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Jawahar Lal Mani Ram Vs. Commissioner of Income-tax, U. P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Miscellaneous Case No. 243 of 1959. Reference under section 66(1) of the Indian Income-ta
Reported in[1963]48ITR837(All)
AppellantJawahar Lal Mani Ram
RespondentCommissioner of Income-tax, U. P.
Excerpt:
- - the question which has been referred for the opinion of the court is :whether the assessments made under section 34 of the income-tax act for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50 were bad in law, as they were made after the expiry of the period of four years from the date of filling of those returns on november 18, 1950 ?' it appears that the question as framed and referred to us is incorrect. acordingly, we reframe the question to bring out the point which has been referred to us for opinion in the following manner :whether the assessments made under section 34 of the income-tax act for the assessment years 1946-47, 1947-48, 1948-49 and 1940-50 were bad in law, as they were made after the expiry of the period of four years from the end of the assessment years.....brijlal gupta j. - this is a reference under section 66(1) of the income-tax act. the question which has been referred for the opinion of the court is :'whether the assessments made under section 34 of the income-tax act for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50 were bad in law, as they were made after the expiry of the period of four years from the date of filling of those returns on november 18, 1950 ?'it appears that the question as framed and referred to us is incorrect. the four years period of limitation provided in section 34(3) for completing an assessment or reassessment under that sub-section is from the end of the assessment year in question and not from the date of filing of a return by the assessee. acordingly, we reframe the question to bring out the.....
Judgment:

BRIJLAL GUPTA J. - This is a reference under section 66(1) of the Income-tax Act. The question which has been referred for the opinion of the court is :

'Whether the assessments made under section 34 of the Income-tax Act for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50 were bad in law, as they were made after the expiry of the period of four years from the date of filling of those returns on November 18, 1950 ?'

It appears that the question as framed and referred to us is incorrect. The four years period of limitation provided in section 34(3) for completing an assessment or reassessment under that sub-section is from the end of the assessment year in question and not from the date of filing of a return by the assessee. Acordingly, we reframe the question to bring out the point which has been referred to us for opinion in the following manner :

'Whether the assessments made under section 34 of the Income-tax Act for the assessment years 1946-47, 1947-48, 1948-49 and 1940-50 were bad in law, as they were made after the expiry of the period of four years from the end of the assessment years in question instead of from the date of the filing of the return on November 18, 1950 ?'

The facts giving rise to this reference are that there was a bigger Hindu undivided family, Messrs. Nathuram Jawaharlal. Up to the assessment year 1945-46 this bigger Hindu undivided family used to be assessee to income-tax as a unit. During the assessment year 1946-47 an application was made under section 25A claiming that a disruption had taken place in the family with effect from May 19, 1945. It was further alleged that on disruption of the bigger Hindu undivided family two smaller Hindu undivided families had come into existence, namely, Jawaharlal Mani Ram, which is applicant in this reference, and Bhagwandas Sitaram. The Income-tax Officer did not accept the claim and rejected the application by order dated October 4, 1950. It may be stated that about a month after this date, on November 18, 1950, the applicant filed four returns of its income for the four assessment years 1946-47 to 1949-50 showing income from business which has hitherto been carried on by the bigger Hindu undivided family as its own income. It appears that the other smaller Hindu undivided family, namely, Bhagwandas Sitaram, also similarly filed four returns claiming income from the erstwhile business of the bigger family as its own income. Meanwhile, the bigger Hindu undivided family, namely, Nathuram Jawaharlal, went up in appeal to the Appellate Assistant Commissioner against the order under section 25A. The Appellate Assistant Commissioner in appeal accepted the case of disruption of the bigger Hindu undivided family but not as it desired it to be accepted, namely, with effect from May 19, 1945, but only with effect from February 8, 1952. Against the order of the Appellate Assistant Commissioner a further appeal was taken by the bigger Hindu undivided family and by order dated August 31, 1954, the Income-tax Appellate Tribunal accepted the claim regarding partition in the family with effect from May 19, 1945. The order which it made was as follows :

'The orders of the income-tax authorities are therefore set aside and the Income-tax officer is directed to recognise partition with effect from May 19, 1945, under section 25A of the Income-tax Act'.

