1968 (8) TMI 13 - SC - Income Tax

On a proper construction of s. 297(2)(d)(ii) of the new Act, the ITO cannot issue a notice under s. 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force - notice issued by ITO under s. 148 of IT Act, 1961 was liable to set aside - Revenue appeal dismissed

Summary

Issues Involved:
1. Validity of notices issued under sections 147, 148, and 142(1) of the Income-tax Act, 1961.
2. Application of section 297(2)(d)(ii) of the Income-tax Act, 1961.
3. Retrospective application of the new Income-tax Act, 1961, on cases barred under the old Act.

Detailed Analysis:

1. Validity of Notices Issued Under Sections 147, 148, and 142(1) of the Income-tax Act, 1961:
The respondent was initially assessed for the assessment year 1947-48 by an order dated January 31, 1952. The Income-tax Officer later received information about undisclosed profits, leading to a notice under section 34(1)(a) of the old Act on March 27, 1956. The notice was contested by the respondent due to improper service. Despite objections, the Income-tax Officer assessed the income, which was later set aside by the Appellate Assistant Commissioner on January 5, 1963, due to invalid service. Subsequently, under the new Act, notices were issued under sections 147(a), 148, and 142(1), which were challenged by the respondent. The High Court quashed these notices, stating the Income-tax Officer could not reopen assessments barred under the old Act by invoking the new Act's provisions.

2. Application of Section 297(2)(d)(ii) of the Income-tax Act, 1961:
Section 297(2)(d)(ii) allows the issuance of notices under section 148 for escaped income if no proceedings under section 34 of the old Act were pending at the commencement of the new Act. The High Court interpreted this provision to mean that the Income-tax Officer could not issue a notice under section 148 if the right to reopen the assessment was already barred under the old Act. The Supreme Court upheld this interpretation, emphasizing that the new Act does not revive the right to reopen assessments barred under the old Act.

3. Retrospective Application of the New Income-tax Act, 1961:
The appellants argued that section 297(2)(d)(ii) should be interpreted to allow reopening of assessments for any year after March 31, 1940, regardless of whether it was barred under the old Act. The Supreme Court rejected this argument, stating that retrospective operation should not be given to the statute unless expressly provided or necessarily implied. The Court cited the principle that a statute should not be construed to affect or revive any right or remedy lost by efflux of time unless explicitly stated. The decision in S. S. Gadgil v. Lal & Co. was referenced, where it was held that an amended provision extending the period of limitation does not revive a right already barred under the unamended provision.

Conclusion:
The Supreme Court affirmed the Gujarat High Court's judgment, holding that the notices issued under sections 147, 148, and 142(1) of the new Act were illegal and ultra vires, as the right to reopen the assessment was barred under the old Act. The appeal was dismissed with costs.