M GANAPATHI ASARI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act, 1922, and relates to the assessment years 1949-1950 to 1953-1954 and 1955-1956 and 1956-1957 The assessee made returns for these years as an individual. But this status was not accepted by the Income-tax Officer who included the income of his brothers in his, on the ground that it was earned out of funds withdrawn from the joint family resources. Assessment orders for the years 1941-42 to 1944-45 had also been similarly made which formed the subject-matter of reference to this court which ended in favour of the assessee. Following this decision the Tribunal set aside similar assessment orders and assessment pertaining to the assessment years 1945-46 to 1947-48. The Appellate Assistant Commissioner, following the decision of this court and of the Tribunal for the earlier years, allowed the appeals relating to the subsequent years, 1949-50 to 1953-54 and 1955-56 and 1956-57. But while setting aside the assessments, the Appellate Assistant Commissioner was silent as to what the Income-tax Officer was to do further. The Commissioner filed appeals before the Tribunal objecting to the orders of the Appellate Assistant Commissioner on the ground that the latter, while disposing of the appeals before him, should have given a direction to re-do the assessment for those years.

(2.) THE appeals were resisted by the assessee, on the ground that they were not maintainable. But we do not find that the Tribunal specifically disposed of that point. On the other point of the assessee, the Tribunal was not impressed that a direction as was sought for by the Commissioner would be improper and illegal because the assessee in his individual capacity was not a party to the assessment proceedings, but was a stranger so far as they were concerned, but, eventually, the Tribunal directed the Income-tax Officer to re-do the assessment according to law to the extent of the income assessable in his hands as an individual. THE reference at the instance of the assessee is of the following questions "(1) Whether, on the facts and in the circumstances of the case, the appeals preferred by the department against the orders of the Appellate Assistant Commissioner are maintainable?(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Income-tax Officer to re-do the assessment for the assessment years 1949-50 to 1953-54, 1955-56 and 1956-57 to the extent of the income assessable in the hands of the assessee as an individual?" *Two points are urged for the assessee : (i) the direction given by the Tribunal was beyond the scope of the appeals before it and (ii) as a result of the assessment orders having been set aside, the returns relevant to those years are pending, with the consequence that section 34 will be inapplicable. In support of the first point our attention has been invited to Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das and East India Corporation Ltd. v. Commissioner of Income-tax and of the second point to a recent judgment the Supreme Court in Civil Appeal No. 754 of 1966 (Estate of the late A. M. K. M. Karuppan Chettiar v. Commissioner of Income-tax)S. C. Prashar v. Vasantsen Dwarkadas, had, by a majority, held that the second proviso to sub-section (3) of section 34 violated article 14 of the Constitution and was invalid, in so far as it authorised the assessment or reassessment of any person other than the assessee beyond the period of limitation specified in section 34. THE scope of the proviso was again considered in Income-tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das. It was held that "any person" in the second proviso must be confined to a person intimately connected with the assessment of the year under appeal. A finding and direction in the proviso, as pointed out by the Supreme Court, mean respectively a finding necessary for giving relief in respect of the assessment for the year in question and a direction which the appellate or revisional authority, as the case may be, was empowered to give under the sections mentioned in the proviso. East India Corporation Ltd. v. Commissioner of Income-tax was not concerned with section 34 or the second proviso, but had dealt with the question whether a direction under section 34(3) to reassess the shareholders as a consequence of section 23A proceedings was legally given as a result of the Tribunal's finding. In Civil Appeal No. 754 of 1966 (Estate of the late A. M. K. M. Karuppan Chettiar v. Commissioner of Income-tax) the facts were briefly these.the assessment year 1949-50, it was claimed that the assessee's undivided Hindu family had been divided between him on the one hand, and one Muthukaruppan and his sons on the other, the latter forming a separate family of their own. Pursuant to notices under section 22(2) issued to the Hindu undivided family, the assessee filed returns in his individual capacity in respect of the income from several sources ascribed to his share at the partition. But the Income-tax Officer rejected the assesse's claim that has should be assessed as an individual, and assessed the Hindu undivided family for the three years 1950-51, 1951-52 and 1952-53 treating his returns as returns filed by the family.

(3.) THE revenue is entitled to its costs. Counsel's fee Rs. 250.