Meanwhile, it appears that, apart from the two returns which had been filed by the two smaller Hindu undivided families for the four years in question claiming the income of the erstwhile business of the larger family as their own income, the bigger family also filed blank returns. The Income-tax Officer, following his view that no partition had taken place in the family on May 19, 1945, as claimed by the bigger family, assessed the entire income in the hands of the bigger family, namely, Nathuram Jawaharlal. In doing so he must have taken the figure of the income of the bigger family from the figures of income given in the returns of the two smaller families, as the bigger family itself had filed only a blank return and did not mention any income at all. These assessments were taken up in appeal to the Appellate Assistant Commissioner of Income-tax thereafter to the Income-tax Appellate Tribunal. The Tribunal, following its view, in its order dated August 31, 1954, under section 25A granting recognition to partition with effect from May 19, 1945, appears to have allowed the appeals by orders of date and to have issued a direction to the Income-tax Officer to make fresh assessments as against the smaller units including the applicant in this reference. The direction is quoted in the order of the Appellate Assistant Commissioner dated January 3, 1957, in appeals against assessments subsequently made against the applicant under section 34, and is to the following effect :

'Fresh assessment should be made, one for the period May 19, 1945, up to which the Hindu undivided family was in existence and the other on the component units, namely, Messrs. Jawaharlal Maniram and Bhagwan Das Sita Ram.'

In pursuance of this direction the Income-tax Officer took the sanction of the Commissioner of Income-tax for initiating proceeding under section 34 against the smaller units. The sanction was accorded and thereupon on March 4, 1955, notices were issued by the Income-tax Officer to the smaller unit, namely, Jawaharlal Maniram (the applicant before us) and in pursuance of the notice returns were filed on July 6, 1955, and assessments completed on September 8, 1955. Against the assessment orders the applicant went up in appeal to the Appellate Assistant Commissioner and raised the point that proceedings under section 34(1)(b) were invalid, as returns filed by it on November 18, 1950, under section 22(3) were pending and valid assessments under section 23 could have been made on those returns. The Appellate Assistant Commissioner rejected the contention on a two-fold ground. The first ground was that, as the claim to partition had not been recognised by the Income-tax Officer under section 25A, the Income-tax Officer was bound to make the assessment against the bigger family and as such he returns filed by the smaller family, namely, the applicant, could not be acted upon. The other ground on which the Appellate Assistant Commissioner rejected the contention was that, as no returns has admittedly been filed by the applicant in pursuance of the notice under section 22(1), a default had been incurred by it and its case came under section 34(1)(a). The period of limitation for Completion of proceedings under that sub-section is eight years and as such the assessments completed against the applicant on September 8, 1955, being within eight years of the end of the four assessments years in question were within time and, therefore, valid.

Against the order of the Appellate Assistant Commissioner the applicant went up in appeal to the Income-tax Appellate Tribunal and the same contention was raised before the Tribunal, namely, that the assessments under section 34 were invalid. The Tribunal rejected the contention on a variety of grounds. The first ground was that the applicant not having filed returns in consequence of the general notice under section 22(1) had committed such default as brought its case within ambit of section 34(1)(a) and, as such, the assessments made under that section were justified. The second ground on which it overruled the contention was that under sub-section (3) of section 34 the four year period of limitation is 'from the end of the year in which the income, profits and gains were first assessable'. This language of sub-section (3) the Tribunal interpreted to mean when the income could be first assessed and not when the income first became assessable. The Tribunal held that, as the claim for partition had been recognised only under the order of the Tribunal dated August 31, 1954, and prior to that date assessments could not be made against the applicant, the income first became assessable in the hands of the applicant only with effect from August 31, 1954, and, as from that date a four year period had not expired until September 8, 1955, when the assessment orders were made under section 34, the assessments were not barred by limitation. The third ground on which the Tribunal rejected the contention was that the assessments, having been made by the Income-tax Officer in Pursuance of the directions contained in the order of the Tribunal, the period of limitation provided in section 34(3) did not apply and assessments could be validly made even after the expiry of four years from the end of the assessment years in question. The Tribunal, therefore, confirmed the assessments. The applicant thereupon asked the Tribunal for a statement of the case to this court which the Tribunal did and thus the reference has come to this court.

