ONKARMAL MEGHRAJ Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference arises out of a group of 12 assessments, 11 out of which are in respect of the assessments for the asst. year 1944 -45 and one for the asst. year 1943 -44. Assessments in all these cases were made taking recourse to S. 34 of the Indian IT Act and the question to be considered is whether the action taken was barred by time.

(2.) THE assessees involved in this reference are some of the partners of the firm of M/s Narayandas Kedarnath, which was formed in the year 1930. It consisted of 16 partners, 13 out of which belonged to three HUF and the remaining three were outsiders. Thus, Narayandas Pokarmal and his three sons, Govindram, Bhagwandas and Vasudeo, formed one HUF; Meghraj Pokarmal and his three sons, Onkarmal, Banarasilal and Beniprasad, were the members of another HUF and Hanumandas Sewakram and his four sons, Kedarnath, Banarasidas, Durgaprasad and Harkisondas, formed the third HUF. The partnership deed, however, showed these 13 persons constituting the three HUFs and the three outsiders as sixteen partners of the firm. Since the commencement of the firm up to the asst. year 1939 -40, the sixteen partners were all assessed as individuals in respect of their respective shares of profits of the partnership firm. For the asst. yrs. 1939 -40, 1940 -41 and 1941 -42 the ITO assessed them as six units : the three outsiders partners as three units and the remaining 13 constituting the HUFs as the three HUF units represented by their respective kartas, Narayandas Pokarmal, Meghraj Pokarmal and Hanumandas Sewakram. It appears that the assessment for these three years on the said basis was made in pursuance of a settlement arrived at between the assessees and the IT Department. The settlement, however, was to apply only for these three years and it was agreed that the ITO was to make an order and declare that a partial partition disrupting the joint families had taken place on the 30th Oct., 1940, which was the last year of the previous year relating to the asst. year 1941 -42, and grant registration for the firm for the asst. year 1942 -43 on the said basis. It appears, however, that, although for the asst. yrs. 1942 -43 and 1943 -44 returns were filed by the partners as individuals, the ITO made the assessment on the same basis, which he had adopted for the earlier three years, i.e., he divided the total income of the firm into six parts and assessed the income of the 13 partners as constituting three HUF units. It appears that appeals for the asst. year 1942 -43 were not filed by the assessees in time before the Tribunal. For the subsequent year, however, the three HUF, which had been assessed by the ITO, took their appeals to the Tribunal and the said appeals were allowed on the 31st July, 1953. The Tribunal held that the ITO was not justified in treating the shares, which certain individuals had in the firm of Narayandas Kedarnath, as the income of the supposed HUFs. It, therefore, set aside the assessments made on the HUFs and directed that all the 13 persons should be assessed separately in accordance with the shares set out in the partnership agreement dated 19th May, 1930. Now, in the meanwhile, for the asst. year 1944 -45, for which all the 13 persons had filed their returns as individuals, the ITO had made the assessments on the same basis, which he had adopted in the earlier years, and made assessments on the three HUFs.

(3.) WE will proceed to dispose of the additional question, which we have framed, viz., question No. 3, first as it requires the consideration of the material which has been supplied along with the supplementary statement of the case. Before proceeding to consider the material on record, we will briefly state the submissions, which have been made by counsels on either side relating to the manner in which the material on record is required to be approached and considered. Sec. 4 of the Act (I of 1959), so far as is material for our purpose, is as follows :