9911796707
TMI Blog1963 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant facts are these. The petitioner is a resident of Mhow, which was formerly a part of the quondam Holkar State. In or about 1934, he began interesting himself in business activities in the then British India and acquired a textile mill, known as the New Premier Mills, Bombay. He also purchased in 1939 a cotton ginning and pressing factory at Khamgaon. For the assessment years 1940-41, 1941-42, 1943-44 and 1946-47, the petitioner was assessed to income-tax at Khamgaon in the former Central Provinces and Berar as a Non-resident. For the assessment years 1942-43, 1944-45, 1945-46, he was assessed to tax as a non-resident by the Income-tax Officer, Special Income-tax cum Excess Profits Tax Circle, Nagpur, in the old C.P. and Bera?. For the assessment years 1944-45 and 1945-46 he was also assessed at Mhow as a resident and ordinarily resident in respect of income from properties situated in Mhow. The orders of assessment for the assessment years in question were made in 1942, 1944, 1945, 1946 and 1947, on various dates on 23rd March, 1962. The Income-tax Officer concerned served on the petitioner six notices under section 34 of the Act in respect of escaped income for the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood each of the notices issued to him as one under section 34(1)(a), that the notices no doubt related to the escaped income of the period mentioned in section 34(1A), but in respect of the income of that period notices could be legally issued after 31st March, 1956, under section 34(1)(a), and that the provisions of section 34(1A) did not override section 34(1)(a). It has been further stated in the returns that the petitioner did not produce any account books at any time during the period 1939 to 1950; that he produced them for the first time in the assessment proceedings for the year 1950-51, that in those proceedings he also gave a balance-sheet s?owing his assets and liabilities, that the petitioner's capital as disclosed by the balance-sheet and the various dispositions made by him between 1939 to 1949 and estimated capital according to the earnings as disclosed by the petitioner during the assessment years in question, showed a clear gap of ₹ 55 lakhs as representing excess wealth which could not be accounted for and which was income that had escaped assessment and had not been assessed to tax. So also the petitioner's account with the New Premier Mills, Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) If, in the case of any assessee, the Income-tax Officer has reason to believe-- (i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946; and (ii) that the income, profits or gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one lakh of rupees or more; he may, notwithstanding that the period of eight years or, as the case may be, four years specified in sub-section (1) has expired in respect thereof, serve on the asse?see, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22, and may proceed to assess or reassess the income, profits or gains of the assessee for all or any of the years referred to in clause (i), and thereupon the provisions of this Act (excepting those contained in clauses (i) and (iii) of the proviso to sub- section (1) and in sub-section (2) and (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice has been issued under sub-section (1A) , the provision, namely, to whom a notice has been issued under clause (a) of sub-section (1) or under sub-section (1A) for any of the years ending on the 31st day of March of the years 1941 to 1948 inclusive . These amendments made in section 34 came into force on the 1st day of April, 1956. Section 34 was again amended in 1959 by the Indian Income-tax (Amendment) Act, 1959. This amending Act inserted a new sub-section (4) in section 34, in the following terms: (4) A notice under clause (a) of sub-section (1) may be issued at any time notwithstanding that at the time of the issue of the notice the period of eight years specified in that sub-section before its amendment by clause (a) of section 18 of the Finance Act, 1956 (18 of 1956), had expired in respect of the year to which the notice relates. Section 4 of the amending Act of 1959 contained provisions regarding saving of notices, assessments, etc., in certain cases only, and read as follows: No notice issued under clause (a) of sub-section (1) of section 34 of the principal Act at any time before the commencement of this Act and no assessment, reassessment or set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1963) in Special Civil Application No. 1458 of 1962 Since reported as Lakshminarayan R. Rathi v. Income-tax Officer, Poona [1964] 52 I.T.R. 254 under articles 226 and 227 of the Constitution filed by one Laxminarayan R. Rathi of Sholapur in which a view contrary to that expressed by the Punjab High Court has been taken. In reply, Shri Adhikari, learned Advocate-General, appearing for the revenue first gave us a historical view of the evolution of section 34(1) as far as limitation was concerned, and urged that sub-section (1A) was inserted in section 34 mainly for the purpose of bringing to tax escaped inc?me which could no longer be charged by following the procedure laid down in the Taxation on Income (Investigation Commission) Act, 1947, as a result of the decision of the Supreme Court in Suraj Mall Mohta and Co. v. Visvanatha Sastri [1954] 26 I.T.R. 1; [1955] 1 S.C.R. 448, M.CT. Muthiah v. Commissioner of Income-tax [1956] 29 I.T.R. 390; [1955] 2 S.C.R. 1247, and Shree Meenakshi Mills Ltd. v. A.V. Visvanatha Sastri [1954] 26 I.T.R. 713; [1955] 1 S.C.R. 787, that sub-section (1A) which dealt with escaped assessment of income of only such previous years as fell wholly or part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such year or years amounted to or was likely to amount to ₹ 1 lakh or more. When sub-section (1A) was introduced with effect from 17th July, 1954, the period of limitation for reopening assessments under clause (a) or clause (b) of section 34(1? for any year falling within the aforesaid period had already expired. Sub-section (1A) made no distinction as to whether the escaped assessment was due to an omission or failure on the part of the assessee to make a return of his income under section 22 for any year or to disclose fully or truly all material facts necessary for his assessment for that year, or whether even if there was no such omission or failure, the Income-tax Officer had reason to believe that income had escaped assessment or full assessment. It enabled the Income- tax Officer to serve a notice, no matter whether the assessee's case fell under clause (a) or clause (b) of sub-section (1) of section 34 and notwithstanding that the period of eight years or, as the case may be, four years specified in sub-section (1) had expired. A notice under sub-section (1A) could be issued only with the previous sanction of the Central Board of Revenue on or before 31st March, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 34 even after 31st March, 1956, it must be taken that the inhibitory provision, namely, that no notice under that sub-section can be