Case: Commissioner of Income Tax, U.P Vs. M/s. Mohd. Shakoor Mohd. Bashir

3. The material facts lie within a narrow compass. Two persons by name Allah Bux and Zahur Bux were carrying on business at various places including tobacco business at Mauranipur and they were assessed in the status of Association of persons. In 1938 Allah Bux died leaving his widow Begum Zaidi as his only heir. The said Begum transferred her interest in favour of Zahur Bux. Thereafter Zahur Bux became the sole owner of the business. Zahur Bux gifted his business at Mauranipur to his two sons Mohd. Shakoor and Mohd. Bashir in 1942. Zahur Bux died in 1948. During the assessment years 1945-46 to l956-57, Mohd. Shakoor and Mohd. Bashir submitted their returns of income in respect of the Mauranipur business. Following his earlier decision the Income Tax Officer rejected that return and proceeded to assess all the heirs of Zahur Bux as an Association of persons. He also took into consideration not merely the Mauranipur business but all the assets left by Zahur Bux. In appeal the Appellate Assistant Commissioner came to the conclusion that the assesses, namely, the Association of persons consisting of all the heirs of Zahur Bux, was not liable to be taxed in respect of the Mauranipur business. He came to the conclusion that that business had been gifted to Mohd. Shakoor and Mohd. Bashir in 1948 (1942-?) itself. But he did not find that during the relevant assessment years Mohd. Shakoor and Mohd. Bashir were continuing that business in their own name; nor did he give a finding in respect of any income earned in this business by Mohd. Shakoor and Mohd. Bashir in those years. On the basis of his finding that the assessee -the Association of persons consisting of all heirs of Zahur Bux-is not liable to be taxed in respect of the Mauranipur business, he set aside the order of the Income Tax Officer but directed him to "assess the income from various sources in the hands of the respective persons to whom they arose, bearing in mind the provisions of second proviso to sub-section (3) of Section 34 of the Indian Income-tax Act." Thereafter the Income-tax Officer issued notices to the respondents under Section 34 (1) (a) of the Act. The question for decision is whether those notices are barred by time. It is urged on behalf of the Revenue that in view of the second proviso to Section 34 (3) of the Act, the notices were not barred. The High Court has rejected that contention.4. The first question that calls for decisionthe Appellate Assistant Commissioner had given any finding as contemplated by the proviso to Section 34 (3);" and the second question that arises for decision is :"Whether the Appellate Assistant Commissioner had given any direction as contemplated under second proviso to Section 34 (3)?"

Court's reasoning:
7. Now, coming to the question of direction, in Murlidhar Bhagwan Das case, (1964) 52 ITR 335  = (AIR 1965 SC 342 ) (supra) this Court held that the directions that Appellate Assistant Commissioner can give, are those falling either under Section 31 (3) (b), (c) or (e) or Section 31 (4). Mr Karkhanis concedes that the direction given by the Appellate Assistant Commissioner does not fall within any one of the provisions mentioned above. Hence we must conclude that the direction given by the Appellate Assistant Commissioner is not one that falls within the scope of the second proviso to Section 34 (3).From the above conclusions it follows that these appeals must fail. But Mr. Karkhanis contended that the finding of the Tribunal in this case that the finding given by the Appellate Assistant Commissioner at the earlier stage is a finding necessary for the disposal of the case, is a finding of fact and, therefore, the High Court could not have interfered with that finding. In the first place, no such contention was taken up before the High Court or in the Memorandum of Appeal. That apart, the conclusion of the Tribunal as to the scope of the Appellate Assistant Commissioners finding is not a finding of fact but one of law.