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Rustomji Cowasji Jall Vs. the Income-tax Officer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 385 of 1962
Judge
Reported inAIR1965MP170
ActsIncome Tax Act, 1922 - Sections 34(1) and 34(1A)
AppellantRustomji Cowasji Jall
RespondentThe Income-tax Officer
Appellant AdvocateN. Palkhivala, ;K.A. Chitaley, ;A.P. Sen, ;R.S. Dabir and ;V.S. Dabir, Advs.
Respondent AdvocateM. Adhikari, Adv. General and ;R.J. Bhave, Government Adv.
DispositionPetitions allowed
Cases ReferredCalcutta Discount Co. v. I. T. Officer
Excerpt:
- - in or about 1934 he began interesting himself in business activities in the then british india and acquired a textile mill, known as the new premier mills, bombay. that, therefore, there was sufficient reason for the income-tax authorities to believe that incomes, profits and gains had escaped assessment in the assessment years in question because of the failure of the applicant lo disclose fully and truly all material facts necessary for the assessment for those years; and that it was after the income-tax officer had recorded his reasons in writing and after the central board of revenue had satisfied itself on the reasons recorded that notices under section 34 of the act were served on the petitioner. according to the respondent income-tax officer, the notices issued to the.....dixit, c.j. 1. this order will also govern the disposal of miscellaneous petitions nos. 390, 391, 392, 393 and 394 all of 1962. 2. by these six petitions under article 226 of the constitution, the petitioner, rustomji jail of mhow, challenges the validity of notices under section 34 of the indian income-tax act, 1922, (hereinafter referred to as the act), served on him in respect of escaped income for the years ending on 31st march 1941, 31st march 1942, 31st march 1943, 31st march 1944, 31st march 1945, and 31st march 1946. he prays for the issue of writs for quashing these notices and for a writ of mandamus restraining the opponent in each case from taking any steps or proceedings in pursuance of the notices. 3. the relevant facts are these. the petitioner is a resident of mhow, which.....
Judgment:

Dixit, C.J.

1. This order will also govern the disposal of Miscellaneous Petitions Nos. 390, 391, 392, 393 and 394 all of 1962.

2. By these six petitions under Article 226 of the Constitution, the petitioner, Rustomji Jail of Mhow, challenges the validity of notices under Section 34 of the Indian Income-tax Act, 1922, (hereinafter referred to as the Act), served on him in respect of escaped income for the years ending on 31st March 1941, 31st March 1942, 31st March 1943, 31st March 1944, 31st March 1945, and 31st March 1946. He prays for the issue of writs for quashing these notices and for a writ of mandamus restraining the opponent in each case from taking any steps or proceedings in pursuance of the notices.

3. The relevant facts are these. The petitioner is a resident of Mhow, which was formerly a yart of the quondam Holkar State. In or about 1934 he began interesting himself in business activities in the then British India and acquired a textile mill, known as the new Premier Mills, Bombay. He also purchased in 1939 a Cotton Ginning and Pressing Factory at Khamgaon. For the assessment years 1940-41/1941-42, 1943-44 and 1946-47, the petitioner was assessed to income-tax at Khamgaon in the former Central Provinces and Berar as a nonresident. For the assessment years 1942-43, 1944-45, 1945-46 he was assessed to tax as a non-resident by the Income-tax Officer, Special Income-tax-cutn-C. P. T. Circle, Nagpur, in the old C. P. and Berar. For the assessment years 1944-45 and 1945-46 he was also assessed at Mhow as 'a resident and ordinarily resident' in respect of income from properties situated in Mhow. The orders of assessment for the assessment years in question were made in 1942, 1944, 1945, 1946 and 1947 on various dates. On 23rcl March 1962, the Income-tax Officer concerned served on the petitioner six notices under Section 34 of the Act in respect of escaped income for the aforesaid years. The notice for the assessment year 1940-41 was in the following terms:

'Whereas I have reason to believe that your income assessable to income-tax for the assessment year 1940-41 has

(a) escaped assessment,

(b) been under-assessed,

income

I, therefore, propose to reassess the said allowance that has-

(a) escaped assessment.

(b) been under-assessed,

I hereby require you to deliver to me within 35 days of the receipt of this notice, a return in the attached form of your total income and total world income assessable for the said assessment year 1940-41.

This notice is being issued after obtaining the necessary satisfaction of the Central Board of Revenue, New Delhi.'