So far as the first two grounds upon which the Tribunal maintained the assessments are concerned, Sri Gopal Behari, learned counsel for the department, did not make any attempt to support the judgment of the Tribunal. He did not argue that, as there was default in filing returns under section 22(1) and even though returns had been filed under section 22(3), action under section 34 could be validly taken. Indeed he could not do so in view of the decision of the Supreme Court in Commissioner of Income-tax v. Ranchhoddas Karsondas. He also did not seek to support the order of the Tribunal on the second ground, namely, on the interpretation which the Tribunal put on the last few words in section 34(3). He conceded that the meaning of those last few words was that the period of limitation commenced from the end of the assessment year in question and expired after the expired after the expiry of the four years from that date. He did not argue that merely because the order recognising the claim to partition came to be passed by the Tribunal on August 31, 1954, the income first became assessable in the hands of the applicant on that date and not prior to that date during the assessment years in question. The real question, therefore, which remains for our consideration is whether in the circumstances narrated above the assessments made under section 34 are valid and can be legally justified.

Sri Gajadhar Prasad Bhargava has taken his stand firstly upon the decision in Commissioner of Income-tax v. Ranchhoddas Karsondas. On the basis of that decision he has urged that admittedly as the returns had been filed by the applicant before the expiry of four years from the end of the four assessment years in question on November 18, 1950, and as it was possible for the Income-tax Officer to act upon those returns, the mere fact that he did not act upon those returns could not justify the proceedings under section 34. We have carefully examined this argument in the light of the facts in the Supreme Court case as well as the facts of the case before us. In the Supreme Court case a return had been filed. No action was at all taken on that return and the Income-tax Officer ignoring it proceeded to take action under section 34. On those facts the Supreme Court came to the conclusion that no such default as is contemplated by omission or failure to file a return under section 22 having taken place, proceedings under section 34 could not be validly taken. That case did not lay down that if any return filed under section 22(3) had been acted upon and despite the return having been so acted income had escaped assessment, even then no action under section 34 could be taken. Turning now to the facts of the case before us, what had happened in this particular case was that three returns had been filed, two by the smaller units and one a blank return by the bigger Hindu undivided family. A claim was also made before the Income-tax Officer under section 25A that a disruption had taken place in the Hindu undivided family and that on account of that disruption income of the family became assessable not in the hands of the bigger family but in the hands of the two smaller units. Upon a consideration of the entire facts and circumstances and taking into consideration the returns that had been filed, the Income-tax Officer first passed the order that no disruption had taken place and rejected the claim to disruption. Thereafter, he proceeded to pool the entire income which had been separately returned by the two smaller units and assessed the total income in the hands of the bigger Hindu undivided family. The question is whether it would be a proper inference from what the Income-tax Officer did that he ignored the returns filed by the applicant as well as the other smaller unit and did not act upon them and they were still pending. We are clearly of the view that in the circumstances it is wrong to say that the returns had not been acted upon and were still pending when the impugned orders were passed. Acting or not acting upon a return does not necessarily mean passing or not passing an assessment order. An assessment order is the final act in the process of assessment but a return can be acted upon all the same even though acting on the return may not result in the passing of an assessment order. Where an assessment order has been made on a return filed under section 22(3), or in respect of income shown in it but against another person, it cannot be argued that proceedings under section 34 cannot be justifiably taken. There may be no ommission under section 31(1)(a) in filing the return and so it may not be possible to take proceedings under section 34(1)(a) but there may still be a case of income escaping assessment and it may be possible to take proceedings validly under section 34(1)(b). We are, therefore, of the view that the facts and circumstances of the case distinguish it from the facts and circumstances of the Supreme Court case relied on by the learned counsel for the applicant.

