1. This is a reference made by the Income-tax Appellate Tribunal under s. 66(2) of the I.T. Act, 1922, at the instance of the High Court. The following question has been referred to us :
'Whether, there was any valid service of the notice under section 34(1A) on the Hindu undivided family ?'
2. A few facts may be stated :
We are concerned with the reference for the assessment year 1946-47 and the corresponding previous year is the year 1945. The assesses is a HUF doing business in petrol and textiles. One Shrikrishna Bijnath, who died in 1933, left behind him three sons, Madhavprasad, Jagmohan and Kunjbehari. Shrikrishna started a business in petrol under the name of Madhav Motor Stores. The income from this business was assessed in the status of HUF. Another business called Ruia Textiles Company was started after his death in or about 1939. Similarly, two other businesses in the names of textile agents and chemical agents were also started in 1941 and 1942, respectively. On December 15, 1941, the three brothers entered into an agreement in which it is stated that they had effected a severance amongst themselves from January 1, 1940. The agreement was apparently to keep the record of the partition to avoid future dispute. In the document it was, inter alia, mentioned that the first two businesses could not be divided and were accordingly held by them as tenants in common in equal shares. On the very day, a partnership deed covering the two businesses was entered into. From 1942-43 onwards, it was claimed that income from these businesses should be assessed on the fiem. This claim was, however, not accepted. Similar claims were made by them for the subsequent years including the year with which we are concerned and met with the same fate. All the assessments were done on the basis of income earned by the HUF. The appeals against the determination of status for these years were not successful.
3. Subsequent to the original assessments, it came to light that income had escaped assessment in these years among others. The cases were originally referred to the Investigation Commission constituted under the Taxation on Income (Investigation Commission) Act, 1947. This Act was subsequently declared ultra vires by the Supreme Court and in July, 1954, Parliament enacted s. 34(1A). Steps were thereafter taken to bring to tax the escaped income by issuing notices on December 22, 1954, after complying with the necessary formalities. Notices for the assessment years 1942-43 to 1945-46 were served on December 24, 1954. A copy of the notice for the year 1942-43 is to be found at annexure D to the statement of the case. For the year with which we are concerned, viz., 1946-47, the office copy of the notice under s. 34(1A) is not on record. The notices for the remaining years 1943-44 to 1945-46 were identical in form with the notice for the assessment year 1942-43 at annexure D. These notices were accepted on behalf of M/s. Madhav Motor Stores by one M. Kamat for partner. Returns for all these years were field on the same day, i.e., April 25, 1955. No objection was taken at that time either regarding the alleged omission to serve the notice or to the issue or service of the notice in a particular form. The assessment was accordingly completed by the ITO. In appeal to the AAC, the point about alleged omission of service or invalidity of service was not raised. As the assessee did not get necessary relief from the AAC, be, thereafter, filed appeal to the Tribunal. In the appeal to the Tribunal a specific point was taken in ground No. 3 which is set out in paragraph 11 of the statement of the case, which reads as follows :
'The appellant next submits that the service of the notice under section 34(1A) is bad in law. The said notice was issued in the name of Messrs. Madhav Motor Stores and the same was served upon Shri Madhav prasad Ruia who signed the acknowledgment in respect of the said notice as partner of Madhav Motor Stores. The return filed was also by the said shri Madhavprasad Ruia as a partner of M/s. Madhav Motor Stores. Thereafter, the assessment was completed by the Income-tax Officer in the status of HUF. The first assessment was made on 'the Madhav Motor Stores, Prop.M. S. Ruia'. The appellant submits that if it was the intention of the Income-tax Officer-tax Officer to make the assessment against the HUF then a proper notice should have been issued and served upon the HUF. In the present case, the notice is clearly issued on a firm and the acknowledgment of the notice and the filing of the return is by the said Madhavprasad Ruia, a partner of M/s. Madhav Motor Stores. It is also a fact that there is a registered firm of the name of M/s. Madhav Motor Stores and it is submitted that the notice was issued and served on the firm of M/s, Madhav Motor Stores and not on the HUF.'
4. Subsequently, by a letter dated October 13, 1961, the assessee raised a ground about alleged absence of service of notice on the assessee for the assessment year in question.
5. As far as ground No. 3 by the assessee, which was extracted in its entirety above, not much discussion is to be found in the order of the Tribunal pertaining to the assessment year 1964-47, and ther is merely a cryptic observation in the opening paragraph of the said order that this point is common to all the assessment years and has been disposed of and decided against the assesssee in the Tribunal's order in I.T.A. No. 9499 of 1958-59 for the assessment year 1942-43. The second paragraph of the order of the Tribunal goes on to deal with the assessee's second contention, which was pec flair to this year, viz., that no notice was issued at all for this year. It was observed that there was no substance in the contention.
6. We have already extracted the question referred to us and this clearly pertains not to the assessee's special contention about the non-service of notice for the assessment year but pertains only to t he question of validity of the service of notice. It has been contended by the assessee that the notice was issued in the name of M/s. Madhav Motor Stores and the notice indicates that it was issued in the name of M/s. Madhav Motor Stores and the notice indicates that it was issued to the partnership firm. Accordingly, it was contended that the reassessment of the business carried on in the same name in the status of HUF was not proper.
7. Mr. Dastur, who appeared on behalf of the assessee, drew over attention to the decision given by a Division Bench of this court in Income-tax Ref. No. 56 of 1966, which pertains to the earlier for assessment year for this very firm, viz., assessment year 1942-43 to 1945-46. In the order made in the said reference, the question referred to the High Court under s. 66(1) was reframed in order to bring out properly the question arising from the Tribunal's order. The reframed questions reads as follows : 'Whether notice under s. 34(1A) of the Indian I.T. Act, 1922, for the assessment years 1942-43 to 1945-46 having been surveyed on the assessee as a firm their assessment in the status of HUF consequent thereon are valid ?' The Division Bench there after referred to the provisions of s. 34 and considered the observation of the Supreme Court in CIT v. K. Adinarayana Murthy : 65ITR607(SC) . Following that decision, it was held that the notices having been issued to the assessee in the status of a firm the reassessment of the assessee in their status as an HUF in pursuance of those notice was invalid.
8. Mr. Joshi submitted in the first instance that the same result ought not to follow for the assessment year 1946-47, inasmuch at it was the assessee's contains that no notice was issued. That argument, we are afraid, is not open to him. The Tribunal rejected that contention, which must mean that the notice was issued to the assessee. The Tribunal rejected the assessee's condition as to the validity of service of this notice for the identical result for which similar contention for four other assessment years had been rejected. This must be taken to mean that, in the view of the Tribunal, notice served on the assessee for the assessment year in the question was identical with the notices served for the four years commencing with the assessment year 1942-43.
9. A copy of the notice for the assessment year 1942-43 is annexed to this reference at annexure D. It is this very notice which has been considered in the decision given by the Division Bench of this court for this very assessee in Income-tax Reference No. 50 of 1966. What has been decided in that reference must govern the decision in this case. Accordingly, the question referred to us is answered as follows :
10. Answer :
The notice was issued to the assessee in their status of a firm. There was no valid notice issued to the assessee in the status of HUF and, accordingly, there assessment in the status of a HUF would be valid. The parties will bear their own coats of this case.