TMI Blog1956 (9) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... assess the said income. He accordingly required the petitioner to deliver to him within the time specified in the notice a return, in the form attached thereto, of the petitioner's total income and total world income assessable for the said Sambat year ending Chet 2003 (1946-47). The petitioner challenges the validity of the notice issued to him and asks for the issue of an appropriate writ restraining the respondent from taking any action against him. 3. The first point for consideration in the present case is, whether the expression 'assessment' appearing in Section 13, Finance Act, 1950, in pursuance of which this notice was issued, is wide enough to cover a re-assessment under Section 34. 4. The history of the Act of 1950 may perhaps be traced back to the year 1946 when the British Parliament, with a mighty stroke of the pen, decided to split up the legal- entity known as British India into the twin Dominions of India and Pakistan, to grant complete independence to these two Dominions and to release Indian States from all their obligations to the Crown. The anticipated departure of British power from the shores of India was a violent blow to the political ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uniformity of law, rates, in-terpretations and administration of all federal fiscal measures resulting in uniform policies, principles and practice in the -levy, assessment and collection of central taxes and duties and tax evasion, always a serious evil, will be more effectively checked. They recommended the financial integration of acceding States and the imposition of Indian income-tax in their territories with effect from 1-4-1950. In para. 9 of the annexure to this report relating to income-tax they observed as follows: 9 (a). ......subject to the limitations indicated below--which were designed to secure legal continuity of pending proceedings and finality and validity of completed proceedings under the preexisting state legislation--we think the whole body of State legislation relating to federal subjects should be repealed and the corresponding body of Central legislation extended proprio vigore to the States with effect from the prescribed date or as and when the administration of particular federal subjects is assumed by the Centre. 6. The Government of India accepted the recommendations of the Committee, as modified in subsequent discussions with the States c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1950; and (b) in accordance with the provisions of the (Indian Income-tax Act if it arose after the said 'date. It preserves the operation of the State law for the purpose of levy, assessment and collection of tax in respect of the income of previous years relevant to assessment years prior to 1950-51. 9. Mr. Pathak who appears for the petitioner disputes the correctness of the broad statement appearing in the preceding paragraph and has placed two submissions before us in support of the contention that the expression assessment appearing in Section 13 is not wide enough to cover a re-assessment under Section 34, income-tax Act. 10. It is contended in the first place that as the Act of 1950 is a statute in pari materia with the Act of 1922 and as both the statutes are governed by one spirit and policy, the words in the later Act must be understood to have been used in the same sense as in the prior statute and that the expressions assessment and re-assessment which appear repeatedly in the Income-tax Act refer to two different proceedings. The first proceeding commences when the income-tax Officer issues a notice under Section 22 and terminates when he dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire the words to be differently understood in the two statutes or where the expressions used in the later statute are not re-enacted with the same limitations as in the earlier statute, or where a contrary intention is manifested by other qualifying or explanatory terms. Nor can the help of this rule be invoked when the terms of the statute to be construed make it quite clear that the expressions used therein were intended to convey a different meaning, statutes in pari materia may not be resorted to to control the clear language of the statute under consideration Palmer v. Santvoord, 153 NY 612 (A). 11. Again it is stated that the Act of 1950 was enacted in order to give effect to the recommendations of the States Finances Enquiry Committee because both the Goveniment of India and the Rulers and Rajpramukhs of Indian states and Unions (including the Rajpramukh of Pepsu) had entered into agreements under Articles 278, 291, 295 and 306 that the recommendations of the said Committee should be accepted by the parties subject to certain modifications in matters of detail. These agreements it is contended, arc the supreme law of the land in respect of the matters to which they rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recommendations made by the Committee were accepted by the Legislature. Thirdly, it is not open to this Court to examine the report of the Committee, for it has been held repeatedly that opinions expressed in reports of Committees arc inadmissible as aids to construction when the intention of a statute is in question (Craies on Statute Law, page 122, Assam Railway Trading Co. v. commissioner of Inland Revenue, 1935 AC 445 at p. 457 (C); Aswini Kumar v. Am-binda Bose, 1953 SCR 1 at p. 78: (AIR 1952 SC 369 at p. 396J (D)) Fourthly, even if the report of the Committee were to be taken into consideration in determining the proper construction of the statute, I am Unable to hold that the recommendations made by it were designed only to secure the legal continuity of pending proceedings and finality and validity of completed proceedings. In Clause (e) of para. 9 which appears at p. 45 of the report the Committee observed as follows: (e) It will be necessary to provide that matters and proceedings 'pending under or arising out of the pre-existing State Acts shall be disposed of under those Acts by, so far as may be, the corresponding authority (nominated by the chief executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposed of under the said Acts and that they had ho desire to reduce the taxing statutes to a nullity by permitting easy evasion. Lastly, if the expression assessment is not wide enough to embrace a reassessment under Section 34 it is obvious that reassessment proceedings which were pending at the time of the financial integration of the States could not be continued after integration had taken place. In the absence of strong and compelling reasons, to the contrary nothing would, in my opinion, be more absurd than to declare that whereas the Committee were anxious to keep alive the entire pre-existing state legislation in respect of pre-integration incomes, they were seized with a sudden and senseless desire to destroy the provisions of Section 34, to foster an obvious opportunity for easy tax evasion and to make a free gift of large sums of money to assessees in Indian States who had successfully evaded the payment of faxes. 