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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.

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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-

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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 134 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

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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