TMI Blog1964 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... as commission agents. In the course of assessment proceedings for the year 1954-55 the assessee's books of account were examined by the Income-tax Officer and it was noticed that the assessee had business connections with certain non-resident parties. On March 12,1957, the Income-tax Officer issued a notice calling upon the assessee to show cause why in respect of the assessment year 1954-55 the assessee should not be treated under section 43 of the Indian Income-tax Act, 1922, as an agent in respect of twenty-five non-resident parties named in the notice. The assessee denied that he had " direct dealings " with any non-resident party and that in any event the proposed action was barred because the period prescribed for initiation of proceeding had expired, and requested the Income-tax Officer to drop the proceeding. The Income-tax Officer, B-III Ward, Bombay, issued on March 27, 1957, a notice under section 34 of the Indian Income-tax Act for assessment of the assessee as an agent of the twenty-five named non-resident parties. The assessee submitted a return showing his income as " nil ". The Income-tax Officer held that the transactions disclosed from the books of account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court the notice dated March 27, 1957, was invalid, and a valid notice being a condition precedent to the exercise of jurisdiction under section 34, the proceeding under section 34 was not maintainable. Against the order of the High Court issuing writs prayed for by the assessee, with certificate of fitness this appeal is preferred by the Income-tax Officer, Bombay. In order to appreciate the contention raised by the assessee and which has found favour with the High Court, it is necessary to refer to the relevant provisions of section 34, as they stood before the section was amended by the Finance Act, 1956. The relevant clauses prescribing the period within which notice may be issued read as follows : " (1) If--... 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,...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 recompute the loss or depreciation allowance ; Provided that--... (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was in the Act, as it then stood, no provision for extending the period beyond the end of one year from the year of assessment. The Income-tax Officer could therefore commence a proceeding under section 34 on March 27, 1957, only if the amended section applied and not otherwise. The amending Act came into force after the period provided for the issue of a notice under section 34 before it was amended had expired. It is true that there was no determinable point of time between the expiry of the prescribed time within which the notice could have been issued against the assessee under section 34, proviso (iii), before it was amended. But there was no overlapping period either. Prima facie, on the expiry of the period prescribed by section 34 as it originally stood, there was no scope for issuing a notice unless the legislature expressly gave power to the Income-tax Officer to issue notice under the amended section notwithstanding the expiry of the period under the unamended provision or unless there was overlapping of the period within which notice could be issued under the old and the amended provision. But counsel for the Commissioner submitted that at no time was the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the trust was not void for remoteness on the ground that it was limited to take effect at the expiration of the term. Neither of these cases has, in our judgment, any application to the principle applicable in the present case. 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 issue a notice under the earlier Act came to an end before the new Act came into force. There was undoubtedly no determinable point of time between the expiry of the earlier Act and the commencement of the new Act ; but that would not, in our judgment, affect the application of this rule. Reliance was also placed by counsel for the Commissioner upon the rule which has prevailed in the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into existence before the Act was enacted. Equating a proceeding under section 34 of the Indian Income-tax Act with a suit or a proceeding in a civil court, counsel said that the law of limitation being a law of procedure, assessment proceedings including proceedings for reassessment are governed by the law in force at the date on which they are instituted, and that the rule that the repeal of a statute without express words or clear implication in the repealing statute, cannot take away a right vested in a party acquired under the repealed statute when it was in force, is a rule of prescription and not of procedure, and notwithstanding general observations to the contrary in certain decisions, applies only to those actions in which by the determination of the period prescribed, a right to institute an action for possession of property is extinguished. Counsel relies in support of the plea on Baleswar v. Latafat. It is unnecessary to dilate upon this argument in any detail, or to enter upon an analysis of the numerous cases which were mentioned at the Bar to determine whether the rule that without an express provision, or a clear implication arising from the amending statute, righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f that period the department cannot make an assessment. Where no period is prescribed the assessment can be completed at any time but once completed it is final. Once a final assessment has been made, it can only be reopened to rectify a mistake apparent from the record (section 35) or to reassess where there has been an escapement of assessment of income for one reason or another (section 34). Both these sections which enable reopening of back assessments provide their own periods of time for action but all these periods of time, whether for the first assessment or for rectification, or for reassessment, merely create a bar when that time passed against the machinery set up by the Income-tax Act for the assessment and levy of the tax. They do not create an exemption in favour of the assessee or grant an absolution on the expiry of the period. The liability is not enforceable but the tax may again become exigible if the bar is removed and the taxpayer is brought within the jurisdiction of the said machinery by reason of a new power. This is, of course, subject to the condition that the law must say that such is the jurisdiction, either expressly or by clear implication. If the lang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of limitation, was not accepted in Calcutta Discount Company's case. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non-resident party under the Income-tax Act before it was amended, ended on March 31, 1956. It is true that under the amending Act by section 18 of the Finance Act, 1956, authority was conferred upon the Income-tax Officer to assess a person as an agent of a foreign party under section 43 within two years from the end of the year of assessment. But authority of the Income-tax Officer under the Act before it was amended by the Finance Act of 1956, having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., up to April 1 1956, only. That provision mus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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