The next question is whether the assessments can be justified under section 34(1)(b). It may be recalled that this reference is concerned with four assessment years 19466-47, 1947-48, 1948-49 and 1949-50. During the first two assessment years under consideration section 34, as it stood prior to its amendment by the amending Act of 1948, was in force. The words of the section at time were materially different from those of the section as it stood after the amendment of 1948. The material words in section 34(1) prior to 1948 were :

'If in consequence of definite information which has came into his possession the Income-tax Officer discovers that income, profits or gains chargeable to income-tax have escaped assessment......'

The limitation prior to 1948 for assessment under section 23 or for assessment or reassessment under section 34 was provided by sub-section (2) and not by sub-section (3) of section 34. There was also a proviso to sub-section (2). The proviso was in these words :

'Provided that nothing contained in this sub-section shall apply to a reassessment made in pursuance of an order under section 31, section 33, section 66 or section 66A.'

In 1948 under the Income-tax and Business Profits Tax Amendment Act of that year section 34(1) was split up into two sub-sections, namely, 34(1)(a) and 34(1)(b). Section 34(1)(a) dealt with cases of default by the assessee either by omission or failure on his part to make a return of his income under section 22 or by omission or failure to disclose fully and truly all material facts necessary for the assessment. Section 34(1)(b) dealt with cases where there were no such omission or failure and it was in these words :

'If notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment.....'

It will be noticed that the requirement in sub-section (b) was whittled down and was not as rigorous as the requirement prior to 1948 when a discovery had to be made of escape of income by the Income-tax Officer in consequence of definite information in his possession. Changes were also made regarding the provision relating to limitation. The provision for limitation was made in sub-section (3) and the second proviso to that sub-section was substituted for the proviso to sub-section (2) of the unamended section. The language of the second proviso was made materially different from that of the earlier proviso. The amended proviso was to the effect :

'Provided further that nothing contained in this sub-section shall apply to a reassessment made under section 27 or in pursuance of an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.'

It will be seen that so far as the language of the relevant proviso to the section prior to 1948 and subsequent to 1948 is concerned there was not much difference therein. The material portion of the language of the proviso was and still continued to be 'reassessment made in pursuance of an order' under the various sections mentioned in the proviso.

The question which, therefore, arises so far as the first two assessment years are concerned is whether the section as it stood prior to 1948 or the section as it stood subsequent to 1948 applies to these years. It will be noticed that the period of limitation for taking action under section 34(1) as it stood prior to the amendment of 1948 without there being any default on the part of the assessee, was four years, and the limitation provided under the amended section 34(1)(b) was also four years. Under the unamended section the requirement was possession of definite information in consequence of which discovery of income having escaped assessment should have been made, and under the amended section the requirement was possession of information in consequence of which the Income-tax Officer comes to have reason to believe that income had escaped assessment. These four years from the end of the two assessment years had not expired before the Act of 1948 came into force. It, therefore, follows that the amended section under the Act of 1948 having come into force prior to the expiry of the four year period of limitation, the amended section applies to these two years also. This has been so held in a case of the Calcutta High Court in Income-tax Officer v. Calcutta Discount Co. Ltd. and a case of the Madras High Court in Muhamad Hussain Nachiar Ammal v. Commissioner of Income-tax and a recent case of the Bombay High Court in Commissioner of Income-tax v. Paluram Dhanania. It follows that in considering the question of the validity of the action taken under section 34 the material words which have to be considered are the words of the section after the amendment of 1948, namely, that the Income-tax Officer should in consequence of information in his possession have reason to believe that income, profits or gains chargeable to income-tax have escaped assessment. So far as the language of the proviso is concerned, it has already been pointed out above that materially the language continued to be the same even after the amendment of 1948, namely, that the period of four years limitation provided for assessment or reassessment under section 34 where the escape of income was not due to any omission or default on the part of the assessee, did not apply where the reassessment was made in pursuance of an order under section 31 etc. These words continued in the section as amended by the Act of 1948 until the 1st of April, 1952. The period of four years from the end of the assessment years 1946-47 and 1947-48 expired on March 31, 1951, and March 31, 1952, respectively, i.e., prior to any change having been made in these words, namely, 'assessment made in pursuance of an order under section 31...' It follows that so far as these two assessment years are concerned those words will have to be considered and interpreted.

