# THE COMMISSIONER OF INCOME-TAX, PRADESH, HYDERABAD v. K. ADINARAYANA MURTY

- **Citation:** [1967] 3 S.C.R. 388
- **Court:** Supreme Court of India
- **Decided:** 1967-04-03
- **Case number:** Civil Appeal No. 632 of 1966
- **Bench:** J. C. Shah, S. M. Sikri, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-commissioner-of-income-tax-pradesh-hyderabad-v-k-adinarayana-murty-4058
- **Pages:** 5

## Headnote

lndian Income•tax Act, 1922, s. 34-Notice of reasscssme11t issued
to assessee in status of individual-Return
filed in
status of HUFAppellate
Authority ho/di11g
that correct
starus was HUF-Another
notice under s.
34
issued-Assess111ent on return filed in response 10
second notice-Validity of asses.Hnent.
The respondent had two sons. ·Prior to the assessment year 1954-55 the
Income-tax Authorities assemd him as had of a Hindu undivided family.
In 1954-55 the Income-tax Officer held that he was an 'individual' and
assessed him accordingly.
Thereafter, having ob'lained sanction from the
Commissioner he issued to the respondent a not:ce under s. 34 of the
Income-tax Act 1922 in respect of the. year 1949-50 in the status of an
individual. A return was filed by the respondent in response to the notice.
However in the appeal relating .to 1954-55 the Appellate Assistant CommiS&ioner held that the correct sta<us of the assesseo was that of a Hindu
undivi<)ed family.
The Income-tax Officer then issued another notice
under s. 34 to the respondent in respect of 1949·50 in the status of a
Hindu undivid~d family.
On the return filed in response to this second
notice the Income-tax Officer made an assessment adding certain "escaped
· income" to that originally assessed for 1949-50.
In reference, the High
Court held that the first of the notices under s. 34 was not ;nvalid in law
and consequently the issue of the second notice
was
illegal
and
the
assessment made in pursuance of it was illegal.
The Revenu·• appealed
to this Court.
HELD : Under the scheme of the Income-tax Act the 'lndividul' and
the 'Hindu undivided family' are treated as sepa·rate units of assessment and
if a notice under s. 34 of the Act is wrongly issued to the assessee in the
status of an 'individual' and not in the correct status of 'Hindu undivided
family', the notice is illegal and ultra vires
and
without
jurisdiction.
[39JF-O]
The Income-tax Officer was therefore justified in ignoring the first notice
under s. 34 of the Act and the return filed by the assessee in response to
that notice and consequently the assessment made by the
Income.tax
Officer pursuant to the, second notice was a valid assessment.
[391H]

