Holding

The High Court was correct that assessments could be made on the basis of the voluntary returns already filed and that the Tribunal was competent to give a direction under the second proviso of Section 34(3), rendering the assessments valid.

Summary

A larger Hindu undivided family (HUF) was partitioned in 1945, after which a smaller HUF (the assessee) filed voluntary returns for assessment years 1946‑47 to 1949‑50. The Revenue sought to assess the assessee under Section 34 of the Income‑Tax Act, 1922, invoking the second proviso to Section 34(3) after the four‑year limitation period had expired, while the assessee argued that assessment could only be made on the basis of the already‑filed voluntary returns under Section 23(3). The High Court held that the four‑year bar was lifted by the Tribunal’s direction, allowing assessment on the voluntary returns, and that the Tribunal was competent to give a direction concerning the assessee as an "any person" under the second proviso. The Supreme Court affirmed this view, dismissing the appeals and upholding the assessments.

Issues considered

Whether assessment could be made under Section 23(3) on the basis of voluntary returns or should be made under Section 34 with the aid of the second proviso to Section 34(3).
Whether the Appellate Tribunal was empowered to give a finding or direction in respect of the assessee (the "any person" clause in the second proviso to Section 34(3)).

Legislation cited

Income Tax Act, 1922s. 22(1), s. 23(3), s. 25A, s. 30(1), s. 30(3), s. 31, s. 34, s. 34(1)(b), s. 34(3)

Subjects

Income TaxAssessmentVoluntary ReturnLimitation periodSection 34Hindu Undivided FamilyTribunal directionPartitionSecond provisoAssessment years

Judgment

1!)0

.BHAGWAN DAS SITA RAM

·-,_- v.

. - . o COMMISSIONER OF INCOME-TAX
.,.- ~

. I
,
1
March 5, 1984

t. . . [V.:0. TuLZAPURKAR AND SABYASACHl MUKHARJI, JJ.) - } ••

~)- IncOme-taX Act, '1922..:._s. 22 and s. 23 read with second provi'so to s~S.
:c: · (6) cf S. 34....--/nterpretation of-When assessnient can be made after a period of
four years from asstssmen.t >;ear-Assessment proceedings commenc~ by.filing of.
voluntary return-.On expiry -'of four years proceedings are suspended but procee-
dings~an4 {e,turrts do not become invalid. Bar of limitation lifts in case of direction
~ Trib~izQ/~When· Ond on whom Tribunal can issue direction. · ,._•.

Words and Phrases-"any·person" in ~econd proviso to sub-s. (3) ofs. 34-
D Scope of must be a Person wl:zo would be liable lo be assessed for whole or part of
income that went into assessment of the year under appeal.

A bigger Hindu undivided family (HUF) had flied income-tax returns for the
assessment years 1946-47 to 1949-50. When the assessment was being done the
bigger (HtTF) made a claim under s. 25A of the Income Tax Act, 1922, that
the said HUF. was paititioned on 19.5.1945. While this claim was pending, the
E appe11ant along with a smailer HUF (hereinafter re;ferred to as the assessee)
which had come into being on pa.rtition of the bigger HUF, filed voluntary
returns on 18.\l.1950for the assessment years 1946-47 to 1949-50unders. 22(1)
of the Act. The bigger HUF's claim partition, Which was rejected by the Income
Tax Officer arid the Appellate Assistant Commissioner, was accepted by the
Appellate Tri~unal ori 31,8.1954. While disposing of the. appeals of the bigger
HUF against the assessment orders, the Tribunal gave a direction on· 28.10.1954
F
that asscssriullts be made on the bigger HUF after accepting partition. 'After
·thC claim of partition ·was accepted the Income-tax Officer sent notices to the
assesseei fOr initiating proceedings against him under s. 34(1) (b).- Jn response to
·the notices the assi!.see filed fresh ·returns on 12.4.1955- Rejecting the conten-
tion of the assessee that the time for making assessment under s. 34 had expiied,
the Income-tax· Officer· completed asseSsments·under s. 2~(3) read with s. 34 on
G ~ .8.9.1955. The assessee's appeal was rejected by the Appellate Assistant Commis-
sioner and the Appellate Tribunal. The assessee filed a writ petition in the High
Court_ which was allowed and the assessment orders were quashed on 30.3.1960. ·
The High Court observed that as voluntary returns ·filed by the assessee
were pending no proceeding could be taken und~r s. 34. Thereafter the Revenue
attempted to assess the assessee on the basis of voluntary returns originaJly
filed on 18.11.1950 by relying upon the order of the Tribunal dated 23.10.1954 in
R the bigger HUF's case and invoking second proviso to s. 34(3). The assessee filed
a writ petition and that was dismissed. The Income-tax Officer completed assess·
m~t undeu, ~3) 9!' ~p, 19\it In appeal the ·Appellate ~ista)lt <;:omllli''
·. -
• •
• . .
BHAGWAN DAS v. c.fr. (S. Mukhrji, j.) ioi
sioner held that no valid assessment could be made on 31..S:.1962 and this viey.:· A
w:is confirm~d by the Appellate Tribunal. A ref.:rence was made to the· High
Court all the questioll whether on the facts and -cfrculnstanCes of the case, valid ·
· asse~srnent'.could be made" on 31.5.1962 for the assfi'isment ye3.rs 1948-49 and,-.
1949 50 on· the basis· of voluntary return.s of income filed under s. 22(1) of the
Act. The assessee contended that-since 3. return exhausted itself ~fter expiry of
four years from the end of the asseSsment year to \\·hich it reIJ.ted, no assessmCnt
· could ~ made ·an th~ ba~ of voluntary return, ,it,"could be done under s. 34 B
only if :2nd prOviso to sub-s. (3) of s. 34 applied. By majority a full Bench of
the High Court answered the question in the affirmativ.! in favour of the reve..
nue. Hence. these appeals. -The two questioi:is which arose" Were! (I) whether the
assessment could be made under s. '23(3) on the basis of ·voluntary returns filed
or actioil should have been taken under!. 34 with the help of the seCond proviso .. ' .
- to· Sub-s~ (3) of s. 34; and (2) ·whether ihe Tribunal cOuld give a finding or
dir~ctioi:i in respect of the as~essee.. ' · · c
. -Dismissing tt:e_ appeals;

