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TMI Blog1963 (12) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners in Special Civil Applications Nos. 370, 371 and 372 of 1962 ₹ 41,000 in the assessment year 1943-44. ₹ 91,575 in the assessment year 1946-47. ₹ 36,535 in the assessment year 1950-51. The petitioner in Special Civil Application No. 373 of 1962. ₹ 84,520 in the assessment year 1943-44. ₹ 1,40,370 in the assessment year 1946-47. ₹ 55,122 in the assessment year 1950-51. The petitioner in Special Civil Application No. 374 of 1962. ₹ 1,60,740 in the assessment year 1943-44. and the Income-tax Officer, therefore, proposed to reassess such escaped income by reopening the assessment of each petitioner for the respective assessment years. There were separate notices to each petitioner in respect of each assessment year and it was stated in each of the notices that it was issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Gujarat, or the Central Board of Revenue, New Delhi, as the case may be. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been underassessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l protection of the laws contained in article 14 of the Constitution. During the course of the discussion in Suraj Mall Mohta's case [1954] 26 I.T.R. 1; [1955] 1 S.C.R. 448 in the Supreme Court certain defects were pointed out in the classification made under section 5(1). Parliament, therefore, tried to remedy these defects when it enacted, consequent upon the decision in Suraj Mall Mohta's case [1954] 26 I.T.R. 1; [1955] 1 S.C.R. 448, the Indian Income-tax (Amendment) Act, 1954, introducing by way of amendment the following sub-sections as sub-sections (1A) and (1B) in section 34: (1A). 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of cases falling within clause (a) was removed and the following provisions were substituted for the existing proviso in sub-section (1): Provided that the Income-tax Officer shall not issue a notice under clause (a) of sub-section (1)-- (i) for any year prior to the year ending on the 31st day of March, 1941; (ii) for any year, if eight years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income-tax which have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed, not being a year or years ending before the 31st day of March, 1941; (iii) for any year, unless he has recorded his reasons for doing so, and, in any case falling under clause (ii), unless the Central Board of Revenue, and, in any other case, the Commissioner, is satisfied on such r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provisions of section 34 as they stood from time to time after undergoing various amendments which we have set out above. Now the impugned notices were issued by the respondent on 31st January, 1962, and the question which, therefore, arises for consideration is whether after the amendment by the Finance Act, 1956, a notice can be issued under sub-section (1)(a) of section 34 for reopening an assessment for any of the assessment years covered by sub-section (1A) of section 34 when no notice for reopening such assessment was issued under sub-section (1A) of section 34 on or before 31st March, 1956. In order to arrive at a proper determination of the question, it is necessary first to consider the scope and ambit of sub-sections (1)(a) and (1A) of section 34 as they stood immediately prior to the amendment by the Finance Act, 1956, and then to examine the effect of the amendment on those sub-sections. Section 34 as it stood immediately prior to its amendment by the Finance Act, 1956, was the section as amended on 17th July, 1954, by the insertion, inter alia, of sub-sections (1A) and (1B). The effect of the amendment of 17th July, 1954, was that with effect from that date we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -limit of eight years in sub-section (1)(a) could alter the position and bring within the scope and ambit of sub-section (1)(a) cases covered by sub-section (1A) when sub-section (1A) still continued on the statute book as a valid provision. The question was, therefore, seriously debated and considerable argument was expended upon it. On an analysis of the provisions of sub-sections (1)(a) and (1A) it is clear that sub-section (1)(a) is a general provision and sub-section (1A) is a special provision. Once an assessment is made and it has become final and conclusive it is elementary that, in the absence of an express provision to the contrary, it cannot be reopened. Section 34 was, therefore, enacted to give power to the Income-tax Officer to reopen an assessment which had already become final and conclusive. The power was conferred under sub-section (1) by two clauses, namely, (a) and (b). We are concerned in these petitions with sub-sections (1)(a) and we will, therefore, refer only to sub-section (1)(a) but what we say here in regard to sub- section (1)(a) must apply equally to sub-section (1)(b). Sub-section (1)(a) empowered the Income-tax Officer to reopen the assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1A). This outside limit was so inexorable that the second proviso to sub-section (3) which relaxed the time-limit for taking action in certain cases was by the express terms of sub-section (1A) not made applicable to cases covered by sub-section (1A) and the outside limit could not, therefore, under any circumstances be infringed. The safeguard provided to the assessee against unnecessary harassment was also improved in the sense that instead of the satisfaction of the Commissioner of Income-tax required