singh [1963] 49 ITR 70 (SC) . But that case was the converse of the one we are now having. There, the assessment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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