HEW:··

.f!n Quest~oit·No. (I) D
- The High Court was right . in taking the vie~ ~hat asses~ments could be
m<idi! on the basis of voIU"iitary returns alrCady filed by_ the asse.ssee. Sub--s~ (3)
·of S. 34 provides a p-eriod Or limitation O:f four years for a~Sessment.under s. 23 .
of the Act.·' If the assessment proceedings _cpmmenCe .b-y filing or' ""votuntarY
returns, as Indeed _these do, on the expiry :of the periOd of four years from the · ·
Cod of the Year in· Which ihe income, "profits or giins Were first assess.able, such E
proceedings are susPended .Jr inierrupte+f. ·But neither the· Proceedings nor the ·
returns·_ beCome-. invalid. Since the ·order Was _passed bY the Tribunal giVing
direction, the. bar of limitatiori provided by s. 34(3) was lifted and the assess--·
ments could be made .
. without. any_ bar of limitation.
i
'
[106
.
G-H, 107 'A]

-- Commissionf!r of Income-tax Bombay City II v. Ranchhoddass Karsondtls, 36
.. J.T.R. 569,· ~ Estat'e Of the iate A.M.K.Af. Karuppan Chettiar v.· Co"1missioner of F
Income-ta~,"Marlras, 72 ·1.T.R. 403 ; and, Commissioner_-· of Income-tax Madras
v. M.K.K.R. Muthukaruppan Chettiar, 18 I.T.R~ 69, refe_rred t~

On Question.No. (1)_·:
' /__ - - . ,:.·...;,
The High Cotirt rightly answered thC question in favour of 'he revenue on G
the view that the Tribunal was competent to give the direction in respec(ofthe··
present assessee. [108 E-G I

Second proviso. to s. 34(3) 3.uthori~es dir~ctionS _to be given by the Tribunat ·
iO respect of the assessee of any person beyOnd follr years 3s·provided iri. s. 34(3) ·
_ofthe Act: As explained in Income-tax. Officer v. Murlidhar Bhagwandas, ,"a"itj .....
person" in respect of whom such direction could be given must_ be one who H
'wOutd be liable, to be assessed, for the' whole or a \?art of the-income t~at went
into the assessment of the yea~ under api)eat o_r reVision. , The court ·must tum -
io2, fopame coliar aeP~Ris tI9s4j 3s.c.i
to s. 31 of the Act to ascertain who is that person otver than the appealing
assessee wbo might be affected by the orders passed by the appellate authority,
.Modification or setting "aside of assessment made on a firm, joint Hindu-family,
association of persons for a particular year may affect the assessinent for the said
year on a' partner ot partner&. of,the firm, member of members of such Hilldu

•• undivided· family or the individual, as the case might be. These instances_ are
only illustrative· and not exhaustive. The expression ''any .person" in 'its widest
amplitude might take in any person connected or not with the assessee, whose .
ioce:me fat any y~ar bad escaped assessment; but "this Constru9tio,n cannOt
be accepted, for the said expression was necessarily circumscribed by the scope
Qf the subject-matter of the appeal or revision, as the case might be. $0 therefore
., -
the.person mu•i be one who would be liable lo 'be aJSeJsed for the whole .or any
·c , part-of the ittcOme that went~nto a$sess1nent of the year under apfleal or revbion
(llmphasjs supplied). Therefore, "any person" in sub-section ~(3) of s. 34 must
be confined to person intimately connected in the aforesaid sense with the assess-
ments of the yearS under appeal. ]701 C-S, 108 A-FJ

Income-tax Officer, A-Ward, Sitapur v. Mur/idhar BhagWan Das, 52 I.T.R.
335; ·Rajinder Nath v. Comminioner of lncome-1ax, Delhi, 120 I.T.R. 14 ; •
Commissioner of Income--tax, <;entral, Calcutta v. National Taj Traders. 121
...,.,
I.T.R. 535; and Commissioner of Income-tax, A.Jl(Jhra Pradesh v. Vadde Pullaiah
& Co., 89 J.T.R. 240, referred IO. · ,

· 'The· f11cL• ·in the instant case show that income can belong either to the
'
biwr Hindu undivided family or to the smaller Hindu undivided family, the
pre·sent assessee alongwith another smaller H.U.F. Snd to no one else~ There~.
!bro a finding that it belongs or it does not belong to the bigger Hindu undivided
famiiy which bad disrupted on partition would determine the issue whether it .
co~ld bO taxed fa the hands Of the present assessee. Judged in the light of the
test laid down in Murlidhar BhagwOn Das case- arid as pointed Out i~ R.ajinder
Nath's case, it appears that the present usessee can be said to be a person who
would be liable to be assessed for the whole or part of the income that went to
the assessment of the bigger Hindu undivided family io years under appeal and
U a Person intimately connected with the as,sessments of the bigger Hindu µn·
.. divlde<I ·ramily; The income in this case cannot be the income of both bigger
Hindu Undivided family and the present assessce, it must be either of these two.
Tbererore. the directions given in the appeals filed by the bigger Hindu undivide°d
family ·would be applicable to the present as......,. (111 A-DJ
•
Comml!siontr" Df l11~ome--tax, Gujarat v. Shanti/al Punjabhai, 57 I.T.R. 58.
fl di<tinguisbed.

