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United Nilgiris Services Ltd. Vs. Commissioner of Income-tax, Madras. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberCase Referred No. 99 of 1955
Reported in[1960]40ITR369(Mad)
AppellantUnited Nilgiris Services Ltd.
RespondentCommissioner of Income-tax, Madras.
Cases ReferredPrashar v. Vasantsen Dwarkadas
Excerpt:
- - (3) if the proviso did apply, it was an unenforceable statutory provision, as it offended against the fundamental right of equal protection of laws guaranteed by article 14 of the constitution and was therefore void under the article 13. since in our opinion the first contention itself is well founded, we do not propose to deal with the second and third contentions. commissioner of income-tax [1956]29itr848(mad) :it is well settled that the law of limitation being procedural law, its provisions operate retrospectively in the sense that they apply to causes of action which arose before their enactment. but it is equally well established that if the right to sue has become barred by the provisions of the act then in force on the date of the coming into force of the later enactment,..........in the original assessment when it was completed on november 22, 1950. the validity of that reassessment, which was the issue raised in the question referred to this court under section 66(1) of the act, was challenged by the learned counsel for the assessee on three grounds. (1) the initiation of proceedings under section 34 with the issue of the notice dated january 20, 1954, made four years after march 31, 1948, when the assessment year 1947-48 came to a close, was barred by limitation. (2) the assessees case did not fall within the scope of the second proviso of section 34(3) of the act as it now stands amended. (3) if the proviso did apply, it was an unenforceable statutory provision, as it offended against the fundamental right of equal protection of laws guaranteed by.....
Judgment:

RAJAGOPALAN, J. - The assessment of the assessee company, referred to as the new company in the statement of the case, for the assessment year 1947-48 was reopened under section 34 of the Income-tax Act on the ground, that excessive relief by way of depreciation allowances had been granted to the assessee in the original assessment when it was completed on November 22, 1950. The validity of that reassessment, which was the issue raised in the question referred to this court under section 66(1) of the Act, was challenged by the learned counsel for the assessee on three grounds. (1) The initiation of proceedings under section 34 with the issue of the notice dated January 20, 1954, made four years after March 31, 1948, when the assessment year 1947-48 came to a close, was barred by limitation. (2) The assessees case did not fall within the scope of the second proviso of section 34(3) of the Act as it now stands amended. (3) If the proviso did apply, it was an unenforceable statutory provision, as it offended against the fundamental right of equal protection of laws guaranteed by article 14 of the Constitution and was therefore void under the article 13.

Since in our opinion the first contention itself is well founded, we do not propose to deal with the second and third contentions.

The relevant dates for deciding the issue of limitation are as follow. The original assessment was completed on November 21, 1950, when the alleged excessive relief was granted to the assessee. It was not disputed that, if the case of the assessee did not fall within the scope of the second proviso to section 34(3), as it now stands amended, the period of limitation for reopening the assessment under section 34(1) (b) was only four years, and that period ended on March 31, 1952. The notice under section 34(1) (b) was issued only on January 20, 1954. That excessive relief had been granted to the assessee in the original assessment was discovered only on September 11, 1952, on the termination of the assessment proceedings of the old company, whose business the assessee, the new company, took over. The amended second proviso to section 34(3) came into force on April 1, 1952 (see section 1(2) of the Amending Act 25 of 1953).

Assuming for the present that the assessees case would fall within the scope of the second proviso to section 34(3), as it now stands amended, and assuming further that it is an enforceable statutory provision, the position is that it came into force only on April, 1, 1952, that is, after the expiry of the statutory four years period of limitation, which was the law in force up to and inclusive of March 31, 1952. The fact of the amended second proviso of section 34(3) would be to abrogate limitation for cases which came within its scope and to prescribe no period of limitation at all, notwithstanding anything else stated in section 34(1) of the Act. If the right to reopen the assessment of the assessee under section 34(1) (b) lapsed on March 31, 1952, under the law of limitation as it stood on that date, the statutory amendment of the period of limitation, which took effect only on April 1, 1952, would not apply that this court pointed out in Janaba Muhamad Hussain Nachiar Ammal v. Commissioner of Income-tax : [1956]29ITR848(Mad) :

'It is well settled that the law of limitation being procedural law, its provisions operate retrospectively in the sense that they apply to causes of action which arose before their enactment. But it is equally well established that if the right to sue has become barred by the provisions of the Act then in force on the date of the coming into force of the later enactment, then such a barred right is not revived by the application of the new enactment.'

