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TMI Blog1971 (12) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... the evening of January 11, 1946. This explanation was not accepted by the Income-tax Officer who held that the amount represented the secreted profit of the assessee and was liable to income-tax. The amount was added to the income for that year as undisclosed income. Corresponding assessment was made for purposes of excess profits tax also. The two assessments made by the Income-tax Officer were, on appeals by the assessee, confirmed by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the instance of the assessee, certain questions of law were referred by the Appellate Tribunal to this court (Income-tax Reference No. 33 of 1957). In this reference, it was held by a Division Bench on December 14, 1960 : (i) That the income of Rs. 20,000 was not from business but from an undisclosed source and, therefore, it could not be subjected to excess profits tax ; and (ii) that the income would fall to be assessed in the assessment year 1946-47 and not in 1947-48. The Bench made it clear that it was not expressing any opinion whether this amount constituted assessable income for the assessment year 1946-47 or not. Thereafter, on September 14, 1961, the impugned notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1946-47. He, accordingly, dismissed the writ petition with costs. The assessee has now preferred this special appeal against the judgment of Manchanda J. Sri Ashok Gupta, learned counsel for the appellant, has challenged the impugned notice before us also on the same two grounds on which it was assailed before Manchanda J. The decision of the question whether the notice is time-barred or is saved from limitation depends on a proper understanding of the various amendments made in section 34(1)(a) of the Income-tax Act. We are, concerned, with amendments made in 1948, and thereafter. The relevant portion of this section, as it stood after the amendment of 1948, reads as follows : "34.-(1)(a) If the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for 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 ..... 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlement made or other proceedings taken in consequence of such notice shall be called in question in any court, tribunal or other authority merely on the ground that at the time the notice was issued of at the time the assessment or reassessment was made, the time within which such notice should have been issued or the assessment or reassessment should have been made under that section as in force before its amendment by clause (a) of section 18 of the Finance Act, 1956 (18 of 1956), had expired." The escaped income in this case is Rs. 20,000, i.e., less than Rs. 1 lakh. The question which arises for determination in this appeal is whether sub-section (4) of section 34 saves the impugned notice which has admittedly been issued more than eight years after the relevant year. It will be noticed that sub-section (4) permits a notice to be, issued after the Amendment Act of 1959 and saves such notice from the bar of limitation placed by section 34(1)(a) as it stood after the amendment of 1948 but it does not save the notice from the bar of limitation imposed by section 34(1)(a) as it stood after the amendment of 1956. The contention of Sri Gupta is that, by virtue of the main provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice is issued after the Amendment Act of 1959 has come into force. If a notice under section 34(1)(a) in respect of a particular year issued before the Amendment Act of 1959 is not saved by section 4 of the Amendment Act of 1959, then, if the notice in respect of the same assessment year is issued after the Amendment Act of 1959 it will not be saved by section 34(4). Therefore, in order to determine as to which bar of limitation applies to a particular case, the fact whether the notice has been been issued before or after the Amendment Act of 1959, is not of any consequence. The decision of the Supreme Court, though given in respect of section 4 of the Amendment Act of 1959, is equally applicable to section 34(4). In the case before the Supreme Court, the notice under section 34(1)(a) was in respect of the assessment year 1948-49 and was issued on July 9, 1958. The notice was thus issued beyond eight years. It was contended by the department that the bar of limitation was saved by section 4 of the Amendment Act of 1959. The Supreme Court observed : "It seems to us that section 4 of the Amending Act of 1959 does not save the notice under section 34(1)(a) issued on July 9, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act freed a notice from the bar of limitation in respect of it imposed by the 1948 amendment, it did not altogether do away with all prescriptions of time. In spite of section 4, a notice contemplated by it would be subject to the prescription of time as its issue under the 1939 Act and may be, under section 34 as it stood before the 1939 amendment. If the notice was issued after the 1956 amendment, it would also be subject to the prescription as to time provided by that amendment. (Emphasis supplied) Then it was said that if section 4 applied to a notice issued more than eight years after the year in which the income escaped assessment but before the 1956 amendment came into force in a case where the escaped income of the year was less than Rs. 1,00,000, the position would be curious. A notice issued in a similar case after the 1956 amendment would be bad under section 34 as it then stood and section 4 could not save it for it saved notices only from the effect of the 1948 amendment. The position then would be that in a case involving the same amount of escaped income for the same year, a notice issued before the 1956 amendment and invalid under the 1948 amendment would be valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt but before the 1959 amendment was not saved by section 4 of the Amendment Act of 1959, then a notice in such a case issued after the 1959 amendment would not be saved by sub-section (4) of section 34, for both the provisions save the notice from the same prescription as to time. Following the decision of the Supreme Court in Hussain Bhai's case and the observations of Sarkar J. in Prashar's case, which have been approved in Hussain Bhai's case, we have come to the conclusion that the impugned notice is barred by the rule of prescription of time laid down by the 1956 amendment and is not saved by sub-section (4) of section 34. The notice being time-barred, the Income-tax Officer had no jurisdiction to issue it or to take any proceedings for assessment on the basis of this notice. Since the notice is time-barred and is illegal for that reason, it is not necessary to consider the second point whether the conditions precedent for issuing it were satisfied or not. Though the question of laches was not raised before us, we would like to observe that the writ petition, out of which this appeal arises, is not liable to be dismissed on the ground of laches. There was considerable delay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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