Decided on September 06,1962

M.R.DALAL Appellant


Tambe, J. - (1.)This is a reference under sub-section (1) of section 66 of the Indian Income-tax Act, 1922, and the first question that falls for consideration is whether the reassessment proceedings started against the assessee on a notice under clause (b) of sub-section (1) of section 34 of the Act have been validly initiated.
(2.)The following facts give rise to this reference : The assessment year with which we are concerned is the assessment year 1952-53, the relevant previous year being one that ended with 31st March, 1952. The assessee is the late Dr. M. R. Dalal, who died on 2nd October, 1952, and therefore has been represented before the income-tax authorities, the Tribunal as well as before us by his legal representative, his wife, Bai Shirinbai M. R. Dalal. On October 13, 1939, Dr. M. R. Dalal made a trust settling certain shares and securities on trust for the benefit of his son, F. M. Dalal and two daughters securities on trust for the benefit of his son, F. M. Dalal, and two daughters, Miss Gool M. Dalal and Miss Ketty M. Dalal Under the trust, it was directed that the income from the shares and securities settled on trust should be equally divided amongst his aforesaid three children. The trustees appointed under the trust were the settler himself, his wife, Bai Shirinbai, and the Central Bank Executor and Trustee Company Ltd. By virtue of clause 13 of the trust deed the trust was made irrevocable for a period of seven years. The said clause 13 is in the following terms : "13. It shall be lawful for the Settlor at any time during his life by any deed or deeds with or without power of revocation and new appointment or by will or codicil to revoke either wholly or partially the trusts and powers hereby declared concerning the Trust Funds hereby settled or any part thereof or the moneys or property for the time being representing the same and the same and by the same or any other deed or deeds revocable or irrevocable or by a will or other testamentary document to appoint and declare any new or other trusts or power concerning the Trust Funds or any part thereof to which such revocation shall extend as to hims shall seem meet PROVIDED HOWEVER that this power of revocation shall not be exercisable and this deed shall remain irrevocable for a period of seven years from the date hereof and for such further period or periods thereafter as the Settler may by writing declare at the expiration of the said first period of seven years and subsequent further period or periods."
(3.)At the time the trust deed was made, Miss Ketty M. Dalal was a minor. In the assessment year 1940-41 the income-tax authorities accepted the trust and excluded the share of income from the trust property of Shri F. M. Dalal and Miss Gool M. Dalal from the total income of Dr. M. R. Dalal. However, one-third share of the income of Miss Ketty M. Dalal was deemed to be income of Dr. Dalal by reason of the provisions of section 16(3) (a) (iv) of the Act. This state of affairs continued till Miss Ketty M. Dalal attained majority on 8th April, 1945. Thereafter, the three children of Dr. Dalal were separately assessed in respect of their share of income in the trust property and Dr. Dalal was separately assessed in respect of his income from other sources and this state of affairs continued till the assessment year 1952-53. For the assessment year 1952-53, returns of income were filed as under :

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