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TMI Blog1964 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... The judgment of the court was delivered by GAJENDRAGADKAR C.J.----These civil appeals and writ petitions have been placed before us for hearing in a group, because all of them raise a common question of law about the validity of section 34(1A) of the Income-tax Act, 1922 (XI of 1922), (hereinafter called " the Act "). M/s. K. S. Rashid and Son, and its partner, Rashid Ahmed, are the appellants in Civil Appeals Nos. 37 to 40 of 1963, and petitioners in W. Ps. Nos. 335-345 of 1960. The appeals arise out of the four writ petitions (Nos. 870-873 of 1956) filed by the firm and its partner in the High Court of Allahabad challenging the validity of the notices served upon them under section 34(1A) of the Act in respect of their income for the years 1941-42 to 1946-47. These writ petitions have been dismissed by the said High Court and it is with the certificate issued by it that the firm and its partner have come to this court in appeal. The Writ Petitions Nos. 335-345 of 1960 have been filed by the same parties in this court under article 32 of the Constitution in respect of the notices served on them on the 19th March, 1956, and the order of excess profits tax levied on them. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, owing to the 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 and truly all material facts necessary for his assessment for that year, whereas section 34(1)(b) refers to cases where income has escaped assessment notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee. In respect of the first category of cases, section 34(1) had provided at the relevant time that the Income-tax Officer 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 " 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 such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. " Let us now read the relevant portion of section 34(1A). This provision lays down, inter alia, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34(1A) in substance deprives the assessee of the said remedies prescribed by the relevant provisions of the Act. If the assumption on which this challenge proceeds is well-founded, section 34(1A) may suffer from the infirmity that it contravenes article 14. Though, as we will later point out, there is a rational classification between the assessee falling under section 34(1), and those falling under section 34(1A), that rational classification would not justify the denial of the right of appeal to the persons included in section 34(1A). The question thus presented is one of construction. Before dealing with the construction of section 34(1A), it would be necessary to refer very briefly to the background of the enactment of the said section. This section was introduced by an amendment in the Act on the 17th July, 1954, and that was because section 5(4) of the Taxation on Income (Investigation Commission) Act, 1947, (50 of 1947), was struck down by this court as unconstitutional on May 28, 1954, in Suraj Mall Mohta v. A. V. Visvanatha Sastri. In that case, while examining the validity of section 5(4) of the Investigation Commission Act, this court held that the persons brought wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is invalid. It is in the light of this background that the controversy between the parties in the present proceedings has to be judged. Reverting then to the question of construction, the narrow point which needs to be examined is, what is the effect of the omission to include in section 34(1A) the clause " as if the notice were a notice issued under that sub-section " which is to be found in section 34(1) ? In dealing with this question, we think it would not be unreasonable to bear in mind that when the legislature enacted section 34(1A), it must have desired to remove the infirmities which had rendered section 5(4) of the Investigation Commission Act invalid. In other words, the legislature must have presumably wanted to afford to the assessees in respect of whom section 34(1A) was intended to be invoked, the same remedies that were available to the assessees covered by section 34(1). Though the importance or significance of this consideration cannot be unduly emphasised, it cannot be said that this consideration is altogether irrelevant. We have already read the relevant portion of section 34(1A) and we have seen that it requires that a notice containing all or any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 22 become irrelevant in dealing with cases under section 34(1A). If section 22 is held to be inapplicable to proceedings under section 34 (1A), the consequence would be entirely irrational and fantastic. The powers conferred on the Income-tax Officer under section 23(2) to take evidence would then not be available to him, and, indeed, all the powers prescribed and the procedure laid down by section 23 would become irrelevant. Likewise, the provisions in regard to appeals and revisions contained in sections 30, 31, 33, 33A and 33B would also be inapplicable. As we have already seen, the inapplicability of these provisions is the main foundation of the attack against the validity of section 34(1A). It is, however, urged that though the specific powers conferred by section 23 may not be available to the Income-tax Officer, he may, nevertheless, exercise similar powers, because the authority to assess must itself include such powers as incidental to assessment. The best judgment assessment which is authorised by section 23(4) may, it is suggested, be made even in cases falling under section 34(1A) under the inherent authority of the Income-tax Officer. In our opinion, this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the legislature was not justified in treating this smaller class of assessees differently on the ground that the profits made by this class were higher and the income which had escaped assessment was correspondingly of a much larger magnitude. The object of the legislature being to catch income which had escaped assessment, it would be legitimate for the legislature to deal with the class of assessees in whose cases the income which had escaped assessment was much larger, because that would be a basis for rational classification which has an intelligible connection with the object intended to be achieved by the statute. It was suggested that as a result of the provisions contained in section 34(1)(a) and section 34(1A) one year would overlap ; and that may be true. But the argument of overlapping has no significance because it makes no difference whether action is taken under section 34(1), or section 34(1A) in respect of that year. Once the notice is served under section 34(1) or section 34(1A), the rest of the procedure is just the same and all the remedies available to the assessees are also just the same. Therefore, we see no substance in the argument that the absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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