Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME-TAX, PATIALA & ORS.
Vs.
RESPONDENT:
M/s. SHAHZADA NAND & SONS & ORS.
DATE OF JUDGMENT:
19/01/1966
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
HIDAYATULLAH, M.
BACHAWAT, R.S.
CITATION:
1966 AIR 1342 1966 SCR (3) 379
CITATOR INFO :
RF 1992 SC 718 (10)
ACT:
Indian Income-tax Act,1922 (11 of 1922), s. 34, sub-s.
34(1) (a) as amended by the Finance Act 1956; sub-s.
34(1A),--Field of operation of the two sub-sections whether
overlapping in respect of war years--Whether s. 34(1)(A) as
a special provision over-rides s. 34(1) (a) in respect of
the war years.
HEADNOTE:
On March 26, 1954 the Income-tax authorities issued a notice
to the respondents under s. 34(1) (a) of the Indian Income-
tax Act, 1922 in respect of assessment year 1945-46. The
assessment made pursuant to the notice was set aside by the
appellate authorities on the ground that the notice under s.
34(1) (a) was time barred because the assessment year in
question was beyond the period of 8 years covered by s.
34(1)(a). Sub-ss. (1A) to (ID) were inserted in s. 34 by
the Income-tax (Amendment) Act 1954. By sub-s. (1A) power
was given to the Income-tax authorities to issue notice in
respect of escaped income of the previous years within the
period September 1, 1939 to March 31, 1946. By the, Finance
Act 1956 with effect from April 1, 1956 s. 34(1) (a) was
amended so that notices in respect of escaped income could
be issued ’at any time’ subject to certain conditions. On
July 25, 1958 the Income-tax Officer again issued a notice
to the respondents calling upon them to file a return for
the assessment year 1945-46. An appeal to the Central Board
of Revenue by some of respondents failed. Thereupon they
filed a petition under Art. 226 of the Constitution
challenging the notice on various grounds. Their main
contention was that no notice under s. 34(1) (a) could be
issued in respect of the war years as the escaped income of
the said war years was governed by s. 34(1A), whereunder
notices could be issued only up to March 31, 1956. The High
Court having taken a view favourable to the respondents, the
Revenue appealed to this Court by special leave.
It was contended on behalf of the appellant that the terms
of s. 34(1) (a) after its amendment in 1956 were clear and
unambiguous and the scope of the expression ’at any time’
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could not be curtailed by construction and that s. 34(lA)
did not operate to restrict the operation of s. 34(1) (a) in
respect of the war years. On behalf of the respondents it
was contended that s. 34(lA) was a species of which s. 34(1)
(a) was genus that in respect of the war years there was a
conflict between the two subsections, and that in view of
the maxim, generalia specialibus non derogant, s. 34(1A)
should prevail.
HELD:(i) It would not be appropriate to describe sub-s.
(1A) as one carved out of sub-s. (1) (a) or to call it a
species of which sub-s. (1) (a) is the genus. When s.
34(lA) was enacted s. 34(1)(a) had practically ceased to
function in respect of the war years. Again when s.
34(1)(a) was amended with effect from April 1, 1956 s.
34(1A) had practically ceased to operate as no notices under
it could be issued after-March 31, 1956. There is no
conflict between the two sub-sections after that date. The
wide phraseology of the amended s. 34(1)(a) takes
380
in all the escaped concealed incomes during all the years
commencing from 1941 and confers power on the Income-tax
Officer to give notice thereunder in respect of the said
income without any bar of limitation. [390 C-F]
(ii)Sub-Section (1A) does not really prescribe any period
of limitation. It enables the Income-tax Officer to take
proceedings within a particular time, though the period of
limitation had expired. It conferred a special power on the
Income-tax Officer which expired on April 1, 1956. The non-
obstante clause in sub-s. (1A) indicates that it was enacted
to operate notwithstanding that the period of 8 years had
expired. The said sub-section served its purpose only when
the period of 8 years governed a notice under sub-s. (1)
(a). But when that bar of limitation was ,removed, sub-s.
