RAMPRASADA RAO J. - A Hindu undivided family consisting of the assessee and his son as one branch and his uncle Meyyappa as the other suffered a partition on December 29, 1948, by which one of the assets of the joint family, namely, 15/21 share in a partnership at Ipoh with the Vilasam 'M.S.S.' was divided. For the years following the partial partition as above, each branch filed their individual returns of income. In particular, the assessee filed voluntarily such returns apparently under section 22 of the Indian Income-tax Act, for the three years 1950-51, 1951-52, and 1952-53. Such returns were respectively filed on September 5, 1950, February 12, 1952, and September 24, 1952. The revenue did not consider the returns so filed but initiated proceedings against the assessee under section 34(1)(a) of the Act and assessed the assessee accordingly. In the first instance, the Income-tax Officer rejected the contentions of the assessee that section 34(1)(a) could not be invoked, when no orders were made on his voluntary returns. The appeals that the assessee filed before the Appellate Assistant Commissioner and the Tribunal having failed, a reference was made by the Tribunal to this court under section 66(1) of the Act and the question referred was whether the reassessment under section 34 for all the assessment years 1950-51 to 1954-55 was invalid. Rajagopalan and Srinivasan JJ. held on such a reference in T.C.No. 150 of 1960, that the purported re-assessment for 1950-51, 1951-52 and 1952-53 under section 34 of the Act was invalid. As regards the second proviso to section 34(3) of the Act, the learned judges felt that it was not necessary for them to pronounce on its constitutional validity or otherwise. The question whether the revenue had jurisdiction to complete the assessments for the years 1950-51, 1951-52 and 1952-53, based on the voluntary returns filed by the assessee, was not also left open. With due deference to the decision of this court, the Tribunal canceled the assessment for the years in question.
After such cancellation of the assessment orders in the circumstances stated above, the respondent issued a notice board July 24, 1962, reading as under :
'Your attention is invited to the judgement of the High Court referred to above, especially to pages 9 and 11 of the said order. Though the reassessment proceedings for the assessment years 1950-51, 1951-52 and 1952-53 have been held to be null and void, the original assessment proceedings which came into being with the submission of the voluntary returns on September 5, 1950, February 15, 1952, and September 24, 1952, for 1950-51, 1951-52 and 1952-53, respectively, are still alive by virtue of the second proviso to section 34(3) of the Income-tax Act, 1922. For the purpose of concluding these assessments, I am enclosing a notice under section 23(2) fixing the hearing for August 20, 1962.'
The assessee, inter alia, contended that the assumption of jurisdiction by the respondent under the second proviso to section 34(3), hereinafter referred to as the proviso, was illegal as the proviso itself is unconstitutional and the proposed proceedings were beyond the prescribed time. But as respondent intended and expressed his desire to proceed with the enquiry concerning the income-tax assessments for the three years in question, and issued letters dated September 24, 1963, and September 30, 1963, asking the assessee to appear for furnishing some more particulars regarding the returns filed earlier and for completion of the enquiry connected thereto, the assessee had filed these writ petitions, praying for the issue of a writ of prohibition or other appropriate writ under article 226 of the Constitution of India, restraining the respondent from proceeding with the assessments in question for the assessment years 1950-51, 1951-52, and 1952-53. In the affidavit in support of the petition, the assessee, amongst other things, reiterates that there is total absence of jurisdiction in the respondent to initiate and continue the assessment proceedings under the proviso and that the same offends article 14 of the Constitution and is therefore ultra vires. The revenue in its counter, however, contends that the respondent has jurisdiction and the proviso is constitutionally sustainable and operates with in the constitutional limitations.
At the time of hearing of these writ petitions, learned counsel for the petitioner contended as follows :
(i) The assessment proceedings now initiated for the assessment years 1950-51, 1951-52 and 1952-53 are time-barred in law and the respondent has now no jurisdiction to complete the same.
