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

- **Citation:** [1973] 3 S.C.R. 87
- **Court:** Supreme Court of India
- **Decided:** 1972-12-12
- **Case number:** Civil Appeals Nos. 337 tO 345 of 1970
- **Bench:** K. S. Hegde, i>. JAGANMOHAN REDDY
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-u-p-v-m-s-mohd-shakoor-mohd-bashir-6569
- **Pages:** 5

## Headnote

Indian Income Tax A.ct, 1922, Section 34(3)-Second Provi.ro-Perso11s 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 asseument 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 Commission 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 Officer 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), dismissing 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 necessary fOr the disposal of an appeal and not other incidental ftndings. [90Bl
The finding of the Appellate Asstt. Commissioner that the Association of persons, consisting of all the heirs of Z is not liable in respect of
the tobacco business, is an essential finding; & finding absolutely necessary for the disposal of the case.
The further finding that busicess had
been gifted to the respondents in 1942 is only an im;idental findi

## Text

A
B
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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-Perso11s 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 asseument 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 Commission 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 Officer 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), dismissing 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 necessary fOr the disposal of an appeal and not other incidental ftndings. [90Bl
The finding of the Appellate Asstt. Commissioner that the Association of persons, consisting of all the heirs of Z is not liable in respect of
the tobacco business, is an essential finding; & finding absolutely necessary 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 holding that the Appellate Asstt.
Commissioner did not· find nor was it necessary for him to find that the
respondents were owners of the tobacco business during the relevant
assessment years.
[90FH]
Income Tax Officer, A·Ward Sitapur v. Murlidhar
Bhagwan
DM
52 l.T.R. 335 applied.
A
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(ii) The 'directions'' that the Appellate Assistant Commissioner can
give are those falling either under S. 31(3){b)1 (c) or (e) or S. 34(4)
It is conceded by the Appellant th~t the direction given by the Ap~llate
D
Asstt. Commissioner does not fall within any one of those proVIsions.
Hence it must be concluded that the direction given by the Appellate Asst!.
Commissioner is not one that falls within the scope ·of the second proviso
of S. 34(3). [91-Bl
(iii) The conclusion of the Tribunal as to the scope of the Appellate
Asstt. Commissioner's finding is not a finding of fact but one relating
to law, and the High Court had power to Interfere.
[91-Cl
E
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 337 tO
345 of 1970.
Appeals by special leave from the judgment and order dated
August 7, 1968 of the Allahabad High Court in I.T. Reference
No. 712 of 1963.
F
N. D. Karkhanis, S. P. Nayar and R. N. Sachthey, for the
appellant.
S. C. Manchanda, Uma Datta and P. C. Sharma, for the Respondent.
The J ud)!lllent of the Court was delivered by
G
HEGDE, J.
These are appeals by special leave.
Though as
many as four questions w~re referred by the Tribunal to the High
Court under Section 66 (1) of the Indian Income Tax Act 1922
(to be hereinafter referred to as 'The Act'), the only question that
was ar~ued before us was question No. 2, namely :
H
"Whether the Appelhrte Assistant Commissioner in
dealinii with appeals of the Association of persons con-
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C.I.T. V. MOHD. SHAKOOR (Hegdl!, J.)
sisting of all the heirs of Zahur Bux could give a direction under Section 34(3) to take action against the
assessee ?"
89
The High Court answered that question in the negative and
in favour of the assessee.
The material facts lie within a narrow compass. Two ;iersons by name Allah Bux and Zahur Bux were carrying on business at various places, including tobacco business at Mauranipur
and they were assessed in the status of Association of persons.
In 1938 Allah Bux died leaving his widow Begum Zaidi as his
only heir. The siiid Begum transferred her interest in favour
of Zahur Bux. Thereafter Zahur Bull became the sole owner of
the business. Zahur Bux gifted his business at Mauranipur to
his two sons Mohd. Shakoor and Mohd Bashir in 1942. Zahur
Bux died in 1948. During the assessment years 1945-46 to
1956-57, Mohd. Shakoor and Mohd. Basir submitteii their returns of income in respect of the Mauranipur business. Following his earlier decision the Income Tax Officer rejected that
return and proceeded to assess all the heirs of Zahur Bux as an
Association of persons. He also took into consideration not
merely the Mauranipur business but all the assets left by Zahur
Bux. In appeal the Appellate Assistant Commissioner came to
the conclusion that the assessee, namely, the· Association of persons consisting of all the heirs of Zahur Bux, was not liable to be
taxed in respect of the Mauranipur business.
