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PETITIONER: S. C. PRASHAR, INCOME-TAX OFFICER,MARKET WARD, BOMBAY AND AN

       Vs.

RESPONDENT: VASANTSEN DWARKADAS AND OTHERS

DATE OF JUDGMENT: 12/12/1962

BENCH: DAS, S.K. BENCH: DAS, S.K. KAPUR, J.L. SARKAR, A.K. HIDAYATULLAH, M. DAYAL, RAGHUBAR

CITATION:  1963 AIR 1356            1964 SCR  (1)  29  CITATOR INFO :  RF         1963 SC1394  (2,9,10)  F          1963 SC1399  (13)  F          1963 SC1401  (3,7)  R          1964 SC1742  (9)  R          1965 SC 342  (20,25)  D          1965 SC1267  (9)  OPN        1967 SC1552  (5)  E          1968 SC 139  (4)  RF         1969 SC 340  (1)  D          1971 SC 147  (15)  F          1971 SC1256  (18)  RF         1972 SC  83  (11)  R          1973 SC2585  (13)

ACT: Income  Tax-Escaped income-Reassesment-Validity  of  notice- Statute   providing  for  saving  of   notices-Retrospective operation-Indian  Income-tax  (Amendment) Act, 1948  (48  of 1948),  s. 8-Indian Income-tax (Amendment) Act, 1953 (25  of 1953  s.  31-Finance  Act 1956 (18 of  1956),  s.  18-Indian Income-tax (Amendment) Act, 1959 (9 of 1959), s. 2, 4-Indian Income-tax Act, 1922 (11 of 1922), s. 34, as amended.

HEADNOTE: The first respondent’s father, D, and another were  partners doing  business in the name of P.L. since 1935.  D  died  in 1946 but the firm was continued with the first respondent as a  partner.  In 1941 another firm in the name of V.  D.  was started by the first respondent and two others, and for  the assessment year 1942-43 the firm made a return of its income and  also  claimed registration.   The  Income-tax  Officer, being of the view that the firm belonged really to D refused registration  and  added  the  income of  the  firm  to  the individual  income of D. In 1943-44 the  Income-tax  Officer came  to a different conclusion and held that the firm  V.D. was  a branch of the firm P.L. For the subsequent  years  of assessment 1942-43 to 1948-49 also the firm V.D. applied for registration  bat was refused, and for those  several  years appeals were filed before the Appellate Tribunal.  An appeal

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was filed by the firm P.L. against its assessment in respect of excess profits tax.  There was also an appeal against the assessment  for the year 1942-43 by the first respondent  as the heir and legal representative of his father against  the decision that the income of the firm V.D. should be included in  the income of his father.  All these appeals were  heard together and decided by the Appellate Tribunal by its  order dated  August 14, 1931.  In that order the Tribunal  gave  a finding  that the business of the firm V.D. really  belonged to  the  firm P.L. This decision was confirmed by  the  High Court  on  reference on October 8, 1953.  In order  to  give effect to the finding of the Tribunal the Income-tax Officer issued a notice on April 30, 1954, to the firm P.L. under s. 34  of the Indian Income-tax Act, 1922, that the income  for the year ending 30 March  31,  1943,  had  been  under-assessed,  and  that  he proposed to reassess the income.  The respondents challenged the  validity  of  the notice on the grounds  (1)  that  the Income-tax  Officer  had no jurisdiction to issue  a  notice after the expiry of the limit of time fixed by sub-s. (1) of s. 34, (2) that the second proviso to sub-s. 3) of s. 34  on which  the  Income-tax Officer relied did not apply  to  the case,  and  in any case, it was bad on the  ground  that  it violated Art. 14 of the Constitution of India, and (3)  that there  was  no provision in the Act under  which  the  Appe- llate Tribunal could give a finding in the appeals filed  by the firm V.D. or in the appeal filed by the first respondent himself  that the income in question represented the  income of the firm P.L. The validity of the notice was sought to be sustained on the grounds that, in any case, it could not  be challenged by reason of the amendments made in s. 34 of  the Indian  Income. tax Act, by the provisions of s. 31  of  the Indian  Income-tax  ’Amendment)  Act, 1953,  s.  18  of  the Finance  Act,  1956,  and  s. 4  of  the  Indian  Income-tax (Amendment) Act, 1959. Held, (per Sarkar, Hidayatullah and Raghubar Dayal, JJ., Das and Kapur, JJ., dissenting), that the notice dated April 30, 1954,  was  valid and its validity could not  be  called  in question in any Court or Tribunal in view of the  provisions in s. 4 of the Indian Income-tax (Amendment) Act, 1959. Per  Das and Kapur, JJ.-(1) The second proviso to s. 34  (3) of  the  Indian  Income-tax Act, 1922,  as  amended  by  the Amending Act of 1933, was hit by Art. 14 of the Constitution of India and was invalid. (2)  The Income-tax Officer had no jurisdiction to issue the notice  on April 30, 1954, and could not rely on the  second proviso to sub-s. (3) of s. 34 because the time limit  fixed by  sub-S.  (1) of s. 34 had expired long  before  the  said proviso  came into effect and the proviso did not  revive  a remedy which had been lost before April 1, 1952. (3)  Section  31 of the Indian Income-tax  (Amendment)  Act, 1953, did not validate the notice dated April 30, 1954. (4)  The  notices  to which s. 4 of  the  Indian  Income-tax (Amendment)  Act,  1959,  were  applicable  and  which  were validated  were those that were issued between the  date  of the  amendment  of the Finance Act, 1956, and  that  of  the Amending  Act  of  1959.  It is not the effect of  s.  4  to abrogate and supersede the time limit provided by s. 34  (1) (a) for all the past years. 31 Per Das, J.-The evidence did not show that the notice  dated April 30, 1954, was issued under s. 34 (1) (Amendment)  Act, 1959, was not applicable. Per  Kapur,  J.-The principle of the law of  limitation  was

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applicable to s. 34 of the Indian Income-tax Act, 1922, that if  the  period  prescribed for taking  action  had  already expired,  subsequent  change in the law did not make  it  so retrospective  in  its effect as to revive the power  of  an Income-tax Officer to take action under the new law. Per Sarkar,J.-The second proviso to s. 34 (3) as amended  in 1953,  in  so  far as it affected  persons  other  than  the assessee was void as violating Art. 14 of the  Constitution, and  could not be relied on in support of the notice in  the present case. Per  Hidayatullah and Raghubar Dayal, JJ.-(1) The  different periods  indicated under s. 34 cannot be treated as  periods of  limitation, in the sense that the expiry of the  periods grants  prescriptive  title to defaulting  tax-payers  or  a vested  right arises in the assessee.  The liability to  the State  is independent of any consideration of time  and,  in the  absence of any provision restricting action by  a  time limit, it can be enforced at any time. (2)  Under  the Indian Income-tax and Business  Profits  Tax (Amendment)  Act, 1948, which came into force on  March  30, 1948,    the   Income-tax   Officer   could   take    action retrospectively  in all cases in which the assessment  years ended  within eight years of the date of his action  and  in which  there  was  an escapement of an  assessment  for  the reasons indicated in cl. (a) o s.  34 (1), as amended. (3)  The Income-tax (Amendment) Act, 1953, enabled action at any  time  if  there  was a  finding  or  direction  of  the character  indicated in the second proviso to sub-s. (3)  of s.  34, and s. 31 of the Amendment Act applied the  ’amended s. 34 to all assessments commenced after September 8,  1948, and saved all notices issued and assessments made in respect of any year prior to April 1, 1948, whether the notices were issued  or  the assessments made before or  after  April  1, 1952. (4)  The  second proviso to s. 34 (3), as amended  in  1953, was  not  discriminatory and did not offend Art. 14  of  the Constitution. (5)  The  notice issued against the firm P. L.  was  validly issued under the amended second proviso to s. 34 (3). 32