·Coinmf3Sldnsr oi lnMme-tax, Punjab, Jammu & Kashmir and HJmac/r4/
Prai.,h-v. S. Rtzghubf• Singh Trust, 123 I.T.R: 438 referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1168-6~ .
(NT) of 1973.

· Appeal by Special leave from the Judgment and Order dated
•
'
'
BHAGWAN DAS v. c.I.T. (S. llfukharji, J.) i03
the 3rd January, 1973 of the Allahabad High Court in I. T:
Ref. No. 450 of 1969.

S.C. Manchanda and M. J.P. Ma/ho.tra for the Appellant .
•

dent.
S.T. Desai, B.B. Ahuja and Miss A. Subhashini for the Respon-
•
• J.
The Judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. These appeals by certificat~
granted by the High Court of Allahabad under Section 66A(2) of the
Indian Income· Tax Act, 1922, arise out of judgment delivered and
order passed on 3rd 1ltnuary, 1973 by the High Court of Allahabad
in Income-tax Reference No. 450 of 1965. The following question of
r law had been referred to the High Court for consideration under
Section 66(1) of the Income-Tax Act, 1922 by the Appellate Tribunal,
Allahabad Belich, Allahabad: · ·
i.

"Whether, on the facts and in fhe circumstances of the
case, valid assessments could be made on 31st May, 1962, for
the assessment years 1948-49 and 1949·50 on the basis of
voluntary returns. of income filed under Section ~2(1) of the
•
Indian Income-Tax Act, 1922 on 18.11'1950?

• The matter came up before a Division Bench of the High
Court and a~ there was a previous bench decision of tliat Court in the
case of Sool Chand Ram Sewak v. Commissioner of Income-tax, U.P. 1
which supported the revenue's case and as the division bench before
whom this case came was unable to accept that view, Jhe division
,; bench referred the case to a larger. B.ench. This reference thereafter .
~· came before a Full Bench41:onsisting of'Gulati, H. N. Seth &.C.S.P.
Singh, JJ. Gulati'and C. S. P. Singh, JJ. answered the question in.
the affirmative in fa.vour of the revenue and against the assessee: ,
Seth J. however, was in favour of assessee. I.n view of. the majority ·
.fue .question was answered in favour of the revenue and in
affirmative.

1'
(!) 73 I. T. R. 466. .::

' •
' •

suPRBMB 'cotiirr REPolltS . [19S4J 3 S.C.R;

Before we deal'with the questiOn ii) controversy, it will be
necessary to note some of the relevant facts. There were originally
four appeals for the assessment years 1946-47, 1947-48, 1948-49 and
1949-50. As the appeals for the assessment years 1946-47 and
1947-48 were withdrawn by the revenue, we are ~ow concerned with
· appeals for the assessment years 1948•49 and 1949-50. .
• The present assessee is a branch of a bigger Hindu undivided
family known as•Nathu Ram Jawahar Lal, Jhansi. .,. -

The bigger Hindu undivided family of M/s Nathu ·Ram
J~wahar Lal was partitioned on 19th May, 1945, and the
cl. present assessee along with anoter smaller H.U.F. came into .
existence and the said bigger H.U.F. had ma~~ claim in respect
otlthe partition under Section 25A of. ~he Indi~n lncome-Tax Act,
1922. While this claim was pending t!le present assessee filed volu.n-
tary returns under Section 22(1) of the Act'.for thi issessment years
194'6~47 to 1949-50 on 10th November, 1950. The said claim of
partition by the bigger H.U.F. was rejected by the Income-tax·
Officer and also by the ~ppeilate Assistant Commissioner. The
said H. U. F. thereafter, filed appeals to the Appellate Tribunal
in respect of the order under claim of partition under Section 25A
of 1922 Act which by its order dated 31st August, 1954 accepted

.. tbe claim under Section 25A of· 1922 Act, and the Tribunal passed
. orders on that basis in the appeals relating to the assessment
orders in respect of. the bigger H.U.F. on 28th October, 1954.
The. Income-tax Officer, thereafter, .initiated proceedings under
Se~tion 34 ofthe Inc~me,tax Act of 1922 for assessing the small.er •
H'indu undivided family, the preseµt assessee in view of the fact.that
F" tlie claim for disruption of the bigger H. U. F. had ·been accepted.
by t~e. Tribunal. The ]Jresent assessee filed fresb r~turns of income
ori 1_2.4.1955 in response to notices under Sectiou 34 of 1922 Act ..
Th_e-re~ums originally filed were under Secti~n 22( I) and were fil~d
on 18th November, 1950, The. assessee's objection regarding the
validity of the assessments being made under Sei:tion 34 on merits
as well as on the point that time for .making the assessment under
Section 34 had already exP.ired, ~were rejected by the Income-tu
Officer. He, therefore, completed the. assessments on . 8.9.1955
under Section 23(3) read with Se.ction 34 of the Income-tax Act,
1922. The assessee could not get any decision in his favour either l
fro in ·the Appellate Assistant Commissioner or from the .Tribunal '
and being aggrieved by these orders, filed a Writ Petition; to· the
High. Court of Allahabad challenging the v~lidity of the Appellate

•
•

DHAGWAN DAS v. C.I.T. (S, Mukharji, J.) iM
orders. ]he assessee was successful in the Writ and, therefor_e, the
appellate orders were quashed by the. High Court. The. revenue
ha~ing failed in its attempt to complete the assessee's assessments
under Section 34, made another attempt to assess the assessee on
the basis of the voluntary returns originally filed by the assessee
on 18.11.1950 by relying upon the order of the Tribunal dated
28.10.1954 and invoking.the provisions of 2nd proviso to Section
311(3). The said assessments which were completed on 31st May,·
. ) 1962 were the subject matters of appeals before the Tribunal.

