TMI Blog1947 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... pers requiring persons generally to submit the returns in the prescribed form. The Indian Finance Act of 1940 had not been extended by any Notification up to that time to this partially excluded area. On the 26th May, 1940, the Governor of Bihar issued a Notification under Section 92 (1) of the Government of India Act, 1935, in the following terms : In exercise of the power conferred by sub-section (1) of Section 92 of the Government of India Act, 1935, the Governor of Bihar is pleased to direct that each of the Acts specified in the Schedule shall be deemed to have been applied to the Santal Parganas and the Chotanagpur Division with effect retrospectively from the date on which each of the said Acts came in to force in other parts of the Province of Bihar. SCHEDULE (1) The Indian Income-tax (Amendment) Act, 1939. (VII of 1939). (2) The Income-tax Law Amendment Act, 1940. (XII of 1940). (3) The Excess Profits Tax Act, 1940. (XV of 1940). (4) The Indian Finance Act, 1940. (XVI of 1940). To remove doubts as to the retrospective applicability of the Indian Finance Act, 1940, and the other Acts mentioned in the Notification, acting u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal but the same were also dismissed on the 27th July, 1943. On the application of the assessees, the Income-tax Tribunal framed a question of law under Section 66 (1) of the Indian Income-tax Act, 1922, and submitted the same in each case for the opinion of the High Court of Judicature at Patna. The question was in the following terms : Whether the Notification dated the 26th May, 1940, read with the Chotanagpur Division and Santal Parganas District Validating Regulation, 1941, issued by the Governor of Bihar is competent in law to validate the proceedings initiated and completed for the assessment of the applicant under the Indian Income-tax Act, 1922, as amended by the Indian Incometax (Amendment) Act, 1939, for the assessment year 1940-41 ? The High Court answered the question in the affirmative. As the judgments dealt with the construction of Sections 91 and 92 of the Government of India Act, the High Court granted a certificate under Section 205 (1) of the Government of India Act, 1935. The appellants have thereupon brought these appeals to this Court. Section 91 (1) (which only is material for the discussion in these appeals) and Section 92 of the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Income-tax Act (XI of 1922), it is provided that the Act extends to the whole of British India including Baluchistan and Santal Parganas. It may be noted that this Act was passed before the Government of India Act of 1935. The term British India is defined in Section 311(1) of the Constitution Act as follows : ' British India ' means all territories for the time being comprised within the Governors' provinces and the Chief Commissioners' provinces. The areas in question are a part of the Province of Bihar and are therefore included in a Governor's Province. By Section 292 of the Constitution Act, it is provided that notwithstanding the repeal by that Act of the previous Government of India Act, but subject to the other provisions of the Act, all the law in force in British India immediately before the commencement of Part III of the Act shall continue in force in British India until altered or repealed or amended by a competent legislature or other competent authority. It is therefore clear that the Indian Incometax Act (XI of 1922) was in force when the Constitution Act came into force and continued to remain operative, amongst others, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of a notice. The issue or receipt of a notice is not, however, the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessees to pay the tax. It may be urged that the issue and service of a notice under Section 22(1) or (2) may effect the liability under the penal clauses which provide for failure to act as required by the notice. The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice. Suppose a person, even before a notice is published in the papers under Section 22(1), or before he receives a notice under Section 22(2) of the Income-tax Act, gets a form of return from the Income-tax Office and submits his return, it will be futile to contend that the Income-tax Officer is not entitled to assess the party or that the party is not liable to pay any tax because a notice had not been issued to him. The liability to pay the tax is founded on Sections 3 and 4 of the Incometax Act, which are the charging sections. Section 22 etc., are the machinery sections to determine the amount of tax. Lord Dunedin in Whitney v. Commissioners of Inland Revenue ([1926] A. C. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts mentioned in the Notification dated the 26th May, 1940, and Regulation I of 1941 retrospectively. It was contended that the Court should be slow to give retrospective effect to legislation, particularly when it is a taxing legislation. It is therefore necessary to consider the words of Section 92 and the Notification and Regulation in question. Section 92 (1) empowers the Governor to direct, by public Notification, that an existing Act of the Federal or Provincial Legislature shall, in its application to the whole or a portion of the excluded or partially excluded area, have effect, subject to such exceptions or modifications as he thinks fit. In the absence of such direction no Act of the Federal or Provincial Legislature applies to the excluded or partially excluded areas. That sub-section only deals with the Governor's power to apply an existing Act in operation in the whole or a portion of British India, with exceptions or modifications to the whole or a part of an excluded or partially excluded area. It does not give him power to make independent legislation. Sub-section (2), however, stands on a different footing. Thereunder the Governor is authorized to make Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Federal or Provincial Legislature which is operative in the other parts of the Province of Bihar, to the partially excluded area in question from the date of his Notification. Even so the appellant's contention about the invalidity of the order of assessment made against them must fail. It is conceded that the Finance Act of 1940 did come into operation in the partially excluded areas from the date of the publication of the Notification, viz., 26th May, 1940. The dispute is only about its retrospective operation. The assessment under the circumstances would be proper because on the 26th of May, 1940, when the Notification was issued, the assessment proceedings were pending before the Income-tax Officer. The blank left in Section 3 of the Income-tax Act was filled in and the Income-tax Officer had therefore to make a computation on the footing of the then existing legislation and pass his order. On that interpretation of the Notification therefore the assessment order passed by the Income-tax Officer would be valid. The matter, however, does not end there. To set at rest all doubts about the applicability of the different Acts mentioned in the Notification the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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