Bhagwati, Actg C.J.
1. The assessment for six assessment years, namely, 1946-47, 1947-48, 1950-51, 1951-52, 1952-53 and 1953-1954, were the subject-matter of different appeals before the Tribunal, but the present reference relates only to the assessments for the assessment years 1946-47 and 1947-48 and we will, therefore, state only so much of the facts as relate to the assessments for those assessments years. The assessee is one Chooharmal Wadhuram represented by Daulatram and others as his legal representatives. Prior to the partition of Indian which took place on 15th August, 1947, the assessee was residing in Karachi and he carried on business in partnership with one Muljibhai in the name of Daulatram Chooharmal at Karachi. Subsequent to the partition of India, the assessee and Muljibhai came down to India and it is common ground that the partnership between them was dissolved by an agreement dated 7th November, 1948. The record does not show that the assessee was assessed to income-tax in Karachi for the assessment years 1946-47 and 1947-48 and the case before the revenue authorities throughout proceeded on the basis that no assessment of the assessee to income-tax was made in Karachi for those assessment years. The assessee died in India on 28th August, 1952, leaving behind him Daulatram and others as his legal representatives. Now it appears that in the books of account of a firm named Messrs. Narayandas Purshottamdas, which was carrying on business in Petlad, there was an account in the name of 'Daulatram Chooharmal Vahivatkarta Shah Muljibhai Dahyabhai, Karachi' and in that account diverse amounts were credited on different dates between 31st January, 1946, and 6th August, 1946. The total amount credited during the financial year 1945-46 came to Rs. 70,000 and that credited during the financial year 1946-47 came to Rs. 30,000. During Samvat year 2008, that is Samvat year ending on 18th October, 1952, a sum of Rs. 74,000 was debited in this account and the narration in the debit entry was that Rs. 2,500 were withdrawn by the owner of the amount and Rs. 71,500 were adjusted by means of a Havala entry under which the owner of the account took over the debts owed by two persons by the names of Nana Mahiji and Ranchhod Bakor to Messrs. Narayandas Purshottamdas. There was also a further sum of Rs. 7,047 debited in this account with the recital that a flour factory called Panchal Ranchhod Dhura Flour Factory was transferred to the owner of the account in consideration of the said amount. It was the case of the revenue that all these adjustment were made with Messrs. Narayandas Purshottamdas by Daulatram on behalf of the owner of the account. The Income-tax Officer was of the view that the various amounts deposited in the aforesaid account with Messrs. Narayandas Purshottamdas belonged to the assessee and that they represented undisclosed income of the assessee which was diverted in the shaped of deposits in that account and the Income-tax Officer, therefore, sought the sanction of the Commissioner for initiating proceedings against the assessee by his legal representatives, Daulatram and others, under section 34(1)(a). The deposits were in the previous years relevant to the assessment years 1946-47 and 1947-48 and the sanction for initiating proceedings under section 34(1)(a) was, therefore, sought by the Income-tax Office by two separate applications, one for the assessment year 1946-47 and the other for the assessment year 1947-48 : In each of the application the name of the assessee sought to be proceeded against was shown as 'Shri Chooharmal Wadhuram by his legal representatives, Daulatram and others' and the status of the assessee was shown as 'association of persons.' There was a report enclosed with each application and the report stated : 'It is possible that Chooharmal may have diverted his un-taxed profits in the benami account of his son though the medium of Muljibhai. Approval is, therefore, sought for under section 34(1)(a) to assess him.' The Commissioner gave his sanction on each of the applications and the Income-tax officer thereafter issued two notices to Chooharmal Wadhuram, legal representatives, Daulatram and others. These two notices were served only on Daulatram and were not served on the on other legal representatives. The notice for the assessment year 1946-47 was served on Daulatram on 29th March, 1955, while the notice for the assessment year 1947-48 was served on him on 29th March, 1956. Pursuant to these two notices Daulatram attended before the Income-tax Officer from time to time