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TMI Blog1979 (1) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ght into India an amount of Rs. 55,000 in cash. This contention of the assessee, viz., that he had brought a sum of Rs. 55,000 from Pakistan was the subject-matter of a dispute between the assessee and the department, which dispute was ultimately resolved by the Income- tax Appellate Tribunal in relation to the appeals for the assessment years 1952-53, 1956-57 and 1957-58. The Tribunal accepted this statement of the assessee. Thereafter the customs authorities raided a locker which stood in the name of the assessee with the Punjab National Bank Ltd. and discovered a cash amount of Rs.47,000 therein. Thereupon, criminal proceedings were started against the assessee, which ultimately resulted in his conviction for contravention of the Foreign Exchange Regulation Act,1947. However, the amount of Rs. 47,000, which had been seized by the Customs authorities, was released by the First Class Magistrate, Central II, Delhi. The ITO, however, received the necessary information and on the basis of such information he included the said amount of Rs. 47,000 in the assessment of the assessee for the assessment year 1956-57 ; the amount was included under the head " Other sources ". The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o which the reassessment proceedings had been initiated, was not under the new Act but under the old Act, the Explanation could not be pressed into service. The AAC, however, rejected this argument, holding that by reason of the provisions of s. 297(2)(k) of the I.T. Act, 1961, the direction given by the Tribunal must be deemed to be one given under comparable or equivalent section of the new Act. The assessee carried the matter in further appeal to the Tribunal. Before the Tribunal the assessee urged that the AAC was totally in error in the view he took of the provisions of s.297(2)(k) of the Act of 1961, by reason of which he applied Expln. 2 to s. 153(3). The Tribunal upheld this contention, holding that the AAC had wrongly pressed into service Expln. 2 to s. 153(3). The Tribunal further held that since the original assessment was made under the provisions of the old Act and had become final, the AAC had exceeded his jurisdiction in sustaining the order of the ITO. It did not dilate over the other contentions of the assessee. In the view that it had taken, the Tribunal allowed the appeal of the assessee and held that the reassessment was beyond the period prescribed in s. 153( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a " finding ". The AAC, according to the Supreme Court, may incidentally hold that the income belonged to another year, but this could not constitute a " finding " as it was not one necessary for the disposal of an appeal in respect of the year of assessment in question. In this view of the matter, it was held that the second proviso to s. 34(3) did not save the time-limit prescribed under s. 34(1) in respect of an escaped assessment of an year other than that which was the subject-matter of the appeal or revision, as the case may be. Accordingly, the notice issued in that case was held as barred by limitation and declared not to be saved by the second proviso to s. 34(3). Under the Indian I.T. Act, 1922, all these provisions were to be found in s. 34, which had the heading " Income escaping assessment ". Section 147 is the equivalent section under the 1961 Act, which primarily deals with income escaping assessment and contemplates two broad classes of cases for initiation of reassessment proceedings. This section is then followed by several procedural sections pertaining to issue of notice, the time-limit for the notice, sanction for issue of notice and other provisions. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, i.e., Expln. 2, was enacted under the new Act to do away with the decision of the majority of the Supreme Court in Murlidhar Bhagwan Das's case [1964] 52 ITR 335. It may be noted that factually in this case the order of the Income-tax Appellate Tribunal, pursuant to which the reassessment proceedings had been initiated by the ITO (which is annexed as annex. " A " to the statement of case) is dated 10th October, 1963, i.e., after the new Act had become effective, but will obviously be an order under s. 33 of the Act of 1922. The order of the Tribunal pertained to the assessment years 1952-53, 1956-57 and 1957-58. The reassessment proceedings pertain to the assessment year 1958-59. If the decision in Murlidhar Bhagwan Das's case [1964] 52 ITR 335 (SC) were to apply, then, the finding or direction given by the Tribunal in its order dated 10th October, 1963, could not be a finding or direction as contemplated by s. 34(3) of the Indian I.T. Act, 1922. However, if Expln. 