1991 (9) TMI 4 - SC - Income Tax

Section 150 of Income-Tax Act 1961 woiuld be applicable even if assessments has been reopened under the Income-Tax Act 1922 - simplest course would have been to provide that the new Act would apply to all proceedings for the assessment year 1962-63 and thereafter

Summary

Issues Involved:

1. Applicability of Section 150(1) of the Income-tax Act, 1961.
2. Interpretation of Section 297(2)(d)(ii) of the Income-tax Act, 1961.
3. Validity of reassessment notices issued under Section 148 of the Income-tax Act, 1961.
4. Conflict of judicial opinions among various High Courts regarding the interpretation of Section 150(1).

Detailed Analysis:

1. Applicability of Section 150(1) of the Income-tax Act, 1961:

The core issue in this appeal revolves around the language of Section 150(1) of the Income-tax Act, 1961. The appellant contended that the reassessment notices issued in March 1977 for the assessment years 1953-54 to 1961-62 were barred by limitation. The Department, however, argued that Section 150(1) lifted the time bar for reassessment proceedings initiated to give effect to findings or directions in orders passed by appellate authorities. The court noted that Section 150(1) removes the bar of time when reassessment proceedings are initiated in consequence of or to give effect to a finding contained in an order passed by any authority in any proceeding by way of appeal, reference, or revision.

2. Interpretation of Section 297(2)(d)(ii) of the Income-tax Act, 1961:

Section 297(2)(d)(ii) permits the issue of a notice under Section 148, subject to the provisions contained in Sections 149 or 150. The appellant argued for a literal interpretation of Section 150(1), which would mean that the exemption from the time limit only applies to orders passed under the 1961 Act. However, the court found that such a literal interpretation would result in an anomaly, as it would discriminate against cases where reassessment proceedings are initiated to give effect to orders passed under the 1922 Act. The court held that the provisions of Section 297(2)(d)(ii) should be read to permit the applicability of Section 150 with necessary modifications to avoid such anomalies.

3. Validity of reassessment notices issued under Section 148 of the Income-tax Act, 1961:

The court observed that the reassessment proceedings were rightly initiated under Section 148 of the Act. However, no notice under Section 148 could have been issued in March 1977 for the assessment years in question unless Section 150(1) applied. The court concluded that Section 150(1) should be interpreted to lift the time bar for reassessment proceedings initiated to give effect to orders on appeal, revision, or reference, even if such orders were passed under the 1922 Act. This interpretation aligns with the intention of the Legislature to provide continuity in proceedings despite the repeal of the 1922 Act.

4. Conflict of judicial opinions among various High Courts regarding the interpretation of Section 150(1):

The court acknowledged the conflict of judicial opinion among various High Courts on the interpretation of Section 150(1). The Allahabad High Court, in the decision under appeal, and the Calcutta High Court in ITO v. Eastern Coal Co. Ltd. [1975] 101 ITR 477, supported the Department's view. Conversely, earlier decisions by the Allahabad and Bombay High Courts took a contrary view. The Supreme Court examined the statutory provisions and the facts of the present case to resolve this conflict. The court emphasized that an interpretation resulting in an anomaly or absurdity should be avoided and that the transitory provisions should be construed to effect continuity rather than create a lacuna.

Conclusion:

The Supreme Court affirmed the conclusion of the High Court, holding that the reassessment proceedings initiated under Section 148, read with Section 297(2)(d)(ii), were valid and not barred by limitation due to the applicability of Section 150(1). The appeal was dismissed with no costs.