The judgment of the court was delivered by
VEERASWAMI J. - This reference involves the construction of section 24B(3) and the second proviso to sub-section(3) of section 34 of the Income-tax Act of 1922 and the question as to how far they are applicable to the facts of the case.
One Rangalal Jajodia, who was carrying on business in the city of Madras, died on January 11, 1946, leaving a will dated April 16, 1945. He was survived by his son, Sankarlal Jajodia, by his first wife, and his second wife, Aruna Devi and children by her. On October 10, 1942, and October 25, 1943, Rangalal Jajodia submitted his return of income relating to assessment years 1942-43 and 1943-44 for which the previous years were December 31, 1941, and December 31, 1942. He also returned for these years his income for the purpose of excess profits tax. In due course he complied with notices issued under sections 23(2) and 22(4). The Income-tax Officer made an exhaustive scrutiny of his accounts, but before he could complete the assessments, Rangalal Jajodia died. Thereafter, he called upon his eldest son, Sankarlal Jajodia, to show cause why he should not be treated as the legal representative of his late father and an assessment made on him accordingly. Sankarlal Jajodia objected to the notice on the ground that his father had under his will disinherited him and he had, therefore, nothing to do with his estate. He also brought it to the notice of the Income-tax Officer that Aruna Devi and Ramkumar Bhuwalka had been appointed by his father under his will as his executrix and executor. But Sankarlal Jajodia not having produced the will in spite of opportunities given to him for the purpose, the Income-tax Officer, apparently on the assumption that Sankarlal Jajodia having performed the obsequies of his father was entitled to act as his legal representative in the assessment proceedings, completed the assessments on February 28, 1947, describing the assessee as 'Estate of Sri late Rangalal Jajodia, by legal representatives Sri Sankarlal Jajodia, son of Sri Rangalal Jajodia, Srimathi Aruna Devi, wife of Sri Rangalal Jajodia, and her children'. But the assessment orders and the demands for payment of tax were only served on Sankarlal Jajodia at the business premises of Rangalal Jajodia.
Sankarlal Jajodia took the assessment orders on appeal to the Appellate Assistant Commissioner of Income-tax. Before doing so, it would appear he had sought rule under article 326 of the Constitution from this court restraining the Collector of Madras from proceeding with the sale of the deceaseds properties under the Revenue Recovery Act in realising the arrears of income-tax. This petition was dismissed by Subba Rao J., as he then was, on the view that, since actually no will was produced, prima facie, Sankarlal Jajodia, being one of the heirs of Rangalal Jajodia, would be his legal representative. But it was made clear that any observations made by the learned judge were not intended to be a final determination of the question of the validity of the assessments, as that question would in any case be decided in the appeals then pending against them. Sankarlal Jajodia produced the will before the Appellate Assistant Commissioner, who accepted its factum and validity. He found that by his will Rangalal Jajodia had appointed his wife, Aruna Devi Jajodia, and Ramkumar Bhuwalka as his executrix and executor and trustees to carry out the directions contained in the will in regard to the administration and disposal of his properties. He also found that Sankarlal Jajodia was literally disinherited by his father under his will, though testator had provided for Sankarlal Jajodias children. On these findings the Appellate Assistant Commissioner considered that there was no justification for treating Sankarlal Jajodia as the legal representative of his late father, and reached the conclusion that the assessments made on Sankarlal Jajodia in that capacity were clearly not valid and not in accordance with law. It would appear to have been contended before him on behalf of the revenue that the assessment orders should in any case be regarded as valid, as they had been made by treating Aruna Devi also as legal representative but this contention did not find favour with the Appellate Assistant Commissioner, because the assessment orders and the notices of demand were never communicated to her. In the circumstances the Appellate Assistant Commissioner set aside the assessments for the two years and said : 'I direct the Income-tax Officer to make fresh assessments on the two executors, viz., Sri Ramkumar Bhuwalka and Srimathi Aruna Devi Jajodia in accordance with the provisions of section 24B of the Act.' It may be seen that the Appellate Assistant Commissioner decided the appeal mainly with reference to the capacity of Sankarlal Jajodia to figure as the legal representative of his father and did not go into the merits of the assessments, which obviously were left open by him.
