HUSSAIN BHAI Vs. COMMISSIONER OF INCOME-TAX MADRAS

JUDGEMENT

(1.) THIS reference raises question of limitation in respect of action taken by the revenue under S. 34 (1) (a) of the Income Tax Act 1922. The assessment for the assessment year 1948-49 was originally made on 30-9-1948, on a total income of one A. B. Fazallali. He died on 1-8-1954, leaving his widow and three sons as his heirs and legal representatives. There was a deposit of Rs. 40,000 in the Bank of india, Palanpur, North Gujarat by the assessee which was investigated by the revenue. This amount had not been included in the return. On 9-2-1957, notice under S. 34 (1) (a) of the Act was issued to one Hussain Bhai Abdullabhai, a son by the first wife of Fazallali. He filed a return on 9-3-1957 showing this amount in the d section. The validity of this notice was challenged in this court by W. P. 231 of 1957 under Art. 226 of the Constitution. Since no stay of further proceedings in assessment was granted, the assessment was completed on 15-3-1957, under S. 34 (1) (a ). On 15-3-1958, the writ petition was dismissed on the ground that the petitioner had an alternative remedy. In the meantime he had filed an appeal on 15-4-1957 which was allowed on 24-4-1958 on the ground that the notice issued under S. 34 (1) (a) was invalid because it had been served only on one of the four legal representatives of the deceased assessee. Thereafter on 9-7-1958 a fresh notice under S. 24 (1) (a) was served on all his legal representatives and the assessment was completed on 14-12-1960. The assessing officer took the view that a sum of Rs. 40,000 was chargeable to tax.

(2.) IT may be seen that the fresh notice issued under S. 43 (1) (a) was beyond eight years from the assessment years 1948-49. The appellate Assistant commissioner on appeal by the legal representatives held that the notice was out of time and allowed the appeal. The department took the matter before the tribunal which was of the view that the notice was in time under the second proviso to sub-section (3) of S. 34. At the instance of the legal representatives, this reference is made to us under S. 66 (1) of the question: "whether the present proceedings initiated under section 34 (1) (a) of the act against the assessees are valid in law?" We are clearly of the opinion that the second proviso to S. 34 (3) will be inapplicable. There was no direction or finding in the order of the Appellate Assistant Commissioner d/- 24-4-58 as would attract that proviso. A finding for the purpose of that proviso should be one on a point at issue in the assessment proceedings or in the appeal: Income Tax Officer v. Murlidhar Bhagwan das In that sense there was no finding given by the appellate Assistant Commissioner in his order dated 24-4-1958. The second proviso being put aside, fresh notice learned counsel for the assessees contends that fresh notice served under S. 34 (1) (a) beyond eight years of the assessment order is barred by time. That will be so but for any other saving provision.

(3.) FOR the Revenue the contention is that Section 4 of Central Act I of 1959 saved the fresh notice from the bar of limitation. On the other hand, for the assessees it is said that this proviso does not have that effect. We have to solve this controversy on a construction of S. 4. That section reads :-