Vildirect: IncomeTax-caselaws-1984-VIL-19-SC-DT

1984-VIL-19-SC-DT

Equivalent Citation: [1984] 146 ITR 563 (SC)

Supreme Court of India

Date: 05.03.1984

BHAGWAN DAS SITA RAM HUF

COMMISSIONER OF INCOME-TAX, LUCKNOW

BENCH

Judge(s) : SABYASACHI MUKHERJEE. and V. D. TULZAPURKAR.

JUDGMENT

The judgment of the court was delivered by

SABYASACHI MUKHARJI J.-These appeals by certificate granted by the High Court of Allahabad under s. 66A(2) of the Indian I.T. Act, 1922, arise out of the judgment delivered and order passed on 3rd January, 1973, by the High Court of Allahabad in Income-tax Reference No. 450 of 1965. The following question of law had been referred to the High Court for consideration under s. 66(1) of the Indian I.T. Act, 1922, by the Appellate Tribunal, Allahabad Bench, Allahabad:

"Whether, on the facts and in the circumstances of the case, valid assessments could be made on 31st May, 1962, for the assessment years 1948-49 and 1949-50 on the basis of voluntary returns of income filed under section 22(1) of the Indian Income-tax Act, 1922, on November 18, 1950?"

The matter came up before a Division Bench of the High Court and as there was a previous Bench decision of that court in the case of Sool. Chand Ram Sewak v. CIT [1969] 73 ITR 466, which supported the Revenue's case and as the Division Bench before whom this case came was unable to accept that view, the Division Bench referred the case to larger Bench. This reference, thereafter, came before a Full Bench consisting of Gulati, H.N. Seth and C.S.P. Singh JJ. Gulati and C.S.P. Singh JJ. answered the question in the affirmative in favour of the Revenue and against the assessee. Seth J., however, was in favour of the assessee. In view of the majority, the question was answered in favour of the Revenue and in affirmative.

Before we deal with the question in controversy, it will be necessary to note some of the relevant facts. There were originally four appeals for the assessment years 1946-47, 1947-48, 1948-49 and 1949-50. As the appeals for the assessment years 1946-47 and 1947-48 were withdrawn by the Revenue, we are now concerned with appeals for the assessment years 1948-49 and 1949-50.

The present assessee is a branch of a bigger Hindu undivided family known as Nathu Ram Jawahar Lal, Jhansi.

The bigger Hindu undivided family of M/s. Nathu Ram Jawahar Lal was partitioned on 19th May, 1945, and the present assessee along with another smaller HUF came into existence and the said bigger HUF had made a claim in respect of the partition under s. 25A of the Indian I.T. Act, 1922. While this claim was pending, the present assessee filed voluntary returns under s. 22(1) of the Act for the assessment years 1946-47 to 1949-50 on 18th November, 1950. The said claim of partition by the bigger HUF was rejected by the ITO and also by the AAC. The said HUF thereafter filed appeals to the Appellate Tribunal in respect of the order under claim of partition under s. 25A of the 1922 Act which by its order dated 31st August, 1954, accepted the claim under s. 25A of the 1922 Act, and the Tribunal passed orders on that basis in the appeals relating to the assessment orders in respect of the bigger HUF on 28th October, 1954. The ITO, thereafter, initiated proceedings under s. 34 of the Indian I.T. Act of 1922, for assessing the smaller HUF, the present assessee, in view of the fact that the claim for disruption of the bigger HUF had been accepted by the Tribunal. The present assessee filed fresh returns of income on April 12, 1955, in response to notices under s. 34 of the 1922 Act. The returns originally filed were under s. 22(1) and were filed on 18th November, 1950. The assessee's objection regarding the validity of the assessments being made under s. 34 on merits as well as on the point that the time for making the assessment under s. 34 had already expired, were rejected by the ITO. He, therefore, completed the assessments on September 8, 1955, under s. 23(3) read with s. 34 of the Indian I.T. Act, 1922. The assessee could not get any decision in his favour either from the AAC or from the Tribunal and being aggrieved by these orders, filed a writ petition to the High Court of Allahabad challenging the validity of the appellate orders. The assessee was successful in the writ and, therefore, the appellate orders were quashed by the, High Court. The Revenue having failed in its attempt to complete the assessee's assessments under s. 34, made another attempt to assess the assessee on the basis of the voluntary returns originally, filed by the assessee on November 18, 1950, by relying upon the order of the Tribunal dated October 28, 1954, and invoking the provisions of the second proviso to s. 34(3). The said assessments which were completed on 31st May, 1962, were the subject-matters of appeals before the Tribunal.

