Judgment

GROVER, J.: This is an appeal by certificate from a judgment of the Calcutta High Court in an Income-tax Reference.

2. The assessee during the material time was a Hindu Undivided Family consisting of the six members. In the original assessment for the assessment year 1946-47 the year of account being from April 14, 1945 to April 13, 1946, the Income-tax Officer determined the total income of the assessee at Rs. 35,741/- accruing from the business and other sources such as sale proceeds of forest produce, fisheries etc. Following demonetization of High Denomination Notes in January 1946 the assessee encashed such notes of the value of Rs. 19,000. The five members of the family named below also enacted notes of the value shown against each of them, the total value of the notes so encashed being Rs. 1,10,000:

1. Hem Chandra Kar Rs. 26,000

2. Jatindra Nath Kar Rs. 24,000

3. Atul Chandra Kar Rs. 23,000

4. Narendra Nath Kar Rs. 21,000

5. Bishnuram Kar Rs. 16,000

3. The Income-tax Officer reopened the assessments of the Hindu Undivided Family and of the five members for the assessment year 1946-47. He included Rs. 19,000 in the total income of the family and the amounts which had been separately encashed by the five members were included in the reassessments of their respective individual income. This reassessment was completed on January 31, 1955. Two days later i. e. February 2, 1955 the Income-tax officer issued another notice under S. 34 of the Income-tax Act 1922 to the family seeking to include in the income of the family the amount of the High Denomination notes of the total value of Rs. 1,10,000 which had been encashed separately by the five members. On behalf of the assessee it was explained that each of the five members was in receipt of the pocket allowance varying from Rs. 100 to Rs. 150 per month and also received cash and jewellery as gifts from his relations; therefore the amounts encashed by such members belonged to them individually. The Income-tax Officer was not satisfied with the explanation. He included the sum of Rs. 1,10,000 in the total income of the family. The Appellate Assistant Commissioner, on appeal, held that the second notice under section 34 issued to the family on February 2, 1955 was incompetent. He annulled the reassessment made pursuant thereto. The Appellate Tribunal, however, held on appeal by the department that the notice issued under section 34 was valid. The Tribunal called for a report from the Appellate Assistant Commissioner on merits. In his report the Assistant Commissioner agreed with the view of the Income-tax Officer. The Tribunal was finally satisfied that the amounts of the High Denomination notes which had been encashed in the name of the five members individually belonged to the Hindu Undivided Family. The following questions of law were referred by the Tribunal for the decision of the High Court:

(1) "Whether, on the facts and in the circumstances of the case, the assessment made upon the assessee Hindu Undivided family pursuant to a notice under section 34 of the Indian Income-tax Act issued on the 2nd February, 1955 was in accordance with law.

(2) Whether on the facts and in the circumstances of the case, the sum of Rs. 1,10,000 was rightly included in the assessment of the Hindu Undivided family"

The High Court held that the second notice issued under S. 34 of the Act on February 2, 1955 could not have been issued by the Income-tax Officer to the Hindu Undivided Family. It was found that when the first reassessment was made the primary facts necessary for reassessment of the family were in the possession of the Income-tax Officer. These facts came into possession not by virtue of disclosure made by the family but were discovered by him otherwise. At the time of the first reopening of the assessment of the Hindu Undivided Family and of the individual members the question of assessment of the entire amount represented by the High Denomination Notes was under direct considera