1946 (8) TMI 25 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the assessment in view of Bihar Validating Regulations I of 1941 and IV of 1942.
2. Governor's authority under Section 92(1) and Section 92(2) of the Government of India Act, 1935.
3. Retrospective operation of the Regulations.
4. Application of the Indian Finance Act of 1939 by the Income Tax Officer.

Detailed Analysis:

1. Validity of the assessment in view of Bihar Validating Regulations I of 1941 and IV of 1942:
The core issue was whether the assessment was legal and valid under the Bihar Validating Regulations I of 1941 and IV of 1942. The assessment year in question was 1939-40, with the accounting year being 1938-39. The assessment was completed on 14th February 1940, and the appeal against it was disposed of on 7th March 1942. The Appellate Tribunal concluded that the Validating Ordinance of 1942, which applied the Finance Act of 1939 retrospectively, was intra vires of the Governor and validated the assessment.

2. Governor's authority under Section 92(1) and Section 92(2) of the Government of India Act, 1935:
The court examined the Governor's power under Section 92(1) and Section 92(2) of the Government of India Act, 1935. The Governor has plenary powers under Section 92(2) to make any Regulation for the peace and good government of the area, provided it has the consent of the Governor-General. The court held that the impugned Regulation was not passed under Section 92(1), which would have limited the Governor's power to make retroactive laws. Instead, it was passed under Section 92(2), granting the Governor unlimited powers to enact Regulations with retrospective effect.

3. Retrospective operation of the Regulations:
The court addressed the argument that the Governor could not enact Regulations with retrospective effect. It was held that the Governor's plenary powers under Section 92(2) allowed for the enactment of Regulations that could operate retrospectively. The court referenced the case of Bhagat Singh, where it was established that the Governor-General's judgment on the necessity of an Ordinance for peace and good government was conclusive. Similarly, the Governor's decision to enact the Regulation for the peace and good government of the area was deemed valid.

4. Application of the Indian Finance Act of 1939 by the Income Tax Officer:
The court considered whether the Income Tax Officer could apply the Indian Finance Act of 1939, which was not in operation when the assessment proceedings began and were completed. The Regulation of 1942 provided that the Indian Finance Act of 1939 shall be deemed to have come into force on 30th March 1939. The court held that the term "deemed" means that the Act must be treated as if it were in operation on that date, thus validating the application of the Finance Act by the Income Tax Officer. The court also noted that the assessment proceedings were not final as the appeal was pending when the Regulation of 1942 was enacted, and thus the Tribunal was bound to apply the provisions of the Act.

Conclusion:
The court concluded that the assessment was legal and valid in view of the Bihar Regulation IV of 1942. The Governor had the authority to enact the Regulation with retrospective effect under Section 92(2) of the Government of India Act, 1935. The Income Tax Officer's application of the Indian Finance Act of 1939 was also deemed valid as per the retrospective operation of the Regulation. Each party was directed to bear its own costs in this Court. The reference was answered accordingly, with all judges concurring.