The notices for the subsequent assessment years were also in similar terms. After the receipt of these notices, the petitioner addressed letters to the Income-tux Officer stilting that he had no jurisdiction to issue the notices after 31st March 1956, after the limit of lime fixed by Sub-section (1A) of Section 34 of the Act and that the notices were, therefore, illegal. The Income-tax Officer, however, issued fresh notices to the petitioner under Section 22 (4) of the Act and again asked him to comply with the notices issued under Section 34.

4. The petitioner contends that as he had submitted the returns of his income in the taxable territory and fully and truly disclosed all material facts necessary for his assessments for the years in question, no notice under Section 34 (1) (a) of the Act could be issued to him; that the notices issued to him purported to be in the exercise of powers under Section 34 (1) (b) and were manifestly out of time; and that even assuming that the notices were issued under Section 34 (1) (a), they were still out of time and invalid inasmuch as Section 34 (1A) of the Act was an overriding provision under which no notice under Section 34 could be issued against the petitioner after 31st March 1956.

5. In the returns filed on behalf of the Income-lax Officer concerned in each case, it has been averred that the notices were plainly under Section 34 (1) (a) as they were issued after obtaining the necessary satisfaction of the Central Board of Revenue; that for a notice under Section 34 (1) (b) the previous satisfaction of the Commissioner of Income-tax or the Central Board of Revenue was not required; that the petitioner himself understood each of the notices issued to him as one under Section 34(1)(a); that the notices no doubt related to the escaped income of the period mentioned in Section 34 (1A), but in respect of the income of that period notices could be legally issued after 31st March 1956 under Section 34 (1) (a); and that the provisions of Section 34 (1A) did not override Section 34 (1) (a). It has been further stated in the returns that the petitioner did not produce any account-books at any time during the period 1939 to 1950; that he produced them for the first lime in the assessment proceedings for the year 1950-51; that in those proceedings he also gave a balance-sheet showing his assets and liabilities; that the petitioner's capital as disclosed by the balance-sheet and the various dispositions made by him between 1939 to 1949 and estimated capital according to the earnings as disclosed by the petitioner during the assessment years in question, showed a clear gap of Rs. 55 lakhs as representing 'excess wealth' which could not be accounted for and which was income that had escaped assessment and had not been assessed to tax. So also the petitioner's account with the New Premier Mills, Bombay, indicated that he had earned during the years in question at least Rs. 28 lakhs, and not only Rs. 11 lakhs as disclosed by him in the assessment proceedings; that, therefore, there was sufficient reason for the income-tax authorities to believe that incomes, profits and gains had escaped assessment in the assessment years in question because of the failure of the applicant lo disclose fully and truly all material facts necessary for the assessment for those years; and that it was after the Income-tax Officer had recorded his reasons in writing and after the Central Board of Revenue had satisfied itself on the reasons recorded that notices under Section 34 of the Act were served on the petitioner. According to the respondent Income-tax Officer, the notices issued to the petitioner in no way prejudiced him as the petitioner is entitled to explain his accounts and satisfy the respondent that there was no failure on his part to disclose truly and fully all the material facts necessary for the assessment, and that no income had escaped assessment.

6. The short point that arises tor determination in all these cases is whether the notices served on the petitioner were out of time and were, therefore, invalid. The question turns on the effect of the amendments made in Section 34 of the Act in 1954, 1956 and 1959. As a result of the decision, dated 28th May 1954, of the Supreme Court in Suraj Mall Mohta and Co. v. A.V. Visvanath Sastri : [1954]26ITR1(SC) , the Act was amended by the Indian Income-lax (Amendment) Ordinance (No. VIII of 1954), published on 17th July 1954, introducing new Sub-sections (1A) and (1B) into Section 34 of the Act. This Ordinance was repealed and its operative provisions re-enacted by Parliament by the Indian Income-tax (Amendment) Act, 1954. The preamble of the Ordinance and the amending Act stated that those measures were for further amending 'the Indian Income-tax Act, 1922, to provide for the assessment or reassessment of persons who have to a substantial extent evaded payment of tuxes during a certain period and for matters connected therewith.' The amending Act, which received the assent of the President on 25th September 1954, was deemed to have come into force on 17th July 1954, the date on which the Ordinance, which was replaced by the Act, took effect.

Sub-section (1A) of Section 34 runs as follows-

(1A) If, in the case of any assessee, the Income-tax Officer has reason to believe-

(i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September 1939, and ending on the 31st day of March 1946; and

(ii) that the income, profits or gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one lakh of rupees or more;

he may, notwithstanding that the period of eight years or, as the case may be, four years specified in Sub-section (1) has expired in respect thereof, serve on the assesses, or, if the assessec is a company, on the principal officer thereof, 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 re-assess the income, profits or gains of the assessee for all or any of the years referred to in Clause (1), and thereupon the provisions of this Act (excepting those contained in Clauses (i) and (iii) of the proviso to Sub-section (1) and in Sub-sections (2) and (3) of this section) shall, so far as may be, apply accordingly:

Provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice:

Provided further that no such notice shall be issued after the 31st day of March 1956.'

