TMI Blog2023 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... less, the petitioner herein, who was neither a party to PRO Lab s case nor had any connection / link / nexus with the parties to the said case; to put it differently, in order to apply the judgment of the Apex Court in PRO Lab s case, which would enable the respondents to initiate the impugned re-assessment proceedings, pursuant thereto, it is absolutely essential that the petitioner herein has to be any person within the meaning of the proviso to Section 12-A(2); it follows there from that if the petitioner cannot be construed, considered or treated as any person in terms of the said proviso, the same would be inapplicable to the petitioner and the benefit of exclusion of the period of 8 years prescribed in Section 12-A(1) would not be available to the petitioner. In ITO, Sitapur vs. M/s.Muralidhar Bhagwan Das case [[ 1964 (1) TMI 5 - SUPREME COURT] ], the Apex Court held 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 follows that the notice under Section 34(1) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of sales tax. 2.1 Meanwhile, Entry No.25 was reintroduced vide Karnataka Act No. 3 of 2004 w.e.f. 29.01.2004 with retrospective effect. The said reintroduction of Entry No.25 was once again challenged before this Court and struck down vide judgment dated 19.08.2005 in the case of M/s. PRO Lab, Mangalore others vs. State of Karnataka 2005 (59) Kar.L.J.410. The State preferred Civil Appeal 1145/2006 before the Apex Court in which, an interim order dated 19.11.2007 was passed, whereby the revenue authorities were permitted to proceed with the assessment in terms of Entry No.25 but restrained from taking coercive steps against the respondents assessees in the said appeals. In this context, it is relevant to state that the petitioner assessee herein was not a party to the said proceedings. 2.2 By final judgment dated 30.01.2015 in the case of State of Karnataka vs. PRO Lab others (2015) 81 Kar.L.J. 377 , the Apex Court allowed the appeals filed by the State and set aside the judgment of the Division Bench of this Court, thereby reversing the judgment of the Division Bench of this Court and restoring the aforesaid Entry No.25 to Sixth Schedule of the KST Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Sardar Lakshmir Singh AIR 1963 SC 1394 (FB); (vi) CIT, Patiala vs. Ambala Flour Mills AIR 1972 SC 82 (SC); (vii) CIT, UP vs. Mohd. Shakoor Bashir AIR 1973 SC 2359 (SC); (viii) Rajinder Nath vs. CIT AIR 1979 SC 1933; (ix) M. CT.Muthuraman vs. ITO Madras (1968) 69 ITR 432 (Mad.HC); (x) DCIT vs. Simplex Concrete Piles (India) Ltd., - (2013) 11 SCC 373; (xi) Gauri Shankar Choudhary vs. Addl.Commissioner of IT (1998) 234 ITR 856 (Pat.); (xii) Krishak Bharati Co-operative Limited vs. State of Gujarat C/SCA/3708/2012 dated 10.01.2023 (Gujarat HC); (xiii) Neelam Motors vs. DCST W.P.No.14486/2021 others dated 26.08.2021 (Orissa HC); (xiv) Sky Automobiles vs. DCCT WP (C) No.2225 / 2017 dated 01.10.2021 (Orissa HC); (xv) K.M.Sharma vs. ITO (2002) 254 ITR 772 (SC); (xvi) Speces Hotels Pvt. Ltd., vs. DCIT (2003) 263 ITR 263; (xvii) National Agricultural Co-operative Marketing Federation of India Ltd., vs. Union of India (2003) 260 ITR 548; 5. Per contra, learned AGA for the respondents, in addition reiterating the various contentions urged in the statement of obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, notwithstanding the fact that the whole or part of such escaped turnover was already before the said authority at the time of the original assessment or reassessment but subject to the provisions of sub-section (2), at any time within a period of eight years from the expiry of the year to which the tax relates , proceed to assess or re-assess to the best of its judgment the tax payable by the dealer in respect of such turnover after issuing a notice to the dealer and after making such enquiry as it may consider necessary. (2) In computing the period of limitation for assessment of the escaped turnover under this section, the time during which an assessment has been deferred on account of any stay order granted by any Court or other authority in any case, or by reason of the fact that an appeal or other proceeding is pending before the Appellate Tribunal or the High Court or the Supreme Court, shall be excluded: Provided that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or re-assessment may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Income Tax Officer would have to initiate proceedings for the said year pursuant to an order made by an Appellate Assistant Commissioner. This contention is obviously untenable. The Appellate Assistant Commissioner or the Appellate Tribunal may set aside the notice itself for one reason or other and in that event the Income Tax Officer may have to initiate the proceedings once again in which case Section 34(1) will be attracted. The expression finding or direction , the argument proceeds, is wide enough to take in at any rate a finding that is necessary to dispose of the appeal or direction which Appellate Assistant Commissioners have