and ultimately the assessment for the assessment year 1946-47 was completed on 24th March, 1956, and the assessment for the assessment year 1947-48 was completed on 31st January, 1957. There were appeals against the assessment order and the Appellate Assistant Commissioner set aside the assessment order and directed the Income-tax Officer to make fresh assessments after giving the assessee a proper opportunity of being heard. The Income-tax Office thereupon gave a proper hearing to the assessee and made fresh order of assessment. The Income-tax Officer took the view that the amounts deposited in the name of Daulatram Chooharmal with Messrs. Narayandas Purshottamdas belonged wholly to the assessee and he accordingly added a sum of Rs. 70,000 in the assessment for the assessment year 1946-47 and sum of Rs. 30,000 in the assessment for the assessment year 1947-48 together with the full amounts of interest credited in this account in the account years corresponding to those respective assessment years. The Income-tax Officer also held that the assessee carried on yarn business during the relevant pervious years and he estimated the income of the assessee from such business at Rs. 6,000 for the assessment year 1946-47 and Rs. 5,000 for the assessment year 1947-48. These assessment orders were followed by the appeals to the Appellate Assistant Commissioner and the appeals were partly successful. The Appellate Assistant Commissioner held that only one half of the amounts deposited in the account in the name of Daulatram Chooharmal with Messrs. Narayandas Purshottamdas could be said to belong to the assessee and he, therefore, allowed only Rs. 35,000 to be added in the assessment for the assessment year 1946-47 and Rs. 15,000 to be added in the assessment year 1947-48 together with half the amounts of intent credited in the account for the respective assessment years. He, however, confirmed the addition of Rs. 6,000 for the assessment years 1946-47 and the addition of Rs. 5,000 for the assessment year 1947-48. There were further appeals to the Tribunal against the order of the Appellate Assistant Commissioner and in the appeals various contention were raised which have given rise to the present reference before us. We shall presently refer to these contentions but it may be sufficient to state at the moment that these contentions were all rejected by the Tribunal and the Tribunal confirmed the order made by the Appellant Assistant Commissioner. The assessee thereupon applied for a reference and according to the assessee there were ten question of law which arose out of the order of the Tribunal but the Tribunal took the view that some of the question sought to be raised by the assessee were question of fact and the Tribunal, therefore refereed only five questions for the opinion of the court. These questions are :
'(1) Whether, on the facts and in the circumstances of the case, the assessee was liable to be assessed in the taxable territories for the assessment years 1946-47 and 1947-48
(2) If the answer to the first question is in the affirmative, whether, on the facts and in the circumstances of the case, the assessments for the years 1946-47 and 1947-48 could be made on the assessee in respect of the deposits in the account of Daulatram Chooharmal with the firm without the amount being first assessed in the hands of the firm of Messrs. Daulatram Chooharmal
(3) If the answer to question No. (2) is in the affirmative, whether, on the facts and in the circumstances of the case, the proceedings for the assessment of the amounts in question could be initiated under section 34(1)(a) and not under section 34(1A)
(4) Whether, on the facts and in the circumstances of the case, the assessment for the years 1946-47 and 1947-48 could be completed on the assessee in the status an individual when the sanction of the Commissioner for starting proceedings was given in respect of an association of persons
(5) Whether, on the facts and in the circumstances of the case, proceeding under section 34(1)(a) for the assessment year 1946-47 and 1947-48 were validly initiated by serving notices under section 34(1)(a) on Daulatram, who was only one of the legal heirs of the deceased ?'
2. We may point out at the outset that question No. 3 was not pressed by Mr. Dwarkadas, learned advocate appearing on behalf of the assessee, and it is, therefore, not necessary to say anything about it. The only question which require to be considered are question Nos. 1,2,4 and 5. We shall proceed to consider these question according to their serial order.
