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PUNJAB & HARYANA HIGH COURT
I.D.Dua, D.K.Mahajan and J.S.Bedi JJ.
Shahzada Nand And Sons
Versus
Central Board Of Revenue
Civil Writ No. 801 of 1959,
Decided On : SEPTEMBER 8, 1961
{'KEYWORD': 'INCOME TAX ACT, 1922 - SECTION 34', 'SUBJECT': 'NOTICE UNDER SECTION 34 - LIMITATION', 'ACT SECTION LIST': ['INCOME TAX ACT, 1922 - SECTION 34']}
Fact of the Case:
The assessee, a Hindu undivided family, was dissolved in March 1945. A new firm consisting of three brothers took over the business. In 1951, the Income-tax Department started investigations into the financial affairs of the Hindu undivided family. After several years, the matter was dropped. In 1954, the Income-tax Officer issued notices under Section 34 to the assessee. The assessee filed a writ petition challenging the validity of the notices. The question referred to the Full Bench was whether the notice under Section 34 issued on 25-7-1958 was barred by time.
Finding of the Court:
The Full Bench held that the notice under Section 34 was barred by time. The Court held that sub-section (1-A) of Section 34 is the proper sub-section under which the impugned notice should be held to fall. Sub-section (1-A) is confined to a very limited sphere. It only covers the period between 1st September, 1939, and 31st March, 1946, which appears to be the period covered by the Second World War. The Legislature seems apparently to be conscious of the provisions of Section 34(1)(a) and the proviso to it, but has nevertheless made a special provision in the form of sub-section (1-A) added in 1954. For the special cases so provided by the new provision an outside limit for issuing motives has also been fixed from which it is obvious that the Parliament desired the Tax-Authorities to act more promptly in the cases covered by the new provision.
Issues: Whether the notice under Section 34 issued on 25-7-1958 was barred by time?
Ratio Decidendi: The Court held that sub-section (1-A) of Section 34 is the proper sub-section under which the impugned notice should be held to fall. Sub-section (1-A) is confined to a very limited sphere. It only covers the period between 1st September, 1939, and 31st March, 1946, which appears to be the period covered by the Second World War. The Legislature seems apparently to be conscious of the provisions of Section 34(1)(a) and the proviso to it, but has nevertheless made a special provision in the form of sub-section (1-A) added in 1954. For the special cases so provided by the new provision an outside limit for issuing motives has also been fixed from which it is obvious that the Parliament desired the Tax-Authorities to act more promptly in the cases covered by the new provision.
Final Decision: The Court held that the notice under Section 34 was barred by time and allowed the writ petition.
I.D.Dua, J.
1. The following question has been referred to the Full Bench for decision:
"Whether or not, in the circumstances of the present case, the notice under Section 34 issued on 25-7-1958 was barred by time?"
2. This writ petition was initially heard by Bishan Narain, J., who in a detailed judgment referred this question to a larger Bench after deciding some other points on the merits. The case was then placed before a Division Bench consisting of Bishan Narain, J. and myself, but without any discussion it was considered that the question had better be decided by a still larger Bench, and it is as a result of the order of the Division Bench that the present Full Bench has been constituted.
3. The facts as stated in the writ petition are that Messrs. Shahzada nand and Sons (defunct Hindu undivided family), petitioner No. 1, used to be assessed as H. U. F. through Sahib Dval son of Shahzada Nand, petitioner No. 2, as its Karta until the assessment of 1945-46. By the end of March 1945, according to the petition, the H.U.F. was dissolved completely after partition amongst its members consisting of petitioners Nos. 2 to 5. According to the allegations in the petition, a new firm described as Shahzada Nand and sons (a partnership concern consisting of three brothers Shri Chaman Lal, Shri Madan Gopal and Shri Harbans Lal,l petitioners Nos. 3 to 5) took over the business of the Hindu undivided firm. This partnership firm, according to the petitioners, has been assessed to income-tax as a firm ever since 1946-47.
4. Sometime in 1951 the Income-tax Department started investigations into the financial affairs of Messrs. Shahzada Nand and Sons, the Hindu undivided firm, which, according to the petitioners, had disrupted and been dissolved in March 1945. The petitioners are stated to have given full information to the Department. After the enquiry lasting for several years the matters is stated to have been dropped as a result of the report of Shri G. R. Bahmat, Income-tax Officer, C Ward, Amritsar. In the meantime Shri G. S. Basanti took over charge as Income-tax Officer, A Ward and the case of the Hindu undivided family, Messrs. Shahzada Nand and sons, petitioner No. 1, was transferred to his file. Shri Basanti, thereupon, issued notices under Section 34, Income-tax Act, to the petitioners. These notices, though purporting to be dated 26th March 1954, were, according to the petition, in fact served on the petitioners on and after 3rd of April 1954. This notice, according to the petitioners case, is barred by time. The proceedings, however, continued and on 29th of March 1955 a sum of Rs. 3,62,00/- was added to the original assessment of petitioner No. 1 for 1945-46 and a penalty notice for default under Section 22(4) was also issued. Eliminating unnecessary facts for our purposes, according to the petition, an appeal was taken by the assessee to the Appellate Assistant Commissioner who, while annulling the assessment order of the Income-tax Officer, A Ward, Amritsar (respondent No.3), made certain observations prejudicial to the petitioners which, according to the petitioners, were not called for. Both the Revenue and the petitioners went up in appeal to the Income-tax Appellate Tribunal which, while dismissing the appeal of the Department, allowed that of the assessee. This order is dated 20th December 1956, and it is averred by the petitioners that this order finally decided the matter of assessment for 1945-46.
5. On 25th of July 1958 the Income-tax Officer, A Ward (respondent No. 3) issued the impugned notice under Section 34, Income-tax Act, requiring the petitioners to file a return for the assessment year 1945-46. On 12th August 1958 the petitioners moved the Central Board of Revenue (respondent No. 1) to recall this notice, but this request was turned down on 22nd April 1959 after repeated representations. It is next averred that the petitioners are not sure as to who has sanctioned the renewed proceedings under se
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