Decided on October 06,1972



KANTAWALA, J. - (1.) BY this reference under S. 66(1) of the Indian INCOME TAX ACT, 1922, the question that is referred for determination is : "Whether proceedings under S. 34 for the asst. year 1956 -57 were validly initiated against the assessee, HUF, and the assessment completed against it within the time -limit applicable to it ?"
(2.) THE case relates to the asst. year 1956 -57 for which the relevant previous year is from May 9, 1954, to May 31, 1955. The assessee is an HUF, namely, M/s Hargovindsing Narainsing. For the asst. year 1956 -57 on May 3, 1956, the ITO issued a notice under S. 22(2) of the Act, in the name of "Shri Hargovindsing Narainsing, C/o. Court Receiver, High Court, Bombay". This notice was served upon the Court receiver on May 7, 1956. In response to this notice the Court receiver filed three separate returns for the accounting year under his signature. These returns are for the following periods of the accounting year : (1) From May 9, 1954, to September 27, 1954, i.e., upto the date of death of Hargovindsing Narainsing, the Karta of the HUF ; (2) from September 28, 1954, to October 28, 1954, i.e., till the date of appointment of the Court receiver by the Court ; and (3) from October 28, 1954, to May 31, 1954, (sic) i.e., from the date on which the Court receiver took charge of the family property till the close of the accounting year. After these returns were submitted by the Court receiver, the ITO issued notice under S. 23(2) of the Act in the name of the Court receiver and thereafter did not proceed to complete the assessment. On September 24, 1958, the ITO initiated proceedings against the HUF by issuing a notice of the same date in the name of M/s Hargovindsing Narainsing (HUF) by present Karta, Damodardas Hargovindsing. In response to that notice under S. 34, Damodardas filed a return under protest. He contended before the ITO that the initiation of proceedings under S. 34 was invalid in law, inter alia, on the ground that the service of the notice issued by the ITO under S. 34 was bad in law. The ITO rejected the contention of the assessee and completed the assessment by his order passed on March 29, 1961. On appeal by the assessee to the AAC, he also rejected the contention of the assessee that the assessment was invalid in law as the proceedings were wrongly initiated under s. 34 of the Act. This contention was rejected by the AAC and he took the view that as the ITO did not take any action on the return filed by the Court receiver, he was entitled to issue notice under s. 34 of the Act and based his assessment on the return submitted by the HUF.
(3.) IN appeal by the assessee before the Tribunal, it was also contended that the initiation of the proceedings under S. 34 of the Act was invalid in law, because a notice under S. 22(2) of the Act was issued and served upon the Court receiver ; that pursuant to the said notice the Court receiver had submitted three returns pertaining to the accounting period ; that so long as no proper order was passed upon these returns, it was not permissible to the ITO to issue a notice under S. 34 of the Act. While passing its original order, the Tribunal took the view that two of the returns filed by the Court receiver were unsigned and were not valid returns and that he was not bound to take cognizance thereof ; that the notice under S. 22(2) was issued in the name of the HUF, but the HUF did not file any return in pursuance of the said notice. The Tribunal accordingly took the view that initiation of proceedings was permissible under S. 34 of the Act.;

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