JUDGMENT: CIVIL   APPELLATE  JURISDICTION : Civil Appeal  No.  705  of 1957. Appeal from the judgment and order dated October 5, 1955  of the Bombay High Court in Appeal No. 1 of 1955. K.N. Rajagopal Sastri and P.D. Menon, for the appellants. N.   A.  Palkhivala,  J.B.  Dadachanji, O.  C.  Mathur,  and Ravinder Narain, for respondents Nos. 1 and 2. N.  A. Palkhivala, D. N. Mukherjee and B.N. Ghosh,  for  the intervener. 1962.  December 12.  The following judgments were delivered. S.  K.  Das,  J.,  J. L. Kapur, J.,  and  A.K.  Sarkar,  J., delivered   separate   judgments.   The   judgment   of   M. Hidayatullah  and  Raghubar  Dayal, JJ.,  was  delivered  by Hidayatullah, J. S. K. DAS, J.  This appeal has been brought to this court on a  certificate  of  fitness granted by  the  High  Court  of Bombay.   The  appellants  are the Union of  India  and  the Income-tax Officer, Market Ward, Bombay.  By this appeal the appellants  challenge  the correctness of the  judgment  and order of the High Court of Bombay dated October 5, 1955,  by which  the High Court affirmed the judgment and order  of  a

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learned  single  judge of the same court dated  December  7, 1954, on a petition filed by the respondents under Art.  226 of the Constitution. The  relevant  facts  are these.   The  firm  of  Purshottam Laxmidas was started on October 28, 1935.  This firm had two partners,   Dwarkadas   Vussonji  and   Parmanand   Odhavji. Dwarkadas  died on April 1, 1946, leaving a son,  Vasantsen. Another firm by the name of Vasantsen Dwarkadas was 33 started  on  January 28, 1941, and in that firm  there  were three  partners,  Vasantsen,  Narandas  Shivji  and  Nanalal Odhavji.  This firm was dissolved on October 24, 1946.   The firm of Vasantsen Dwarkadas filed a return of its income for the assessment year 1942-1943 and also claimed  registration as a firm.  The Income-tax authorities refused  registration and  came  to  the conclusion that  the  firm  of  Vasantsen Dwarkadas belonged really to Dwarkadas, father of Vasantsen; therefore they added the income of the firm to the income of Dwarkadas.   In  subsequent  assessment years  the  firm  of Vasantsen  Dwarkadas  again applied  for  registration,  but registration  was again refused.  For the  assessment  years 1942-1943 to 1948-1949 several appeals were filed before the Income-tax   Appellate  Tribunal  by  the   firm   Vasantsen Dwarkadas  both against the quantum of income  assessed  and against  the refusal of the Income-tax Officer  to  register the  firm of Vasantsen Dwarkadas.  An appeal was also  filed by the firm of Purshottam Laxmidas against its assessment in respect of excess profits tax, and there was also an  appeal for  the assessment year 1942-1943 by Vasantsen as the  heir and legal representative of his father against the  decision of  the Income-tax authorities that the income of  the  firm Vasantsen  Dwarkadas  should be included in  the  income  of Dwarkadas.    It   appears  that  after  the   decision   in Vasantsen’s  case  in  the assessment  year  1942-1943,  the Income-tax Officer gave a finding that the firm of Vasantsen Dwarkadas  was  only  a branch of  the  firm  of  Purshottam Laxmidas  and  therefore the Income-tax  Officer  added  the income  of  Vasantsen Dwarkadas to the income  of  the  firm Purshottam Laxmidas.  This question also came up before  the Income-tax  Appellate  Tribunal  in  the  appeals  filed  by Purshottam  Laxmidas  in  respect of  the  assessments  made against it.  By a consolidated order dated August 14,  1951, the  Income-tax  Appellate  Tribunal  disposed  of  all  the aforesaid  appeals, and it came to the conclusion  that  the business done 34 in  the name of Vasantsen Dwarkadas was really the  business of the firm Purshottam Laxmidas.  With regard to the  appeal filed  by Vasantsen as heir and legal representative of  his father  for  the  assessment year  1942-1944,  the  Tribunal expressed  the view that the income of  Vasantsen  Dwarkadas should be deleted from the assessment of Dwarkadas.  It said :               "We are therefore of opinion that the addition               of  Rs. 62,3721/-to Dwarkadas’s income or  the               modification directed by the Appellate  Assis-               tant  Commissioner  should  be  deleted   from               Dwarkadas’s income.  If the Income-tax Officer               can   include  the  same  in  the  income   of               Purshottam  Laxmidas,  he  is  of  course   at               liberty  to do so.  He can then apportion  the               income  of  Purshottam  Laxmidas  amongst  the               partners  thereof as provided in s. 23 (5)  of               the Act." The Commissioner of Income-tax questioned the correctness of

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the aforesaid finding of the Tribunal, but on a reference to the High Court the latter upheld the order of the  Tribunal. The reference was decided on October 8, 1953. On  April 30, 1954, the Income-tax Officer concerned who  is the  appellant  before  us served  on  the  firm  Purshottam Laxmidas a notice under s. 34 of the Indian Income-tax  Act, 1922.  This notice was in these terms :               "Whereas  I have reason to believe  that  your               income  assessable to income-tax for the  year               ending 31st March 1943 has been under-assessed               I  therefore, propose to re-assess  to  income               allowance that has 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 35               and total world income assessable for the year               ending 31st of March, 1943.               This  notice is being issued  after  obtaining               the necessary satisfaction of the Commissioner               of Income-tax, Bombay City, Bombay." The  notice was followed by some correspondence between  the firm  Purshottam Laxmidas and the Income-tax  Officer.   The result of the correspondence was that the Income-tax Officer informed  the firm that its income was to be re-assessed  in order  to  give  effect  to the  finding  of  the  Appellate Tribunal  in  its  order  dated August  14,  1951  that  the business  of Vasantsen Dwarkadas was really the business  of the firm Purshottam Laxmidas. On  July 9, 1954, Vasantsen as the first petitioner and  the firm  of  Purshottam Laxmidas as second petitioner  filed  a petition   in  the  High  Court  under  Art.  226   of   the Constitution and asked for the issue of a writ quashing  the notice  dated  April  30,  1954,  and  a  writ  of  mandamus restraining  the Union of India and the  Income-tax  Officer concerned from taking any steps or proceedings in  pursuance of  the said notice.  Their main contentions were  (1)  that the  Income-tax  Officer had no jurisdiction  to  issue  the notice after the expiry of the limit of time fixed by sub-s. (1)  of s. 34, (2) that the second proviso to sub-s. (3)  of s.  34 on which the Income-tax Officer relied did not  apply to  the  case, (3) that there was no provision  in  the  Act under  which the Appellate Tribunal could give a finding  in the  appeals filed by the firm of Vasantsen Dwarkadas or  in the appeal filed by Vasantsen  himself, that the  income  in question  represented  the  income of  the  firm  Purshottam Laxmidas  and  (4) lastly, that that the second  proviso  to sub-s.  (3) of s. 34 was bad on the ground that it  violated Art. 14 of the Constitution. Desai, J., who heard the petition in the first instance came to the conclusion that the notice was 36 bad and without jurisdiction because, to use his own  words, the  Income-tax Officer in issuing the notice on  April  30, 1954, which was clearly more than eight years from the close of  the assessment year 1942-1943 was obviously in error  in thinking  that  the second proviso to sub-s. (3)  of  s.  34 applied  to  the  case.  The learned  judge  held  that  the proviso  did  not apply to orders of  assessment  which  had become  final before the date when it came into  force.   It may be here stated that the second proviso to sub-s. (3)  of s. 34 was amended by Act XXV of 1953 and by s. 1 (2) of  the Amending Act of 1953 the amended proviso came into force  on April 1,  1952.  Desai, J., further held that the proviso in question  did not violate Art. 14 of the Constitution in  so

