C.I.T. BOMBAY versus ONKARMAL MEGHRAJ (H.U.F.) & ORS.

Citation: [1974] 1 S.C.R. 391 · Decided: 16-08-1973 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Disposed off

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
<l 
D 
F 
G 
C.I.T. BOMBAY 
v. 
ONKARMAL MEGHRAJ (H.U.F.) & ORS. 
August 16, 1973 
[H. R. KHANNA AND 
A. ALAG!RI~WAMI, JJ.] 
Indian Income Tax (Amendment) Act 1953-S. 34(3)-11$ scope. 
391 
16 person'1:i constituted a partnership firm under an agreement dated 
19-5-
1930. Out' of the 16 partners, 3 were outsiders and 13 were 
members 
of 3 
Hinclu Undivided Families. Though the firm. consisted of 3 Hindu Undivided 
Families, the income tax assessment till 1939-40 was on aU the 16 individuals. 
From 1939-40 to 1941-42, the Income Tax Department asseosed the 13 persons 
not as individuals but as 3 Hindu Undivided Families. on the basis of a settle-
ment between them and the department. After 1941-42, all the 16 personS were 
to be individually assessed. Nevertheless, the Income Tax Officer proceeded to 
make the asessment as though the 3 HiJidu Undivided Families still continued. 
The members of the Hindu Undivided Families disputed this ~nd on appeal, the 
Income Tax Appellate Tribun3.l directed that the assessment for the year 1943~ 
44 had to be made on each individual partner. In respect of the year- 1944-45, 
the I.T.0. had, meanwhile, assessed the 3 H.U. Families as Hindu Undivided 
Families by declaring the cases of the individuals as cases of "No assessment". 
These assessments were, however, set aside by the' Appellate Assis!ailt Commis-
sioner according to the directions given by the Tribunal earlier. 
After receipt of the orders of the Appellate Assistant Comrnissionet the 
I.T.O. fasued notices urider s. 34 to aU the 13 persons in April 1954. By that 
tiine, the Indian Income-tax (Amendment) Act 1953, which amended s. 34U) 
became operative retrospectively from 1-4-1952. The notices under s. 34 were 
served on 8th April 1954 and the assessments were made on 31-1-1955 on the 
footing that under that Sectior.., there was no time limit. Both the Appellate 
Assistant Commissioner and Tribunal dimissed the appeals filed by 'the assessees. 
These assessments were, however, set aside by the Appellate Assistant Comtnis-
(i) whether, having regard to the' directions given by the· AppelJate 
Assistant 
Commissioner. and havir..g regard to the second provisQ to Se:::tion 
34(3) 
as 
amended, the reas·sessment made by the I.T.0. on 31-1-1955 is governed by any 
limitation period, such as mentioned in s. 34(::\). 
(2) In respect of 4 other assessees, who furnished individual returns, "whether 
the remedy available to the I.T.0. had already become time-barred under s. 34 
before that Section was amended .in 1953 with retrospective effect." 
The High Court answered the questions in the affirmative , arid hence, the 
appeals before this Court. 
Allowing 3 appeals and dismissing the others. 
HELD: (i) The direction given by the Tribunal on 31-3-53 was in respect 
of the assessment for 1943-44. The I.T.0. had even before that date, assessed 
the three units as H.U.F., for 1944-45 and paSsed an order of 'No ,assessment' 
in respect of the individuals. 
For that year also, all of th¢ hadj filed their 
ret11rns as individuals. Therefore, there was no question of omission or failure 
to make a return or to disclose fully all material facts necesSary for their 
assessment and, escapement of assessment was not due to any such fact but due 
fo the action of the l.T.0. asseS'Sing non-existent Hindu Undivided Families and 
passing an order of 'No assessment' in respect of individuals. -Section 34(1)(a) 
cannot, therefore, apply and only section 34(1) (b) can apply. [395D-FJ 
(i) AS regards the application of-the second proviso to s. 34(3), it applies 
only to the three individuals (Narayandas, Meghraj and. Hanuma~~as) who ~l~d 
returns as individuals but who had been assessed as Hindu Und1v1ded Families 
and who were before the Appellate Assistant Cornn1issioner and the Tribunal 
392 
SUPREME COURT REPORTS 
[ 1974] 1 S.C.R. 
but not to other eight respondents who were not parties to the proceedings and 
there was no Hindu Undivided Families at that time-all these eight persons 
having filed thei1 returns as individuals. [395F-396C] 
l.T.0. v. Mur/idhar Bhagwa11 Das, [1964] 52 I.T.R. 325, referred to. 
The right of the I. T. 0. to assess these persons can be upheld only if the 
notice under the substantive part of s. 34 can be said to be a valid notice. The 
assessment yeJ.r being 1944-45, the n'Jtice under s. 34 issued in April 1954 was 
B 
beyond the period of 4 years under s. 34 ( 1) (b) and so, the second proviso to 
s. 34 (3) 

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