Pursuant to the directions of the Appellate Assistant Commissioner, further proceedings were taken. In answer to the notice of the Income-tax Officer acting under sections 24B, 23(3) and 31, Aruna Devi appeared and asked for copies of the return and notes on examination and enquiry and the letters written by the department to the deceased, so that she could have an opportunity to place her objections; but Ramkumar by his solicitor intimated that he had no desire to serve as executor and that he disclaimed that he had no desire to serve as executor and that he disclaimed any responsibility in respect of the estate of the deceased. The Income-tax Officer was of the view that as even before the death of Rangalal Jajodia notices under sections 23(2) and 22(4) as well as under section 22(3) had been served and the accounts had been scrutinized and only the assessment orders had formerly to be made, it was sufficient, if he proceeded from the point where the proceedings had been left when Rangalal Jajodia died. On that view he thought that all that was necessary in the reassessments was to issue a formal notice to the executors informing them of the intention to treat them as executors so that they could file any objections which they might. Accordingly, he sent letters to both the executors informing them of the proceedings that had been so far taken and specifically bringing to their notice that all the formalities connected with the assessment proceedings had already been over even in the original assessments and that what remained was the location of the executors, and asking them to have their say in relation to their capacity as executors. As to the request of Aruna Devi the Income-tax Officer was of the opinion that it was not necessary to comply with it and in fact he went to the extent of stating in his order that such a request was not relevant to the assessments to be done then, as the only pint that remained to be decided before the assessment orders were made was whether Aruna Devi and Ramkumar were or were not executrix and executor to the deceased. His view was thus stated : 'To repeat, the point to be noted here is that it is unnecessary to go through all the formalities again at this stage of reassessment as the matter in respect of the accounts remain concluded before the Income-tax Officer and information relating to them is irrelevant for the Purpose of information or stating her objections as to her treatment as executor.' The Income-tax Officer completed the assessment both under the Income-tax Act and the Excess Profits Tax Act. Against these orders Aruna Devi filed appeals which were disposed of by the Appellate Assistant Commissioner on April 16, 1955. Two points were urged before him on her behalf : (1) The assessments were time-barred and illegal; and (2) even otherwise the assessment orders were initiated on account of the fact that the Income-tax Officer had denied her an opportunity to put forward her objections to the assessments. The Appellate Assistant Commissioner was o the view that apart from the fact that the amendment made to the Income-tax Act in 1953 had retrospective effect from April 1, 1953, the assessee was the estate of the late Rangalal Jajodia. He further thought that as his predecessor in the earlier appeal had not cancelled the assessments that were made on the estate through Sankarlal Jajodia but only set them aside on the view that Sankarlal Jajodia was not the proper legal representative, the reassessments made pursuant to the direction under section 31 and the second proviso to section 34(3) were not barred by time. But on the other contention of the appellant, he was inclined to think that the Income-tax Officer was wrong in denying Aruna Devi an opportunity to place her objections to the assessments and prove that the income that has been returned was correct. On this ground he set aside the assessment orders with a direction that the Income-tax Officer should give an opportunity to the executors to report their objections, if any, to the income that was sought to be assessed and then complete the assessment s according to law. Against this order there were appeals by Aruna Devi representing her husbands estate. The Tribunal dismissed them on November 29, 1955, on the view that it was unnecessary to go into the merits as the Appellate Assistant Commissioner had given her a fresh opportunity to urge her objections. This court on a reference ordered on November 24, 1960, that the appeals should be disposed of afresh, since they had not been earlier dealt with properly. When the appeals were thus taken up by to Tribunal afresh, it took the view that the second proviso to sub-section (3) of sections 34 saved limitation and that the assessment s were valid under section 24B(3). The Tribunal considered that it was wrong to regard the legal representative as a person different from the deceased, and so far as section 24B(3) was concerned, Aruna Devi had acquired in the proceedings, her only plea at that time being that she should be furnished a fresh opportunity to prove the correctness of the returns and did not attack the order of the Appellate Assistant Commissioner as being without jurisdiction. On that reasoning the Tribunal dismissed the appeals on June 9, 1961.