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far as assessees who were parties to the proceedings  before the Appellate Tribunal were concerned ; but the proviso  was bad  in so far as it affected persons other than  assessees. He held however that the petitioners before him were parties to  the  proceedings  before  the  appellate  Tribunal   and therefore  fell within the category of assessees.   In  view however of his finding that second proviso to sub-s. (3)  of s.  34 did not apply to the case, his final  conclusion  was that the notice was without jurisdiction. The matter was then taken in appeal and the appeal was heard by  Chagla,  C.  J., and Tendolkar J.  The  appellate  court affirmed the finding of Desai, J., that the notice under  s. 34  was  issued out of time and was therefore  invalid.   It further held that the second proviso to sub-s. (3) of s.  34 did  not apply to the case.  On the question as  to  whether the second proviso violated Arts. 14 of the Constitution  it came  to the conclusion that no valid distinction  could  be drawn  between  persons  with regard to whom  a  finding  or direction  is  given by the appellate Tribunal  and  persons with  regard to whom no such direction or finding is  given. The appellate court expressed the view that both fell in the same 37 category  and  there was no difficulty in having  a  uniform provision  of law with regard to them.  The appellate  court further  expressed  the view that for  the  assessment  year 1942-1943  the  assessee before the Tribunal  was  Vasantsen Dwarkadas  as representing his father ; in that  appeal  the firm of Purshottam Laxmidas was not before the Tribunal  and therefore the firm was no better than a stranger who was  in some way associated with the assessee.  The appellate  court held in the result that the second proviso to sub-s. (3)  of s. 34 offended against Art. 14. I  have stated earlier that the appeal has been  brought  to this  Court  from the decision of the appellate court  on  a certificate  of fitness granted by the High Court.   In  the original  statement  of  the case filed  on  behalf  of  the appellants, the principal question raised was that  relating to  the second proviso to sub-s. (3) of s. 34 which I  shall presently  read.  The appellants were however allowed by  us to  file a supplementary statement of the case in which  two other  points have been urged.  One of these points is  that the  validity of the notice dated April 30, 1954, cannot  be challenged  by  reason  of the provisions of s.  31  of  the Amending Act, 1953 (XXV of 1953).  The second point is  that the validity of the notice cannot be challenged also because of  the  provisions  of  s.  4  of  the  Indian   Income-tax (Amendment) Act, 1959 (1 of 1959). Therefore, three substantial questions fall for decision  in this  appeal.   The  first question is  whether  the  second proviso to sub-s. (3) of s. 34 is constitutionally valid and applies to the case.  The second is, can the validity of the notice  dated April 30, 1954, be challenged in view  of  the provisions of s. 31 of the Amending Act of 1953.  The  third question  is  the  effect of the provisions  of  the  Indian Income-tax  (Amendment) Act, 1959 (1 of 1959). I  shall  now deal with these questions one by one. 38 First as to the second proviso to sub-s. (3) of s. 34. S. 34 of  the  Indian  Income-tax Act, 1922,  has  undergone  many amendments.  It is not necessary to refer to the section  as it  stood  prior to 1939.  The section as it stood  in  1939 empowered  the  Income-tax  Officer to  assess  or  reassess income  which  had  escaped assessment or  had  been  under- assessed or had been assessed at too low a rate or had  been

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the subject of excessive relief under the Act.  The  section made  a  distinction between two classes of  cases;  one  in which the Income-tax Officer had reason to believe that  the assessee had concealed the particulars of his income or  had deliberately furnished inaccurate particulars thereof and in this class of cases the Income-tax Officer could take action as laid down in the section at any time within eight  years; in all other cases the Income-tax Officer could take  action within  four  years of the end of  the  relevant  assessment year.   The  section  was almost completely  recast  by  the Income-tax  and Business Profits Tax (Amendment)  Act,  1948 (Act XLVIII of 1948).  For the purpose of this case all that I need state is that the two time limits of eight years  and four years were continued in respect of two classes of cases mentioned  in  clauses (a) and (b) of sub-s. (1) of  s.  34; clause  (a) related to cases of omission or failure  on  the part  of  an assessee to make a return of his income  or  to disclose  fully and truly all material facts  necessary  for his  assessment,  and  cl. (b) related to  cases  where  the Income-tax Officer had in consequence of information in  his possession  reason to believe that income, profits or  gains chargeable  to income-tax had escaped assessment  etc.   The time limit of eight years applied to cases under cl. (a) and the time limit of four years applied to cases under cl. (b). By s. 18 of the Finance Act, 1956, more changes were  intro- duced  with  effect from April 1, 1956.  The time  limit  of eight  years  was omitted from sub-s. (1) as  regards  cases falling  under cl. (a) but a proviso to sub-s. (1) of s.  34 which was substituted for the original proviso 39 said inter alia that the Income-tax Officer shall not  issue a  notice under cl. (a) of sub-s. (1) for any year if  eight years have elapsed after the expiry of that year unless  the income, profits or gain chargeable to income-tax which  have escaped  assessment or have been under-assessed or  assessed at too low a rate or have been made the subject of excessive relief under the Act etc. amount to or are likely to  amount to  Rs.  1,00,000/- or more in the aggregate for  that  year etc.   Certain other safeguards were also introduced in  the sub-section  with which we are not concerned.  Put  shortly, the  time limit of eight years continued in respect  of  cl. (a) cases if the amount was less than Rs. 1,00,000/-. Now,  I come to sub-s. (3) and the second  proviso  thereto. Prior  to 1956 sub-s. (3) provided that every assessment  or re-assessment  should be completed within eight  years  from the end of the relevant assessment year in those cases where the  assessee  had  failed to make a  return  or  failed  to disclose  fully and truly all material facts  necessary  for his assessment.  In 1956 the time limit was removed and  the assessment or re-assessment in such cases might be completed at  any time.  In all other cases the period  of  limitation was still four years, as it was before 1956, for  completion of assessment under s. 23 or of assessment or re-assessment, under  s. 23 read with s.34. The second proviso,  after  its amendment in 1953, constituted an exception to sub-s. (1) as well as sub-s. (3).  The periods of limitation laid down  in sub-s. (1) for initiating proceedings and in sub-s. (3)  for making an order of assessment or re-assessment were  subject to the exception mentioned in the second proviso.  I may now read that proviso-               "Provided  further that nothing  contained  in               this  section limiting the time  within  which               any action may be taken or any order,  assess-               ment or re-assessment may be made, shall 40

