1!)0

.BHAGWAN DAS SITA RAM

-,_v.

.,.-. - . o COMMISSIONER OF INCOME-TAX

. I March15, 1984

t. . . [V.:0. TuLZAPURKAR AND SABYASACHl MUKHARJI, JJ.)

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~)- IncOme-taX Act, '1922..:._s. 22 and s. 23 read with second provi'so to s~S. :c: ·

(6) cf S. 34....--/nterpretation of-When assessnient can be made after a period of four years from asstssmen.t >; ear-Assessment proceedings commenc~ by.filing of. voluntary return-.On expiry -'of four years proceedings are suspended but proceedingsan4 {e, turrts do not become invalid. Bar of limitation lifts in case of direction TribizQ/~When Ond on whom Tribunal can issue direction. ,._ •.

Words and Phrases-"anyperson" in econd proviso to sub-s. (3) ofs. 34- D Scope of must be a Person wl:zo would be liable lo be assessed for whole or part of income that went into assessment of the year under appeal.

A bigger Hindu undivided family (HUF) had flied income-tax returns for the assessment years 1946-47 to 1949-50. When the assessment was being done the bigger (HtTF) made a claim under s. 25A of the Income Tax Act, 1922, that the said HUF. was paititioned on 19.5.1945. While this claim was pending, the appe11ant along with a smailer HUF (hereinafter re; ferred to as the assessee) which had come into being on pa.rtition of the bigger HUF, filed voluntary returns on 18.\l.1950for the assessment years 1946-47 to 1949-50unders. 22(1) of the Act. The bigger HUF's claim partition, Which was rejected by the Income Tax Officer arid the Appellate Assistant Commissioner, was accepted by the Appellate Triunal ori 31,8.1954. While disposing of the. appeals of the bigger HUF against the assessment orders, the Tribunal gave a direction on 28.10.1954 that asscssriullts be made on the bigger HUF after accepting partition. 'After thC claim of partition was accepted the Income-tax Officer sent notices to the assesseei fOr initiating proceedings against him under s. 34(1) (b).- Jn response to the notices the assi!.see filed fresh returns on 12.4.1955- Rejecting the contention of the assessee that the time for making assessment under s. 34 had expiied, the Income-tax Officer completed asseSsmentsunder s. 2~(3) read with s. 34 on

~ .8.9.1955. The assessee's appeal was rejected by the Appellate Assistant Commissioner and the Appellate Tribunal. The assessee filed a writ petition in the High Court_ which was allowed and the assessment orders were quashed on 30.3.1960. The High Court observed that as voluntary returns filed by the assessee were pending no proceeding could be taken undr s. 34. Thereafter the Revenue attempted to assess the assessee on the basis of voluntary returns originaJly filed on 18.11.1950 by relying upon the order of the Tribunal dated 23.10.1954 in the bigger HUF's case and invoking second proviso to s. 34(3). The assessee filed a writ petition and that was dismissed. The Income-tax Officer completed assess

mt undeu, ~3) 9!' p, 19\it In appeal the Appellate ista)lt <;:omllli''

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• • • BHAGWAN DAS v. c.fr. (S. Mukhrji, j.) ioi

sioner held that no valid assessment could be made on 31..S:.1962 and this viey.:· w:is confirmd by the Appellate Tribunal. A ref.:rence was made to the High Court all the questioll whether on the facts and -cfrculnstanCes of the case, valid · assesrnent'.could be made" on 31.5.1962 for the assfi'isment ye3.rs 1948-49 and,-. 1949 50 on the basis of voluntary return.s of income filed under s. 22(1) of the Act. The assessee contended that-since 3. return exhausted itself fter expiry of four years from the end of the asseSsment year to \\hich it reIJ.ted, no assessmCnt could made an th~ ba~ of voluntary return, , it,"could be done under s. 34 only if :2nd prOviso to sub-s. (3) of s. 34 applied. By majority a full Bench of the High Court answered the question in the affirmativ.! in favour of the reve .. nue. Hence. these appeals. -The two questioi:is which arose" Were! (I) whether the assessment could be made under s. '23(3) on the basis of voluntary returns filed or actioil should have been taken under!. 34 with the help of the seCond proviso - to Sub-s~ (3) of s. 34; and (2) whether ihe Tribunal cOuld give a finding or

dirctioi:i in respect of the asessee.. ' ·

. -Dismissing tt:e_ appeals;

HEW:··

.f!n QuestoitNo. (I)

- The High Court was right . in taking the vie~ hat assesments could be m<idi! on the basis of voIU"iitary returns alrCady filed by_ the asse.ssee.

