Full Judgment Text
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PETITIONER:
BANARASI DEVI
Vs.
RESPONDENT:
INCOME-TAX OFFICER, CALCUTTA
DATE OF JUDGMENT:
31/03/1964
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
SHAH, J.C.
SIKRI, S.M.
CITATION:
1964 AIR 1742 1964 SCR (7) 539
CITATOR INFO :
R 1968 SC 623 (28)
D 1987 SC1378 (2)
ACT:
Income-tax Act, (11 of 1922), as amended by Income-tax
(Amendment) Act (1 of 1959) s. 4-Fiscal enactments--Inter-
pretation of-"Issued" in s. 4 of the Amending Act-Meaning
of.
HEADNOTE:
For the assessment year 1947-48 the appellant in the first
case field a return of her income and the assessment was
completed sometime in 1948 as a result whereof it was found
that no tax was payable by her. On April 2,1956, the
appellant was ,served with a notice dated March 19, 1956,
under s. 34 (1) of the Income-tax Act, 1922, on the ground
of escaped assessment. The date of the notice fell within 8
years from the end of the relevant assessment year i.e.
March 31, 1948, but it was served beyond 8 years from the
date and therefore was clearly out of time under the
provisions of the said section. In the second case, the
appellant was assessed for the assessment year 1947-48 and
the tax thereon was deposited on his behalf. On April 2,
1956, the appellant was also served with a similar notice as
aforesaid. The appellants filed two petitions under Art.
226 for quashing the said notices and the learned Judge of
the High Court issued rules nisi to the Income-tax Officer,
the Commissioner of Income-tax and the Union of India. On
September 11, 1958, the rules were made absolute. The
respondents then preferred appeals to a Division Bench of
that Court. Pending the appeals, on March 12, 1959, s. 34
of the Act was amended by s.2 of the Amending Act, 1959.
After the said amendment the appeals were heard and relying
upon the said amendment the learned judges held that the
said notices, though served on the appellants after the
prescribed time, were served under s. 4 of the Amending Act.
On appeal by Special Leave it was urged on behalf of the
appellants that s.4 of the Amending Act only saved a notice
issued after the prescribed time, but did not apply to a
situation where notice was issued within but served out of
time. The respondents contended that the expression
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"issued" means "served" and that, in any view, it was
comprehensive enough to take in the entire process of giving
and serving of notice.
Held: To the present case the general rule of construction
of fiscal Acts would apply, and not the exception engrafted
on the rules; for, s. 4 of the Amending Act, cannot be
described as a provision laying down the machinery for the
calculation of tax. In substance it enables the Income-tax
Officer to reassess a person’s income which has escaped
assessment, though the time within which he could have so
assessed had expired under the Act before the amendment of
1959. It resuscitates barred claims. Therefore, the same
stringent rules of construction appropriate to a charging
section shall also apply to -such a provision.
Case law discussed.
On a true construction of s. 4 of the Amending Act, it must
be held that the clear intention of the legislature was to
save the validity of the notice as well as the assessment
from an
540
attack on the ground that the notice was given beyond the
prescribed period. That intention would be effectuated if
the wider meaning is given to the expression "issued". The
dictionary meaning of the expression "issued" takes in the
entire process of sending the notice as well as the service
thereof. The said word used in s. 34(1) of the Act itself
was interpreted by courts to mean ’served". The limited
meaning, namely, "sent" will exclude from the operation of
the provision a class of cases and introduce anomalies. In
the circumstances, by interpretation, the wider meaning of
the word "issued" must be accepted. In this view, though
the notices were served beyond the prescribed time, they
were saved under s.4 of the Amending Act.
Case law referred to
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 142 and
143 of 1963. Appeals by special leave from the judgment and
order dated July 13, 1961, of the Calcutta High Court in
Appeals from Original Orders No. 41 and 69 of 1959.
S. Chaudhury and K. R. Chaudhuri, for the appellants (in
C.A. No. 142/63).
M. Rajagopalan, K. Rajendra Chowdhary and K. R. Chaudhuri,
for the appellants (in C. A. No. 143/1963).
