1. This is a reference under Section 66(1) of the Income-tax Act, 1922. The assessment year relevant to this reference is 1947-48, the corresponding previous year being the year which ended on Diwali of 1946.
2. One Sodradevi, widow of Narsinghdas Daga, and her three major sons constituted certain partnerships and her three minor sons are Gowardhandad, Hiralal an Sunderlal. On 3rd January, 1949, each of the three minor sons made a voluntary return of income for the above assessment year. The return was signed by Dwarkadas. The return showed the income received by the minor as his share of profits in the said partnerships. The Income-tax Officer, however, has passed no order whatever on that return. He, however, included the income of the 3 minors shown in the returns in the assessment of their mother, Sodradevi, treating the same as being includible under the provisions of section 16(3) (a) (ii).
3. Sodradevi filed an appeal to the Appellate Assistant Commissioner against the inclusion of the income of the minors in her assessment. The Appellate Assistant Commissioner upheld the Income-tax Officer's action. Sodradevi filed a second appeal to the Income-tax Appellate Tribunal, hereinafter referred to as 'the Tribunal'. By that time, however, the Nagpur High Court had decided in references filed by Sodradevi for earlier years that section 16(3) (a) (ii) was applicable only to the father but not to the mother. Following the ratio of that judgment of the Nagpur High Court, the Tribunal deleted the income of the three minors from the assessment of Sodradevi's income. In order to bring to tax the income so deleted from the assessment of Sodradevi, the Income-tax Officer issued under Section 34(1) (b) a notice dated 1st August, 1960. In pursuance of this notice, all the three minor assessees filed their returns on 12th December, 1960, under protest raising an objection that the action taken was without jurisdiction and time-barred. On 30th December, 1960, the Income-tax Officer completed the assessments of the three minors under Section 23(3) read with section 34(1) (b). The Appellate Assistant Commissioner accepted the contention of the assessees and cancelled their assessments. In appeal, the Tribunal upheld the order of the Appellate Assistant Commissioner.
4. Thereafter, an application was made to the Tribunal on behalf of the revenue under Section 66(1) for a reference being made of the following two questions :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the return of income filed by the assessee under the signature of his elder brother was a valid return ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified on holding that initiation of action under Section 34 was bad and time-barred and the assessment was void ?'
5. The Tribunal refused to refer the first question applied for giving its reasons for the same, but referred the second question applied for but with a slight modification. The revenue has made no complaint nor has it any grievance against the modification so made when referring the question. The question as referred is :
'Whether, on the facts and in the circumstances of the case, the action taken by the Income-tax Officer under section 34(1) (b) against the assessee for the assessment year 1947-48 by the issue of the notice date August 1, 1960, was without jurisdiction and time-barred ?'
6. Now, so far as the first question which was sought to be referred by the revenue's application for reference is concerned, the position is similar to, if not completely identical with, that relating to the same question which was applied for to be referred but was not referred in the Income-tax Reference No. 67 of 1965. Mr Hajarnavis, the learned counsel for the revenue, has advanced the same arguments, raised the same contentions and has made the same applications as he had made in that Income-tax Reference No. 67 of 1965 We have, in our judgment in that matter which we have just delivered, rejected whose arguments, contentions and applications. It is not necessary for us to repeat the same here, because there is nothing new either in the facts and circumstances of this case or in the arguments, etc, advanced in this case in connection with question No. 1. The same reasoning and conclusions apply in this case also in connection with that question No. 1.
7. In the proceedings up to the stage when the Tribunal made its order on the applications for reference, the matter relating to each of the said three minor assessees was dealt with separately. So far as this reference is concerned, the material facts and circumstances as also the points of law arising under the question for our consideration are identical. The Tribunal has, therefore, made this reference as a single reference and has submitted a single statement of the case. We propose to deal with the cases of all the three minors as a single case and will hereafter proceed as if there was but one assessee, but whatever we say will apply to each of the said three minor assessees.
8. So far as the question referred is concerned, Mr. Thakar, the learned counsel for the assessee, pointed out that the assessee had in fact filed a voluntary return, but the Income-tax Officer has not at any time proceeded with the assessment nor has he passed any order in connection with that voluntary return. He contended that when in respect of any year a return has been voluntarily submitted for assessment, the Income-tax Officer cannot chose to ignore the return and any notice of reassessment and consequent assessment under Section 34 ignoring the return is invalid. In support of his contention he relied upon three judgments of the Supreme Court, namely, Commissioner of Income-tax v. Ranchhoddas Karsondas, Estate of the Late A.M. K. M. Karuppan Chettiar v. Commissioner of Income-tax and Commissioner of Income-tax v. M. K. K. R. Muthukaruppan Chettiar.