## Text

THE
COMMISSIONER OF INCOME-TAX,
PRADESH, HYDERABAD
v.
K. ADINARAYANA MURTY
April 3, 1967
ANI>HRA
(J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ.J
lndian Income•tax Act, 1922, s. 34-Notice of reasscssme11t issued
to assessee in status of individual-Return
filed in
status of HUFAppellate
Authority ho/di11g
that correct
starus was HUF-Another
notice under s.
34
issued-Assess111ent on return filed in response 10
second notice-Validity of asses.Hnent.
The respondent had two sons. ·Prior to the assessment year 1954-55 the
Income-tax Authorities assemd him as had of a Hindu undivided family.
In 1954-55 the Income-tax Officer held that he was an 'individual' and
assessed him accordingly.
Thereafter, having ob'lained sanction from the
Commissioner he issued to the respondent a not:ce under s. 34 of the
Income-tax Act 1922 in respect of the. year 1949-50 in the status of an
individual. A return was filed by the respondent in response to the notice.
However in the appeal relating .to 1954-55 the Appellate Assistant CommiS&ioner held that the correct sta<us of the assesseo was that of a Hindu
undivi<)ed family.
The Income-tax Officer then issued another notice
under s. 34 to the respondent in respect of 1949·50 in the status of a
Hindu undivid~d family.
On the return filed in response to this second
notice the Income-tax Officer made an assessment adding certain "escaped
· income" to that originally assessed for 1949-50.
In reference, the High
Court held that the first of the notices under s. 34 was not ;nvalid in law
and consequently the issue of the second notice
was
illegal
and
the
assessment made in pursuance of it was illegal.
The Revenu·• appealed
to this Court.
HELD : Under the scheme of the Income-tax Act the 'lndividul' and
the 'Hindu undivided family' are treated as sepa·rate units of assessment and
if a notice under s. 34 of the Act is wrongly issued to the assessee in the
status of an 'individual' and not in the correct status of 'Hindu undivided
family', the notice is illegal and ultra vires
and
without
jurisdiction.
[39JF-O]
The Income-tax Officer was therefore justified in ignoring the first notice
under s. 34 of the Act and the return filed by the assessee in response to
that notice and consequently the assessment made by the
Income.tax
Officer pursuant to the, second notice was a valid assessment.
[391H]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 632 of
1966.
~ppeal by special leave from the judgment and order dated
April 14, 1964 of the Andhra Pradesh High Court in case referred No. 46 of 1962.
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3. Sen, GopaiSingh, S. P. Nayyar and R. N. Sachthey, for the
appellant.
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S. T. Desai, B. Parthasarathy and 0. C. Mathur, for the res·
pondent.
c.I.T. v. AD!NARAYANA (Ramaswam1, J.)
389
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The Judgment of the Court was delivered by
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.Ramaswami, J. This appeal is brought, by special leave, fro~
the judgment of the High Court of Andhra Pradesh dated Apnl
14, 1964 in Referred Case No. 46 of 1962.
The respondent, hereinafter called the "assessee" was a Hindu
Undivided family consisting of K. Ankineedu and his two sons.
For the assessment year 1!149-50 corresponding to the previous
financial year ending March 31, 1949, the assessee submitted a
return in response to a notice sent to him. The Income-tax Officer
computed h!S total income as Rs. 2,429 /- only which was below
the taxable limit and so the assessee was declared not liable to pay
income·!~. Subsequent to the assessment, the Income-tax Officer
had information that the assessee had done some business as procurement agent for the Government and in this. business he had
earned large profits which had escaped assessment. Accordingly
he issued a notice under s. 34 of the Income-tax Act, 1922 (hereinaner called the 'Act') on March 22, 1957. In response to the
notice the assessee made a return on April 30, 1957.
Prior to
the issue of the above notice the Income-tax Officer had taken the
view in the assessment made for the year 1954-55 that the correot
status of the assessee was not 'Hindu Undivided Family' but his.
status was .. individual". In accordance with this view the notice
under s. 34 of the Act was issued to the assessee on March 22,
1957 in the status of an 'individual'.
As the proceeaings under
this notice were continuing, but before the assessment could be
made, the Appellate Assistant Commissioner in the appeal for the
assessment year 1954-55 accepted the contention of the assessee
and held that the status of the assessee was that of 'Hindu Undivi·
ed Family' and not 'individual'. Thereafter, the Income-tax Officer
issued a fresh notice under s. 34 on February 12, 1958 which was
served on the assessee on the same day.
This notice was issued
to assess the income of the assessee as a 'Hindu Undivided Family'
f~om the procurement business which had escaped .from the original ~ssessment made on February 10, 1950. A return in pursuance of the second notice was duly filed on February 28 1958
and the a5s~m~nt was ulti_mately made under s. 34 of the 'Act in
~ status of Hmdu Und!Vtded Family' on August 16, 1958. In
JS a~sment, a sum of Rs. 60,000/- was included as the income
escapmg from
the original assessment.
The assessee preferred dan appeal to the Appellate Assistant Commissioner and
co'!ten ed that the ~roceedings under s. 34 of the Act were not
¥ahd i:ause no not1~ cou~d be issu;d after the expiry of 8 years
~~: e ~lose of the preVtous year as distinct from the 'assessconte ~ar · _The Appellate Assistant Commissioner accepted the
.
r~ 101{!1sed by the assessee and held that the proceeding was
mva I .
Income-tax Officer took the matter in appeal before
390
SUPREME COURT REPORTS
[1967] 3 S.C.R.
the Income-tax Appellate Tribunal and claimed that the period of
limitation for starting proceedings under s. 34 was to be counted
from the end of the 'assessment year' and not from the end of the
'previous year'; The Tribunal accepted his contention and over·
ruled the view of the Appellate Assistant Commissioner on this
point. The assessee also contended that the assessment proceed·
ing started by the second notice dated February 12, 1958 was
·bad in Jaw as he had already made a return on April 30, 1957
which was in pursuance of the first notice under s. 34 issued on