14a. Let us approach the consideration of this case by reminding over selves of certain well-known rules for the construction of statutes. The first and foremost rule, to which all others are subordinate, is that where the language of a statute is plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -judicial function and collection an executive function. These three expressions levy , assessment and collection are of the widest significance and embrace in their broad sweep all the proceedings which can possibly be imagined for raising money by the exercise of the power of taxation from the inception to the conclusion o the proceedings. The Act of 1950 declares with irresistible clearness that income in respect of a certain period was to be assessed in accordance with the State laws and that income in respect of another period was to be assessed in accordance with the Indian laws. The language of the statute is clear and unambiguous and the intention of the Legislature plain. I entertain no doubt in my mind that even If the compass of the expression assessment were to be narrowed in the sense proposed by Mr. Pathak, the expressions levy and collect appearing in Section 13 are wide enough to cover proceedings under Section 34 for re-examining and re-determination of income-tax liability in spite of a prior determination Lekshmana Shenoy v. Income-tax Officer, AIR 1954 Trav-Co 137 (PB) (G); Bhailal Amin Sons Ltd, V. H. P. Dalai, 1953-24 ITR 229 : (AIR 1953 Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y law shall, notwithstanding that this section makes no provision or insufficient provision for the adaptation of such law to the changes effected by or consequential on the establishment of the State, construe such law with all such adaptations as ate necessary for the said purpose. 19. On 2-2-1949 Ordinance I of 2005 was replaced by the Patiala and East Punjab States Union General Provisions Administration Ordinance (16 of 2005) which re-enacted the provisions of the earlier Ordinance with only a small modification, namely that instead of stating in Section 3 that all laws in force in the covenanting states immediately before the relevant date shall be repealed, it declared that all such laws shall cease to have effect. 20. The administration of Income-tax Law in Pepsu, as in other Part B States excepting Jammu and Kashmir, was taken over by the Central GOVeminent early in April 1950 and the pre-existing State laws in regard to Income-tax in force in any of these States ceased to have effect except for the purposes of levy, assessment ,and collection of income-tax and super-tax in respect of any period therein defined. 21. It is contended on behalf of the petitioner that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view. No intention to take away the right to assess or collect taxes can be imputed to the Legislature where other enactments contemporaneous with the repealing statute disclose that the Legislature did not intend to abandon the income from the parti cular source of taxation in question bub intended to continue it in the same or a similar form of revenue exactions. It is firmly established in the United States that where a tax law is repealed by a later tax law, which does not expressly contain a saving clause reserving the right to collect taxes under the former law, but provides a different method of ascertaining the taxable value on the same subject of taxation, such Act does not operate as a release from liability for the taxes accrued at its passage under the former law, Gorley v. Sewell, 77 Ind 319 (J). In Com. v. Mortgage Trust Company, 227 Pa. St. 163 (K), the Court observed as follows: The only rational interpretation of the legislative intention as expressed in the statute is that the taxation of such shares of stock should continue after the passage of the Act as it had existed for many years prior to that time, except as to the basis of valuation. The Act of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets of rules which were in force in the covenanting states should be repealed and that a uniform system of laws should be established in the whole o the Union. He accordingly directed that with effect from 20-8-1948 all laws in force in the covenanting states be repealed and that all laws in force in the Patiala State should apply to the territories of all covenanting States. He had no intention, either express or implied, to deprive the income-tax Department of its power to reassess income of an assessee who had paid the tax first assessed against him or to exempt a tax-payer from his liability to pay the tax when the return submitted by him was incomplete or imperfect in consequence of any omission, understatement, undervaluation or false and fraudulent return. There was no intention to circumscribe the powers exercised by Income-tax Officers under the-previous State laws. I am accordingly of the opinion that in view of the principles enunciated in the authorities cited above the law-making power had no intention to relinquish the right of the State' to recover income-tax under Section 34, Kapurthala Income-tax Act. This conclusion is supported by at least two circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailing to make a return of his income or by omitting to disclose fully and truly all material facts necessary for his assessment, and (b) that every tax-payer shall pay to the State his proper share of the public taxes. The power of reassessment is co-extensive with the power of original assessment, excepting only that it must be exercised within the periods and in respect of the cases set out in the body of the section. If this line of reasoning can be justified in law it is scarcely necessary to point out that the right to issue a notice under Section 31 of the Kapur-thala Act did not come to an end with the repeal of the said Act. 25. I now come to consider another objection raised by the petitioner, namely that as the Commissioner of Income-tax, Punjab, transferred the case to the Income-tax Officer, special Circle, under the provisions of the Indian Income-tax Act and not under the provisions of the Patiala Act, the notice issued by him on 12-3-1955 was without jurisdiction and of no consequence. It is common ground that when the Indian Finance Act, 1950, declared that all income which had arisen in an Indian State prior to 1-4-1950 Khali be assessed wholly in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory Construction where the learned author, citing an early case observes: If the provision involved relates to some immaterial matter, where compliance is a matter of convenience rather than substance, or directs certain actions with a view to the proper, orderly and prompt conduct of public business, the provision may be regarded as directory, but were it directs acts or proceedings to be done in a certain way and indicates that a compliance with such provisions is essential to the validity of the act or proceeding, or requires some antecedent and pre-requisite conditions to exist prior to the exercise of the power, or be performed before certain other powers can be exercised, the statute may be regarded as mandatory. In Section 270 the learned author observes as follows: Statutes regulating the assessment of taxes must be given a mandatory construction, if their purpose is to protect the tax-payer. On the other hand, if the statute is simply intended to establish a uniform system of procedure and to promote dispatch, and if non-compliance does not injure the tax-payer, the statute is to be construed as directory. 28. The provisions of Sub-section (5) of 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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