(1A) had become otiose. [390 G-391 A]
Further sub-s. (1B) as amended by the Finance Act of 1956
and sub-s. 4 added by the Indian Income-tax Act (Amendment)
Act 1959, also reinforces the construction that sub-s. 34(1)
(a) as amended in 1956 was applicable to, the war years
despite sub-s. 34(1A). [391 B., D-E]
(iii)The reason why sub-s. (1A) was retained in the
statute even after the Finance Act of 1956 was that though
no new notices could be issued under that sub-section after
April 1, 1956, notices already issued before that date were
pending. They could be disposed of in the manner prescribed
by sub-ss. (1A), (1B), (1C), and (1D) of s. 34. All the aid
sub-sections formed an integral code. The legislature,
presumably, intended to keep the said sub-sections
whereunder proceedings had already been initiated and make
available to the said proceedings the procedure prescribed
under the said provisions. It may also be that sub-s. (1A)
was kept in super abundant caution. Whatever that may be,
it cannot, in the circumstances, detract from the clear
provisions of sub-s. (1) (,a). [391 F, G]
Case law referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 494 and
495 of 1964.
Appeals by special leave from the judgment and order dated
September 26, 1961 of the Punjab High Court in Civil Writ
No. 801 of 1959.
S.T. Desai, R. Ganapathy Iyer and R. N. Sachthey, for the
appellant.
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N.A. Palkhivala, I. M. Nanavati, T. A. Ramachandran, J.
B. Dadachanji, O. C. Mathur and Ravinder, Narain, for the
respondents.
N. A. Palkhivala, J. B. Dadachanji, O. C. Mathur and
Ravinder Narain, for intervener Nos. 1 and 2.
I. M. Nanavati, J. B. Dadachanji, O. C. Mathur and
Ravinder Narain, for intervener No. 3.
N. A. Palkhivala, R. J. Kolah, J. B. Dadachanji, O. C.
Mathur and Ravinder Narain, for intervener No. 4.
D. N. Mukherjee, for intervener No. 5.
381
The judgment of the Court was delivered by
Subba Rao, J. These two appeals, one by special leave and
the other by certificate, raise the question whether notice
can be issued at any time for reassessment under s.
34(1)(a), as amended by the Finance Act, 1956, of the Indian
Income-tax Act, 1922, hereinafter called the Act, in respect
of a concealed income to which s. 34(1A) thereof applied.
The facts may be briefly stated. Messrs. Shahzada and
Sons, the 1st respondent in both the appeals, was an
undivided Hindu Family firm and it was assessed in that
capacity up to the assessment year 1945-46. It is alleged
that subsequently there was a partition in the family and a
new firm came into existence, which took over the business
of the family. On March 26, 1954, the income-tax
authorities issued a notice to the members of the defunct
Hindu undivided family under s. 34(1)(a) of the Act in
respect of the assessment year 1945-46 on the ground that
certain income of the said family had escaped assessment.
Pursuant to the proceedings so initiated, a sum of Rs.
3,63,000/- was added to the original assessment of the said
family. The assessee took up the matter on appeal to the
Appellate Assistant Commissioner, who held that the said
notice was barred by time, though on the merits he confirmed
the order of the Income-tax Officer. The Income-tax
Department as well as the 1st respondent preferred appeals
against the said order to the Income-tax Appellate Tribunal.
The Tribunal held that the notice was barred by time and,
therefore, the income-tax authorities had no jurisdiction to
give a finding on the merits. Meanwhile s. 34(1)(a) of the
Act was amended by the Finance Act, 1956, with effect from
April 1, 1956, whereunder, subject to certain conditions, a
notice under s. 34(1)(a) could be issued at any time.
Thereafter, on July 25, 1958, the Income-tax Officer issued
a notice to the 1st respondent calling upon the members who
constituted the undivided family to file a return for the
assessment year 1945-46. Respondents 2 to 5, who were the
members of the said undivided Hindu family, appealed to the
Central Board of Revenue for redress without any success.