At the time Sub-section (1A) was introduced into Section 34, the period of limitation provided with regard to the issue of notices under Section 34 (1) (a) was eight years and for cases falling under Section 34 (1) (b), it was four years. In 1956, Section 34 was further amended by Section 18 of the Finance Act of 1956. By that amendment, the eight years' period of limitation for the issue of a notice under Section 34 (1) (a) was removed and the legislature provided that if the case fell under Section 34 (1) (a), the notice could be served at any time. Section 18 of the Finance Act, 1956, also substituted the following provisos to Section 34 (1) for the provisos which existed at the date of the amendment:

''Provided that the Ineome-tax Officer shall not issue a notice under Clause (a) of Sub-section (1)-

(i) for any year prior to the year ending on the 31st day of March 1941 ;

(ii) for any year, if right years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income-tax which have escaped assessment or have been underassessed or assessed at loo low a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed, not being a year or years coding before the 31st clay of March, 1941;

(iii) for any year, unless he has recorded his reasons for doing so, and, in any case falling under Clause (ii), unless the Central Board of Revenue, and, in any other case, the Commissioner, is satisfied on such reasons recorded that it is a fit case for the issue of such notice : * * * *'

Sub-section (1B) was also amended by Section 18 of the Finance Act, 1956, by substituting for the words, brackets, figure and letter 'to whom a notice has been issued under Sub-section (1A)', the provision, namely, 'to whom a notice has been issued under Clause (a) of Sub-section (1) or under Sub-section (1A) for any of the years ending on the 31st day of March of the years 1941, to 1948, inclusive.' These amendments made in Section 34 came into force on the Ist day of April, 1956. Section 34 was again amended in 1959 by the Indian Income-tax (Amendment) Act, 1959. This amending Act inserted a new Sub-section (4) in Section 34, in the following terms-

'(4) A notice under Clause (a) of Sub-section (1) may be issued at any time notwithstanding that at the time of the issue of the notice the period of eight years specified in that sub-section before its amendment by Clause (a) of Section 18 of the Finance Act, 1956 (18 of 1956), had expired in respect of the year to which the notice relates.'

Section 4 of the amending Act of 1959 contained provisions regarding the saving of notices, assessments, etc., in certain cases only , and read as follows:--

'no notice issued under Clause (a) of Sub-section (1) of Section 34 of the Principal Act at any time before the commencement of this Act and no assessment, reassessment or settlement made or oilier 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 or at the time the assessment, or re-assessment, was made, the time within which such notice should have been issued or the assessment or re-assessment 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.'

7. The argument that was put forward by Shri Palkhivala learned counsel appearing on behalf of the petitioner was that the period in respect of which the notices in regard to escaped assessment were served on the petitioner fell within the period mentioned in Section 34 (1A), namely, the period beginning on the 1st day of September 1939, and ending on tho 31st day of March 1946; that under the second proviso to Sub-section (1A) no notice could be issued after the 31st March 1956; that Sub-section (1A) was a special provision regarding the reopening of assessments of particular assessment years and was in no way affected by the amendment relating to limitation made in 1956 in the general provision embodied in Section 31 (1) (a); that even after the alteration in the period of limitation made in 1956 in regard to service of notice under Section 34 (1) (a) and the substitution of a proviso to Sub-section (1), Section 34 (1) could not be applied to cases falling under Sub-section (1A); and that it was open to the legislature to delete Sub-section (1A) when it amended Section 34 in 1956 but it did not do so and the retention of Sub-section (1A) was only indicative of the fact that Section 34 (1) even after the amendment in 1956 did not apply to cases falling under Sub-section (1A).

Learned counsel for the petitioner referred us to the Full Bench decision of the Punjab High Court in Shahzada Nand and Sons v. Central Board of Revenue , expressing the view that Sub-section (1A) of Section 34 of the Act is an exception to the cases covered by Section 34 (1) (a) and consequently if a notice falling, under Section 34 (1) (a) falls also within Sub-section (1A), then such a notice could not under the last proviso to Sub-section (1A) be issued after 31st March 1956. He also brought to our notice an unreported decision of the Bombay High Court, dated 2nd/3rd May 1963, in Special Civil Appln. No. 1458 of 1962 (Bom), under Articles 226 and 227 of the Constitution filed by one Laxminarayan R. Rathi of Sholapur, in which a view contrary to that expressed by the Punjab High Court has been taken.