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             apply to a re-assessment 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 33-B, section               66 or section 66A." I have stated earlier that the second proviso as amended was inserted  by  the Income-tax (Amendment) Act, 1953  (XXV  of 1953), with effect from April 1, 1952. Now,  I proceed to discuss the first question as to  whether this proviso applies in the present case.  The question  has two  facets  : (1) whether the proviso  is  constitutionally valid and (2) if it is constitutionally valid, does it apply to a case where the time limit fixed by sub-s. (1) of s.  34 had  expired  some time before April 1, 1952,  the  date  on which  the  proviso came into effect ?  With regard  to  the first  facet, Chagla, C.J., has pointed out, rightly  in  my opinion,  that the persons with regard to whom a finding  or direction  is  given  and persons with  regard  to  whom  no finding  or  direction is given belong really  to  the  same category, namely, the category of persons who are liable  to pay tax and have failed to pay it for one reason or another. Admittedly,  persons who are liable to pay tax and have  not paid  it could not be proceeded against after the period  of limitation,  unless  a finding or direction with  regard  to them  was given by some tribunal under the various  sections mentioned  in  the  proviso;  therefore  out  of  the  large category of people who were liable to pay tax but failed  to pay  it,  a  certain number is selected for  action  by  the proviso  and with regard to that small number the  right  of limitation  given to them is taken away.  The real  question is,  is there any rational basis for distinguishing  between persons who are liable to pay tax and have failed to pay  it and with 41 regard to whom a finding or direction is given, and  persons who are liable to pay tax and have failed to pay it and with regard  to whom no finding or direction is given.  I  am  in agreement  with  the  view expressed by  the  learned  Chief justice  that  no rational basis has been made out  for  the distinction  between the two classes of people  referred  to above, who really fall in the same category and with  regard to  whom  there  was  no  difficulty  in  having  a  uniform provision  of law.  I am further in agreement with the  view of the learned Chief justice that the principle laid down by this  court  in Suraj Mall Mohta & Co.  v.  A.V.  Visvanatha Sastri and another (1) applies.  In that case sub-s. (4)  of s.  5 of the Taxation on Income  (Investigation  Commission) Act,  was challenged and this Court pointed out  that  there was   nothing   uncommon   either  in   properties   or   in characteristics  between  persons  who  were  discovered  as evaders  of  income-tax during  an  investigation  conducted under s. 5 (1) and those who were discovered by the  Income- tax Officer to have evaded payment of income-tax. Both these kinds  of persons really belonged to the same  category  and therefore required equal treatment.  This Court pointed  out that s. 34 of the Indian Income-tax Act and sub-s. (4) of s. 5  of  the impugned Act dealt with persons who  had  similar characteristics  and  properties and therefore  a  different treatment  of some out of the same class offended the  equal protection  clause embodied in Art. 14 of the  Constitution. It seems to me that the position is the same here.   Whether persons  who evade tax are discovered by means of a  finding given  by  a tribunal or they are discovered  by  any  other

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method,  they  really  belong  to  the  same  category   and therefore  require equal treatment.  The second  proviso  to sub-s.  (3)  of s. 34 which came into effect from  April  1, 1952, patently introduced an unequal treatment in respect of some  out  of  the  same  class  of  persons.   Those  whose liability  to pay tax was discovered by one method could  be proceeded against at any time and (1)  [1955] 1 S.C.R. 448. 42 no limitation would apply in their case, and in the case  of others the limitation laid down by sub-s. (1) of s. 34 would apply.  This in my opinion is unequal treatment which is not based on any rational ground.  Desai, J., put the matter  on a  somewhat  narrower  ground.   He  held  that  so  far  as assessees  were concerned, there might be a rational  ground for  distinction because the appeal proceedings  etc.  might take  a  long  time and the assessee being a  party  to  the appeal   could  not  complain  of  such  delay,   therefore, assessees  did  not occupy the same position  as  strangers. But  the  learned  judge field that there  was  no  rational distinction so far as strangers were concerned and there was no reason why they should be deprived of the benefit of  the time limit prescribed by sub.s. (1).  He therefore held that the  proviso,  so  far as it  affected  persons  other  than assessees  not parties to the proceedings enumerated in  it, must  be  held to be ultra vires the legislature.   Even  on this  narrow ground it seems to me that the respondents  are entitled  to  succeed.   The  finding  which  the  Appellate Tribunal  gave  in its consolidated order dated  August  14, 1951,  was a finding given in the appeal filed by  Vasantsen as  heir  and  legal representative of his  father  for  the assessment year 1942-43.  In that appeal the firm Purshottam Laxmidas  was not even a party, though  Purshottam  Laxmidas was  a party to certain other appeals before  the  Appellate Tribunal.   I have some difficulty in appreciating  how  the firm  Purshottam  Laxmidas  can be treated  as  an  assessee within the meaning of the second proviso to sub-s. (3) of s. 34 for the assessment year 1942-1943.  If the firm cannot be so treated, then even on the narrow ground stated by  Desai, J.,  the  proviso  would  be  of  no  help  to  the  present appellants. I  now  take up the second facet of the same  question.   On this  aspect  of  the case both  the  learned  single  judge (Desai,J.)  and  the  appellate court (Chagla,  c.  J.,  and Tendolkar, J.) were agreed.  The 43 relevant assessment year was 1942-1943 and it ended on March 31,1943.   The period of four years therefrom would  end  on March  31,1947, and the period of eight years would  end  on March  31,1951.  Now the second proviso to sub-s.  (3)  came into effect, as I have stated earlier, on April 1, 1952.  In other words, the time limit fixed by sub-s. (i) had  expired some  time  before  the amended  second  proviso  came  into effect.   Desai,  J., has rightly pointed out that it  is  a firmly  established principle of income-tax law that once  a final  assessment  is  arrived  at  and  the  assessment  is complete, it cannot be re-opened except in the circumstances detailed  in  ss.34 and 35 of the Act and  within  the  time limited by those sections.  Is there anything in the proviso in  question  which  would give it  a  retrospective  effect beyond  April  1, 1952?  In my opinion there is  none.,  The second proviso came into force on April 1, 1952, and  before that date the period of eight years from March 31, 1943, had already  expired.  The legislation which provided that  from April  1, 1952, there would be no limitation in  respect  of