So far as the other two years are concerned, namely, 1948-49 and 1949-50 the words in the substantive provision of section 34(1)(b) have continued to be the same but the words in the proviso underwent a material change. This change was brought about by the Act of 1953, acting retrospectively with effect from April 1, 1952. The proviso thereafter stood as follows :

'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, etc...'

It will be noticed that for the words 'reassessment made in pursuance of an order' the words substituted were 'assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in and order, etc.' This sub-section, after its amendment by the Act of 1953, specifically mentioned both 'assessment' and 'reassessment' and provided that such assessment or reassessment may be made either against the 'assessee' himself or against 'any other person'. It also altered the words 'in pursuance of' into 'in consequence of or to give effect to any finding or direction'. In the present case the assessment was made in the first instance against the bigger Hindu undivided family. If the bigger the smaller Hindu undivided family is treated to be an entity different from the smaller Hindu undivided family, then, so far as the words of the proviso are concerned the requirement is satisfied if the proviso as it stood after its amendment by the Act of 1953 is taken into consideration. It has been stated that the Act of 1953 was given retrospective effect from 1st April, 1952, and the period of four years from the end of the years 1948-49 and 1949-50 had not expired prior to the coming into force retrospectively of the Act of 1953. It follows that so far as the proviso as amended by the Act of 1953 is concerned, it applies to the two years 1948-49 and 1949-50. The action was professedly taken under the specific direction issued by Income-tax Appellate Tribunal and, therefore, if the action is treated simply as an action to give effect to a finding or a direction contained in an order in making the assessment of the smaller Hindu undivided family that action could be taken without any bar of limitation operating in view of the provision of the amended proviso.

So far as the first two years are concerned the question may arise whether, even if the action was taken in pursuance of the order of the Tribunal, the assessment made for the first time against the smaller Hindu undivided family can be considered to be 'reassessment' within the meaning of that word as used in the proviso prior to its amendment by the amending Act of 1953. The 'reassessment' had to be made in pursuance of an order under section 31 or section 33. Section 31, when it speaks of the powers of the Appellate Assistant Commissioner uses the following language in sub-section (3)(b) : 'set aside for assessment and direct the Income-tax Officer to make a fresh assessment...' It will be noticed that the words used are 'a fresh assessment' and not 'reassessment'. It follows that the word 'reassessment' in the proviso must included a fresh assessment as provided in section 31(3)(b). In order words the word 'reassessment' has not been necessary used in the sence of including an assessment made for the first time in pursuance of a direction contained in an appellate order. Thus even if it be considered that in the case of the smaller Hindu undivided family an assessment was made for the first time, it was still 'fresh' and it would be included in the word 'reassessment' as used in the proviso to section 34(3) prior to its amendment by the Act of 1953.

There is another way of looking at the matter. It has been observed both by the Privy Council as well as by the Supreme Court that the word 'assessment' as used in the Income-tax Act is used sometimes in a narrower and sometimes in wider sense. It includes computation of income. It also includes the bringing of income to charge or to tax and further it includes the levy of tax presumably against a person in whole hands the income is taxable. Thus when one speaks of 'assessment' one may merely refer to the bringing of a certain income to the charge of tax. If an income has either not been assessed at all of has not been assessed in particular hands but is assessed subsequently in the hands of a different person, in either case to should amount to reassessment. In order words the word 'reassessment' is not confined to a fresh assessment being made of an income in the hands of the same person but it wide enough to include a fresh assessment of an income in hands different from those in which it had been assessed originally. The Privy Council and the Supreme Court cases are Khemchand Ramdas v. Commissioner of Income-tax and A. N. Lakshman Shenoy v. Income-tax Officer. It follows that the assessment for even the first two years with which this reference is concerned would be covered by the expression 'reassessment made in pursuance of an order' and would not be affected by the bar of four years limitation. So far as the next two years are concerned it has already been shown that the amended proviso which applied to these two assessment specifically made provision or a fresh assessment being made against any person in consequence of a direction given in an appellate order against another person.