K. N. Rajagopal Sastri and R. N. Sachthey, for the res-
pondent (in both the appeals).
March 31, 1964. The Judgment of the Court was delivered by
SUBBA RAO, J.-These two appeals filed by special leave raise
the question of the true construction of the provisions of
s. 4 of the Indian Income-tax (Amendment) Act, 1959 (Act No.
1 of 1959), hereinafter called the Amending Act. The
material facts lie in a small compass and they are as
follows. For the assessment year 1947-48 the appellant in
Civil Appeal No. 142 of 1963 filed a return of her income
before the Income-tax Officer, District IV, Calcutta, and
the assessment was completed sometime in 1948 as a result
whereof it was found that no tax was payable by her. on
April 2, 1956, the Income-tax Officer served on her a notice
dated March 19, 1956, under s. 34(7) of the Indian Income
tax Act, 1922, hereinafter called the Act, on the ground of
escaped assessment. The date of the notice fell within 8
years from the end of the relevant assessment year i.e.,
March 31, 1948; but it was served beyond 8 years from that
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date and, therefore, was clearly out of time under the
provisions of the said section.
In Civil Appeal No. 143 of 1963, for the assessment year
1947-48 the appellant was assessed on a total income
541
of Rs. 28,993/- on December 30, 1948, by the Income-tax
Officer and the tax thereon amounting to Rs. 4,747-13-0 was
deposited on behalf of the appellant in the Reserve Bank
of,,, India. On April 2, 1956, the appellant was served
with a notice dated March 19, 1956, by the Income-tax
Officer purporting to be under s. 34 of the Act on the
ground of escaped assessment. The date of the notice fell
within 8 years from the end of the relevant assessment year,
i.e., March 31, 1956; but it was served beyond 8 years from
that date and was, therefore, clearly out of time under the
provisions of the said section.
The appellants in the two appeals filed two petitions in the
High Court of Calcutta under Art. 226 of the Constitution
for quashing the said notices and for other appropriate
reliefs. On March 20, 1957, Sinha, J., of that Court issued
rules nisi on the said two applications to the Income-tax
Officer, the Commissioner of Income-tax and the Union of
India. On September 11, 1958, the said Judge made the rules
absolute. The respondents to the applications preferred
appeals from the judgment of Sinha, J., to a Division Bench
of that Court. Pending the appeals, on March 12, 1959, s.
34 of the Act was amended by s. 2 of the AmendinAct. After
the said amendment the appeals were heard by a Division
Bench of the High Court, consisting of Bose, C. J., and G.
K. Mitter, J. Relying upon the said amendment the learned
Judges held that the said notices, though served on the
appellants after the prescribed time, were saved under s. 4
of the Amending Act. In that view they set aside the orders
of Sinha, J., and dismissed the writ petitions. Hence the
appeals.
Learned counsel for the appellants contends that the notices
under s. 34(1) of the Act were served on the appellants
beyond 8 years from the end of the assessment year and.
therefore, were barred and that on a true construction of
the provisions of s. 4 of the Amending Act, the said notices
were not saved thereunder. To appreciate the contention it
is necessary to read the relevant provisions of the Act.
before and after the amendment.
Section 34(1) of the Indian Income-tax Act, 1922. before it
was amended by the Finance Act No. XVIII of 1956:
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 hit-, income under Section 22 for
any year or to disclose fully
542
and truly all material facts necessary for his
assessment for the year, income, profit or
gain
chargeable to income-tax have escaped
assess-
ment 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, or
(b)
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he may in cases falling under clause (a) at
any time within eight years 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 re-compute the loss or
depreciation allowance; and the provisions of
this Act shall, so far as may be applied
accordingly as if the notice were a notice
issued under that subSection.
Provided that where a notice under sub-
Section (1) has been issued within the time
therein limited, the assessment or re-
assessment to be made in pursuance of such
notice may be made before the expiry of one
year from the date of the service of the
notice even if such period exceeds the period
of eight years or four years, as the case may
be.