3. So far as the first question is concerned it is difficult to appreciate the argument on which the assessee wants us to answer this question in his favour. The contention of the assessee seems to be that, since the assessee was during the previous years relevant to the assessment year 1946-47 and 1947-48 resident in Karachi which is now a part of Pakistan, proceedings for assessment or reassessment of the assessee for those assessment years can be taken only by the revenue authorities in Pakistan and not by the revenue authorities in India. But this contention ignore the fact that during the relevant previous years Karachi was a part of British India and its income was liable to be assessed under the Income-tax Act and merely because subsequently Karachi, which was the place of residence of the assessee, because part of Pakistan, the assessee cannot escape his liability to Indian income-tax. This conclusion is undisputable on principle but apart from principle there is a direct decision of a Division Bench of the Bombay High Court in support of it and that is the decision in Lilaram Thawerdas v. Commissioner of Income-tax, Income-tax Reference No. 60 of 1956, which is unreported in any authorised series but of which a report is to be found in Unreported Income-tax Judgments of the Bombay High Court, Book two, published by the Western India Regional Council of the Institute of Chartered Accountants of India, Bombay. The assessee in this case was a resident of Karachi on 1st January, 1948, and for the assessment years 1946-47, the Income-tax Officer in Pakistan assessed him to tax on an income of Rs. 1,05,173 earned by him from business in Africa. Subsequently, in 1954, the Income-tax Officer in India issued notices to the assessee under section 34(1)(a) seeking to tax the identical amount and in assessing him for that amount he gave double taxation relief under the provision for such relief between India and Pakistan. The assessee, however, contended that he was not liable to be taxed at all in India and was only liable to pay tax in Pakistan. This contention was negatived by the Division Bench which held that as the assessment year 1946-47, the assessee was resident in a territory which was then a part of British India, the assessee was a resident within the taxable territories as defined in section 4(1)(b), though those territories subsequent became part of Pakistan and, therefore, the assessee could not dispute his liability to be taxed under section 4(1)(b)(ii). This decision concludes the determination of the first question against the assessee. Some reliance was placed on behalf of the assessee on the agreement for avoidance of double taxation between India and Pakistan but we do not see how the agreement helps the assessee in disputing his liability to be assessed to Indian income-tax. There is nothing in this agreement which says or even remotely suggests that an assessee who was resident in territories, subsequently forming part of Pakistan, during the previous years relevant to the assessment years 1946-47 and 1947-48, should not be assessable in the taxable territories under the Indian Income-tax Act. The first question must, therefore, be answered against the assessee.
4. The position of the assessee is equally hopeless, when we turn to the second question. We will assume for the purpose of the second question, as the Tribunal seems to have done, that the amounts deposited in the account of Daulatram Chooharmal with Messrs. Narayandas Purshottamdas belonged to the firm of Messrs. Daulatram Chooharmal consisting of the assessee and Muljibhai as partners with equal shares. But that does not preclude the revenue from the assessing the assessee to tax in respect of his half share in the said amounts. It is now well-settled, as a result of the decision of the Bombay High Court in J.C. Thakkar v. Commissioner of income-tax, the decision of this court in Fulchand Purshottam v. Vasavada, Income-tax Officer, and the decision of the Supreme Court in Commissioner of Income-tax v. Murlidhar Jhawar and Purna Ginning and Pressing Factory that in the case of a firm, the revenue has an option either to assess the firm or to assess the partners of the firm as individuals. The revenue is not bound to proceed first against the firm before proceeding against the partners of the firm. It was, therefore, competent to the revenue in the present case to assess the assessee as a partner of the firm of Messrs. Daulatram Chooharmal in respect of his half share in the amounts deposited in the name of Messrs. Daulatram Chooharmal on the basis that they represented the undisclosed income of the said firm. The decision of she second question must also, therefore, be given against the assessee.
