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TMI Blog1968 (4) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee was a partnership firm which carried on business in the Sarguja State. The firm was dissolved on July 25, 1947. It was assessed for the assessment year 1946-47 on December 30, 1947 (annexure " B "). On March 26, 1952, a notice was issued to the assessee under section 34(1)(a) of the Income-tax Act for reassessment of escaped income as it was discovered that the firm had made a declaration of high denomination notes to the extent of Rs. 4,75,000 on January 23, 1946. The income was ultimately assessed to income-tax. The assessee went up in appeal before the Assistant Commissioner of Income-tax who held that the income could not be assessed in the year 1947-48 but was liable to assessment for the year 1946-47 (annexure " F "). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responding State Act was repealed. However, the earlier Act was saved for the purpose of assessments relating to years prior to the previous year before the Act of 1949. Thus, for the purpose of the assessment for the years 1945-46, the relevant Act would be the Income-tax Act as applied to the Sarguja State by the then Ruler in 1941 under Darbar order, annexure "A" (hereinafter referred to as the Sargua Act). Shri Y. S. Dharmadhikari appearing for the petitioner pressed three points in support of the petition. They are : (i) that the Sarguja Act, which applies to the instant case, should be applied as it was on the date of the merger of the State (January 1, 1948), and subsequent amendments to the Indian Income-tax Act do not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclude amendments made in the Income-tax Act after the merger. The position, however, changes after the Sarguja Act was repealed by the Taxation Laws (Extension to Merged States and Amendment) Act, 1949. Section 7 of that Act introduced the Indian Income-tax Act ill the merged State of Sarguja and repealed the Sarguja Act. The relevant part of seetion 7 is as under : " 7. (1) If, immediately before the 26th day of August, 1949, there was in force in any of the merged States any law relating to income-tax, super-tax or business profits tax, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts made from time to time", if literally interpreted, is comprehensive enough to include amendments made at any time but the difficulty arises in the context of amendments made in the Indian Income-tax Act after the repeal of the Sarguja Act. We are unable to accept that amendments subsequent to the repeal can be read in the Sarguja Act. Amendments can be made only in an Act which is in existence. The fact that the Act has been saved for a limited purpose would not, in our opinion, make any difference. The very purpose of a saving clause is to save vested rights as they existed on the date of repeal and this purpose may be defeated if the expression "amendments made from time to time, " is interpreted literally to make subsequent amendments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as referring to the Income-tax Act as it stood at the commencement of that Act in 1949. Subsequent amendments will have to be ignored. On this view, the income-tax authorities are not entitled to rely upon sub-section (4) of section 34 which was introduced by an amendment in 1959. In 1949, the limitation for a notice under section 34(1)(a) was eight years only and the period had expired long before the impugned notice. It was thus not competent for the income-tax authorities to issue the impugned notice. Point No. 2 : Shri Adhikari then contended that he relied upon the second proviso to sub-section (3) of section 34. He argued that the notice in the instant case was to give effect to the finding or direction contained in an order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 31. Under that section he can give directions, inter alia, under section 31(3)(b), (c) or (e) or section 31(4). The expression ' direction ' in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other Tribunals can issue under the powers conferred on him or them under the respective sections. " In the instant case, the direction can only mean that the escaped income could not be assessed for the year 1947-48. The observation that it could be assessed for the earlier year is not a finding or direction within the meaning of the proviso to sub-section (3) and cannot thus help the authorities in supporting the validity of the notice. Point No. 3 : The learned counsel for the petitioner r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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