Section 4 of the Amending Act, (Act 1 of
1959)
No notice issued under clause (a) of sub-
section (1) of section 34 of the principal Act
at any time before the commencement of this
Act and no assessment, re-assessment or
settlement made or
other proceeding-, taken in consequence of
such notice shall be called in question in any
Court, tribunal or other authority merely on
the ground that at the time the notice was
issued or at the time the assessment or re-
assessment was made, the time within which
such notice should have been issued or the
assessment or reassessment should have been
made under that section as in force before its
amendment by clause (a) of section 18 of the
Finance Act, 1956, and expired.
Section 34(1) (a) of the Act empowered the Income-tax
,Officer to assess concealed income which escaped assessment
by serving a notice on the assessee at any time within 8
years
543
of the end of the assessment year in respect whereof the
said income has escaped assessment. Section 4 of the
Amending Act debars the court from questioning the validity
of notice issued or the assessment or re-assessment made
under sub-s. (1) (a) of s. 34 of the Act on the ground that
the time for the issue of such notice or the making of such
assessment or re-assessment had expired under the said sub-
section before it was amended by s. 18 of the Finance Act of
1956.
Learned counsel for the appellants contends that s. 4 of the
Amending Act only saver, a notice issued after the pres-
cribed time. but does not apply to a situation where notice
is issued within but served out of time. Learned counsel
for the respondents argues that the expression "issued"
means "served" and that, in any view, it is comprehensive
enough to take in the entire process of giving and serving
of notice.
Before construing the section it will be useful to notice
the relevant rules of construction of a fiscal statute. In
Oriental Bank v. Wright(1) the Judicial Committee held that
if a statute professed to impose a charge, the intention to
impose a charge upon a subject must be shown by clear and
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unambiguous language. In Canadian Eagle Oil Co. v. R.,(2)
Viscount Simon L. C. observed:
"In the words of Rowlatt
J................................. in a taxing
Act one has to look at what is clearly said.
There is no room for any intendment. There is
no equity about a tax. There is no presump-
tion as to a tax. Nothing is to be read in,
nothing is to be implied. One can only
look fairly at the language used."
In other words, a taxing statute must be couched in express
and unambiguous language. The same rule of construction has
been accepted by this Court in Gursahai Saigal v. Com-
missioner of Income-tax, Punjab (3), wherein it was stated:
"It is well recognized that the rule of
construction that if a case is not covered
within the tour corners of the provisions of a
taxing statute, no tax can be imposed by
inference or by analogy or by trying to probe
into the intentions of the legislature and by
considering what was the substances of the
matter applies only to a taxing provision has
no application to all provisions in a taxing
statute. It does not apply to a provision not
creating a charge for the tax but laying down
the machinery for its calculation or
procedures
(1)(1880) 5 A.C. 842, 856.
(2)[1946] A.C. 119, 140.,
(3) 1868 Punj. Rec. Crl. Case No. 6.
544
for its collection. The provisions in a
taxing statute dealing with machinery for
assessment have to be construed by the
ordinary rules of construction, that is to
say, in accordance with the clear intention of
the legislature, which is to make a charge
levied effective.
In that case, the court was called upon to construe the
provisions of s. 18A of the Income-tax Act, 1922, which laid
down the machinery for assessing the amount of interest and,
therefore, this court did not apply the stringent rule of
construction. Apart from the emphasis on the letter of the
law, the fundamental rule of construction of a taxing
statute is not different from that of any other statute and
that rule is stated by Lord Russell of Killowen C. J. in
Attorney-General v. Calton Ban(1), thus:
"The duty of the court
is........................... to give effect
to the intention of the legislature, as that
intention is to be gathered from the language
employed, having regard to the context in
connection with which it is employed."
To the present case the general rule of construction of
fiscal Acts would apply, and not the exception engrafted on
that rule; for, s. 4 of the Amending Act cannot be described
as a provision laying down the machinery for the calculation
of tax. In substance it enables the Income-tax Officer to
reassess a person’s income which has escaped assessment,
though the time within which he could have so assessed had
expired under the Act before the amendment of 1959. It
resuscitates barred claims. Therefore, the same stringent
rules of construction appropriate to a charging section
shall also apply to such a provision.
