- (1.) THESE three writ petitions raise a common point and are therefore consolidated for the sake of convenience. The first two writ petitions, Nos. 1995 and 3069 of 1960, are by Mukand Lal Damodar Das, sons of L. Kanhaiya Lal Sarraf, and they are concerned with the assessment years 1947-48, 1948-49 and 1949-50. The third with petition No. 3068 of 1960 is by Hiralal, son of the aforesaid Mukand Lal Sarraf, and it is concerned only with the assessment years 1948-49 and 1949-50.
(2.) THE question which arise in these petitions is whether the petitioners can be assessed under section 34(1)(b) read with the second proviso to section 34(3) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act, for the aforesaid relevant years in the status of an individual in respect of the share income of the first two petitioners from the firm of Kanhaiya Lal Mukand Lal Sarraf, Raja Darwaza, Varanasi, and the third petitioner, Hira Lal, in respect of his share income from the firm, Kanhaiya Lal Damodar Das Sarraf and Company, Raja Darwaza, Varanasi. The contention of Mr. Karkhanis, the learned counsel for the petitioners, in substance was that for the assessment year 1947-48, the second proviso to section 34(3) as it stood before its amendment in 1953 with retrospective effect only till April 1, 1952, would be applicable and as no assessment had previously been made for 1947-48 and 1948-49 on the petitioners the issue of section 34 notice would be barred by the prescribed limitation of four years and in any event the unamended second proviso to section 34(3) would have no application as that only applied to a reassessment and not to an assessment which was being made for the first time. In respect of the assessment years 1948-49 and 1949-50 it was contended that though the second proviso to section 34(3), as amended, would be applicable and an assessment made for the first time could be made there under yet as the High Court had not given any finding or direction in its order under section 66 the action taken under the second amended proviso to section 34(3) was misconceived; it was further contended that the High Court could not ever give any findings or directions, as its jurisdiction was only advisory and, therefore, the time-limit could never be extended by virtue of any finding or consequence of any direction given by the High Court under section 66 of the Act. The departments contention on the other hand is simply this that for the assessment year 1947-48, on the date when the notice were issued, i.e., on the 30th June, 1960, the amended second proviso to section 34(3) was already on the statute book and it would have retrospective effect even beyond April 1, 1952. Even if the unamended second proviso to section 34(3) applied what the Income-tax Officer sought to do was not to assess the petitioner but to reassess them as they were all members of the Hindu undivided family in the reference proceedings under section 66 of the Act. For this latter proposition reliance was placed on the unreported decision of the Full Bench of this court in the case of Sri Lakshman Prakash v. Commissioner of Income-tax (Income-tax Miscellaneous case No. 413 of 1954, decided on the 27the July, 1962) and further that though the High Courts jurisdiction was advisory it could always give findings which could be given effect to even against strangers after the period of limitation provided under section 34(3) had expired. In order to appreciate the contentions raised it is necessary to state the relevant facts. L. Kanhaiya Lal, who was the karta of his undivided family had to sons, L. Damodar Das and L. Mukand Lal, and their sons. L. Kanhaiya Lal died on the 29th September, 1947, and the Hindu undivided family, thereafter, consisted of the aforesaid two brothers and their sons. Hiral Lal was the son of Mukand Lal. The firm, Kanhaiya Lal Mukand Lal, was constituted on November 2, 1945, and the partners there of were Mukand Lal with Rs. 0-8-0 share two outsiders, Purshottam Das and Badri Das, with Rs. 0-4-0 each. Mukand Lal claimed that he was a partner in the said firm in his individual capacity and not as the representative of the Hindu undivided family. On the individual returns filed by him, the following orders were passed by, the Income-tax Officer. Assessment Year 1947-48 Case discussed personally with the E. P. T. O. Second the records to him for amalgamation with the H. U. F. records. Vide order dated January 13, 1948. Assessment year 1948-49 Income returned by the assessee is being considered in the assessment of G. I. R. No. 10K. There will therefore be no assessment. Assessment year 1949-50 Income returned by the assessee is being considered in the assessment of G. I. R. No. 10K. There will therefore be no assessment. (Vide order dated March 29, 1951). Similarly, the firm of Kanhaiya Lal Damodar Das Sarraf and Co. came into existence on the 20th January, 1946, and the partners thereof were Damodar Das, Petitioner, with Rs. 0-11-0 share and two strangers, Purshottam Das and Ashok Chandra, with Rs. 0-3-0 and Rs. 0-2-0 shares respectively. The constitution of this firm was changed and ultimately Damodar Das, the petitioner, had only Rs. 0-9-0 share and one more outsider having been brought in they had between them the Rs. 0-7-0 as their share. Damodar Das, petitioner, claimed also that he was a partner in his individual capacity and not as representative of the family.
(3.) THE firm of Kanhaiya Lal Hira Lal came into existence on October 5, 1946, and the partners thereof were the petitioner, Hira Lal, with Rs. 0-9-0 share and three outsiders with Rs. 0-4-0, Rs. 0-2-0 and Rs. 0-1-0 shares respectively. Hira Lal also claimed that he was a partner in his individual capacity and not as representative of his Hindu undivided family. Each one of the three petitioners, for the relevant assessment years in which their shares of income from the aforesaid firms was assessable, was returned by them in the status of individual. Bal Mukand had made the returns on the 6th of November, 1947, 30th of December, 1948, and 24th of February, 1950, respectively for the three relevant assessment years in the status of an individual. Similarly, Damodar Das had made three returns on November 6, 1947, January 3, 1949, and January 12, 1950, respectively, for the assessment years. THE orders passed on these returns were exactly the same as the said order passed on the three returns made by Bal Mukand in the status of an individual. Hira Lal had also filed returns for the assessment years 1947-48, 1948-49 and 1949-50 in his status as individual showing his share of income from the firm of Kanhaiya Lal Hira Lal Sarraf & Co. THE department took the view that three petitioners who are members of the Hindu undivided family of Kanhaiya Lal had become partners as representatives of the Hindu undivided family and not in their individual capacity and therefore ignored the individual returns filed by the petitioners and assessed the income which was returned by them in their returns as the income of the Hindu undivided family. The assessment having been made on the Hindu undivided family, in respect of the share income of the three petitioners from the aforesaid three firms, the Hindu undivided family appealed to the Appellate Assistant Commissioner through its karta, i.e., Mukand Lal, petitioner, and further to the Tribunal, where it was contended that the share income was the individual income of the aforesaid three petitioners and the share income had wrongly been added to the income of the Hindu undivided family. The Tribunal by its order dated September 29, 1950, upheld the order of the Appellate Assistant Commissioner. The matter came before the High Court on a reference made under section 66(2) and the question that was referred was : Whether there was material on which the Tribunal could hold that L. Mukand Lal was a partner in the firm of Messrs. Kanhaiya Lal Mukand Lal Sarraf as a representative of the assessee family and not in his individual capacity ? ;