TMI Blog1964 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a plot of land bearing Survey No. 63 at Vastrapur really belonged to the petitioner since Natwarlal Manilal Pandit was merely a benamidar of the petitioner and that the said profit had escaped assessment by reason of the petitioner not having disclosed it at the time of the original assessment. The Income-tax Officer, therefore, after obtaining the approval of the Commissioner of Income-tax, issued a notice dated 27th March, 1956, under section 34(1)(a) of the Income-tax Act, 1922 (hereinafter referred to as the old Act). The notice was attempted to be served by the process-server on the petitioner at his residence on or about 31st March, 1956. The petitioner was, however, not at his residence, having temporarily gone out of Ahmedabad to Vatwa in order to attend the meeting of the Vatwa Panchayat of which he was the sarpanch and the notice could not, therefore, be served on him personally at that time. On the process-server making a report to that effect, the Income-tax Officer directed the process-server to effect service by affixing the notice on a conspicuous part of the petitioner's house and pursuant to this direction, the process-server affixed the notice on the door ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 34(1)(a) on the petitioner was, therefore, bad in law and liable to be set aside. The Appellate Assistant Commissioner accordingly cancelled the assessment made by the Income-tax Officer without going into the merits of the assessment. The revenue accepted the decision of the Appellate Assistant Commissioner and did not carry the matter higher in appeal to the Tribunal. Now this decision was given by the Appellate Assistant Commissioner on 5th January, 1963, by which time the old Act had been repealed and the new Act had come into force with effect from 1st April, 1962. The time for taking action for assessment or reassessment in the case of escaped income exceeding ₹ 50,000, but less than ₹ 1,00,000, was enlarged from eight years to sixteen years under the new Act and the Income-tax Officer, Circle IV, Ward G, Ahmedabad, therefore, issued a notice dated 4th July, 1963, calling upon the petitioner to show cause why proceedings should not be taken under section 147(a) of the new Act for bringing to tax the escaped profit of the petitioner on the sale of the plot of land at Vastrapur. The petitioner by his letter dated 15th July, 1963, disputed the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains or re-compute the loss or depreciation allowance; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section: Provided that-- (i) the Income-tax Officer shall not issue a notice under this sub-section, unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice:...... Provided further that nothing in this section limiting the time within which any action may be taken or any order, assessment or reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld in Debi Dutta Mody v. T. Bellan A.I.R. 1959 Cal. 567, that once the right of the Income-tax Officer to proceed under clause (a) of sub-section (1) of section 34 as it stood prior to its amendment by the Finance Act, 1956, was barred by reason of the expiration of the period of eight years, it was not revived by the deletion of the time-limit of eight years from clause (a) of sub-section (1) of section 34. This decision led to the passing of an ordinance and later the Indian Income-tax (Amendment) Act, 1959. This Amending Act added sub- section (4) to section 34 providing for issue of notice under clause (a) of sub-section (1) at any time notwithstanding the expiration of the period of eight years provided under the section as it stood prior to its amendment by the Finance Act, 1956, and also enacted section 4 for validating notices issued prior to the commencement of the Amending Act, even though at the time when such notices were issued, the time within which such notices should have been issued under clause (a) of sub-section (1) of section 34 as in force before its amendment by the Finance Act, 1956, had expired. These were the relevant provisions of section 34 as they stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime-limits were prescribed in the following words: 149. Time-limit for notice.--(1) No notice under section 148 shall be issued, (a) in cases falling under clause (a) of section 147-- (i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (ii); (ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year..... Section 150, sub-section (1), made an exception in cases where assessment or reassessment is sought to be made in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision and provided that in such cases there shall be no time-limit and notice under section 148 may be issued at any time unless of course the case fell within sub- section (2) of section 150. Section 151 made it a condition precedent to the issue of notice under section 148 that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed notice was covered by section 297(2)(d)(ii) it would be valid but not so, if it was not covered by that section. Mr. B.G. Thakore, learned advocate appearing on behalf of the petitioner, therefore, attacked the applicability of section 297(2)(d)(ii) at three points. In the first place he contended that proceedings initiated by the Income-tax Officer by issue of the notice dated 27th March, 1956, under section 34(1)(a) were pending at the commencement of the new Act and the conditions requisite for the applicability of section 297(2)(d)(ii) were, therefore, not satisfied so as to authorize the Income-tax Officer to issue the impugned notice under section 148. When his attention was drawn to the order of the Appellate Assistant Commissioner, he agreed that it was undoubtedly true