1971 (9) TMI 13 - SC - Income Tax

During pendency of proceedings under s. 34, Income-tax Officer could not issue any fresh notice under section 148

Summary

Issues:
Validity of notice under section 34(1)(a) of the Indian Income-tax Act, 1922
Competence of Income-tax Officer to issue notice under section 148 of the Income-tax Act, 1961
Interpretation of Section 297(2)(d)(ii) in relation to pending proceedings under the repealed Act

Analysis:
The judgment pertains to two appeals against the same judgment, involving the validity of notices issued by the Income-tax Officer under different sections of the Income-tax Acts of 1922 and 1961. The first notice was issued under section 34(1)(a) of the 1922 Act, seeking to reopen the assessment for the year 1946-47. The High Court quashed this notice. Subsequently, a notice under section 148 of the 1961 Act was issued for the same assessment, which was also challenged and quashed by the High Court. The key issue was whether the proceedings initiated under the 1922 Act were pending when the 1961 Act came into force.

The provisions of Section 147 and Section 148 of the Income-tax Act, 1961 were crucial in determining the competence of the Income-tax Officer to issue a fresh notice under the new Act. Section 147 outlines the circumstances under which income can be reassessed, while Section 148 mandates the Income-tax Officer to record reasons before issuing a notice. The time limit for issuing a notice under Section 148 is prescribed in Section 149, emphasizing the importance of adherence to procedural requirements.

The interpretation of Section 297(2)(d)(ii) was central to the decision, as it dealt with repeals and savings concerning pending proceedings under the repealed Act. The court emphasized that the factual pendency of proceedings under the repealed Act was essential, irrespective of any procedural irregularities or limitations. Drawing parallels from previous judgments, the court highlighted that the validity of proceedings is distinct from their factual pendency, underscoring that the bar of limitation does not negate the existence of pending proceedings.

The court relied on the decision in Raja Kulkarni v. State of Bombay to establish that the factual pendency of proceedings is paramount, regardless of any legal defects. Additionally, the court referenced Mela Ram & Sons v. Commissioner of Income-tax to emphasize that adherence to procedural timelines does not nullify the existence of pending proceedings. Ultimately, the court concluded that the proceedings initiated under the 1922 Act were indeed pending when the 1961 Act came into force, rendering the Income-tax Officer incompetent to issue a fresh notice under the new Act.

In the final verdict, Civil Appeal No. 1301 of 1971 was dismissed with costs, affirming the incompetence of the Income-tax Officer to issue a fresh notice. Civil Appeal No. 1981 of 1968 was also dismissed as not maintainable, with parties directed to bear their own costs. The judgment underscores the importance of procedural compliance and the distinction between the validity and factual pendency of legal proceedings under different tax statutes.