in practice been issuing in respect of assessments of the years other than those before them in appeal. What does the expression finding in the proviso to sub-section (3) of Section 34 of the Act mean? Finding has not been defined in the Income Tax Act. Order 20 Rule 5 of the Code of Civil procedure reads: In suits in which issues have been framed, the court shall state its finding or decision, with the reasons therefor, upon each separate issue, unless the finding upon any one or more of the issues is sufficient for the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the appeal, though it need not necessarily conclude the appeal. This concession does not materially differ from the definition we have given, but the difference lies in the application of that definition to the finding given in the present case. A finding , therefore, can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression direction cannot be construed in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under Section 31. Under that section he can give directions, inter alia, under Section 31(3)(b), (c) or (e) or Section 31(4). The expression direction in the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r further. We would, therefore, hold that the expression any person in the setting in which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal. 11. We shall now briefly touch upon the conflict of decisions on the question. The Full Bench of the Allahabad High Court in Lakshman Prakash case overruled the decision of the Division Bench in Pt. Hazari Lal case . A Division Bench of the Madras High Court, consisting of Rajagopalan and Balakrishna Ayyar, JJ., in Simrathmull v. Additional Income Tax Officers, Ootacamund , took the same view as the Full Bench of the Allahabad High Court in Lakshman Prakash case . But a Division Bench of the Calcutta High Court, consisting of Bose, C.J., and Mookerjee, J., in Brindaban Chandra Basak v. Income Tax Officer though it had not finally expressed any opinion that, was inclined to accept the view expressed by the Division Bench of the Allahabad High Court in Pt. Hazari Lal case. We have gone through the decision carefully, for the reasons given by us, we agree with the view expressed by the Division Bench of the Allahabad High Court in Pt. Hazari Lal case on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. It was found that if the person is intimately connected with the assessee he would be covered by the phrase assessee or any other person . The decision given in Income-tax Officer v. Murlidhar Bhagwan Das, [1964] 52 ITR 335 (SC), was accepted and applied. In Murlidhar's case, [1964] 52 ITR 335 (SC), the words assessee or any other person were interpreted to mean a person who would be liable to be assessed for a whole or part of the income under appeal or revision. 5. In the case of S. Zoraster Company (Supplies) Pvt. Ltd. v. State of Rajasthan, [1995] 99 STC 281, the High Court of Rajasthan held that the extended time for reassessment to give effect to an order of competent court, would mean an order passed under the sales tax law and not under any other Act. 6. In S.C. Prashar v. Vasantsen Dwarkadas, [1963] 49 ITR 1 (SC), Godbole (P.V.), Income-tax Officer v. Jagannath Fakirchand, [1963] 49 ITR 88 (SC) and Commissioner of Income-tax v. Sardar Lakhmir Singh, [1963] 49 ITR 70 , it was observed that the second proviso to section 34(3) of the Income-tax Act relating to any person other than the assessee is a stranger and has nothing to do with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court then also there is no problem. The word any person which has been used in the proviso though is similar to the provisions of the Income-tax Act, but may have a different concept in sales tax law. If a judgment, is given by the Supreme Court or by the High Court of that very State, the judgment being binding could be a ground for reopening the assessment or making the assessment of escaped turnover. But if the judgment itself has been given, in some other case unconnected with the assessee, then it cannot be interpreted with the word any person referred under the proviso to section 12-A(2) should even extend the limitation of eight years as prescribed under section 12-A(1). It is stated that the appeal against the order passed under section 25-A are pending. Under the proviso to section 12(B) (sic), the time limit prescribed under section 12(1) or 12(2) is not applicable for an action to be taken or order assessment or reassessment to be made. The assessment has to be made of the assessee or any person; such assessment could be in consequence of or to give effect to any finding, direction or order as mentioned in the proviso. 15. Learned counsel for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent who may decide the same following the observations made above. 