1968 (8) TMI 36 - HC - Income Tax

Act of 1961 - Act of 1922 - Notice issued u/s 148 - time limit - held that if the right of the respondents to reassess the petitioner for the year 1948-49 became barred by time under the 1922 Act, such a proceeding cannot be initiated under the 1961 Act

Issues Involved:
1. Whether reassessment proceedings under section 147 of the Income-tax Act, 1961, are barred by time under the Indian Income-tax Act, 1922.
2. Whether reassessment proceedings can be initiated under the 1961 Act if they were barred under the 1922 Act.
3. The applicability of section 297 of the 1961 Act regarding reassessment proceedings.
4. The jurisdiction of the High Court under Article 226 of the Constitution to quash the reassessment notice.

Issue-wise Detailed Analysis:

1. Whether reassessment proceedings under section 147 of the Income-tax Act, 1961, are barred by time under the Indian Income-tax Act, 1922:

The petitioner contended that reassessment proceedings were barred by time under the 1922 Act. The respondents disputed this, arguing that reassessment proceedings were not barred under the 1922 Act, and even if they were, it would not prevent initiation under the 1961 Act. The court examined Section 34 of the 1922 Act, which allowed for reassessment if income had escaped assessment. For amounts below one lakh rupees, the period of limitation was eight years. Since the amount involved was Rs. 90,000, the reassessment for the year 1948-49 was barred after March 31, 1957. The court concluded that reassessment proceedings under Section 34(1)(a) of the 1922 Act were barred by time.

2. Whether reassessment proceedings can be initiated under the 1961 Act if they were barred under the 1922 Act:

The court examined Section 149 of the 1961 Act, which allows for reassessment within 16 years if the income escaping assessment amounts to Rs. 50,000 or more. The notice issued was within this 16-year period. However, the court had to determine if the 1961 Act allowed reassessment if it was barred under the 1922 Act. The court analyzed Section 297(2)(d)(ii) of the 1961 Act, which permits reassessment under the new Act even if no action had been taken under the 1922 Act. The court found no indication that the legislature intended to revive barred reassessment proceedings under the new Act.

3. The applicability of section 297 of the 1961 Act regarding reassessment proceedings:

The court examined Section 297, which deals with repeals and savings, and found that it did not explicitly or implicitly allow for the revival of reassessment proceedings barred under the 1922 Act. The court referenced decisions from the Madhya Pradesh High Court and the Gujarat High Court, which had differing views on whether the 1961 Act could revive barred reassessment proceedings. The court sided with the view that the new Act did not revive barred proceedings unless explicitly stated.

4. The jurisdiction of the High Court under Article 226 of the Constitution to quash the reassessment notice:

The court considered whether it should interfere under Article 226 of the Constitution. It referenced previous cases, emphasizing that the High Court could examine if the preliminary conditions for reassessment, including limitation, were met. Since the notice under Section 148 of the 1961 Act was barred by time, the court concluded that it was within its jurisdiction to quash the notice to prevent unnecessary harassment to the petitioner.

Conclusion:

The petition was allowed with costs. The notice dated March 26, 1965, was quashed on the grounds that reassessment proceedings were barred by time under the 1922 Act, and the 1961 Act did not revive such barred proceedings.

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