GENTLE,J. - (1.) THE applicant is a firm consisting of three partners each of who is also the Karta of a HUF. Up to and including the year 1934-35 the three families were each separately assessed to income-tax. In the year 1935-36 they were grouped together and were assessed as an association of individuals. The assessment contained the whole of the income of the three families from all sources including the profits from the business conducted by the applicant firm. In the years 1936-37 and 1937-38 similar assessments were made as in the previous year. The assessees objected, in respect of these two assessments, to the method by which they had been made, the objection being taken to the CIT who took cognizance of the matter under S. 33 of the Indian IT Act.
(2.) WHILST these two assessments were under consideration by the CIT, the ITO on 15th Feb., 1939, made a further assessment upon the association of individuals for the year 1938-39 and against which an appeal was preferred to the AAC on 6th March, 1939. By his order dt. 12th May, 1939, the CIT accepted the contention that the three families should not have been grouped together in one assessment and the profits of the firm should be eliminated from it. The CIT's order was passed after the ITO had made the assessment upon the association for the year 1938-39 and before the appeal against it was decided. On 14th July, 1939, the ITO was informed of the CIT's order and he served a notice under S. 34 of the Act upon the applicant firm requiring it to furnish a return of profits from the business for assessment for the year 1938-39 on the ground that they had escaped assessment for that year. On 5th July, 1940, the appeal by the association in respect of the assessment made upon it for the year 1938-39 was allowed and on 21st Dec., 1940, the applicant firm was assessed in respect of the year 1938-39 under ss. 23(3) and 34 of the Act. The validity of the notice under S. 34 of the Act is questioned in this Reference. The question which is raised is "Whether in the facts and the circumstances of the case the action of the ITO in issuing a notice under S. 34 for the asst. yr. 1938-39 was valid in law?"
(3.) DURING the course of the argument it transpired that the association has paid all the tax pursuant to the assessment for the years 1936-37 and 1937-38 and that the firm has also paid the tax in respect of the year 1938-39. The individuals who were the subjects of the assessment upon the association and upon the firm are in fact the same. The learned Advocate on behalf of the applicants stated that whatever may be the answer to the question raised in this Reference, whether it is in favour of the applicant firm or whether it is adverse to it, there will be no action taken to obtain refund of any of the income-tax which has in fact been paid. The payments which have been made will remain and the assessments have all been fully satisfied so far as the tax is concerned.;