Tl\j! point before the Tribunar was whether valid ·assessments
: ;~
could be made for the assessment years under consideration on 31st
May, 1962 on the basis l>f the returns filed under Section. ~2(1) of
c
the Act of 1922 on 18th November, 1950. The Appellate Assistant
Commissioner by his order held· that no valid assessments could
. ,... bf
')
made ori'3Yst
' .,
May, 1962.
'11 \<_it
It appears that on 28th October, 1950, relating to the assess- D
ment years 1946-47 to 1949-50 in case of bigger Hi!Jd1! undivided
family, M/s Nathu Ram Jawaharlal, Jhansi, order was passed by th~,
Tribunal in ·the appeal relating to the assessments pending before it.
It" should be noted that originally on the basis that the bigger
H.U.F. had not been disrupted assessments for these years bad been
made and appeals relating to those assessments were pending before
tlie"'rribunaL The Tribunal disposed of these appeals by the order
dated 28th October, 1954 and the Tribunal in the said order had
observed, inter alia, as follows;

"The assessments for . those years were (have) ';f:

necessarily to be set aside with the direction that fresh assess- p
·. ments should be made, one for the period 19.5.1945 upto
.J.
which the Hindu undivided family was in existencil and the
· . others on the component Hindu undiviiled families, namely
M/s Jawaharlal Mani Ram and Bhagwan Das Sita Ram."
.. -_,

The· Tribunal in the instant appeal out of which the reference G
was m~de to .the High_ Couq and out of which these appeals arise,
after d1scussmg the relevant facts and the provisions of law confirmed
the' order of the Appellate Assistant Commissioner and dismissed the
appeals. As mentioned hereinbefore after the Tribunal had directed
·, j
th~- assessm_e~ts shoul~ be made on the cowponent units of the bigger
Hmdu,und!Vlded famdy, afte:_partition was accepted, namely, tpe
II
as$essee and Jawabarlal Mam Ram, the Income-tax Officer instea4
•

106 suPilEME couh REPORTS (!984] 3s.c.lt
of proceding on the hasis of the voluntary returns already filed by
the assessee proceeded to take action under Section 34(1) (bfof the
Act of 1922 and completed the assessments for all the four years on
Septemper 8,1955. The assessee appealed against these assessments
to the Appellate Assistant Commissioner of Income-tax, but before
the appeals were taken up for hearing, the assessee moved th~ High
.B. Court of Allahabad under Article 226 of the Constitntion. On
March 30, 1960, the High Court quashed the assessment orders on
the ground that as volnutary returns filed. by . the assessee were ....
pending, no proceeding could be taken under Section 34 of tJle Act,
1922. Theraefter the Income-tax Officer initiated proceedings on the
basis of the voluntary returns. The assessee again filed a writ peti-
c tion. praying for quashing the proceedings on the ground that
revenue fould not proceed against it on the basis of the voluntary
re.turns. This petition was rejected by the High Court and thereafter
the Income-tax Officer proceededlto complete the assessments under
·. Section 23(3) and passed assessment orders on 31st May, 1962; in ~.·

respect of the four years.

The first question, is, whether the assessment could be made
Under S.ection 23(3) on the basis of voluntary returns filed or action
should have been taken under .Section 34 with the help of the second
proviso to sub-section (3) of Section 34. it is well-settled that when
a return of income is filed by the assessee voluntarily under Section
22(1) of the Act, 1922, assessment proceedings commence against
him and Section 34 does not come into play at all so long as tlie: ·
assessment proceedings remain pending. Bnt it was contended that
a return exhausted itself after the expiry of four years from the end
of the assessment year to which it related. After the expiry of that
period, no assessment was possible on the basis of the voluntary
return. In such a case assessment was possible under •Section 34, if
the case was covered by the second proviso to Section 34(3).

The High ·Court was of the opinion that sub-section (3) of
Section 34 provides a period of limitation of four years fot assess-
G.
ment under Section 23 of the Act, l 9Z2. If the assessment proceedings
commence by filing of voluntary return, ·as indeed these do, on the
expiry of the period of four years from the eud of the year in which
the income, profits or gain~ were first assessable, such proceedings
are suspended or interrupted. But neither.the proceedings nor the
returns become invalid. The High Court referred to the provisions ,·
of Section 34(3) and was of'the view that since the order was passed
by the Tribunal giving direction,' the bar or limitation was lifted and
•
BHAGWAN DAS v. c.J.T. (S. Mukharji, i.)

the assessments could be made without any bar or limitation. Refe- A..
rence was made to the decision of this Court in the case of
Commissioner of Income-tax ·Bombay. City l/ v. Ranchhoddass
Karsondas,, and in the case of Estate of the late A.M.K.M. Karuppan
Chettiar v. Commissioner of Income-tax, Madras' and Commissioner
of Income-tax Madras v. M.K. K.R. Muthukaruppan Cheuiar3.
8
The High Court, on the basis of these decisions, was cif the
· ) view that assessments could be made on the basis of voluntary
retl!rns already filed by the assessee. We are of the opinion that the
High Court was right.
• The next question is whether it was open to the Tribunal to c
give a finding or ·direction in respect of the present assessee. Reliance
was.placed on the decision of this Court in Income-tax Officer, A~
Ward, Sitapur v. Murlidhar Bhagwan Das.• There, this tourt after
referring to the expression "any pt;rson" in the 2nd proviso of sub·
section (3) of Section 34 of 1922 Act observed at page 346 of the D
r~ort as follows.