(ii) The respondents purported attempt to justify the same with reference to the provisions of the 2nd proviso to section 34(3) is also illegal and without jurisdiction, inasmuch as the said provisions of the 2nd proviso to section 34(3) have been held to be ultra vires and void by the Supreme Court, in circumstances and facts similar to the petitioners case.
(iii) The provisions of section 34(3), second proviso, cannot apply to the facts and circumstances of the petitioners case, inasmuch as the purported finding or direction were only given in the appellate orders on the Hindu undivided family of Meyyappa Chettiar in which the petitioner was not a party to the proceedings.
The respondent on the other hand states that :
(i) the assessments are not time-barred since they are saved by the second proviso to section 34(3) of the Indian Income-tax Act, 1922.
(ii) It is not necessary for the application of the said second proviso that the petitioners should have been eo nomine a party to the proceedings in the appeal before the Appellate Tribunal in I.T.A. No. 4469 of 1955-56 in regard to the assessment year 1950-51 and in the appeals before the Appellate Assistant Commissioner in regard to the assessment years 1951-52 and 1952-53 in I.T.A. Nos. 470 of 1954-55 and 471 of 1954-55 respectively. There was sufficient nexus between the Hindu undivided family and the petitioner and their respective assessment for the second proviso to section 34 to be invoked in the petitioners assessments. In the first place, the petitioner was a member of the Hindu undivided family, and hence a person intimately connected with the proceedings for assessment and appeal in which the Hindu undivided family was concerned; secondly, the petitioner was liable to be assessed in respect of a part of the income that had already been assessed, albeit mistakenly, in the hands of the Hindu undivided family; thirdly, the petitioners assessments depended on the assessments of the Hindu undivided family under section 14 of the Act.
(iii) The second proviso to section 34(3) of the Act is not an unconstitusional piece of legislation. Properly construed, the proviso operates within the constitutional limitations. It is not correct to assert that the Supreme Court had held the proviso to be ultra vires and void in the circumstances and on the facts similar to the present case.
We shall now take up for consideration whether, in the facts and circumstances of the case, the assessment can be made under the proviso on the assessee 'in consequence of or to give effect to any finding or direction in an order under section 31, section 33, section 33A, section 33B, section 66, or section 66A'. It is the admitted case of the parties that initially the partial partition between the assessees branch and his uncle did not find favour with the Income-tax Officer. The Appellate Assistant Commissioner, however, held a contrary view. Even so, the Tribunal. In all these proceedings, the uncle was representing the alleged joint family. The assessee was eo nomine not a party thereto. It has to be therefore considered whether the representation by the uncle is sufficient such that any finding in such proceedings can be taken to be one given within the meaning of the proviso. The revenue contends, in our opinion rightly, that the appeal by the uncle as representing the Hindu undivided family created a sufficient nexus resulting in the assessee being deemed as a person who shall be bound by any finding in such proceedings. It cannot be said that the uncles action at the earlier stages did not have anything to do with the assessee or his rights. There is therefore sufficient nexus between the earlier proceedings in which the uncle of the assessee was representing the Hindu undivided family and the assessee himself. In those proceedings which of course ultimately went against the assessee certain findings were given. But the finding given is such that it was apposite in the circumstances then confronting the parties. As pointed out by the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das :
'The expression direction in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other Tribunals can issue under the powers conferred on him or them under the respective sections. Therefore, the expression finding as well as the expression direction can be given full meaning, namely, that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate or revisional authority, as the case may be, is empowered to give under the sections mentioned therein. The words in consequence of or to give effect to do not create any difficulty, for they have to be collated with, and cannot enlarge, the scope of the finding or direction under the proviso. If the scope is limited as aforesaid, the said words also must be related to the scope of the findings and directions.'
Such a finding or direction should obviously be necessary for the disposal of the earliest proceedings.