8. In reply, Shri Adhikari, learned Advocate-General appearing for the Revenue, first gave us a historical view of the evolution of Section 34 (1) as far as limitation was concerned, and urged that Sub-section (1A) was inserted in Section 34 mainly for the purpose of bringing to tax escaped income which could no longer be charged by following the procedure laid down in the Taxation on Income (Investigation Commission) Act, 1947, as a result of the decision of the Supreme Court in : [1954]26ITR1(SC) , M. Ct. Muthiah v. Commr. of Income-Tax : [1956]29ITR390(SC) and Meenaks'ni Mills v. A. V. Visvanatha Sastri : [1954]26ITR713(SC) , that Sub-section (1A), which dealt with escaped assessment of income of only such previous years as fell wholly or partly within the period from 1st September 1939 to 31st March 1946, was a special provision with regard to the aforesaid particular period only till 1st April 1956 when Section 34 (1) (a) was amended and not thereafter; and that the effect of the removal of eight years limitation in regard to a notiee under Section 34 (1) (a) by the amendment effected in 1956 was that a notice under that provision could be served at any time even in regard to the escaped income for any year after 31st March 1956 even though the period fell under Sub-section (1A). Learned Advocate General laid emphasis on the provision

'he may, notwithstanding that the period of eight years or, as the case may he, four years specified in Sub-section (1) has expired in respect thereof serve on the assessee.'

occurring in Sub-section (1A), and argued that Sub-section (1A) applied only when the period of limitation mentioned in Sub-section (1) had expired and enabled the Income-tax Officer to take action under that provision notwithstanding the expiry of the period of eight years or four years as the case may be; and that when after the amendment made in 1956 in Section 34 (1) a notice under Section 34 (1) (a) could be issued at any time, no question of the expiry of any period of limitation for the service of notice could arise and, therefore, Sub-section (1A) could not be invoked in respect of escaped income for any year after 31st March 1941.

It was also said that the addition of Sub-section (4) to Section 34 by the amending Act of 1959 indicated that a notice under Section 34 (1) (a) could be issued at any time after 31st March 1956 in respect of any year after 31st March 1941. Learned Advocate General further submitted that if Sub-section (1A) was repugnant to Section 34(1)(a), then the amendment made in 1956 in Section 34(1) removing the bar of limitation for the issue of a notice under Section 34(1) (a) being later in time, Section 34(1)(a), as amended would prevail over Sub-section (1A).

9. On the arguments addressed before us, the first question that arises for consideration is of the nature of Sub-section (1A). As is plain from the language of that provision, it enabled the Income-tax Officer to bring to tax escaped income for only such previous years as fell wholly or partly within the period beginning on 1st September 1939 and ending on 31st March 1946 if the escaped income of such year or years amounted to or was likely to amount to Rs. 1 lakh or more. When Sub-section (1A) was introduced with effect from 17th July 1954, the period of limitation for reopening assessments under Clause (a) or Clause (b) of Section 34(1) for any year falling within the aforesaid period had already expired. Sub-section (1A) made no distinction as to whether the escaped assessment was due to an 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 or truly all material facts necessary for his assessment for that year, or whether even if there was no such omission or failure, the Income-tax Officer had reason to believe that income had escaped assessment or full assessment. It enabled the Income-tax Officer to serve a notice, no matter whether the assessee's case fell under Clause (a) or Clause (b) of Sub-section (1) of Section 34, and notwithstanding that the period of eight years or, as the case may be, four years specified in Subsection (1) had expired. A notice under Sub-section (1A) could be issued only with the previous sanction of the Central Board of Revenue on or before 31st March 1956 Sub-section (1A) thus expressly referred to the assessments which could be duly opened by specific reference to particular previous years. There can, therefore, be no doubt that it embodied a special provision with regard to the reopening of assessment of particular previous years which could not be reopened either under Clause (a) or Clause (b) of Section 34 (1) because of the bar of limitation. That sub-section was no doubt introduced soon after the decision of the Supreme Court in : [1954]26ITR1(SC) . Rut its applicability was not confined to only those eases which were being dealt with under the Taxation on Income (Investigation Commission) Act, 1947, or were before the Investigation Commission. It was a provision inserted for the 'assessment or re-assessment' of all persons 'who have to a substantial extent evaded payment of taxes' during the period specified in the subsection. Learned Advocate General did not dispute that Sub-section (1A) was a special provision. What he urged was that it was a special provision till 1st April 1956 only and thereafter it ceased to be operative, and that though it was retained on the Statute Book after 1st April 1956, it must be taken to have been impliedly repealed when the time-limit of eight years for a notice under Section 34(1)(a) was removed by Section 18 of the Finance Act, 1956.