Thereafter, they filed a petition under Art. 226 of the
Constitution in the High Court of Punjab challenging the
notice on various grounds. Their main contention was that
no notice under s. 34(1)(a) could be issued in respect of
the war years, as the escaped income during the said years
was governed by s. 34(1A) of the Act whereunder a notice
could be issued only before March 31, 1956. The writ
petition came up before a single Judge of the High Court,
who referred the following question to a larger Bench :
"Whether or not in the circumstances of the
present case the notice under section 34
issued on 25th July 1958 was barred by time."
382
The Division Bench, in its turn, referred the said question
to a Full Bench. The Full Bench, inter alia, held that s.
34(1A) was a special provision whereas s. 34(1)(a) was a
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general provision and that, as the escaped income of the
year 1945-46 was governed by s. 34(1A), no not-Ace under s.
34(1)(a) could be issued. In the result, after expressing
that view, the Full Bench sent back the case to the single
Judge before whom it came in the first instance. Dua, J.,
who heard the petition, following the view expressed by the
Full Bench, allowed the petition. The appellants,
thereafter, preferred a Letters Patent appeal against that
order to a Division Bench, which dismissed the same. Civil
Appeal No. 494 of 1964 has been Sled by the Revenue by
special leave against the order of the Full Bench dated
September 8, 1961, and Civil Appeal No. 495 of 1964 has been
filed, by certificate, by the Revenue against the order of
the Division Bench confirming that of Dua, J.
At the outset it will be convenient to read the material
provisions of s. 34 of the Act as amended by the Finance
Act, 1956, and by the Income-tax (Amendment) Act, 1959.
Section 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
chargeable to income-tax have escaped
assessment for that year, or have been under-
assessed, 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,
he may in cases falling under clause (a) at
any time ................ serve on the
assessee................ 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 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 income, profits or gains
383
chargeable to income-tax which have escaped
assessment or have been under-assessed 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 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
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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
(1A). If in the case of any assessee, the
Income-tax Officer has reason to believe
(i) that income, profits or gains chargeable
to income-tax have escaped assessment for any
year in respect of which the relevant previous
year falls wholly or partly within the period
beginning on the 1st day of September, 1939,
-and ending on the 31st day of March, 1946,
and
(ii) that the income, profits or gains which
have so escaped assessment for any such year
or years amount, or are likely to amount, to
one lakh of rupees or more,
he may, notwithstanding that the period of eight years or,
as the case may be, four years specified in sub-section (1)
has expired in respect thereof, serve on the
assessee........................ 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 re-assess the income, profits or gains of the
assessee for all or any of the years referred to in clause
(i), and thereupon the provisions of this Act excepting
those contained in clauses (i) and (iii) of the proviso to
sub-section (1) and in subsections (2) and (3) of this
section], shall, so far as may be, apply accordingly :
Provided that the Income-tax Officer shall not issue a
notice under this sub-section unless he has recorded his
reasons for doing so, and the Central Board of Revenue is
satisfied on such reasons recorded that it is a fit case for
the issue of such notice :
Provided further that no such notice shall be issued after
the 31st day of March, 1956.
384
(1B) Where any assessee to whom a notice has
been issued under clause (a) of sub-section
(1) or under sub-section (IA) for any of the
years ending on the 31 st day of March of the
years 1941 to 1948 inclusive applies to the
Central Board of Revenue at any time within
six months from the receipt of such notice or
before the assessment or reassessment is made,
whichever is earlier, to have the matters
relating to his assessment settled, the
Central Board of Revenue may, after
considering the terms of settlement proposed
and subject to the previous approval of the
Central Government, accept the terms of such
settlement, and, if it does so, shall make an
order in accordance with the terms of such
settlement specifying among other things the
sum of money payable by the assessee.
(1C) Any sum specified in a settlement arrived
at in pursuance of sub-section (1B) may be
recovered and any penalty for default in
making payment of any such sum may be imposed
and recovered in the manner provided in
Chapter VI.