"The expression "any person" in. its widest connotatfon
.may take in any person, whether connected ~r not with the
assessee, wh.ose income for any year has escaped assessment;
E
but this construction cannot be accepted, for the said
expression is necessarily circumscribed by the . scope of the
subject-matter of the appeal or revision, as the case may .be.
That is to say, that person must be one who would be liable
to be assessed for the whole or a part of the income that went
into the assessment of the year under appeal or revision. If so r
construed, we must turn to sect.ion 31 .to ascertain who is
that person other· than the appealing assessee who can be
liable to be assessed for the income of the said assessment
year. A combined reading of section 30(1) and Section 31(3)
· of the Act indicates the cases where persons other than the
appealing assessees might be affected by orders passed by the
.·Appellate CommiSsioner. Modification or setting aside of
assessment made on a firm, joint Hindu family, association

(I) 361.lf.R. $69.
(2) ?2 t.T.R. 403.
(3) 78 I.T.R. 69.
(4) 52 l.T.R. 335.
•

108 SUPREME COURT REPORTS tJ 984] 3s.c.lt.
·of persons, for a particular year may affect the assessment for
the said year on a partner or partners of the firm, member or
members of the Hindu undivided family or the. individual, as
the case may be. In such cases though the latter are not
· co-nomine' parties to the appeal, their assessments depend
l upon the assessments on the former. The said instances are
B only illustrative. It is not necessary to pursue the matter
further. We would, therefore, hold that ·the expression "any
person" in the setting in which it appears must be confined to
a person intimately connected in the ·aforesaid sens·e with the
.
assessments of the
.
year under appeal."
•
The High Conrt was of the view that "any person" would
include the person who would be liable to be assessed for the whole
or ·a part of the income that went into the assessment of the year .
under appeal or revision. In that view of the matter, the majority
judgment of the High Court ort this aspect was in' favour of the ,,
< revenue. Then on the question whether the direction for the assess:
D
ment could. be given in respect of any other year, other than the year
in which the partition took place, it was contended that direction
could be given only for the assessment year 1946-47. Majority
judgment of the High Court found no force in. that contention. As
this question arose directly for the assessment years 1948-49 and
1949-50 in resp~ct of which the appeals came before the Tribunal in
which the directions ba:d been given, the High Court was of the view
that it was necessary for the Tribunal to give a finding with regard
to the partition of the family and the ownership of the income in
.
both the appeals.. .
The Tribunal was thus competent to give the
direction. In that view ofthe matter, the two learnedjudges of the
r Allahabad High Court were of the opinion that assessments were
valid and ·answered the question in favour of the revenue. Referring
to the said decision which has been mentioned in the majority judg·
ment, Seth J. however was of the!view that the direction given by
the Tribunal in this case did not authorise the assessment on the
smaller Hindu undivided family. Seth J. was further of the view that
such direction could only have been given in the year in which
disruption of the bigger H.U.F. took place. In that view of the
matter, Seth J. expressed Clissent as mentioned her.einbefore. We
are of the opinion that the majority of the learned judg;es the of
High Court Were right. Second proviso to Section 34(3) of the fllC!ian-
Income-tax ·Act, 1922 authorised directions to be given by ·the
Tribunal in respect of the assessee or any person beyond four y~ars
as provided in Section 34(3) of 1922 Act.
BHAGWAN DAS~. C.I.T. (S. Mukharji, J.)
' '
109
As noted before the expression "any person" in respect of A
whom such direction could be given was explained by this Court in
Income-tax Officer, A· Ward Sitapur v. Murlidhar Bhagwandas
(supra). As mentioned iii the passage quoted above . from lhe said
decision, if so construed then the Court must turn to Section 31 of
1922 Act to a certain who is that person other thap the appealing
assessees might be affected by the orders passed by ·the appellate B
authority. Modification o'r setting aside of assessment made on a firm, •
joint Hindu family, association of persons, for a particular year may
affect the assessment for the said year on a partner or partners of
the firm, member or members of such Hindu undivided family or the
individual, as the case might be. It was therefore argued that it was c!',
only those types of assessees mentioned by this Court in the passage
noted above were the 'persons' who could be "any person" other
than the appealing assessee who can be said to be liable to .be assessed
and in respect of whom direction might be given, otherwise such
directions or provision for such direcMons if the provision is so re.ad ·
would be ultra vires article 14 of the Constitution. We must make it D
clear that this Court had itself made it clear categorically in the •
passage quoted above that the instances given in the above passage
were only illustrative passage nieaningthereby that.the instances were
not exhaustive. This Court made it clear that the expression .<•any per·
son" in its widest amplitude might take in any person connected or
not with the assessee, whose incom" for any year had escaped assess-
ment; but this construction could not be accepted, for the said expres·
sion was necessarily circumscribed by the scope of the subject-matter.
of the appeal or revision, as the. case might be. So therefore the person
' '

must be one who would be liable to be assessed for the whole or any
part of the income that went into assessment of the year under appeal
or revision (Emphasis supplied). Therefore, this Court observed that F
·~any person" in sub-section (3) of Section 34 must be confined to a
person intimately connected in the aforesaid sense with the assess-
ments of the years under appeal.

