Full Judgment Text
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PETITIONER:
J.P. JANI, INCOME-TAX OFFICER, CIRCLE IV,WARD-G, AHMEDABAD &
Vs.
RESPONDENT:
INDUPRASAD DEVSHANKAR BHATT
DATE OF JUDGMENT:
20/08/1968
BENCH:
RAMASWAMI, V.
BENCH:
RAMASWAMI, V.
SHAH, J.C.
GROVER, A.N.
CITATION:
1969 AIR 778 1969 SCR (1) 714
CITATOR INFO :
R 1973 SC2585 (13)
R 1987 SC1378 (2)
ACT:
Income-tax Act (43 of 1961), ss. 148 and 297 (2)(d)(ii)-
Right of Income-Tax Officer to reopen assessment under s.
34 of the Income-tax Act, 1922, barred on the date of
commencement of the 1961 Act-Whether notice under s. 148
to reopen assessment could be issued.
HEADNOTE:
Under s. 297(2)(d)(ii) of the Income-tax Act, 1961. dealing
with repeals and savings, notwithstanding the repeal of the
1922-Act, where in respect of any assessment year after the
year ending on 31st day of March, 1940, any income had
escaped assessment and no proceedings under s. 34 of the
repealed Act are pending at the commencement of the 1961-
Act, a notice under s. 148 of the 1961-Act may be issued
for reopening the assessment.
The respondent was assessed to income-tax for the assessment
year 1947-48. Thereafter the Income-Tax Officer issued a
notice under s. 34(1)(a) of the Income-tax Act, 1922, for
reassessment. There was no proper service of the notice,
and despite the respondent’s objection, the Income-tax
Officer determined the total income of the respondent at Rs.
89,000. The Appellate Assistant Commissioner allowed the
respondent’s appeal by order dated 5th January, 1963 on the
ground that there is no valid service of the notice. On
1st April, 1962 the1922-Act was repealed and the Income-
tax Act. 1961 came into force, and the time for taking
action for reassessment was enlarged. from 8 years to 16
years. By that date, the right of the Income-Tax Officer to
reopen the assessment under s. 34(1)(a) of the 1922-Act
became barred. The Income-Tax Officer however, issued a
notice under s. 148 of the 1961 Act for reopening the
assessment. The respondent, thereupon filed a writ
petitioning the High Court for quashing the notice and the
petition was allowed.
In appeal to this Court.
HELD: On a proper construction of s. 297(2)(d)(ii) the
Income-Tax Officer cannot issue a notice under s. 148 in
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order to reopen the assessment of an assessee in a case
where the right to reopen the assessment under the 1922-Act
was barred at the date when the 1961-Act came into force.
The reason is that unless the statute expressly so provides
or there is a necessary implication, retrospective operation
should not be given to it so as to affect, alter or destroy
any right already acquired or to revive any remedy’ already
lost by effluviums of time. The 1961-Act does not disclose
in express terms or by necessary implication that there was
a revival of the right of the Income-Tax Officer to reopen
an assessment which was already barred under the 1922-Act
and if the section is construed as reviving such a right
it would be tantamount to giving it retrospective
operation which is not warranted by its language. The words
’where in respect of any assessment year after the year
ending on 31st day of March, 1940,’ in the section, cannot
take in their sweep all assessment years subsequent to the
year ending on 31st March, 1940 without regard
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to the question whether the fight to reopen the assessment
in respect of any assessment year was or was not barred
under the repealed Act. The section must he read as
applicable only to those cases where the right of the
Income-Tax Officer to reopen the assessment was not barred
under the repealed section. [720 H; 721 A-D; 722 G-H]
S.S. Gadgil v. Lal & Co. (1964) 53 I.T.R. 231 (S.C.),
followed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 972 of 1967.
Appeal from the judgment and order. dated December 14, 15,
1964 of the Gujarat High Court in Special Civil Application
No.. 54 of 1964.
D. Narsaraju, S.K. Aiyar, S.P. Nayar and, B.D. Sharma, for
the appellants.
S.T. Desai, M.C. Bhandare and K. Rajendra Chaudhuri, for the
respondent.