Sub--s~ (3) of S. 34 provides a p-eriod Or limitation O:f four years for a~Sessment.under s. 23 . of the Act.' If the assessment proceedings _ cpmmenCe .b-y filing or' ""votuntarY returns, as Indeed _these do, on the expiry :of the periOd of four years from the · Cod of the Year in Which ihe income, "profits or giins Were first assess.able, such proceedings are susPended .Jr inierrupte+f. But neither the Proceedings nor the returns_ beCome-. invalid. Since the order Was _passed bY the Tribunal giVing direction, the. bar of limitatiori provided by s. 34(3) was lifted and the assess--·

ments could be made without any_ bar of limitation. [106 G-H, 107 'A] . . . ' . i

-- Commissionf!r of Income-tax Bombay City II v. Ranchhoddass Karsondtls, 36 .. J.T.R. 569,· Estat'e Of the iate A.M.K.Af. Karuppan Chettiar v.· Co"1missioner of

Income-ta~,"Marlras, 72 1.T.R. 403 ; and, Commissioner_-· of Income-tax Madras

v. M.K.K.R. Muthukaruppan Chettiar, 18 I.T.R~ 69, refe_rred t~

On Question.No. (1)_:

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' /__ - - . ,:.·...;, The High Cotirt rightly answered thC question in favour of 'he revenue on G the view that the Tribunal was competent to give the direction in respec(ofthe· present assessee. [108 E-G I

Second proviso. to s. 34(3) 3.uthories dirctionS _to be given by the T ribunat iO respect of the assessee of any person beyOnd follr years 3sprovided iri. s. 34(3) _of the Act: As explained in Income-tax. Officer v. Murlidhar Bhagwandas, ,"a"itj person" in respect of whom such direction could be given must_ be one who 'wOutd be liable, to be assessed, for the' whole or a \?art of the-income tat went into the assessment of the yea~ under api)eat o_r reVision. , The court must tum -

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to s. 31 of the Act to ascertain who is that person otver than the appealing assessee wbo might be affected by the orders passed by the appellate authority, .Modification or setting "aside of assessment made on a firm, joint Hindu-family, association of persons for a particular year may affect the assessinent for the said year on a' partner ot partner&. of, the firm, member of members of such Hilldu undivided family or the individual, as the case might be. These instances_ are

only illustrative and not exhaustive. The expression ''any .person" in 'its widest amplitude might take in any person connected or not with the assessee, whose .

ioce:me fat any yar bad escaped assessment; but "this Constru9tio, n cannOt be accepted, for the said expression was necessarily circumscribed by the scope Qf the subject-matter of the appeal or revision, as the case might be. $0 therefore the.person mu•i be one who would be liable lo 'be aJSeJsed for the whole .or any , part-of the ittcOme that wentnto a$sess1nent of the year under apfleal or revbion

(llmphasjs supplied). Therefore, "any person" in sub-section ~(3) of s. 34 must be confined to person intimately connected in the aforesaid sense with the assessments of the yearS under appeal. ]701 C-S, 108 A-FJ

Income-tax Officer, A-Ward, Sitapur v. Mur/idhar BhagWan Das, 52 I.T.R. 335; Rajinder Nath v. Comminioner of lncome-1ax, Delhi, 120 I.T.R. 14 ; • Commissioner of Income--tax, <; entral, Calcutta v. National Taj Traders. 121 I.T.R. 535; and Commissioner of Income-tax, A.Jl(Jhra Pradesh v. Vadde Pullaiah & Co., 89 J.T.R. 240, referred IO. ,

 'The f11cL• in the instant case show that income can belong either to the biwr Hindu undivided family or to the smaller Hindu undivided family, the present assessee alongwith another smaller H.U.F. Snd to no one else~ There~. !bro a finding that it belongs or it does not belong to the bigger Hindu undivided famiiy which bad disrupted on partition would determine the issue whether it .

cold bO taxed fa the hands Of the present assessee. Judged in the light of the test laid down in Murlidhar BhagwOn Das casearid as pointed Out i~ R.ajinder Nath's case, it appears that the present usessee can be said to be a person who would be liable to be assessed for the whole or part of the income that went to the assessment of the bigger Hindu undivided family io years under appeal and U a Person intimately connected with the as, sessments of the bigger Hindu µn divlde<I ramily; The income in this case cannot be the income of both bigger Hindu Undivided family and the present assessce, it must be either of these two.

Tbererore. the directions given in the appeals filed by the bigger Hindu undivide°d family would be applicable to the present as......,. (111 A-DJ

Comml!siontr" Df l11ome--tax, Gujarat v. Shanti/al Punjabhai, 57 I.T.R. 58. fl di<tinguisbed.

Coinmf3Sldnsr oi lnMme-tax, Punjab, Jammu & Kashmir and HJmac/r4/ Prai., h-v. S. Rtzghubf• Singh Trust, 123 I.T.R: 438 referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1168-6~ . (NT) of 1973.

 Appeal by Special leave from the Judgment and Order dated

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BHAGWAN DAS v. c.I.T. (S. llfukharji, J.) i03

the 3rd January, 1973 of the Allahabad High Court in I. T: Ref. No. 450 of 1969.

S.C. Manchanda and M. J.P. Ma/ho.tra for the Appellant . •

S.T. Desai, B.B. Ahuja and Miss A. Subhashini for the Respondent .

The Judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. These appeals by certificat~ granted by the High Court of Allahabad under Section 66A(2) of the Indian Income Tax Act, 1922, arise out of judgment delivered and order passed on 3rd 1ltnuary, 1973 by the High Court of Allahabad in Income-tax Reference No. 450 of 1965. The following question of law had been referred to the High Court for consideration under Section 66(1) of the Income-Tax Act, 1922 by the Appellate Tribunal, Allahabad Belich, Allahabad: ·

i. "Whether, on the facts and in fhe circumstances of the case, valid assessments could be made on 31st May, 1962, for the assessment years 1948-49 and 1949·50 on the basis of voluntary returns. of income filed under Section ~2(1) of the Indian Income-Tax Act, 1922 on 18.11'1950?

• The matter came up before a Division Bench of the High Court and a~ there was a previous bench decision of tliat Court in the case of Sool Chand Ram Sewak v. Commissioner of Income-tax, U.P.1 which supported the revenue's case and as the division bench before whom this case came was unable to accept that view, Jhe division ,; bench referred the case to a larger. B.ench. This reference thereafter .

~· came before a Full Bench41:onsisting of'Gulati, H. N. Seth &.C.S.P.

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Singh, JJ. Gulati'and C. S. P. Singh, JJ. answered the question in. the affirmative in fa.vour of the revenue and against the assessee: , Seth J. however, was in favour of assessee. I.n view of. the majority .fue .question was answered in favour of the revenue and in affirmative.

(!) 73 I. T. R. 466. .::

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suPRBMB 'cotiirr REPolltS

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Before we deal'with the questiOn ii) controversy, it will be necessary to note some of the relevant facts. There were originally four appeals for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50. As the appeals for the assessment years 1946-47 and 1947-48 were withdrawn by the revenue, we are ow concerned with appeals for the assessment years 1948•49 and 1949-50. .

The present assessee is a branch of a bigger Hindu undivided

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family known as•Nathu Ram Jawahar Lal, Jhansi. .,. -

The bigger Hindu undivided family of M/s Nathu Ram

Jwahar Lal was partitioned on 19th May, 1945, and the present assessee along with anoter smaller H.U.F. came into . existence and the said bigger H.U.F. had ma~~ claim in respect otlthe partition under Section 25A of. he Indin lncome-Tax Act,

1922. While this claim was pending t!le present assessee filed volu.ntary returns under Section 22(1) of the Act'.for thi issessment years

194'6~47 to 1949-50 on 10th November, 1950. The said claim of partition by the bigger H.U.F. was rejected by the Income-tax Officer and also by the ppeilate Assistant Commissioner. The said H. U. F. thereafter, filed appeals to the Appellate Tribunal in respect of the order under claim of partition under Section 25A of 1922 Act which by its order dated 31st August, 1954 accepted tbe claim under Section 25A of 1922 Act, and the Tribunal passed . orders on that basis in the appeals relating to the assessment orders in respect of. the bigger H.U.F. on 28th October, 1954.

The. Income-tax Officer, thereafter, .initiated proceedings under

Setion 34 ofthe Incme, tax Act of 1922 for assessing the small.er H'indu undivided family, the preseµt assessee in view of the fact.that tlie claim for disruption of the bigger H. U. F. had been accepted. by te. Tribunal. The ]Jresent assessee filed fresb rturns of income ori 1_2.4.1955 in response to notices under Sectiou 34 of 1922 Act ..

Th_e-reums originally filed were under Sectin 22( I) and were fild on 18th November, 1950, The. assessee's objection regarding the validity of the assessments being made under Sei:tion 34 on merits as well as on the point that time for .making the assessment under Section 34 had already exP.ired, were rejected by the Income-tu

Officer. He, therefore, completed the. assessments on . 8.9.1955 under Section 23(3) read with Se.ction 34 of the Income-tax Act,

1922. The assessee could not get any decision in his favour either fro in the Appellate Assistant Commissioner or from the .Tribunal and being aggrieved by these orders, filed a Writ Petition; to the High. Court of Allahabad challenging the vlidity of the Appellate

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.J.

DHAGWAN DAS v. C.I.T. (S, Mukharji, J.) iM

orders. ]he assessee was successful in the Writ and, therefor_e, the appellate orders were quashed by the. High Court. The. revenue

haing failed in its attempt to complete the assessee's assessments under Section 34, made another attempt to assess the assessee on the basis of the voluntary returns originally filed by the assessee on 18.11.1950 by relying upon the order of the Tribunal dated 28.10.1954 and invoking.the provisions of 2nd proviso to Section 311(3).

The said assessments which were completed on 31st May,· 1962 were the subject matters of appeals before the Tribunal.

Tl\j! point before the Tribunar was whether valid assessments could be made for the assessment years under consideration on 31st May, 1962 on the basis l>f the returns filed under Section. ~2(1) of the Act of 1922 on 18th November, 1950. The Appellate Assistant Commissioner by his order held that no valid assessments could bf made ori'3Yst May, 1962. ') ' .,

'11 It appears that on 28th October, 1950, relating to the assessment years 1946-47 to 1949-50 in case of bigger Hi!Jd1! undivided family, M/s Nathu Ram Jawaharlal, Jhansi, order was passed by th~, Tribunal in the appeal relating to the assessments pending before it.

