JUDGMENT R.L. Gulati, J.
1. Under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act" the Income-tax Appellate Tribunal. Allahabad Bench, Allahabad, has submitted this statement of the case at the instance of the Commissioner of Income-tax, U.P., Lucknow.
2. There was a joint Hindu family at Jhansi of the name and style of Nathu Ram Jawaharlal. On May 19, 1945, there was a partition in this family as a result of which two smaller undivided families came into existence, namely, (i) Bhagwan Dass Sita Ram, the assessee, and (ii) Jawaharlal Mani Ram. The bigger Hindu undivided family preferred a claim under Section 25A of the Act for an order recognising the partition. While this claim was pending the assessee family filed voluntary returns under Section 22(1) of the Act for the assessment years 1946-47 to 1949-50 on November 18, 1950. The Income-tax Officer did not accept the claim of partition and assessed the income of the two units in the hands of the bigger Hindu undivided family. The partition was not recognised even by the Appellate Assistant Commissioner of Income-tax on appeal. Finally, the bigger Hindu undivided family appealed to the Income-tax Appellate Tribunal. The Tribunal by its order dated October 28, 1954, accepted the claim and held that a partition in the family had taken place with effect from May 19, 1945. The Tribunal directed that assessments should be made on the component units of the bigger Hindu undivided family, namely, the assessee and Jawahar Lal Mani Ram. The Income-tax Officer instead of proceeding on the basis of the voluntary returns already filed by the assessee proceeded to take action under Section 34(1)(b) and completed the assessment for all the four years on September 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 this court under Article 226 of the Constitution. On March 30, 1960, the High Court quashed the assessment orders on the ground that, as voluntary returns filed by the assessee were pending, no proceeding could be taken under Section 34, Thereafter, the Income-tax Officer initiated proceedings on the basis of the voluntrary returns. The assessee again filed a writ petition praying for quashing the proceedings on the ground that the department could not proceed against it on the basis of the voluntary returns. This petition was rejected by the High Court and, thereafter, the Income-tax Officer proceeded to complete the assessments under Section 23(3) and passed assessment orders on May 31, 1962, in respect of all the four assessment years. These assessment orders were again challenged by the assessee by way of an appeal to the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner of Income-tax cancelled the assessments on the ground that they were barred by time. The department appealed to the Income-tax Appellate Tribunal. The appeals relating to the assessment years 1946-47 and 1947-48 were withdrawn by the department and the appeals relating to the remaining two assessment years were dismisssd by the Tribunal on the ground that no assessment could be made on the basis of voluntary returns which had exhausted themselves after the expiry of four years from the end of the assessment years to which they related. According to the Tribunal, assessment could only be made by initiating proceedings under Section 34 with the help of the second proviso to Sub-section (3) of Section 34. The department is aggrieved. Hence this reference.
3. The following question of law has been referred for our opinion:
" Whether, on the facts and in the circumstances of the case, valid assessments could be made on 31st May, 1952, for the assessment years 1948-49 and 1949-50 on the basis of voluntary returns of income filed under Section 22(1) of the Indian Income-tax Act, 1922, on November 18, 1950 ?
This reference came up before a Division Bench of this court of which brother Seth J. was a member. On behalf of the department it was contended before the Bench that voluntary return having been filed by the assessee, it must be taken that assessment proceedings had commenced and so long as those proceedings were pending, income could not escape assessment and as such Section 34 was not applicable. Reliance was placed on a recent decision of this court in Sool Chand Ram Sewak v. Commissioner of Income-tax, [1969] 73 ITR 466 (AH).. The facts of that case are similar to the facts of the present case and it fully supports the case of the department. However, the correctness of that decision was doubted by the Bench and accordingly it referred the case to a larger Bench. That is how this reference has come before this Full Bench.
4. The first question that we have to decide is as to whether assessments could be made under Section 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. Now, it is not disputed that when a return of income is filed by a person voluntarily under Section 22(1), assessment proceedings commence against him and Section 34 does not come into play at all so long as the assessment proceedings remain pending. But it is contended that a return exhausts itself after the expiry of four years from the end of the assessment year to which it relates. After the expiry of that period, no assessment is possible on the basis of the voluntary return. In such a case assessment is possible only under Section 34, if the case is also covered by the second proviso to Section 34(3). It is not possible to accept this contention.