5. That takes us to the fourth question which challenges the validity of the assessments made on the assessee on the ground that the assessments were made on the assessee in the status of individual, though the sanction of the Commissioner for initiating the proceedings was given on the basis that the proceedings were going to be initiated against the assessee in the status of the association of persons. This contention of the assessee is also in our opinion futile. The applications made by the Income-tax Officer to the Commissioner for obtaining his saction for the initiation of proceedings under section. 34(1)(a) clearly show that the assessee against whom the proceedings were sought to be initiated by the Income-tax Officer was 'Shri Chooharmal Wadhuram, legal representatives Daulatram and others.' The reports enclosed with these application also show that the Income-tax Officer was of the view that the amounts deposited in the name of Messrs. Daulatram Chooharmal with Messrs. Narayandas Purshottamdas represented the undisclosed profits of Chooharmal Wadhuram and the Income-tax Officer sought the sanction of the Commissioner for the purpose of assessing Chooharmal Wadhuram under section 34(1)(a). It can, therefore, hardly be disputed that the sanction of the Commissioner sought by the Income-tax Officer was for initiation of proceedings for reassessment of the profit derived by Chooharmal Wadhuram during his lifetime and the assessment was sought to be made by the Income-tax Officer on Daulatram and others as legal representatives of Chooharmal Wadhuram under section 24B(1). This assessment could obviously be made only in the status of the individual and not in the status of association of persons. But through some oversight the applications made by the Income-tax Officer to the Commissioner showed the status of the assessee as association of persons. This was clearly a mistaken and the question is whether this mistake had any invalidating consequence on the subsequent proceedings for assessment initiated by the Income-tax Officer after the grant of the sanction by the Commissioner. We do not think that the wrong description of the status of an assessee can have the effect of invalidating the proceedings for assessment initiated after obtaining the sanction of the Commissioner when the sanction is in terms granted to the initiation of proceedings against the assessee. If the status of the assessee was wrongly described, it can always be corrected by the Income-tax Officer in the course of the assessment proceedings but that cannot affect the validity of the assessment proceedings. The position would of course be different where the status is so inextricably mixed up with the question as to who is the assessee that the description of the status one way would be referable to one assessee while the description of the status the other way would be referable to another assessee. Where such is the case, the description of the status may be indicative of the fact that a particular assessee is sought to be proceeded against and if sanction of the Commissioner is obtained for proceeding against that assessee, such sanction cannot be availed of for the purpose of initiating proceedings against another assessee who would be indicated by the description of the status the other way. Such a case may arise where proceedings are sought to be initiated against A either as individual or as Hind undivided family. If the sanction of the Commissioner is given to the initiation of proceedings against A in the status of an individual, the Income-tax Officer cannot proceed against A in the status of Hindu undivided family and vice versa, for the sanction having been given to initiate proceedings against one assessee, the Income-tax Officer cannot avail of such sanction for the purpose of the proceeding against another. That was the case in Commissioner of Income-tax v. K. Adinarayanamurty, Civil Appeal No. 632 of 1966, decided by the Supreme Court on 3rd April, 1967. The Income-tax Officer in that case obtained sanction of the Commissioner for the purpose of proceeding against the respondent in the status of individual and issued notice under section 34(1)(a) for reassessing the income of the respondent. The respondent filed a return in the status of Hindu undivided family but before the return could be processed, it was decided by the Appellate Assistant Commissioner in an appeal perferred to him in respect of another assessment year that the status of the respondent was that of Hindu undivided family and not individual. The Income-tax Officer, therefore, issued a fresh notice to the respondent in the status of Hindu undivided family and sought to proceed against the Hindu undivided family for the purpose of reassessing its income. The respondent challenged the initiation of the proceedings by issue of a fresh notice and the ground of challenge was that respondent having already filed a return in the status of Hindu undivided family pursuant to the first notice, it was not competent to the Income-tax Officer to issue a fresh notice to the respondent in the status of Hindu undivided family under section 34(1)(a). The Supreme Court negatived the challenge on the ground that the sanction of the Commissioner having been given to the initiation of proceedings against the respondent in the status of individual and the first notice having been issued pursuant to such sanction, the proceedings initiated by the issue of such notice were invalid and ultra varies in so far as they were directed towards reassessing the income of the respondent in the status of a Hindu undivided family and it was, therefore competent to the Income-tax Officer to issue a fresh notice against the respondent in the status of Hindu undivided family for the purpose of reassessing the income of the Hindu undivided family. Ramaswami J., speaking on behalf of the Supreme Court, pointed out :
'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 notice under section 34 was issued to the assessee as an 'individual' for making assessment in that status, it is manifest that the proceedings taken under that notice were illegal and without jurisdiction. Under the scheme of the Income-tax Act the 'individual' and the 'Hindu undivided family' are treated as separate units of assessment and if a notice under section 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 notices is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction.
