1946 (8) TMI 23 - HC - Income Tax

Summary

Issues:
Validity of the notification and regulation to validate income tax assessment proceedings for the year 1940-41 under the Indian Income-tax Act, 1922.

Analysis:
The case involved a reference under Section 66(1) of the Indian Income-tax Act, 1922, regarding the competence of a notification and regulation issued by the Governor of Bihar to validate income tax assessment proceedings for the year 1940-41. The key contention raised was whether the notification and regulation could apply retrospectively to the assessment. The notification declared that the Indian Finance Act of 1940 and other related Acts should be deemed to have been applied to the relevant area with retrospective effect. The assessment proceedings were initiated before the notification but completed after its issuance. The court held that the assessment was valid as the Finance Act of 1940 was in force in the area when the assessment concluded, rendering the proceedings valid.

Another argument raised was the lack of a retrospective declaration in the notification. The court rejected this argument, emphasizing that the liability to tax arises only after the relevant Finance Act is passed. Therefore, the notification's retrospective effect was not necessary for the validity of the assessment. The court also addressed the issue of the validity of the notice under Section 22(1) of the Act, stating that a valid notice under Section 22(2) had been issued, making the Section 22(1) notice's validity immaterial in this case.

Furthermore, the court discussed the Governor's power to pass the regulation retrospectively. It was held that even if such power was questioned, the regulation was valid, and the Finance Act of 1940 was deemed to have come into force in the area on a specified date, validating the assessment proceedings initiated before that date. The court also analogized the situation to civil procedure rules regarding notices, emphasizing that the completion of assessment after the Act's application validated any preceding procedural irregularities.

In conclusion, the court answered the reference question in the affirmative, affirming the competence of the notification and regulation to validate the income tax assessment proceedings for the year 1940-41. Each party was directed to bear their own costs, and the judgment aligned with a similar case with identical facts. The judges, including Manohar Lall, Ag., CJ, Sinha, J., and Das, J., concurred with the decision.