Case: M/s. Daffadar Bhagat Singh &amp; Sons Vs. The Income Tax Officer, A-Ward, Ferozepure

In such cases though the latter are not eo nomine parties to the appeal, their assessments depend upon the assessments on the former. The said instances are only illustrative. It is not necessary to pursue the matter 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". The argument of Mr. Veda Vyasa for the appellant has been two-fold. He contends firstly that the finding or direction which the Appellate Assistant Commissioner gave in the present case in his order dated August 11, 1959 that the business belonged to the partnership and not the Hindu Undivided Family and the further direction which was given by him that the Income tax Officer should assess the income in the hands of the partnership firm were not necessary for the disposal of the appeal According to Mr. Veda Vyasa the crux of the matter was that the Appellate Assistant Commissioner gave a decision that the income was to be excluded from the assessment of the Hindu Undivided Family thereby reversing the decision of the Income tax Officer that it was assessable in the hands of the family. It is contended that, in these circumstances, the direction to the Income tax Officer that be should assess the income in the hands of the firm was neither necessary nor called for and therefore the law laid down in Murlidhar Bhagwan Dass case, 1964-52 ITR 335 = (AIR 1965 SC 342 ) was clearly applicable. In this connection it may be mentioned that according to Mr. Veda Vyasa two returns had been filed by the appellant for the assessment year 1952-53, one relating to the Hindu Undivided Family and the other, of the partnership firm. But the statements contained in the writ petition of the appellant do not support this submission. In para 3 of that petition it is stated that the firm and all the three partners filed their returns of profit and loss on March 31, 1953 with the Income tax Officer and also made in applicable under S. 26A of the Act for registration of the firm. It is true that in the assessment order of the Income tax Officer the status of the assessee is shown to be Hindu Undivided Family but that has been apparently shown in the order because the Income tax Officer gave an express decision about the status of the assessee and held that it constituted a Hindu Undivided Family.It, however, stands proved that the assessee filed the return claiming the status of a firm together with an application under S. 26A or its registration which was disallowed by the Income tax Officer but was allowed by the Appellate Assistant Commissioner. The substantial issue before the Appellate Assistant Commissioner was one of status of the assessee and he held that it was a partner firm and not a Hindu Undivided Family. This finding was necessary for deciding the appeal before the Appellate Assistant Commissioner and it is not possible to understand how it can be regarded as having been made only incidentally. Once a finding is given which was necessary for the disposal of the appeal the second proviso to S. 34(3) of the Act would be attracted and the bar of limitation would be lifted. In N. K. Sivalingam Chettiar v. Commissioner of Income-tax, Madras, Civil Appeal No. 1985 of 1966 D/- 27-3-1967 (SC) this Court after referring to the relevant observations in Murlidhar Bhagwandas case1964-52 ITR 335 =(AIR 1965 SC 342 ) reiterated that a finding within the second proviso to Section 34 (3) must be necessary for giving relief in respect of the assessment of the year in question. It was further observed that this Court in an earlier case lent approval to the observations of the Allahabad High Court in Hazari Lal v. Income tax Officer, Kanpur, 1960-39 ITR 265 = (AIR 1960 All 97 ) "that the word "finding" only covers "material questions which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the "final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing." The first submission of Mr. Veda Vyasa therefore cannot be accepted.2. The second limb of the argument of Mr. Veda Vyasa is based on the premise that the appellant which was a partnership firm was a distinct legal entity and was thus a total stranger to the Hindu Undivided Family the assessment of which came up for consideration before the Appellate Assistant Commissioner in which the orders already referred were made by him. It is suggested that the appellant could not fall within the meaning of the expression "any person" in the second proviso to Section 34 (3) of the Act.If the observations made in Murlidhar Bhagwan Dass case 1964-52 IRT 335=(AIR 1965 SC 342 ) are borne in mind it is again not possible to understand how the appellant can be taken out of the category of person or persons intimately connected with the assessment of the year under appeal. The returns, as stated before, were originally filed by the partnership firm comprising Bhagat Singh and his two sons. The question was of the assessment of the income of the business of the firm. The Income tax Officer treated the father and the sons as Hindu Undivided Family. On appeal, however. the Assistant Commissioner accepted their contention that they formed a partnership firm. It is difficult, in these circumstance, to agree that the appellant was a total stranger to the assessment which was under appeal before the Appellate Assistant Commissioner and had no intimate connection with the person whose assessment was made by the Income tax Officer and was set aside in appeal by the Appellate Assistant Commissioner.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In this connection it may be mentioned that according to Mr. Veda Vyasa two returns had been filed by the appellant for the assessment yearone relating to the Hindu Undivided Family and the other, of the partnership firm. But the statements contained in the writ petition of the appellant do not support this submission. In para 3 of that petition it is stated that the firm and all the three partners filed their returns of profit and loss on March 31, 1953 with the Income tax Officer and also made in applicable under S. 26A of the Act for registration of the firm. It is true that in the assessment order of the Income tax Officer the status of the assessee is shown to be Hindu Undivided Family but that has been apparently shown in the order because the Income tax Officer gave an express decision about the status of the assessee and held that it constituted a Hindu Undivided Family.It, however, stands proved that the assessee filed the return claiming the status of a firm together with an application under S. 26A or its registration which was disallowed by the Income tax Officer but was allowed by the Appellate Assistant Commissioner. The substantial issue before the Appellate Assistant Commissioner was one of status of the assessee and he held that it was a partner firm and not a Hindu Undivided Family. This finding was necessary for deciding the appeal before the Appellate Assistant Commissioner and it is not possible to understand how it can be regarded as having been made only incidentally. Once a finding is given which was necessary for the disposal of the appeal the second proviso to S. 34(3) of the Act would be attracted and the bar of limitation would bewas further observed that this Court in an earlier case lent approval to the observations of the Allahabad High Court in Hazari Lal v. Income tax Officer, Kanpur,ITR 265 = (AIR 1960 All 97  ) "that the word "finding" only covers "material questions which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the "final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing." The first submission of Mr. Veda Vyasa therefore cannot bethe observations made in Murlidhar Bhagwan Dass caseIRT 335=(AIR 1965 SC 342  ) are borne in mind it is again not possible to understand how the appellant can be taken out of the category of person or persons intimately connected with the assessment of the year under appeal. The returns, as stated before, were originally filed by the partnership firm comprising Bhagat Singh and his two sons. The question was of the assessment of the income of the business of the firm. The Income tax Officer treated the father and the sons as Hindu Undivided Family. On appeal, however. the Assistant Commissioner accepted their contention that they formed a partnership firm. It is difficult, in these circumstance, to agree that the appellant was a total stranger to the assessment which was under appeal before the Appellate Assistant Commissioner and had no intimate connection with the person whose assessment was made by the Income tax Officer and was set aside in appeal by the Appellate Assistant Commissioner.