March 22, 1957. It appears from the statement of the case that
the Income-tax Officer was required to disclose the particular
notice on which he made the assessment. The Income-tax Officer
said that the assessment was based on the second notice. .The Ap·
pellate Tribunal took the view that the return filed by the assessee
on April 30, 1957 in response to the first notice was not a valid
return and the Income-tax Officer was not bound to act upon it.
Accordingly the Appellate Tribunal held that the assessment made
under the second notice was legally valid.
Since the Appellate
Assistant Commissioner did not deal with the merits of the assessment the Appellate Tril)unal remanded the appeal to the Appellate
Assistant Commissioner for being dealt with on merits.
At the
instance of the assessee the Appellate Tribunal stated case to the
High Court on the following question of Jaw :
"Whether, on the facts and in the circumstances of
the case, the assessment in pursuance of the notice issued
under s. 34 on 12-2-1958 is a valid assessment?"
The High Court held that tht:. first notice dated March 22, 1957
was not invalid in Jaw and consequently the issue of the second
notice on February 12, 1958 was illegal and the assessment made
in pursuance of that notice was also illegal. The High Court accordingly answered the question of law in favour of the assessee.
The question presented for determination in this appeal is whether it was competent for the Income-tax Officer to issue the second
notice dated February 12, 1958 and continue proceedings thereon
ignoring the return already filed by the assessee in pursuance of
the first notice under the same section. It was pointed out by Mr.
S. T. Desai on behalf of the assessee that both the notices under
s. 34 of the Act were in identical terms and were addressed to the
assessee in his name and the issue of the second notice made no
difference in its contents to the knowledge of the assessee. It was
also contended that the assessee filed his return in the status of
'Hindu Undivided Family' in response to the first notice and the
Income-tax Officer ought not to have ignored that return. We are
unable to accept the argument put forward on behalf of the assessee
as correct. The Income-tax Officer could not have validly acted
on the return filed by the assessee in the status of 'Hindu UndiviA
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"
C.l.T. v. ADINilAYANA (Rama.swami, J.)
391
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ded Family' and any assessment made by the Inoomc·tax Officer
on such a retum would have been Invalid in law because the notice
under s. 34 had been issued In the status of 'Individual' and sane·
....
tion of the Commissioner for the issue of a notice under s. 34 was
also obtained on that basis. We therefore consider that the Income·
tax Officer was entitled to ignore the return filed by the assessee
.....
B
as non est in law. It is not disputed that the Income-tax Officer
issued the first notice under s. 34 of the Act on March 22, 1957
to the assessee in the status of 'individual'. The Appellate
Tribunal has stated in 3ara 3 of the statement of the case that the
Income-tax Officer ha taken the view that the correct status of
the assessee was 'individual' and in accordance with that view "a
c notice under s. 34 was issued to the assessee as above for making
an assessment in the status of 'individual' ". As there was some
ambiguity in the statement of the case on this point, we referred to
the orltat file of the income-tax proceedings and satisfied ourselves t at the assertion of fact made In the statement of the case is
correct. It appears that on February 13, 1957 the Income-tax
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Officer had applied for the sanction of the Commissioner for in·
,;
stituting proceedings under s. 34(1)(a) of the Act against the assessee
to make an assessment in the status of an 'individual' with regard
to the procurement agency business. Sanction of the Commissioner
was ~ven to the proposal of the Income-tax Officer and thereafter
the
st notice under s. 34 of the Act was issued on March 22,
1957. In this state of facts we are of opinion that the proceeding
E
taken under the first notice under s. 34 of the Act was invalid and
ultra vlres. The correct status of the assessee was that of 'Hindu
Undivided Family' as was held by the Appellate Assistant Commissioner in the assessment for the year 1954-55 and since the first
noti~e under s. 34 was issued to the assessee as an 'individual' for
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!llaktng assessment in that status, it is manifest that the proceed.
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mgs taken under that notice were illegal and without jurisdiction.
U'!der the scheme of the Income-tax Act the 'Indi:vidual' and th
'Hmdu Un~ivided .Family' are treated as separate units of assess:
:i:nt and 1f .a notice under s. 34 of the Act is wrongly issued to
assessee m the status of an 'ind· · d r
d
.
statu.s of 'Hindu Undivided Family' fu~ ~~tic~ mot ~n the correct
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ceedings talren under that notice
e is
eg and all prodiction. It was contended by Ma:° 5ui;a r::s. and without juris.
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assessee that the return was filed b · th ·
Bl • on behalf of the
first '!ot!ce in the character of 'Hin~u U
'J~C;"J: m r~ponse to the
subm1ss10n of the return by the assess
11: !VI
Family'. But the
to the character of the proceedi
.ee Will not make any difference
H
which must be held to be illeg1:if mluruan~e of the first notice
already stated. We are therefore of~ u !"! Vires for the reasons
Officer was legally justified · .
. he opimon that the Income-tax
s. 34 of the Act and the re~8J:f
~ng the first notice issued under
that notice and consequently the
Y the assessee in response to
assessment made by the Income-
392
SUPREME COURT REPORTS
(1967] 3 S.<i.R.
tax Officer in pursuance of the six;ond notice issued on February
12, 195'8 was a valid assessment.
We accordingly allow this appeal, set aside the judgment of
the High Court of Andhra Pradesh dated April 14, 1964 and hold
that the question of law referred to the High Court should be answered in the affumatiYe and against the assessee. Thsre will be no
order as to costs in this appeal.
G.C.
A pp~a/ allowed.
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