1957 (5) TMI 46 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the assessment made on 27th November, 1953, considering the provisions of section 34(3) of the Indian Income-tax Act.
2. Retrospective effect of the Amending Act 25 of 1953.
3. Potential violation of Article 14 of the Constitution by the amendment to section 34(3).

Issue-wise Detailed Analysis:

1. Validity of the assessment made on 27th November, 1953, considering the provisions of section 34(3) of the Indian Income-tax Act:

The primary issue was whether the assessment made on 27th November, 1953, on Sardar Lakhmir Singh in his individual capacity was valid under section 34(3) of the Indian Income-tax Act. The assessee argued that the assessment was time-barred as per the unamended section 34(3), which stipulated a four-year limitation period from the end of the year in which the income was first assessable. The period of limitation expired on 31st March, 1951. The court held that the right to assess had become barred on 31st March, 1951, and the subsequent amendment could not revive this right. Therefore, the assessment made on 27th November, 1953, was held to be legally invalid.

2. Retrospective effect of the Amending Act 25 of 1953:

The court examined whether the Amending Act 25 of 1953, which received presidential assent on 24th May, 1953, but was given retrospective effect from 1st April, 1952, could revive the right of the Income-tax Officer to assess. The court concluded that the amending law could not apply retrospectively to revive a right already barred by the previous law of limitation. The principle that limitation laws are procedural and can be extended by the legislature was acknowledged, but it was emphasized that such amendments cannot apply to cases where the right had already expired. The court cited precedents, including the Judicial Committee's decision in Delhi Cloth and General Mills Co. v. Commissioner of Income-tax, to support this principle. Consequently, the court held that the Amending Act did not apply to the assessee's case, and the assessment was time-barred.

3. Potential violation of Article 14 of the Constitution by the amendment to section 34(3):

The assessee's counsel raised the issue that the amendment to section 34(3) by Act 25 of 1953 violated Article 14 of the Constitution due to unreasonable classification. However, the court declined to address this argument, noting that it was not argued before the Appellate Tribunal and was not part of the referred question under section 66(1) of the Indian Income-tax Act. Therefore, no determination was made on this constitutional issue.

Conclusion:

The court answered the referred question of law in favor of the assessee, holding that the assessment made on 27th November, 1953, was not validly made under section 34(3) of the Indian Income-tax Act. The assessee was entitled to costs of the reference.