issued after 31st March, 1956, is as much in force after 31st March, 1956, as an enabling provision would be after that day. If then, as we think, sub-section (1A) is a special provision and the second proviso to it laying down that no notice shall be issued after 31st March, 1956, cannot be regarded as a provision making the sub-section inoperative after that date, the next question that requires consideration is whether the amendments made in section 34(1) by section 18 of the Finance Act, 1956, has the effect of repealing or abrogating altogether sub-section (1A). By the amendments which came into force on 1st April, 1956, the period of eight years for a notice under clause (a) of section 34(1) was removed and it was provided that in a case falling under that clause a notice could be served at any time. While removing this bar of limitation, the legislature provided some safeguards for the assessee set out in the substituted proviso. They are, that a notice under clause (a) of sub-section (1) shall not be issued for any year prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e.... general provisions will not aborgate special provisions. The principle has been stated in similar terms in Maxwell on the Interpretation of Statutes, 11th edition, at pages 168-169. The Privy Council also said in Barker v. Edger [1898] A.C. 748 that: When the legislature has given its attention to a separate subject, and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provision unless it manifests that intention very clearly. Each enactment must be construed in that respect according to its own subject-matter and its own terms. On the application of the above principle, it is plain that unless the amendments made in section 34(1) in 1956 manifest very clearly intention to derogate from or affect or abrogate sub-section (1A) specially relevant to the reopening of assessment of the specific years mentioned in that sub-section, sub-section (1A) cannot be held to be repealed by implication by those amendments. The intention to abrogate sub-section (1A) is negatived first by the fact of the retention of that sub-section even after 31st March, 1956. The Finance Act, 1956, did not touch tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was amended in 1956, laid down a certain period of time within which notices must be served in order to enable a reassessment to be made and that on the expiry of that period the assessee was entitled to tell himself that no proceedings having been taken, he was safe from having his assessment reopened , and that action under the amended section could not be taken if prior to the amendment coming into force, that is 1st April, 1956, the period of serving the notice had already expired. The learned judge, who decided the Calcutta case, also observed A.I.R. 1959 Cal. 567, 572 ...the fact that the section deals with a past period, makes the argument of its retrospective operation plausible at first sight. But a closer consideration will show the weakness of it. Such an argument ignores the principle I have mentioned above, which provide for a particular situation, namely, where the existing right of reassessment has been already barred. In my opinion, the law is firmly established that under such circumstances the remedy cannot be revived unless the law provides for it in express terms or necessary intendment. I hold that in the latest amendment of section 34(1) there is nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment in 1956. It is significant that even in 1959 when section 34 was again amended in the manner indicated above s?b-section (1A) was left untouched. The continuance of that sub-section even after the amending Act of 1959 only shows that Parliament did not intend that action under section 34(1)(a), after it was amended in 1956, should be taken in cases where action under sub-section (1A) had become time-barred for want of issue of notice on or before 31st March, 1956. If that had been the intention then Parliament while providing by the insertion of the new sub-section (4) for the issue of a notice under clause (a) of section 34(1) notwithstanding the expiry of the eight years' limitation specified in the second proviso to sub-section (1A) for serving a notice (sic). Parliament did not do so. On the other hand, the express reference in sub-section (4) of section 34 of the Act and section 4 of the amending Act of 1959 to the expiry of eight years' limitation specified in section 34(1)(a) before its amendment by section 18 of the Finance Act of 1956 makes it pointedly clear that Parliament did not intend that action under the amended section 34(1)(a) should be taken in reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it must be held that an assessment for the year ending on 31st March, 1941, and subsequent years covered by sub-section (1A) cannot be reopened by r?sort to the amended section 34(1) when no notice for reopening the assessments was issued under sub-section (1A) on or before 31st March, 1956. Turning now to the authorities cited by the learned counsel for the petitioner, the decision of the Punjab High Court in Shahzada Nand and Sons v. Central Board of Revenue [1962] 45 I.T.R. 233 supports the views we have taken. In that case, the learned judges of the Punjab High Court on the principle of harmonious construction and the rule of construction that a statute must be construed according to the plain, literal and grammatical meaning of the words in which it is expressed, reached the conclusion that sub-section (1A) of section 34 is an exception to the cases covered by sub-section (1)(a) of the said section and, consequently, if a notice falling under section 34(1)(a) falls also within sub-section (1A), that is to say, the notice is in respect of income, profits or gains which have escaped assessment for any previous year falling within 1st September, 1939, and 31st March, 1946 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and that this extension of the facility indicated that a notice unde? clause (a) of sub-section (1) could be issued for any of the years ending on 31st March, 1941, and subsequent years falling under sub-section (1A). We should not be regarded as disrespectful to the learned judges of the Bombay High Court if we say that we are unable to see how this conclusion follows from the amendment made in sub-section (1B); sub-section (1B) must be read along with sub-sections (1) and (1A); and so read, the true and reasonable construction of that sub-section is that any assessee to whom a notice has been issued under clause (a) of sub-section (1) for the two years from 1st April, 1946, to 31st March, 1948, as well as any assessee to whom a notice has been issued under sub-section (1A) for any of the years ending on 31st March of the years 1941 to 1946 can apply to the Central Board of Revenue within the prescribed time for the settlement of his assessment. If Parliament did really intend that even after the 31st March, 1956, a notice for the reopening of an assessment should be given under clause (a) of sub-section (1) for any of the years ending on 31st March of the years 1941 to 1946, t ..... 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