R.L. Gulati, J. - (1.) UNDER Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act" the Income-tax Appellate Tribunal. Allahabad Bench, Allahabad, has submitted this statement of the case at the instance of the Commissioner of Income-tax, U.P., Lucknow.
(2.) THERE was a joint Hindu family at Jhansi of the name and style of Nathu Ram Jawaharlal. On May 19, 1945, there was a partition in this family as a result of which two smaller undivided families came into existence, namely, (i) Bhagwan Dass Sita Ram, the assessee, and (ii) Jawaharlal Mani Ram. The bigger Hindu undivided family preferred a claim under Section 25A of the Act for an order recognising the partition. While this claim was pending the assessee family filed voluntary returns under Section 22(1) of the Act for the assessment years 1946-47 to 1949-50 on November 18, 1950. The Income-tax Officer did not accept the claim of partition and assessed the income of the two units in the hands of the bigger Hindu undivided family. The partition was not recognised even by the Appellate Assistant Commissioner of Income-tax on appeal. Finally, the bigger Hindu undivided family appealed to the Income-tax Appellate Tribunal. The Tribunal by its order dated October 28, 1954, accepted the claim and held that a partition in the family had taken place with effect from May 19, 1945. The Tribunal directed that assessments should be made on the component units of the bigger Hindu undivided family, namely, the assessee and Jawahar Lal Mani Ram. The Income-tax Officer instead of proceeding on the basis of the voluntary returns already filed by the assessee proceeded to take action under Section 34(1)(b) and completed the assessment for all the four years on September 8, 1955. The assessee appealed against these assessments to the Appellate Assistant Commissioner of Income-tax, but before the appeals were taken up for hearing, the assessee moved this court under Article 226 of the Constitution. On March 30, 1960, the High Court quashed the assessment orders on the ground that, as voluntary returns filed by the assessee were pending, no proceeding could be taken under Section 34, THEREafter, the Income-tax Officer initiated proceedings on the basis of the voluntrary returns. The assessee again filed a writ petition praying for quashing the proceedings on the ground that the department could not proceed against it on the basis of the voluntary returns. This petition was rejected by the High Court and, thereafter, the Income-tax Officer proceeded to complete the assessments under Section 23(3) and passed assessment orders on May 31, 1962, in respect of all the four assessment years. These assessment orders were again challenged by the assessee by way of an appeal to the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner of Income-tax cancelled the assessments on the ground that they were barred by time. The department appealed to the Income-tax Appellate Tribunal. The appeals relating to the assessment years 1946-47 and 1947-48 were withdrawn by the department and the appeals relating to the remaining two assessment years were dismisssd by the Tribunal on the ground that no assessment could be made on the basis of voluntary returns which had exhausted themselves after the expiry of four years from the end of the assessment years to which they related. According to the Tribunal, assessment could only be made by initiating proceedings under Section 34 with the help of the second proviso to Sub-section (3) of Section 34. The department is aggrieved. Hence this reference. The following question of law has been referred for our opinion: " Whether, on the facts and in the circumstances of the case, valid assessments could be made on 31st May, 1952, for the assessment years 1948-49 and 1949-50 on the basis of voluntary returns of income filed under Section 22(1) of the Indian Income-tax Act, 1922, on November 18, 1950 ? This reference came up before a Division Bench of this court of which brother Seth J. was a member. On behalf of the department it was contended before the Bench that voluntary return having been filed by the assessee, it must be taken that assessment proceedings had commenced and so long as those proceedings were pending, income could not escape assessment and as such Section 34 was not applicable. Reliance was placed on a recent decision of this court in Sool Chand Ram Sewak v. Commissioner of Income-tax, 1969 73 ITR 466 AH.. The facts of that case are similar to the facts of the present case and it fully supports the case of the department. However, the correctness of that decision was doubted by the Bench and accordingly it referred the case to a larger Bench. That is how this reference has come before this Full Bench. The first question that we have to decide is as to whether assessments could be made under Section 23(3) on the basis of voluntary returns filed, or action should have been taken under Section 34 with the help of the second proviso to Sub-section (3) of Section 34. Now, it is not disputed that when a return of income is filed by a person voluntarily under Section 22(1), assessment proceedings commence against him and Section 34 does not come into play at all so long as the assessment proceedings remain pending. But it is contended that a return exhausts itself after the expiry of four years from the end of the assessment year to which it relates. After the expiry of that period, no assessment is possible on the basis of the voluntary return. In such a case assessment is possible only under Section 34, if the case is also covered by the second proviso to Section 34(3). It is not possible to accept this contention.
(3.) SUB-section (3) of Section 34 provides a period of limitation of four years for an assessment under Section 23. If assessment proceedings commence by filing of voluntary return, as indeed they do, on the expiry of the period of four years, such proceedings are suspended or interrupted. But neither the proceedings nor the return become invalid. If subsequently the bar of limitation which intervenes is removed, the proceedings revive. The second proviso to Section 34(3) raises the bar of limitation in certain circumstances. That proviso reads : " Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under Section 27 or 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 an order under Section 31, Section 33, Section 33A, Section 33B, Section 66 or Section 66A." Thus where assessment is to be made in consequence of or to give effect to any rinding or direction contained in an appellate order, etc., the bar of limitation is lifted and the assessment can be made at any time. The instant case is a case of that nature where an assessment had to be made against the assessee in consequence of or to give effect to a finding or direction contained in the order of the Income-tax Appellate Tribunal. As soon as that order was passed the bar of limitation was lifted and the assessment could be made without any bar of limitation. As the returns had already been filed by the assessee, there was no need to issue a notice under Section 34. In fact Section 34 had no application. If the return had not been filed, of course, the Income-tax Officer would have been justified in initiating proceedings under Section 34.;