6. The present case stands on an entirely different basis. Here the attempt of the Income-tax Officer is not to proceed against an assessee different from the one in respect of whom sanction has been given by the Commissioner. The sanction of the Commissioner is given to initiation of proceedings under section 34(1)(a) for the purpose of assessing the profits derived by Chooharmal Wadhuram during his lifetime by proceeding against Chooharmal Wadhuaram by his legal representatives, Daulatram and others, under section 24B(1) and that is exactly what the Income-tax Officer has done. It is true that in the applications made by the Income-tax Officer to the Commissioner the status was wrongly described as association of person and even in the original order of assessment, the Income-tax Officer wrongly described the status as association of persons, but that cannot affect the validity of the initiation of the proceedings, since the assessee proceeded against by the Income-tax Officer is the same in respect of whom sanction is given by the Commissioner. The fourth question would also, therefore, have to be answered against the assessee.
7. The last question arises under these circumstances. The notice under section 34(1)(a) was addressed to 'Chooharmal Wadhuram legal representatives Daulatram and other' and though there were admittedly, apart from Daulatram, other legal representatives of Chooharmal Wadhuram, the notice was served only on Daulatram and was not served on the other legal representatives. On these facts the assessee contended that since the notice was not served on all the legal representatives of Chooharmal Wadhuram, the proceedings were not validly initiated and the orders of assessment made against the assessee were invalid. The Tribunal took the view that so far as the account in the name of Daulatram Chooharmal with Messrs. Narayandas Purshottamdas was concerned, Daulatram had operated on this account and all the adjustments which had been made in this account were the result of negotiations between Daulatram and Messrs. Narayandas Purshottamdas and Daulatram had, therefore, administered that part of the estate of Chooharmal Wadhuram which consisted of the amounts deposited in this account and in circumstances the notice served on Daulatram as legal representative of the deceased was sufficient to bind his estate. The validity of this view taken by the Tribunal was challenged before us on behalf of the assessee and in support of the challenge strong reliance was placed on a decision of the Supreme Court in First Addl. Income-tax Officer v. Mrs. Suseela Sadanandan. The question which arose before the Supreme Court in this decision was almost identical with the one before us except that in the case before the Supreme Court, the assessee had died leaving a will appointing three executors and the notice under section 34(1)(a) was served only on one of the executors whereas in the case before us Chooharmal Wadhuram died intestate leaving several heirs and the notice under section 34(1)(a) was served only on one of the heirs, namely, Daulatram. Discussing the question whether notice served on one of the executors or heirs would be sufficient to bind the estate of the assessee, Subba Rao J., as he then was, speaking on behalf of the Supreme Court, made certain observations in regard to what he, prima facie, conceived to be the correct approach to the question and since the question had not been approached from that point of view by the High Court, he formulated four points for the consideration of the High court and remanded the matter to the High Court to come to its own conclusions in regard to those points. The learned judge made it clear that the observations made by the Supreme Court were not intended to be the final decision of the Supreme Court on the various aspects of the question but were only intended to afford guidance to the High Court to come to its own conclusions on those points. The observations of the Supreme Court in this case do not, therefore, lay down the law on the subject which is binding upon this court and the assessee was not prepared to accept these observations as laying down the correct law on the subject. But he pointed out that even if these observations were held to represent the correct law on the subject, it was not sufficient for the revenue to establish that Daulatram had administered a part of the estate of