Law: Income Tax Act, 1922

Section: 34(3)

Section 153, read with section 147 of the Income-tax Act, 1961 [Corresponding to section 34(3) read with section 34(1)(b) of the Indian Income-tax Act, 1922] - Income escaping assessment - Time limit for completion of - Assessment years 1951-52 and 1952-53 - Assessee, who was a partner in a firm as a karta of HUF, was paid salary by firm - For assessment years in question two returns one in capacity of an individual and other in capacity of HUF were filed - On 30-9-1955, ITO completed assessments treating income shown in individual return as that of HUF - On appeal, AAC directed that income from salary was to be taxed in hands of assessee - Accordingly, on 31-5-1957, ITO issued notices under section 34 and passed assessment orders on 9-9-1957 treating salary income as that of assessee after expiry of four years from end of assessment year - Whether ITO did not believe that returns were correct and, therefore, he could not be said to have had information in his possession that incomes were earned by assessee and that information was acquired by him later when he received a copy of AAC's order through which he learnt that incomes were really of assessee and that they had escaped assessment on account of AAC having reduced assessable income of HUF - Held, yes -Whether provisions in sub-section (1)(b) and sub-section (3) of section 34 of 1922 Act are subject to proviso that provisions limiting time within which any action may be taken or any order of assessment may be made are not to apply to assessment made on assessee in consequence of, or to give effect to, any finding or direction contained in an order under section 31 of 1922 Act - Held, yes - Whether since subsequent assessment by ITO of income of assessee after expiry of four years from end of assessment year was made in consequence of, and to give effect to, finding of AAC, second proviso to section 34(3) of 1922 Act clearly applied and neither issue of notices nor making of assessment order could be said to have been time-barred - Held, yes FACTS The assessee was a partner in a firm as karta of HUF. He was also paid a salary by the firm. For the assessment year 1950-51 there arose a question whether the…

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