# • DAFFADAR BHAGAT SINGH & SONS v. THE INCOME-TAX OFFICER, A-WARD, FEROZEPORE

- **Citation:** [1969] 1 S.C.R. 828
- **Court:** Supreme Court of India
- **Decided:** 1968-08-22
- **Bench:** V. RA:v!ASWAMI A1"D A. N. GROVER
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/daffadar-bhagat-singh-sons-v-the-income-tax-officer-a-ward-ferozepore-4527
- **Pages:** 6

## Headnote

Jnco111e Tax Act, (11of1922) s. 34(3)-As~cssnu·nt claiincd as fir111AssesseJ as llind11 lindivided 1-·an1ily- ·Appellate Cor11111i,sioner rever:i;es
order and directs as,-e,·.nnent c.:.> /inn-First notice issued after four }'enrs1/ harm/.
The appctl;inl-~1 p~rtncrship Jirn1
con~isllng of a f;1lhcr and his hvo
sons filed a roturn for the assessment ye<tr 1952-53 on March 31, 1953,
and applied for hcing rc~istercd as a firm.
The Income-tax Officer held
that the assc.;scc constituted a Hindu Undivided Family and not a firn1,
and refused ro
rcgisl~r it.
But in appeal, the Appcllaic Assistant Comn1issioner by an order dated August 11. 1959 allO\\'Cd the registration
and held th;1t the business belonged to the firn1 and therefore its income
must he excluded from that of the family.
Accordingly the Income Tax
Officer issued frc<h notice to the appellant under ss. 22(4) and 23(2) of
the Act.
The appellant refused to con1ply \Vith the notice and moved the
Inspecting Assistant Commisc;ioner for giving a direction that the assess·
ment should not be proceeded \vith O\ving to the statutory bar created hy
s. 34( 3) of the Act.
As the income-tax authorities did not accede to the
request, the appellant filed a writ petition in the High Court. The High
Court dic;n1issetl the petition.
In appeal lo this lonrl.
HELD :-The appoal must be dismissed.
(i) The substantial issue before the
Appellate Assistant Commissioner \\'as one of ~tatus of the assessec and he held that it y,·as a partnership firm and not a Hindu Undhrided Fan1ily.
11lis finding Y.'as necessary
for deciding the appeal hefore the Appellate Assistanl Commissioner and
it could not he rcgardC<.l as having been made only incidentally.
Once
a finding is gi\•,;n \\-'hich \Vas necessary for the di'iposal of the appeal the
second proviso to s. 34(3) of the Act would he attracted and the bar
of limitation would he li.ftcd. [8JI H-832 BJ
S. C. Prashar and Others v. Vc.san'sen D1\'arkada.r & Ors. 49 l.T.R.
1 (S.C.); f\1. K. Si~·afi11_r:nn1 C'hcf/iar v. Tire Co111n1issio11cr of /11con1e-rax,
Madra<. Civil Appeal No.
198.~ of 1966 decided on 27-3-67, referred to.
(ii) lt could not be held in the circumstances of the CJse lhat the
appellant \\'as a total .stranger to the asscs~ment \\
1hich \Vas under appeal
before the Appellate Assistant Commissioner and had no intimate connection Y.1ith the person v.·hoc;c
~1ssessmcnt \\'as
made
h~· the lncon1c-tax
Officer and \\'11<; set a-.idc in appeal by
the
Appellate
Assio;;tant
Commissioner. (8:\2 H]
Clvr1. APPELLATE JuRISDICTIO~ :
Civil Appeal N0. 952 of
1966.
Appeal by special leave from the judgment and order dated
May 11. 1965 of the Punjab High Court in Letters Patent Appca~
No. 169 of 1965.
A
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BHAGAT SINGH v. J.T.O, (Grover, !.)
8 29
A
Veda Vyasa, Bishambar Lal, H. K. Puri, M. K. Garg and
B
c
D
E
F
G
H
K. K. Jain, for the appellant.
Niren De, Solicitor-General,
T. A. Ramchandran,
R. N.
Sachthey and B. D. Sharma, for the respondent.

## Text

•
DAFFADAR BHAGAT SINGH & SONS
v.
THE INCOME-TAX OFFICER, A-WARD, FEROZEPORE
August 22, 1968
[V. RA:v!ASWAMI A1"D A. N. GROVER, JJ.]