2 to s. 153(3) were to apply, then, the decision in Murlidhar Bhagwan Das's case [1964] 52 ITR 335 (SC) would have no application, and by reason of the said Explanation the finding given by the Tribunal, although a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's accounts showed cash credits of over Rs.3 lakhs. The AAC held that out of this, cash credits amounting to Rs. 2 1/2 lakhs had to be excluded from the assessment year 1959-60 and had to be brought to tax in the assessment year 1958-59. Thereupon,the ITO initiated proceedings under s. 147 in January, 1967, in respect of the assessment year 1958-59. The assessee contended that the reassessment proceedings were barred by limitation. In 1970, an assessment order was passed and recovery proceedings initiated. The Tribunal set aside the order of assessment on the ground that the assessee had not been given an opportunity of being heard. One of the points, which was considered by the High Court in the petition, concerned the plea of the assessee that the reassessment proceedings were barred by limitation. This argument advanced on behalf of the petitioner is considered at page 276 onwards of the reported decision (105 ITR). It was held that the Explanation was a new provision and a deliberate departure from the 1922 Act to obviate the principle enunciated by the Supreme Court in Murlidhar Bhagwan Das's case [1964] 52 ITR 335 and subsequently re-enunciated in Sivalingam Chettiar (N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court had noted the decision of the Supreme Court in Third ITO v. M. Damodar Bhat [1969] 71 ITR 806 and lain Brothers v. Union of India [1970] 77 ITR 107. It was urged before the Division Bench that even if its view was that s. 150(1) of the 1961 Act was applicable, the notice had become time barred. It was further submitted that Expln. 2 to sub-s. (3) of s. 153 could not be invoked in the said case. Two alternative arguments were submitted. According to the assessee, Expln. 2 dealt with a different section and, in any event, it did not in fact come into play. This argument was disposed of by the Calcutta High Court in the following words : " Explanation 2 created a fiction by deeming an assessment to be made in consequence of an order or to give effect to a finding or direction which was not there. But there was no provision that the proceedings under the 1922 Act should be deemed to be proceedings under the new Act. But for this no fiction or deeming provision, in our opinion, is necessary because section 297(2)(d)(ii) read properly with the provisions of the new Act would apply mutatis mutandis to the present case. Therefore, even though in respect of an order passed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1960-61 itself, there was no time-limit for making such reassessment. The contention which was urged on behalf of the assessee, that Expln. 2 to s. 153(3) could not be looked at, was rejected by the High Court. The court considered the reason why Expln. 2 was added, and in the view of the court that was subsequent to the decision of the Supreme Court in Murlidhar Bhagwan Das's case [1964] 52 ITR 335. The court then considered the provisions of s. 297(2)(ii) of the 1961 Act. According to the Allahabad High Court, s. 297(2)(d)(ii) clearly provides that where no proceedings under s. 34 of the old Act were pending at the commencement of the present Act, i.e., the 1961 Act, a notice under s. 148 could be issued, and where such a notice was issued, it was provided that all the provisions of the present Act shall apply accordingly to the reassessment proceedings (underlining supplied). The Allababad High Court then considered the effect to be given to these words. In its view the provisions of the Act of 1961, were or the procedure of the Act of 1961 was, required to be applied mutatis mutandis, and it derived Support from the decision of the Supreme Court in M. Damodar B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court, the assessment of a HUF had been completed under the provisions of the 1922 Act. To such an assessment the revenue authorities had sought to apply sub-s. (6) of s. 171 pursuant to a notice issued under s. 148. This was sought to be done by the revenue under the argument that the new provisions will be applicable by reason of the phraseology employed in s. 297(2)(d)(ii), which phraseology we have extracted earlier. It was held that the argument was without force. The words relied on by the revenue, according to the Supreme Court, " merely refer to the machinery provided under the new Act for the assessment of the escaped income ". They do not import any substantive provisions of the new Act which create rights or liabilities. The court had in the said decision occasion also to consider the proper effect to be given to the word " accordingly " occurring in s. 297(2)(d)(ii). According to Bhagwati J., the word in the context meant nothing more than " for the purpose of assessment ". According to Bhagwati J., further, the phraseology clearly suggested that the provisions of the new Act which are made applicable " are those relating to the machinery of the assessment. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, can properly be regarded as part of the machinery provisions which are being postulated by the Supreme Court as being within the contemplation of the phraseology employed in s. 297(2)(d)(ii) and cannot be regarded as a substantive provision which is not made applicable. Mr. Patwa then relied on the express phraseology of s. 153(3) and submitted that Expln.2 could be pressed into service only when a reassessment was made in consequence of or to give effect to findings or directions contained in orders under s. 250, 254, 260, 262, 263 or 264 of the 1961 Act and in the present case, since the direction was contained in the order of the Tribunal under s. 33 of the 1922 Act, it was not covered by the comprehensive phraseology of s. 153(3) ; and if that was so, there would be no warrant to press into service Expln. 