A similar view was taken by the Bombay High Court in S. C. Prashar v. Vasantsen Dwarkadas : [1956]29ITR857(Bom) , and by the Patna High Court in Sardar Lakhmir Singh v. Commissioner of Income-tax : [1958]33ITR856(Patna) . These two cases dealt directly with the application of the amended second proviso to section 34(3). The learned counsel for the Department did not accept as correct the principle laid down by this court in Muhammad Hussain Nachiar Ammal v. Commissioner of Income-tax : [1956]29ITR848(Mad) , but he realised that we are bound to follow that decision as authority binding on us.

The resulting position is that, as the amendment of the law of limitation took effect only on April 1, 1952, and as under the law of limitation which was in force before that date the right of the Department to initiate proceedings against the assessee under section 34 had lapsed, the Department could not have the benefit of the amendment, even if the amended proviso covered the case of the assessee.

The learned counsel for the Department then urged that even before March 31, 1952, it was not a four year period of limitation that applied, and that even under the proviso to section 34(3), before it was amended with effect from April 1, 1952, there was no period of limitation.

Before the proviso was amended by Act 25 of 1953 with effect from April 1, 1952, it ran :

'Provided further that nothing contained in this sub-section shall apply to a reassessment made under section 27 or in pursuance of an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.'

The proviso as it now stands amended runs :

'Provided further that nothing contained in this section limiting the time within which any action may be taken or any order of assessment or reassessment may be made shall apply to a reassessment made under section 27 or to an assessment or re-assessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.'

We are unable to accept the contention of the learned counsel for the Department, that the amendment effected by Act 25 of 1953 was only explanatory, and that the phrase 'in pursuance of' in the un-amended proviso was comprehensive enough to include a reassessment made 'on the assessee or any other person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.' In the case of the assessee the assessment was not reopened under section 34 of the Act in pursuance of an order under any of the enumerated sections in proceedings to which the assessee himself was a party. To follow up the finding in the assessment proceedings of A by taking action against B under section 34 cannot be viewed as reassessment 'in pursuance of an order' within the meaning of the proviso as it stood unamended before April 1, 1952. The expression 'pursuance' in that context implies a continuity of operations against the same person. The unamended proviso therefore did not lift the ban of the four year period of limitation prescribed by section 34(1) (b) in the case of the assessee, and proceedings under section 34(1) (b) could not have been taken against the assessee at any time after March 31, 1952.

The learned counsel for the Department next submitted that the impugned order of reassessment could be viewed as a case of rectification effected under the enabling provisions of section 35 of the Act. We express no opinion on the question whether the assessees was a case that could have been brought within the scope of section 35 at all, had it been dealt with under that section, Factually, the Department invoked and applied only the powers vested in the Income-tax Officer by section 34. It is not open to us at this stage and in proceedings under section 66 to find whether an alternative basis may be found in law for sustaining the reassessment that was ordered by the Department and sustained by the Tribunal. The learned counsel for the Department referred to Commissioner of Income-tax v. Khemchand Ramdas [1938] 6 ITR 414. Their Lordships of the Privy Council pointed out in that case that the finality of an assessment could, under the provisions of the Income-tax Act, be avoided only either under section 34 or under section 35 of the Act. We are unable to see anything in that decision to support the contention of the learned counsel for the Department, that a reassessment effected under section 34 could be viewed in proceedings under section 66 as a case of rectification under section 35 ignoring the appeal to the Tribunal. Had it been a case dealt with under section 35 of the Act, recourse to section 66 itself would have been barred.

We are unable to see any support for the contention of the learned counsel for the Department in the other case cited by him, Commissioner of Income-tax v. B. C. Swimming Bath Trust : [1955]27ITR279(Bom) .

We are of opinion, that when the notice was issued to the assessee under section 34(1) (b) of the Act on January 20, 1954, initiation of the proceedings under section 34 of the Act was barred by the law of limitation applicable to the case of the assessee, and that the further proceedings to reassess the assessee were without jurisdiction. That is sufficient to answer the question referred to us in favour of the assessee.

We express no opinion on the question, whether the amended second proviso to section 34(3) is void under article 13 of the Constitution, though such was the view taken in Prashar v. Vasantsen Dwarkadas : [1956]29ITR857(Bom) . An examination of the constitutional validity of a statutory provision should not be undertaken, if relief could be given to a party without a need for pronouncement on the constitutional validity of the impugned provision. We have also refrained from going into the question, whether the case of the assessee falls at all within the scope of the amended second proviso, because we have held that even if it did, it did not save the reassessment from the bar of limitation.

We answer the question in the negative and in favour of the assessee. The assessee will be entitled to the costs of this reference. Counsels fee Rs. 250.

Question answered in the negative.


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