for taking action under sub-section (1)(a) or (1)(b), the satisfaction of a higher revenue authority, namely, the Central Board of Revenue, was required to be obtained before taking action under sub-section (1A). An additional facility was also given to the assessee against whom notice was issued under sub- section (1A) and such an assessee could under sub-section (1B) apply to the Central Board of Revenue for settlement of the matters relating to assessment unlike an assessee proceeded against under sub-section (1)(a) or (1)(b). It is clear from these circumstances that sub-section (1A) constituted a selfcontained code dealing with a special class of tax-evaders, namely, tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capement of income from assessment within the meaning of sub-section (1A) did not include even a case of under-assessment and that it referred only to cases where income had escaped assessment by reason of not having suffered taxation. This last contention of the learned Advocate-General is, however, not right for it is clear that under-assessment of total income resulting from a part of the income having escaped assessment would be covered by sub- section (1A) because though it is under-assessed when looked at from the point of view of total income, it is certainly escapement from assessment so far as the part of the income which escapes assessment is concerned. In view of this position adopted by the parties we propose to proceed on the basis that sub-section (1A) applied only to cases in which there was escapement of income from assessment whether such escapement resulted in underassessment or not. But if this be so, it certainly supports the contention of Mr. I.M. Nanavati that sub-section (1A) was a special provision inasmuch as it dealt with a more limited class of cases than those covered by the general provision contained in sub-section (1)(a). We may, however, point out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had, therefore, become void on the introduction of sub-section (1A) in section 34 as violating the guarantee of article 14 of the Constitution. Mahajan C.J., speaking on behalf of the Supreme Court, observed: Further it seems that this very class of persons is now included within the ambit of the amended section 34 of Act XXXIII of 1954... It is thus clear that the new sub-section inserted in section 34 by the provisions of Act XXXIII of 1954 is intended to deal with the class of persons who were said to have been classified for special treatment by section 5(1) of Act XXX of 1947. The Supreme Court in the subsequent decision, Thangal Kunju Musaliar v. Venkatachalam Potti [1956] 29 I.T.R. 349; [1955] 2 S.C.R. 1196, after referring to the decision in Shree Meenakshi Mills' case [1954] 26 I.T.R. 713; [1955] 1 S.C.R. 787, said: Section 34(1A) purported to meet two criticisms which had been, in the main, offered against the constitutionality of section 5(1) of the Act in Suraj Mall Mohta's case [1954] 26 I.T.R. 1; [1955] 1 S.C.R. 448. One criticism was that the classification made in section 5(1) of the Act was bad because the word 'substantial' used the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new sub-section inserted in section 34 by Act XXXIII of 1954 was intended to deal with the class of persons who were said to have been classified for special treatment by section 5(1) of Act XXX of 1947. These observations of the Supreme Court clearly show that the class of assessees which was selected for special treatment by section 5(1) of the Act XXX of 1947 was dealt with by sub-section (1A) after the introduction of that sub-section in section 34 with this modification that defects of classification which were alleged to exist in section 5(1) were cured by the basis of classification being made more definite and if that be so, the conclusion is irresistible that sub-section (1A) was enacted as a special provision and must be construed as such. Mr. I.M. Nanavati also cited a decision of the Allahabad High Court in Jai Kishan Srivastava v. Income-tax Officer [1960] 40 I.T.R. 222, 239. In that case the vires of sub- section (1A) was challenged on the ground that it was discriminatory and violated the constitutional guarantee contained in article 14 of the Constitution. The validity of the sub-section was however upheld by the Full Bench of the Allahabad High Court and Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n M.M. Ispahani Ltd. v. Union of India [1961] 43 I.T.R. 58, which was the other decision cited by Mr. I.M. Nanavati also contains observations to the same effect and it is, therefore, not necessary for us to make a detailed reference to the same. If sub-section (1A) was a special provision in regard to reopening of assessment of assessment years in respect of which the relevant previous years fell wholly or partly within the war period where income that had escaped assessment was ₹ 1,00,000 or more, and sub-section (1)(a) was a general provision in regard to reopening of assessment of all assessment years, on what principle of interpretation must the scope and ambit of the two provisions be determined? The answer is supplied by the maxim generalia specialibus non derogant. This maxim has been the subject of an almost bewildering mass of authorities and the reasons given in support of it have differed somewhat in expression from time to time probably because more reasons than one can be given. But it is now well settled that where there is a special provision as well as a general provision in a statute, and the case is covered by the special