1. This is an application under Article 226 of the Constitution for, inter alia, the issue of a writ in the nature of mandamus directing the respondents to cancel or to rescind the said notice dated January 25, 1972, issued under Section 148 of the Income-tax Act, 1961, and the purported letter dated August 17, 1971, for the assessment year 1958-59.
2. The petitioner derived his income from salary and also from money-lending business. For the assessment year 1959-60, the respondent No. 1 assessed the income of the petitioner at Rs. 4,000 from salary and Rs. 25,000 from other sources. This the respondent No. 1 did because a sum of Rs. 25,000 was appearing in the books of the assessee for that year as the opening balance. In the ultimate appeal before the Income-tax Appellate Tribunal the Appellate Tribunal set aside the addition of Rs. 25,000 in the income of the petitioner for the assessment year and allowed the appeal of the petitioner. The Appellate Tribunal found that the assessee derived income from salary and observed that the said amount of Rs. 25,000 could not be earned nor constitute the petitioner's income from any known sources in that assessment year as the amount could not have been earned by the assessee on the first day of the accounting year. The Appellate Tribunal observed : 'It must be taken to have been earned by him in the earlier year or years.' Thereafter, the present Income-tax Officer, 'B' Ward, District VI, Calcutta, wrote the aforesaid letter dated August 17, 1971, asking the petitioner to show cause on August 28, 1971, as to why proceedings under Section 147(a) should not be initiated against the petitioner for the assessment year 1958-59. By a letter dated August 28, 1971, the petitioner showed cause as asked for. Thereafter, the petitioner received the said impugned notice dated January 25, 1972, under Section 148 of the Income-tax Act, 1961, issued by the respondent No. 1 proposing to assess the income of the petitioner for the said assessment year 1958-59, on the ground that he had reason to believe that the income of the petitioner in that year had escaped assessment.
3. Mr. Sanjoy Bhattacharya, appearing for the petitioner, contended that --(1) the law as it stood at the material time, that is, 1958-59, ought to be applied in the instant case and the case of the petitioner should be governed not by Section 150 of the Act of 1961, but by the second proviso to Subsection (3) to Section 34 of the Indian Income-tax Act of 1922. Even if Section 150 was at all attracted, the said Section is subject to Section 151 of the Act of 1961 and the conditions precedent for issuing a notice underSection 148 as envisaged in Section 151 of the Act of 1961, were not fulfilled and as such the respondent No. 1 had no jurisdiction to issue the said notice.
4. Mr. Bhattacharya urged that it was apparent from the notice itself, a copy whereof has been annexed to the petition, that no valid sanction in accordance with law was obtained for the issuing of the said notice. Neither the Board of Direct Taxes nor the Commissioner of Income-tax did apply its mind to the matter and thus the sanction given was no sanction at all.
5. More than eight years expired from the date when the said assessment for the year 1958-59 should have been completed. The amount of income that was left out of assessment admittedly was not more than Rs. 25,000 and thus no sanction could be given for issuing the notice under Section 148. There was no finding or direction of the Appellate Tribunal contained in the aforesaid order passed in the aforesaid appeal mentioned above within the meaning of the second proviso to Sub-section (3) to Section 34 of the Act of 1922 or Sub-section (1) to Section 150 of the Act of 1961 and, thus, in view of Sub-section (2) to Section 150 of the Act of 1961, the impugned notice could not be issued. The said notice was thus issued without any jurisdiction and was and is void and must be quashed.
6. According to Mr. Sanjoy Bhattacharya, the second proviso to subsection (3) to Section 34 which was in force at the relevant time, that is to say, during the assessment year 1958-59, was applicable to the present case. Sub-section (3) together with the provisos to Section 34 of the Act of 1922 as well as Sections 149, 150 and 151 of the Act of 1961 are set out hereunder:
'34. (3) No order of assessment or reassessment, other than an order of assessment under Section 23 to which Clause (c) of Sub-section (1) of Section 28 applies or an order of assessment or reassessment in cases falling within Clause (a) of Sub-section (1) or Sub-section (1A) of this Section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable:
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 reassessment the four years aforesaid have already elapsed :
Provided further that nothing contained in this Section limiting the time within which any action may be taken or any order, assessment or reassessment may be made shall apply to a reassessment made under Section 27 or to an -assessment or reassessment made on the assessee or anyperson 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.' '149. Time limit for notice.--(1) No notice under Section 148 shall be issued,--
(a) in cases falling under Clause (a) of Section 147-
(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under Sub-clause (ii);
(ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year;
(b) in cases falling under Clause (b) of Section 147, at any time after the expiry of four years from the end of the relevant assessment year.