(ID) Any settlement arrived at under this
section shall be conclusive as to the matters
stated therein; and no person, whose
assessments have been so settled, shall be en-
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titled to re-open in any proceeding for the
recovery of any sum under this Act or in any
subsequent assessment or reassessment
proceeding relating to any tax chargeable
under this Act or in any other proceeding
whatsoever before any court or other authority
any matter which forms part of such
settlement.
(4) A notice under clause (a) of sub-section
(1) may be issued at any time notwithstanding
that at the time of the issue of the notice
the period of eight years specified in that
sub-section before its amendment by clause (a)
of section 18 of the Finance Act, 1956 (18 of
1956) had expired in respect of the year to
which the notice relates.
Sub-section (IA) was inserted in s. 34 of the Act by the
Income-tax (Amendment) Act, 1954, and it came into force on
July 17, 1954. Clause (a) of sub-s. (1) of s. 34 was
amended by the Finance Act, 1956, with effect from April 1,
1956. Sub-section (1B) of s. 34, which was inserted by the
Income-tax (Amendment) Act, 1954, was also amended by the
Finance Act, 1956, whereunder the words "to whom a notice
has been issued under clause (a) of sub-section (1) or
under sub-section (IA) for any of the years ending on the
31st day of March of the years 1941 to 1948 inclusive" were
substituted for the words "to whom a notice has been issued
under sub-
385
section (1A)." Sub-section (4) was added by the Income-tax
(Amendment) Act, 1959.
The gist of the relevant provisions may be stated thus:
Under s. 34(1)(a), before it was amended by the Finance Act,
1956, in the case of concealed income a notice for re-
assessment could be issued within 8 years of the end of the
relevant year; and after the said amendment, notice in
respect of the said income could be issued at any time, but
it was subject to three conditions, namely, (i) it would not
be issued for any year prior to the year ending on March 31,
1941, (ii) such concealed income amounted to one lakh of
rupees or more in the aggregate, and (iii) the Income-tax
Officer gave reasons for doing so and obtained the consent
of the Central Board of Revenue. Sub-section (IA) of s. 34
did not undergo any change after the Finance Act, 1-956.
Escaped assessment for any year in respect of which the
relevant previous year fell within the period beginning on
September 1, 1939, and ending on March 31, 1946, could be
reached by issuing a notice thereunder: but, it was subject
to the condition that the income which escaped assessment
for any year amounted to or was likely to amount to rupees
one lakh or more; it was subject to a further condition that
no such notice should be issued after March 31, 1956. Sub-
section (1B) of s. 34, as amended in 1956, enabled an
assessee to whom a notice has been issued under cl. (a) of
sub-s. (1) or sub-s. (IA) for any of the years ending on
March 31 of the years 1941 to 1948 inclusive, to apply to
the Central Board of Revenue for a settlement of the amount
of tax payable by him, Sub-section (4), which was inserted
in 1959, emphasized the fact that a notice could be issued
under s. 34(1)(a), notwithstanding that the time of 8 years
had expired before the Finance Act, 1956, came into force.
We may at this stage notice the arguments advanced by learn-
ed counsel on the interpretation of the said provisions.
The arguments. of Mr. S. T. Desai, learned counsel for the
Revenue, may be summarized thus : The terms of s. 34(1)(a),
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after its amendment by the Finance Act, 1956, are clear and
unambiguous and the scope of the expression "at any time"
cannot be curtailed by construction. So construed,
proceedings for re-assessment in respect of escaped income
contemplated by the said clause can be initiated without any
restriction of time. The legislative history of the
fasciculus of sub-sections, namely, sub-ss. (1)(a), (1A),
(1B), (1C) and (1D) of s. 34, supports the said construction
and explains the relative scope of s. 34(1)(a) and s.