The point before the Tribunal was whether valid assessments could be made for the assessment years under consideration on 31st May, 1962, on the basis of the returns filed under s. 22(1) of the Act of 1922, on 18th November, 1950. The AAC by his order held that no valid assessments could be made on 31st May, 1962.

It appears that on 28th October, 1954, relating to the assessment years 1946-47 to 1949-50 in the case of the bigger HUF, M/s. Nathu Ram Jawahar Lal, Jhansi, the order was passed by the Tribunal in the appeal relating to the assessments pending before it. It should be noted that originally on the basis that the bigger HUF had not been disrupted, assessments for these years had been made and appeals relating to those assessments were pending before the Tribunal. The Tribunal disposed of these appeals by the order dated 28th. October, 1954, and the Tribunal in the said order had observed, inter alia, as follows:

" The assessments for those years were (have) necessarily to be set aside with the direction that fresh assessments should be made, one for the period ending 19-5-1945 up to which the Hindu undivided family was in existence and the others on the component Hindu undivided families, namely, M/s. Jawaharlal Mani Ram and Bhagwan Das Sita Ram,"

The Tribunal in the instant appeal out of which the reference was made to the High Court and out of which these appeals arise, after discussing the relevant facts and the provisions of law confirmed the order of the AAC and dismissed the appeals. As mentioned hereinbefore, after the Tribunal had directed that the assessments should be made on the component units of the bigger HUF, after partition was accepted, namely, the assessee and Jawahar Lal Mani Ram, the ITO instead of proceeding on the basis of the voluntary returns already filed by the assessee proceeded to take action under s. 34(1)(b) of the Act of 1922 and completed the assessments for all the four years on September 8, 1955. The assessee appealed against these assessments to the AAC, but before the appeals were taken up for hearing, the assessee moved the High Court of Allahabad under art. 226 of the Constitution. On March 30, 1960, the High Court quashed the assessment orders on the ground that as voluntary returns filed by the assessee were pending, no proceeding could be taken under s. 34 of the Act, 1922. Thereafter, the ITO initiated proceedings on the basis of the voluntary returns. The assessee again filed a writ petition praying for quashing the proceedings on the ground that the Revenue could not proceed against it on the basis of the voluntary returns. This petition was rejected by the High Court and thereafter the ITO proceeded to complete the assessments under s. 23(3) and passed assessment orders on 31st May, 1962, in respect of the four years.

The first question is, whether the assessment could be made under s. 23(3) on the basis of voluntary returns filed or action should have been taken under s. 34 with the help of the second proviso to sub-s. (3) of s. 34. It is well settled that when a return of income is filed by the assessee voluntarily under s. 22(1) of the Act of 1922, assessment proceedings commence against him and s. 34 does not come into play at all so long as the assessment proceedings remain pending. But it was contended that return exhausted itself after the expiry of four years from the end of the assessment year to which it related. After the expiry of that period, no assessment was possible on the basis of the voluntary return. In such case assessment was possible under s. 34, if the case was covered by the second proviso to s. 34(3).

The High Court was of the opinion that sub-s. (3) of s. 34 provides period of limitation of four years for an assessment under s.23 of the Act of 1922. If the assessment proceedings commence by filing of a voluntary return, as indeed these do, on the expiry of the period of four years from the end of the year in which the income, profits or gains were first assessable, such proceedings are suspended or interrupted. But neither the proceedings nor the returns become invalid. The High Court referred to the provisions of s. 34(3) and was of the view that since the order was passed by the Tribunal giving direction, the bar of limitation was lifted and the assessments could be made without any bar of limitation. Reference was made to the decision of this court in the case of CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569 (SC), and in the case of Estate of late A. M. K. M. Karuppan Chettiar v. CIT [1969] 72 ITR 403 (SC) and CIT v. M. K. K. R. Muthukaruppan Chettiar [1970] 78 ITR 69 (SC).

The High Court, on the basis of these decisions, was of the view that assessments could be made on the basis of voluntary returns already filed by the assessee. We are of the opinion that the High Court was right.