9. In Ranchhoddas's case, a return in answer to a general notice under Section 22(1) was filed. No assessment was made on that return. Subsequently, however, the Income-tax Officer initiated action under Section 34. The Supreme Court held that the notice issued under Section 34 was improper, because with the return already filed, there was neither an omission nor a failure on the part of the assessee, nor was there any question of assessment escaping and that the notice under section 34(1) was, therefore, invalid and the consequent assessment, equally so. The ratio for so holding was that where the assessee himself chooses voluntarily to make a return, no question can arise under Section 34 of assessment escaping, and, therefore, there would be no necessity to serve any notice under Section 34. That principle has been accepted and followed in the said two later Supreme Court judgments. In view of the law so laid down by the Supreme Court we must, as the assessee had filed a voluntary return but no assessment had been made thereon, hold that the Income-tax Officer had no legal right to issue notice under Section 34(1) (b) which he in fact issued. Because of that reason, the question referred must be answered in the negative.
10. Mr. Hajarnavis, however, sought to distinguish the facts in the said three cases from the facts in the case before us. He pointed out that in Ranchhoddas's case, on the date when the notice under Section 34 was issued, the time to make the assessment on the voluntary return had not expired and it was possible for the Income-tax Officer to proceed to assess on the basis of the voluntary return, whereas in the case before us, on the date when the notice under Section 34 was issued, the assessment on the basis of the voluntary return had become time-barred. Mr. Hajarnavis's contention was that the ration laid down in Ranchhoddas's case should be confined to be applicable only to those cases in which the making of the assessment on the voluntary return has not become barred by time at the date on which notice under Section 34 is issued. Undoubtedly, there does exist this distinction as pointed out by Mr. Hajarnavis. But we must also consider the above two other judgments of the Supreme Court. In Karuppan Chettiar's case, a notice under Section 34 had been issued in respect of the three assessment years and, on the facts of that case, as appearing from the judgment of the Supreme Court, the making of assessment in respect of the first two years had become barred by time when the notice under Section 34 was issued, though it was not so in the case of the third year. Nonetheless, the judgment of the Supreme Court makes no distinction in respect of the third year in contrast to the first two years and has applied the same ratio as was laid down in Ranchhoddas's case equally in respect of all the three years. Same was the position in the case of Muthukaruppan Chettiar. It also related to three consecutive assessment years. For each of the three years, a voluntary return had been filed but no assessment had been made on the date when the notice under Section 34 was issued. At the date of that notice, the making of assessment on the voluntary return in respect of three years. Nonetheless, the Supreme Court applied the said ration equally in respect of all the three years. In the light of these two judgments of the Supreme Court, although a distinction in fact exists as between the case before us and Ranchhoddas's case, we cannot make any difference in the legal position on the basis of such distintion. It is true that it appears that in these two latter cases, no such distinction was sought to be made and the Supreme Court has not specifically considered or decided that the ratio of Ranchhoddas's case can apply even to cases where the making of assessment is bared at the date when the notice under Section 34 is issued, but, in our opinion, it is not open to us to make such a distinction when the Supreme Court has in fact not made such a distinction, even though, such a distinction did in fact exist before the Supreme Court in each of the two latter cases.
11. Our answer to the question, therefore, is that the action taken under Section 34(1) (b) by the issue of the notice dated 1st August, 1960, was without jurisdiction as no assessment had been made on the voluntary return for that year filed by the assessee. The last part of the question is whether such action taken under Section 34(1) (b) was time-barred, but that part of the question does not require to be answered by us, because we have held that the Income-tax Officer had no jurisdiction whatever to issue tha notice under Section 34, be it within or be it without the bar of limitation. We, therefore, unnecessary.
12. We may state, however, that Mr. Hajarnavis had during his argument stated that even in this reference he desired to argue the same points and advance the same contentions which he had made in Income-tax Reference No.. 66 of 1965. We, however, told him that it would be totally unnecessary to advance the said argument or raise the same contentions because the Income-tax Officer did not, in our opinion, have any jurisdiction whatsoever to issue a notice under Section 34. It was because of that reason that Mr. Hajarnavis refrained from re-urging the same arguments and contentions we also have not dealt with the same.
13. The revenue will pay the costs of the assessees.