16. Petitions stand disposed of. 17.Petitions disposed of. (v) In Hungerford Investment Trust Ltd., case supra , the Apex Court held as under:- 15. The scope of this second proviso to Section 34(3) was examined by a Constitution Bench of this Court in the case of S.C. Prashar v. Vasantsen Dwarkadas [(1963) 49 ITR 1 : AIR 1963 SC 1356]. This Court, examining the second proviso to sub-section (3) of Section 34 which came into effect from 1-4-1952, said that it patently introduced an unequal treatment in respect of some out of the same class of persons. Those whose liability to pay tax was discovered by one method would be proceeded against at any time and no limitation would apply in their case and in the case of others the limitation laid down by sub-section (1) of Section 34 would apply. Referring to the distinction made by the High Court in that case on a somewhat narrower ground, this Court observed that so far as the assessees were concerned, there might be a rational ground of distinction because appeal, proceedings etc. might take a long time and the assessee being a party to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io laid down in S.C. Prashar case [(1963) 49 ITR 1 : AIR 1963 SC 1356]. This Court observed (ITR p. 346) that the expression any person in the second proviso to Section 34(3) in its widest connotation may take in any person, whether connected or not with the assessee, whose income for any year has escaped assessment; but this construction cannot be accepted. For the said expression is necessarily circumscribed by the scope of the subject-matter of the appeal or revision, as the case may be. That is to say, that person must be one who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. If so construed, we must turn to Section 31 to ascertain who is that person other than the appealing assessee who can be liable to be assessed for the income of the said assessment year. A combined reading of Section 30(1) and Section 31(3) of the Act indicates the cases where persons other than the appealing assessees might be affected by orders passed by the Appellate Commissioner. Modification or setting aside of assessment made on a firm, joint Hindu family, association of persons, for a particular year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, in appeal, a necessary direction was given that notice should be given to her and after hearing her assessment should be made. Interpreting the second proviso to Section 34(3) this Court said that she was not a stranger to the assessment, she was not merely intimately connected with the assessment. She was in fact an assessee. Therefore, the second proviso to Section 34(3) would apply. 22. In the case of CIT v. Mohd. Shakoor Mohd. Bashir [(1973) 4 SCC 107 : 1973 SCC (Tax) 393 : (1973) 89 ITR 57] one Zahur Bux who was the sole owner of the business gifted his business to his two sons Mohd. Shakoor and Mohd. Bashir. Zahur Bux died thereafter. The two sons submitted their returns of income in respect of the business. The Income Tax Officer, however, rejected their returns and proceeded to assess all the heirs of Zahur Bux as an association of persons. In appeal, the Appellate Assistant Commissioner held that the assessee, namely, the association of persons consisting of all the heirs of Zahur Bux was not liable to be taxed in respect of the business. He held that the business had been gifted to two sons, Mohd. Shakoor and Mohd Bashir. He set aside the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment could be made even after the expiry of the four years. The exception applied to an assessment made against the assessee or any person in consequence of, or to give effect to any finding or direction contained in the order of any superior tribunal, or the High Court or this Court. This Court in S.C. Prashar v. Vasantsen Dwarkadas [49 ITR 1] held that the second Proviso to Section 34(3) of the Income Tax Act, 1922, insofar as it authorised the assessment or reassessment of any person other than the assessee after the expiry of the period of limitation specified in Section 34 in consequence of or to give effect to a finding or direction given in an appeal, revision or reference arising out of the proceeding in relation to the assessee violated the provisions of Article 14 of the Constitution and was invalid to that extent. 12. In a later case Income Tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das [52 ITR 335] this Court explained the connotation of the expression any person as used in Section 34, sub-section (3), proviso 2 at p. 346: The expression any person in its widest connotation may take in any person, whether connected or not with the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee was assessed to tax as income of an association of persons, of which on the finding of the Income Tax Officer, Debi Parshad was a member. In making a direction against Debi Parshad the Tribunal did not exercise his powers qua a stranger to the assessment proceeding. Civil Appeal Nos. 1280-82 of 1966 must therefore fail. 15. The Appellate Assistant Commissioner had directed that the income in the three assessment years be assessed in the hands of the family of Debi Parshad, apparently on the view that Debi Parshad represented the Hindu Undivided family of which he was a member. The Tribunal set aside the direction to assess the income of the Ambala Flour Mills in the hands of Debi Parshad personally for in their view Debi Parshad was a stranger to the proceeding for assessment. The High Court held that the order of the Appellate Assistant Commissioner directing assessment of the family of Debi Parshad was clearly unwarranted and could relate only to Debi Parshad in his individual capacity . 