The next question is whether it was open to the Tribunal to give finding or direction in respect of the present assessee. Reliance was placed on the decision of this court in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC). There, this court after referring to the expression " any person in the second proviso to sub-s. (3) of s. 34 of the 1922 Act, observed at 346 of the report as follows :

"The expression 'any person' in its widest connotation may take in any person, whether connected or not with the assessee, whose income for any year has escaped assessment ; but this construction cannot be accepted, for the said expression is necessarily circumscribed by the scope of the subject-matter of the appeal or revision, as the case may be. That is to say, that person must be one who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. If so construed, we must turn to section 31 to ascertain who that person is other than the appealing assessee who can be liable to be assessed for the income of the said assessment year. combined reading of section 30(1) and section 31(3) of the Act indicates the cases where persons other than the appealing assessees might be affected by orders passed by the Assistant Commissioner. 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 undivided family or the individual, as the case may be. In such cases, 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 which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal. "

The High Court was of the view that " any person " would include the person who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. In that view of the matter, the majority judgment of the High Court on this aspect was in favour of the Revenue. Then on the question whether the direction for the assessment could be given in respect of any other year, other than the year in which the partition took place, it was contended that the direction could be given only for the assessment year 1946-47. Majority judgment of the High Court found no force in that contention. As this question arose directly for the assessment years 1948-49 and 1949-50 in respect of which the appeals came before the Tribunal in which the directions had been given, the High Court was of the view that it was necessary for the Tribunal to give a finding with regard to the partition of the family and the ownership of the income in both the appeals. The Tribunal was thus competent to give the direction. In that view of the matter, the two learned judges of the Allahabad High Court were of the opinion that assessments were valid and answered the question in favour of the Revenue. Referring to the said decision, which has been mentioned in the majority judgment, Seth J., however, was of the view that the direction given by the Tribunal in this case did not authorise the assessment on the smaller HUF. Seth J. was further of the view that such direction could only have been given for the year in which disruption of the bigger HUF took place. In that view of the matter, Seth J. expressed dissent as mentioned hereinbefore. We are of the opinion that the majority of the learned judges of the High Court were right. The second proviso to s. 34(3) of the Indian I.T. Act, 1922, authorised directions to be given by the Tribunal in respect of the assessee or any person beyond four years as provided in s. 34(3) of the 1922 Act.

As noted before, the expression " any person " in respect of whom such direction could be given was explained by this court in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335. As mentioned in the passage quoted above from the said decision, if so construed, then, the court must turn to s. 31 of the 1922 Act to ascertain who that person is other than the appealing assessees that might be affected by the orders passed by the appellate authority. 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 such HUF or the individual, as the case might be. It was, therefore, argued that it was only those types of assessees mentioned by this court in the passage noted above were the " persons who could be " any person " other than the appealing assessee who can be said to be liable to be assessed and in respect of whom direction might be given; otherwise, such directions or provision for such directions, if the provision is so read, would be ultra vires art. 14 of the Constitution. We must make it clear that this court had itself made it clear categorically in the passage quoted above that the instances given in the above passage were only illustrative meaning thereby that the instances were not exhaustive. This court made it clear that the expression " any person " in its widest amplitude might take in any person connected or not with the assessee, whose income for any year had escaped assessment; but this construction could not be accepted, for, the said expression was necessarily circumscribed by the scope of the subject-matter of the appeal or revision, as the case might be. So, therefore, the person must be one who would be liable to be assessed for the whole or any part of the income that went into assessment of the year under appeal or revision (emphasis supplied). Therefore, this court observed that " any person " in sub-s. (3) of s. 34 must be confined to a person intimately connected in the aforesaid sense with the assessments of the years under appeal.