In the circumstances, at the distance of the assessee, this reference has been made to us under section 66(1) on the following questions :
'Whether, on the facts and in the circumstances of the case, there reassessments on Mrs. Aruna Devi made on October 29, 1952, were in pursuance of the directions of the Appellate Assistant Commissioner in the appeals filed by Sri Sankarlal Jajodia ?
(ii) Whether any direction given on an assessment made in the appeals of Sri Sankarlal Jajodia will give jurisdiction to the Income-tax officer to make reassessments on the applicant who is a different person
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the legal representative is not a person different from the deceased for the purpose of application of the provisions contained in section 24B(3)
(iv) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the original assessments made on Sri Sankarlal Jajodia have not abated ?
(v) Whether any of the provisions of section 24B are applicable on the facts and circumstances of the case ?
(vi) Whether, on the facts and in the circumstances of the case, the assessment on the indeterminate group of persons as legal representative is valid in law ?
(vii) Whether, on the facts and in the circumstances of the case, the assessments to income-tax and excess profits tax are valid in law ?'
Thought these questions have been formulated in that way, the sub-stantial points which arise are, as we said at the outset, as to the scope and applicability of sub-section(3) of section 24B and the second proviso to sub-section (3) of section 34.
As to the first aspect, Mr. Padmanabhan for the assessee submits that sub-section(3) of section 24B will have no application to the facts of the case, as here the procedure contemplated by the latter half of that sub-section had already been complied with during the lifetime of Rangalal Jajodia and that, therefore, the assessment orders are bad, Learned counsel urges that the Act has prescribed no procedure for a situation in which the assessee having submitted his returnees and produced his accounts on being called upon to do so and died at a point where all that remained to be done was to make formal orders of assessments, the Income-tax Officer having already formed his opinion in regard to them. It is said that it is only where a person died after furnishing a return which the Income-tax Officer has reason to believe to be incorrect or incomplete and the Income-tax Officer may make an assessment of the total income of the deceased and determine the tax by the issue of proper notices, which would have to be served on the deceased person had he survived, would sub-section (3) of section 24B apply. We are of the view that this contention as to the scope of the sub-section is not correct.
Section 24B was inserted for the first time by section 11 of the Income-tax (Second Amendment) Act, 1933. Prior to that the Act contained no procedure for assessment of income of a deceased person. In Ellis C. Reid v. Commissioner of Income-tax, a person was served with a notice under section 22(2), but he failed to make a return and died after expiration of the period specified in the notice. It was held by the Bombay High Court that an assessment under section 23(4) could not in the circumstances be made on him after his death. The learned judges pointed out that the definition of 'assessee' in the Act meant a person by whom income-tax was payable and that it was clear from this definition that it applied only to a living person, the words being 'a person by whom income-tax is payable' and not 'a person by whom or by whose estate income-tax is payable.' They went on to state :
'It is to be noticed that there is throughout the Act no reference to the decease of a person on whom the tax has been originally charged, and it is very difficult to suppose the omission to have been unintentional. It must have been present to the mind of the legislature that whatever privileges the payment of income-tax may confer, the privilege of immortality is not that amongst them. Every person liable to pay tax must necessarily die and, in practically every case, before the last installment has been collected, and the legislature has not chosen to make any provisions expressly dealing with assessment of, or recovering payment from, the estate of a deceased person. In order that the Government may succeed and the assessment made in this case may be held legal, I think, one must do a certain amount of violence to the language of section 23(4);.... If the legislature intends to assess the estate of a deceased person to tax charged on the deceased in his lifetime the legislature must provide proper machinery and not leave it to the court to endeavour to extract the appropriate machinery out of the very unsuitable language of the statute.'
