TMI Blog1963 (5) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... t). On 23rd March, 1962, the Income-tax Officer, Special Investigation Circle, Poona, issued nine notices under section 34 of the Act, in respect of assessment years 1940-41 to 1948-49. All these notices are in identical terms, In brief, it is stated in these notices that whereas the Income-tax Officer had reason to believe that the income of the assessee assessable to income-tax for the said assessment years had escaped assessment, been under-assessed, or had been the subject of computation of excessive loss or depreciation allowance, it was proposed by the Income-tax Officer to assess or reassess the said income. The notice further called upon the assessee to deliver to the Income-tax Officer not later than 27th April, 1962, or within 35 days of the receipt of the notice, a return in the attached form of the assessee's total income and total word income assessable for the said years. The notices further stated that they had been issued after obtaining the necessary satisfaction of the Central Board of Revenue. By this petition, the assessee seeks to get quashed seven out of these nine notices on the ground that it was beyond the jurisdiction of the Income-tax Officer to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat his balance-sheet showed a capital of ₹ 10 lakhs and odd, though the sources of the family, of which Kisanlal was the karta, were meagre. This large capital was used for making advances to various firms in which Laxminarayan Rathi was a partner. The said large advances made to Laxminarayan Rathi were practically without interest. Further investigation in the matter led the respondent to believe that the capital alleged to belong to Kisanlal really belonged to the petitioner family. The respondent having reason to believe that this large capital which belonged to the petitioner represented his-income from undisclosed sources, action under section 34 was initiated after obtaining the necessary satisfaction of the Board of Revenue. According to Mr. Joshi, the notices issued fall under section 34(1)(a), and that is the apposite provision of law applicable to the case. Under the said section 34(1)(a), it is open to the respondent to issue notice at any time, and, therefore, it was within his jurisdiction and competence to issue these notices ; the notices are not bad in law, and are not liable to be quashed. The rival contentions raised before us relate principally to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 other two provisos and the Explanation to section 34(1)(a) are not material). (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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by Mr. Palkhivala, namely, that the notices fell under section 34(1A) and not under section 34(1)(a), the argument of Mr. Palkhivala is that the present case relating to assessment years 1940-41 to 1946-47 is covered by both sections 34(1)(a) as well as section 34(1A). The provisions of section 34(1)(a) are general provisions relating to the years from 1940-41 onwards, while the provisions of section 34(1A) govern only the cases relating to assessment years 1940-41 to 1946-47. The special provisions contained in section 34(1A), therefore, must be read as an exception to the general provision contained in section 34(1)(a). Consequently, the cases would fall under section 34(1A) and be governed by those provisions. Section 34(1A) in terms provides that notices relating to the said years must be issued before 31st March, 1956. The impugned notices were issued on 23rd March, 1962, and, therefore, bad in law. He has placed reliance on a Full Bench decision reported as Shazada Nand and Sons v. Central Board of Revenue [1962] 45 ITR 233 . It is true that there are some. common features in the provisions of section 34(1)(a) and section 34(1A). Section 34(1)(a) empowers the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al one was intended to embrace the special cases provided for by the previous one, or there be something in the nature of the general one making it unlikely that an exception was intended as regards the special Act. In the, absence of these conditions, the general statute is read as silently excluding from its operation the cases which have been provided for by the special one. The same principles would also be applicable when there are, in one and the same statute, a certain provision dealing with a special case and the other provision which are in general terms. Craies on Statute Law, 5th edition, puts the matter thus at page 205 : 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. It would thus be seen that to attract the principle quoted above, the requisite conditions are: Firstly, both the general enactment and the particular enactment must be simultaneously ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Investigation Commission) Act, 1947, in force, under which cases had been referred by the Central Government to the Commission for investigating the cases of certain asses-sees whose income made by them during the war period, i.e., the period commencing from 1st September, 1939, to 31st March, 1946, had, in the opinion of the Central Government escaped assessment. That enactment was declared ultra vires the Constitution by the Supreme Court some time in 1954. The position thus was neither notices could be issued under section 34(1)(a) in respect of assessment years prior to 1945-46, nor could the cases of assessees, who had concealed their income made during the war years, be dealt with under the Taxation on Income (Investigation Commission) Act, 1947. It is to get over these difficulties that sub-sections (1A) to (1D) were inserted in section 34 by the aforesaid Amending Act, 1954. Section 34(1A) enabled the Income-tax Officer to issue notice under that section similar in terms to the notice issued under section 34(1)(a) and (b), and proceed to assess or reassess the income, profits and gains of the assessee made in any of the war years, i.e., the period beginning from 1st Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Revenue was obtained for issuing the notice. Section 34(1B) also has been introduced by the Finance Act, 1956, and sub-section (4) was added by the Indian Income-tax (Amendment) Act, 1959, with effect from 12th March, 1959. To these provisions we would advert later. The position thus obtaining after 1st April, 1956, was that it was open to the Income-tax Officer to issue notice at any time under section 34(1)(a) and proceed to assess or reassess the assessee in respect of the escaped concealed income exceeding one lakh of rupees in respect of any year from 1940-41 onwards, after obtaining the necessary satisfaction of the Central Board of Revenue. But, as would be seen from the terms of section 34(1A), it was no more open to the Income-tax Officer to issue notice under section 34(1A) and proceed to assess or reassess the escaped concealed income of the war years, because the outside limit prescribed in the proviso had by then expired. It would thus be seen that section 34(1)(a) either as it stood prior to its amendment by the Finance Act, 1956, or as it stood after its amendment by the Finance Act, 1956, and section 34(1A) were not simultaneously operating on the escaped