Reference may be made to the decision of this court in the case of Rajinder Nath v. CIT [1979] 120 ITR 14, where the ITO treated two buildings as belonging to a firm comprised of a father and his two major sons as partners and in the assessments on the firm for the assessment years 1955-56 and 1956-57, he estimated the cost of construction of the buildings at a higher figure than that disclosed and brought to tax the excess as income in the hands of the firm. On appeal, the AAC found that the money advanced for the construction of the buildings had been debited in equal shares to the father and two major sons and a minor son and held that the firm was not the owner of the properties and deleted the addition. The AAC also observed that the ITO was free to take action to assess the excess in the bands of the co-owners. The ITO thereupon issued notices under s. 147(a) of the I.T. Act, 1961, and reopened the assessments of the individual assessees (the co-owners) and included therein the proportionate shares of the additions on account of the estimated excess of the cost of construction. On appeal, the AAC held that s. 147(a) could not apply but upheld the assessments under s. 153(3)(ii) of the 1961 Act. On further appeal, the Tribunal held that s. 153(3)(ii) could not apply because there was neither a finding nor a direction in the earlier order of the AAC and further that the AAC could not convert the assessments made under s. 147(a) into those under s. 153(3)(ii). On a reference of the questions, (i) whether the AAC was justified in holding that the provisions of s. 147(a) were not applicable, and (ii) whether the provisions of s. 153(3)(ii) were not applicable, the High Court held that the provisions of s. 153(3) were applicable observing that the AAC's finding that the properties did not belong to the firm and, therefore, the excess amount of the cost of construction could not be regarded as the income of the firm was a finding which was necessary for the disposal of the firm's appeal and as a corollary it was held that the buildings belonged to the co-owners and this necessitated the " direction " to the ITO that lie was free to assess the excess in the hands of the co-owners. Dealing with this contention, Pathak J., who delivered the judgment of this court, observed at p. 20 of the report:

"The expression 'another person' in the Explanation would include persons intimately connected with the person in whose case the order is made in the sense explained by this court in Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC). It is one thing for the partners of a firm to be required to explain the source of a receipt by the firm, it is quite another for them in their individual status to be asked to explain the source of amounts received by them as separate individuals. On such opportunity being provided it would have been open to the assessees to show that the excess alleged over the disclosed cost of construction did not constitute any taxable income. The finding contemplated in Expln. 3, it will be noted, is a finding that the amount represents the income of another person."

In the instant case before us, applying the test observed in that case, this was a case where the facts showed that income can belong either to the bigger HUF or to the smaller HUF, the present assessee along with another smaller HUF and to no one else. Therefore, a finding that it belongs or it does not belong to the bigger HUF which had disrupted on partition would determine the issue whether it could be taxed in the hands of the present assessee judged in the light of the test laid down in Murlidhar Bhagwan Das and as pointed out in Rajinder Nath's case, it appears to us that the present assessee can be said to be a person who would be liable to be assessed for the whole or part of the income that went into the assessment of the bigger HUF in the years under appeal and is person intimately connected with the assessments of the bigger HUF. The income in this case cannot be the income of both the bigger HUF and the present assessee, it must be of either of these two. We are, therefore, of the opinion that directions given in the appeals filed by the bigger HUF would be applicable to the present assessee.

On behalf of the assessee, it was contended that only the categories of persons referred to in ss. 30(1) and 30(3) of the 1922 Act would be governed by the said expression " any person ".

Sub-section (3) of s. 31, inter alia, authorises the AAC in case of an order cancelling the registration of a firm under sub-s. (4) of s. 23 or refusing to register a firm under sub-s. (4) of s. 23 or s. 26A or to make a fresh assessment or to confirm such order or cancel it and direct the ITO to register the firm or to make a fresh assessment, as the case may be, or, in the case of an order under sub-s. (2) of s. 25 or sub-s. (1) of s. 23A or subs. (2) of s. 26 or s. 48, 49 or 49F, confirm, cancel or vary such order. It also authorises, in case of an order under sub-s. (1) of s. 25A to confirm such order or cancel it and either direct the ITO to make further inquiry and pass a fresh order or to make an assessment in the manner laid down in sub-s. (2) of s. 25A. The other cases were cases of orders under s. 28 or sub-s. (6) of s. 44E or sub-s. (5) of s. 44F or sub-s. (1) of s. 46, or in case of an appeal against a computation of loss under s. 24, confirm or vary such computation, or in case of an appeal under sub-s. (1A) of s. 30, decide that the person is or is not liable to make the deduction and in the latter case direct the refund of the sum paid under sub-s. (6) of s. 18.

While on these provisions, it is material to refer to sub-s. (4) of s. 33 which authorises the Tribunal after giving both parties an opportunity of being heard to pass such orders thereon as it thinks fit and to communicate any such orders to the assessee and to the Commissioner.