The Judgment of the Court was delivered by
Ramaswami, J. This appeal is brought by certificate against
the judgment of the Gujarat High Court dated 14th/15th
December 1964 in Special Civil Application No. 54 of 1964
whereby a writ of mandamus was issued to. quash the
notices issued under sections 147, 148 and 142(1) of the
Income Tax Act, 1961 against the respondent.
The respondent was assessed by the, Income Tax Officer,
Ward E, Circle 11, Ahmedabad for the assessment year 1947-48
by an assessment order dated 31-1-1952. The Income Tax
Officer thereafter received ’information that a certain
profit made by the assessee in the name of Natwarlal Mardial
Pandit who was a benamidar of the respondent had escaped
assessment by reason of the respondent not having disclosed
it at the time of the original assessment. The Income Tax
Officer, therefore, after obtaining the approval of the
Commissioner of Income Tax issued a notice dated 27th March,
1956 under s. 34(1)(a) of the Income Tax Act, 1922
(hereinafter referred to as the old Act). The notice could
not be served personally, and, therefore, was served by
affixing on a conspicuous part of the respondents. The
respondent objected to the service of the notice and did not
file a return stating that there had been no valid service.
When the Income Tax Officer threatened to proceed ex parte,
a return was filed under protest on 16-1-19’57 and in that
return the respondent showed the same amount of income which
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was determined in the original assessment. Despite the
objection. of the respondent that there was no proper
service of notice under s. 34( 1 ) (a), the Income Tax
Officer proceeded to assess the income of the respondent for
the assessment year 1947-48 and made an order
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dated 29th March, 1957 determining the total income of the
respondent at Rs. 89,000 by including the profit alleged to
have been earned by Natwarlal Manilal Pandit. The
respondent preferred an appeal to the Appellate Assistant
Commissioner who allowed the appeal and set aside the order
of assessment on the ground that there was no valid service
of the notice. The’ decision of the Appellate Assistant
Commissioner was given on 5-1-1963 by which time the Income
Tax Act, 1922 had been repealed and the Income Tax Act, 1961
(hereinafter called the New Act) had come into force with
effect from 1st April, 1962. The time for taking action for
assessment or reassessment in case of escaped income
exceeding Rs. 50,000 but less than Rs. ,1,00,000/- was
enlarged from 8 years to 16 years under the new Act. On
4-1-1963 the Income Tax Officer, Circle IV, Ward G,
Ahmedabad issued a notice calling upon the respondent to
show cause why proceedings should not be taken under s.
147(a) of the new Act for bringing to tax the escaped profit
of the respondent. The respondent protested against the
new notice on the ground that action under the old Act had
become time barred and the new Act had no application to
his case. Subsequently, a notice under s. 148 of the new
Act was issued on 13-11-1963 and this notice was followed by
another notice dated 9-1-1964 issued under s. 142(1).
The respondent, therefore, preferred Special Civil
Application No. 54 of 1964 in the Gujarat High Court praying
for a writ of certiorari to quash the notices dated 13-11-
1963 and 9-1-1964 by the first appellant. The High Court
took the view that on a true construction of s.
297(2)(d)(ii) of the new Act the Income Tax Officer could
not issue a notice under s. 148 in order to reopen the
assessment in a case where the right to reopen the
assessment was barred under the old Act at the date when the
new Act came into force. The High Court observed that the
right of the Income Tax Officer to reopen the assessment of
the resportdent in the present case was admittedly barred
under s. 34(1 )(a) of the old Act at the commencement of
the new Act and it was, therefore, not competent to the
Income Tax Officer to issue a notice under s. 148 of the new
Act in order to reopen the assessment of the’ respondent and
to reassess the income of the respondent relying on the
provisions enacted under s. 297 (2)(d)(ii) of the new Act.
The High Court accordingly allowed the Special Civil
Application preferred by the respondent and set aside the
notices dated 13-11-1963 and 9-1-1964.