Before the Amending Act of 1959 was passed, Income tax
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Officers issued notices before April 1, 1956, and also after
that date for reopening assessments made beyond 8 years from
the issue of such notices. The validity of such notices was
questioned. To save the validity of such notices the
Amending Act was passed. This Court in S. C. Prashar v.
Vayasantsen Dwarkadas(2) held, on a construction of s. 4 of
the Amending Act, that it operated and validated the notices
issued under s. 34(1) (a) of the Act. as amended in 1948,
even earlier than April 1, 1956. In other words, notices
issued under s. 34(1) (a) of the Act before or after April
1, 1956, ,could not be challenged on the ground that they
were issued beyond the time limit of 8 years from the
respective assessment years prescribed by the 1948 amendment
Act. Section
(1) [1899] 2. Q.B. 158, 164.
(2) [1964] 1 S.C.R. 29.
545
4 of the Amending Act of 1959, therefore, was enacted for
the sole purpose of saving the validity of such notices in
respect of all escaped incomes relating to any year commenc-
ing from the year ending on March 31, 1941, though they In
were issued beyond the prescribed time. If the construction
sought to be placed by the learned counsel for the
appellants be accepted, it would defeat the purpose of the
amendment in some cases. If the words were clear and
exclude the class of cases where the notices were sent
before 8 years from the date of assessment, but served
thereafter, this Court has to give them the said meaning.
This bring us to the question of construction of the pro-
visions of s. 4 of the Amending Act. The crucial word in
the said section is "issued". The section says that though
a notice was issued beyond the time within which such notice
should have been issued, its validity could not be
questioned. If the word ’issued" means "sent", we find that
there is no provision in the Act prescribing a time limit
for sending a notice, for, under s. 34(1)(a) of the Act a
notice could be served only within 8 years from the relevant
assessment year. It does not provide any period for sending
of the notice. Obviously, therefore, the expression
"issued" is not used in the narrow sense of "sent".
Further, the said expression has received, before the
amendment, a clear judicial interpretation. Under s.
34(1)(a) of the Act the Income-tax Officer may in cases
falling under cl. (a) at any time within 8 years serve on
the assessee a notice. The proviso to that section says
that where the notice under s. 34(1)(a) is within time
therein limited, the assessment or re-assessment to be made
in pursuance of such notice may be made before the expiry of
one year from the date of the service of the notice even if
such period exceeds the period of 8 years or 4 years, as the
case may be. In Commissioner of Income-tax, Bombay South v.
D. V. Ghurve(1), it was argued that a notice sent before 8
years though served beyond 8 years was in compliance with
the section; and in support of that argument the expression
"issued" in the proviso was relied upon to limit the meaning
of the word "served" in the substantive part of the section.
Rejecting that argument, Chagla, C. J., speaking for the
Court, observed:
"In other words, the attempt is to equate the
expres-
sion "served" used in section 34 with the
expres-
sion "issued" used in the proviso to sub-
section
(3). Now we must frankly confess that we find
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it
difficult to understand why the Legislature
has used in the proviso the expression "where
a notice under sub-section (1) has been issued
within the
(1)(1937) 31 I.T.R. 683, 686.
546
time therein limited". In sub-section (1) no
time is limited for the issue of the notice:
time is only limited for the service of the
notice-, and therefore it is more appropriate
that the expression "issued" used in the
proviso to sub-section (3) should be equated
with the expression "served" rather than that
the expression "served" used in sub-section
(1) should be equated with the expression
"issued" used in the proviso to sub-section
(3)."
This decision equated the expression "issued" with expres-
sion "served". The Allahabad High Court in Sri Niwas v.
Income-tax Officer(1) has also interpreted the word "issued"
to mean "served". The relevant rule of construction is
clearly stated by Viscount Buckmaster in Barras v. Aberdeen
Steam Trawling and Fishing Co. Ltd.(2) thus:
"It has long been a well established principle
to be applied in the consideration of Act of
Parliament that where a word of doubtful
meaning has received a clear judicial
interpretation the subsequent statute which
incorporates the same word or the same phrase
in a similar context, must be con,-,trued so
that the word or phrase is interpreted
according to the meaning that has previously
assigned to it."