2 to s. 153(3). This was sought to be countered by counsel for the revenue, who submitted that the language of s. 153 was required to be applied with suitable necessary modifications and the suitable modification which was suggested for our approval was that after the words "under s. 250, 254, 260, 262, 263 or 264 " the court should read " or the equivalent provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was correct and based on the proper reading and application of the Supreme Court decision in M.Damodar Bhat's case [1969] 71 ITR 806. It becomes necessary, therefore, in the first place to consider whether it is necessary at all to apply or take resort to the principle of uniformity. In other words, have these two courts, viz., the Calcutta High Court in Eastern Coal Co. Ltd.'s case [1975) 101 ITR 477 and the Allahabad High Court in Kamlapat Moti Lal's case [1977] 110 ITR 769, taken the correct view of the provisions of s. 297(2)(d)(ii), viz., that what is provided therein, i. e., " all the provisions of this Act shall apply accordingly " must be interpreted and applied to mean that the provisions of this Act shall apply subject to necessary modifications or after making necessary changes? Both the courts have observed that on a plain and proper reading of this provision, the provisions of the 1961 Act which were required to be applied which following the decision of the Supreme Court in Govinddas's case [1976) 103 ITR 123 would mean machinery provisions, would be required to be applied mutatis mutandis or subject to necessary modifications. If that be the correct method of applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, to consider the decision of the Supreme Court in M.Damodar Bhat's case [1969] 71 ITR 906. In Damodar Bhat's case [1969] 71 ITR 806, the Supreme Court was considering and applying s. 297(2)(j) of the 1961 Act. The said section provides as under : " 297. Repeals and savings.--(1). . . (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred to as the repealed Act),--...... (j) any sum payable by way of income-tax, super-tax, interest, penalty or otherwise under the repealed Act may be recovered under this Act, but without prejudice to any action already taken for the recovery of such sum under the repealed Act." The Supreme Court reversed the decision of the Mysore High Court and expressed its opinion that the ITO had authority to issue the notice of demand dated 11th December, 1963, under s. 156 of the new Act with respect to the tax liability of Rs. 485.55 incurred by the assessee under the old Act. The High Court had expressed the view that in the case of an assessment under the old Act no notice under s. 156 of the new Act was possible and there was no way of taking advantage of the provision for recovery and collecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion a total nullity and of no consequence. If then the language of the provision could be reasonably construed in a manner to make it or some other provision governed by it relevant and effective, then that construction will be required to be given and preferred to another which will render it or that other provision a nullity or of no consequence. It is that principle which the Supreme Court called into play in M. Damodar Bhat's case [1969] 71 ITR 806 and in consequence of which it made necessary application of the mutatis mutandis rule to the procedure of the new Act made applicable by s. 297(2)(j), because not to have done so would have rendered the provisions of s. 297(2)(j) meaningless. In our view, the mutatis mutandis rule or the principle of construction based thereon is not one which can be called into play in cases where the legislature has not so expressly provided and where without necessary modification the statutory provision would not be rendered into a nullity but will have a restricted application. This may be explained in this manner : The effect of s.153(3) is not nullified nor does the section become of no significance if we restrict the application of that sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by necessary implication as perhaps was the case in M. Damodar Bhat's case [1969] 71 ITR 806 (SC). There is no such warrant for reading after the words " under s. 250, 254, 260, 263 or 264 " occurring in s. 153(3)(ii) the words or equivalent sections of the Act of 1922. Without these words the statutory provision under consideration is not rendered into one of no significance. The statutory provision is not nullified in the absence of these words and, therefore, there would be no warrant for enlarging the ambit of the statutory provision in the manner sought for the revenue, which admittedly has received approval of the Calcutta and the Allahabad High Courts. On a number of occasions, the Bombay High Court has taken the view that the principle of uniformity should be followed particularly for interpreting and applying all-India Acts such as the I.T. Act. Indeed, Mr. Joshi has rightly pointed out that on at least two occasions Division Benches have answered the questions submitted to them in a manner which perhaps did not appeal to them principally because some other High Court had already taken the same view and the matter and the point was not res integra or arising for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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