1. Aruppukottai Chandra Bus Lines and Aruppukottai Chandra Transport is an unregistered partnership firm. On October 1, 1952, a return was submitted by the Aruppukottai Chandra Bus Lines and Aruppukottai Chandra Transport in respect of the accounting period ending on August 16, 1949, relevant for the assessment year 1950-51 showing an income of Rs. 51,528. The status claimed therein was that of an ' association of persons '. In Part III of the return in Form A the following names had been put in : (1) M. M. Palanichami Nadar, (2) N. Seeniammal (wife of No. 1), (3) P. Mathurai Veeraswami Nadar, (4) S. Ponnammal (wife of No. 3), and (5) P. Palanichami Nadar (younger brother of No. 3). But the shares of the above persons had not been noted.
2. Notices under Sections 22(4) and 23(2) of the Indian Income-tax Act, 1922, dated April 14, 1953, were issued to M. M. Palanichami Nadar and the return was disposed of by the Income-tax Officer by noting in his order sheet ' N.A. ' on January 28, 1954. On August 9, 1957, a notice under Section 34 was issued. In response to this notice, a return was filed but the status whether it was a ' firm ' or an ' association of persons ' had not been given in this return. The Income-tax Officer completed the assessment on March 29, 1958, in the status of an ' unregistered firm ' and included the income from two other bus lines, namely, Ettayapuram Chandra Bus Lines and Devakottai Chandra Transport.
3. An appeal to the Appellate Assistant Commissioner was filed against the assessment in which the income from Ettayapuram Chandra Bus Lines and Devakottai Chandra Transport were included. When the appeal was pending, in a dispute between M. M. Palanichami Nadar and Mathurai Veeraswami Nadar, the Sub-Court, Sivaganga, held that Aruppukottai Chandra Bus Lines and Aruppukottai Chandra Bus Transport belonged to one firm consisting of the five persons noted above and that Ettayapuram Chandra Bus Lines and Devakottai Chandra Transport was a different entity.
4. Following the findings of the Sub-Court, Sivaganga, the Appellate Assistant Commissioner held that the Aruppukottai Chandra Bus Lines and Aruppukottai Chandra Transport is a separate assessable entity and belonged to the partnership consisting of the said five partners, and set aside the assessment order and directed the Income-tax Officer to make a fresh assessment conforming to his findings. Thereafter, the Income-tax Officer issued notices under Section 34 of the Act in the name ofAruppukottai Chandra Bus Lines and Aruppukottai Chandra Transport to M. M. Palanichami Nadar, Madurai Veeraswami Nadar and P. Palanichami Nadar. In response to the notices three returns were filed under protest. These returns were one by M. M. Palanichami Nadar, the other by Mathurai Veeraswami Nadar and the third by P. Palanichami Nadar. These returns did not mention the status but disclosed the income of Rs. 51,528. In the return submitted by Mathurai Veeraswami Nadarr under Part III he had given the names of himself, his wife and four sons, M. M. Palanichami Nadar and P. Palanichami Nadar and the shares against each had also been given. The Income-tax Officer completed the assessment on February 29, 1960, in the status of an 'unregistered firm'. He computed the income from Chandra Bus Lines and Chandra Bus Transport at Rs. 58,673, before allowance of earned income relief.
5. The circumstances leading to the assessment under Section 34 on February 29, 1960, in respect of the assessment year 1951-52 were almost the same as set out above except for the difference in the figures of the income returned and the fact that no notices under Section 22(4) and 23(2) had been issued on the return filed on October 1, 1952.
6. There were appeals to the Appellate Assistant Commissioner against these assessments dated February 29, 1960, in respect of the assessment years 1950-51 and 1951-52 wherein the assessee questioned the validity of the proceedings under Section 34. The Appellate Assistant Commissioner overruled the objections and dismissed the appeals. The assessee filed appeals to the Appellate Tribunal. The Tribunal held that the returns that had been submitted on October 1, 1952, were not by the firm but by an ' association of persons ' and that the returns filed on that date could not be taken to be the returns filed by the partnership firm. In that view, it held that there had been a failure to file returns by the partnership firm and the case fell under Section 34(1). The Tribunal also held that, in the facts and circumstances of this case and in the context, it should be taken that the note in the order sheet as ' N. A. ' standing for ' not assessable ' should be taken as terminating the proceedings in so far as the returns filed on October 1, 1952, were concerned and that since, in the Tribunal's opinion, there was a failure on the part of the assessee to disclose fully and truly all material facts and since the returns filed on October 1, 1952, had been disposed of, it was open to the Income-tax Officer to issue notices under Section 34,
7. On an application filed by the assessee under Section 66(1), the Tribunal has referred the following question for determination :
' Whether, on the facts and in the circumstances of the case, the reassessment on the assessee under Section 34 for the assessment years 1950-51 and 1951-52 are valid?'