It is necessary at this stage to set out the relevant
provisions of the two statutes. Section 34 of the Income
Tax Act, 1922 (No. 11 of 1922) as it stood immediately
prior to its amendment by the Finance Act, 1956 is in the
following terms :--
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"34. (1) If--
(a) the Income Tax Officer has reason to
believe that by reason of the omission or
failure on the part of an assessee to make a
return of his income under section 22 for any
year or to disclose fully and truly all
material facts necessary for his assessment
for that year, income, profits or gains
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chargeable for that year or have been
underassessed, or assessed at too low a rate,
or have been made the subject of excessive
relief under the Act or excessive loss or
depreciation allowance has been computed, or
(b) notwithstanding that there has been no
omission or failure as mentioned in clause (a)
on the part of the assessee, the Income Tax
Officer has m consequence of information in
his possession reason to believe that income,
profits or gains chargeable to income-tax have
escaped assessment for any year, or have been
underassessed, or assessed at too ,low a rate,
or have been made the subject of excessive
relief under this Act, or that excessive loss
or depreciation allowance has been computed,
he may in cases falling under clause (a) at
any time within eight years and in cases
falling under clause (b) at any time within
four years of the end of that year, serve on
the assessee, or if the assessee is a company,
on the principal officer thereof, a notice
containing all or any of the requirements
which may be included in a notice under sub-
section (2) of section 22 and may proceed to
assess or reassess such income, profits or
gains or recompute the loss or depreciation
allowance and the provisions of this Act
shall, so far as may be apply accordingly as
if the notice were a notice issued under that
sub-section:
Provided that :--
(1 ) the Income Tax Officer shall not issue a
notice under this sub-section, unless he has
recorded his reasons for doing so and the
Commissioner is satisfied on such reasons
recorded that it’ is a fit case for the issue
of such notice.
Provided further that nothing in this section
limiting the time within which any action may
’be taken, or any order, assessment or
reassessment may be made shall app
ly to a
reassessment made under section 27 or to an
assessment or reassessment made on the
assessee
718
or any person in consequence of Or to give
effect to any finding or direction contained
in an order under section 31, section 33,
section 33A, section 33B, section 66 or
section 66A".
By the Finance Act, 1956 certain amendments were made in
section 34 with effect from 1st April, 1956. The time limit
of 8 years in sub-section (1 ) in respect of cases failing
within clause (a) was removed and the following provisos
were substituted for the existing proviso in sub-section (1
) :--
"Provided that the Income Tax Officer shall
not issue a notice under clause (a) of sub-
section (1)--
(i) for any year prior to the year ending on
the 31st day of March, 1941:
(ii) for any year, if eight years have elapsed
after the expiry of that year, unless the
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income, profits or gains chargeable to income-
tax which have escaped assessment or have been
underassessed or assessed at too low a rate or
have been made the subject of excessive relief
under this Act, or the loss or depreciation
allowance which has been computed in excess,
amount to, or are likely to amount to, one
lakh of rupees, or more in the aggregate,
either for that year, or for that year and any
other year or years after which or after each
of which eight years have elapsed, not being a
year or years ending before the 31st day of
March, 1941;
(iii) for any year, unless he has recorded his
reasons for doing so, and, in any case falling
under clause (ii), unless the Central Board of
Revenue, and, in any other case, the
Commissioner is satisfied on such reasons
recorded that it is a fit case for the issue
of such notice;
The Income Tax Act, 1961 (No. 43 of 1961) came into force
from 1st April, 1962. Sub-section ( 1 ) of section 297 of
the new Act repealed the old Act and by sub-section (2) of
that section the new Act enacted certain saving provisions
consequent upon the repeal of the old Act. The material
provision is set out in clause (d):
"297. Repeals and savings :-
(1)........
(2) notwithstanding the repeal of the
Indian Income Tax Act 11 of 1922 (hereinafter
referred to as the repealed Act) :--
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(d) where in respect of any assessment year
after the year ending on the 31st day of
March, 1940---
(i) a notice under section 34 of the repealed
Act’ had been issued ’before the commencement
of this Act, the proceedings in pursuance of
such notice may be continued and disposed of
as if this Act had not been passed;
(ii) any income chargeable to tax had escaped
assessment within the meaning of that
expression, in section 1.47 and no proceedings
under section 34 of the repealed Act in
respect of any such income are pending at the
commencement of this Act, a notice under
section 148 may, subject to the provisions
contained in section 149 or section 150, be
issued with respect to that assessment year
and all the provisions of this Act shall apply
accordingly".