Chooharmal Wadhuram represented by the amounts deposited with Messrs. Narayandas Purshottamdas but it was further necessary for the revenue to show that the Income-tax Officer after diligent and bona fide inquiry believed Daulatram to be the sole legal representative of Chooharmal Wadhuram. Now, there can be no doubt that, according to the observations made by the Supreme Court, where a person dies intestate leaving behind him more than one heir, all of them together represent the estate of the deceased and if the Income-tax Officer wants to proceed under section 24B, he must proceed to assess the total income of the deceased against all the heirs and the notice must, therefore, be served on all the heirs. But the Supreme Court observed that the principle laid down in Daya Ram v. Shyam Sundari, that, where a plaintiff or an appellant after diligent and bona fide enquiry ascertains who the legal representatives of a deceased defendant or respondent are and brings them on record within the time limited by law, there is no abatement of the suit or appeal, that the impleaded legal representatives sufficiently represent the estate of the deceased and that a decision obtained with them on record will bind not merely those impleaded but the entire estate including those not brought on record, although laid down in the context of suits or appeals, is one of general application and there is no reason why this principle cannot be invoked in the case of assessment of income of a deceased person in the hands of his legal representatives. If this principle is applicable in the case of assessment of the income of a deceased person in the hands of his legal representatives as the Supreme Court was prima facie inclined to hold, it is necessary to have a finding of the Tribunal whether the Income-tax Officer after diligent and bona fide inquiry believed Daulatram to be the sole legal representative of Chooharmal Wadhuram. If he did, Daulatram would sufficiently represent the estate of the deceased in the proceedings for assessment of the income of Chooharmal Wadhuram and the service of the notice under section 34(1)(a) on him would have to be held to be valid. We would, therefore, direct the Tribunal to submit a supplemental statement of the case containing its findings on the question whether the Income-tax Officer initiating proceedings by serving notice under Section 34(1)(a) on Daulatram, after diligent and bona fide inquiry, believed Daulatram to be the sole legal representative of Chooharmal Wadhuram. The Tribunal will give its finding on the material already on record and will submit the supplemental statement of the case within six months of the receipt of the writ by it. We may make it clear that after receipt of the finding it will be open to the parties to contend before us as to what is the correct law on the subject and whether, even if the Income-tax Officer after diligent and bona fide inquiry believed Daulatram to be the sole legal representative of Chooharmal Wadhuram and accordingly served the notice under section 34(1)(a) on him along, that would be sufficient service of the notice for the purpose of binding the estate of Chooharmal Wadhuram. It would also be open to the revenue to contend that, in any event, service of the notice on Daulatram was sufficient service so as to bind the estate of Chooharmal Wadhuram and if for the purpose of this contention, any further material which is already on record is sought to be relied upon on behalf of the revenue, the revenue would be at liberty to ask the Tribunal to bring it before us in the supplemental statement of the case.
8. We, therefore, answer the first and the second questions in the affirmative. So far as the fourth question is concerned, it does not bring out properly the real controversy between the parties and it is, therefore necessary to reframe it as follows :
'Whether, on the facts and in the circumstances of the case, the initiation of proceedings against the assessee for the assessment years 1946-47 and 1947-48 was invalid in view of the fact that the sanction of the Commissioner for initiating proceedings against the assessee was given in the status of 'association of persons' ?'
9. Our answer to the question as reframed is in the negative. So far as the fifth question is concerned, the reference will stand over until after receipt of the supplemental statement of the case from the Tribunal.