TMI Blog1991 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1922, stood repealed by the new Act, sub-section (2) of the above section made detailed and meticulous provisions in clauses (a) to (m) as to whether the new Act or the old Act will govern in the various situations dealt with therein. These provisions have led to a lot of litigation and the controversy in this appeal also arises out of one such provision. We are concerned here with the scope of proceedings for reassessment in respect of the assessment years prior to 1962-63 and the answer to the question before us turns on the provisions of the following two sections of the 1961 Act : Section 297 : "297. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred to as 'the repealed Act') -. . . (d) where, in respect of any assessment year after the year ending on the 31 st day of March, 1940, (i) a notice under section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed ; (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the assessment years 1956-57 to 1958-59. Consequent on these decisions of the Tribunal and the High Court, the income from some of the erstwhile family properties stood excluded from the assessment of the Hindu undivided family and became liable to be included in the hands of the present appellant. The assessment for the year 1949-50 and subsequent years up to 1961-62 on the family had been completed and the appeals and references disposed of under the Indian Income-tax Act, 1922. The original assessments made on the appellant as an individual for the assessment years 1953-54 to 1961-62 had been completed under the Indian Income-tax Act, 1922. In these assessments, no income from the erstwhile joint family properties had been included as the Officer was of the view, as in 1949-50, that it was assessable in the hands of the family. There were no proceedings initiated or pending under section 34 of the 1922 Act in respect of these assessment years as on April 1, 1962. Quite sometime after the High Court had decided the reference for 1949-50 in the case of the family, the Income-tax Officer thought of steps to include the income assessable in the hands of the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77, for the assessment years in question. The Revenue can successfully support the validity of this notice only by reference to section 150(1). Two questions then arise : (i) Are the provisions of section 150(1) attracted ? (ii) If yes, do they save the impugned proceedings ? The answer to the first question is furnished by section 297(2)(d)(ii), the very clause which authorises the issue of the notice of reassessment under section 148. It permits the issue of the notice under section 148, "subject to the provisions contained in section 149 or section 150". Though the words "subject to" may be appropriate in the context of section 149 and section 150(2) (which place restrictions on the issue of the notice under section 148), they are somewhat inappropriate a propos section 150(1) which relaxes the conditions for issue. But, there is no doubt that the statute clearly intends that the benefit of enlargement of the time limit under section 149 should be available in respect of the notice issued under section 148 read with section 297 (2)(d)(ii). The answer to the second question is furnished by section 150(1) itself. It removes the bar of time when the reassessment proceedings are ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose, the Legislature goes further than section 150(1) and makes specific reference to particular provisions of the new Act; (3) the provisions of section 150(1) will not become redundant, if read in the manner contended for by the assessee. While no doubt the proceedings are initiated, in all cases covered by section 297(2)(d)(ii), under the new Act, the orders, for giving effect to a finding or direction in which such proceedings are initiated, may belong to either category-they may be orders passed under the old Act or they may be orders passed under the new Act. The terms of section 150(1) will be effective in the latter category of cases ; and (4) the provisions contained in sections 150(1) and 153(3) are provisions exempting the applicability of a normal rule of limitation otherwise applicable to actions for reassessment and such provisions should be construed strictly. On the other hand, it is contended for the Department that the object of the provision being very obvious, namely, that, where reassessment proceedings are initiated to give effect to orders on appeal, reference or revision, there should be no time-limit tying down the hands of the Revenue as such order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 297(2)(d)(ii). The assessee had no grievance thus far. But, while completing the reassessment, the Officer, in addition to reassessing the family, also took advantage of the provisions enacted in section 171(6) and (7) of the 1961 Act-which had no counterpart in the 1922 Act and passed orders apportioning the tax assessed on the family amongst its members. This was objected to by the assessee. The Department, referring to the language of section 297(2)(d)(ii)-"that all the provisions of this Act shall apply accordingly",-contended that the Income-tax Officer could legitimately invoke the provisions of section 171(6) and (7) as well while making the reassessments. This contention was negatived. The court observed (p. 134) : "These words merely refer to the machinery provided in the new Act for the assessment of the escaped income. They do not import any substantive provisions of the new Act, which create rights or liabilities. The word 'accordingly' in the context means nothing more than 'for the purpose of assessment' and it clearly suggests that the provisions of the new Act which are made applicable are those relating to the machinery of assessment." It will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be so construed as to enable the Revenue to invoke reassessment proceedings on the footing that the orders on appeal or reference were ones passed " under this Act" within the meaning of section 150(1). Sri Manchanda cited two decisions in support of his contention. In Third ITO v. M. Damodar Bhat [1969] 71 ITR 806 (SC), the question was whether proceedings under section 226(3) of the new Act would apply with respect to a tax liability incurred under the 1922 Act. The answer to this question, in the affirmative, turned on the language of section 297(2)(j), which provided that any tax or other dues payable under the 1922 Act may, notwithstanding the repeal of the 1922 Act, be recovered under the Act. The contrary interpretation accepted by the High Court in that case would have had the effect of nullifying the provisions of section 297(2)(j). Again, in Jain Bros. v. Union of India [1970] 77 ITR 107 (SC), it was held that penalty could be imposed under section 271(1) of the 1961 Act in respect of returns filed before April 1, 1962, and assessments completed after April 1, 1962, but under the 1922 Act. This was because of section 297(2)(g), the special transitory provision in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his class of cases. An interpretation which will result in such anomaly or absurdity should be avoided. It is also necessary to remember that section 297(2) is a provision enacted with a view to provide for continuity of proceedings in the context of repeal of one Act by a fresh one broadly containing analogous provisions and the transitory provisions should, as far as possible, be construed so as to effect such continuity and not so as to create a lacuna. For these reasons, we think that it will be appropriate to so read the words of section 297(2)(d)(ii) as to permit the applicability of section 150 (or section 153) with the necessary modifications. To paraphrase, the last words of section 297(2)(d)(ii) should be read to mean that, where the proceedings initiated under section 148, subject to the relaxations and limitation of sections 149 and 150, all the provisions of the Act shall apply accordingly : that is to say, in the same manner as they would apply in case of proceedings normally initiated under these provisions. Since reassessment proceedings so initiated to give effect to orders on appeal, revision or reference will not be subject to a time-limit, the proceedings likewi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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