In the decision cited above, the Supreme Court had to consider the meaning of the word 'person' appearing in the proviso. Their Lordships say :
'The words any person, it is said, conclude the matter in favour of the department. The expression any personin 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 construction 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.'
Thus, in instant case, the uncle was indeed concerned with a matter with which the assessee was intimately connected. We are of the view that the finding in the earlier proceedings can form the basis for reassessment of the assessee as a person and are, therefore, unable to accept the contention of the assessee that the finding given by the Tribunal and other authorities on the Hindu undivided family of Meyyappa cannot be deemed to relate to him as he is not a party thereto.
Having thus held that the petitioner was indeed connected with the earlier proceedings in which the finding or direction was give affecting the assessee, we shall now consider the question whether the proviso is unconstitutional as offending article 14. In Prashar v. Vasantsen Dwarkadas, Commissioner of Income-tax v. Sardar Lakhmir Singh and P.V. Godbole v. Jagannath Fakirchand the majority of the learned judges of the Supreme Court were considering the question whether the proviso should be struck down as unconstitutional as it is not supported by the well-known theory of reasonable classification. It is, however, to be remembered that in Prashar v. Vasantsen Dwarkadas the majority were mainly concerned in applying the principal and text of the proviso to any person, meaning thereby an utter stranger to the proviso to any person, meaning thereby an utter stranger to the earlier appeal or revisional proceedings. In that context it was held that the provisions of the second proviso to section 34(3) in so far as they authorised the assessment or reassessment of any person other than the assessee beyond the period of limitation specified in section 34 in consequence of or to give effect to a finding or direction given in an appeal, revision or reference arising out of proceedings in relation to the assessee, violated the provisions of article 14 of the Constitution of India and were invalid to that extent. As Already stated by us, the ratio in the series of cases reported in 49 I.T.R. concerned itself to the consideration of the question whether an utter stranger in the sense an assessee who had no connection whatsoever with the earlier appeal or revisional proceedings, could be got in the net of taxation on the only ground that the expression used in the proviso is 'any person'. As will be seen hereinafter, the real intent of the law as laid down by the Supreme Court was considered later by a catena of decisions including the Supreme Court itself. These later cases do not countenance that the ratio in Prashar v. Vasantsen Dwarkadas lays down a totality of a ban on the jurisdiction of the Tribunal to reopen assessments under the proviso, but it is restrictive in its scope and definitely applicable to assessees who are connected with such earlier proceedings.
It has however become necessary for us to advert to the scope of the decision of the majority of the judges in Prashar v. Vasantsen Dwarkadas, in juxtaposition to the law as expressed in the later decision of the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das. Though on a prima facie reading of the ration of the majority of the judges in Prashar v. Vasantsen Dwarkadas, the view appears to be that the proviso is unconstitutional and is therefore invalid, yet the paramount intention of the court appears to us to be that the proviso is invalid in so far as it affected rights of persons, who are utter strangers to earlier proceedings in which a 'finding' or 'direction' is given. But there are indications in the said judgement to sustain the view that in so far as persons intimately and closely connected with the earlier proceedings are concerned, the proviso would still be attracted. We are unable to subscribe to the view expressed by the Bombay High Court in Mahendra Bhawanji Thakar v. S.P. Pande, that the Supreme Court struck down the proviso as unconstitutional unreservedly. This judgement was rendered on March 5, 1963. But the Supreme Courts ruling in Income-tax Officer v. Murlidhar Bhagwan Das, which in fact succinctly explained the decision in Prashar v. Vasantsen Dwarkadas, was rendered on January 29, 1964. In the later decision in Income-tax Officer v. Murlidhar Bhagwan Das, the learned judges observed at page 354 that :
'...it is sufficient to point out that the majority of the learned judges have only struck down that part of the proviso which enables a notice to issue to any person on the ground that it is violative of article 14. The precise question which we have before us does not appear to have been the subject of decision in this case.'