The learned counsel for the assessee contended that the returns filed on October 1, 1952, had not been disposed of and that, therefore, Section 34 could not be invoked. It was not the case of the assessee before us that if there was a termination of the proceedings in respect of the returns submitted by him on October 1, 1952, Section 34 could not have been properly invoked. On the other hand, the contention of the learned counsel for the revenue was that there was no return at all by the assessee in this case in respect of the assessment years 1950-51 and 1951-52 and that, in any case, the disposal by the Income-tax Officer by noting in his order sheet ' N.A ' amounted to a termination of the proceedings and that since those returns did not disclose all materials for proper assessment as it came later to light, Section 34 was properly invoked.
8. There can be no doubt that under the scheme of the Income-tax Act 'association of persons' and 'firm' are treated as separate units of assessment and a return submitted with the status as ' association of persons ' could not be considered to be a return submitted by a 'firm'. Section 3 of the Act provides that income-tax shall be charged in respect of the total income of the previous year of every 'individual, Hindu undivided family, company, and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually '. In the returns submitted on October 1, 1952. though the names of the persons who constituted the ' association (of persons' were mentioned, their shares had not been noted. The status claimed in the returns was that of an ' association of persons''. It could not therefore be contended that the returns submitted on October 1, 1952, should be treated as returns submitted by an ' unregistered firm '.
9. In support of his contention that the returns submitted on October 1, 1952, remained undisposed of and that, therefore, Section 34 could not be invoked, the learned counsel for the assessee relied on the decision in Commissioner of Income-tax v. M. K. K. R. Muthukaruppan Chettiar : 78ITR69(SC) . In that case the facts were these : The father, his son and two grandsons formed a Hindu undivided family, which was assessed as such till the end of the assessment year 1948-49. In the proceedings for the assessment year 1949-50 the father claimed that there was a partition between the father on the one hand and the son and grandsons on the other and, following up this claim, pursuant to notices issued on the family, the father filed a return in his individual capacity for the assessment years 1950-51, 1951-52 and 1952-53 and the son and his sons filed a separate return voluntarily for the assessment years 1950-51, 1951-52 and 1952-53. The Income-tax Officer rejected the scheme of partition and, treating the father's return as the proper return, assessed the family as before. He closed the assessmentsrelating to the returns filed by the son and the grandsons as ' N.A. ', by his notes in his order-sheet dated June 18, 1953, holding that as the partition had not been accepted by him there was no source of income to be separately assessed in the hands of the respondent and that the file had to be clubbed with the file of the father. The son and grandsons again filed returns for the three years on February 23, 1955, and March 30, 1956. The Appellate Assistant Commissioner accepted the partition and, thereafter, on March 2, 1957, the Income-tax Officer issued notices to the son and grandsons under Section 34 for the assessment years 1950-51 to 1952-53 and completed the assessment for those years. The Supreme Court held that the order of the Income-tax Officer dated June 18, 1953, was not an order terminating the proceedings and that there was no disposal of the voluntary returns submitted by the respondent for the assessment years 1950-51, 1951-52 and 1952-53. It was, therefore, held that the assessment proceedings under Section 34 of the Act were invalid.
10. As could be seen from the facts of that case, the returns by the son and the grandsons were on the basis that there was a partition between the father and the son and grandsons and that, therefore, they were valid returns by the assessee. The Supreme Court, on a consideration of the facts and circumstances of that case, came to the conclusion that there was no disposal of the voluntary returns made by the assessee and that, therefore, Section 34 could not be invoked. This decision is clearly distinguishable as in the present case the returns were not by the assessee who is an unregistered firm. Therefore, this is clearly a case falling under Section 34(1) of the Act.
11. We are also of the view that the proceedings in respect of the returns submitted on October 1, 1952, were terminated by the order 'N.A'on the note-sheet by the Income-tax Officer on January 28, 1954. It is stated that the letters ' N.A. ' refer to 'not assessable'. The Tribunal held that though the words ' not assessable ' may not be appropriate in the circumstances of the case (since the returned income was Rs. 51,528), in the context those words should be taken as terminating the proceedings in so far as the returns filed on October 1, 1952, are concerned. We are in entire agreement with this finding of the Appellate Tribunal. It did not appear to be the intention of the Income-tax Officer when he made the order ' N.A. ' on January 28, 1954, to keep the file pending undisposed of.
12. In Commissioner of Income-tax v. M. K. K. R. Muthukaruppan Chettiar, the Supreme Court, in view of the specific reference in the order of the Income-tax Officer that he was closing the proceedings as ' N.A. 'since there was no separate income and that the file would be removed and clubbed with the family file, came to the conclusion that the reference to closing of file as ' N.A ' would not amount to disposal of the return. It may also be mentioned that the Supreme Court referred to ' N.A.' as ' no assessment' whereas in our case all the authorities including the Tribunal and also in the statement of the case have stated that 'N.A.' is an abbreviation for ' not assessable '. We are, therefore, of opinion that there was an intention to terminate and there was a termination of the proceedings in so far as the returns filed on October 1, 1952, were concerned. If that were so, as already stated, the learned counsel for the assessee did not contend that Section 34 was not applicable to the instant case.
13. We, accordingly, answer the reference against the assessee and in favour of the revenue with costs. Counsel's fee Rs. 250.