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TMI Blog1958 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... our appeals brought by the Income-tax Officer, Special Circle, Bangalore, on a certificate granted by the High Court of Mysore, are from the judgment and order of the said High Court dated March 22, 1955, by which it quashed certain proceedings initiated, and orders of assessment made, against the respondent assessee in the matter of re-assessment of income-tax for the years 1945-46, 1946-47, 1947-48, and 1948-1949. The relevant facts are these : The respondent, K. N. Guruswamy, was carrying on business as an excise contractor in the Civil, and Military Station of Bangalore, hereinafter called the retroceded area, in Mysore. He was assessed to income-tax for each of the four years mentioned above under the law then in force in the retroceded area by the Income-tax Officer having jurisdiction therein. For 1945-46 the original assessment was made on February 12, 1946, for 1946-47 on January 21, 1949, for 1947-48 on January 22, 1949, and for 1948-49 also sometime in the year 1949. The tax so assessed was duly paid by the assessee. On January 5, 1954, more than four years after, the Income-tax Officer, Special Circle, Bangalore, served a notice on the assessee under section 34 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction therein. Pursuant to that agreement, the retroceded area was granted to the Governor-General in Council, and jurisdiction therein was exercised by virtue of powers given by the Indian (Foreign Jurisdiction) Order in Council, 1902, made under the Foreign Jurisdiction Act, 1890. The laws administered in the area included various enactments made applicable thereto from time to time by the promulgation of notifications made under the aforesaid Order in Council, and one of such enactments was the Indian Income-tax Act, 1922. The year 1947 ushered in great political and constitutional changes in India, which affected not merely what was then called British India but also the Indian States, such as Mysore, etc. The Indian Independence Act, 1947, brought into existence two independent Dominions, India and Pakistan, as from August 15, 1947. The Act, however, received Royal assent on July 18, 1947. Section 7 set out the consequences of the setting up of the two new Dominions : one such consequence was that the suzerainty of His Majesty over the Indian States lapsed, and with it lapsed all treaties, agreements, etc., between His Majesty and the rulers of Indian States, including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof was in these terms : " 5. Notwithstanding anything to the contrary in the Mysore Income-tax Act, 1923, or the Mysore Excess Profits Tax Act, 1946,---.... (b) in respect of the total income or profits chargeable to income-tax or excess profits tax in the Retroceded Area prior to the first day of July, 1948, but which has not been assessed until that date, the provisions of the Indian Income-tax Act, 1922, and the Excess Profits Tax Act, 1940, as in force in the Retroceded Area immediately, before that date shall apply to proceedings relating to the assessment of such income or profits until the stage of assessment, and the determination of the income-tax and excess profits tax payable thereon, and the Mysore Income-tax Act, 1923, or the Mysore Excess Profits Tax Act, 1946, as the case may be, shall apply to such proceedings after that stage ; ..." The effect of sections 3, 5 (b) and 6 of Mysore Act XXXI of 1948, inter alia, was that though the Indian Income-tax Act, 1922, stood repealed and the Mysore Income-tax Act, 1923, came into effect from July 1, 1948, the former Act as in force in the retroceded area prior to July 1, 1948, continued to apply in respect of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt thereof. By a proclamation dated November 25, 1949, the Maharaja of Mysore accepted the Constitution of India, as from the date of its commencement, as the Constitution of Mysore, which superseded and abrogated all other constitutional provisions inconsistent therewith and in force in the State. On January 26, 1950, the Constitution of India came into force, and Mysore became a Part B State within the Constitution of India. On February 28, 1950, there was a financial agreement between the Rajpramukh of Mysore and the President of India in respect of certain matters governed by articles 278, 291, 295 and 306 of the Constitution. Under article 277 of the Constitution, however, all taxes which immediately before the commencement of the Constitution were being levied by the State continued to be so levied notwithstaning that those taxes were mentioned in the Union List, until provision to the contrary was made by Parliament by law. Such law was made by the Finance Act, 1950, by which the whole of Mysore including the retroceded area became " taxable territory " within the meaning of the Indian Income-tax Act, 1922, from April 1, 1950, and the Indian Income-tax Act again came into fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The principal question before us, as it was before the High Court, is one of jurisdiction. Did the Income-tax Officer concerned have jurisdiction to issue the notice under section 34 of the Indian Income-tax Act, 1922, and to make a re-assessment order pursuant to such notice ? The High Court pointed out that though the notice did not clearly say so, the Income-tax Officer clearly acted under section 34 of the Indian Income-tax Act, 1922, as it was in force in the retroceded area prior to July 1, 1948, and the writ applications were decided on that footing. The four main lines of argument on which the respondent assessee rested his contention that the Income-tax Officer concerned had no jurisdiction were these : firstly, it was urged that section 34 of the Indian Income-tax Act, 1922, was not saved by section 13(1) of the Finance Act, 1950, because what was saved was the prior law " for the purposes of the levy, assessment and collection of income-tax ", which expression did not include re-assessment proceedings ; secondly, it was argued that, even otherwise, the financial agreement made between the President of India and the Rajpramukh of Mysore on February 28, 1950, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee ; does not render the impugned proceedings unconstitutional and void. That decision disposes of these two arguments in the present appeals. The two additional points which remain for consideration depend on the interpretation to be put on the saving provisions in section 5(b) of Mysore Act XXXI of 1948 and paragraph (2), sub-paragraph (b) of Schedule A to Mysore Act LVII of 1948. These provisions are expressed in identical terms, and the question is if they save section 34 of the Indian Income-tax Act with regard to re-assessment proceedings. We think that they do. It is worthy of note that the saving provisions say that the Indian Income-tax Act, 1922, as in force in the retroceded area prior to July 1, 1948, shall apply in respect of the total income chargeable to income-tax prior to that date and it shall apply to proceedings relating to the assessment of such income until the stage of assessment and determination of income-tax payable thereon. " Total income " means the total amount of income, profits and gains computed in the manner laid down in the Act, and there are no good reasons why the word " assessment " occurring in the saving provisions should be restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X
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