10. We are unable to accede to this argument of the learned Advocate General. It is no doubt true that under the second proviso to Sub-section (1A) a notice could not be issued after 31st March 1956. But it is fallacious to read the prohibition about the issue of notice after 31st March 1956 as a provision prescribing that Sub-section (1A) itself would cease to be operative after that date. It is one thing to say that no proceedings can be initiated under Sub-section (1A) by the issue of a notice after 31st March 1956 and quite another to urge that inasmuch as no notice can be issued after 31st March 1956, the provisions of Sub-section (1A) including the time-limit for the issue of a notice has ceased to be in force and consequently that time limit cannot stand in the way for the issue of a notice under Section 34(1)(a) after the removal of the period of limitation of eight years by Section 18 of the Finance Act, 1956. Sub-section (1A) having been retained in Section 34 even after 31st March 1956, it must be taken that the inhibitory provision, namely, that no notice under that Sub-section can be issued after 31st March 1956, is as much in force after 31st March 1956 as art enabling provision would be after that da.

11. If then, as we think, Sub-section (1A) is a special provision and the second proviso to it laying down that no notice shall be issued after 31st March 1956 cannot be regarded as a provision making the sub-section inoperative after that date, the next question that requires consideration is whether the amendments made in Section 34(1) by Section 18 of the Finance Act, 1956, has the effect of repealing or abrogating altogether Subsection (1A). By the amendments which came into force on 1st April 1956, the period of eight years for a notice under Clause (a) of Section 34(1) was removed and it was provided that in a ease falling under that clause a notice could be served at any time. While removing this bar of limitation, the legislature provided some safeguard for the assessee set out in the substituted proviso. They are, that a notice under Clause (a) of Sub-section (1) shall not be issued for any year prior to the year ending on 31st March 1941, and that if eight years have elapsed, then a notice may be issued at any time after obtaining the previous sanction of the Central Board of Revenue, if the income which has escaped assessment is likely to amount to Rs. 1-Lakh or more in the aggregate for one or more years prior to the eight years' period Subject to these limitations, a notice under Section 34(1)(a) can be issued at any time within a period of eight years from the end of the relevant assessment year, provided the Income-tax Officer has recorded bis reasons in writing for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such a notice. It will be seen that Section 34(1) remains, even after the amendment made therein in 1956, a general provision as before for the reopening of assessments. The reopening of assessments under Sub-section (1) is not by any reference to particular assessment years.

12. Now, it is firmly established that a general law has to be construed as not repealing particular one, that is, one directed towards a special object or a special class of object, and generally later law does not abrogate an earlier special one by mere implication. So also, it is a well-recognised canon of construction that where there is a specific provision in a statute as well as a general one and the case is covered by the specific provision, it is the specific provision which must govern the case and not the general one. The principle of 'Generalia specialibus non derogant' has been stated in 'Craies on Statute Law' (6th edn. at p. 376) thus:--

''The general rule, that prior statues are held to be repealed by implication by subsequent statutes if the two are repugnant, is said not to apply if the prior enactment is special and the subsequent enactment is general, the rule of law being, as stated by Lord Selborne in Seward v. Vera Cruz, (1884) 10 AC 59 that where there are general words in a later Act capable of reasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so'. . . The general maxim is, Generalia specialibus non derogant--i.e., general provisions will not abrogate special provisions.'

The principle has been stated in similar terms in 'Maxwell on Interpretation of Statutes' (11th edn. at pp. 168-169). The Privy Council also said in Barker v. Edger, 1898 AC 748 that :--

'When the legislature has given its attention to a separate subject and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provision unless is manifests that intention very clearly Each enactment must be construed in that respect according to its own subject-matter and its own terms.'