Section 4 of the Amending Act was enacted for saving the
validity of notices issued under s. 34 (1) of the Act. When
that section used a word interpreted by courts in the
context of such notices, it would be reasonable to assume
that the expression was designedly used in the same sense.
That apart, the expressions "issued" and "served" are used
as interchangeable terms both in dictionaries and in other
statutes. The dictionary meaning of the word "issue" is
"the act of sending out, put into circulation, delivery with
authority or delivery". Section 27 of the General Clauses
Act (Act X of 1897) reads thus:
"Where any Central Act or Regulation made
after the commencement of this Act authorizes
or requires any document to be served by post,
whether the expression "serve" or either of
the expression, "give" or "send" or any other
expression is used, then, unless a different
intention appears, the service shall be deemed
to be effected by properly addressing,
prepaying and posting
(2) [1933] A.C. 402, 411.
(1) (1956) 30 I.T.R. 381.
547
by, registered post, a letter containing the
document, and unless the contrary is proved,
to have been effected at the time at which the
letter would be delivered in the ordinary
course of post."
It would be seen from this provision that Parliament used
the words "serve", "give" and "send" as interchangeable
words. So too, in ss. 553, 554 and 555 of the Calcutta
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Municipal Act, 1951, the two expressions "issued to" or
"served upon" are used as equivalent expressions. In the
legislative practice of our country the said two expressions
are sometimes used to convey the same idea. In other words,
the expression "issued" is used in a limited as well as in a
wider sense. We must, therefore, give the expression
"issued" in s. 4 of the Amending Act that meaning which
carries out the intention of the Legislature in preference
to that which defeats it. By doing so we will not be
departing from the accepted meaning of the expression, but
only giving it one of its meanings accepted, which fits into
the context or setting in which it appears.
With this background let us give a closer look to the
provisions of s. 4 of the Amending Act. The object of the
section is to save the validity of a notice issued beyond
the prescribed time. Though the time within which such
notice should have been issued under s. 34(1) of the Act, as
it stood before its amendment by s. 18 of the Finance Act of
1956, had expired, the said notice would be valid. Under s.
34(1) of the Act, as we have already pointed out, the time
prescribed was only for service of the notice. As the
notice mentioned in s. 4 of the Amending Act is linked with
the time prescribed under the Act, the section becomes
unworkable if the narrow meaning is given to the expression
"issued". On the other hand, if we give wider meaning to
the word, the section would be consistent with the
provisions of s. 34(1) of the Act. Moreover, the narrow
meaning would introduce anomalies in the section: while the
notice, assessment or re-assessment were saved, the
intermediate state of service would be avoided. To put it
in other words, if the proceedings were only at the stage of
issue of notice, the notice could not be questioned, but if
it was served, it could be questioned; though it was served
beyond time, if the assessment was completed, its validity
could not be questioned. The result would be that the
validity of an assessment proceeding would depend upon the
stage at which the assessee seeks to question it. That could
not have been the intention of the Legislature. All these
anomalies would disappear if the expression was given the
wider meaning.
LP(D)ISCI-18(a).....
548
To ’summarize: the clear intention of the Legislature is to
save the validity of the notice as well as the assessment
from an attack on the ground that the notice was given be
yond the prescribed period. That intention would be effec-
tuated if the wider meaning is given to the expression
"issued" takes in the entire process of sending the notice
as well as the service thereof. The said word used in s.
34(1) of the Act itself was interpreted by courts to mean
"served". The limited meaning, namely, "sent" will exclude
from the operation of the provision a class of cases and
introduce anomalies. In the circumstances, by
interpretation, we accept the wider meaning the word
"issued" bears. In this view, though the notices were
served beyond the prescribed time, they were served under s.
4 of the Amending Act. No other point was raised before us.
In the result, the appeals fail and are di;-,missed with
costs. There will be one hearing fee.
Appeals dismissed.
549