The following question of law has been referred to us for our opinion by the Income-tax Appellate Tribunal :
'Whether on a true interpretation on the terms of sub-sections (1) and (3) of section 34 of the Indian Income-tax Act, 1922, is it not necessary that the notice with respect to cases falling under clause (b) of sub-section (1) if that section must not only be issued within four years from the end of the relevant year, but must also be served within that time limit ?'
The matter arose out of the assessment of Shri Shanti Sarup for the assessment year 1945-46. The assessee had a share in the partnership which was accepted by the Income-tax Officer art the figure of Rs. 17,083. Subsequently, when the assessment of the firm was made the share was determined by the Income-tax Department at Rs. 20,056. On March 29, 1950, i.e., almost fire years after the period mentioned in section 34, a notice under section 34 was issued to the assessee.
This notice was served upon him on April 1, 1950, and the question arose whether the assessment under section 34 could or could not be made.
Section 34(1)(b) is in the following terms :
'....... he may in cases falling under clause (a) at any time and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee.....'
Therefore the notice, according to this clause, must be served upon the assessee within a period of four years. It has been argued before us on behalf of the Income-tax Department that 'serve' must be taken here to read 'issue' because in the proviso to sub-section (3) the word 'issued' has been used. That proviso reads in the following terms :
'Provided that where a notice under clause (b) of sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if at the time of the assessment or re-assessment the four years aforesaid have already elapsed.'
It will be seen, therefore, that in section 34 the words 'serve' and 'issue' have both been used. It cannot be assumed that the Legislature was ignorant of the meaning of these words or that then could not distinguish between their significance. Both these words have been used in the proviso and they are to be interpreted in their true meaning. It cannot, therefore, be argued that when the word 'serve' was used in clause (b), the Legislature intended to mean 'issue.' Mr. Kirpal has drawn our attention to the phrase 'issued within the time therein limited ' in the proviso above mentioned. He has argued that 'the time therein limited' means the period of four years mentioned in clause (b). It seems to me, however, quite clear that 'the time therein limited' means the time specified in clause (b) which is a period of four years for effecting service upon the assessee to a period of four years less such time as may be required to effect service after issuing the notice, and when in the proviso the notice is required to be issued within the limited time what is meant is that the notice must be issued within such time that service of it can be effected within a period of four years. This is the only way to interpret the provisions of clause (b) of sub-section (1) and of the proviso.
There are two decisions - one of the Allahabad High Court and the other of the Bombay High Court - in which the same view was taken.
In Sri Niwas v. Income-tax Officer, it was held that sub-section (1) and (3) of section 34 of the Act deal with different matters and the use of the word 'issue' in sub-section (3) does not lead to any inference that the word 'serve' in sub-section (1) is also used in the sense of 'issue.' The retention of the word 'serve' in sub-section (1) by the Legislature even though section 34 was amended several times leads also to the inference that the Legislature did not intend that 'serve' must be equivalent to 'issue.'
In Commissioner of Income-tax v. D. V. Ghurye, Chagla, C.J., felt somewhat surprised that the Legislature had used the word 'serve' instead of the word 'issue', but he felt constrained to give full meaning to these two words. The words of the stature being quite clear and unequivocal, the statute must be interpreted as bearings the will of the Legislature. Mr. Kirpal has sought to put a gloss on the wording of clause (1) by drawing our attention to the history of this section. There is, however, nothing ambiguous or doubtful about the phraseology of clauses (1) and (2) of section 34, and, therefore, the previous history of the section can throw no light upon the meaning which must be attached to it. But even referring to the previous history, it is not at all clear that the Legislature intended that under clause (1) the notice must issued within four years and not served within four years. The period of limitation has been varied from time to time, and it seems to me that in the interest of the individual it was enacted that too long a time should not be allowed to elapse before an assessee is apprised of the fact that his past accounts are being looked into again and he is going to be held liable for income-tax which he is alleged to have evaded.
In this view of the matter e must hold that the word 'serve' in sub-section (1) does not mean 'issue' and that in the present case the assessee having been served after a period of four years, the assessment was rightly cancelled by the Income-tax Appellate Tribunal. We answer the question accordingly. The assessee will recover his costs. Counsels fee Rs. 100.
Reference answered accordingly.