13. On the application of the above principle, it is plain that unless the amendments made in Section 34(1) in 1956 manifest very clearly an intention to derogate from or affect or abrogate Subsection (1A) specially relevant to the reopening of assessments of the specific years mentioned in that sub-section, Sub-section (1A) cannot be held to be repealed by implication by those amendments. The intention to abrogate Sub-section (1A) is negatived first by the fact of the retention of that sub-section even after 31st March 1956. The Finance Act, 1956, did not touch that sub-section and enact that as from 1st April 1956 the sub-section shall stand repealed. It would have been easier and simpler so to enact, if it had been thought that assessments in regard to the year ending on 31st March 1941 and subsequent years and covered by Sub-section (1A) should be reopened under Section 34(1) as amended even though no notice had been issued in regard to reopening of those assessments on or before 31st March 1956. Instead, Parliament allowed Sub-section (1A) to continue on the Statute Book even after the amendment of Sub-section (1) of Section 34 by the Finance Act, 1956. It is not disputed that assessments in regard to the aforesaid years would become final and conclusive if no notice for reopening them had been issued on or before 31st March 1956 and if no action can be taken for that purpose under Section 34(1) as amended in 1956. Learned Advocate General, however, urged that the removal of the bar of eight years' limitation for a notice under Clause (a) of Section 34(1) by Section 18 of the Finance Act, 1956, by the deletion of the words 'within eight years' so as to enable the Income-tax Officer to give a notice under that clause 'at any time' necessarily meant that an assessment for any year ending on 31st March 1941 and subsequent years failing under Subsection (1A) could be reopened even if no action in regard to them had been taken on or before 31st March 1956 Thus, it was said, the intention to abrogate or repeal Sub-section (1A) from 1st April 1956 was clearly shown. We do not think that the alteration in the period of limitation for the reopening of an assessment under Section 34(1)(a) by the amendment made in 1956 has the implication suggested by the learned Advocate General. Merely by force of the deletion of the words 'within eight years' occurring m Sub-section (1) of Section 34 and the retention of general words 'at any time' therein, it cannot be held that the necessary intendment of the change in the period of limitation was also to affect assessments in regard to the period mentioned in Sub-section (1A) which had become final and conclusive for want of a notice on or before 31st March 1956 under the second proviso to Sub-section (1A).

14. It is pertinent to note here that in Debi Dutt v. T. Bellan : AIR1959Cal567 it was held that the provision of Section 34(1) of the Act, before it was amended in 1956, laid down certain period of time within which notices must be served in order to enable a reassessment to be made and that on the expiry of that period 'the assessee was entitled to tell himself that no proceedings having been taken, he was safe from having his assessment reopened', and that action under the amended section could not be taken if prior to the amendment coming into force, that is 1st April 1956, the period of serving the notice had already expired. The learned Judges, who decided the Calcutta case, also observed:--

'-.....the fact that the section deals with a past period, makes the argument of its retrospective operation plausible at first sight. But, a closer consideration will show the weakness of it. Such an arguinent ignores the principle I have mentioned above, which provides for a particular situation, namely, where the existing right of reassessment has been already barred. In my opinion, the law is firmly established that under such circumstances the remedy cannot be revived unless the Jaw provides for it in express terms or necessary intendment. I hold that in the latest amendment of Section 34(1) there is nothing which does so.'