The question still remains whether the assessment or reassessment made in pursuance of or in consequence of a finding or to give effect to a direction of an appellate authority is an of kind other than an assessment under section 23 or an assessment under section 34, in other words whether the proviso merely removes the bar of limitation in cases of assessment or reassessment under section 23 and 34 or contemplates a different kind of a assessment altogether, namely, an assessment made in pursuance of or in consequence of a direction contained in an appellate order. If the view is taken that an assessment had in any case to be one either section 23 or under section 34 before the question of removal of the bar limitation under the proviso can arise, then, the conditions for making an assessment or a reassessment under section 23 or under section 34 would first have to be complied with before the question of the removal of the bar can arise. If, on the other hand, the assessment or reassessment made in pursuance of an appellate order is a different kind of assessment than an assessment or reassessment made under section 23 and 34 no question of compliance with the conditions of section 23 or section 34 would arise. The question may be looked at first from the point of view that it is fresh or a new kind of assessment altogether independent of the provisions of section 23 or section 34. Under the system of hierarchy of courts in this country including proceeding under the Income-tax Act a subordinate authority like the Income-tax Officer is bound to carry out the directions of a superior authority. This was so laid down by the Supreme Court in the case of Bhopal Sugar Industries Ltd. v. Income-tax Officer. It follows that as there is no period of limitation prescribed either for the Appellate Assistant Commissioner or for the Income-tax Appellate Tribunal for disposing of an appeal pending before them by reference to the assessment year involved in the appeal, if the assessment made in consequence of an appellate order is an altogether different kind of assessment than one made under section 23 or section 34 no question of limitation can at all arise and there would be no question of making any provision for the removal of a non existent bar of limitation. In order words, the question would arise whether on the hypothesis that a fresh assessment made in consequence of an appellate order is a different kind of assessment the proviso was not a mere superfluity or was enacted merely by way of abundant caution. This precise question came up for consideration before the Bombay High Court in Commissioner of Income-tax v. Kishoresinh Kalyansinh, and the Bombay High Court took the view that the proviso had been enacted merely by way of abundant caution. If this view is accepted, it will not be necessary to comply with the conditions prescribed in the enacting portion of section 34. If they were not complied with it would make no difference to the validity of the fresh assessment as that assessment would be in a class by itself and would not require those conditions to be satisfied; it would be sufficient that the assessment had been completed in consequence of the directions of the appellate authority.