It" should be noted that originally on the basis that the bigger H.U.F. had not been disrupted assessments for these years bad been made and appeals relating to those assessments were pending before tlie"'rribunaL The Tribunal disposed of these appeals by the order dated 28th October, 1954 and the Tribunal in the said order had observed, inter alia, as follows;

"The assessments for . those years were (have) necessarily to be set aside with the direction that fresh assessments should be made, one for the period 19.5.1945 upto which the Hindu undivided family was in existencil and the . others on the component Hindu undiviiled families, namely M/s Jawaharlal Mani Ram and Bhagwan Das Sita Ram."

The Tribunal in the instant appeal out of which the reference was mde to .the High_ Couq and out of which these appeals arise, after d1scussmg the relevant facts and the provisions of law confirmed the' order of the Appellate Assistant Commissioner and dismissed the appeals. As mentioned hereinbefore after the Tribunal had directed

th~- assessm_ets shoul~ be made on the cowponent units of the bigger Hmdu, und!Vlded famdy, afte:_partition was accepted, namely, tpe as$essee and Jawabarlal Mam Ram, the Income-tax Officer instea4

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106 suPilEME couh REPORTS (!984] 3 s.c.lt

of proceding on the hasis of the voluntary returns already filed by the assessee proceeded to take action under Section 34(1) (bfof the Act of 1922 and completed the assessments for all the four years on Septemper 8,1955. The assessee appealed against these assessments to the Appellate Assistant Commissioner of Income-tax, but before the appeals were taken up for hearing, the assessee moved th~ High Court of Allahabad under Article 226 of the Constitntion. On March 30, 1960, the High Court quashed the assessment orders on the ground that as volnutary returns filed. by . the assessee were pending, no proceeding could be taken under Section 34 of tJle Act,

1922. Theraefter the Income-tax Officer initiated proceedings on the basis of the voluntary returns. The assessee again filed a writ petition. praying for quashing the proceedings on the ground that revenue fould not proceed against it on the basis of the voluntary re.turns. This petition was rejected by the High Court and thereafter the Income-tax Officer proceededlto complete the assessments under

. Section 23(3) and passed assessment orders on 31st May, 1962; in respect of the four years.

The first question, is, whether the assessment could be made Under S.ection 23(3) on the basis of voluntary returns filed or action should have been taken under .Section 34 with the help of the second proviso to sub-section (3) of Section 34. it is well-settled that when a return of income is filed by the assessee voluntarily under Section 22(1) of the Act, 1922, assessment proceedings commence against him and Section 34 does not come into play at all so long as tlie: assessment proceedings remain pending. Bnt it was contended that a return exhausted itself after the expiry of four years from the end of the assessment year to which it related. After the expiry of that period, no assessment was possible on the basis of the voluntary return. In such a case assessment was possible under •Section 34, if the case was covered by the second proviso to Section 34(3).

The High Court was of the opinion that sub-section (3) of Section 34 provides a period of limitation of four years fot assessment under Section 23 of the Act, l 9Z2. If the assessment proceedings commence by filing of voluntary return, as indeed these do, on the expiry of the period of four years from the eud of the year in which the income, profits or gain~ were first assessable, such proceedings are suspended or interrupted. But neither.the proceedings nor the returns become invalid. The High Court referred to the provisions of Section 34(3) and was of'the view that since the order was passed by the Tribunal giving direction,' the bar or limitation was lifted and

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BHAGWAN DAS v. c.J.T. (S. Mukharji, i.)

A. the assessments could be made without any bar or limitation. Refe- . rence was made to the decision of this Court in the case of Commissioner of Income-tax Bombay. City l/ v. Ranchhoddass Karsondas,, and in the case of Estate of the late A.M.K.M. Karuppan Chettiar v. Commissioner of Income-tax, Madras' and Commissioner of Income-tax Madras v. M.K. K.R. Muthukaruppan Cheuiar3. 8

The High Court, on the basis of these decisions, was cif the ) view that assessments could be made on the basis of voluntary retl!rns already filed by the assessee. We are of the opinion that the High Court was right.

• The next question is whether it was open to the Tribunal to give a finding or direction in respect of the present assessee. Reliance was.placed on the decision of this Court in Income-tax Officer, A~

Ward, Sitapur v. Murlidhar Bhagwan Das.• There, this tourt after referring to the expression "any pt; rson" in the 2nd proviso of sub section (3) of Section 34 of 1922 Act observed at page 346 of the

rort as follows.

"The expression "any person" in. its widest connotatfon .may take in any person, whether connected r not with the assessee, wh.ose 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 sect.ion 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

(I) 361.lf.R. $69.

(2) ?2 t.T.R. 403.

(3) 78 I.T.R. 69.

(4) 52 l.T.R. 335.