The contention on behalf of the assessee is that though the Appellate Tribunal has wide powers as indicated in sub-s. (4) of s. 33, the amplitude of that power is curtailed by other provisions. It was contended that read with sub-s. (3) of s. 34, an assessment order could not be passed after the expiry of four years from the end of the year in which the income, profits or gains were first assessable and in view of the fact that, here, in the instant case, voluntary returns for the years under question had been filed by the assessee within time, after four years no directions could be given by the Tribunal. It was, secondly, contended that as the present smaller HUF was not intimately connected with the assessment of the bigger HUF as contemplated by the observations of this court in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335, this direction was of no use and the assessment made on the basis of this direction cannot be availed of.

We are unable to accept this contention. Firstly, it must be observed that the Tribunal passed the orders and gave its directions in respect of the years concerned. These years were the subject-matters of appeal before the Tribunal in the case of the bigger HUF. It was contended that these directions were given subsequent to the order under s. 25A and could not affect the position thereafter. We are unable to accept this position also. As mentioned hereinbefore, the order under s. 25A was passed in August, 1954. The bigger HUF had applied for an order under s. 25A regarding the disruption of the HUF ; the ITO rejected that prayer. The assessee appealed therefrom. In August, 1954, this order was set aside by the Tribunal and it was held that the bigger HUF had been disrupted. Inasmuch as the income liable to be assessed on the smaller HUF would arise only on the disruption of the larger HUF, this direction was proper. The order under s. 25A declares the status of the family and the smaller HUF became liable to be assessed as a result of disruption of the bigger HUF. The assessment orders, however, were passed based on the previous order under s. 25A but these orders were passed for all these four years and the assessments under appeal for all these four years were pending before the Tribunal in disposing of which the Tribunal gave the direction to make the assessments on the smaller HUF. Therefore, no question arises as to whether for subsequent periods directions could have been given. This is a direction clearly within the contemplation of sub-s. (3) of s. 34. Secondly, we are of the opinion that the smaller HUF is one of the persons which was clearly contemplated by sub-s. (3) of s. 34, in the facts and circumstances of this case. The assessability of income and the quantum of the same of the present assessee was linked up with the assessability of the bigger HUF; if the bigger HUF was liable to be assessed if there was no disruption, then there was no income of the smaller HUF. The income in the hands of the smaller HUF could then not have been liable to be assessed. If, on the other hand, it was the other way, viz., that there was a valid partition, the bigger HUF no longer existed and the smaller HUF would be liable to be assessed. From that point of view, it clearly comes within the ratio of the observations of this court in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335. Furthermore, looked at from another point of view, though the karta represented the bigger HUF, all members of the bigger HUF including those who were members of the smaller HUF were parties though not eo nomine for all practical purposes, because they were liable as members of the family for the amount assessed. In that view of the matter, we are of the opinion that this direction was quite valid and would be applicable.

The observations of this court in the case of CIT v. National Taj Traders [1980] 121 ITR 535, are in consonance with the conclusions reached by us. Tulzapurkar J. explained in the said decision the situations in which directions could be given under s. 33B of the Indian I.T. Act, 1922, where there was no express provision like sub-s. (3) of s. 34. In our opinion, in the facts of this case, the present assessee can be said to be "any person" as, indicated in Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), in s. 34(3) of the 1922 Act.

The view taken by us is also in consonance with the observations of this court in the case of CIT v. Vadde Pullaiah & Co. [1973] 89 ITR 240.

Reference was also made to a Bench decision of the Bombay High Court in the case of Mathuradas B. Mohta v. CIT [1965] 56 ITR 269 and a decision of this court in the case of CIT v. Mohd. Shakoor Mohd. Bashir [1973] 89 ITR 57. But, in view of the facts and circumstances of the instant case before us, it is not necessary to deal with the said decisions.

On behalf of the assessee, reliance was placed on a decision of the Division Bench of the Gujarat High Court in the case of CIT v. Shantilal Punjabhai [1965] 57 ITR 58. There an individual, Shantilal, was a member of an HUF and also a partner of the firm. The ITO found that the assessee was the nominee of the HUF in the said firm, and, therefore, included the share of profits of the assessee in the said firm, in the total income of the HUF.

