TMI Blog1978 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... see on 12th February, 1964. The assessee filed a nil return under protest and declared an amount of rupees one lakh in column D of the return. The assessment was made by the ITO by adding the sum of rupees one lakh as income from undisclosed sources. The Income-tax Appellate Commissioner and the Tribunal, however, both came to the conclusion that the action of the ITO in reopening the assessment under s. 147(a) read with s. 148 was bad in law. This view was taken on the reasoning that the right to reopen the assessment was already barred under s. 34(1)(a) of the Indian I.T. Act, 1922, on 1st April, 1962, when the 1961 Act came into force and, therefore, s. 297(2)(d)(ii) of the 1961 Act did not revive the right of the ITO to reopen the assessment. Reliance for this view was placed on the ruling of the Supreme Court in J. P. Jani, ITO v. Induprasad Devshanker Bhatt [1969] 72 ITR 595. In reaching the conclusion that the right to reopen the assessment was barred under s. 34(1)(a) of the 1922 Act on 1st April, 1962, it was held that the amendment made in s. 34(1) of the 1922 Act by the Finance Act, 1956, which came into force on 1st April, 1956, and which provided that the notice in tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was also no difference on this point in S. C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC) and the Calcutta High Court's view in Calcutta Discount Co.'s case [1953] 23 ITR 471 was approved. It is not necessary to elaborate on this aspect any further as the arguments before us have proceeded on the basis that s. 34 as substituted in 1948 applied for the assessment year 1947-48. The section in so far as relevant for our purposes reads as follows: "34. (1) If- (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at too low a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed, not being a year or years ending before the 31st day of March, 1941 ; (iii) for any year, unless he has recorded his reasons for doing so, and, in any case falling under clause (ii), unless the Central Board of Revenue, and, in any other case, the Commissioner, is satisfied on such reasons recorded that it is a fit case for the issue of such notice : Provided further that the Income-tax Officer shall not issue a notice under this sub-section for any year, after the expiry of two years from that year, if the person on whom the assessment or reassessment is to be made in pursuance of the notice is a person deemed to be the agent of a non-resident person under section 43 : Provided further that the tax shall be chargeable at the rate at which it would have been charged had the income, profits or gains not escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) by the 1956 Act came into force on 1st April, 1956. On the expiry of the period of eight years provided in s. 34(1) as introduced by the 1948 Act, the assessee on 31st March, 1956, got a vested right as he could tell himself that no proceeding having been taken, he was safe from having his assessment reopened. Although, the 1956 Act removed the restriction as to time in cases falling under s. 34(1)(a) in which the escapement of income was likely to be rupees one lakh or more, this change could not apply to the assessee for the year 1947-48 for which his vested right had arisen as the 1956 Act did not expressly or by necessary implication express an intention to take away this vested right. Indeed, this was the view taken by the Calcutta High Court in Debi Dutta Moody v. T. Bellan, AIR 1959 Cal 567. It was to get over this decision that the 1959 Act was passed by Parliament which inserted sub-s. (4) in s. 34 and enacted a saving clause. These two provisions came up for consideration before the Supreme Court in S. C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC). In that case, the relevant assessment year was 1942-43 and the notice for reopening the assessment was served on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieves this purpose otherwise it would be reduced to an entirely useless provision. Further, as stated earlier, this construction is supported by the history of the provision and the Supreme Court decision in S. C. Prashar's case [1963] 49 ITR 1 (SC). For these reasons, our conclusion is that the vested right accruing to the assessee after the expiry of eight years under s. 34(1)(a) before its amendment in 1956 was taken away by sub-s. (4) introduced by the 1959 Act and the right to reassess him was not barred before 1st April, 1962, when the 1961 Act came into force. The notice issued by the ITO in February, 1964, under s. 148 read with s. 147(a) of the 1961 Act was, therefore, valid. Learned counsel for the assessee submitted before us that if sub-s. (4) had that effect, it would have been noticed in J. P. Jani's case [1969] 72 ITR 595 (SC), and the applicability of ss. 147(a) and 148 of the 1961 Act would not have been negatived on the ground that the right to reopen the assessment had become barred before 1st April, 1962, when the 1961 Act came into force. In Jani's case [1969] 72 ITR 595 (SC), the department conceded that the right to reopen the assessment had become barred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. As earlier expressed by us, sub-s. (4) of s. 34 introduced by the 1959 Act empowered the issuance of a notice under s. 34(1)(a) for an assessment year for which the period of eight years prescribed by the 1948 Act had expired and the argument based on accrual of vested right after the lapse of eight years is not open to the assessee in view of the clear intention of Parliament. Learned counsel for the assessee then pointed out that sub-s. (4) of s. 34 was not relied upon by the department before the Tribunal and it is not referred to in the order of the Tribunal. It was also pointed out that in the application for reference under s. 256(1), the department wanted that a question as to the applicability of sub-s. (4) should also be referred but that prayer was refused by the Tribunal on the ground that this question did not arise out of the order of the Tribunal. On these grounds, learned counsel argued that it is not open for the department to rely upon sub-s. (4) before us in this reference. It is true that no reliance was placed before the Tribunal on sub-s. (4) which is not even referred to in the order of the Tribunal. It is also true that the department wanted that the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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