provision, it is the special pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and notice was issued before 31st March, 1956. Sub-section (1A) thus clearly indicated a particular intention incompatible with the general intention expressed in sub-section (1)(a) and this incompatibility was emphasized by the non-obstante clause in the opening part of sub-section (1A). The general provision in sub- section (1)(a) was, therefore, having regard to the aforesaid rule of interpretation, inapplicable to cases covered by the special provision in sub-section (1A). Such cases were governed exclusively by sub-section (1A) and the general words of sub-section (1)(a) could not be availed of for the purpose of reopening assessment in such cases (vide Koka Ram v. Salig A.I.R. 1928 All. 536, Bhana Makan v. Emperor A.I.R. 1936 Bom. 256, Vithalji Madhavji v. Commissioner of Income-tax [1953] 24 I.T.R. 566 and Subodh Chandra Popatlal v. Commissioner of Income-tax [1948] 16 I.T.R. 43). The next question that arises is as to what is the effect of the amendment made by the Finance Act, 1956? The argument of Mr. I.M. Nanavati on this part of the case was that, even after the amendment, sub-section (1A) continued on the statute book as a valid provision and operated in all its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght years amounted to ₹ 1,00,000 or more, and sub-section (1)(a) as amended applied generally to all assessment years including the assessment years dealt with by sub- section (1A) and, provided certain conditions were satisfied, only the assessment years prior to the assessment year ending on 31st March, 1941, could be reopened under that sub-section at any time regardless of any time-limit. Sub-section (1A) which was a special provision in regard to reopening of assessment of assessment years for which the corresponding previous years fell wholly or partly within the war period where income that had escaped assessment was ₹ 1,00,000 or more, was not repealed but was continued on the statute book and if it was a special provision prior to the amendment, for the same reasons it must be regarded as a special provision subsequent to the amendment. The result was that after the amendment, we had two provisions in section 34 for reopening assessments, one a general provision in sub-section (1)(a) and the other a special provision in sub-section (1A). In regard to the assessment years for which the corresponding previous years fell wholly or partly within the war period wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1A) continued to be operative after the amendment that assessment in cases covered by sub-section (1A) could not be reopened after 31st March, 1956, and apparently it was with a view to achieving this result that the legislature continued sub-section (1A) as an operative provision. Since sub-section (1A) continued as an operative enactment making a special provision in regard to cases covered by it, full meaning and effect must be given to it and the only way in which this can be done is by reading the general provision in sub-section (1)(a) as applicable to cases other than those covered by the special provision in sub- section (1A). This question can also be looked at from another point of view. When amendment was made in sub-section (1)(a), the effect was as if sub-section (1)(a) was re-enacted in the amended form. Did the re-enactment of sub-section (1)(a) in the amended form have the effect of impliedly repealing sub-section (1A)? Though the learned Advocate-General stated that he did not rely on the principle of implied repeal but based his argument only on the principle of harmonious construction, the effect of the argument must be that sub-section (1A) was imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latter sub-section. On the contrary, as we have already pointed out above, the indication is the other way round and that is manifested clearly by the continuance of the special provision in sub-section (1A). We must then consider as to whether the substitution of the words 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 in sub- section (1B) had the effect of setting at naught the provisions of sub-section (1A). It is no doubt true that sub-section (1B) talks of a notice issued under sub-section (1)(a) for any of the years ending on the 31st day of March of the years 1941 to 1948 and that some meaning must be given to those words. But if those words can be given a reasonable and sensible application without rendering them meaningless or ineffective, then they cannot be relied upon as indicating a legislative intent to abrogate sub- section (1A). If the effect of accepting the construction contended for on behalf of the petitioners were to render those words totally meaningless and superfluous, a question might arise whether those words should be discarded as superfluous and unnecessary or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 1946, then they would have expressed their intention clearly by suitably amending section 34(1) for that purpose or by repealing sub-section (1A), and not concealed it with a more than Baconian obscurity in a provision dealing with settlement of assessments. This contention of the learned Advocate- General based on the substitution of words effected in sub-section (1B) by the Finance Act, 1956, must therefore be rejected. There is also another circumstance which strongly supports the contention of Mr. I.M. Nanavati. It is now settled by the decision of the Calcutta High Court in Debi Dutt v. T. Belan [1959] 35 I.T.R. 781 and the