Pathak, J. - (1.) THERE was a Hindu undivided family which carried on business under the name and style, M/s. Nathuram Jawaharlal. During the assessment proceedings for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50 a claim was made under Section 25A of the Indian Income-tax Act, 1922, that the Hindu undivided family had disrupted with effect from May 19, 1945, giving rise to smaller Hindu undivided families. One of such smaller Hindu undivided families is the assessee, M/s. Jawaharlal Maniram. In the assessment proceedings against the parent Hindu undivided family, M/s. Nathuram Jawaharlal, the Income-tax Officer rejected the claim under Section 25A and assessed the entire income in the hands of the parent family. The parent family appealed unsuccessfully to the Appellate Assistant Commissioner against the rejection of the claim under Section 25A and thereafter took the case in second appeal to the Income-tax Appellate Tribunal. The Tribunal by its order of August 31, 1954, accepted the claim under Section 25A and directed the Income-tax Officer to recognise the complete partition of the parent Hindu undivided family with effect from May 19, 1945. Parallel appeals were filed against the assessments of the income in the hands of the parent Hindu undivided family and these assessments were set aside in second appeal by the Tribunal by its order dated October 28, 1954, with the direction : " Fresh assessments should be made, one for the period 1945 up to which the Hindu undivided family was in existence, and the other on the component units, namely, M/s. Jawaharlal Maniram and Bhagwandas Sitaram."
(2.) MEANWHILE, on November 18, 1950, the assessee Hindu undivided family filed returns of its total income for the assessment years 1946-47 to 1949-50. As the Income-tax Officer had rejected the claim under Section 25A and declined to hold that the parent family had suffered partition, he took no action upon the returns filed by the assessee Hindu undivided family. But after the order of the Tribunal dated October 28, 1954, in the appeals filed by the parent Hindu undivided family, the Income-tax Officer, pursuant to the directions contained in that order, commenced proceedings under Section 34 in respect of the assessee Hindu undivided family for the assessment years 1946-47 to 1949-50. On March 4, 1955, the Income-tax Officer issued a notice under Section 34 in respect of each of the four assessment years. The assessee submitted its returns on July 6, 1955, but contended that the notices issued under Section 34 were invalid inasmuch as it had already filed the returns relating to those years on November 18, 1950, and it could not be said that income had escaped tax on account of the failure or omission on the part of the assessee to submit its return. It was further contended that the assessments for those years had become barred by limitation. The Income-tax Officer rejected the contentions of the assessee and assesseed it for the four assessment years on September 8, 1955. The assessee appealed unsuccessfully before the Appellate Assistant Commissioner against the validity of the proceedings under Section 34. In second appeal the Tribunal held that income had escaped assessment because of the failure of the assessee to file its returns pursuant to the notice under Section 22(1) in respect of the four assessment years and the Income-tax Officer was entitled to proceed under Section 34(1)(a) for which the period of limitation was eight years. Accordingly, it held that the assessments were not barred by time. Alternatively, it held that the Income-tax Officer was precluded from assessing the assessee Hindu undivided family on account of his finding that the parent Hindu undivided family had not suffered partition and that it was only subsequently when the Tribunal held on August 31, 1954, that the parent Hindu undivided family had been partitioned, that the assessee became first assessable. In the view that the assessee became first assessable on August 31, 1954, the Tribunal held that the period of limitation of four years for taking assessment proceedings against the assessee commenced on August 31, 1954. On that reasoning, it found that the assessments had been made within limitation. At the instance of the assessee the Tribunal referred the following question to this court for its opinion : " Whether the assessments made under Section 34 of the Income-tax Act for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50 were bad in law, as they were made after the expiry of the period of four years from the date of filing of those returns on November 18, 1950 ? " The reference came on for hearing before a Bench of this court. The Bench considered it necessary to reframe the question as follows : " Whether the assessments made under Section 34 of the Income-tax Act for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50 were bad in law, as they were made after the expiry of the period of four years from the end of the assessment years in question instead of from the date of the filing of the returns on November 18, 1950 ? " The Bench answered the question in the negative and against the assessee, holding that the assessments were valid, even though made after the expiry of four years from the end of the assessment years in question. The assessee proceeded in appeal to the Supreme Court. On April 19, 1967, the Supreme Court delivered judgment setting aside the judgment of the High Court and remitting the case to it for reframing the question and disposing of the reference afresh. The Supreme Court took the view that the assessee attacked the validity of the notices issued under Section 34 as well as the validity of the assessments made in pursuance of those notices and the two questions which really arose in the case had not been considered. One question was whether the proceeding for reassessment could be commenced after the returns had been filed on November 18, 1950, or the returns could be ignored. The other question was whether the assessment had to be completed within the period of limitation prescribed by Section 34(3). Being of the view that there should be a proper trial of the question arising out of the order of the Tribunal, it expressed the opinion that the appropriate questions should be refrained by this court keeping in view the questions mentioned by the assessee and the Commissioner. The reference has now been placed before us.
(3.) WE heard learned counsel for the parties on the questions which could be said to properly arise in the case and accordingly we have framed the following two questions : "(1) Whether it was open to the Income-tax Officer to issue notices under Section 34 of the Income-tax Act, 1922, for the assessment years 1946-47 to 1949-50 and make assessmentin pursuance of the notices in spite of the fact that the assessee had already filed returns for those assessment years on November 18, 1950 ? (2) Whether, under the circumstances of the case, the notices issued by the Income-tax Officer under Section 34 of the Act and the assessment orders made in pursuance of the notices were within limitation ? " Learned counsel for the parties agreed that the two questions formulated above are the questions which really arise in the case.;