RAMASWAMI) - (1.) THE Judgment of the court was delivered by
(2.) KARUPPAN Chettiar, his son Muthukaruppan and thelatter's minor sons all together formed a Hindu undivided family which wasassessed as such till the end of the assessment year 1948-49. In the course ofassessment proceedings for 1949-50 the family claimed on 7/02/1951that the several businesses of the family had been partitioned between KARUPPANChettiar on the one hand and Muthukaruppan Chettiar and his sons forminga separate family on the other. Following up this claim the returns in responseto the notice under Section 22(2) of the Income-tax Act, 1922 (hereinaftercalled the Act) .issued to the family for the assessment years 1950-51, 1951-52and 1952-53 were made by KARUPPAN Chettiar in his individual capacity showing the income from the several sources that fell to his share. The Income-tax Officer rejected the claim of partition and assessed the Hindu undividedfamily for the aforesaid three years treating KARUPPAN Chettiar's returns as theproper returns for the family. An appeal was made by the assessee to theAppellate Assistant Commissioner in which complete partition as required bySection 25-A of the Act was accepted by the Appellate Assistant Commissionerby his order, dated 18/12/1954. In keeping with this order he alsocancelled the assessments of the family for the aforesaid years. In the course of his order he observed : "I therefore hold that there is no asset left in the hands of theH. U. F. which can be brought to tax and that the H. U. F. is nolonger in existence. As such the present assessment requires to beannulled and the income considered in this assessment requires tobe considered in the hands of the separating coparceners. I thereforeannul these assessments." Meanwhile Muthukaruppan and his minor sons forming the family,the assessee in this case, filed returns for the Tamil years Virethi, Vikruthi andKara as the 'previous years' for assessment years 1950-51, 1951-52 and 1952-53as follows: JUDGEMENT_546_2_1970Html1.htm The Income-tax Officer closed the assessments as 'no assessments' by his notes in the order sheet, dated 18/06/1953, reproduced below: "The assessee is a member of the family of A. M. K. M. K.Karuppan Chettiar, assessed in F. 1005-A. I have held in the familyfile in my order for Income-tax year 1949-50 that there have been nodivision between father and son. This being the case, there is no sourceof income to be separately assessed in the assessee's hands. The return ofincome in this file relates to the alleged share of income consequent onpartition. Since partition has not been accepted, this file has only tobe clubbod with the father's file. If, for any reasons, it is ultimatelyheld on appeal that a separate assessment should be made, it will no doubtbe possible to take action under provision of Section 34 as now amended.Since there is no separate income, the pending proceeding will be closedas N. A. and for Income-tax year 1953-54 the file will be removed andclubbed with the family file F. 1005-A." 549The Income-tax Officer in giving effect to the aforesaid order of partitionunder Section 25-A of the Act and cancelling consequentially the family assessments, simultaneously issued notices under Section 3 4/03/1957, forthe three assessment years 1950-51, 1951-52 and 1952-53 to the assessee familyafter obtaining the previous approval of the Commissioner. In response to thenotice the assessee submitted its returns on 9/04/1957, for the three assessment years under protest. On the basis of these returns the Income-tax Officerassessed the assessee by his order of the same date for all the three years, ignoring the protest. The assessee appealed to the Appellate Assistant Commissionerbut the appeal was dismissed. The assessee took the matter in appeal to theAppellate tribunal but was unsuccessful. The Appellate tribunal stated acase to the High court under Section 66(2) of the Act on the following question of law : "Whether the aforesaid assessment for years 1950-51, 1951-52 and1952-53 are valid?" The High Court by its judgment, dated 16/09/1964, recordedan answer in the affirmative. In the view of the High court, the order passedby the Appellate Assistant Commissioner and the direction given by him liftedthe bar of limitation prescribed by Section 34(3) of the Act for making theassessment.
(3.) IT is not necessary to decide whether the observations made by theAppellate Assistant Commissioner in his order declining to assess the incomeof the Hindu undivided family operated to lift the bar of limitation as regardsthe assessment of income of the separate members of the application of theprinciple of the judgments of this court in Income-tax Officer v. Murlidharv Bhagwandas and N. Kt. Sivalingam Chettiar v. Commissioner of Income-tax. In ouropinion the orders passed by the Income-tax authorities and confirmed by theTribunal suffer from a fundamental defect. As we have already stated,Karuppan Chettiar submitted returns of his income in his individual capacityfor the years 1950-51, 1951-52 and 1952-53 in response to the notice issued underSection 22 (2) of the Act. By his order, dated 18/06/1953, the Income-taxOfficer closed the assessments as 'no assessments' and added that since therewas no separate income, the pending proceedings would be closed as N. A. andfor income-tax year 1953-54 the file would be removed and clubbed with thefamily file F. 1005-A. Thereafter the assessee filed two sets of returns for theaforesaid three years, once on 23/02/1955 and again on 30/03/1956. These returns were submitted by the assessee in response to the noticeissued on 2/03/1957. IT is manifest that in these circumstances noticeunder Section 34 of the Act cannot be issued to Muthukaruppan Chettiar andhis minor sons unless the returns which had already been filed by that family were disposed of. It was held by this court in Commissioner of Income-tax V. RanchhaddasKarsondas that the return in answer to the general notice under Section 22(1)of the Act can, under Section 22(3), be filed at any time before assessmentand for this there is no limit of time. When in respect of any year a returnhas been voluntarily submitted before assessment) the Income-tax Officercannot ignore the return and the notice of re-assessment and consequentassessment under Section 34 ignoring the return are invalid. In the presentcase we are of opinion that the order of the Income-tax Officer, dated June 18,550 1953, is not an order to terminate the proceedings and the result, therefore, isthat the original returns submitted by the assessee under Section 22(2) and (3)have not been properly and legally proceeded with. In the case before us theorder of the Income-tax Officer, dated 18/06/1953, should be interpreted inthe light of circumstances in which that order -was passed. So interpreted itappears to us that the Income-tax Officer did not intend to conclude theproceedings before him. It follows, therefore that there is no disposal of thevoluntary returns made by the respondent for the assessment years 1950-51,1951-52 and 1952-53. It is manifest that the assessment proceedings underSection 34(1) of the Act for the aforesaid three years are invalid.;