5. Sub-section (3) of Section 34 provides a period of limitation of four years for an assessment under Section 23. If assessment proceedings commence by filing of voluntary return, as indeed they do, on the expiry of the period of four years, such proceedings are suspended or interrupted. But neither the proceedings nor the return become invalid. If subsequently the bar of limitation which intervenes is removed, the proceedings revive. The second proviso to Section 34(3) raises the bar of limitation in certain circumstances. That proviso reads :
" Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under Section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 31, Section 33, Section 33A, Section 33B, Section 66 or Section 66A."
6. Thus where assessment is to be made in consequence of or to give effect to any rinding or direction contained in an appellate order, etc., the bar of limitation is lifted and the assessment can be made at any time. The instant case is a case of that nature where an assessment had to be made against the assessee in consequence of or to give effect to a finding or direction contained in the order of the Income-tax Appellate Tribunal. As soon as that order was passed the bar of limitation was lifted and the assessment could be made without any bar of limitation. As the returns had already been filed by the assessee, there was no need to issue a notice under Section 34. In fact Section 34 had no application. If the return had not been filed, of course, the Income-tax Officer would have been justified in initiating proceedings under Section 34.
7. In Commissioner of Income-tax v. Ranchhoddas Karsondas, [1959] 36 ITR 569 (SC). the Supreme Court held that a return in answer to a general notice under Section 22(1) can be filed at any time before the assessment is made and for that there is no time limit. So that if in respect of any year a return is voluntarily submitted before the assessment, the Income-tax Officer cannot ignore the return and proceed under Section 34. This principle has been affirmed by the Supreme Court in Estate of Late A.M.K.M. Karuppan Chettiar v. Commissioner of Income-tax, [1969] 72 ITR 403 (SC). and Commissioner ojIncome-tax v. M.K.K.R. Muthukaruppan Chettiar, [1970] 78 ITR 69 (SC)..
8. Thus it is clear that, in the instant case, Section 34 was not applicable and the assessments could be made on the basis of the voluntary return already filed by the assessee.
9. The next question that arises is as to whether it was open to the Tribunal to give a finding or direction in respect of the assessee. Now, a finding or a direction can be given in the case of an assessee or " any person " according to the second proviso to Section 34(3). The contention of the learned counsel for the assessee, however, is that the expression " any person " includes only such persons as are intimately connected with the assessment of the bigger Hindu undivided family, the appealing assessee. The contention is that the assessee is not a person so intimately connected, but is a stranger.
10. The answer to this contention is to be found in the decision of the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das, [1964] 52 ITR 335 (SC).. While dealing with the scope of the words "any person", their Lordships observed at page 346:
" 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 Section 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 Assistant Commissioner. Modification or 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 the Hindu undivided family or the individual, as the case may be. 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 assessment of the year under appeal."
11. Thus, according to the test laid down by the Supreme Court, " any person " would include " that 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 ". Now, it cannot be disputed that the income earned by the assessee had been included in the assessment of the bigger Hindu undivided family and when that assessment was set aside on appeal, the assessee became liable to be assessed in respect of a part of the income which had previously been included in the income of the bigger Hindu undivided family. It may be noticed that the case of the Hindu undivided family has been specifically mentioned by the Supreme Court so that when the assessment of a Hindu undivided family is set aside on the ground that there has been a partition in the family, the separating members automatically become liable to assessment.
12. It was then urged that the direction given by the Tribunal could only be given in respect of the year in which the partition took place. Thus, the direction could be given only in respect of the assessment year 1946-47. There is no force in this contention either. The finding or direction has to be given while disposing of an appeal and the only requirement, therefore, is that the finding or the direction should be relevant to the assessment year under appeal. In the instant case the question as to whether there was a partition and consequently as to whether the income assessed in the hands of the Hindu undivided family belonged to it or not directly arose in the assessment years 1948-49 and 1949-50 in respect of which the appeals came up before the Tribunal. It thus became 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 a direction that it did in each of the two appeals. In our opinion the case of Sool Chand Ram Sewak v. Commissioner of Income-tax has been correctly decided.