That was the background in which section 24B was enacted. This section is in three parts, the first of which deals with the liability of the executor, administrator or other legal representative to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge the tax which has been assessed on the deceased during this lifetime or which remained to be assessed after his death. While the executor, administrator or other legal representative is made liable to pay tax assessed or to be assessed, such liability is not personal to him but is to be mighty out of the estate of the deceased and to the extent to which such estate is capable of meeting charge. The liability to pay tax, which is yet to be assessed, is comprehend by the last words of the first part of the section, viz., 'or any tax which would have been payable by him under this Act if he had not died.' The second and third parts of the section prescribe the procedure for assessment of total income and determination of the tax payable on the basis of such assessment. Sub-section(2) was substituted in its present form by section 29 of the Indian Income-tax (Amendment) Act, 1939. The two sub-sections seem to deal with, as we understand them, practically all kinds of situations in the matter of assessment of income of a deceased person. Sub-section (2) applies to cases where a person dies without filing returns. This may be before the publication of a notice under sub-section (1) of Section 22 or before he is served with a notice under sub-section (2) of section 22 or section 34. In such cases the sub-section says that the executor, administrator or the legal representative of the deceased shall, on the service of notice on him either under section 22(2) or section 34, comply with it. The Income-tax Officer may them proceed to assess the total income of the deceased person as if such an executor, administrator or the legal representative were the assessee. It may be seen that such a legal representative, executor or administrator is deemed to be an assessee for the purpose of assessment vis-a-vis the deceased. The legal representative is the assessee quoad, of course, the estate of the deceased : vide Additional Income-tax Officer v. E. Alfred. Sub-section (3) contemplates yet other situation in which a person might have died without filing a return though required to furnish under section 22 or having furnished a return which the Income-tax Officer has reason to believe to be incorrect or incomplete. In these cases the Income-tax Officer may made an assessment of the total income of such person and determine the tax payable by him on the basis of such assessment, and for this purpose, the sub-section says :
'...... the Income-tax Officer...... may, by the issue of the appropriate notice which would have had to be served upon the deceased person had he survived, require from the executor, administrator or other legal representative of the deceased person any accounts, documents or other evidence which he might under the provisions of section 22 and 23 have required from the deceased person.'
It is on the interpretation of the scope of the words which we have extracted from the sub-section, there is divergence of argument, counsel for the assessee, on the one hand, contending that these words would be inapplicable to a case as her where, even during the lifetime of the deceased, the procedure contemplated by those words had been gone through and complied with while, on the other hand, the contention for the revenue being that these words do not contemplate a reiteration of the procedure in the presence of the legal representative and that the first part of sub-section (3) is of sufficient amplitude to support the legality of the assessment orders. The argument for the revenue is elaborated in this way. Sub-section (3) of section 24B was intended by the legislature to immortalise the assessee, that its object is to see that assessment proceedings never abated on account of the death of a person, whether he has or has not returned his income during this lifetime. The whole of section 24B was intend to cover a lacuna in respect of all situations arising out of the death of a person at any stage, before or after finding of returns by him. While liability to pay tax is fixed by sub-section (1), on the procedural matter it is only for proposes of sub-section (2) a legal representative is to be regarded or to be dammed an assessee quoit the estate of get deceased, but not necessarily for the purpose of sub-section (3). In fact, sub-section (3) does not say that legal representative, for purposes of assessment, shall be deemed to be an assessee. The first part of sub-section (3) enables the Income-tax Officer to deal with a return submitted by the deceased which he believes to be incorrect or incomplete and make an assessment of his total income and determine the tax payable by him on the basis of such assessment. In the words, it is within the contemplation of the first part of sub-section (3) that the assessment is made on the estate of the deceased and it is only for the purpose of representation, the procedure in the second part of sub-section (3) has been rosebud and that if the procedure prescribed there in has already been followed, it is not contemplated by sub-section (3) that it should be reiterated in the presence of the legal representative. Where the procedure has already been followed, all that remains to be done is to bring the legal representative on record and proceed with the assessment proceedings from the point at which the were let at the death of the deceased assessee. On this view there is a continuity in the assessment proceedings from the stand point of the estate of the deceased. The liability as contemplated by sub-section (1) is after all on the estate though the legal representative is made liable, his liability being limited to get extent of the estate and the taxes assessed or to be assessed. On these premises, learned counsel almost suggests without seating so that the estate of the deceased should in a sense be regarded as the assessee and the legal representative is but a formality for purposes of sub-section (3) of section 24B. We have carefully considered this argument, but we are unable to accept it.