If the reasoning on which the Calcutta High Court held that action under the amended section could not be taken if prior to the amendment coming into force the period of serving the notice had already expired is accepted as sound, then it must be held that action under the amended section could not be taken even in regard to the reopening of assessments for the year ending on 31st March 1941 and subsequent years falling under Sub-section (1A) after 31st March 1956, that is to say, after the end of the period for the issue of a notice under Sub-section (1A). It must be noted that Section 18 of the Finance Act, 1956, came into force on 1st April 1956, that is, from the midnight of 31st March 1956, and it was at this midnight hour that the 31st day of March 1956, after which no notice under Sub-section (1A) could be issued, ended. The decision of the Calcutta High Court led to the insertion of a new Sub-section (1) in Section 34 by the Indian Income-tax (Amendment) Act, 1959. After the coming into force of Sub-section (4) in 1959, a notice under Clause (a) of Sub-section (1) of Section 34 could be issued at any time notwithstanding that at the time of the issue of the noice the period of eight years specified in the sub-section before its amendment by Section 18 of the Finance Act, 1956, had expired. Section 4 of the amending Act of 1959 saved and validated notices issued and action taken between 1956, when Section 34 was amended by the Finance Act, 1956, and 1959 when the amending Act was passed, and said that those notices and actions could not be called in question on the ground that at the time the notices were issued or action was taken the time within which the notice should have been issued or assessment or re-assessment should have been made under Section 34, as in force before its amendment by Section 18 of the Finance Act of 1956, had expired. According to the majority decision of the Supreme Court in S. C. Prashar v. Vasantsen : [1963]49ITR1(SC) the new Sub-section (4) of Section 34 of the Act, as amended in 1959, is prospective and operates only from 12th March 1959 and does not affect the notices issued previous to that date, and the effect of Section 4 of the amending Act of 1959 is to validate an action, under Section 34, as amended, in cases where action under Section 34 has already become time-barred prior to its amendment in 1956. It is significant that even in 1959, when Section 34 was again amended in the manner indicated above, Sub-section (1A) was left untouched. The continuance of that sub-section even after the amending Act of 1959 only shows that Parliament did not intend that action under Section 34(1)(a), after it was amended in 1956, should be taken in cases where action under Sub-section (1A) had become time-barred for want of issue of notice on or before 31st March 1956. If that had been the intention, then Parliament, while providing by the insertion of the new Sub-section (4) for the issue of a notice under Clause (a) of Section 34(1) notwithstanding the expiry of the eight years' limitation specified in that sub-section before its amendment by Section 18 of the Finance Act, 1956, would have also made a similar provision for the issue of a notice under Section 34(1)(a) at any time notwithstanding the expiry of the period specified in the second proviso to Subsection (1A) for serving a notice. Parliament did not do so. On the oilier hand, the express reference in Sub-section (4) of Section 34 of the Act and Section 4 of the amending Act of 1959 to the expiry of eight years' limitation specified in Section 34(1)(a) before its amendment by Section 18 of the Finance Act of 1956, makes it pointedly clear that Parliament did not intend that action under the amended Section 34(1)(a) should be taken in regard to the year ending on 31st March 1941 and subsequent years falling under Sub-section (1A) if prior to the coming into force of the amendment on 1st April 1956 no action had been initiated under Sub-section (1A) by the issue of a notice on or before 31st March 1956. In our judgment, there is nothing to show in the amendments made in 1956 in Section 34(1) that the special provision embodied in Subsection (1A) was repealed or abrogated when the amendments came into force on 1st April 1956.

15. The argument of the learned Advocate, General that Sub-section (1A) applied only when the period of limitation mentioned in Sub-section (1) had expired and enable the Income-tax Officer to take action under that provision notwithstanding the expiry of the period of eight years or four years as the case may be, and that as after the amendment made in 1956 a notice under Section 34(1)(a) could be issued at any time, no question of the expiry of any period of limitation for the service of notice could arise and consequently Sub-section (1A) could not be invoked in respect of escaped income for any year after 31st March 1941, is fallacious. The flaw in the argument lies in assuming that the expression 'he may, notwithstanding that the period of eight years or, as the case may be, four, years specified in Sub-section (1) has expired in respect thereof serve on the assessee' occurring in Subsection (1A) embodied a condition precedent for the coming into play of Sub-section (1A). The non obstante provision only enabled the Income-tax Officer to take action notwithstanding the expiry of the period of limitation specified in Sub-section (1) as it stood before its amendment in 1956. This enabling provision cannot be read as prescribing a condition precedent for founding the argument that as after the 1956 amendment a notice under Clause (a) of Section 34(1) could be issued at any time, Sub-section (1A) bad erased in be operative.

16. In our view, Sub-section (1A) cannot be held to have been repealed by implication by the amendments made in Section 34(1)(a) in 1956. The two sub-sections can stand together if the reopening of assessments for the. year ending on 31st March 1941 and subsequent years arid covered by Sub-section (1A) is taken as falling outside the purview of Section 34(1), as amended in 1956, and as falling under Sub-section (1A) alone. On the principle of generalia specialibus non derogant and of harmonious construction, it must be held that an assessment for the year ending on 31st March 1941 and subsequent years covered by Sub-section (1A) cannot be reopened by resort to the amended Section 34(1) when no notice for reopening the assessments was issued under Sub-section (1A) on or before 31st March 1956.

17. Turning now to the authorities ciled by the learned counsel for the petitioner, the decision of the Punjab High Court in supports the view we have taken. In that case, the learned Judges of the Punjab High Court on the principle of harmonious construction and the rule of construction that a statute must be construed according to the plain, literal and grammatical meaning of the words in which it is expressed, reached the conclusion that Sub-section (1A) of Section 34 is an exception to the cases covered by Sub-section (1)(a) of the said section and consequently if a notice falling under Section 34(1)(a) falls also within Sub-section (1A), that is to say, the notice is in respect of income, profits or gains which have escaped assessment for any previous year falling within 1st September 1939 and 31st March 1946, such a notice could not under the last proviso to Sub-section (1A) be issued after 31st March 1956.