Reference may be made to the decision of this Court in· the
case of Rajinder Nath v. Commissioner of Income-tax, Delhi, 1 where
the I.T.O. treated two buildings as belongillg to a firm comprised of
a father and his two major sons as partners and in the assessments on
the firm for the assessment years 1955-56 and 1956·57 and he estimated
the cost of construction of the buildings at a higher fi~re t)lan that
ff
H
11) Ito .IT.R. P· 14
110 SUPREME COURT REPORTS (1984] 3 S.C.R,

disclosed and brought to tax the ex~ess as income in the hands of the
firm. On appeal, the A.A. C. found that the money advanced .for the
construction of the buildings had beep debited in equal shares to the
father and two major sons and a minor son and held that the firm
was not the owner of the properties and defocted the addition .. The
A.A.C. also observed that the I.T.O. was free to take action to assess
B the excess in the hands of the co-owners. The I.T.O. thereupon'
• issued notices under Section 147(a) of the I.'r. Act, 1961 and reopened
.the assessments of tlte individual assessees (the co-owners) and ·
included. therein the proportionate shares of the additions on account
of the estima!ed excess of the cost of construction. On appeal, the
· A.A.C. held that ·Section 147(a) couid not apply but upheld the
'
assessments under Section 153(3) (ii) of 1961 Act.. On further appeal,
the Tribunal held that Section 153(3) (ii) could not apply because
there was neither a finding .nor a direction in the earlier order of the
A.A.C: and further that A.A.C. could 'not convert the assessments
· made under Section l 47(a) intb those under Section 153(3) (ii). On
a reference of the questfons, (I) whether the A.A.C. was justified in
)loldirig that the provisions of Section 147(a) were not applicable, and
-(ii) whether the provisions of Section 153 (3) (ii) were not applicable,
the High Court-held that the proyisions of Section 153(3) were
J applicable observing that the A.A.C's finding that the properties did
not belong to the firm and, therefore, the excess amount of the cost
of construction could not be rekarded as the income of the firm was
a finding which was necessary for the disposal of the firm's appeal
and as a corollary it was held that the buildings belonged to 1he co-
owners and this necessitated the "direction" to the ·I.T.O. that. he
was free to assess the excess in the hands of the co-owners. Dealing
·with this contention, Pathak J. who delivered ~he judgment of this
F Court observed at page 20 of the report:

"The expression "another person" in the Expln.
would include persons intimately conne.cted with the person
in whose case the order is made in the sense explained by this
Court in Murlidhar Bhagwan Da.i (1964) 52 ITR 335 (SC). It
is one thing for the partners or'a firm to be·required'toexplain
the socnrce of ·a receipt by tlie firm, it is quite another for
them in their jndividual status to be aske.d to explain the
source of amounts received by them as separate individuals.
On such opportunity b~ing provided it would have been open
n· to the assessees to show that the excess alleged over the
disclosed cost of construction did not constitute any taxable
income, The fi,ndin~ contemplated in Bxpln, 3, it will ~
llHAGWA~ v. C.I.T. (S. Mukharji, J.) Ill
noted, is a finding that the amount represents the income of
another person."
0

In the iastant case b efore 'us, applying the test observed in that
case tliis was a case where the facts showed. that income can belong
either to the bigger Hindu u11divided family or to the smaller Hindu
undivided family, the present assessee along with another smaller
H.lJ.F. 'and to 'no one else. Therefore a finding that it belongs odt
does not belong to the bigger Hindu u.ndivided family which had
disrupted on partition would determine the issue whether it could be .
taxed in the hands of the present assessee. Judged in the light of the
test laid down in Murlidhar BhagwaT1 Das (supra) and as pointed
outin Rajinder Nath's case, it appears to us that the pre~ent assessee
can be said to be a person who would be liable to be·assessed for
the whole or part of the income that went to the.a.ssessment of the
. )"
bigger ,Hindu undivided family in years under appeal and is a person
intimately connected with the assessments of the bigger Hfodu
undivided family. The income in this case cannot be the income of
both bigger H.indu undivided family and the present assessee, it must
be either or these two. We are, therefore, of the opinion that direc.
tions given in the appeals filed by the bigger Hindu undivided family
yould b,e applicable to the present asacssee.

On behalf of the assessee it was contended that only the
categories of persons referred to in Sections 30(1) and 30(3) of 1922
Act would be governed by the said expression "any person"

Sub-section (3) of Section 3,I, inter alia, authorises the AJ?pel-
late Assistant Commissioner in case Of an order cancelling registra-
tion of a firm under sub-section (42) of Section 23 or refusing to
· register a firm under sub-section (4) of Section 23 or Section 26A
or to make fresh assessment or to confirm such order, or cancel it
and direct the Income-tax Officer to register the firm or to make
a fresh assessment, as the case may be, or in the case of an order
under sub·section (2) .of Section 25 or sub-section (I) of Section 23A
or sub-section (2) of Section 26 or Section 48, 49 or 49F, confirm
cancel or vary such order. It also authorises in case of an order un~
der sub-section (I) of Section 25A to ccinfirm such order or cancel
if and either direct the Income-tax Officer to make further inquiry
and pass a fresh' order 'or to make an assessment in 'the manner
• laid down in sub-section (2) of section 25A. ,The other cases were
• cases.of orders under Section 28 or sub-section (6) of Section 44E
or sqb-se9tion (5) of ~e9fo'n 44F or ~qb-section (I) of Section 46
1
•
•
112 SUPREME COURT J!.EPOlns [1984] 3 S.C.R.

or in case of an appeal against a computation of loss under Section
24, confirm or vary such computation, or in case of an appeal under
sub-section (IA) of Section 30 decide. that the person is or is not
liable to make the deduction and in \he latter case direct the refund
of the Sl)m paid under sub-section (6)-0f Settion 18.
B
., While on these provisions it is material to refer to sub-section
(4), of Section 33 whiGh authorises the Tribunal afrer giving both
parties an opportunity of being heard to pass such orders thereon
as it thinks fit and to communicate any such orders to the assessee
and to the Commissioher.
c;:,
The c:ontention on behelf of the assessee is that though the.
Appellate Tribunal has wide powers as indicated in sub-section (4)
of Section 33 but the amplitude of that power is curtailed by other
provisions. It was contended that read with sub-section (3} ofSectio.n
34; as assessment order could not be passed after the expiry of four
years from the end of the year in which the income, profits or gains
were first assessable and is view of the fact that here in the instant
c.ase voluntary reiurns for the years under question had been filed by.
the assessee within time, after four years no direction could be giyei;i
by the Tribunal. It was, seco!ldly, contended that the present smal,
!er Hindu undivided family was not intimately connected (with .the
E assessment of the bigger Hindu undivided family as contemplated by
the observations of this Court in Income-tax Officer v. Murlidhar
Bhagwan Das (supra), this direction.was of ,no use and the assess-
ment made on the basis of this direction cannot be availed of. · ·