34(1A)--the former, as amended by the Finance Act, 1956,
operated after s. 34(1A) ceased to operate so far as the
escaped concealed income of war years was concerned. The
amendment of s. 34(1B) by the said Act and the introduction
of s. 34(4) by the Income-tax (Amendment) Act, 1959,
reinforces the said construction, namely,
386
that the amended s. 34(1)(a) lifted the ban of limitation
also in respect of the escaped income of the war years. The
retention of S. 34(1A) on the statute became necessary as
proceedings taken thereunder were pending at the time the
Finance Act, 1956, came into force and the consequential
provisions, such as, s. 34(1B) etc., with which s. 34(1A)
was integrally connected could not be applied if the latter
was omitted. Further, the said sub-sections still applied
to incomes falling under s. 34(1)(b) in respect of war
years. In any view, it must have been retained in
superabundant caution and that fact could not restrict the
scope of an otherwise clearly expressed provision, viz., s.
34(1)(a). The construction accepted by the High Court led
to the anomalous position of the Legislature prescribing a
shorter period of limitation in the case of tax-evaders
during the war years and no period of limitation for evaders
of such income during the prewar and post-war years. This
could not have been the intention of the Legislature, as the
evasion of tax during the war. years was comparatively of
larger amounts than during the other periods and for that
very reason it has passed the Taxation of Income
(Investigation Commission) Act, 1947, which was declared to
be void by this Court. This contention was accepted by the
Bombay and Calcutta High Courts in Laxminarayan R. Rathi v.
Income-tax Officer, Poona (1) and Mandanlal Jajodia v.
Income-tax Officer, Dist. II(1), Calcutta (2) respectively.
Mr. Palkhivala, learned counsel for the respondents,
answered this criticism thus. In a taxing Act one has to
look merely what is clearly stated and, if the
interpretation is open to doubt, the construction most
beneficial to the subject must be adopted. Section
34(1)(a), before it was amended in 1956, provided for the
genus out of which, by the Income-tax (Amendment) Act, 1959,
the species of r.. 34(1A) was carved out. While s.
34(1)(a) was a general provision, s. 34(1A) was a special
provision. On the principle of generalia specialibus non
derogant, the field covered by s. 34(1A) should be excluded
from that covered by s. 34(1)(a). If that was the legal
position before the 1956 amendment, the argument proceeded,
the same position would continue thereafter, as Parliament
retained s. 34(1A), along with its provisos, as it stood
before the amendment and amended only S. 34(1)(a). The
lifting of the ban of limitation, therefore, should, on the
basis of the said doctrine, be confined to the field covered
by S. 34(1)(a) before the amendment. If Parliament intended
to do away with the period of limitation in respect of the
escaped incomes during the war period, it would not have
retained s. 34(1A) on the statute book; for, in that event,’
it would serve no purpose. It would be wrong to say that it
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ceased to be operative after April 1, 1956, for the period
of limitation would still apply to proceedings in respect of
escaped incomes of the war years. Sub-s. (4) added in s. 34
in the year 1959 and s. 34(1B), as amended
(1) (1964) 52 I.T.R. 254.
(2) (1965) 58 I.T.R. 693.
387
in 1956, would not throw any light on the question, but in a
way would support the view that they were concerned only
with the escaped incomes covered by s. 34(1)(a), excluding
thereform those covered by s. 34(1A). The argument based on
the alleged anomaly led nowhere and indeed the retention of
s. 34(1A) on the statute book was intentionally done, as the
Parliament, having already placed a particular class of
assessees under a special and heavy burden, did not think
fit to make any provision which was likely to harass them
further. The ambiguity in the section, if any, should go
for the benefit of the tax-payer and not the tax-gatherer.
This argument was accepted by the Madhya Pradesh and Gujarat
High Courts in Rustomji v. Income-tax Officer, Special
Investigation Circle, Indore(1), and Mathurdas Govinddas v.
G. N. Gadgil, Income-tax Officer, Special Investigation
Office, Ahmedabad (2).
Before we advert to the said arguments, it will be
convenient to notice the relevant rules of construction.
The classic statement of Rowlatt, J., in Cape Brandy
Syndicate v. I.R.C. (3). still holds the field. It reads :
"In a Taxing Act one has to look merely at
what is clearly said. There is no room for
any intendment. There is no equity about a
tax. There is no presumption as to a tax.
Nothing is to be read in, nothing is to be
implied. One can only look fairly at the
language used."