decision of the Bombay High Court in S.C. Prashar v. Vasantsen [1956] 29 I.T.R. 857, that if the right of the Income- tax Officer to reopen an assessment is barred under the law for the time being in force, no subsequent enlargement of the time can revive such right in the absence of express words or necessary intendment. The decision of the Bombay High Court was of course taken in appeal and was reversed by the Supreme Court, but on this point, out of five judges, two judges expressed one view, two judges expressed another view and the fifth j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (1)(a) at any time notwithstanding the expiration of the outside limit of 31st March, 1956, specified in sub-section (1A). No such provision was, however, made by the legislature and far from making such provision the legislature retained sub-section (1A) along with the second proviso which prescribed the outside limit of 31st March, 1956. This circumstance is clearly indicative of the legislative intent that no notice in respect of cases covered by sub-section (1A) should be issued under sub-section (1)(a) even after its amendment by the Finance Act, 1956. If any such notice is issued it would be barred by time and therefore beyond the jurisdiction of the Income-tax Officer. Before we part with this point, we must refer to three decisions which were cited at the Bar and which deal with the present point in controversy between the parties. From out of these three decisions, the first decision to which we must refer is a decision of a Full Bench of the Punjab High Court in Shahzada Nand and Sons v. Central Board of Revenue [1962] 45 I.T.R. 233. We refer to this decision first because it represents the first judicial pronouncement on the question, but it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that both before and after the amendment by the Finance Act, 1956, sub- section (1)(a) covered the entire subject-matter of sub-section (1A) and we have already given our reasons for taking this view. The fallacy in the argument which found favour with the Bombay High Court lies, if we may say so with great respect, in treating the period of limitation provided for taking action under sub-sections (1)(a) and (1A) as defining and delimiting the ambit and coverage of those sub-sections. This fallacy will become immediately apparent if we consider the following cases. Take the case of assessment year 1946-47 for which the relevant previous year was the calendar year 1945. The previous year in this case fell wholly within the war period and yet action for reopening assessment could, on the plain terms of sub-section (1)(a), be taken under that sub-section between 17th July, 1954, and 31st March, 1956, being the period during which sub- section (1A) was in force. Equally, if sub-section (1)(a) stood alone, action for reopening assessment in respect of the assessment year 1947-48 for which the relevant previous year was the calendar year 1946 could be taken under sub-section (1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars had elapsed at the date of the notice, excluding the assessment year or years ending before 31st March, 1941. Mr. I.M. Nanavati on behalf of the petitioners contended that this condition was not satisfied in the present case and the reason he gave was that for the purpose of computation of the amount of ₹ 1,00,000 or more mentioned in the condition, the escaped income of only those assessment years was liable to be taken into account in respect of which notice for re- opening assessment could be issued under sub-section (1)(a) and since, as held by us, no notice for reopening assessment could be issued under sub- section (1)(a) in respect of the assessment years 1943-44 and 1946-47, the escaped income of those assessment years was not liable to be taken into account and if that was so, the escaped income admittedly did not amount to ₹ 1,00,000 or more and the condition was, therefore, not fulfilled. We cannot accept this contention. It is based on a construction of clause (ii) of the proviso to sub-section (1) which is contrary to the plain language of the enactment and involves the addition of the words in respect of which notice can be issued under clause (a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the object of the clause. Moreover, there is inherent indication in the clause itself showing that the construction contended for on behalf of the petitioners is not a correct construction. If the language of the clause carried the meaning which Mr. I.M. Nanavati wants to place upon it, it was hardly necessary for the legislature to provide expressly in the clause that the assessment year or years of which escaped income may be taken into account shall not be the assessment year or years ending before 31st March, 1941. On Mr. I.M. Nanavati's construction, even without this express provision, the escaped income of those assessment years would have been liable to be excluded from consideration since admittedly no notice for reopening assessment in respect of those assessment years could be issued under sub-section (1)(a) by reason of clause (i) of the proviso. The construction suggested on behalf of the petitioners thus leads to superfluity and it is an elementary principle of interpretation that the court should not be prompt to ascribe and should not without necessity or some sound reason impute to the language of the statute tautology or superfluity and should be rather at t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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