COMMISSIONER OF INCOME TAX, ASSAM, TRIPURA, MANIPUR & NAGALAND versus M/S. RAMESHWARI LAL SANWARMAL

Citation: [1972] 1 S.C.R. 854 · Decided: 22-09-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Case Partly allowed

Judgment (excerpt)

·ss4 
COMMISSIONER OF INCOME TAX, ASSAM, TRIPURA, 
MANIPUR & NAGALAND 
v. 
M/S. RAMESHWARI LAL SANWARMAL 
September ll2, 1971 
' 
[K. s., HEGDE AND A. N. GROVER, JJ.] 
Jnco1ne-tax Act, 1922, ss. 27 and 34(3 )-Assess111enr on S as indivi-
.dual set aside under s. 27 and fresh assessl'Yzent 
1nacle on S as karta of 
H.U.F.--Fresh assessnient is on a differe11t assessee and not one under 
s. 27--Cannot claim protection of s. 34(3) 2nd pro_viso. 
Jnco111e-tax Act, 1922, s. 2(6A)-Shares of co111pany in which ,public 
.are not substantially interested-Held in na1ne of ka1ra in H.U.F.-Loan 
to karta by conipany Jvliether liable to be treated as 
'dividend' under 
.s. 2(6A). 
In connection with the assessment year 1955-56 the lncomc-tax Offi-
cer issued notice under s. 22(2) of the Income-lax Act, 1922 to S in the 
status of an individual. 
He submitted a return in the stattL'i of kirta of 
:his H.U.F. 
The Income-tax Officer passed an. ex-parte assessn1ent ·order 
·on him as individual under s. 23(4). 
The assessment 
was however set 
aside on S's application under s. 27 of the Act. 
A fresh assessment was 
made on the H.U.F. on February 6, 1961 on the basis of the return sub-
mitted by S in that status. This assessment was made a'fter the period 
of four years mentioned in s. 34(3) of the Act. 
The question in appel-
late and reference proceedings was whether the latter assessment was one 
.under s. 27 and therefore protected as regards"1limitation under s. 34(3) 
2nd proviso. 
In the previous years relevant to the assessment years 1955-56 
and 
1956-57 certain loans were advanced to the aforesaid H.U.F. by a com-
-pany. 
The tribunal found that S held ce·rtain shares in that company. Its 
further finding was that he held these shares as the karta of his H.U.F.-
The company being one in which the public were not substantially in-
terested the question Was 1whether 
these loans 
could be considered 
as 
belonging to S and therefore any loan given by the c,ompany to S could 
not come within the scope of cl. (3) to s. 2(6A). 
HELD: (i) The return submitted by Si~ respect of the year 1955-56 
was in his capacity as karta o.f 
his family. 
The status shown in 
the 
return was H.U.F. He filed no return in the status of an individual. The 
two capacities are totally different. 
The ex-paJ:te· order was made against 
.S in the statUs of an individual. 
What was set ii.Side under s. 27 was the 
aSsessmeru made on him in the status of an individ.ual. 
There 
was no 
assessment against H:U.F. and there was no question o'f setting aside any 
assessment made against H.U.F. 
On February 6, 1961 the H.U.F. was 
assessed for the ftrst time though the Income-tax Officer \Vrongly called 
it as a fresh assessment. 'On the facts established it was not possible to 
-come to the conclusion that the assessment made against the H.U.F. was 
an assessment under s. 27. 
That being so the 
a~sessrnent made against 
the H.U.F. on February 6, 1961 was clearly barred by time. 
The High 
Court was accordingly justifi,ed in answering the first question against the 
Department. [ll58 D·Gl 
A 
B 
---
D 
E 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
C.I.T. v. RAMESHWARI LAL (Hegde, J.) 
855 
(ii) Since the High Court had not gone into the question whether the 
shares were held by S in his individual capacity or as karta of H.U.F., 
this Court had to proceed on the basis of the finding of the Tribunal that 
he held those shares as the .karta of his 
family. · This Court held in 
Kishanchand Lunidasing Bajaj's case that when the shares acquired with 
the funds of H.U.F. were held in the name of the karta, 
the 
H.U.F. 
could be' assessed to tax under the Act on the dividend from those shares. 
In view of that decision the Joan in question must be held to be dividend 
within the meaning of cl. (e) of s. 2(6A). 
[The Court however made 
it clear that the loan grantJ!d in the account year previous to the assess-
ment year 1955-56 could not be brought to tax because assessment 
in 
respect of that year was not made within the time prescribed.] [859 B-H] 
Kishanchattd Lunidasing Bajaj v. C.I. T .. Bangalore, 60 I.T.R. 
500, 
applied. 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1956 
and 1957 of 1969 and 1426 and 1427 of 1971. 
Appeals by certificate/special leave from the jµdgment and 
order dated May 10, 1965 of the Assam and Nagaland High Court 
in Income-tax Reference No. 2 of 1964. 
S. C. Manchanda and R. N. Sachthey, for the appellant (in all 
the appeals). 
0. P. K

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