• We are unable to accept this oontention. Firstly ii must be
observed that the Tribunal passed the orders and gave its dreiction ii
respect of the years concerned. These years were the subject matters
of appeal before the Tribunal in the case of bigger H.U.F. It wa~
contended that ihese direction were given subsequent to the order
under Section 25A and could not affect position thereafter. · We are
unable to accept this position also. As mentioned hereinbefore, the
order under Section 25A was passed in August, 1954. The bigger'
Hindu undivided family had applied for order under Section 25A ·
regarding the disruption a( the Hindu undivided family, the Income:
tax Officer rejected that prayer. The assessee appealed therefrom. In
Aug\ist, 1954, this order was set aside by .the Tribunal and it wa8
...
,.-; .
'held that the bigger Hindu undivided family had been disruptec). Iii- . •
asmnch as the income liable to be assessed. on the smaller Hind·u un- ·
'
.
!livided family wo11ld 11rise only on the disrurtion of the lar$er Biridq •
•
BHAGWAN DAS v. c.1.T. (s: Mnkharji, J.). 113

undivided family; this direction was proper. The order under A
Section 25A declares the status of the family and the smaller Hindu
undivided family became liable to be assessed as a result of disrup-
tion of the bigger Hindu undivided family. The assessment orders
h.owever wer~ passed based on the previous order· under Section
25A but these orders were passed for all these follr years anq the as-
B
sessments under appeal for all these four years were pending. before
the Tribunal in disposing of which the Tribunal gave the direction
to make the assessments on· the smaller Hindu undivided family.
Therefore no question arises as to whether for subsequent periods
i:lirec(ions could have been given. This is a direction clearly within
the contemplation of sub-section (3) of Section 34. Secondly, we are
of the opinion that the smaller Hindu undivided family is one of the
. persons which was clearly contemplated by sub-section (3) of Section
34 in the facts and circumstances of this case. The. assessabili\y o&
income and the quantum of the same of the present assessee was
linked up with the assessability of the bigger Hindu. undivded family ·
if the bigger Hindu undivided family was liable to be' assessed if D
there was no disruption then there was no income of the smaller
Hindu undivided family. The income in the hands of smaller Hindu
undivided family could then ·not have been liable to·be asssesssd, I
on the other hand it was the other way that there was a valid parti-
. lion, the \)igger Hindu undivided" family no longer existe.d and the
smaller Hindu undivided family would . be liable . to be assessed.
From that point of view it clearly . comes within· the ratio of the
observation of this 'Conrt in Jncomi!-tax Officer v. Murlidhar
Bhagwan Das (supra). Further more looked at from another point
of view, though the Karta represented the bigger Hindu undivided
family, all the member's of the bigger Hindu undivided family, F
including those who were members of the smaller Hindu undivided
family were parties though .not oe nomine for all practical purposes,
because they were liable as mambers of the family ·for the amount
assessed. In that view of the matter, we are of the opinion that this
direction was quite valid and would be applicable.
G
The obsevations of this Court in the case of Comissioner of
Income-tax Central; Calcutta v. National Taj Traders' are 'in
consonance .with the conlusions reached by us. Tulzapurkar, J.
expla:ined in the said decision the._ situations in which directions
could be given.under Section 33B of the Income-tax Act, 1922 where
n
)21 I.T.R. 53$.
114 SUPREME COURT REPORTS "' [1984] 3 S.C.R,
A · there was no express provision like sub-section (3) of Section 34.
In our opinion in the facts of this· cas~, the· present assessee can be
said to be•"any person" as indicated in Mur/idhar Bhagwr.n Das
·(supra) in Section 34(3) of 1922 Act

The view taken by _us is also in consonance with the obser-
B ' vation of this Courts in- the case of Co!Jlmissioner of Income-tax,
Andhra Pradesh v. Vadde Pul/aiah & Co.'
Refer~nce was also made to a Bench decision of the Bombay
. High Court in the case of Mathuradas B. Mohta v. Commissioner
of Income-tax, Poona;' and a decision of ·this Court in the case of
Commissioner of Income-tax, U.P. v. Mohd: Shakoor Mohi
Bashir.• But in view of the facts and circumstances of the instant
case before us, it is not necessary to deal with the said decisions.

On behalf.of the assessee, reliance was placed on a decision
of the Division Bench of Gujarat" High Co~rt in the case of
Commissioner of Intome-tax, Gujarat v. Shanti/al Punjabhai. 4 There
D
an individual Shantilal was a member of the Hindu undivided family
and also a partner of a firm. The Income-tax Officer found that the
assessee was the nominee of the Hindu undivided family in the said
' firm, and, therefore, included the share of of profits the assessee in
the said firm, in the total income of the Hindu. undivided family .
E •
The decision proceeded on the _basis that the Income-tax Act did -
not contemplate two different assessees in the same assessment year )
for tbe same taxable income. In that ~ase the assessee was also an
assessec in his own right. In that case the·Court had observed at .page
80 of the report that there were two separate and distinct assessment
F proceedings, one in respect of the assessee in his status as an indivi-
dual and the other in respect of the Hindu undivided family. The
assessment proceedings in respect of the assessee, Shantilal, were
in respect of his income arising from his self-acquired and separate
. property. The ~ssessment proceedings against the Hindu undivided
· family, were proceedings against the entire entity'. and. though the
G assessee, Shantilal, was a member of the family, the assessment was
on the income derived by the Hindu undivided family from the
property or business 'of the said Hindu undivided family. In th~t