that by the order the reassessment of the income of the petitioner under section 34(1)(a) was cancelled but he pointed out that the reason for which the reassessment was cancelled was not that the notice was bad but that the notice was not duly served on the petitioner. He urged that the only effect of the order of the Appellate Assistant Commissioner was to declare the service of the notice bad and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adanlal Mathurdas v. Chunilal, Income- tax Officer [1962] 44 I.T.R. 325, the words issue and serve as used in section 34 cannot be equated with each other and that the stage of issue of notice is a distinct and different stage from the stage of service of notice and ordinarily this decision being a decision of a Division Bench of this court would be binding upon us, but having regard to the subsequent decision of the Supreme Court in Banarsi Debi v. Income-tax Officer [1964] 53 I.T.R. 100 (S.C.), this decision can no longer be regarded as good law and its authority must be held to have been impliedly overruled, though we may point out that even if the view taken by the Bombay High Court in this decision were correct, we should still have found considerable difficulty in accepting the contention that the proceedings under section 34 commence on the issue of the notice. The Supreme Court in the decision to which we have just referred pointed out that the words issued and served are used as interchangeable terms in the context of notices issued under section 34 and that where the legislature has used the word issued in the context of such notices, that word is used in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Appellate Assistant Commissioner did was to declare the service of the notice bad with the result that the notice remained as it was drawn up and prepared by the Income- tax Officer but not served on the petitioner. Unless the notice was served on the petitioner, no proceedings under section 34(1)(a) could be said to have been started against the petitioner and there were, therefore, no proceedings under section 34(1)(a) pending against the petitioner at the commencement of the new Act. This attack against the applicability of section 297(2)(d)(ii) must, therefore, fail. Mr. B.G. Thakore then contended and this was an alternative contention under the same head as the previous contention that, in any event, at the date of the commencement of the new Act, the appeal preferred by the petitioner against the order of assessment made by the Income-tax Officer under section 34(1)(a) was pending and the appeal being merely a continuation of the original proceedings, the proceedings under section 34(1)(a) must be said to be pending at the commencement of the new Act. Now this contention ignores the true effect of the order of the Appellate Assistant Commissioner. As we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capement of income from assessment within the meaning of that expression as used in section 147 so as to attract the applicability of section 297(2)(d)(ii). The argument was that so long as any proceedings are pending for assessment or reassessment of the income of an assessee, such income cannot be said to have escaped assessment, for it may be brought to tax as a result of an order of assessment which might be made in those proceedings. The argument was that proceedings for bringing to tax escaped income of the petitioner were pending since the notice dated 27th March, 1958, was not quashed or set aside and until those proceedings terminated in an order of assessment, it could not be said that the income of the petitioner had escaped assessment. Now this contention suffers from a double fallacy. In the first place, as we have already pointed out above, no proceedings under section 34 were pending either at the commencement of the new Act or at the date when the impugned notice was issued by the Income-tax Officer and the foundation for the argument urged on behalf of the petitioner is, therefore, lacking. Moreover, even if the view be taken that proceedings were initiated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 297(2)(d)(ii) by resort to the machinery provided in sections 147 to 150. The validity of this contention was disputed by the learned Advocate-General appearing on behalf of the revenue and his argument was that section 297(2)(d)(ii) was wide in its sweep and it took in all assessment years after the year ending on 31st March, 1940, irrespective of the fact whether the right to reopen the assessment in respect of any such assessment years was barred or not under the old Act at the date when the new Act came into force. According to him the legislative intent was that once the new Act came into force, the question whether the assessment in respect of any assessment year after the year ending on 31st March, 1940, should be liable to be reopened or not should be decided by reference to the provisions of the new Act and if the provisions of the new Act authorized the reopening of such assessment, such reassessment should be reopened whatever might have been the position in regard to the right to reopen such assessment under the old Act. These rival contentions raised an interesting question in regard to the retrospective operation of section 297(2) (d)(ii). Now it is settled law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the finality of his assessment disturbed by any reopening of the assessment was taken away, the general words used in the amended section could not be read as achieving any such effect. The general words of the amended section must be read as applicable only to those cases where the right of the Income-tax Officer to reopen the assessment was not barred under the unamended section and in such cases the right of the Income-tax