COMMISSIONER OF INCOME TAX Vs. NARAINDAS DWARKADAS

JUDGEMENT

(1.) THIS reference is made at the instance of the revenue under section 66(1) of the Indian Income -tax Act, 1922 (hereinafter referred to as 'the Act'). The question of law referred for our determination is whether, on the facts and in the circumstances of the case, could it be said that the Income -tax Officer had validly reopened the assessments of the firm, M/s. Naraindas Dwarkadas, for the assessment years 1951 -52 and 1952 -53.

(2.) AS the question shows, the reference relates to the assessment years 1951 -52 and 1952 -53, for which the relevant previous years are Samvat years 2006 and 2007. The partnership -firm of Messrs. Naraindas Dwarkadas consists of three partners, one of the partners being Bhagwandas Naraindas. The sources of income of Bhagwandas Naraindas during the relevant years were two : (1) his individuals share income from the firm of Messrs. Naraindas Dwarkadas, and (2) dividends. For the assessment years 1951 -52 and 1952 -53, Bhagwandas filed returns of his personal income declaring his status as that of resident and ordinarily resident and he was accordingly assessed by the Income -tax Officer at the ordinary rates applicable to a resident and ordinarily resident.

(3.) PURSUANT to the above order and direction of the Appellate Assistant commissioner, the Income -tax Officer wanted to initiate steps to assess the share income of Bhagwandas in the hands of the firm of Messrs. Naraindas Dwarkadas. The Income -tax Officer, therefore, issued notices for both the years under section 34 on March 2, 1961, and these notices were issued in the following name : 'Shri Bhagwandas Naraindas, non -resident, as represented by the firm, M/s. Naraindas Dwarkadas, Picket Road, Bombay'. Before the Income -tax Officer initiation of such reassessment proceedings was challenged on more than one ground. All the grounds were rejected by the Income -tax Officer and the Income -tax Officer added the share income of Bhagwandas in the assessment of the firm of M/s. Naraindas Dwarkadas and subjected it to tax at the maximum rate. These orders of reassessment were challenged in appeal before the Appellate Assistant Commissioner. Aggrieved by the order of the Appellate Assistant Commissioner further appeals were filed before the Tribunal. It was, inter alia, contended before the Tribunal on behalf of the assessee that under the order and direction of the Appellate Assistant Commissioner dated March 20, 1961, the Income -tax Officer was directed to assess the firm in respect of the share of Bhagwandas who was a non -resident in accordance with the second proviso to section 23(5)(a). It was urged on behalf of the assessee that the assessments made by the Income -tax Officer as confirmed by the Appellate Assistant Commissioner were invalid on a number of grounds. It was, inter alia, urged that as action was taken in the present case to initiate reassessment proceedings in view of the provisions of section 34(1)(a), the Income -tax Officer ought to have obtained the permission of the Commissioner of Income -tax for taking action under the said section but such permission was not obtained by him for any of the two years. Even an alternative contention was urged that if initial initiation of reassessment proceedings against Bhagwandas was commenced after obtaining such permission such permission enured to the benefit of the assessee pursuant to the order and direction given on March 20, 1961. It was also contended that for commencement of reassessment proceedings under section 34, serving of a notice upon the entity sought to be reassessed is a condition precedent; that in the present case in view of the order passed by the Appellate Assistant commissioner the entity to be reassessed was the firm of M/s. Naraindas Dwarkadas; that the notice given in the present case is not served upon the firm but upon the individual, Bhagwandas Dwarkadas; and so the entire initiation of proceedings is without jurisdiction. All these contentions found favour with the Tribunal and the Tribunal set aside the orders of reassessment passed against the firm.