To this may be added a rider’: in a case of reasonable
doubt, the construction most beneficial to the subject is to
be adopted. But even so, the fundamental rule of
construction is the same for all statutes, whether fiscal or
otherwise. "The underlying principle is that the meaning
and intention of a statute must be collected from the plain
and unambiguous expression used therein rather than from any
notions which may be entertained by the court as to what is
just or expedient." The expressed intention must guide the
court. Another rule of construction which is relevant to
the present enquiry is expressed in the maxim, generalia
specialibus non derogant, which means that when there is a
conflict between a general and a special provision, the
latter shall prevail. The said principle has been stated in
Craies on Statute Law, 5th Edn., at P. 205, thus
"The rule is, that whenever there is a
particular enactment and a general enactment
in the same statute, and the latter, taken in
its most comprehensive sense, would overrule
the former, the particular enactment must be
operative, and the general enactment must be
taken to affect only the other parts of the
statute to which it may properly apply."
(1) [1964] 54 I.T.R. 461 (2) [1965] 56
I.T.R. 621.
(3) [1921] 1 K.B. 64, 71.
388
But this rule of construction is not of, universal
application. It is subject to the condition that there is
nothing in the general provision, expressed or implied,
indicating an intention to the contrary : see Maxwell on
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Interpretation of Statutes, 11th Edn., at pp. 168-169. When
the words of a section are clear, but its scope is sought to
be curtailed by construction, the approach suggested by Lord
Coke in Heydons case (1), yield better results :
"To arrive at the real meaning, it is always
necessary to get an exact conception of the
aim, scope, and object of the whole Act : to
consider, according to Lord Coke : (1) What
was the law before the Act was passed; (2)
What was the mischief or defect for which the
law had not provided ; (3) What remedy
Parliament has appointed ; and (4) The reason
of the remedy."
With these rules of construction in mind, let us now tackle
the-problem raised in this case. Under s. 34(1)(a), after
it was amended by the Finance Act, 1956, a notice in respect
of an escaped concealed income could be issued at any time.
The terms of cl. (a) and the expression "at any time" are
clear and unambiguous and, if there is nothing in the Act
detracting from the width of the said terms, it is clear
that a notice can be issued at any time in respect of the
concealed income of any year not being a year ending before
March 31, 1941. But s. 34(1A) provides for the issue of
notice in respect of escaped income of the previous years
within the period beginning on September 1, 1939, and ending
on March 31, 1946. Does this sub-section detract from the
generality of s. 34(1)(a) ? The history of the said
provision may usefully be noticed. As we have stated
earlier, the Parliament passed the Taxation of Income
(Investigation Commission) Act, 1947, mainly to catch the
escaped incomes of the war profiteers. This Court in Suraj
Mall Mohta and Co. v. A. V. Viswanatha Sastri (2) and
Muthiah v. C.L.T. (3) held that s. 5(4) and 5(1) of the said
Act became void on the commencement of the Constitution as
offending Art. 14 thereof. The first decision led to the
insertion of sub-ss. (IA) to (ID) in S. 34 by the Income-tax
(Amendment) Act, 1954, with effect from July 17, 1954. The
object of the Amending Act was to provide for the assessment
or re-assessment of persons who had, to a substantial
extent, evaded payment of taxes during the war years and for
matters connected therewith. But at the time sub-s. (IA)
was inserted in s.34, the period of limitation provided with
regard to issue of notices under s. 34(1)(a) was 8 years and
for cases falling under s. 34(1)(b) it was 4 years; but, as
the Income-tax (Amendment) Act, 1954, came into force only
on July 17, 1954, the said periods of limitation prescribed
in respect of escaped concealed incomes during the said
period had run out except in respect
(1) [1584] 3 Rep. 7b. (2) [1955] 1
S.C.R. 448.
(3) [1955] 2 S.C.R. 1247.