To our minds, as we already mentioned, the two last sub-sections cover the entire field of procedure to be followed in assessing the income of deceased persons. To this extent we agree with learned counsel for the revenue. But we do not agree with him that if the procedure contemplated by sub-section (3) has already been gone through during the lifetime of the deceased, it is unnecessary to reiterate it when the assessee dies after going trough that procedure but before assessment orders are actually made. Equally it follows that we cannot accept the argument for the assessee that because the procedure laid down in sub-section (3) has already been gone through during the lifetime of the assessee, therefore, sub-section (3) will have no application to the present situation. In our view, the procedure contemplated by sub-section (3) will have to be followed or reiterated, as the case may be, as a condition to the validity of assessments in situations within its purview. That is to say, where, as in this case, an assessee died after having filed a return, which the Income-tax Officer believes to be incorrect or incomplete and the assessee during his lifetime being called upon to answer under sections 22(4) and 23(2) had complied with it, the procedure so far, before the Income-tax Officer passes formal orders of assessments, will have to be reiterated in the presence of his executor, administrator or other legal representative in order to enables him to show that the return file by the deceased was correct or complete. In such a case, the procedure will have to be gone through de novo. It may be that from the point of view of the revenue reiteration of the procedure may be pointless. But when user sub-section (1) of section 24B a legal representative is sought to be made liable to tax queued the estate of the deceased, he must necessarily have an opportunity to convince the Income-tax Officer that the return filed by the deceased was correct or complete. In our view, this opportunity to the legal representative is not mercy a formal one, but is one of substance, and it is not for the revenue to think that it is unnecessary, though the legal representative may not avail himself of an opportunity given to him. That will be a different matter. The words in sub-section (3) 'by the issue of the appropriate notice which would have had to be served upon the deceased person had he survived' merely describe the procedure to be followed in cases covered by sub-section (3) and are not intended to convey that if the procedure had already been followed by the deceased during the lifetime of the deceased, it need not be reiterated. It is true that the first part of sub-section (3) enables the Income-tax Officer, in cases falling within its purview, to make an assessment of the total income of the assessee and determine the tax payable by him, but the sub-section explicitly says that for this purpose the Income-tax Officer will have to follow the procedure prescribed. If he does not do so, the procedure being a condition precedent to his powers, the Income-tax Officer will be acting without jurisdiction or in irregular exercise of his jurisdiction.
On that view we take, we are not persuaded that the first part of sub-section (3) of section 24B in a sense regards the estate of the deceased as the assessee. This contention for the revenue will go, in our opinion, counter to the definition of an 'assessee' in section 2(2). This contemplates, as was pointed out by the Bombay High Court in Ellis C. Reid v. Commissioner of Income-tax, a living person and not an inanitimate estate. Though sub-section (3) of section 24B does not in so many words indicate that a legal representative is to be regarded as an assessee, we think that in effect there is no difference between sub-section (2) and sub-section (3) as to the character of the person who represents the estate of the deceased for purposes of assessment of his income and determination of tax.
In our opinion, section 24B(3) applies to the facts of this case and, therefore, the assessment orders in the instant case were defective inasmuch as the procedure prescribed by sub-section (3) of section 24B, which as we have held, its a condition precedent to the Income-tax Officer assessing the income and determining the tax in cases falling within his purview, had not at all been followed by him.