13. For the reasons stated above, we answer the question in the affirmative, in favour of the department and against the assessee. The department is entitled to the costs which we assess at Rs. 200.
H.N. Seth, J.
14. I have carefully gone through the judgment prepared by Hon. Gulati J. but regret my inability to concur in the answer proposed by him.
15. Facts leading to this reference have been mentioned in the judgment of Gulati J. and it is not necessary for me to repeat them here. I agree with him that, so long as the returns filed by the assessee relating to the assessment years 1948-49 and 1949-50 were pending and they had not been finally disposed of, there was no occasion for the Income-tax Officer, to initiate proceedings by issuing notices under Section 34(1) of the Income-tax Act and that he could, on the basis of the returns already filed by the assessee, complete the assessment proceeding provided the second proviso to Section 34(3) applied to the facts of the present case and the bar of limitation mentioned therein had been lifted. It is not disputed that if the present case is not covered by the second proviso to Section 34(3), it would not be possible to uphold the assessments for the years 1948-49 and 1949-50, made by the Income-tax Officer on May 31, 1962, The second proviso to Section 34(3) of the Act runs thus :
" Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under Section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding of direction contained in an order under Section 31, Section 33, Section 33A, Section 33B, Section 66 or Section 66A."
16. This proviso merely lays down that if under some provisions contained in the Act, the assessee or some other person is to be assessed or reassessed in consequence of or in order to give effect to a finding or direction contained in an order under Sections 31, 33, 33A, 33B, 66 or 66A, the period of limitation for making assessment or reassessment as provided in Section 34(3) shall not apply.
17. It does not provide as to when and in what circumstances assessment or reassessment of an assessee or of any other person is to be made in consequence of or in order to give effect to any finding or direction contained in an order under any of the Sections 31, 33, 33A, 33B, 66 or 66A of the Act. The circumstances in which such assessments are to be made as a consequence of or in order to give effect to such findings, orders or directions have to be found in other provisions of the Act This has been made clear in the majority judgment of the Supreme Court in the case of Income-tax Officer v. Murlidhar Bhagwan Das, wherein the learned judge observed as follows :
" It is important to remember that the proviso does not confer any fresh power upon the Income-tax Officer to make assessments in respect of escaped incomes without any time limit. It only lifts the bar of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the bar cannot be so construed as to increase the jurisdiction of the tribunals under the relevant section. The lifting of the bar was only to give effect to the orders that may be made by the appellate, revisional or reviewing tribunal within the scope of its jurisdiction."
18. This observation further makes it clear that in the opinion of the Supreme Court the proviso contemplated only such directions or findings contained in the order under Section 31, etc., that are within the scope and ambit of the respective authority.
19. Next question that arises for consideration is as to which persons are covered by the expression any person and whose assessment or reassessment is contemplated by the second proviso to Section 34(3) of the Act. In my opinion, on this question also the observations made by the Supreme Court in Murlidhar Bhagwan Das case conclude the matter. The observations to which I refer are:
" The expression ' any person ' in its widest connotation may take in any person, whether connected or not with the assessee, whose income for any year has escaped assessment; but this contruction 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 Section 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 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 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."