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SUPREME COURT REPORTS tJ 984] 3 s.c.lt.

of persons, for a particular year may affect the assessment for the said year on a partner or partners of the firm, member or members of the Hindu undivided family or the. individual, as the case may be. In such cases though the latter are not co-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 High Conrt was of the view that "any person" would include the person 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. In that view of the matter, the majority judgment of the High Court ort this aspect was in' favour of the revenue. Then on the question whether the direction for the assess: ment could. be given in respect of any other year, other than the year in which the partition took place, it was contended that direction could be given only for the assessment year 1946-47. Majority judgment of the High Court found no force in. that contention. As this question arose directly for the assessment years 1948-49 and 1949-50 in respct of which the appeals came before the Tribunal in which the directions ba:d been given, the High Court was of the view that it was necessary for the Tribunal to give a finding with regard to the partition of the family and the ownership of the income in both the appeals. The Tribunal was thus competent to give the . . . direction. In that view ofthe matter, the two learnedjudges of the Allahabad High Court were of the opinion that assessments were valid and answered the question in favour of the revenue. Referring to the said decision which has been mentioned in the majority judg ment, Seth J. however was of the!view that the direction given by the Tribunal in this case did not authorise the assessment on the smaller Hindu undivided family. Seth J. was further of the view that such direction could only have been given in the year in which disruption of the bigger H.U.F. took place. In that view of the matter, Seth J. expressed Clissent as mentioned her.einbefore. We are of the opinion that the majority of the learned judg; es of the High Court Were right. Second proviso to Section 34(3) of the fllC!ian- Income-tax Act, 1922 authorised directions to be given by the Tribunal in respect of the assessee or any person beyond four yars as provided in Section 34(3) of 1922 Act.

BHAGWAN DAS~. C.I.T. (S. Mukharji, J.)

' ' 109

As noted before the expression "any person" in respect of whom such direction could be given was explained by this Court in Income-tax Officer, A Ward Sitapur v.

Murlidhar Bhagwandas (supra). As mentioned iii the passage quoted above . from lhe said decision, if so construed then the Court must turn to Section 31 of 1922 Act to a certain who is that person other thap the appealing assessees might be affected by the orders passed by the appellate authority. Modification o'r setting aside of assessment made on a firm, joint Hindu family, association of persons, for a particular year may affect the assessment for the said year on a partner or partners of the firm, member or members of such Hindu undivided family or the individual, as the case might be. It was therefore argued that it was only those types of assessees mentioned by this Court in the passage noted above were the 'persons' who could be "any person" other than the appealing assessee who can be said to be liable to .be assessed and in respect of whom direction might be given, otherwise such directions or provision for such direcMons if the provision is so re.ad would be ultra vires article 14 of the Constitution. We must make it clear that this Court had itself made it clear categorically in the passage quoted above that the instances given in the above passage were only illustrative passage nieaningthereby that.the instances were not exhaustive. This Court made it clear that the expression .<•any per son" in its widest amplitude might take in any person connected or not with the assessee, whose incom" for any year had escaped assessment; but this construction could not be accepted, for the said expres sion was necessarily circumscribed by the scope of the subject-matter. of the appeal or revision, as the. case might be. So therefore the person

' ' must be one who would be liable to be assessed for the whole or any part of the income that went into assessment of the year under appeal or revision (Emphasis supplied). Therefore, this Court observed that

any person" in sub-section (3) of Section 34 must be confined to a person intimately connected in the aforesaid sense with the assessments of the years under appeal.

Reference may be made to the decision of this Court in the case of Rajinder Nath v. Commissioner of Income-tax, Delhi, 1 where the I.T.O. treated two buildings as belongillg to a firm comprised of a father and his two major sons as partners and in the assessments on the firm for the assessment years 1955-56 and 1956·57 and he estimated the cost of construction of the buildings at a higher fire t)lan that

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disclosed and brought to tax the exess as income in the hands of the firm. On appeal, the A.A. C. found that the money advanced . for the construction of the buildings had beep debited in equal shares to the father and two major sons and a minor son and held that the firm was not the owner of the properties and defocted the addition .. The A.A.C. also observed that the I.T.O. was free to take action to assess the excess in the hands of the co-owners. The I.T.O. thereupon' issued notices under Section 147(a) of the I.'r. Act, 1961 and reopened .the assessments of tlte individual assessees (the co-owners) and included. therein the proportionate shares of the additions on account of the estima!ed excess of the cost of construction. On appeal, the A.A.C. held that Section 147(a) couid not apply but upheld the assessments under Section 153(3) (ii) of 1961 Act.. On further appeal, the Tribunal held that Section 153(3) (ii) could not apply because there was neither a finding .nor a direction in the earlier order of the A.A.C: and further that A.A.C. could 'not convert the assessments made under Section l 47(a) intb those under Section 153(3) (ii). On a reference of the questfons, (I) whether the A.A.C. was justified in )loldirig that the provisions of Section 147(a) were not applicable, and -(ii) whether the provisions of Section 153 (3) (ii) were not applicable, the High Court-held that the proyisions of Section 153(3) were J applicable observing that the A.A.C's finding that the properties did

not belong to the firm and, therefore, the excess amount of the cost of construction could not be rekarded as the income of the firm was a finding which was necessary for the disposal of the firm's appeal and as a corollary it was held that the buildings belonged to 1he coowners and this necessitated the "direction" to the I.T.O. that. he was free to assess the excess in the hands of the co-owners. Dealing with this contention, Pathak J. who delivered he judgment of this Court observed at page 20 of the report:

"The expression "another person" in the Expln. would include persons intimately conne.cted with the person in whose case the order is made in the sense explained by this Court in Murlidhar Bhagwan Da.i (1964) 52 ITR 335 (SC). It is one thing for the partners or'a firm to berequired'toexplain the socnrce of a receipt by tlie firm, it is quite another for them in their jndividual status to be aske.d to explain the source of amounts received by them as separate individuals.

On such opportunity bing provided it would have been open to the assessees to show that the excess alleged over the disclosed cost of construction did not constitute any taxable income, The fi, ndin~ contemplated in Bxpln, 3, it will ~

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llHAGWA~ v. C.I.T. (S. Mukharji, J.) Ill

noted, is a finding that the amount represents the income of another person."

In the iastant case b

0efore 'us, applying the test observed in that case tliis was a case where the facts showed. that income can belong either to the bigger Hindu u11divided family or to the smaller Hindu undivided family, the present assessee along with another smaller H.lJ.F. 'and to 'no one else. Therefore a finding that it belongs odt does not belong to the bigger Hindu u.ndivided family which had disrupted on partition would determine the issue whether it could be . taxed in the hands of the present assessee. Judged in the light of the test laid down in Murlidhar BhagwaT1 Das (supra) and as pointed outin Rajinder Nath's case, it appears to us that the preent assessee can be said to be a person who would be liable to beassessed for the whole or part of the income that went to the.a.ssessment of the bigger , Hindu undivided family in years under appeal and is a person intimately connected with the assessments of the bigger Hfodu undivided family. The income in this case cannot be the income of both bigger H.indu undivided family and the present assessee, it must be either or these two. We are, therefore, of the opinion that direc. tions given in the appeals filed by the bigger Hindu undivided family yould b, e applicable to the present asacssee.

On behalf of the assessee it was contended that only the categories of persons referred to in Sections 30(1) and 30(3) of 1922 Act would be governed by the said expression "any person"

Sub-section (3) of Section 3, I, inter alia, authorises the AJ?pellate Assistant Commissioner in case Of an order cancelling registration of a firm under sub-section (42) of Section 23 or refusing to register a firm under sub-section (4) of Section 23 or Section 26A or to make fresh assessment or to confirm such order, or cancel it and direct the Income-tax Officer to register the firm or to make a fresh assessment, as the case may be, or in the case of an order under subsection (2) .of Section 25 or sub-section (I) of Section 23A or sub-section (2) of Section 26 or Section 48, 49 or 49F, confirm cancel or vary such order. It also authorises in case of an order un~

der sub-section (I) of Section 25A to ccinfirm such order or cancel if and either direct the Income-tax Officer to make further inquiry and pass a fresh' order 'or to make an assessment in 'the manner • laid down in sub-section (2) of section 25A. , The other cases were cases.of orders under Section 28 or sub-section (6) of Section 44E or sqb-se9tion (5) of e9fo'n 44F or qb-section (I) of Section 461

c;:,

... ,.-; .

112 SUPREME COURT J!.EPOlns

[1984] 3 S.C.R.

or in case of an appeal against a computation of loss under Section 24, confirm or vary such computation, or in case of an appeal under sub-section (IA) of Section 30 decide. that the person is or is not liable to make the deduction and in \he latter case direct the refund of the Sl)m paid under sub-section (6)-0f Settion 18.

. , While on these provisions it is material to refer to sub-section (4), of Section 33 whiGh authorises the Tribunal afrer giving both parties an opportunity of being heard to pass such orders thereon as it thinks fit and to communicate any such orders to the assessee and to the Commissioher.

The c:ontention on behelf of the assessee is that though the.

Appellate Tribunal has wide powers as indicated in sub-section (4) of Section 33 but the amplitude of that power is curtailed by other provisions. It was contended that read with sub-section (3} ofSectio.n 34; as assessment order could not be passed after the expiry of four years from the end of the year in which the income, profits or gains were first assessable and is view of the fact that here in the instant c.ase voluntary reiurns for the years under question had been filed by. the assessee within time, after four years no direction could be giyei; i

by the Tribunal. It was, seco!ldly, contended that the present smal, !er Hindu undivided family was not intimately connected (with .the assessment of the bigger Hindu undivided family as contemplated by the observations of this Court in Income-tax Officer v. Murlidhar Bhagwan Das (supra), this direction.was of , no use and the assessment made on the basis of this direction cannot be availed of. ·