In fact, in this case, the classification which, according to the learned judges, is indeed a sub-classification, envisaged in the proviso is rational and permissible. The learned judges also referred to the earlier decisions of that court in A. Thangal Kunju Musaliar v. M. Venkatachalam Potti and Balaji v. Income-tax Officer, Special Investigation Circle, Akola, and expressed positively their view that the proviso cannot in to be struck down as offending article 14. Though, no doubt, this view was expressed by the minority in Income-tax Officer v. Murlidhar Bhagwan Das, yet it has a special signification in that the learned judges of the Supreme Court were indeed interpreting what was the purport and scope of the decision in Prashar v. Vasantsen Dwarkadas.
That there has not been a striking down of the proviso unreservedly and without any limitation is also seen from the judgements of this court which had occasion to consider the effect of the ration in Prashar v. Vasantsen. A reconciliation has been made and there are now clear pronouncements of this court, which we will advert to presently, to the effect that the proviso is applicable to a case where the assessee is intimately connected with the 'finding' or 'direction' given in the earlier proceedings. If, however, the assessee is not in any way concerned with the said 'finding' or 'direction', then it would squarely come within the rule laid down in Prashar v. Vasantsen Dwarkadas and any proceedings against such an assessee purporting to be in the exercise of jurisdiction under the proviso would be invalid.
The first of the decisions of this court is reported in M.K.K.R. Muthukaruppan Chettiar v. Commissioner of Income-tax. The learned judges held that the effect of the decisions of the Supreme Court was that in so far as the proviso authorises the assessment or reassessment of any person other than the assessee beyond the period of limitation specified in section 34, it violates the provisions of article 14 of the Constitution and is invalid : but the proviso was valid to the extent of its operation against the assessees who are parties to the proceedings. This judgment was rendered on September 16, 1964. The next case in sequence was rendered by the same Division Bench of this court wherein the learned judges reiterate that the proviso was ultra vires only in so far as it applied to the persons other than the actual assessee and those represented by him in whose appeal the appellate authority had given a finding or direction which necessitated the subsequent reopening of the assessment. This judgment was rendered on September 18, 1964. In the latest case of this court in Estate of Late Rangalal Jajodia v. Commissioner of Income-tax, to which one of us was a party, considering the scope of the proviso, it is observed as follows, after referring to the decisions of the Supreme Court in Prashar v. Vasantsen Dwarkadas, Commissioner of Income-tax v. Sardar Lakhmir Singh and P.V. Godbole v. Jagannath Fakirchand :
'In the three cases decided by the Supreme Court, which we just now referred to, it was held that the second proviso in so far as it affected any person, meaning a third party or a stranger to the appeal or revision or a person who is not the assessee and who is not the appellant or the revision petitioner, offended article 14 and would, therefore, to that extent, be void... 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.'
We are, therefore, of the opinion that, having regard to the decisions of this court and the view expressed by the Supreme Court itself in the later decisions, it cannot be said that the proviso has been struck down by the Supreme Court without any reservation or limitation whatsoever. On the other hand, the dicta referred to by us earlier and the interpretation placed upon the decisions in the series of cases reported in 49 I.T.R. lends support to the view that the application of the proviso is linked only to persons who are not intimately connected with the proceedings.
We have already held that the petitioner in this case is a person who cannot be characterised as an utter stranger to the earlier proceedings prosecuted by his uncle Meyappa; on the other hand, his uncle did have the capacity at that time to represent him and, therefore, such proceedings do have a nexus to the affairs of the assessee and such intimate connection thus established would enable the revenue to exercise jurisdiction under the proviso. We are, therefore, unable to accept the contention of the learned counsel for the petitioner that the proviso is violative of article 14 and that this is the law as laid down by the Supreme Court in Prashar v. Vasantsen Dwarkadas.
In this view, the writ petitions are dismissed with costs, one set. Counsels fee Rs. 250.
Writ petitions dismissed.