(1) 89 I.T.R. 240
H (2) . 56 l.T ,R. 269 •'
(3) 89 I.T.R. 57
(4) sn.T.R. SB

..
BHAGWAN DAS v. c.I.T. (S. Mukharji, J.) 115
)I ,

assessment; the income accruing and arising from the separate pro- A
'

..
perty of.the assessee, Shantilal could not be· assessed, as the business
carried on by the asseseee, Shanti!al, was not the bussiness of the
Hindu undivided family. The Income-tax Officer held that Shantilal
was the nominee of the Hindu undivided family, meaning thereby-'
that the business belonged to tbe Hindu undivided family and it was
.
. that conclusion
.
of the Income-tax. Officer which was reversed by the
Tribunal. The Tribunal holding that the revenue had failed to prove
B

• J
that the assessee, Shantital was the nominee of the family, in other
words, that the income arising from the firm's business· was. the in-
come of the Hindu undivided family. The direction given by the Tri-
bunal was on the question which was between the revenue and the c
Hindu undivided family and the only finding that could be given by
the Tribunal was between the two parties, namely, the· Hindu undivi-
ded family and the revenue and not between the revenue and the as-
• sessee. Shantilal, who was not an assessee nor a party to those asseSS'
ment proceedings. Therefore, if any
. action had to be taken in con- .
sequence of the finding or the direction given by the Tribunal, that D
action could be taken not against the assessee, Shantilal, but against
the Hindu undivided famliy. As would be apparent, the facts of th~t
·case were entirely different.

'
Here in the instant case the proceeding against the assessee in
the present case could be taken only if there was disruption· of the
Hindu undivided family. Therefore in the assessment of Hindu
undivided family viz. if the bigger Hindu undivided family was
considered to be an existing entity then in such a case the asssessment
against the present assessee could not be sustained. If on the other
hand the assessment on the bigger H. U.F. could not be sustained
F
because there was disruption of the family as contended for. by the
bigger Hinud undivided family then only the present assessee could
be assessed. In that view of the matter, we are of opinion that the
present assessee can be said to be. a person other then the appealing
assessee would be affected by the order concernd and would come ·
within the nieaning of "any person" as explained by this Court in the G
case of Income-tax.Officer v. Mur/idar Bhagwan Das (supra).

l)ecision of this Court in the case of Comissioner of Income-tax, .
Punjab, Jammu & Kashmir and Himachal Pradesh v. S. Raghubir
. Singh Trust' was relied on behalf of the assessee. There the res-
ff

(1} 123 I.T.R. p. 438
116 SlJ?REME COURTS REPORfS [1984] 3 S.C.R.
A pondent trust created by R. filed its return of income for the· as;ess·
ment year 195'4·55. Holdiiig that the trust was invalid, the Jncome-
tax Officer· assessed the income of the trust in the hands of R. R.
carried the matter in appeal and other proceedings and ultimately
tl1e High C.ourt held that ·the trust was yalid and the income was
the income of the trust and not Of R. The I.T.O. issued a notice on
B
19th· September, 1961, under Section 34(1)1b) oftbe Indian J.T. Act,
i922, to reopen the assessment of the trust. · The trust claimed that
the notice. was barred by limitation. The Tribunal accepted the
claim and held that trust was a stranger to the pr6ceedings for the
~ssessment of Rand the second proviso' to Section ·34(3) did not
G save the reassessment proceedings initiated against the.trust from
the b.ar of limitation and. the High Court, on a reference, agreed
with<the Tribuna1. On appeal to this Court it was held, affirming
the decision of the High Court, that even .though the finding of the
High Court that the income belonged to the trust and not tp R was •
a finding necessary for disposing of the reference in favour of R and
D it was a "finding", bnt the trust was a stranger to the assessment
proceedings of R. and not "any Jlerson" within the meaning of the
second proviso to Section 34(3) and, therefore, the ·second proviso
to Section 34(3) was not attracfed and the reassessment proceedings·
against the trust were barred by time. That decision must be under-
stood in the facts of that case. The settler ahd the trust cannot be ·
E said so intimately connected as to corn,e within the ratio of Murli·
dhar Bhagwan Das's case. The Court found that assessee ttust
could not be said to be intimately connected·with the assessment of
Raghubir Singh. As a result of the trust deed failing, there may be
numerous situations viz., there· might be resulting trust or it might
be that the trust property would go to other beneficiaries. It is not
F
necessary for us to explore or explain those possibilities. Biit in
the facts of this case; we are of the opinion that whether the income
•of the smaller Hindu undivided family, namely the present assessee
is liable to be taxed is so intimately or· inextricably linked up with
the question of assessability of bigger Hindu undivided family, which
G again is dependent upon the question whether there was disruption
of bigger Hindu undivided family and that being the very subject·
matter' of appeals in the four years in which this direction had been
given, we are of the opinion that' _directions given in this case are
°,yalid and would save the assessments against the assessee for the two
years in question.
H
In the aforesaid view of the matter, we Me of th~ 9pinion that
i17 iluA.owAN DAS v. c.i.r. (S. Mukharji, i.)

the majority of the learned judges of the High Court were right in A
their conclusions and the question was correctly answered by the
majority of the learned judges of the High Court. The ltppeals
therefore fail and are dismissed with costs.

·H.S.K. · Appeals dismiss ed.

c

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•

,