20. According to these observations, the expression " any person " does not cover a person who is not connected with the assessee in whose case the direction is made or the finding is regarded. It merely covers the case of a person who is connected with the assessee in the sense that his assessment depends upon the assessment of the assessee concerned. The Indian Income-tax Act, 1922, has made provision for cases where the assessment of persons other than the assessee depends upon an order made in his assessment. For example, Section 23(5)(a) and 23(5)(b) provide for a case where the assessment of a partner depends upon the assessment of the firm in which he is a partner. Similarly, Section 34(4) provides for a case in which, while altering the assessment of a firm or of an association of persons, the Assistant Commissioner may authorize an alteration in the assessment of a partner or the individuals constituting the association. Section 25A of the Act provides for a contingency in which assessment of an individual member of a family depends upon the assessment of the Hindu undivided family. When the Supreme Court observed that the examples of persons so connected with the assessee given by it are merely illustrative and not exhaustive, it merely meant that in the case of a firm, joint Hindu family, and association of persons, there are provisions in the Income-tax Act according to which the assessment of a partner, member of the Hindu undivided family or an individual depends upon the assessment of the firm, Hindu undivided family or the association of persons. There may still be other provisions in the Act according to which assessment of a class of persons may depend upon the assessment of some other class of persons. This decision neither lays down that it is only in the cases of a firm, Hindu undivided families and association of persons that a question of assessment of any other person arises, nor that the assessments of a partner, a member of a Hindu undivided family or an individual is to be altered as a result of or in consequence of the findings recorded in the assessment proceedings of the firm, Hindu undivided family or association of persons, irrespective of or beyond the provisions contained in the Income-tax Act which provides for such assessment of partners, etc., as a result of or in consequence of the findings contained in the case of a firm, etc., which the order or direction under Section 31, etc., is made. The observations made by the Supreme Court, in my opinion, are clear that such partners and members and individuals, etc., can be assessed in consequence of, or in order to give effect to a finding in the case of a firm, etc., only in accordance with the provisions contained in the Act.
21. I will, therefore, proceed to examine if there is any provision in the Indian Income-tax Act, 1922, which authorises the Income-tax Officer to assess or reassess one of the component units of a Hindu undivided family as a result of a finding arrived at in proceedings for the assessment of the Hindu undivided family that it had disrupted earlier and whether any such direction for the assessment of the component units could be given. Now, for purposes of assessment, a Hindu undivided family is an entity entirely separate and different from the members or the units constituting it. The Hindu undivided family, Nathu Ram Jawahar Lal, was disrupted in the year 1945 and as such it might have been possible to urge that, so far as the assessment year 1946-47 was concerned, the assessment of the units constituting the family depended upon the assessment of the Hindu undivided family. But, as I see, Section 25A has no application to the assessment of the component units of Nathu Ram Jawahar Lal in respect of the years subsequent to that in which the dissolution took place. No other provision has been brought to my notice according to which the assessment of component units depended upon the assessment of Messrs. Nathu Ram Jawahar Lal. Thus, the assessment of the present assessee for the assessment year 1947-48 onwards did not depend upon the assessment of Messrs. Nathu Ram Jawahar Lal in the sense in which the Supreme Court used that expression in Murlidhar Bhagwan Das's case. Moreover, no provision has been brought to my notice which enabled the authorities to issue a direction in respect of the present assessee while -passing orders under Section 31, etc.
22. I am accordingly of opinion that, for these two years, it cannot be said that the assessee was connected with the firm, Nathu Ram Jawahar Lal, and that its assessment could be altered in consequence of or in order to give effect to any finding contained in the assessment proceedings of Nathu Rain Jawahar Lal. There is no provision in the Income-tax Act which authorizes the Income-tax Officer to proceed with the present assessment proceedings initiated on the basis of voluntary returns filed by the assessee, in consequence of, or to give effect to, the findings of the Appellate Tribunal dated October 23, 1954. That order of the Tribunal, therefore, does not have the effect of lifting the bar of limitation imposed by Section 34(3) of the Act. The assessment under Section 23, therefore, could not be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable. The assessment orders made in respect of the assessment years 1948-49 and 1949-50 on May 31, 1962, were, therefore, clearly incompetent.
23. I would, therefore, answer the question referred to us for opinion in the negative and in favour of the assessee. The assessee is entitled to costs which I assess at Rs. 200.
BY THE COURT
24. Under Section 66(1) of the Indian Income-tax Act, 1922, the Income-tax Appellate Tribunal, Allahabad, has submitted this statement of the case seeking the opinion of this court on the following question of law :
" Whether, on the facts and in the circumstances of the case, valid assessments could be made on 31st May, 1962, for the assessment years 1948-49 arid 1949-50 on the basis of voluntary returns of income filed under Section 22(1) of the Indian Income-tax Act, 1922, on November 18, 1950? "
25. According to the opinion of the majority, we answer the question in the affirmative, in favour of the department and against the assessee. The department is entitled to the costs, which we assess at Rs. 200.