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certain  cases could not revive a remedy which  was  already lost  to  the Income-tax Officer.  It seems to me  that  the proposition of law is settled beyond any doubt that although limitation  is a procedural law and although it is  open  to the  legislature  to  extend the period  of  limitation,  an important  right accrues to a party when the remedy  against him  is  barred  by the existing law of  limitation,  and  a vested right cannot be affected except by express terms used by  the  statute  or  the  clearest  implication   following therefrom.  Some reliance was placed on the decision of  the Calcutta  High  Court  in  Income-tax  Officer  v.  Calcutta Discount Co., Ltd., (1) which later came to this Court on  a different  point.  I am of the opinion that the decision  is of  no help to the present appellants.  It was said in  that decision that the plain effect of the substitution of new s. 34 with effect from March 30, 1948, was that from that  date the Income-tax Act was to be read as including the (1)  [1953] 23 I.T.R. 471. 44 new  section  as a part thereof, the further effect  of  the express  language  of the section was that so far  as  cases coming  within  cl. (a) of sub-s. (1)  were  concerned,  all assessment  years ending within eight years from  March  30, 1948,  and from subsequent dates, were within  its  purview. the  learned Chief justice of the Calcutta High  Court  took particular care in that decision to point out that what  was not  within  the purview of the section  was  an  assessment which  ended-before eight years from March 30,  1948.   That decision  therefore does not in any way assist  the  present appellants. On behalf of the appellants, some distinction was sought  to be  drawn between a right and the remedy thereof and it  was contended  that the liability of an assessee to pay the  tax owing to the State was always there from the commencement of the  assessment year and s. 34 of the Act dealt merely  with the  machinery  of assessment.  It was argued  that  a  case under  s.  34 was not analogous to a time  barred  claim  to recover money from one individual by another.  In my opinion such a distinction is entirely out of place so far as s.  34 is concerned.  The learned Chief justice has rightly pointed out that under s. 34 the Income-tax Officer has the right to issue a notice within the period of limitation fixed by sub- s. (1); in another sense, it may be said that the remedy  of the  Income-tax  Officer to bring to tax escaped  income  is available  to him under s. 34 provided he avails himself  of the remedy within the period of limitation.  No  distinction can  be  drawn, so far as s. 34 is  concerned,  between  the right of the Income-tax Officer and the remedy available  to him.   If the remedy is lost, the right is also lost and  if the right is lost, much more so is the remedy. Therefore, I am clearly of the view that on April 30,  1954, the  Income-tax  Officer had no jurisdiction  to  issue  the notice which he did on the 45 firm Purshottam Laxmidas under the second proviso to  sub-s. (3) of s. 34, because the time limit fixed by sub-s. (1)  of s.  34  had expired long before the said proviso  came  into effect  and  the  proviso does not in express  terms  or  by necessary  implication revive a remedy which had  been  lost before April 1, 1952. This  disposes  of the first question argued  before  us.  I proceed now to the second question, namely, the effect of s. 31  of the Indian Income-tax (Amendment) Act, 1953  (XXV  of 1953). I may first set out the section :               "For  the  removal  of  doubts  it  is  hereby

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             declared  that the provisions of  sub-sections               (1),  (2)  and  (3)  of  section  34  of   the               principal Act shall apply and shall be  deemed               always  to have applied to any  assessment  or               reassessment  for any year ending  before  the               first  day of April, 1948, in any  case  where               proceedings  in respect of such assessment  or               re-assessment  were commenced under  the  said               sub-sections  after the 8th day of  September,               1948 and any notice issued in accordance  with               sub-section (1) or any assessment completed in               pursuance  of  such  notice  within  the  time               specified  in sub-section (3), whether  before               or  after  the  commencement  of  the   Indian               Income-tax   (Amendment)  Act,  1953,   shall,               notwithstanding  any judgment or order of  any               court,   Appellate  Tribunal   or   Income-tax               authority  to the contrary, be deemed to  have               been validly issued or completed, as the  case               may be, and no such notice, assessment or  re-               assessment shall be called in question on  the               ground  merely that the provisions of  section               34  did  not  apply or  purport  to  apply  in               respect of an assessment or re-assessment  for               any year prior to the 1st day of April, 1948." 46 It  will be noticed that the section is in two parts  :  the first  part is declaratory of the law and says that  sub-ss. (1),  (2) and (3) of s. 34 shall apply and shall  be  deemed always  to have applied to any assessment  or  re-assessment for any year ending before April 1, 1948, in any case  where proceedings   in  respect  of  such  assessment  etc.   were commenced  under  the said sub-sections after  September  8, 1948, and any notice issued in accordance with sub.s. (1) or any assessment completed in pursuance of such notice  within the  time specified in sub-s. (3), whether before  or  after the  commencement  of  the Amending Act of  1953,  shall  be deemed  to  have been validly issued etc.; the  second  part says  inter  alia  that no such notice shall  be  called  in question  on the ground merely that the provisions of s.  34 did not apply or    purport  to  apply  in  respect  of   an assessment prior to April  1,  1948.  It should  be  noticed here that the  Amending  Act  of 1948 (Act XLVIII  of  1948) completely recast s. 34; and sub-s. (2) of s. 1 of that  Act which came into force on September 8, 1948 provided that ss. 3  to 12 of the Amending Act should be deemed to  have  come into  force on March 30, 1948.  The amendment of s.  34  was made  by  s.  8 of the Amending Act ; therefore,  s.  34  as amended by the Amending Act of 1948 operated retrospectively from  March 30, 1948.  In the Calcutta Discount Co. Ltd.  v. Income-tax  Officer (1), Bose, J., held that s. 34  although described as a machinery section did not relate to procedure pure  and  simple but affected the protection  given  to  an assessee   and,  therefore,  the  amended  section  had   no application to the assessments for 1942-1943, 1943-1944  and 1944-1945.   This view of Bose.J., was not accepted  by  the Appellate  Court in Income-tax Officer v. Calcutta  Discount Co.  Ltd.  (2),  where  the learned  Chief  justice  of  the Calcutta  High  Court rightly pointed out that s. 34  as  it spoke  from  March 30, 1948, took in  all  assessment  years ending within eight years from March 30, 1948, and subsquent dates, but (1) [1952] 21 I.T.R. 579. (2) [1953] 23 I.T.R. 471. 47