The decision proceeded on the basis that the I.T. Act did not contemplate two different assessees in the same assessment year for the same taxable income. In that case, the assessee was also an assessee in his own right. In that case, the court had observed at p. 80 of the report that there were two separate and distinct assessment proceedings, one in respect of the assessee in his status as an individual and the other in respect of the HUF. The assessment proceedings in respect of the assessee, Shantilal, were in respect of his income arising from his self-acquired and separate property. The assessment proceedings against the HUF were proceedings against the entire entity, and though the assessee, Shantilal, was a member of that family, the assessment was on the income derived by the HUF from the property or business of the said HUF. In that assessment, the income accruing and arising from the separate property of the assessee, Shantilal, could not be assessed, as the business carried on by the assessee, Shantilal, was not the business of the HUF. The ITO held that Shantilal was the nominee of the HUF, meaning thereby that the business belonged to the HUF, and it was that conclusion of the ITO which was reversed by the Tribunal. The Tribunal held that the Revenue had failed to prove that the assessee, Shantilal, was the nominee of the family; in other words, that the income arising from the firm's business was the income of the HUF. The direction given by the Tribunal was on the question which was between the Revenue and the HUF and the only finding that could be given by the Tribunal was between the two parties, namely, the HUF and the Revenue, and not between the Revenue and the assessee, Shantilal, who was not an assessee nor a party to those assessment proceedings. Therefore, if any action had to be taken in consequence of the finding or the direction given by the Tribunal, that action could be taken not against the assessee, Shantilal, but against the HUF. As would be apparent, the facts of that case were entirely different.

Here, in the instant case, the proceedings against the assessee in the present case could be taken only if there was a disruption of the HUF. Therefore, if in the assessment of the HUF, the bigger HUF was considered to be an existing entity, then, in such a case, the assessment against the present assessee could not be sustained. If on the other hand the assessment on the bigger HUF could not be sustained because there was disruption of the family as contended for by the bigger HUF, then only the present assessee could be assessed. In that view of the matter, we are of the opinion that the present assessee can be said to be a person other than the appealing assessee who would be affected by the order concerned and would come within the meaning of " any person " as explained by this court in the case of ITO v. Muylidhar Bhagwan Das [1964] 52 ITR 335.

The decision of this court in the case of CIT v. S. Raghubir Singh Trust [1980] 123 ITR 438, was relied on behalf of the assessee. There the respondent-trust created by R filed its return of income for the assessment year 1954-55. Holding that the trust was invalid, the ITO assessed the income of the trust in the hands of R. R carried the matter in appeal and other proceedings and ultimately the High Court held that the trust was valid and the income was the income of the trust and not of R. The ITO issued a notice on 19th September, 1961, under s. 34(1)(b) of the Indian I.T. Act, 1922, to reopen the assessment of the trust. The trust claimed that the notice was barred by limitation. The Tribunal accepted the claim and held that the trust was a stranger to the proceedings for the assessment of R and the second proviso to s. 34(3) did not save the reassessment proceedings initiated against the trust from the bar of limitation and the High Court, on a reference, agreed with the Tribunal. On appeal to this court it was held, affirming the decision of the High Court, that even though the finding of the High Court that the income belonged to the trust and not to R was a finding necessary for disposing of the reference in favour of R and it was a " finding ", yet the trust was a stranger to the assessment proceedings of R, and not " any person " within the meaning of the second proviso to s. 343 and, therefore, the second proviso to s. 34(3) was not attracted and the reassessment proceedings against the trust were barred by time. That decision must be understood in the facts of that case. The settlor and the trust cannot be said to be so intimately connected as to come within the ratio of Murlidhar Bhagwan Das' case [1964] 52 ITR 335 (SC). The court found that the assessee-trust could not be said to be intimately connected with the assessment of Raghubir Singh. As a result of the trust deed failing, there may be numerous situations, viz., there might be a resulting trust or it might be that the trust property would go to other beneficiaries. It is not necessary for us to explore or explain those possibilities. But, in the facts of this case, we are of the opinion that whether the income of the smaller HUF, namely, the present assessee, is liable to taxed is so intimately or inextricably linked up with the question of assessability of the bigger HUF, which again is dependent upon the question whether there was a disruption of bigger HUF and that being the very subject-matter of appeals in the four years in which this direction had been given, we are of the opinion that directions given in this case are valid and would save the assessments against the assessee for the two years in question.

In the aforesaid view of the matter, we are of the opinion that the majority of the learned judges of the High Court were right in their conclusions and the question was correctly answered by the majority of the learned judges of the High Court. The appeals, therefore, fail and are dismissed with costs.

Appeals dismissed.

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