PATHAK, J. - (1.) ALLAH Bux and Zahur Bux carried on business in tobacco at Mauranipur. Allah Bux died in 1938. Zahur Bux carried on the business with his sons. In 1942 he gifted the business to his two sons, Mohd. Shakoor and Mohd. Bashir. He died in 1948.
(2.) FOR the assessment years 1943 -44 onwards, Mohd. Shakoor and Mohd. Bashir filed returns of the income from the Mauranipur business showing that the business was being carried on by them. The Income -tax Officer, however; assessed the business profits in the hands of an association of persons, Allah Bux and Zahur Bux, even after the death of Allah Bux. He was, of the view that the association included the sons and grandsons of Zahur Bux. He did not make any assessment on the basis of the returns filed by Mohd. Shakoor and Mohd. Bashir. This continued year after year. In appeals for the assessment years 1945 -46 to 1956 -57 the Appellate Assistant Commissioner held that for those assessment years there was no such association of persons as contemplated by the Income -tax Officer and on October 31, 1957, he made an order setting aside the assessment made on the association of persons, Allah Bux and Zahur Bux, and directed the Income -tax Officer 'to assess the income from the various sources in the hands of the respective persons to whom they arose bearing in mind the provisions of the second proviso to Sub -section (3) of Section 34 of the Indian Income -tax Act.' Pursuant to that direction, the Income -tax Officer initiated proceedings under Section 34(1)(a) on December 3, 1958, for the purpose of assessing the income of the Mauranipur business in the hands of Mohd. Shakoor and Mohd. Bashir for the assessment years 1945 -46 to 1953 -54. Simultaneously, the Income -tax Officer appealed to the Income -tax Appellate Tribunal against the finding of the Appellate Assistant Commissioner that the assessee was not an association of persons. Those appeals were dismissed by the Tribunal on October 7, 1959, Meanwhile, the proceedings under Section 34 taken by the Income -tax Officer culminated in assessments on Mohd. Shakoor and Mohd. Bashir on August 31, 1959. The Income -tax Officer specifically pointed out that, although he had appealed to the Tribunal against the decision of the Appellate Assistant Commissioner, the assessments were made on the basis of the direction contained in the order of the Appellate Assistant Commissioner. The assessments under Section 34 were challenged in appeal by the assessee before the Appellate Assistant Commissioner and, thereafter, in second appeal, before the Tribunal. The validity of the action under Section 34 was assailed before the Tribunal and a number of different contentions were raised. The Tribunal rejected those contentions and affirmed that the assessment proceedings under Section 34 were valid. On the merits, it granted some relief to the assessee. The Tribunal held that income had escaped assessment, because, as the period of limitation for making the assessment had expired, it was not open to the Income -tax Officer to act upon the voluntary returns filed by Mohd. Shakoor and Mohd. Bashir and, therefore, Section 34 was attracted. It accepted the contention of the assessee that Section 34(1)(a) did not apply but held that Section 34(1)(b) should have been invoked. Then treating the assessment as valid on the basis of the provisions of Section 34(1)(b), it held that, although the period of limitation prescribed in Section 34(1)(b) had expired, the bar of limitation was raised by the second proviso to Section 34(3). It also rejected the contention of the assessee that Mohd. Shakoor and Mohd. Bashir, constituting a partnership firm, were not (sic) strangers to the association of persons, Allah Bux and Zahur Bux, and, therefore, the second proviso to Section 34(3) was not attracted.
(3.) UPON this, at the instance of the assessee, the Tribunal has referred the following questions to this court for its opinion : '1. Whether, on the facts and in the circumstances of the case, income had escaped assessment, within the meaning of Section 34, when the Income -tax Officer did not take cognizance of the return filed by the assessee, and allowed the assessments to lapse ? 2. Whether the Appellate Assistant Commissioner in dealing with appeals of the association of persons, Zahur Bux and Allah Bux, could give a direction under Section 34(3) to take action against the assessee ? 3. Whether the second proviso to Section 34(3), which came into force on April 1, 1952, could be invoked in the case of the assessments, for the years 1945 -46 to 1951 -52? 4. If the answer to question No. 3 is in the negative, whether, on the facts and in the circumstances of this case, and on a true interpretation of the relevant terms of Sections 31 and 34 as they stood at the material time, the assessments for the years 1945 -46 to 1951 -52 were valid ? ' ;