PETITIONER: P. V. GODBOLE Vs. RESPONDENT: JAGANNATH FAKIRCHAND DATE OF JUDGMENT: 12/12/1962 BENCH: DAS, S.K. BENCH: DAS, S.K. KAPUR, J.L. SARKAR, A.K. HIDAYATULLAH, M. DAYAL, RAGHUBAR CITATION: 1963 AIR 1399 1964 SCR (1) 130 ACT: Income-Tax-Escaped income-Iimitation for assessment-Saving provision-Applicability and constitutionality of--Indian Income-tax Act 1922 (11 of 1922), s. 34-Indian Income-tax (Amendment) Act, 1953 (25 of 1953), ss. 18, 31--Constitution of India, Art. 14. HEADNOTE: In pursuance of the directions given by the Appellate Assistant Commissioner in connection with the appeal of another assessee, the income-tax Officer on February 18, 1957, issued a notice under s. 34 (1) of the Indian Income- tax Act, 1922, to the respondent in respect of the assessment years 1944. 45, 1945-46 and 1946-47. The respondent contended that the Income-tax Officer had no jurisdiction to assess him after four years of the expiry of the year of assessment. The appellant 131 contended that the , second proviso to s. 34 (3) introduced by the Amending Act of 1953 saved the proceedings. Held (per Das, Kapur and Sarkar, JJ., Hidayatullah and Dayal,JJ., dissenting), that the proceedings were barred and were not saved by the second proviso to s. 34 (3). Per Das and Kapur, JJ. The second proviso to s. 34 did not revive the power to assess which hid already become barred by s. 34 (3). S. C. Prashar, Income-tax Officer v. Vasantsen Dwarkadas, [1964] Vol. 1 S. C. R. 29 followed. Per Sarkar, J.-The second proviso to s. 34 (3) was unconstitutional as it offended Art. 14 of the Constitution. The Commissioner of Income-tax, Bihar & Orissa v. Sardar Lakhmir Singh, [1964] Vol.1 S. C.R. 148, followed. Per Hidayatullah and Dayal, JJ.-The notice and proceedings were valid. The assessment was governed by the second proviso to s. 34 (3) as amended in 1953 and by s. 31 of the Amending Act of 1933. The notice was further saved by the provisions of the Amending Act of 1959. JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 585 of 1960.
Appeal from the judgment and order dated September 4, 1957
of the Bombay High Court in Special Civil Application No.
1400 of 1957.
K. N. Rajagopal Sastri and P. D. Menon for the Appellants.
J. B. Dadachanji, O. C. Mathur and Ravinder Narain for the
Respondent.
1962. December 12. The following separate judgments were
delivered by Das,J., Kapur, J., and Sarkar, J The judgment
of Hidayatullah and Raghubar Dayal, JJ., was delivered by
Hidayatullah, J.
132
S. K. DAS, J.-The facts of this appeal have been stated by
my learned brother Kapur,J. As I am in agreement with him,
I need not re-state the facts.
The assessment years were 1944-1945, 19451946 and 1946-47.
The notice was issued by the Income-tax Officer on February
18, 1957, pursuant to a direction given by the Appellate
Assistant Commissioner in an appeal of another assessee.
The only question is whether the second proviso to sub-s (3)
of s. 34, as amended in 1953 saves the proceedings impugned.
For the reasons given by me in S. C. Prashar, Income-tax
Officer v. Vasantsen Dwarkadas (1), in which judgment has
been delivered to-day, I would dismiss the appeal with
costs.
KAPUR, J.-This is an appeal brought on behalf of Revenue
against the judgment and order of the High Court of Bombay
on a certificate granted by that Court.
In W. P. No. 1400/57 the present respondent challenged the
jurisdiction of the Income-tax Officer to issue notice under
s. 34(1) of the Indian Act, hereinafter called the “Act”.
The assessment years are 1944-45, 1945-46 and 1946-47 and
the notice was issued by the Income-tax Officer on February
18, 1957, pursuant to a direction given by the Appellate
Assistant Commissioner in an appeal of another assessee that
the income was the income of a partnership of which the
respondent and the other assessee were partners. The High
Court held that the respondent was a stranger to the
proceedings before the Appellate Assistant Commissioner and
that the second proviso to s. 34(3) of the Act under which
the notice was given was unconstitutional as it offended
Art. 14 of the Constitution.
(1) [1964] Vol. 1 S.C.R. 29.
133
The facts of the appeal are these : The respondent was the
karta of a Hindu Undivided Family which carried on business
as merchants and commission agents in cotton, grains and
other commodities. That Hindu Undivided Family was assessed
for the assessment years 1944-45, 1945-46 and 1946-47. The
assessment for the year 1944-45 was completed by the Income-
tax Officer on March 14, 1949, and an appeal was taken
against that assessment to the Appellate Assistant
Commissioner and was decided on February 9, 1956, and then
an appeal was taken to the Income-tax Appellate Tribunal
which has not been shown to have been decided. For the
assessment years 1945-46 and 1946-47 the assessment was
completed in March and May, 1950, respectively. Appeals
were taken against these assessments to the Appellate
Assistant Commissioner who remanded the cases to the Income-
tax Officer and they have not yet been decided. As regards
the assessment year 1946-47 a notice under s. 34(1) was
issued and the order in that case was passed on March 6,
1956. Against that order an appeal was taken to the Appel-
late Assistant Commissioner which is still pending. It
appears that for the year of assessment 1945-46 no notice
under s. 34(1) of the Act was issued.
