Law: Income Tax Act, 1922

Section: 34(1)(a), 34(3),

Income-tax------Re-assessment-Hindu undivided family-Member's remuneration as Managing Director-High Court holding remunera tion to be individual income for one assessment year-Remuneration excluded from original assessments of subsequent years-Supreme Court reversing decision of High Court-Re-assessment beyond four years of remuneration in hands of family for subsequent years-Whether valid-Whether income escaped assessment owing to failure to disclose facts-Limitation-Supreme Court's decision for earlier year-Whether operates to extend period of limitation Indian Income-tax Act, 1922, Ss. 34(1)(a) & 34(3), proviso 2. Two brothers, Band R, and their families constituted the assessee, a Hindu undivided family. In accordance with the decision of the High Court for an earlier assessment year, the remuneration earned by R as managing director of a company was his individual income. The Income-tax Officer, having knowledge of such income, completed the original assessments of the assessee family for the assessment years 1951-52 to 1953-54 excluding R's remuneration. The High Court's decision was subsequently reversed by the Supreme Court, and the officer initiated re-assessment proceedings under section 34(1)(a) of the Income-tax Act, 1922, and assessed the Managing Director's remuneration in the hands of the assessee family. The Tribunal, however, held that the escapement of income was due to the change in the judicial decision, all the material facts, viz, the payment of the remuneration and its receipt by the assessee, were in the possession of the Income-tax Officer, and there was no omission or failure on the part of the assessee to disclose any material fact which could attract the provisions of section 34(1)(a), and hence the re-assessments having been made beyond four years of the respective assessment years were barred and they could not be saved under the second proviso to section 34(3). On a reference: Held, (i) on the facts, that even though there might not have been a disclosure by the assessee of the income in its return, inasmuch as the assessee was contending at the time of the original assessments that R's remuneration…