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HIGH COURT OF BOMBAY
SHAH, S. T. DESAI, JJ.
Onkarmal Meghraj, (H. U. F.), Bombay Assessee
Versus
Commissioner of Income Tax, Bombay City I
J. T. Ref. No. 54 of 1958
Decided On : 25-06-1959
INCOME TAX - Reassessment - Limitation - Amendment of S. 34 of the Income-tax Act, 1922 by Act 1 of 1959 - Retrospective effect - Notices issued before 1-4-1956 - Bar of limitation - Whether abrogated.
Fact of the Case:
The assessee, a Hindu Undivided Family (HUF), filed its return for the assessment year 1944-45, claiming that the income from the family business was assessable in the hands of the HUF. The Income-tax Officer (ITO) rejected the assessee's claim and assessed the income in the hands of the individual members of the HUF. The assessee appealed to the Appellate Assistant Commissioner (AAC), who directed the ITO to quash the assessment of the HUF and to tax the income in the hands of the separated members of the family entitled to receive the income. The ITO issued notices to the assessee under S. 34(1)(a) of the Income-tax Act, 1922, for reopening the assessment of the year 1944-45. The assessee challenged the notices on the ground that they were barred by limitation. The ITO relied on the amendment to S. 34 by Act 1 of 1959, which provided that a notice under S. 34(1)(a) could be issued at any time notwithstanding that the period of eight years specified in that sub-section before its amendment had expired.
Finding of the Court:
The court held that S. 4 of Act 1 of 1959 protected notices issued before the enactment of Act 1 of 1959 merely against the plea of the bar of limitation, and no other bar was sought to be abrogated thereby. Therefore, in giving full retrospective operation to S. 4, the court was not faced with any inconsistency with any other provision contained in Section 34. The court also held that S. 4 of Act 1 of 1959 prevented a plea of the bar of limitation being set up against a notice under clause (a) of sub-s. (1) of S. 34 and not to any other notice.
Issues: Whether the amendment of S. 34 of the Income-tax Act, 1922 by Act 1 of 1959 had retrospective effect.
Ratio Decidendi: The court held that S. 4 of Act 1 of 1959 protected notices issued before the enactment of Act 1 of 1959 merely against the plea of the bar of limitation, and no other bar was sought to be abrogated thereby. Therefore, in giving full retrospective operation to S. 4, the court was not faced with any inconsistency with any other provision contained in Section 34. The court also held that S. 4 of Act 1 of 1959 prevented a plea of the bar of limitation being set up against a notice under clause (a) of sub-s. (1) of S. 34 and not to any other notice.
Final Decision: The court directed the Tribunal to submit a supplementary Statement of facts as to the character of the notices issued by the ITO in April 1954 upon the assessee.
SHAH, J. : This Reference substantially deals with two assessments. One part of the reference concerns the assessment year 1944-45 in which 11 assessees are interested and the other part concerns the assessment year 1943-44 in which the assessee Onkarmal Meghraj is interested. We are at this stage primarily concerned with the assessment of the following 11 assessees :
1. Narayandas Pokermal.
2. Govindram (s/o No. 1).
3. Bhagwandas (s/o. No. 1).
4. Vasudeo (s/o. No. 1).
5. Meghraj Pokermal
6. Onkarmal Meghraj (s/o No. 5).
7. Banarisilal (s/o No. 5).
8. Beniprasad (s/o No. 5).
9. Hanumandas Sewakram
10. Kedarnath (s/o. -No. 9).
11. Durgaprasad (s/o. No. 9).
Sixteen persons entered on 19-5-1930 into an agreement of partnership to conduct a business in partnership in the name of Messrs. Narayandas Kedarnath. Amongst these sixteen persons there were three sets of persons who constituted Hindu United Families. Narayandas Pokermal and his three sons Govindram. Bhagwandas and Vasudeo - constituted one Hindu United Family : Meghraj Pokermal and his three sons - Onkarmal, Banarasilal and Beniprasad constituted another Hindu United
Family and Hanumandas Sewakram and his four sons - Kedarnath, Banarasidas, Durgaprasad and Harikisondas - constituted the third Hindu United Family. Besides these 13 persons there were three strangers who were partners in the firm. For the assessment year 1944-45, the members of the original three Hindu United Families made returns for income-tax in their status as individuals returning their respective incomes in the firm. The Income-tax Officer following his orders in the previous year of assessment ordered that the firm of Narayandas Kedarnath be registered under S. 26A of the Income-tax Act and the total income be assessed in the hands of only six assessees, viz., the three outsiders and the three Hindu United Families of Narayandas Pokermal, Meghraj Pokermal and Hanumandas Sewakram and he closed the assessment of the others by declaring their cases as of "no assessment". Against the order passed by the Income-tax Officer, the three Hindu United Families preferred appeals to the Appellate Assistant Commissioner and claimed that the income of the sons of the respective Managers in the three Hindu United Families be excluded from the family income as it belonged to those sons exclusively and was not the income of the Hindu United Families to which they belonged. In support of their contention, they relied upon an agreement reached with the Income-tax Department for the assessment years 1939-40 to 1941-42 by which it was admitted that a partition has taken place in the three families on 19-7-1940. The Appellate Assistant Commissioner following the decision of the Tribunal in respect of the profits from the firm for the assessment year 1943-44 directed the Income-tax Officer to quash the assessment of the three Hindu United Families and to tax the income assessed in the hands of the H. U. F. in the hands of the separated members of the family entitled to receive the income. The Income-tax Officer purporting to exercise powers under S. 34 then issued notices to all the thirteen members of the original three Hindu United Families for reopening the assessment of the year 1944-45. These notices were issued in April 1954, after obtaining the Commissioners approval for taking action under S. 34(1) read with S. 34(3) as amended by Act 18 of 1953. For the purpose of these assessments, the assessees Narayandas, Meghraj, Hanumandas and Beniprasad respectively assessees Nos. 1, 5, 9 and 8 in the table set out hereinbefore made their fresh returns in the status of individuals and the other assessees made their returns in the status of H. U. F. It may be observed that all thirteen assessees had submitted their original returns as individuals and the Income-tax Officer had assessed them in the status of Hindu United family. Against the order passed by the Income-tax Officer assessing the thirteen assessees as separated members
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