Jnco111e Tax Act, (11of1922) s. 34(3)-As~cssnu·nt claiincd as fir111AssesseJ as llind11 lindivided 1-·an1ily- ·Appellate Cor11111i,sioner rever:i;es
order and directs as,-e,·.nnent c.:.> /inn-First notice issued after four }'enrs1/ harm/.
The appctl;inl-~1 p~rtncrship Jirn1
con~isllng of a f;1lhcr and his hvo
sons filed a roturn for the assessment ye<tr 1952-53 on March 31, 1953,
and applied for hcing rc~istercd as a firm.
The Income-tax Officer held
that the assc.;scc constituted a Hindu Undivided Family and not a firn1,
and refused ro
rcgisl~r it.
But in appeal, the Appcllaic Assistant Comn1issioner by an order dated August 11. 1959 allO\\'Cd the registration
and held th;1t the business belonged to the firn1 and therefore its income
must he excluded from that of the family.
Accordingly the Income Tax
Officer issued frc<h notice to the appellant under ss. 22(4) and 23(2) of
the Act.
The appellant refused to con1ply \Vith the notice and moved the
Inspecting Assistant Commisc;ioner for giving a direction that the assess·
ment should not be proceeded \vith O\ving to the statutory bar created hy
s. 34( 3) of the Act.
As the income-tax authorities did not accede to the
request, the appellant filed a writ petition in the High Court. The High
Court dic;n1issetl the petition.
In appeal lo this lonrl.
HELD :-The appoal must be dismissed.
(i) The substantial issue before the
Appellate Assistant Commissioner \\'as one of ~tatus of the assessec and he held that it y,·as a partnership firm and not a Hindu Undhrided Fan1ily.
11lis finding Y.'as necessary
for deciding the appeal hefore the Appellate Assistanl Commissioner and
it could not he rcgardC<.l as having been made only incidentally.
Once
a finding is gi\•,;n \\-'hich \Vas necessary for the di'iposal of the appeal the
second proviso to s. 34(3) of the Act would he attracted and the bar
of limitation would he li.ftcd. [8JI H-832 BJ
S. C. Prashar and Others v. Vc.san'sen D1\'arkada.r & Ors. 49 l.T.R.
1 (S.C.); f\1. K. Si~·afi11_r:nn1 C'hcf/iar v. Tire Co111n1issio11cr of /11con1e-rax,
Madra<. Civil Appeal No.
198.~ of 1966 decided on 27-3-67, referred to.
(ii) lt could not be held in the circumstances of the CJse lhat the
appellant \\'as a total .stranger to the asscs~ment \\
1hich \Vas under appeal
before the Appellate Assistant Commissioner and had no intimate connection Y.1ith the person v.·hoc;c
~1ssessmcnt \\'as
made
h~· the lncon1c-tax
Officer and \\'11<; set a-.idc in appeal by
the
Appellate
Assio;;tant
Commissioner. (8:\2 H]
Clvr1. APPELLATE JuRISDICTIO~ :
Civil Appeal N0. 952 of
1966.
Appeal by special leave from the judgment and order dated
May 11. 1965 of the Punjab High Court in Letters Patent Appca~
No. 169 of 1965.
A
B
c
D
E
F
•
G
H
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BHAGAT SINGH v. J.T.O, (Grover, !.)
8 29
A
Veda Vyasa, Bishambar Lal, H. K. Puri, M. K. Garg and
B
c
D
E
F
G
H
K. K. Jain, for the appellant.
Niren De, Solicitor-General,
T. A. Ramchandran,
R. N.
Sachthey and B. D. Sharma, for the respondent.
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by special leave against. ~he
judgment of the Punjab High Court dismissing the writ pent;on
of appellant Firm herein under Arts. 226 and 227 of the COjl)Sntution by which it was prayed that a writ of prohibition directing
the income tax authorities not to proceed with the assessment for
the year 1952-53 be issued.
A prayer was als? made (or the
issue of a writ of certiorari for quashing the notices under ss.
23 ( 2) and 22 ( 4), of the Income tax Act, 1922, hereinafter called
the Act, which had been issued by the Income tax Officer in that
connection. The appellant firm filed a return for the assessment
year 1952-53 on March ~l, 1953. It also applied that it may be
registered as a firm under s. 26A of the Act, the partners being
Bhagat Singh and his two sons Kartar Singh & Dhian Singh, their
shares being in the proportion of 4/16, 6/16 and 6/16 respectively.
The Income tax Officer passed an or<ler on March 26,
1957 holding that the assessee constituted a Hindu Undivided
Family and not a firm.
The registration under s. 26A was also
refused.
