COMMISSIONER OF INCOME TAX, U.P. versus M/S. MOHD. SHAKOOR MOHD. BASHIR

Citation: [1973] 3 S.C.R. 87 · Decided: 12-12-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
COMMISSIONER OF INCOME TAX, U.P. 
v. 
M/S. MOHD. SHAKOOR MOHD. BASHIR 
December 12, 1972 
(K. S. HEGDE AND i>. JAGANMOHAN REDDY, JJ.) 
Indian Income Tax A.ct, 1922, Section 34(3)-Second Provi.ro-Per-
so11s originally carrying on tobacco and otlier business as.u1ed in the status 
of association of persons-On devolution, tobacco business subsequently 
gifted to appellants-A.ppellate Assistant Commissioner holding that 
assessee not liable to be taxed in respect of tobacco business-No finding 
that appellants were continuing tobacco buslntss I~ their own name or 
in respect of ani income earned In i~-Direction to Income Tax Officer 
ro assess income bearing i11 mind second proviso to S. 34(3)-Not/ces 
under S. 34(1)(a) whether barred by time-Mtllning of expression• 
'fi11c/ing' and 'direction' in second prov/Jo to S. 34(3). 
A and Z were carrying on busineu at various places, includin11 
tobacco business at Mauranipur and they were assessed in the statllfl of 
Association of persons. In 1938 A died leiwin11 his widow as his only 
heir. 
She transferred her interest in •favour of Z, who then became the 
sole owner of the entire business. Z aifted the tobacco business to his 
two sons, the respondents, in 1942. Z died in 1948. During the asseu-
ment years 1945-46 to 1956-57, the respondents submitted their returns 
of income in respect of the tobacco busine1S. Following his earlier deci· 
sion the Income Tax Officer rejected that return and proceeded to assess 
all the heirs of Z as an Association of persons in respect of all assets 
including tobacco business. 
In appeal the Appellate Assistant Commis-
sion came to the conclusion that the assessee, namely, the Association 
of persons consisting of all the heirs of Z, was not liable to be taxed 
in respect of the tobacco business, and that that business had been gifted 
to the respondents in 1948 itself. 
But he did not find that during the 
relevant assessment years the respondents were continuing that business 
in -their own name; nor did he give a finding in respect of any incomfl 
ec..:ned in that business by the respondents in those years. 
He there. 
fore set aside the order of the Incon1e Tax Officer but directed him to 
assess the income from various sources in the hands Of the respective 
persons to whom they arose. bearing in mind the provisions of the 
second proviso to S. 34(3 J of the Act. Thereafter the Income Tax Offi-
cer issued notices to the respondents under S. 34(1)(a) of tbe Act. 
Four questions were referred by the Tribunal to the High Court 
under S. 66(1) of the Act. The High Court held that the notices issued 
under S. 34(1)(:a) were barred by time. 
On the second question under 
reference. which was the ooly question argued before this Court, the 
High Court held thM the Appellate Asstt. Commissioner in dealing with 
appeals of the A'5ociation of Persons consisting of all the heirs of Z 
could not give a direction under S. 34(3) to take action against the 
assessee. 
On appeals by special leave to this Court, on the questions 
whether the Appellate Asstt. Commissioner (i) had given a"Y finding 
a! co_ntemplated by the proviso to S. 34(3); and (ii) had given any 
d1rect1on as contemplated under the second proviso to S. 34(3), dismiss-
ing the appeals. 
HELD: (i) The expression 'finding' in the second proviso to S. 34(3) 
n1eans a finding necessary for giving relief in respect of the assessment 
for the year in question. A finding therefore could only be that which 
87 
88 
SUPREME COURT REPORTS 
[1973] 3 S.C.R. 
was necessary for the disposal of the appeal in respect of an assessment 
of a particular year. 
The only 'finding' that can fall within the scope 
of the second proviso to S. 34(3) is a 'finding' which is absolutely neces-
sary fOr the disposal of an appeal and not other incidental ftndings. [90Bl 
The finding of the Appellate Asstt. Commissioner that the Associa-
tion of persons, consisting of all the heirs of Z is not liable in respect of 
the tobacco business, is an essential finding; & finding absolutely neces-
sary for the disposal of the case. 
The further finding that busicess had 
been gifted to the respondents in 1942 is only an im;idental finding and 
not a finding necessary for the disposal of the appeal. 
Further from 
that conclusion it does not follow that the respondents continued to be 
the owners of the tobacco business during the relevant assessment years. 
Hence the High Court was right in holdin

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