COMMISSIONER OF INCOME TAX Vs. SUNDERLAL N DAGA NO 1

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act, 1922, and relates to the assessment years 1949-50, 1950-51, 1952-53 and 1953-54. The question that is referred for our answer is :

(2.) ON behalf of the assessee, voluntary returns of his income from the partnership were filed for all the assessment years through his major brother, Hiralal Daga. Sodradevi, the mother of the assessee, also filed her returns separately showing her own income during those years. In the assessment proceedings recording "nil assessments" on the view take by him that the income falling to the share of the assessee from the partnership to whose benefits he was admitted and in which partnership his mother, Sodradevi, was one of the partners, was assessable in the hands of his mother Sodradevi, under the provisions of section 16(3) (a) (ii) of the Income-tax Act 1922. In the assessment proceedings of Sodradevi her income together with the income of the assessee from the partnership was clubbed together and Sodradevi was assessed on these two income and taxed thereon. Sodradevi then challenged the assessment order against her contending that the income of the present assessee was not liable to be included in her assessments and should be excluded from computation. Prior to these assessments, similar proceedings were taken for the assessment year 1946-47, and similar orders were passed by the Income-tax Officer in those proceedings also. Sodradevi was unsuccessful before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal and, at her instance, reference was made by the Appellate Tribunal to the then High Court of Judicature at Nagpur under section 66(1) of the Income-tax Act. By order dated April 13, 1954, the High Court took the view that the share of the income of the minor son from the partnership to whose benefits he was admitted could not be included in the assessment of his mother-partner under section 16(3) (a) (ii) and should, therefore, be excluded from her assessment. The deciasion of the Nagpur High Court, which is reported as Sahodradevi N. Daga v. Commissioner of Income-tax, was upheld by the Supreme Court by decision reported in Commissioner of Income-tax v. Sodradevi. In pursuance of the decision of the then Nagpur High Court, the Tribunal excluded from her assessment the income of the minor son. For the assessment year 1949-50 the Appellate Assistant Commissioner upheld the order of the Income-tax Officer including the minor's income in the income of his mother, but the said order was set aside in second appeal by the Appellate Tribunal and the Tribunal directed that the assessee's income should be deleted from the assessment of his mother, Sodradevi. The relevant portion of the Tribunal's order is in these words :

(3.) THE assessment for the assessment year 1949-50 stands separately. Section 34(1) (b) enables the Income-tax Officer to assess an income which has escaped assessment if, in consequence of information in his possession, he has reason to believe that income, profits and gains chargeable to income-tax have escaped assessment for any year even though returns of the income under section 22 might have been filed. However, for issuing such notices on the assessee a bar of limitation is put by the said sub-section and no such notice could be issued beyond a period of 4 years of the end of that year. However, this bar of limitation is lifted by the second proviso to sub-section (3) of the section 34, which proviso reads as under :