The appellant approached
the
Appellate
Assistant
Commissioner in appeal who made an order on August 11, 1959
allowing registration of the partnership firm under s. 26A.
He
further held that the business belonged to the firm and therefore
its income must be excluded from that of the family. The Income
tax Officer was directed to assess the income of the business in
the hands of the firm.
The Income tax Officer
issued fresh
notice to the appellant u'lder s. 22 ( 4) and s. 23 (2) of the Act.
The appellant refused to comply with these notices and moved
the Inspecting Assistant Commissioner of income tax for giving
a direction that the assessment should not be proceeded with owing
to the statutory bar created by s. 34(3) of the Act.
As the
income tax authorities did not accede to the request of the appellants a petition under Arts. 226 and 227 was filed in the High
Court.
The High Court dismissed the petition on the ground
that in view of the decision of this Court in lncome tax Officer
A-Ward, Sitapur v. Murlidhar Bhagwandas(')
the second proviso to s. 34 ( 3) would be applicable because the members of the
appellant firm could not be regarded as strangers to the proceedings which resulted in the assessment order made in respect of
them and others on the basis of their constituting a Hindu Undivided Family along with others and that they were intimately
connected with the "person" whose assessment was made by the
(1) 5' I.T.R. 335.
•
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8 30
SUPREME COl:RT REPORTS
(1969J i SCR
In.come tax Ofliccr and set aside by the Appellate Assistant Commissioner on whose dirc~tion fresh assessment proceedings were
taken.
The second proviso to s. 34(3) of the Act reads:
"'Provided further that nothing contained in
this
section limiting the time within which any action may
be taken, or any order, assessment
or
reassessment
may be made, shall apply to a reassessment made under
section 27 or to an assessment or reassessment made on
the assessec or any person in consequence of or to give
effect to any finding or direction contained in an order
under section 31, section 33. section 33A, section 33B.
section 66 or section 66A".'
In S. C. Prashar and Others
v.
Vasa111sc11 Dwarkadas &
Ors. ( 1 ), this Court, by majority, held that the provisions of the
second proviso to s. 34(3) in so far as they authorised the assessment or reassessment of any person other than the assessee beyond
the period of limitation specified in s. 34 in consequence of or to
give effect to a finding or direction given in an appeal, revision
or reference arising out of proceedings in relation to the a1scsscc.
violated the provisions of Art. 14 of the Constitution and were
invalid to that extent. The scope and ambit of the second
proviso came up for consiileration again in Income
tax Officff.
A-H1artl, Sitapur v. Murlidhar BhaR11 1andas(::).
,i:\.ccording to
the majority decision the expression "finding., and "directio1!" in
the said proviso means respectively a finding necessary for giving
relief in respect of the assessment for the year in quc,1ion and a
direction which th~ appellate or revisional authority. as the case
may be, was empowered to give under the sections mentioned in
that proviso.
A "finding" therefore could only he
that which
was neccssa1y for the disposal of an appeal in respect of an as;cssmcnt of a particular year. If the Appellate Assistant Commissioner found that the income shown by the assessee was not the
income for the relevant year but was income which belonged to
another year that was not a finding necessary for the disposal of
the appeal and was only incidental to it.
The meaning of the
words "any person" was also conside"ed and it was said at page
346 that a combined rcadini( of s. 30 (I ) and s. 31 ( 3) indicated
the case where persons other than the appealing assessec might
he affected by the orders passed by the Appellate Commissioner.
It was observed :
"Modification or setting aside of assessment made
on a firm, joint Hindu Family, association of persons,
for a particular year may affect the assessment for the
said year on a partner or partners of the firm, member
or members of the Hindu Cndividcd Family or the
fll
.19 IT.R_1.1S<"1
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BHAGAT SINGH v. I.T.O. (Grover,!.)
8 31
•
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individual as the case may be.
In such ca~es though
the latter are not eo nomine parties to the appeal, their
assessments depend upon the assessments on .the former.
The said instances are only illustrative. It, is not necessary to pursue the matter further. We would, therefore,
hold that the expression "any person" in the setting in
B
which it appears must be confined to a person intimately
connected in the aforesaid sense with the assessments of
the year under appeal".
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The argument of Mr. Veda Vyasa for the appellants has been two1
fold.
He contends firstly that the finding or direction which the
Appellate Assistant Commissioner gave in the present case in his
order dated August 11, 1959 that the business belonged to the
partnership and not the Hindu Undivided Family and the further
direction which was given by him that the Income tax Officer
should assess the income in the hands of the partnership firm were
not necessary for the disposal of the appeal.
