COMMISSIONER OF INCOME TAX PATIALA Vs. SHAHZADA NAND AND SONS

JUDGEMENT

(1.) These two appeals, one by special leave and the other by certificate, raise the question whether notice can be issued at any time for reassessment under S. 34 (1) (a), as amended by the Finance Act, 1956, of the Indian Income-tax Act, 1922, hereinafter called the Act, in respect of a concealed income to which S. 34 (1A) thereof applied.

(2.) The facts may be briefly stated. M/s. Shahzada and Sons, the 1st respondent in both the appeals, was an undivided Hindu family Firm and it was assessed in that capacity upto the assessment year 1945-46. It is alleged that subsequently there was a partition in the family and a new firm came into existence, which took over the business of the family. On March 26, 1954, the Income-tax Authorities issued a notice to the members of the defunct Hindu undivided family under S. 34 (1) (a) of the Act in respect of the assessment year 1945-46 on the ground that certain income of the said family had escaped assessment. Pursuant to the proceedings so initiated, a sum of Rs. 3,63,000 was added to the original assessment of the said family. The assessee took up the matter on appeal to the Appellate Assistant Commissioner, who held that the said notice was barred by time, though on the merits he confirmed the order of the Income-tax Officer. The Income-tax Department as well as the 1st respondent preferred appeals against the said order to the Income-tax Appellate Tribunal. The Tribunal held that the notice was barred by time and, therefore, the income-tax authorities had no jurisdiction to give a finding on the merits. Meanwhile S. 34 (1) (a) of the Act was amended by the Finance Act, 1956, with effect from April 1, 1956, whereunder, subject to certain conditions, a notice under S. 34 (1) (a) could be issued at any time. Thereafter on July 25, 1958, the Income-tax Officer issued a notice to the 1st respondent calling upon the members who constituted the undivided family to the return for the assessment year 1945-46. Respondents 2 to 5, who were the members of the said undivided Hindu family, appealed to the Central Board of revenue for redress without any success. Thereafter, they filed a petition under Art. 226 of the Constitution in the High Court of Punjab challenging the notice on various grounds. Their main contention was that no notice under S. 34 (1) (a) could be issued in respect of the war years, as the escaped income during the said years was governed by S. 34 (1A) of the Act whereunder a notice could be issued only before March 31, 1956. The writ petition came up before a single Judge of the High Court, who referred the following question to a larger Bench:

(3.) At the outset it will be convenient to read the material provisions of S. 34 fo the Act as amended by the Finance Act, 1956, and by the Income-tax (Amendment) Act, 1959.