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did not take in an assessment year which ended before  eight years  from March 30, 1948.  It is worthy of note  that  the Bill  which became Act XXV of 1953 was introduced after  the judgment of Bose, J., and before the judgment of the learned Chief  Justice. There were really two separate and  distinct questions  one was whether s. 34 as amended in 1948  applied to  assessment  years  prior to  1948-1919  and  the  second question was whether, on the footing that amended s. 34  did apply  to  assessment years prior to 1948-1949,  any  action could be taken under the amended section in respect of those assessments which had become time-barred before the  amended section  came  into effect.  Bose, J.,  answered  the  first question in the negative and necessarily the second question also  in the negative.  The learned Chief  Justice  answered the  first  question in the affirmative, but took  pains  to point  out that an assessment made before eight  years  from March 30, 1948, was not within the purview of s. 34. I  am of the opinion that in its true scope and effect.,  s. 31  of the Amending Act of 1953 puts beyond any  doubt  that the  view expressed by the learned Chief justice in  Income- tax  Officer  v.  Calcutta Discount Co.  Ltd.  (1),  is  the correct  view and amended s. 34 applies to assessment  years prior  to 1948-1949, but it does not say that an  assessment which had become final and in respect of which  reassessment proceedings  had  become  time-barred  before  the   amended section came into force could be re-opened.  This appears to me to be clear from the first part of s. 31.  That part says that  sub-ss. (1), (2) and (3) of s. 34 shall apply  and  be deemed always to have applied to any assessment etc. for any year  ending  before  April  1,  1948  in  any  case   where proceedings   in  respect  of  such  assessment  etc.   were commenced  under  the said sub-sections after  September  8, 1948,  and any notice issued in accordance with  sub-s.  (1) shall be deemed to be valid (1)  [1953] 23 I.T.R. 471. 48 etc.   The  section  does  not  say  that  the  periods   of limitation  laid down in sub-ss. (1) and (3) are being  done away  with ; on the contrary, the first part of the  section says  that  the proceedings must have been  commenced  after September  8,  1948 (the date on which the Amending  Act  of 1948  came into force) under the said sub-sections  and  the notice must have been issued in accordance with sub-s.  (1). The  Income-tax Officer can commence proceedings  under  the said sub-sections or issue a notice in accordance with  sub- s.  (1)  only when he obeys the injunction as to  time  laid down  therein;  then only he can be said to  have  commenced proceedings  or issued a notice in accordance with the  sub- sections.   If  he has done that and  commenced  proceedings after September 8, 1948, then the second part of the section says  that the notice or the assessment shall not be  called in  question on the ground merely that the provisions of  s. 34 did not apply or purport to apply in respect of any  year prior  to  April  1, 1948.  These lines  underlined  in  the second part of the section also bring out its true scope and effect.  If there has been compliance with provisions of the sub-sections  including the time limits fixed therein,  then the  notice  issued  or assessment made  is  not  liable  to challenge  on  the mere ground that amended s. 34  does  not apply  in  respect of a year prior to 1948-1949.   In  other words,  s.  31  of the Amending Act of  1953  nullifies  the effect of the decision of Bose, J. in Calcutta Discount  Co. Ltd.  v.  Income- tax Officer, (1) and gives effect  to  the decision  of the learned Chief Justice of the Calcutta  High Court.   The  section  does  not  abrogate  the  periods  of

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limitation laid down in the relevant sub-sections of s.  34; if it did, it would be in conflict with s. 34 and the ground taken would be such conflict and not merely the ground  that the  provisions of s. 34 did not apply to any year prior  to 1948-1949. My conclusion, therefore, is that s. 31 of the Amending  Act of 1953 does not validate the notice (1)  [1952] 21 I.T.R. 579. 49 issued  in  the present case--a notice issued on  April  30, 1954 long before which date the assessment had become  final and in respect of which reassessment proceedings had  become time-barred.   The short answer to the argument based on  s. 31 is that the notice in the present case was not issued  in accordance  with sub-s. (1) of s. 34, and the first part  of s. 31 requires that the notice must be so issued before  the second part thereof can give any protection to it. I  now  proceed to consider the Amending Act of  1959.   The Indian Income-tax (Amendment) Act, 1959 (1 of 1959) received the assent of the President on March 12, 1959.  The relevant provisions with which we arc concerned are contained in  ss. 2 and 4 of the amending Act.  By s. 2 of the amending Act, a new sub-section, namely, sub-s. (4) was inserted in s. 34. This sub-section said :               "S. 34 (4).  A notice under clause (a) of sub-               section (1) may be issued at any time notwith-               standing 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." S. 4 of the amending Act 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-sec-               tion (1) of section 34 of the principal Act at               any  time before the commencement of this  Act               and no assessment, re-assessment or settlement               made or other proceedings taken in consequence               of such notice shall be called in question  in               any court, tribunal or other authority  merely               on the 50               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." The main point argued before us on behalf of the  appellants is  that s. 4 of the amending Act of 1959 saves  the  notice which  the Income-tax Officer issued in the present case  on April  30,  1954.  I may here state one  initial  difficulty which  faces  the appellants.  S. 4 of the amending  Act  of 1959  refers to a notice issued under cl. (a) of sub-s.  (1) of  s.  34; therefore, in order to get the  benefit  of  the section the appellants must establish that the notice  dated April  80, 1954 was a notice issued under cl. (a) of  sub-s. (1) of s. 34.  In an earlier part of this judgment I had set out  in  full the notice which the  Income-tax  Officer  had issued  on April 30, 1954, That notice said inter alia  that the Income-tax Officer had reason to believe that the income

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of the firm Purshottam Laxmidas assessable to income-tax for the  year ending March 31, 1943 had been under-assessed  and therefore  the Income-tax Officer proposed to re-assess  the income.   It  is at least doubtful that the notice,  if  one were  to  go by the words used in the  first  part  thereof, would make it a notice under cl. (a) of sub-s. (1) of s.  34 unless  the satisfaction of the Commissioner referred to  in the  last part makes it one.  I have said earlier  that  cl. (a)  of sub-s. (1) of s. 34 related to those cases in  which there was an omission or failure on the part of the assessee to  make a return of his income under s. 22 for any year  or to disclose fully and truly all material facts necessary for his  assessment for that year.  When the  Calcutta  Discount Company’s  case  (1) came to us, we had explained  what  was meant by non-disclosure of (1)  [1961] 2 S.C.R, 241. 51 material  facts  and  pointed out  the  distinction  between primary  facts  and  inferences  therefrom.  (see   Calcutta Discount  Company Limited v. Income-tax  Officer,  Companies District, (1)).  There is nothing in the record to show that in the present case there was an omission or failure on  the part of the assessee to make a return of his income under s. 22  for  the year 1942-1943; nor is there any  avertment  on behalf  of  the  appellants  that  the  assessee  failed  to disclose  fully and truly all material facts  necessary  for his  assessment for that year in the sense explained  above. I  have  said  earlier that there  was  some  correspondence between  the  Income-tax Officer concerned and the  firm  of Purshottam  Laxmidas  with regard to the  notice  issued  on April 30, 1954.  The firm wanted to know the reason why  the notice  had  been issued.  In reply to the letter  from  the firm, the Income-tax Officer said (see Ex.  C) :               "The  income  of  the  concern  of   Vasantsen               Dwarkadas was originally included in the hands               of Dwarkadas Vassonji; Dwarkadas Vassonji  was               also  a  partner  in the  registered  firm  of               Messrs  Purshottam  Laxmidas.   The  Appellate               Tribunal by its consolidated order dated 14-8-               1951 (I.  T. Nos. 7836 to 7851 of 1951/52  and               E.P.T.A. Nos. 13 to 17 of 1950/51) has come to               the  finding  that the  concern  of  Vasantsen               Dwarkadas  is the branch of Messrs  Purshottam               Laxmidas.    The  income  of  the   firm   has               therefore to be reassessed." The  aforesaid  reply does not make out any  case  that  the notice was issued under cl. (a) of sub-s. (1) of s. 34. When we allowed the appellants to file a supplementary  statement of  the case urging new points, we also granted time to  the respondents  to file a supplementary statement of  case,  if any, on their behalf.  The respondents filed a supplementary statement of their case and said therein that the notice (1)  [1961] 2 S.C.R. 241. 52 dated  April 30, 1954 was not and could not be issued  under cl.  (a)  of sub-s. (1) of s. 31 but was and could  only  be issued under cl. (b) or sub-s. (1) of s. 34.  Therefore,  it seems to me that the appellants have not established without any doubt that the notice in this case was issued under  cl. (a)  of  sub-s.  (1)  of  s. 34, so  as  to  give  them  the protection  of s. 4 of the Amending Act of 1959.  The  point taken  is  indeed  a  point  of  law,  namely,  whether  the appellants  are  entitled  to the benefit of  s.  4  of  the Amending Act of 1959.  But the applicability of s. 4 depends on certain facts and those facts must first be found.  It is