According to Mr.
Veda Vyasa the crux of the matter was that the Appellate Assistant Commissioner gave a decision that the income was to be excluded from the assessment of the Hindu Undivided Famjly thereby reversing the decision of the Income tax Officer that it was
assessable in the hands of the family.
It is contended that, in
these circumstances, the direction to the Income tax Officer that
he should assess the income in the hands of the firm was neither
necessary nor called for and therefore the law laid down in
Murlidhar Bhagwan Da,;'s case(') was clearly applic-able.
In
this connection it may be mentioned that according to Mr. Veda
Vyasa two returns had been filed by the appellant for the assessment year 1952-53, one relating to the Hindu Undivided Family
and the other, of the partnership firm.
But the statements contained in the writ petition of the appellant do not support this
submission.
In para 3 of that petition it is stated that the finn
and all the three partners filed their returns of profit and Joss on
March 31, 1953 with the Income tax Officer and also made an
application under s. 26A of the Act for registration of the firm.
It is true that in the assessment order of the Income tax Officer
the status of the assessee is shown to be Hindu Undivided Family
but that has been apparently shown in the order because the
Income tax Officer gave an express decision about the status of
the assessee and held that it constituted a Hindu Undivided
Family.
It, however, stands proved that the assessee filed the
return claiming the status of a firm together with an application
under s. 26A for its registration which was disallowed by the
Income tax Officer but was allowed by the Appellate Assistant
Commissioner.
The substantial issue before the Appellate Assistant Commissioner was one of status of the assessee and he held
---~---------
(!) 52 1.T.R. 335.
•
~32
SUPREME COURT REPORTS
[1969) IS.CR
that it was a partnership firm and not a Hindu Undivided Family.
This finding was necessary for deciding the appeal
before the
Appellate Assistant Commissioner and it is not possible to understand how it can be regarded as having been made only incidentally. Once a finding Is given which was necessary for the disposal
of the appeal the second proviso to s. 34( 3) of the Act would
be attracted and the bar of limitation would be lifted.
In N. K.
Sivali11gam Chettiar v. The Commissio11er of l11c'l'!nc tax. Madras( 1 ), this Court after referring to the relevant observations in
Murlidhar /lhagwa11da1's(') case reiterated that a finding within
the second proviso to s. 34 ( 3) must be necessary for giving relief
in respect of the assessment of the year in question.
It was further observed that this Court in an earlier case lent approval to
the observations of the Allahabad High Court in Pt. Hazari Lal v.
Income tax Officer, Kanpur( 3 ) that the
word
"finding" only
covers "material questions which arise in a particular case for
decision by the authority hearing the case or the appeal which,
being necessary for passing the 'final order or giving
the final
decision in the appeal has been the subject of controversy between
the interested
parties or on which
the
parties concerned
have been given a hearing'."
The first submission of Mr. Veda
Vyasa therefore cannot be accepted.
The second limb of the argument of Mr. Veda Vyasa is based
·on the premise that the appellant which was a partnership finn
was a distinct legal entity and was thus a total stranger to the
Hindu Undivided
Family the assessment of which came up for
<:onsideration before the Appellate Assistant
Commissioner
in
which the orders already referred were made by him.
It is suggested that the appellant could not fall within the meaning of the
expression "any person" in the second proviso to s. 34(3) of the
Act. If the observations made in Murlidhar Bha{:wan Das's(')
case are borne in mind it is again not possible to understand how
the appellant can be taken out of the category of person oo persons intimately connected with the assessment of the year under
appeal. The returns, as stated before, were originally filed by the
partnership firm comprising Bhagat Singh and his two sons. The
question was of the assessment of the income of the business of
the firm.
The Income tax Officer treated the father and the sons
as Hindu Undivided Family.
On appeal, however, the Assistant
Commissioner accepted their contention that they formed a partnership firm .. It is difficult, in these circumstances, to agree that
the appellant was a total stranger to the assessment which was
under appeal before the Appellate Assistant Commissioner and
had no intimate connection with the per.;on whose assessment was
.1 ! 'i
(.(, IT R
~~6.
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BHAGAT SINGH v. l.T.O. (Grover, J.)
8 3:J.
•
A
made by the Income tax Officer and was set aside in appeal by the
Appellate Assistant Commissioner.
For all these reasons, the appeal fails and is dismissed with
costs.
B
Y.P.
Appeal dismissea .
•