(2) The provisions of Sub-section (1) as to the issue of notice shall be subject to the provisions of Section 151.
(3) If the person on whom a notice under Section 148 is to be served is a person treated as the agent of a non-resident under Section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year.'
'150. Provision for cases where assessment is in pursuance of an order on appeal, etc.--(1) Notwithstanding anything contained in Section 149, the notice under Section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision.
(2) The provisions of Sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that Sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.'
'151. Sanction for issue of notice.--(1) No notice shall be issued under Section 148 after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice.
(2) No notice shall be issued under Section 148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice.'
7. Section 297 of the Act of 1961 reads as follows:
'297. Repeats and savings,--(1) The Indian Income-tax Act, 1922 (XI of 1922), is hereby repealed.
(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the repealed Act),--. . . .
(d) where in respect of any assessment year after the year ending on the 31st day of March, 1940,--
(i) a notice under Section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed;
(ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under Section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act a notice under Section 148 may, subject to the provisions contained in Section 149 or Section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly;....'
8. In view of the provisions of Sub-clause (ii) to Clause (d) of subsection (2) of Section 297 of the Act of 1961, as urged by Mr. Chandan Banerjee appearing on behalf of the department, I am of the view that Section 150 of the Act of 1961 is applicable to the instant case. The second proviso to Sub-section (3) to Section 34 of the Act of 1922 could not be applicable as urged by Mr. Bhattacharya. It must be noted here that the second proviso to Sub-section (3) to Section 34 of the Act of 1922 has been enacted in the form of Clause (ii) to Sub-section (3) to Section 153 of the Act of 1961 which reads as follows :
'153. Time-limit for completion of assessments and reassessments.--....
(3) The provisions of Sub-sections (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may be completed at any time--. . . . (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Sections 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act . . . .'
9. It should be noted that in the instant case the time to issue notice under Section 148 as prescribed under Section 149 of the Act of 1961 had expired long prior to the issue of the impugned notice.
10. In my opinion, the provisions contained in Section 151 of the Act of 1961 should be read along with Section 149. Provision for issue of notice under Section 148 under Sub-section (1) of Section 149 has been made expressly subject to the provisions of Section 151 and Section 151 shall be read with Sub-section (1) to Section 149 of the Act. Sub-section (1) to Section 150 of the Act begins with the words : 'Notwithstanding anything contained in Section 149....'. The said Sub-section provides that notice under Section 148 may be issued at any time for the purpose cf assessment or reassessment or recomputation to be made 'in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision'. Thus, if any effect is sought to be given to any finding or direction contained in any order passed by any authority mentioned in the said Sub-section in spite of the limits to the time for the issue oi the notice under Section 148 prescribed by Section 149 of the Act, such notice may be issued at any time and for that purpose the requirements laid down in Section 151 of the Act need not be complied with. In any event, the sanction of the Central Board of Direct Taxes has been obtained as is evident from the authentication made by the Secretary of the Board.
11. The case of the respondents is that they, by and under the said notice, wanted to make an assessment 'in consequence of or to give effect to any finding or direction' contained in the above-mentioned order passed by the above-mentioned Appellate Tribunal. The relevant part of the order of the Income-tax Appellate Tribunal, Bangalore Bench (Calcutta Camp), passed in I.T.A. No. 13106 of 1965-66 (Assessment year: 1959-60), Bakshish Singh v. Income-tax Officer, 'B' Ward, Dist. VI, a copy whereof has been set out as annexure 'C' to the petition is set out hereunder :
'The said amount of Rs. 25,000 cannot thus be earned or constituted his income from any known source. The account year in such cases is the financial year. As the amount could not have been earned by the assessee on the very first day of the accounting year, it must be taken to have been earned by him in the earlier year or years.'
12. According to Mr. Bhattacharya, the aforesaid observation was made in regard to the year or years earlier to the assessment year, that is to say, the assessment year 1959-60, which was the subject-matter of the aforesaid appeal before the aforesaid Appellate Tribunal and cannot be treated to be a finding or direction or order made or given in the aforesaid appeal by the aforesaid appellate authority.