389
of one or two years. So, with the twin object of "tending
the time and expediting the assessment, the second proviso
was introduced therein to the effect that no such notice
should be issued after March 31, 1956. But, notwithstanding
the said Act, presumably notices could not have been issued
against all the evaders of tax with incomes of rupees one
lakh or more during the said period. Parliament also wanted
to bring to tax escaped concealed incomes during the period
not covered by the said years. With that object, in 1956 s.
34 was amended by the Finance Act, 1956, by which it Was
provided that notice under s. 34(1)(a) can be issued at any
time. But sub-s. (IA) was retained, including the second
proviso. This amendment, along with the other amendments,
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made by the said Act came into force on April 1, 1956. In
1959, the said section was again amended by the Indian
Income-tax (Amendment) Act, 1959. Under sub-s. (4), as
amended by the 1959 amendment Act, notice under sub-s.
(1)(a) might be issued at any time notwithstanding that at
the time of the issue of notice the period of 8 years
specified in that sub-section before its amendment by the
Finance Act, 1956, had expired in respect of the year to
which the notice related. This amendment was necessitated
by the judgments of the Bombay and calcutta High Courts in
Debi Dutt v. T. Belan(1) and S. C. Prashar v. Vasantsen(2)
respectively holding that if the right of the Income-tax
Officer to reopen an assessment was barred under the law for
the time being in force, no subsequent enlargement of the
time could revive such right in the absence of "press words
or necessary intendment. Sub-section (4) was added to s. 34
to make it abundantly clear that notice under s. 34(1)(a)
could be issued at any time notwithstanding that the said
right was barred before the Amendment Act of 1956. This
history of the legislation loaves no room for doubt that the
intention of the Legislature was to bring the escaped
concealed income of rupees one lakh and more to tax without
any time limit. Before the 1956 Act was passed, the period
of limitation prescribed for proceeding against concealed
incomes of rupees one lakh and more during the war years and
the earlier years had expired. The Legislature stepped in
to prevent evasion of taxes on such incomes and lifted the
ban of limitation in respect thereof, subject to certain
conditions.
But the crucial question is, whether the Legislature by
making the relevant amendments has succeeded to effectuate
its intention. To state it differently, do the amended
provisions carry out its intention ?
Section 34(1)(a), as it now stands on the statute book,
expressly states that in cases falling under cl. (a) of sub-
s. (1) notice can be served thereunder on an assessee at any
time. The terms of s. 34(a) read with the 2nd proviso, take
in the concealed incomes of all the,
(1) [1959] 35 I.T.R. 781.
(2) [1956] 29 I.T.R. 857
390
years commencing from the year ending on March 31, 1941. It
does not exclude the incomes of the war years, but the said
incomes are sought to be excludes on the principle of
generalia specialibus non derogant. As we have pointed out
earlier, the said doctrine embodies a rule of construction,
but it has no universal application. To invoke it, the
general and special provisions shall occupy the same field.
In this case, both during the period between the amendments
of 1954 and 1956 and thereafter they occupied different
fields. By July 17, 1954, when sub-s. (IA) was introduced
in s. 34, no proceedings under s. 34(1)(a) could be
initiated except for the assessment year 1946-47 in respect
of the previous years that fell within the period beginning
on September 1, 1939, and ending on March 31, 1946, for they
were barred under the unmended section. Sub-section (IA),
therefore, practically governed a situation that was not
governed by the provisions of s. 34(1)(a). It was intended
to catch escaped incomes of the war years which were out of
the reach of s. 34(1)(a). It is not, therefore, appropriate
to describe sub-s. (IA) as one carved out of sub-s. (1)(a)
or to call it a species of which sub-s. (a)(1) is the genus.
Sub-section (IA) operated where sub-s. (1)(a) practically
ceased to function.
Now, coming to the period after the Finance Act, 1956, was
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passed, i.e., after April 1, 1956, a different situation
arose. The extended period given under the second proviso
to sub-s. (IA) expired on March 31, 1956. Thereafter, sub-
s. (IA) ceased to be operative in the sense that no notice
could thereafter be given thereunder. It worked itself out.