• We are unable to accept this oontention. Firstly ii must be observed that the Tribunal passed the orders and gave its dreiction ii respect of the years concerned. These years were the subject matters of appeal before the Tribunal in the case of bigger H.U.F. It wa~ contended that ihese direction were given subsequent to the order under Section 25A and could not affect position thereafter. We are unable to accept this position also. As mentioned hereinbefore, the order under Section 25A was passed in August, 1954. The bigger' Hindu undivided family had applied for order under Section 25A regarding the disruption a( the Hindu undivided family, the Income: tax Officer rejected that prayer. The assessee appealed therefrom. In Aug\ist, 1954, this order was set aside by .the Tribunal and it wa8 'held that the bigger Hindu undivided family had been disruptec). Iii- . •

asmnch as the income liable to be assessed. on the smaller Hindu un- ' . !livided family wo11ld 11rise only on the disrurtion of the lar$er Biridq •

BHAGWAN DAS v. c.1.T. (s: Mnkharji, J.). 113

undivided family; this direction was proper. The order under Section 25A declares the status of the family and the smaller Hindu undivided family became liable to be assessed as a result of disruption of the bigger Hindu undivided family. The assessment orders h.owever wer~ passed based on the previous order under Section

25A but these orders were passed for all these follr years anq the assessments under appeal for all these four years were pending. before the Tribunal in disposing of which the Tribunal gave the direction to make the assessments on the smaller Hindu undivided family.

Therefore no question arises as to whether for subsequent periods i:lirec(ions could have been given. This is a direction clearly within the contemplation of sub-section (3) of Section 34. Secondly, we are of the opinion that the smaller Hindu undivided family is one of the . persons which was clearly contemplated by sub-section (3) of Section 34 in the facts and circumstances of this case. The. assessabili\y o& income and the quantum of the same of the present assessee was linked up with the assessability of the bigger Hindu. undivded family if the bigger Hindu undivided family was liable to be' assessed if there was no disruption then there was no income of the smaller Hindu undivided family. The income in the hands of smaller Hindu undivided family could then not have been liable tobe asssesssd, I on the other hand it was the other way that there was a valid parti- . lion, the \)igger Hindu undivided" family no longer existe.d and the smaller Hindu undivided family would . be liable . to be assessed.

From that point of view it clearly . comes within the ratio of the observation of this 'Conrt in Jncomi!-tax Officer v.

Murlidhar Bhagwan Das (supra). Further more looked at from another point of view, though the Karta represented the bigger Hindu undivided family, all the member's of the bigger Hindu undivided family, including those who were members of the smaller Hindu undivided family were parties though .not oe nomine for all practical purposes, because they were liable as mambers of the family for the amount assessed. In that view of the matter, we are of the opinion that this direction was quite valid and would be applicable.

The obsevations of this Court in the case of Comissioner of Income-tax Central; Calcutta v.

National Taj Traders' are 'in consonance .with the conlusions reached by us. Tulzapurkar, J. expla:ined in the said decision the._ situations in which directions could be given.under Section 33B of the Income-tax Act, 1922 where

)21 I.T.R. 53$.

B '

SUPREME COURT REPORTS "'

[1984] 3 S.C.R,

 there was no express provision like sub-section (3) of Section 34.

In our opinion in the facts of this cas~, the present assessee can be said to be•"any person" as indicated in Mur/idhar Bhagwr.n Das ·(supra) in Section 34(3) of 1922 Act

The view taken by _us is also in consonance with the observation of this Courts inthe case of Co!Jlmissioner of Income-tax, Andhra Pradesh v. Vadde Pul/aiah & Co.'

Refernce was also made to a Bench decision of the Bombay . High Court in the case of Mathuradas B. Mohta v. Commissioner of Income-tax, Poona;' and a decision of this Court in the case of Commissioner of Income-tax, U.P. v.

Mohd: Shakoor Mohi Bashir.• But in view of the facts and circumstances of the instant case before us, it is not necessary to deal with the said decisions.

On behalf.of the assessee, reliance was placed on a decision of the Division Bench of Gujarat" High Cort in the case of Commissioner of Intome-tax, Gujarat v. Shanti/al Punjabhai.4 There an individual Shantilal was a member of the Hindu undivided family and also a partner of a firm. The Income-tax Officer found that the assessee was the nominee of the Hindu undivided family in the said firm, and, therefore, included the share of of profits the assessee in the said firm, in the total income of the Hindu. undivided family .