That takes us to the other question as to the scope and applicability of the second proviso to sub-section (3) of section 34. The contention for the assessee is that the direction given by the Appellate Assistant Commissioner in his order dated April 30, 1952, falls outside the purview of the second proviso, so that it would not save the bar of time. This is on the assumption that the last date for initiating action or passing of orders of assessment or reassessment would be March 31, 1947, in the case of assessment year 1942-43 and March 31, 1948, in the case of the following assessment year. The Indian Income-tax (Amendment) Act, 1953, came into force only from April 1, 1952, so that the second proviso, according to counsel for the assessee, as amended by that Act will not help the revenue to save time. He contends that even on the assumption that the Amending Act was retrospective, the position would be the same, because Aruna Devi was a stranger so far as the assessment made against Sankarlal Jajodia and the appeal that was taken by him were concerned and that then direction made by the Appellate Assistant Commissioner on April 30, 1952, was unnecessary for the disposal of the appeal of Sankarlal Jajodia. It is also pointed out that the second proviso in so far as it affected 'any person' meaning a third party, has been held to offend the guarantee of quality. On the other hand, Mr. Balasubrahmanyan for the revenue argues that Aruna Devi could not be regarded as a stranger or third party, but she was intimately connected with the assessment which had been made against Sankarlal Jajodia as a legal representative of his father, the common factor being the estate. Learned counsel points out that the assessment on Aruna Devi was dependent on the result of the appeal filed by Sankarlal Jajodia and in this sense Aruna Devi was intimately connected with the appeal of Sankarlal Jajodia, so that the direction given by the Appellate Assistant Commissioner would be within the purview of the second proviso. Mr. Balasubrahmanyan further contends that 'any person' in the second proviso, if understood in a limited sense, namely, a person intimately connected with the assessment, the decisions of the Supreme Court holding the second proviso to be ultra vires as offending article 14 could not affect the revenue in this case.
To deal with the rival contentions, it is necessary to notice section 34 which is a much amended section. As it stood prior to 1939, the section was a simple one containing one paragraph followed by a proviso. That paragraph provided :
'If for any reason income, profits or gains chargeable to income-tax has escaped assessment in any year or has been assessed at too low a rate the Income-tax Officer may, at any time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains,..... a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22, and may proceed to assess or reassess sub income, profits or gains, and the provisions of its Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.'
The proviso is not material for our present purpose. The section as substituted in 1939 provided a two-fold limitation for initiating action, namely, 8 years in cases of concealment and 4 years in other cases. A further period of limitation was also introduced in respect of passing of orders. Sub-section (2) of the section stated :
'No order of assessment under section 23 or of assessment or reassessment under sub-section (1) of this section shall be made after the expiry, in any case to which clause (c) of sub-section (1) of section 28 applies, of eight years and in any other case, of four years from the end of the year in which the income, profits or gains were first assessable.'
This scheme of limitation, in broad outlines, has been more or less maintained in the subsequent stages of amendments of section 34 both in respect of initiating action and passing of orders of assessment or reassessment in particular cases. Then came the Income-tax and Business Profits Tax (Amendment) Act, 1948 (XLVIII of 1948), which considerably expanded section 34. What is material to note is sub-section (2) of section 34 as it stood prior to 1948 was renumbered as sub-section (3), to which two provisos have been added, the first of which was to the effect that where a notice under sub-section (1) head been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice might her made before the expire of one year from the date of the service of the notice, even if such period exceeded 8 years or 4 years as the case may be. The second proviso read as follows :
'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.'
This proviso under went further amendments by the Indian Income-tax (Amendment) Act, 1953, which came into force from April 1, 1952. Section 18 of this Amendment Act substituted 'sub-section' in the second proviso by the words 'section limiting the time with which any action may be taken of or any order of assessment or reassessment may be made' and also the words 'in pursuance of' by the words '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'. It is with reference to this amendment the question as to how far a stranger implied in the words 'any person' could be affected by the second proviso and how far a direction which would be unnecessary for disposal of the appeal could be validly made, had arisen.