He came to the
conclusion that that business had been gifted to Mohd. Shakoor
and Mohd. Bashir in 1948 itself. But he did not find that during the relevant assessment years Mohd. Shakoor and Mohd.
Bashir were continuing that business in their own name; nor did
he give a finding in respect of any income earned in this business
bv Mohd. Shakoor and Mohd. Bashir in those years.
On the
basis of his. findin2 that the assessee--the Association of penons
consistine: of all heirs of Zahur Bux-is not liable to be taxed in
respect of the Mauranipur business, he set aside the order of the
I!icome Tax Officer but directed· him to "assess the income from
various sources in the hands of rthe respective persons to whom
they arose, bearinf? in mind the provisions of- second proviso to
sub-section (3) of Section 34 of the Inruan Income-Tax Act."
Thereafter the J~come.Jtax Officer issued notices to the respondents under Sect10n 34(1 )(a) of the Act. The auestion for
decision is whether those notices are barred by time. It is urged on
behalf of the Revenue that in view of the second proviso to Section 34 (3) of the Act, the notices are not barred. The High
Court has rejected that contention.
90
SUPREME COURT REPORTS
(1973] 3 S.C.R.
The first question that calls for decision is :-
"Whether the Appella'le Assistant
Commissioner
had given any finding as contemplated by the proviso
to Section 34 ( 3) ;"'
and the second question that arises for decision is :-
"Whether the Appellate
Assistant Commissioner
had given any direction as contemplated under second
proviso to Section 34 ( 3) ?"'
This Court in Income-tax Officer, A-Ward Sitapur v. Murlidhar Bhagwan Das('), ruled as to what exactly is the meaning
of .the words 'finding' as well as 'direction' in the second proviso
to Section 34(3). ·Dealing with the expression
'finding',
this
Court ruled that it meant a finding nec·~ssary for giving relief in
respect of the _assessment for the year in question.
A finding
therefore could only be that which was necessary for the disposal
of the appeal in respect of an assessment of a particular year. In
that case the t\ppel!ate Assistant Commissioner had come to a
finding that the disputed income did not arise or accrue in the
concerned assessment year but had arisen in the previous year.
The question for decision by this Court was whether the finding
that th~ income arose in the previous year is a 'finding' within
the meaning of second proviso to Section 34 ( 3). This Court
held that it is not a finding falling within the meaning of that
proviso, though it was a matter considered in the order of the
Appellate Assistant Commissioner.
In other words this Court
ruled that the only 'finding' that can fall within the scope of second
proviso to Section 34(3) is a 'finding' which is absolutely nec·~s
sary for the disposal of an appeal and not other incidental findings.
Let u~ apply that rule to the facts of the present case.
The
finding of the Appellate Assistant Commissioner that the Association of persons. consisting of all the heirs of Zahur Bux is not
liable in reipe_~t of the Mauranipur business. is an essential finding; a finding which was absolutely nec•'5sory for the disposal of
the cas.e.
The further finding that that business had been gifted
to Mohd. Shakoor and Mohd. Bashir in the year 1942 is onlv "n
incidental finding and not a finding neccsary for the dispo>al of
the appeal.
J".urther from that conclusion of the Appellate Assistant Commissioner it does not follow tha'l Mohd. Shakoor and
Mohd. Bashir continued to be the owners of the Maurnnipur
business du• ing the relevant assessment years.
Hence we agree
with the High Court that th·~ Appellate Assistant Commissioner
did not fi!ld nor was it necessary for him to find that Mohd.
Shakoor and Mohd. Bashir were owners of the Mauranipur business during the relevant assessment years.
----·-----·-
(!) 52 1.T.R. 335.
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C.I.T. v. MOHD. SHAKOOR (Hegde, l.)
91
Now, coming to the question of 'direction', in Murlidhar
Bhagwan Das case (supra) this Court held that the Appellate
Assistant Commissioner can give, are those falling either under
section 31(3)(b), (c) or (e) or Section 31(4). Mr. Karkhanis.
concedes that the direction given by the Appellate Assistant Commissioner does not fall within any one of the provisions mentioned above.
Hence we must conclude that the direction given by
the Appellat_e Assistant Commissioner is not one that falls within the scope of the second proviso to Section 3 4 ( 3).
From the above conclusions it follows that these apepals must
fail.
But Mr. Karkhanis contendo:d that the finding of the Tribunal in this case that the finding given by the Appellate Assistant
Commissioner at the earlier stage is a finding necessary for the
disposal of the case, is a finding of fact and, therefore, the High
Court could not have interfered with that finding. In the first
place, no such contention was taken up before the High Court or
in the Memorandum of Appeal.
That apart, the conclusion of
the Tribunal as to the scope of the Appellate Assistant Commissioner finding is not a finding of fact but one relating to law.
In the result these appeals fail and they are dismissed with:
costs.
One hearing fee.
S.B.W.
Appeals dismissed.
_,