MADHAV MOTOR STORES Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is a Reference at the instance of the assessee under section 66(1) of the Indian Income-tax Act, 1922, in which the only question that arises is whether notices for reassessment under section 34(1A) of the Indian Income-tax Act issued in the name of a firm are valid notices on which an assessment order can be passed against a Hindu Undivided Family. The short facts necessary for the purpose of this Reference are that the Shri Krishna Baijnath was carrying on business in petrol in the name of Madhav Motor Stores, the income from which was being assessed in the status of H.U.F. He died some time in 1933 leaving behind him three sons, who, after the death, started new businesses in 1939, 1941 and 1942. On 15th December 1941, the three brothers entered into an agreement in which it was stated that they had effected a severance of status amongst themselves, but it was mentioned that the first two businesses could not be divided and were, accordingly held by them as tenants-in-common in equal shares. On the same date, a partnership relating to those two businesses was entered into. Assessments were made in respect of the income of those businesses against assessees in the status H.U.F., and the appeals filed therefrom were infructuous. Subsequent to the original assessments, proceedings were initiated to bring to tax what was considered to be escaped income, and notices under section 34(1A) addressed to Madhav Motor Stores were served which were accompanied in the usual way by notices under section 22(2) in which all the units of assessment other that "firm" were scored out. Attempts at settlement having failed, reassessment proceedings were continued and concluded, and were confirmed, on appeal, by the Appellate Assistant Commissioner for each of the four years in the question, viz. assessment years 1942-43 to 1945-46. On further appeal to the Tribunal, it was contended that the re-assessment notices having been issued to the firm, no assessment could be made on the H.U.F. pursuant to those notices. The Tribunal took the view that that contention had no merit, and also held that it had not been raised at the earlier stage, and it, therefore, rejected the same. It is from that order of the Tribunal, that the following question has been referred to us for out decision.

(2.) It is true that the notices issued in the present case under section 34(1A) do not themselves specify that they are notices against Madhav Motor Stores as a firm, but these notices were accompanied by notice under section 22(2), as is the usual practice. In fact, what section 34 requires is that a notice under section 34 should contain all or any of the requirements which may be included in a notice under section 22(2), but the practice as, for the sake of convenience, been that instead of including the requirement of a notice under section 22(2) in a notice under section 34, a separate notice under section 22(2) accompanies the notice under section 34. The position, therefore, clearly is that these two notices must really be regarded in law as one notice, and indeed, Mr. Joshi has very fairly not disputed that, having regard to the fact that the notice under section 22(2) is addressed to the assessee as a firm, the notice under section 34 also be regarded as having been issued to the assessee in the capacity of a firm of assessment.

(3.) Viewed in that light, the question is completely covered by the decision of the Superme Court in the case of Commissioner of Income-tax vs. K. Adinarayana Murty (65 I.T.R. 607, at 611) in which it has been laid down that under the scheme of the Income-tax Act there are separate units of assessment; and if a notice under if a section 34 of the Act is issued to an assessee in one status, all proceedings taken under that notice are illegal, if the real status of the assessee is another status. In that connection, if has further been pointed out by the Superme Court that even the submission of a return by the assessee will not make and difference to the character of the proceedings. Following that decision, which is binding upon us, I would, therefore, hold that the notices in question in the present case having been issued to the assessees in the status of a firm, the assessment of the assessees in the status of an H.U.F. in pursuance of those notices was not valid. S.K. Deasi, J.