C. I. T. ANDHRA PRADESH versus M/S. VADDE PALLAIAH & CO.

Citation: [1973] 3 S.C.R. 655 · Decided: 08-03-1973 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
C.I.T., ANDHRA PRADESH 
v. 
M/S. VADDE PALLAIAH & CO. 
March 8, 1973 
655 
(K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.J 
Income-tax Act (11 of 1922) s. 34(3), Second Proviso-Scope of. 
Upto the assessment year 1953-54 a business was being carried on by 
P as an individual. 
In March 1953, he entered into a partnership con-
sisting of himself and others. For the assessment years 1954-55, 1955-56, 
and 1956-57 the firm filed returns of income aad applied for registration 
under s. 26A of the Income-tax Act 1922. The income-tax officer rejected 
the application holding that there was no genuine firm. 
He accordingly 
assessed P as an individual in respect di the income earned in that busi-
ness. As against that order the firm as well as P appealed to the Appellate 
Assistant Oimmissioner who allowed both the appeals. 
The Appellate 
Assistant Commissioner held that the business was that of the firm and' 
not of P. When the Income-tax Officer proceeded to assess the firm for· 
the assessment years 1954-55, 1955-56 and 1956-57, the firm resisted it 
taking the plea that the proceedings were barred by limitation 
under 
s. 34(3) of the Act. On the question whether the assessment for each 
of the assessment years was valid the High Court, on reference, held that 
the assessments were barred by time and were not saved by the second· 
proviso to s. 34(3) of the Act. 
Allowing the appeals to this Court. 
HELD : Under the proviso the limitation of time would not apply to, 
an assessment or re·assessment made on the assessee or any person 
in 
consequence of or to give effect to any finding ·or direction contained in 
an order under s. 31, 33, 33A and 33B, 66 or 66A. 
A finding which 
can be considered as relevant under the proviso must bt> one which was 
necessary for deciding the appeal before the authority; and the expression 
'any person' refers to one who would be liable to be assessed 
for 
the 
whole or part of the income that went into the assessment of the year 
under appeal or revision. The person should be intimately connected 
with the proceedings in which the finding was given. (658 CD; 660 A-B; 
E-Fl 
In the present case, the order df the Appellate Assistant Commissioner 
was made under s. 31. 
Though he hac! not given any direction. 
the 
order made by the Income~tax Officer was in consequence of the finding 
given by the Appellate Assistant Commissioner. 
The finding given by 
the Appellate Assistant Commissioner that the business was that of the 
firm was absolutely necessary for deciding both the appeals before him. 
P, v;ho was the dominant partner of the firm was not only interested in 
his own assessment but was also interested in the assessment of the firm. 
The partners and the firm were intimately connected with him and hence, 
they are 'persons' coming within the scope of the proviso. [658 E-F· 660 C 
F-GJ 
. 
' 
' 
Income-tax Officer; A-Ward, Sitapur v. Murlidhar Bhagwan Das, 52 
I.T.R. 335; 344. N.KT. Sivalingam Chettiar v. Commi,<sioner of lncome-
tax, Madras, 66 J.T.R. 586 and Daffadar Bhagat Singh and Sons v. Jncome-
ta.t Offecer, A-Ward Ferozepore, 11 I.T.R. 417, followed. 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1682 to 
1684 of 1970. 
656 
SUPREME COURT REPORTS 
[1973] 3 S.C.R. 
Appeals by special leave from the ·.iudgment and order dated 
October 3, 1969 of the Andhra Pradesh High Court in R.C. No. 
4 of 1966. 
S. T. Desai, B. D. Sharma, S. P. Nayar, and R. N. Sachthey, 
:for the appellant. 
N. 
D. Karf(hanis, 
and K. 
Ra;endra Chowdhary, for the 
respondent. 
The JudgmeJllt of the Court was delivered by 
llEGDE, J.-These are appeals by Special Leave. They arise 
from a common judgment of the Andhra Pradesh High Court in 
a reference under section 66(i) of the Indian Income Tax Act, 
1922, to be hereinafter referred to as the "Act". The reference i.n 
question relates to the assessment of the assessee tor the assess-
ment years 1954-55, 1955-56 and 19,6-57. 
'I'he question of 
law referred by the Tribunal is "Whether on the facts and the cir-
cumstances of the case, the assessm.ent Dll\(le on <the firms,. for 
each of the assessment years 1954-55, 1955-56 and 1956-57, are 
valid in law ?" 
Now we shall set out the material facts as could be gathered 
from the case stated by the Triqunal. Up to and including the 
assessment year 1953-54 business with which we are concerned 
in this case, was carried on by V adde Pallaiah. He was assessed 
as an 'indiv

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