Sections 147 to 150 referred to in section 297(2)(d)(ii) and
sections 151 to 153 were the provisions of the new Act
corresponding to section 34 of the old Act. In the new Act,
section 34 of the old Act was split up into sections 147 to
153. Section 147 empowered the Income Tax Officer to
assess or reassess escaped income in the same kind of
cases in which he could do so under section 34 but that
right could be exercised subject to the provisions of
sections 148 to 153. Sub-section (1) of section 148
provided that before making any assessment or reassessment
under s. 147, the Income Tax Officer shall serve on the
assessee a notice containing all or any of the requirements
which may be included in a notice under section 139(2) and
sub-section (2) of that section imposed an obligation on the
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Income Tax Officer before issuing such notice, to record
’his reasons for doing so. Section 149 laid down different
time limits for issuing notices and in cases falling within
clause ( a ) of section 14 7 corresponding to clause (a) of
sub-section (1 ) of section 34 the time limits. were
prescribed as follows :--
"149. Time limit for notice :--(a) No notice
under section 148 shall be issued,
(a) in cases failing under clause (a) of
section 147--
(i) for the relevant assessment year, if eight
years have elapsed from the end of that year,
unless the ease falls under sub-clause (ii);
(ii) for the relevant assessment year, where
eight years, but not more than sixteen years,
have elapsed from the end of that year, unless
the income chargeable
720
to tax which has escaped assessment amounts to
or is likely to amount to rupees fifty
thousand or more for that year;
Section 150(1) makes an exception in cases where assessment
or reassessment is sought to be made in consequence of or to
give effect to any finding or direction contained in an
order passed by any authority in any proceeding under the
Act by way of appeal, reference or revision and provided
that in such cases there should be no time limit and notice
under section 148 may be issued at any time unless of course
the case fell within sub-section (2) of section 150.
Section 151 made it a condition precedent to the issue of
the notice under section 148 that the Income Tax Officer
should obtain the previous sanction of the Central Board
of Revenue or the Commissioner of Income Tax according as
the notice is proposed to be issued after the expiry of 8
years from the end of the relevant assessment year or after
the expiry of 4 years from the end of the relevant
assessment year.
On behalf of the appellants Mr. Narasaraju stressed the
argument that the High Court was in error in holding that
the provisions of the new Act of 1961 were not applicable in
cases where the time limit fixed in the old Act had expired
before the coming into force of the new Act. It was
contended that section 297(2) (d)(ii) of the new Act was
wide in its sweep and it took in all assessment years after
the year ending on 31st March, 1940 irrespective of the
question whether the right to reopen the assessment in
respect of any such assessment years, was barred or not
under the old Act at the date when the new Act came into
force. According to Mr. Narasaraju the legislative intention
was that once the new Act came into force, the question
whether the assessment in respect of any assessment year
after the year ending on 31st March, 1940 was liable to be
reopened or not should be decided with reference to the
provisions of the new Act. It was argued that the new Act
authorised such assessment to be reopened whatever might be
the position in regard to the right to reopen such
assessment under the old Act. In our opinion, the argument
put forward by Mr. Narasaraju is not warranted. It is
admired in this case that the right of the Income Tax
Officer to reopen the assessment for the year 1947-48 was
barred under the old Act before the new Act came into force.
In our opinion, it not permissible to construe section
297(2)(d)(ii) of the new Act as reviving the right of the
Income Tax Officer to reopen the assessment which was
already barred under the old Act. The reason is that such a
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construction of section 297(2)(d)(ii) would be tantamount to
giving of retrospective operation to that section which is
not warranted either by the express language of
721
the section or by necessary implication. The principle is
based on the well-known rule of interpretation that unless
the terms of the statute expressly so provide or unless
there is a necessary implication, retrospective operation
should not be given to the statute so as to affect, alter or
destroy any right already acquired or to revive any remedy
already lost by efflux of time. On behalf of the appellants
reference was made to the opening phrase "where in
respect of any assessment year after the year ending on the
31st day of March 1940" occurring in section 297(2)(d)(ii)
of the new Act, but these general words cannot take in their
sweep assessment years subsequent to the year ending on
31st March, 1940 without regard to the question whether the
right to reopen the assessment in respect of any assessment
year was or was not barred under the repealed Act. We
consider that the language of the new section must be read
as applicable only to those cases where the right of the
Income Tax Officer to reopen the assessment was not barred
under the repealed section. In our view, the new statute
does not disclose in express terms or by necessary
implication that there was a revival of the right of the
Income Tax Officer to reopen an assessment which was already
barred under the old Act. This view is borne out by the
decision of this Court in S.S. Gadgil v. Lal & Company(1).