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true  that  in  the judgment of the High Court  there  is  a reference  to eight years’ period of limitation but none  of the  parties  raised any question as to whether  the  notice dated April 30, 1954 was issued under cl. (a) or cl. (b)  of sub-s.  (1) of s. 34.  The parties joined issue only on  the question  whether the second proviso to sub-s. (3) of s.  34 applied  or not.  The necessary facts were not  investigated and  no  finding  was given as to whether  the  notice  came within cl. (a) or cl. (b) of sub-s. (1) of s. 34. I  am of the opinion that this is enough to dispose  of  the claim  put forward by the appellants that the  notice  dated April  30,  1954, is saved by s. 4 of the  Amending  Act  of 1959.   No  foundation  on facts having been  laid  for  the claim, it must be rejected. The  matter was however argued before us at great length  on the  supposition that the notice dated April 30, 1954 was  a notice issued under cl. (a) of sub-s. (1) of s. 34. 1 am  of the opinion that even on that supposition the appellants are not entitled to succeed.  It is manifest that sub-s. (4)  of s.  34  does not help the appellants.  That  sub-section  is clearly  prospective  and is intended  to  authorise  action after  the coming into force of the 1959  amendment;  there- fore, sub-s. (4) of s. 34 cannot validate a notice issued in 1954.  Now the question is, what about 53 s.  4  of  the  Amending Act of  1959?   It  has  been  very strenuously  argued before us that section by reason of  the unambiguous  language used therein saves the notice.  It  is pointed out that the section in its first part refers  inter alia to a notice issued under cl. (a) of sub-s. (1) of s. 34 at  any time before the commencement of the 1959 Act and  in its second part says that no such notice shall be called  in question in any court etc. merely on the ground that at  the time  the  notice  was issued, the time  within  which  such notice  should  have  been issued under s. 34  as  in  force before  its amendment by s. 18 of the Finance Act, 1956  had expired.   The argument is that the language of the  section is such that it clearly saves the notice issued on April 30, 1954  because  (1) it fulfils the requirement of  the  first part  of  the section in as much as the  notice  was  issued before  the commencement of the 1959 Act and (2) the  second part of the section says that the notice cannot be called in question  on the ground that it was issued after the  expiry of  the  time mentioned in sub-s. (1) of s. 34 as  it  stood before the amendment made in 1956. At  first  sight the argument appears  almost  irresistible. But on a careful consideration I have come to the conclusion that  it is not correct.  It is necessary here to  refer  to the  circumstances under which the amending Act of 1959  was enacted.   Prior to the amendment of sub-s. (1) of s. 34  by the  Finance  Act, 1956, in cases falling under  cl.  (a)  a notice  had to be served within eight years from the end  of the relevant assessment year. This time limit was removed by s. 18 of the Finance Act, 1956.  In Debi Dutta v. T.  Bellan (1),  the  Calcutta High Court held that  action  under  the amended section could not be taken if prior to the amendment coming  into force (that is, April 1, 1956) the  period  for serving  the  notice  bad already  expired.   This  was  the difficulty  which the Legislature had to meet and it  wanted to (1)  A.I.R. 1959 Cal. 567. 54 supersede  the view expressed by the Calcutta High  Court.It is indeed true that the Statement of Objects and Reasons for introducing a particular piece of  legislation   cannot   be

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used  for  interpreting the legislation if  the  words  used therein are clear enough.  But the Statement of Objects  and Reasons  can be referred to for the purpose of  ascertaining the  circumstances which led to the legislation in order  to find  out what was the mischief which the legislation  aimed at.  The decision of the Calcutta High Court to which I have earlier made a reference was adverted to in the Statement of Objects  and Reasons.  It seems to me that sub-s. (4) of  s. 34  was  enacted  to supersede the  view  expressed  in  the Calcutta  decision aforesaid, so that after the coming  into force of sub.s. (4) in 1959 a notice under cl. (a) of sub-s. (1) could be issued at any time notwithstanding that at  the time  of the issue of the notice the period of  eight  years specified  in the sub-section before its amendment by s.  18 of the Finance Act, 1956 had expired.  It further appears to me  that both sub-s. (4) of s. 34 and s. 4 of  the  Amending Act  of 1959 are meant to deal with only those  cases  where action  is taken under s. 34 as amended in 1956,  but  where the  eight  years’ time limit had already  expired  and  the original  assessment (if any) had become final prior to  the amendment of s. 34 in 1956.  Whereas sub-s. (4) of s. 34  is intended to authorise action in such cases after the  coming into force of the Amending Act of 1959, s. 4 is intended  to save  and validate action taken in such cases  between  1956 when  s.  34 was amended by the Finance Act, 1956  and  1959 when  the Amending Act was passed.  In my view, s. 4 of  the Amending Act of 1959 has no bearing on a notice issued under s. 34 prior to 1956. 1 do not accept as correct the decision of the Bombay High Court in Onkarmal Meghraj v. Commissioner of Income-tax, Bombay-1 (1).  That decision implies that  s. 4 of the Amending Act of 1959 in effect abrogates and super- sedes the statutory time limits for action under (1)  [1960] 38 I.T.R. 369. 55 s. 34 (1) (a) in all the past years ever since s. 34 (1) (a) was  put  on the Statute Book.  It seems to me that  on  the contrary,  the  provisions  of s. 34 (4) and  s.  4  of  the Amending Act clearly indicate that the only effect of s.  34 (4)  is to authorise action, and the only effect of s. 4  of the  Amending  Act  is to validate action, under  s.  34  as amended  in  1956  in cases where action  under  s.  34  has already  become time barred prior to its amendment in  1956. They  have  no bearing on notices issued or  on  assessments made  under  s. 34 prior to 1956.  If the intention  was  to abrogate  altogether all provisions regarding limitation  in s. 34 right from 1922, then s. 4 would have been differently worded and would not have said that it saved notices etc. in certain  cases  only;  on  the view  canvassed  for  by  the department,  s.  4 would save notices issued  in  all  cases before  1959  irrespective of any  question  of  limitation. Moreover,  if the view taken of s. 4 of the Amending Act  of 1959 is that it abrogates and supersedes all past provisions regarding limitation, then the section would be in  conflict with  the  provisions  of  s.  34.   On  the  principle   of harmonious construction the attempt should be to avoid  such conflict rather than create it.  The last part of s. 4 shows in my opinion its true intent, namely that what is  intended is to validate post-1956 action, that is, action taken under s.  34  as  amended by s. 18 of the Finance  Act,  1956.   I cannot read s. 4 as abrogating all periods of limitation and as validating notices issued prior to 1956, even though such a notice was not property issued under cl. (a) of sub-s. (1) of  s. 34.  If the intention was that any and  every  notice issued  under  cl. (a) of sub-s. (1) of s. 34  at  any  time before the commencement of the 1959 Act could be  validated,

