RAJINDER NATH ETC. versus COMMISSIONER OF INCOME TAX, DELHI

Citation: [1980] 1 S.C.R. 272 · Decided: 13-08-1979 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

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

Judgment (excerpt)

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272 
RAJINDER NATH ETC. 
v. 
COMMISSIONER OF INCOME TAX, DELHI 
August 13, 1979 
[P. N. BHAGWATI AND R. S. PATHAK, JJ.) 
Income-Tax Act 1961 (43 of 
1961)-S. 153(3)(ii)-Applicability of-
"fi1uling" and "direction"_..Dif]erence betlveen-Observation that Income 1'nx 
Officer, "is free to take actioii" not a 'direction.' 
A Hindu undivided family consisting of the; f<~titer (Karta) and his three 
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son~ carried on business. Land was acquired in the name of the Karta and. 
the price wa~ paid out of the books of the family, and a building was con-
structed on the land. Another building was constructed on another plot cf 
land. 
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On a partial partition of the above' Hindu undivided family its busi1Iess was 
taken over by a partnership firm consisting of the Kart a and the two e!der sons 
and the firm. debited a certain sum of money in the building account of the 
firm for the assessment year 1955-56 and a similar sum in respect of the other 
property for the assessment year 1956-57. 
The appellants (oosessees) who were members of the partnership firm, filed 
separate returns in their individual status for the assessment 
years 
1955-56 
and 1956-57 claiming that the two properties belonged to the four members of 
the family in their individual capacity, The Income Tax Officer however regarded 
the propertiee as belonging to the partnership firm, ood in the assessment proceed-
ings of the firm for the ·said years, estitnated the cost of construction at a 
higher figure, than the cost disclosed, and made additions accordingly tCJ the 
returned income of the firm. 
Allowing the ap.peals of the partnership firm the Appeliate Assistant Commi!i-
~;ioner deleted the additions hdlding that ~ the money was advanced by the 
firm and debited to the account of each co-owner, the partnership firm wa~ 
not the owner of the properties and therefore it could not be said to- have 
earned any concealed income. 
The Income Tax Officer then initiated proceedings under s. 147(a) O:f the 
I.T. Act 1961 against the individual <l!Ssessees for the assessment years 1955-56 
and 1956-57 and the additions on account of concealed income originally made 
in tho assessments of the partnership firm were divided between the assessees 
and included in their individual assessment, rejecting the plea of the ass.euees 
that there was no case for invoking the said section, as they had already dis-
closed that ·they had invested in the properties when filing their origin.at irtdi-
vidual return!!:. 
On appeal the Appellate Assistant Commissioner though agreeing that th.ere 
was no default on the part of the assessees to warrant proceedings under s. 147(3:) 
and though ordinaf"ily the assessments would be barred by limitation, maintained. 
the assessments on the ground that s. 153(3)(ii) of the Act applied. 
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RAJINDER NATH V. C.I.T. 
273 
The Income Tax Appellate Tribunal though rejecting the contention that il1e 
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assessees were not covered by the expression "any person" in s. 153(3)(ii), 
pointed out that the provision could not be availed of by the Income Tax 
Officer as there was neither any "finding" nor a "direction" on the earlier order 
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of the Appellaite Assistant Commissioner in consequence of which, or to give 
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effect to which, the impugned assessment could be said to have been made and 
that no opportunity had been afforded to the assessees of being heard as was 
required by Explanation 3 to s. 153(3) before that earlier order was made. 
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It held that the Appellaite Assistant Commissioner had no jurisdiction to convert 
the aasessments made by the Income Tax Officer under s. 147(a) to "assess111ents 
paS!ed under '· 153(3)(ii)". 
The High Court 011 Reference. by the Tribunal observed that the finding 
that the properties did not belong to the partnership firm and therefore the 
excess amount of the cost of construction could not be regarded as the concealed 
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iru:ome of the firm, was necessary for the disposal of the appeals filed by the 
firm and as a corollary it was held that the buildings belonged to the co-owner.. 
This necessitated the "direction" to the Income Tax Officer that he was free to 
MSCU the excess amount in the hands of the co-owners. 
It held that the 
Appellate Assistant Commissioner could convert the provisions of s. 147(i) into 
those of s. 153(3)(ii) of the Act a<nd that the provisions of s. !53(3)(ii) of the 
Act applied to the case. 
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In llie asscssee'• appeals to thi• Court 

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