• The decision proceeded on the _basis that the Income-tax Act did - not contemplate two different assessees in the same assessment year for tbe same taxable income. In that ase the assessee was also an assessec in his own right. In that case theCourt had observed at .page 80 of the report that there were two separate and distinct assessment proceedings, one in respect of the assessee in his status as an individual and the other in respect of the Hindu undivided family. The assessment proceedings in respect of the assessee, Shantilal, were in respect of his income arising from his self-acquired and separate . property. The ssessment proceedings against the Hindu undivided family, were proceedings against the entire entity'. and. though the assessee, Shantilal, was a member of the family, the assessment was on the income derived by the Hindu undivided family from the property or business 'of the said Hindu undivided family. In tht

(1) 89 I.T.R. 240

(2) . 56 l.T , R. 269

(3) 89 I.T.R. 57

(4) sn.T.R. SB

)I ,

• J

BHAGWAN DAS v. c.I.T. (S. Mukharji, J.) 115

assessment; the income accruing and arising from the separate pro- ' perty of.the assessee, Shantilal could not be assessed, as the business carried on by the asseseee, Shanti!al, was not the bussiness of the Hindu undivided family. The Income-tax Officer held that Shantilal was the nominee of the Hindu undivided family, meaning thereby-'

that the business belonged to tbe Hindu undivided family and it was . that conclusion of the Income-tax Officer which was reversed by the . . .

Tribunal. The Tribunal holding that the revenue had failed to prove that the assessee, Shantital was the nominee of the family, in other words, that the income arising from the firm's business was. the income of the Hindu undivided family. The direction given by the Tribunal was on the question which was between the revenue and the Hindu undivided family and the only finding that could be given by the Tribunal was between the two parties, namely, the Hindu undivided family and the revenue and not between the revenue and the as- • sessee. Shantilal, who was not an assessee nor a party to those asseSS' ment proceedings. Therefore, if any action had to be taken in con- . . sequence of the finding or the direction given by the Tribunal, that action could be taken not against the assessee, Shantilal, but against the Hindu undivided famliy. As would be apparent, the facts of tht case were entirely different. ' Here in the instant case the proceeding against the assessee in the present case could be taken only if there was disruption of the Hindu undivided family. Therefore in the assessment of Hindu undivided family viz. if the bigger Hindu undivided family was considered to be an existing entity then in such a case the asssessment against the present assessee could not be sustained. If on the other hand the assessment on the bigger H. U.F. could not be sustained because there was disruption of the family as contended for. by the bigger Hinud undivided family then only the present assessee could be assessed. In that view of the matter, we are of opinion that the present assessee can be said to be. a person other then the appealing assessee would be affected by the order concernd and would come within the nieaning of "any person" as explained by this Court in the case of Income-tax.Officer v. Mur/idar Bhagwan Das (supra).

l)ecision of this Court in the case of Comissioner of Income-tax, .

Punjab, Jammu & Kashmir and Himachal Pradesh v. S. Raghubir . Singh Trust' was relied on behalf of the assessee. There the res-

(1} 123 I.T.R. p. 438

116 SlJ?REME COURTS REPORfS


pondent trust created by R. filed its return of income for the as; ess ment year 195'4·55. Holdiiig that the trust was invalid, the Jncometax Officer assessed the income of the trust in the hands of R. R. carried the matter in appeal and other proceedings and ultimately tl1e High C.ourt held that the trust was yalid and the income was the income of the trust and not Of R. The I.T.O. issued a notice on

19th September, 1961, under Section 34(1)1b) oftbe Indian J.T. Act, i922, to reopen the assessment of the trust. The trust claimed that the notice. was barred by limitation. The Tribunal accepted the claim and held that trust was a stranger to the pr6ceedings for the

ssessment of Rand the second proviso' to Section 34(3) did not

save the reassessment proceedings initiated against the.trust from the b.ar of limitation and. the High Court, on a reference, agreed with<the Tribuna1. On appeal to this Court it was held, affirming the decision of the High Court, that even .though the finding of the High Court that the income belonged to the trust and not tp R was a finding necessary for disposing of the reference in favour of R and it was a "finding", bnt the trust was a stranger to the assessment proceedings of R. and not "any Jlerson" within the meaning of the second proviso to Section 34(3) and, therefore, the second proviso to Section 34(3) was not attracfed and the reassessment proceedings against the trust were barred by time. That decision must be understood in the facts of that case. The settler ahd the trust cannot be said so intimately connected as to corn, e within the ratio of Murli dhar Bhagwan Das's case. The Court found that assessee ttust could not be said to be intimately connectedwith the assessment of Raghubir Singh. As a result of the trust deed failing, there may be numerous situations viz., there might be resulting trust or it might be that the trust property would go to other beneficiaries. It is not necessary for us to explore or explain those possibilities. Biit in the facts of this case; we are of the opinion that whether the income •of the smaller Hindu undivided family, namely the present assessee is liable to be taxed is so intimately or inextricably linked up with the question of assessability of bigger Hindu undivided family, which again is dependent upon the question whether there was disruption of bigger Hindu undivided family and that being the very subject matter' of appeals in the four years in which this direction had been given, we are of the opinion that' _directions given in this case are °, yalid and would save the assessments against the assessee for the two years in question.

In the aforesaid view of the matter, we Me of th~ 9pinion that

" ,.

i17 iluA.owAN DAS v. c.i.r. (S. Mukharji, i.)

the majority of the learned judges of the High Court were right in their conclusions and the question was correctly answered by the majority of the learned judges of the High Court. The ltppeals therefore fail and are dismissed with costs.

H.S.K. Appeals dismiss ed.