income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an exception to the cases covered by sub-section (1)(a), and if this be the correct view, then the notice in question cannot but be held to fall under sub-section (1A). With utmost respect, for the reasons stated above, and for reasons we will hereinafter give, we find it difficult to take a similar view. This brings us to the second contention raised by Mr. Palkhivala that the outside limit mentioned in section 34(1A) for issuing a notice in respect of war years must be imported into section 34(1)(a) for issuing notices in respect of those years. The argument is that the legislature, when it enacted the Finance Act, 1956, was well aware that section 34(1A) was on the statute book, and that it provided the outside limit of March 31, 1956, for issuing notices to bring to tax escaped concealed income of war years. The legislature has not chosen to delete the provisions of section 34(1A), or, at any rate, the proviso to the said sub-section, which prescribed the outside limit. The retention of section 34(1A) on the statute book indicates the clear intention of the legislature that the outside limit prescribed in section 34(1A) was intended to apply to notices issued under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er prior to the amendment of section 34(1)(a) or after its amendment were operating over the escaped income of war years at different times. Section 34(1A) operated when section 34(1)(a), as it stood prior to its amendment, ceased to operate. Section 34(1)(a), as it stands after its amendment operates after section 34(1A) has ceased to operate so far as the escaped concealed income of war years is concerned. There being thus no conflict between the two provisions, the question of reconciling these two provisions, in our view, does not arise. Even assuming that there be any conflict between the two provisions, the legislature has clearly indicated its intention by omitting the period of limitation of eight years and expressly providing that the Income-tax Officer may in cases falling under clause (a) issue notices at any time . The legislature having thus expressly stated its intention, in our opinion, we would not be justified in reading in section 34(1)(a), the outside limit specified in section 34(1A), and thereby derogate from the intention of the legislature expressly stated in section 34(1)(a). The said intention of the legislature also is disclosed when the legislative histo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess terms authorised him to take action at any time. It has next to be considered whether the retention of section 34(1A) on the statute book leads to the conclusion that the outside limit mentioned in section 34(1A) must necessarily be read in section 34(1)(a). In our opinion, it is not possible to say that the retention of section 34(1A) necessarily leads to that conclusion. It may equally be that the legislature finding section 34(1A) having ceased to be operative after 31st March, 1956, and having expressly provided in section 34(1)(a) that the Income-tax Officer should take action at any time, perhaps did not think it necessary to omit these provisions, possibly in view of the cases pending consequent on action having been taken under section 34(1A) between the period 17th July, 1954, to 31st March, 1956. Mr. Joshi has also referred to the amendment effected in sub-section (1B) and to sub-section (4) added by the Amending Act, 1959, as indicating the legislative intent that from April 1, 1956, it is competent to the Income-tax Officer to issue notice under section 34(1)(a) at any time in respect of the years 1940-41 onwards. There is considerable force in the argument of Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment to sub-section (1B) by extending it to cases falling under section 34(1)(a) relate to proceedings started by a notice given under section 34(1)(a) after 1st April, 1956, and that is indicative of the legislative intent to empower the Income-tax Officer to issue notice under section 34(1)(a) at any time after April 1, 1956, in respect of war years also. Mr. Mehta, giving a reply, on behalf of the assessee, to the argument of Mr. Joshi, contended that the extension of the facility to proceedings started under section 34(1)(a) was only in respect of the assessment year 1947-48, which was not covered by section 34(1A), or the facility extended may be in respect of proceedings started consequent on orders of higher authorities or the Income-tax Tribunal, the High Court or the Supreme Court. We find it difficult to restrict the general language of sub-section (1B) to only such limited field as suggested by Mr. Mehta. Coming to the provisions of sub-section (4), which is introduced by the Amending Act of 1959, it in express terms provides that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had escaped assessment or had been under-assessed, prescribed that notice for such assessment should be issued within four years of the end of the chargeable accounting period. A question was raised whether, in the circumstances, the period of limitation of four years mentioned in section 14 would also govern the issue of notice under section 11. The position obtaining was an anomalous position. The income which had escaped assessment could only be taxed by issuing a notice within a period of four years, while the proceedings for the initial assessment could under section 11 be started by issuing a notice at any time. In these circumstances, it was held that the legislative intent of laying down the period of four years for starting assessment proceedings was indicated in section 14. Afterstating the principle that the Act must be construed as a whole and the duty of the court must be, as far as possible, to reconcile the various provisions of the statute, the learned Chief Justice, who delivered the judgment of the court, at pages 169-170 of the report, observed : The intention of the legislature was clear that after four years of the end of the chargeable accounting pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no application to the facts of the present case. The facts in Bisesar House case (Supra ) are similar to Narsee Nagsee's case (Supra) , though it arose under another enactment, namely, the C.P. and Berar Sales Tax Act. Sub-section (2) of section 11 thereof empowered the Sales Tax Officer to issue a notice for the purpose of initial assessment if he was not satisfied with the return filed by the dealer. The section, however, was silent as to the period of time within which the notice had to be issued. Sub-section (5) of section 11 deals with the case where the Commissioner receives information that the dealer, who is liable to pay tax under the Act, has failed to apply for registration, and the Commissioner was given power to assess such dealer, but the period of limitation was fixed and that period of limitation was any time within three calender years from the expiry of such period during which the dealer was liable to pay tax. Following the ratio in Narsee Nagsee's case (Supra) , it was held that the period of limitation mentioned in sub-section (5) of section 11 should be imported into sub-section (2) of section 11 of the Act. We have already shown that the ratio of N ..... 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