TaxTMI 
TaxTMI 
1961 (4) TMI 90
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....rtition of December 29, 1948, that is, 1949-50 and 1950-51, the assessee and Meyyappa each filed returns showing his share income from the M.S.S. Firm. But the Income-tax Officer declined to give effect to that partition and included the income of both the assessee and Meyyappa in the assessment of the Hindu undivided family. The Appellate Assistant Commissioner allowed the appeals preferred by the Hindu undivided family and upheld the claim based on partition. That was confirmed on further appeal by the Tribunal in its order dated September 22, 1956, and the Tribunal recorded: ".......we wholeheartedly endorse the decision of the Appellate Assistant Commissioner that the shares in the Ipoh vilasam belong only to the two members, at any rate, after December 29, 1948, in the manner claimed. The accrued profits from this business after that date, accordingly, can no longer be assessed in the hands of the assessee family." We are not now concerned with the assessment year 1949-50. This reference relates to the assessment year 1950-51 and the four years that followed, that is, up to 1....
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....e filed successively to the Appellate Assistant Commissioner and to the Tribunal failed. A consolidated reference with reference to all the five years was made by the Tribunal under section 66(1) of the Act, and the question referred to this court ran: "Whether the reassessments under section 34 for all the assessments 1950-51 to 1954-55 are valid?" The challenge to the validity of the assessment in each of the five years was rested principally on the plea that recourse to section 34 was not permissible. That the assessee was not assessed on the income that he returned for assessment in the relevant assessment years was undeniable. The assessee filed those returns voluntarily for the first three assessment years. The returns for 1953-54 and 1954-55 were filed in response to notices issued under section 22(2) of the Act. It was the same income that was subsequently assessed to tax after initiating proceedings under section 34(1). Though the notices were issued under section 34(1)(a), it should be obvious that, if at all the provisions of section 34(1) could be invoked, it was only sectio....
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....ld, and did, lead to the conclusion that the assessee had no assessable income in any of the assessment years. The assessment proceedings that commenced with the returns filed by the assessee were lawfully terminated when they were closed with the entry "N.A.". Thereafter, the finality of the termination of those assessment proceedings could be vacated only by recourse to section 34, as this was not a case for the application of section 35. That the orders terminating the assessment proceedings were not apparently communicated to the assessee did not affect the legality of those orders or their finality. Nor was the legality or finality of that order affected by the absence of a specific notice to the assessee under section 23(2) of the Act before the returns were in effect rejected. We are unable to accept the contention of learned counsel for the assessee that the Income-tax Officer had no jurisdiction to terminate the assessment with the entry "N.A." and without issuing notices prescribed by section 23(2) of the Act. We are therefore unable to accept his contention that the order "N.A." must be treated as non est in law. The assessments for 1953-54 and 1954-55, thus lawfully ....
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....as no ban on the assessment of the assessee in the assessment proceedings initiated by the submission of the voluntary returns by the assessee. In other words, the original assessment proceedings did not terminate on the expiry of the four years, for which section 34(3) provided, and they must therefore be treated as pending when the notices were issued under section 34(1) of the Act. We have therefore to examine the question whether the assessee's case came within the scope of the proviso. For the assessment year 1950-51, the appeal preferred by the Hindu undivided family was disposed of on September 22, 1956, in which it was found that the income in question which belonged to the assessee could not be taxed in the hands of the Hindu undivided family. The issue of the notice under section 34(1) on April 24, 1957, was subsequent to that. The appeal preferred by the Hindu undivided family with reference to the assessment year 1951-52, in which, again, there was a similar finding, was disposed of by the Appellate Assistant Commissioner on March 11, 1957, and the issue of the notice under section 34(1) for that year was on April 24, 1957. With reference to the assessment yea....
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....nd 1951-52. We are unable to accept the contention of learned counsel for the department that recourse to section 34 for all the three years could be justified on the ground that it was in consequence of or to give effect to the finding of the Tribunal in the appeal of the Hindu undivided family that related to the assessment year 1949-50. Each assessment year was a unit by itself, and, factually, in this case, there was an appeal by the Hindu undivided family in each of the relevant years. Whether the second proviso in section 34(3) applied to the assessee has to be decided with reference to the appellate order in the assessment proceedings of the Hindu undivided family for each of the years separately. The position we thus reach is that the second proviso in section 34(3) saved the assessment proceedings of 1950-51 and 1951-52 from the bar of limitation imposed by section 34(1)(b). But then, it also removed the bar imposed by section 34(3). What section 34(3) prohibits is an order of assessment after the expiry of the four years prescribed. If nothing supervenes, that ban, in effect, terminates the assessment. But, if the ban to assessment is removed under the second proviso i....
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....ty or otherwise of the impugned provisions of the second proviso, as we can grant relief to the assessee without that investigation. Learned counsel for the assessee submitted that, independent of the pendency of the assessment proceedings invalidating the issue of the notices under section 34(1), the notices should be viewed as ineffective in law as there was no "escape" from assessment at all. Learned counsel pointed out that, in each of the years, the assessee had offered the income for assessment in the returns submitted by him. Of course, while assessment proceedings are pending and an assessment is permissible in law, there can be no question of any escape from assessment. If, however, the assessment proceedings have lawfully terminated and the income has not been assessed, it would be a case not only of non-assessment as explained in Rajendranath Mukherjee v. Commissioner of Income-tax [1934] 2 I.T.R. 71 (P.C.), but also a case of escape from assessment, though the assessee himself was not to blame for that escape from assessment. We do not consider it necessary to pursue this question further, as we are resting our decision on the ground that the assessment proceedings f....