The view expressed by the Bombay High Court in Laxminarayan Rathi's case, Special Civil Appln. No. 1458 of 1962, dated 2/3-5-1963 (Bom) that an assessment for any year ending on 31st March 1941 and subsequent years falling under Sub-section (1A) could be reopened by the issue of a notice at any time under the amended Section 34(1)(a), even after 31st March 1956 is based on the reasoning that Section 34(1), as it stood before or after its amendment in 1956, and Sub-section (1A) never operated simultaneously; that Sub-section (1A) operated when Section 34(1)(a), as it stood prior to its amendment, ceased to operate and that after Section 34 (1)(a) was amended, Sub-section (1A) ceased to operate. What we have said above is sufficient to show that we are unable to agree--and we say so with all due respect to the learned Judges of the Bombay High Court--with this reasoning.

In Laxminarayan Rathi's case, Special Civil Appln. No. 1458 of 1962 dated 2/3-5-1963 (Bom) (supra), Sub-section (4) of Section 34 was also referred to as indicative of the intention of Parliament that a notice under the amended Section 34(1) could be issued after 31st March 1956 even in respect of the period falling under Sub-section (1A). We have already pointed out that Sub-section (4), far from showing such an intention on the part of Parliament, indicates that Parliament never intended that action under the amended Section 34(1) should be taken in regard to the year ending on 31st March 1941 and subsequent years falling under Sub-section (1A) if prior to the coming into force of the amendment on 1st April 1956 no action had been initiated under Sub-section (1A) by the issue of a notice on or before 31st March 1956. A reference was also made by the learned Judges of the Bombay High Court to the amendment made in Sub-section (1B) in 1956 to reinforce their conclusion. They took the view that before the amendment of Section (1B) an opportunity for settlement of assessment by applying to the Central Board of Revenue was available under that sub-section only to a person to whom a notice has been issued under Sub-section (1A); that after amendment this facility was extended to any assessee to whom a notice has been issued under Clause (a) of Sub-section (1) or under Sub-section (1A) for any of the years ending on 31st March of the years 1941 to 1948 inclusive; and that this extension of the facility indicated that a notice under Clause (a) of Sub-section (1) could be issued for any of the years ending on 31st March 1941 and subsequent years falling under Sub-section (1A). We should not be regarded as disrespectful to the learned Judges of the Bombay High Court if we say that we are unable to see how this conclusion follows from the amendment made in Sub-section (1B). Sub-section (1B) must be read along with Sub-sections (1) and (1A); and so read, the true and reasonable construction of that sub-section is that any assessee to whom a notice has been issued under Clause (a) of Sub-section (1) for the two years from 1st April 1946 to 31st March 1948, as well as any assessee to whom a notice has been issued under Sub-section (1A) for any of the years ending on 31st March of the years 1941 to 1946 can apply to the Central Board of Revenue within the prescribed time for the settlement of his assessment. If Parliament did really intend that even after 31st March 1956 a notice for the reopening of an assessment should be given under Clause (a) of Sub-section (1) for any of the years ending on 31st March of the years 1941 to 1946, then they would have expressed their intention clearly by suitably amending Section 34(1) for that purpose or by repealing Sub-section (1A), and not concealed it with a more than Baconian obscurity in a provision dealing with settlement of assessments.

18. In the view we have taken of the matter, it is unnecessary for us to deal with the further questions raised in the petitions, namely, whether the notices given to the petitioner were under Clause (b) or Clause (a) of Section 34(1) or whether the satisfaction of the Central Board of Revenue stated in the notices brought them under Clause (a) or whether there was material before the Income-tax Officer to issue the impugned notices. It is sufficient to say that in the returns filed by the respondent Income-tax Officer, it has been stated that the escaped assessment has been due to the failure of the petitioner to disclose fully and truly all material facts necessary for the assessments of the years in question. As held by the Supreme Court in Calcutta Discount Co. v. I. T. Officer : [1961]41ITR191(SC) it is the duty of the assesses who wants the Court to hold that jurisdiction was lacking to establish that the Income-tax Officer had no material at all before him for beliving that there had been such non-disclosure. At present, there is no material whatsoever on record to enable us to express any opinion on the question whether the Income-tax Officer issued the notices without jurisdiction. In response to the notices issued to him, the petitioner has not filed any return or any statement before the Income-tax Officer showing that during the assessment proceedings for the years in question, he had fully and truly disclosed all material facts necessary for his assessment.

19. For the foregoing reasons, all these sixpetitions are allowed and the notices issued to thepetitioner in each case on 23rd March 1962 arequashed. The petitioner shall have costs of theseapplications. Counsel's fee for all cases is fixed atRs. 600/- (six hundred rupees). The outstandingamount of security deposit, shall be refunded to thepetitioner.


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