BHAGWAN DAS SITA RAM vs. COMMISSIONER OF INCOME-TAX

CIVIL APPEAL No. 1168/1973Supreme Court[1984] 3 S.C.R. 10005 March 1984Bench: 2 JudgesAuthor: V.D. TULZAPURKAR, SABYASACHI MUKHERJI18 pages
AI SummaryDismissed

What were the facts?

The assessee, a smaller Hindu Undivided Family (HUF) formed from the partition of a bigger HUF, filed voluntary returns for assessment years 1946-47 to 1949-50 on 18.11.1950. The bigger HUF's claim of partition, initially rejected, was accepted by the Appellate Tribunal on 31.08.1954. The Tribunal directed assessments on the bigger HUF after accepting the partition. Subsequently, the Income-Tax Officer initiated proceedings under section 34(1)(b) against the assessee, who filed fresh returns on 12.04.1955. Assessments were completed on 28.09.1955. The assessee's appeals were rejected by lower authorities. A writ petition led to the quashing of these orders by the High Court, stating no section 34 proceedings could be taken while voluntary returns were pending. The Revenue then attempted to assess the assessee based on the original voluntary returns, invoking the second proviso to section 34(3) and relying on the Tribunal's order in the bigger HUF's case. The assessee's writ petition was dismissed. Assessments were completed on 31.05.1962. The Appellate Assistant Commissioner and Tribunal held no valid assessment could be made on this date. A reference to the High Court concerned the validity of assessment on 31.05.1962 for assessment years 1948-49 and 1949-50 based on voluntary returns.

What did the Supreme Court hold?

On Question No. (1): The High Court was correct in holding that assessments could be made on the basis of voluntary returns already filed by the assessee. While sub-section (3) of section 34 provides a four-year limitation for assessment under section 23, if assessment proceedings commence by filing voluntary returns, they are suspended but do not become invalid upon expiry of the four-year period. The Tribunal's order giving a direction lifted the bar of limitation, allowing assessments to be made without being time-barred. The Tribunal was competent to give the direction in respect of the present assessee. The phrase 'any person' in the second proviso to section 34(3) refers to a person 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 present assessee was intimately connected with the assessment of the bigger HUF, as the income could belong to either the bigger or the smaller HUF. Therefore, the direction given by the Tribunal was valid and saved the assessments against the assessee. The appeals were dismissed.

What were the issues?

1. Whether assessment could be made under section 23(3) on the basis of voluntary returns filed, or if action should have been taken under section 34 with the aid of the second proviso to sub-section (3) of section 34, considering the limitation period? (Question of law and fact, concerning Sections 23(3), 34(1)(b), and 34(3) of the Indian Income-Tax Act, 1922). Assessee's contention: A voluntary return exhausts itself after four years from the end of the assessment year, precluding assessment based on it beyond that period. Assessment could only be done under section 34 if the second proviso to sub-section (3) of section 34 applied. Revenue's contention: Assessments could be made on the basis of voluntary returns already filed, and the bar of limitation was lifted by the Tribunal's direction. 2. Whether the Tribunal could give a finding or direction in respect of the assessee (the smaller HUF) when the appeal before it concerned the bigger HUF? (Question of law and fact, concerning the scope of the Tribunal's powers under section 34(3) and the interpretation of 'any person' in the second proviso to section 34(3)). Assessee's contention: The Tribunal's direction could not affect the assessee as it was not a party to the proceedings concerning the bigger HUF. The assessee was a stranger to those proceedings. Revenue's contention: The assessee was 'any person' within the meaning of the second proviso to section 34(3) as its assessment was intimately connected with the assessment of the bigger HUF, and the Tribunal was competent to issue such a direction.

Which sections of the Income-tax Act were involved?

Section 22,Section 23,Section 23(3),Section 25A,Section 34,Section 34(1)(b),Section 34(3)

AI-generated summary — verify with the full judgment below

1!)0 .BHAGWAN DAS SITA RAM ·-,_- v. .,.-. ~ - . o COMMISSIONER OF INCOME-TAX . I March15, 1984 t. . . [V.:0. TuLZAPURKAR AND SABYASACHl MUKHARJI, JJ.) - } ~)- IncOme-taX Act, '1922..:._s. 22 and s. 23 read with second provi'so to s~S. :c: · (6) cf S. 34....--/nterpretation of-When assessnient can be made after a period of four years from asstssmen.t >;ear-Assessment proceedings commenc~ by.filing of. voluntary return-.On expiry -'of four years proceedings are suspended but procee- dings~an4 {e,turrts do not become invalid. Bar of limitation lifts in case of direction ~ Trib~izQ/~When· Ond on whom Tribunal can issue direction. · ,._ •.

Words and Phrases-"any·person" in ~econd proviso to sub-s. (3) ofs. 34- D Scope of must be a Person wl:zo would be liable lo be assessed for whole or part of income that went into assessment of the year under appeal. E F G R A bigger Hindu undivided family (HUF) had flied income-tax returns for the assessment years 1946-47 to 1949-50. When the assessment was being done the bigger (HtTF) made a claim under s. 25A of the Income Tax Act, 1922, that the said HUF. was paititioned on 19.5.1945. While this claim was pending, the

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