In that case, a notice was issued against the assessee as an
agent of a non-resident on 27th March, 1957 and that notice
related to the assessment year 1954-55. Under clause (iii)
of the proviso to section 34( 1 ) as it stood prior to its
amendment by the Finance Act, 1956, a notice of assessment
or reassessment could not be issued against a person deemed
to be an agent of a non-resident after the expiry of one
year from the end of the year of assessment. The right to
commence a proceeding for assessment against the assessee as
agent of a non-resident for the assessment year 1954-55
therefore ended on 31st March, 1956 under the new Act before
its amendment in 1956. This provision was, however, amended
by the Finance Act, 1956 and under the amended provision the
period of limitation was extended to two years from the end
of the assessment year. The amendment was made on 8th
September, 1958 but was given effect from 1st April, 1956.
Since the time within which notice could be issued against a
person deemed to be an agent of a non-resident was extended
to two years from the end of the assessment year, it was
contended on behalf of the Income Tax Officer that the
notice issued by him was within the terms of the amended
provision and was; therefore, a valid notice. Now the notice
issued on 27th March, 1957 was clearly within a period of
two years from the end of the assessment year 1954-55 and if
the amended provision, applied, the! notice would be a valid
notice. It was, however, held by this Court that notice was
(1) (1964) 53 I.T.R. 231.
722
not a valid notice inasmuch as the right of the Income
Tax Officer to reopen the assessment of the assessee under
the unmended provision became barred on 31st March, 1956 and
the amended provision did not operate against him so as to
authorise the Income Tax Officer to commence proceedings for
reopening the assessment of the assessee in a case where
before the amended provision came into force, the
proceedings had become barred under the unamended provision.
At page 240 of the Report, Shah, J. speaking for the Court
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observed as follows :-
"As we have already pointed out, the right to
commence a proceeding for assessment against
the assessee an agent of a non-resident party
under the Income Tax Act before it was
amended, ended on March 31, 1956. It is true
that under the amending Act by section 18 of
the Finance Act, 1956, authority was conferred
upon the Income Tax Officer to assess a person
as an agent of a foreign party under section
43 within two years from the end of th
e year of
assessment. But authority of the Income Tax
Officer under the Act before it was amended by
the Finance Act of 1956, having already come
to an end, the amending provision will not
assist him to commence a proceeding even
though at the date when he issued the notice
it is within the period provided by that
amending ACt. This will be so,
notwithstanding the fact that there has been
no determinable point of time between the
expiry of the time provided under the old Act
and the commencement of the amending Act.
The legislature has given to section 18 of the
Finance Act, 1956, ’only a limited
retrospective operation, i.e. up to April 1,
1956 only. That provision must be read
subject to the rule that in’ the absence of an
express provision or clear implication, the
legislature does not intend to attribute to
the amending provision a greater retrospective
than is expressly mentioned, nor to authorise
the Income Tax Officer to commence proceedings
which before the new Act came into force had
by the expiry of the period provided become
barred".
In our opinion, the principle of this decision applies in
the present Case and it must be held that on a proper
construction of section 297(2)(d)(ii) of the new Act, the
Income Tax Officer cannot issue a notice under section 148
in order to reopen the assessment of an assessee ,in a ease
where the right to reopen the assessment was barred under
the old Act at the. date when the new Act came into force.
It follows therefore that the notices dated 13-11-1963 and
9-1-1964 issued by the Income Tax
723
Officer, Ahmedabad were illegal and ultra vires and were
rightly quashed by the Gujarat High Court by the grant of a
writ.
For the reasons expressed, we hold that the judgment of the.
High Court of Gujarat dated 14th/15th December, 2964 is
correct and this appeal must be dismissed with costs.
V.P.S. Appeal dismissed.
sup CI/68--15
724