13. In support of his contention Mr. Bhattacharya relied on the case of Income-tax Officer, 'A' Ward, Sitapur v. Murlidhar Bhagwan Das, : 52ITR335(SC) . In the said case, Murlidhar Bhagwan Das, a firm carrying on business in different lines, was assessed to income-tax for the assessment year 1949-50 under Section 23(4) of the Act. On September 27, 1955, the said assessment was cancelled under Section 27 of the Act. Thereafter, the Income-tax Officer issued a notice under Section 34(1)(a) of the Act for the assessment year 1949-50 on the ground that a sum of Rs. 83,737, being the interest income in the shape of U. P. Encumbered Estates Act Bonds, received by the assessee had escaped assessment in the said assessment year. In the fresh assessment made subsequent to the cancellation mentioned above, the Income-tax Officer ignored the notice issued under Section 34(1)(a) of the Act and included the said sum of Rs. 88,737 in the income of the assessee for that assessment year. Upon appeal by the assessee, the Appellate Assistant Commissioner held that the bonds were received by the assessee in the previous accounting year and directed that the sum representing interest on the bonds should be deleted from the assessment for the year 1949-50, but included in the assessment for the year ending 1948-49. Pursuant to the said direction given by the Appellate Assistant Commissioner, the Income-tax Officer initiated proceedings under Section 34(1) of the Act in respect of the assessment year 1948-49. The High Court of Allahabad quashed the said assessment proceedings as made beyond the time prescribed by Section 34 of the Act. The proceedings would have been in time if the second proviso to Sub-section (3) to Section 34 of the Act were attracted and, thus, the meaning of the said second proviso quoted earlier in the judgment came up for consideration.
14. The Supreme Court held that by reason of the reference to the said provisions, the powers and jurisdiction conferred on the respective authorities, tribunals or courts mentioned in the said provisions were not enlarged or modified. The Supreme Court was further pleased to observe that the said proviso only lifted the bar of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the bar could not be construed as having the effect of enlarging the jurisdiction of the Tribunals under the relevant Sections. The lifting of the bar was provided for only to give effect to the orders that might be made by the appellate, revisional or reviewing tribunals within the scope of their respective jurisdictions. The terms 'finding' or 'order' or 'direction' mentioned in the said proviso was considered by the Supreme Court on the basis of various authorities including Pt. Hazari Lal v. Income-tax Officer,  89 I.T.R. 265 (All.) and Lakshman Prakash v. Commissioner of Income-tax,  48 I.T.R. 705 (All.) [F.B] and Order XX, Rule 5, of the Code of Civil Procedure. The Supreme Court held that the expression 'finding' could not be any incidental finding. It must be a conclusion on a material question necessary for the disposal of the appeal in respect of an assessment of a particular year. In coming to the said conclusion the Supreme Court observed as follows :
'The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but.that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression 'direction' cannot be construed in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under Section 31. Under that section he can give directions, inter alia, under Section 31(3)(b), (c) or (e) or Section 31(4). The expression 'direction' in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other tribunals can issue under the powers conferred on him or them under the respective sections. Therefore, the expression 'finding' as well as the expression ' direction' can be given full meaning, namely, that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate or revisional authority, as the case may be, is empowered to give under the sections mentioned therein. The words ' in consequence of or to give effect to' do not create any difficulty, for they have to be collated with, and cannot enlarge, the scope of the finding or direction under the proviso. If the scope is limited as aforesaid, the said words also must be related to the scope of the findings and directions.'
15. Thus, it was held by the Supreme Court in the aforesaid case that the finding or direction must necessarily be confined to and relate to the matters in issue in the particular year of assessment pending in appeal before the appellate or reviewing or revisional authorities mentioned in the said proviso. The terms of Section 150(1) seem to be identical with those of the second proviso to Sub-section (3) to Section 34 of the Act of 1922. In the instant case also the findings or directions must be held to be those findings or directions which relate and confine to the findings or directions in regard to the matters in issue before the appellate or revisional or reviewing authority. The observation that the said sum of Rs. 25,000 was earned by the assessee in earlier year or years, that is to say, in years prior to the assessment year 1959-60, cannot be the finding or direction within the meaning of the expressions used in Sub-section (1) to Section 150 of the Act of 1961 and Section 150 would not be attracted for the purpose of giving effect to the aforesaid directions and observations.
16. For the aforesaid reason, this application must succeed. The rule nisix is made absolute. Each party shall pay and bear its or his own costs of and incidental to this application.