On the view take, which we shall presently indicate, as to the scope of the second proviso, it seems to us to be unnecessary to consider the question whether section 31 of the Indian Income-tax (Amendment) Act, 1953, had retrospective effect. For, even if it had such effect, unless it is held that Aruna Devi with reference to the appeal of Sankarlal Jajodia was not a third party or a stranger and the direction given by the Appellate Assistant Commissioner in April, 1952, was within his powers, the second proviso would not in any case save time.
Two questions arise as to the scope and applicability of the second proviso to the facts of this case. One of them is as to what precisely is meant by the words 'any person' in that proviso and what is the effect in relation thereto of S. C. Prashar v. Vasantsen Dwarkadas Commissioner of Income-tax v. Sardar Lakhmir Singh, and P. V. Godbole v. Jagannath Fakirchand. The second is as to the scope of the powers of appellate or revisional authorities under the second proviso to give a finding or direction relating to a person other than the appearing assessee or the petitioner in revision. 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. Relying on this ruling of the Supreme Court, learned counsel for the assessee argues that Aruna Devi being a stranger to the appeal of Sankarlal Jajodia, the second proviso was totally inapplicable to this case and the Appellate Assistant Commissioner had no jurisdiction in this appeal to give a finding or a direction to assess her. On the other hand, the revenue contends that the effect of the judgment of the Superhuman Court above referred to is not to totally nullify the scope of 'any person' in the second proviso, but it leaves the second proviso unaffected in so far as it relates to a person intimately connected with the assessment under appeal or revision. If this contention is accepted, it would follow that the finding or direction given by the Appellate Assistant Commissioner to assess or reassess Aruna Devi in her capacity as legal representative of the deceased would be in order. The question posited by the rival contentions had been considered and settled in Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das, and it is, therefore, not necessary for this court to considered the matter independently of it. In Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das a certain interest income was brought to tax for the assessment year 1949-50. On appeal by the assessee it was held that the income was received in the proviso accounting year. The Appellate Assistant Commissioner, while disposing of the appeal, directed that the amount should be deleted from the assessment for the year 1949-50 and included in the assessment for the year 1948-49. Pursuant to this direction, proceedings were initiated to reassess under section 34(1) in respect of the year 1948-49 and, for that purpose, a notice was served on the assessee on December 5, 1957. On these facts, the question was whether the second proviso to section 34(3) applied and saved the notice from the time limit prescribed by section 34(1). The Supreme Court held that the jurisdiction of the Appellate Assistant Commissioner the particular year under appeal. While reaching that conclusion, the Supreme Court went into the import of the words 'any person' in the second proviso and expressed the view :
'......... 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.'
It was observed that though the expression 'any person' in its widest connotation may take in any person, whether connected or not with the assessee, whose income for any year has escaped assessment, 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. On that construction, reference was made to section 30(1) to ascertain who the person was that was comprehended by the expression 'any person' in the second proviso, and it was pointed out :
'A combined reading of section 30(1) and section 31(3) of the Act indicates the cases where persons other than the appearing assessees might be affected by orders passed by the Appellate Assistant Commissioner. Modification or setting aside of assessment made on a firm, joint Hindu family, association of persons, for a particular year may affect the assessment for the said year on a partner or partner of the firm, member or members of the Hindu undivided family or the individual, as the case may be. In such cases though the latter are not economic parties to the appeal, their assessments depend upon the assessments on the former. The said instances are only illustrative. It is not necessary to pursue the matter further. 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.'