Officer to reopen the assessment not having been lost, there would be no question of giving retrospective operation to the amended section and the right of the Income-tax Officer to reopen the assessment could be exercised under the amended section. The same principle was also applied by the Bombay High Court in S.C. Prashar v. Vasantsen Dwarkadas [1956] 29 I.T.R. 857, where the Bombay High Court took the view that once the right of the Income-tax Officer to reopen the assessment under section 34 as it stood prior to its amendment by the Income-tax (Amendment) Act, 1956, was barred by lapse of time, it could not be revived by reason of the newly amended proviso to section 34(3) which did away with the time-limit in certain cases. This decision was of course t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the notice was not a valid notice inasmuch as the right of the Income-tax Officer to reopen the assessment of the assessee under the unamended provision became barred on 31st March, 1956, and the amended provision did not operate retrospectively so as to authorise the Income-tax Officer to commence proceedings for reopening the assessment of the assessee in cases where before the amended provision came into force, the proceedings had by the expiry of the period provided in the unamended provision become barred. Shah J., delivering the judgment of the Supreme Court, observed [1964] 53 I.T.R. 231, 236, 240: The power to issue a notice under the unamended Act came to an end on March 31, 1956. Under that Act no notice could thereafter be issued. It is true that by the amendment made by section 18 of the Finance Act, 1956, a notice could be issued within two years from the end of the year of assessment. But the application of the amended Act is subject to the principle that, unless otherwise provided, if the right to act under the earlier statute has come to an end, it could not be revived by the subsequent amendment which extended the period of limitation. The right to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, be applied in the interpretation of section 297(2)(d)(ii) of the new Act. We cannot accept this contention. So far as the application of the principle laid down by the Supreme Court in this decision is concerned, we do not see any difference between a position where a section in a statute is amended and a position where a statute is repealed and another statute takes its place. The rule of interpretation on which this principle is based is, as we have already pointed out above, that no statute should be construed as retrospective in operation if it has the effect of altering, modifying or affecting existing rights unless the statute says so in express words or by necessary implication. This rule of interpretation is equally applicable whether the occasion which calls for its application is an amendment of an existing statute or the repeal of an existing statute by enactment of a new statute. We are, therefore, of the opinion that the principle of this decision of the Supreme Court must apply in the present case and we must ask ourselves the question whether there are any express words or there is any necessary intendment which would show that the legislature intended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of giving retrospective operation arises. In a case where the right to reopen the assessment was not barred under the old Act, there would be no existing right of the assessee which would be liable to be affected nor would there be any question of reviving a right already lost and hence there would be no question of giving retrospective operation to section 297(2)(d)(ii). It is only where the right to reopen the assessment was barred under the old Act and the assessee had acquired the right to tell the revenue that the assessment was final and could not be reopened, that the question would arise whether this right was intended to be taken away by the legislature by enacting section 297(2)(d)(ii). Now it is significant to note that section 297(2)(d)(ii) occurs as a saving provision. Sub-section 297 repeals the old Act and sub-section (2) of that section enacts various saving provisions consequent on the repeal of the old Act. Now there may be two classes of cases at the commencement of the new Act. One class of cases may be where a notice to reopen the assessment under section 34 may have already been issued and the proceedings in pursuance of such notice may be pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and would not have left its intention to be gathered by doubtful implication from the language of a provision relegated to the section dealing with repeals and savings. The learned Advocate-General on behalf of the revenue laid strong emphasis on the words where in respect of any assessment year after the year ending on the 31st day of March, 1940 occurring at the commencement of section 297(2)(d)(ii), but these general words cannot, as we have pointed out above, avail the revenue. There is, no doubt, a reference made in the section to past assessment years right up to the assessment year immediately after the year ending on 31st March, 1940, but that reference had to be made because under section 34 as it stood immediately prior to the coming into force of the new Act, the reopening of the assessment could not extend to assessment years prior to the assessment year ending 31st March, 1941, and since the intention of the legislature in enacting section 297(2)(d)(ii) was to save only the existing right of the Income-tax Officer to reopen an assessment and not to extend it further backwards, the legislature introduced the same limitation also in section 297(2)(d)(ii). In a case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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