In 1946 the respondent on behalf of the Hindu Undivided
Family filed a suit against one Jagannath Ramkishan for
rendition of accounts as the Munim of the respondent. His
defence was that he was a partner and not a Munim which was
accepted and the suit was dismissed. An appeal against that
decree was dismissed by the High Court. Jagannath Ramkishan
died during the pendency of the appeal and his widow
Kalavati was impleaded. In the meantime proceedings under
s. 34(1) (a) of the Act were started against Kalavatibai for
the assessment years 1944-45, 1945-46 and 1946-47 in respect
of the business which her husband Jagannath Ramkishan had
claimed to be a partnership business of the
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respondent’s Hindu Undivided Family and himself. Two orders
were passed by the Income-tax Officer for those ),cars.
Kalavatibai took appeals against those orders and the
Appellate Assistant Commissioner on October 10, 1956, in
allowing those appeals gave a finding that the business
belonged to the partnership as claimed by Jagannath
Ramkishan and the Income-tax Officer was authorised to make
assessments under the provisions of s. 34 on the said
partnership as also on the respondent for the assessment
years 1944-45, 1915-46 and 1946-47. Thereupon a notice was
issued with regard to the three assessment years on February
18, 1957, against M//s Jagannath Fakirchand and Jagannath
Ramkishan. These notices were challenged and were held to
be illegal. Against that order of the High Court this
appeal is brought on a certificate of the High Court under
Art. 132(1) and Art. 133(1)(b) of the Constitution.
For the reasons given in S. C. Prashanr, Income-tax Officer
v. Vasantsen Dwarkadas (1), judgment in which has been
delivered today, this appeal is dismissed with costs.
SARKAR J.-This case is concerned with the three assessment
years 1944-45 1945-46 and 1946-47. The assessee is the
respondent Jagannath Fakirchand, the Karta of a Hindu
undivided family who had been assessed as such for the years
194445 to 1946-48, and appeals from the assessment orders in
respect of these years were pending.
The assessee had filed in 1946 a suit against an ex-
employee, Jagannath Ramkishan for accounts of certain
transactions. Jagannath Ramkishan contended that he was not
an employee but the transactions were the transactions of a
business carried on in partnership between him and the
assessee. The trial court upheld the contention of
Jagannath Ramkishan.
(1) [1964] Vol. 1 S.C.R. 29.
135
The asessee appealed to he High Court of Bombay against the
decision of the trial court but in the meantime Jagannath
Ramkishan had died- and his wife, Kalavatibai, had been
substituted in his place in that appeal. The High Court
dismissed the appeal but said nothing as to whether
Jagannath Ramkrishan was a partner.
In the view of the decision in the appeal mentioned in the
preceeding paragraph, the revenue authorities started
proceedings against Kalavatibai under s.34(1) (a) of the
Income-tax Act and assessed her on the entire income in the
aforesaid three years, realised from the said transactions.
Kalavatibai then appealed from this assessment and in the
appeal, she contended that her husband’s estate was not
liable for the tax on the entire income as the income
belonged to a firm of which her husband was only one the
partners. The appellate Assistant Commissioner accepted
this contention of Kalavatibai and observed : “In view
of my finding………… thatthe business belonged to
the partnership…….the Income-tax Officer is. hereby
authorised tomake assessments under the provisions of s.
34 on the said partnership as also on the other partner,
Shri Jagannath Fakirchand for the assessment years 1944-45,
1945-46 and 1946-47.”
In pursuance of this order the Income-tax Officer started
proceeding under s. 34 (3) of the Income-tax Act, 1922,
against the assessee by issuing a notice on February 18,
1947, calling on him to file a return in respect of the
aforesaid three assessment years as that income had escaped
assessment. Thereupon the assessee moved the High Court of
Bombay under Art. 226 of the Constitution for a writ to
quash the aforesaid notice and to prohibit proceedings
being taken thereunder. The High Court allowed the writ.
Hence this appeal.
136
The only question in this appeal is whether the second
proviso to s. 34 (3) of the Income-tax Act, 1922 as amended
in 1953, could save the proceedings impugned. For the
reasons mentioned in my judgment in The Commissioner of
Income-tax, Bihar & Orissa v. Sardar Lakhmir Singh (1), I
think that proviso is invalid as offending Art. 14 of the
Constitution and affords no protection to the revenue
authorities. It may be added that the impugned notice was
issued in consequence of an order under s. 31 in a
proceeding to which the assessee was not a party.
In the result the appeal is dismissed with costs.
For the judgment of Hidayatullah and Raghubar Dayal, JJ.,
see S. C. Prashar, Income-tax Officer v. Vasantsen
Dwarkadas, ante p. 29.
By COURT : In accordance with the opinion of the majority,
this appeal is dismissed with costs.
Appeal dismissed.
(1) [1964] Vol. 1 S.C.R. 148.
137