The Legislature could have extended the period under the
second proviso to sub-s. (IA), but it did not do so. It did
not give a further lease of life to it; instead it removed
the period of limitation under sub-s. (1)(a), as sub-s. (IA)
had become practically defunct. The wide phraseology of
sub-s. (1)(a) takes in all the escaped concealed incomes
during all the years commencing from 1941 and confers a
power on the Income-tax ,Officer to give notice thereunder
in respect of the said incomes without any bar of
limitation. There is, therefore, no conflict after April 1,
1956, between sub-s. (])(a) and sub-s. (]A), as the latter
ceased to be operative.,
There is another way of looking at the problem. Sub-section
(IA) does not really prescribe any period of limitation. It
enables the Income-tax Officer to take proceedings within a
particular time, though the period of limitation had
expired. In this view, no question of carving out a species
out of a genus arises. It conferred a special power on the
Income-tax Officer and the said power expired on April 1.
1956.
There is yet another way of looking at the problem. The
non-obstante clause in sub-s. (IA) indicates that it was
enacted to operate notwithstanding that the period of 8
years had expired. The said
391
sub-section served its purpose only when the period of 8
years governed a notice under sub-s. (1)(a). But when that
bar of limitation was removed, sub-s. (IA) had become
otiose.
Sub-section (1B), as amended by the Finance Act of 1956,
also throws some light on the interpretation of s. 34.
Before it was amended, an assessee to whom a notice had been
issued under sub-s. (1)(a) could apply to the Central Board
of Revenue for settlement of the amount of tax payable by
him. After the amendment, an assessee to whom a notice was
given under sub-s. (1)(a) and under sub-s. (IA) for any of
the years ending on March 31, 1941 to 1948 could apply for
such a relief to the Central Board of Revenue. The years
1941 to 1948 are the war years. This sub-section,
therefore, assumes that notice could be issued in respect of
the war years under sub-s. (1)(a). The notice contemplated
by sub-s. (1B) could only be a notice after the amendment of
1956, for such notice could not have been issued earlier
under sub-s. (1)(a) in respect of the said years. The
notice under sub-s. (IA) obviously refers to the notice
issued before the amendment of 1956 and pending disposal.
Sub-section (4) added by the Indian Income-tax (Amendment)
Act, 1959, also reinforces the said construction. As
indicated earlier, that sub-section was added to get over
the legal objection that proceedings barred before 1956 were
not revived under the 1956 Act. It is true that sub-s. (4)
refers only to sub-s. (1)(a), but the subsection indicates
that the Legislature assumed that proceedings after 1956
could only be taken under sub-s. (1)(a).
It was asked, with some plausibility, if the Legislature
assumed that sub-s. (IA) ceased to be operative, why it was
retained along with its proviso prescribing a period of
limitation in the amended section. Though no new notices
could be issued under that subsection after April 1, 1956.
notices already issued before that date were pending. They
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would be disposed of in the manner prescribed by sub-ss.
(IA), (1B), (1C) and (1D) of S. 34. All the said sub-
sections formed an integral code. The Legislature, pre-
sumably, intended to keep the said-sub-sections whereunder
proceedings had already been initiated and make available to
the said proceedings the procedure prescribed under the said
provisions. It may also be that sub-s. (1A) was kept in
super-abundant caution. Whatever that may be, it cannot, in
the circumstances mentioned by us, detract from the clear
provisions of sub-s. (1)(a).
We have carefully gone through the judgments of the various
High Courts, namely, Bombay, Madhya Pradesh, Gujarat and
Calcutta, cited at the Bar. We received considerable help
from the seasonings contained in the said judgments. As we
have in the course of the judgment dealt with the
conflicting reasons given by
10 Sup. C. I./66-12.
392
the High Courts, we do not think it necessary to consider
each of the four judgments in detail. For the reasons
mentioned above we agree with the conclusion arrived at by
the Bombay and Calcutta High Courts in preference to those
reached by the Madhya Pradesh and Gujarat High Courts.
In the result, the order of the High Court is set aside and
the petition filed under Art. 226 of the Constitution is
dismissed. The appeals are allowed with costs one hearing
fee.
Appeals allowed.
393