16. Appeals Nos. 1277 to 1279 of 1966 were filed against that part of the order of the High Court by which they sought to modify the order of the Appellate Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hindu undivided family and the assessee himself. In those proceedings which of course ultimately went against the assessee certain findings were given. But the finding given is such that it was apposite in the circumstances then confronting the parties. As pointed out by the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das [[1964] 52 I.T.R. 335, 345, 346 (S.C.).] ; The expression direction in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other Tribunals can issue under the powers conferred on him or them under the respective sections. Therefore, the expression finding as well as the expression direction can be given full meaning, namely, that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate or revisional authority, as the case may be, is empowered to give under the sections mentioned therein. The words in consequence of or to give effect to do not create any difficulty, for they have to be collated with, and cannot enlarge, the scope of the finding or direction under the proviso., If the scope is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, meaning thereby an utter stranger to the earlier appeal or revisional proceedings. In that context it was held that the provisions of the second proviso to section 34(3) in so far as they 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, revision or reference arising out of proceedings in relation to the assessee, violated the provisions of article 14 of the Constitution of India and were invalid to that extent. As already stated by us, the ratio in the series of cases reported in 49 I.T.R. concerned itself to the consideration of the question whether an utter stranger in the sense an assessee who had no connection whatsoever with the earlier appeal or revisional proceedings, could be got in the net of taxation on the only ground that the expression used in the proviso is any person . As will be seen hereinafter, the real intent of the law as laid down by the Supreme Court was considered later by a catena of decisions including the Supreme Court itself. These later cases do not countenance that the ratio in Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned judges, is indeed a subclassification, envisaged in the proviso is rational and permissible. The learned judges also referred to the earlier decisions of that court in A. Thangal Kunju Musaliar v. M. Venkatachalam Potti [[1956] 29 I.T.R. 349 : [1955] 2 S.C.R. 1196.] and Balaji v. Income-tax Officer, Special Investigation Circle, Akola [[1961] 43 I.T.R. 393 (S.C.).] , and expressed positively their view that the proviso cannot in to to be struck down as offending article 14. Though, no doubt, this view was expressed by the minority in Income-tax Officer v. Murlidkar Bhagwan Das [[1964] 52 I.T.R. 335 (S.C.).] , yet it has a special signification in that the learned judges of the Supreme Court were indeed interpreting what was the purport and scope of the decision in Prashar v. Vasantsen Dwarkadas [[1963] 49 I.T.R. (S.C.) 1.] . 12. That there has not been a striking down of the proviso unreservedly and without any limitation is also seen from the judgments of this court which had occasion to consider the effect of the ratio in Prashar v. Vasantsen [[1963] 49 I.T.R. (S.C.) 1.]. A reconciliation has been made and there are now clear pronouncements of this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third party or a stranger to the appeal or revision or a person who is not the assessee and who is not the appellant or the revision-petitioner, offended article 14 and would, therefore, to that extent, be void We would, therefore, hold that the expression any person in the setting in which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal. 14. We are, therefore, of the opinion that, having regard to the decisions of this court and the view expressed by the Supreme Court itself in the later decisions, it cannot be said that the proviso has been struck down by the Supreme Court without any reservation or limitation whatsoever. On the other hand, the dicta referred to by us earlier and the interpretation placed upon the decisions in the series of cases reported in 49 I.T.R. lends support to the view that the application of the proviso is linked only to persons who are not intimately connected with the proceedings. 15. We have already held that the petitioner in this case is a person who cannot be characterised as an utter stranger to the earlier proceedings prosecuted by his uncle Meyappa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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