If the Bombay view is not accepted the question which arise is whether the Income-tax Officer had any information in his possession in consequence of which he could have reason to believe that income had escaped assessment. There is a volume of authority on the point of the precise signification of the word 'information' as used in this section. It may be noted that even before the amendment of 1948 the word 'information' found place in the section, though it was qualified by the word 'definite'; that meant no more than that the information had to be precise and not vague or merely consist of rumours. Another difference in the language used prior to 1948 from the language used thereafter was that the information should lead to the 'discovery' that income had escaped assessment. The word 'discovery' had now been omitted and replaced by the words 'reason to believe'. It will not be of much use citing or discussing many authorities on the interpretation of the words as they occurred prior to 1948, because in most of these authorities the word 'information' has been interpreted more in the light of the words 'definite' and 'discovery' than independently by itself and without taking colour from them. It is now settled that the word 'information' is not confined to information as to facts and also includes information as to the state of law or as to a new ruling or a new interpretation of the law or a new statute. We need cite only the Supreme Court case in Chatturam Horilram Ltd. v. Commissioner of Income-tax. It has also been held that a judgment of the Privy Council or of a High Court interpreting relevant law constitutes information. The question arises whether, if such judgment constitute information within the meaning of that section, a judgment of the Income-tax Appellate Tribunal or even of the Appellate Assistant Commissioner in appeal from an assessment order, taking a different view on the facts of the case, does or does not constitute 'information'. On principle there would seem to be no distinction between information from a judgment of the Privy Council rendered on appeal either from an order of the Tribunal or from an answer given in a reference by the High Court and a judgment recorded by the Tribunal or an Appellate Assistant Commissioner against an assessment order in the same assessment proceeding. The question was decided by the Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax. It was held in that case that information, whether factual or legal, derived from whatever source, not necessarily external to the income-tax authorities, would constitute information within the meaning of section 34(1)(b). The Madras High Court in the case of Salem Provident Fund Society v. Commissioner of Income-tax went even further. In that case after the assessment proceeding were over the Income-tax Officer on examination of the record more closely came to the conclusion that he had committed a mistake. The mistake was such as could be rectified under the provisions of section 35. Insted, however, of proceeding under that section he proceeded under section 34. Thereupon the question arose whether the Income-tax Officer could be said to have such information in his possession as would entitle him to take action under section 34. The matter went up to the High Court after the Income-tax Officer had made a fresh assessment under section 34 and had rectified the mistake. The Madras High Court observed that information under section 34 need not be wholly extraneous to the record of the original assessment; a mistake apparent on the face of the record of assessment would itself constitute information and whether someone else gave that information to the Income-tax Officer or he informed himself about the same was immaterial. In this case it is not necessary to go so far as to hold that an Income-tax Officer can come into possession of information even by informing himself by closer study of the record or by a reconsideration of the questions involved in the original assessment proceedings. In other words, in this case we are only concerned with information coming to the Income-tax Officer from an extraneous source. The question merely is what external sources could be included in such sources from which information could be derived. We are clearly of the view that there is no justification in principle to confine the external sources of information to information derived from a judgment of the Privy Council or the Supreme Court or a High Court. If information can be derived properly from those sources and such information will constitute information for the purposes of section 34, it is not possible to exclude similar information derived from other sources, namely, the Income-tax Appellate Tribunal or the Appellate Assistant Commissioner. It might be said that the external sources should be such as cannot be characterised as departmental authorities, such as the Privy Council, the Supreme Court and the High Court, but we do not agree. It is well known that departmental authorities are merely the Appellate Assistant Commissioner of Income-tax and the Income-tax Officer. These two authorities as under the Finance Department of the Government of India. The Income-tax Appellate Tribunal is not under the Finance Department but under a different department, viz., the Law Department. On this ground also information derived from the Income-tax Appellate Tribunal cannot be classed with information derived from the Appellate Assistant Commissioner or by the Income-tax Officer himself by a further and closer study of the file. Apart from this, as already observed, the information derived from an order of the Income-tax Appellate Tribunal or of an Appellate Assistant Commissioner is as much information from an outside or extraneous source vis-a-vis the Income-tax Officer as that derived from the High Court or the Supreme Court or the Privy Council. Consequent, when in this case the Tribunal took the view that the claim of the assessee to partition should be recognised with effect from May 19, 1945, it was information within the meaning of section 34 and proceeding could properly be taken under that section. Thus, even if assessment made on the smaller unit was an assessment under section 34, it was validly made under that section and, as it was made in pursuance of an appellate order of the Tribunal, the bar of four year period of limitation did not apply to such assessment. Thus, whether the fresh assessment is treated as in a class by itself independently of section 23 or 34 or an assessment under section 34, it was valid and was not barred by limitation.

The result is that the question referred to us must be answered in the negative and against the assessee. The assessments were valid even though they were made after the expiry of four years from the end of the various assessment years in question. The department should get its costs of this reference in the sum of Rs. 200.

Question answered in the negative.


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