Having regard to this view of the Supreme Court as to the scope of the expression 'any person' in the second proviso, we are clearly of opinion that Aruna Devi, with reference to the appeals of Sankarlal Jajodia, could in no sense be regarded as a person intimately connected with the assessments under appeal, in the sense in which the Supreme Court explained 'intimate connection' in the context. Aruna Devi was not one who would be liable to be assessed for the whole or a part of the income that went into the assessment of Sankarlal Jajodia. In fact, his appeal was confined to his liability to pay tax which turned upon whether he would be a proper legal representative of the deceased. But it is argued for the revenue that the liability to tax was on the estate and whether Aruna Devi, as legal representative of the deceased, would be liable to pay the tax would depend upon the result of the appeal of Sankarlal Jajodia and that further Aruna Devi herself of described in the original assessment order as an heir or legal representative of the deceased. The answer is that Aruna Devi, as the legal representative of the deceased, should herself e regarded as an assessee within the definition of the expression though her liability would be quoad the estate of the deceased. Her liability in her capacity as the legal representative was in no sense dependent on the validity or otherwise of the assessment made on Sankarlal Jajodia who had nothing to do with the estate. When Sankarlal Jajodia contention was that he was nobody so far as his fathers estate was concerned and that, therefore, he could not be assessed, it cannot be said by any stretch of imagination that Aruna Devi was intimately connected with Sankarlal Jajodia as an assessee. There was nothing in common between the two in the matter of liability quoad the estate of the deceased. Further, as we already pointed out, though Aruna Devi was arrayed along with Sankarlal Jajodia in the original assessment order as a party, it is not in dispute that no assessment orders or demands were served on her rate any time.
The Supreme Court in Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das held that a finding in the second proviso can be only that which is necessary for the disposal of an appeal in respect of n assessment of a particular year. It accepted the following definition of the word 'finding' as applicable to that expression in the second proviso :
'The word finding, interpreted in the sense indicated by us above, will only cover material questions which arise in particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing.'
The Supreme Court also pointed out that the expression 'direction' cannot be construed in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under section 31. It was further pointed out :
'Under that section he can give directions, inter alia, under section 31(3)(b),(c) or (e) or section 31(4). The expression direction in the proviso could only refer to the directions which the Appellate Assistant Commissioner 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 he 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.'
That being the scope and effect of the words 'finding or direction' on the second proviso, it is obvious that the direction given by the Appellate Assistant Commissioner in his order dated April 30, 1952, to assessee Aruna Devi was quite unnecessary for the disposal of the appeal filed by Sankarlal Jajodia. The finding or direction given by that authority to that effect was outside the scope of the second proviso. We are of the view, therefore, that the second proviso to sub-section 34 will not assist the revenue to save the bar of time prescribed by sub-section (3) of section 34.
We shall now pass on to the reference relating to the assessments under the Excess Profits Tax Act. The Tribunal was silent in its order on that question. The contention for the assessee is that if section 24B(3) was inapplicable to the facts of this case, the position would be no different under the Excess Profits Tax Act. But, on the view we have expressed as to its applicability to the facts of the case in respect of the assessment under the Income-tax Act, this contention must fail. Also section 14(4) of the Excess Profits Tax Act clearly provides for a situation as in this case. Sub-section (4) says :
'Where by virtue of the foregoing provisions an assessment could, but for his (assessees) death, have been made on any person either solely or jointly with any other person or persons, the assessment may be made on his legal representative either solely or jointly with that other person or persons, as the case may be.'
Section 21 of the Excess Profits Tax Act applies section 24B of the Income-tax Act to assessments against the legal representatives. Under the power of modification conferred by section 21, rules have been framed which direct that section 22 in sub-section (3) of section 24B is to be read as section 13 of the Excess Profits Tax Act, 1940. We are of opinion that these provisions amply cover the procedure to be followed in the circumstances of this case. But on our view as to the scope and aplication of sub-section (3) of section 24B, it must be held that the assessment orders under the Excess Profits Tax Act are also vitiated because of the same defects in not fully applying the procedure prescribed by that sub-section. The questions referred to us are all answered in favour of the assessee and against the revenue with costs. Counsels fee Rs. 250.
Questions answered in favour of the assessee.