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then the section should not have said-               "notice issued under clause (a) of sub-s.  (1)               of s. 34."               The very fact that the section talks of a 56 notice  issued  under cl. (a) of sub-S. (1) of s.  34  means that it is a notice issued in compliance with the provisions of  cl. (a) of sub-s. (1) of s. 34 as amended in  1956  when the  time limit was removed.  When a notice is issued  under cl. (a) of sub-s. (1) of s. 34 as amended in 1956; it cannot be  called  in  question merely on the ground  such  as  was upheld by the Calcutta High Court is Debi Dutta v. T. Bellan (1) that the time limit had already expired before the issue of the notice; this seems to me to be the true meaning of s. 4  when  the first of the section which talks  of  a  notice issued  under cl. (a) of sub-s. (1) of s. 34  is  contrasted with the second part which says that such a notice shall not be called in question on the ground that the time limit  had already  expired  before the date on which  the  notice  was issued.  If the intention was to abrogate the time limit for all notices issued before 1959, there was no sense in saying that the notice should issue under cl. (a) of sub-s. (1)  of s.  34  and  at  the same time it would  not  be  called  in question  on  the  ground that the time  limit  had  expired before  the date of its issue; the section then  would  have simply  said that notwithstanding any time limit in cl.  (a) of sub-s. (1) of s. 34, all notices issued before 1959 would be valid.  I do not think s. 4 of the Amending Act 1959  was intended  to abrogate all periods of limitation  for  action under cl. (a) of sub-s. (1) of s. 34 for all past years. The time limit of eight years was removed in 1956 in respect of  those cases where the amount was not likely to  be  less than  Rs.  1,00,000/-.  The present case is  one  where  the amount  is  less than Rs. 1,00,000/- and the  limitation  of eight  years applied in 1954.  All that s. 4 states is  that if  a notice has been issued under cl. (a) of sub-s. (1)  of s.  34 at any time before the commencement of the 1959  Act, the  notice  shall not be called in question merely  on  the ground that at the time it was issued (1)  A.I.R. 1955 Cal. 567. 57 the time limit as in force before the amendment made in 1956 had  expired,  in other words, s. 4 validates  action  taken between  1956  when  s. 34 was amended  and  1959  when  the Amending Act was passed.  It does not affect notices  issued prior   to  1956  nor  does  it  abrogate  all  periods   of limitation. For all these reasons I have come to the same conclusion  as my  learned  brother  Kapur, J., that  the  appeal  must  be dismissed with costs. KAPUR, J. -This is an appeal against the judgment and  order of  the High Court of Bombay confirming the order passed  by S.T.  Desai,.   J., in Writ Petition No. 266 of  1954  under Art. 226 of the Constitution whereby Desai,J., issued a writ of  prohibition restraining the appellants from  taking  any further  steps in pursuance of the notice dated  April,  30, 1954, issued under s. 34 of the Income-tax Act,  hereinafter called  "the Act" or from assessing or reassessing the  firm known  as Purshottam Laxmidas in respect of  the  assessment year  1942-43.   The Appellant before us is  the  Income-tax Officer and the respondents are the firm and partners of the firm above noted. Dwarkadas Vussanji and Parmanand Odhavji carried on business in partnership in the name and style of Purshottam  Laxmidas from  October 28, 1935, till April 1, 1946,  when  Dwarkadas

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Vussenji  died.  Thereafter Vasantsen Dwarkadas, the son  of Dwarkadas  Vussonji, and Parmanand Odhavji respondent No.  3 continued  the business under the same name i.e.  Purshottam Laxmidas.  That firm was registered under the Indian Income- tax Act. On  January  28,  1941,  another  firm  under  the  name  of Vasantsen Dwarkadas was started, its partners were Vasantsen Dwarkadas  respondent  No. 1, Narandas  Shivji  and  Nanalal Odhavji.This 58 firm was dissolved on October 24, 1946.  For the  assessment year  1942-43  firm Vasantsen Dwarkadas  filed  a  voluntary return of income and also applied for registration under  s. 26  of the Act.  The registration was refused on the  ground that the firm was not a genuine firm but really belonged  to Dwarkadas  Vussonji,  the  principal  partner  in  the  firm Purshottam Laxmidas.The Income-tax Officer added the  income of   the firm Vasantsen Dwarkadas for the assessment   year 1942-43  to the individual income of Dwarkadas Vussonji,  in the  subsequent  assessment  year  i.e.  1943-44.   In   the subsequent  years also the firm Vasantsen Dwarkadas  applied for registration but registration was refused on the  ground that it was not a genuine firm.  Appeals were taken in usual course   to  the  Income-tax  Appellate  Tribunal  by   firm Vasantsen Dwarkadas both against the quantum of its assessed income  and against the refusal of registration.   This  was for  the  years  of assessment 1942-43  to  1948-49.   These appeals  filed  by firm Vasantsen Dwarkadas and  the  appeal filed  by Vasantsen Dwarkadas as representing the estate  of his  father Dwarkadas Vussonji and the appeals filed by  the firm Purshottam Laxmidas in regard to the Excess Profits Tax were  all  heard  together and  decided  by  the  Income-tax Appellate Tribunal by its order made on August 14, 1951.  In that order the Income-tax Appellate Tribunal gave a  finding that  Dwarkadas Vussonji was not the sole proprietor of  the business  of firm Vasantsen Dwarkadas but that the  business of  that firm belonged to the firm Purshottam Laxmidas.   At the  instance  of the Commissioner of Income  the  Appellate Tribunal  stated a case to the High Court and  the  question referred was answered in favour of the assessee i.e. On April 30, 1954, the Income-tax Officer issued a notice to the  firm  Purshottam Laxmidas under s, 34 of  the  Act  the relevant portion of which 59 was in the following terms:-               "Whereas  I have reason to believe  that  your               income  assessable to income tax for the  year               ending 31st March 1943 has been under-assessed               I therefore, propose to reassess to the income               allowance that has been under-assessed." It  is  the validity of this notice which has to  be  deter- mined. As the decision of the case depends upon the  interpretation of  the various legislative changes made in s. 34 it may  be convenient  at  this  stage  to  mention  those   amendments relating  to the periods during which action could be  taken by  the  Income-tax Officer in regard  to  escaped  incomes. Under  s.  34(1) of the Act as it stood in 1939,  after  the Income-tax  Amendment Act, 1939, Act 7 of 1939,  hereinafter referred  to as "the Amending Act of 1939", the  period  for taking  action  was  eight years for cases  of  omission  or failure  on  the part of the assessee  to  furnish  accurate particulars  and four years in any other case of  escapement of  income-tax.   This section was amended by s.  8  of  the Income-tax and Business Profits Tax (Amendment) Act, Act  48

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of  1948, hereinafter referred to as "’the Amending  Act  of 1948".  The period in the two cases still remained the  same but  certain  safeguards  in favour of  the  assessees  were provided.  A further amendment was made in s. 34, this  time in  the second proviso to sub-s. (3) of s. 34 by  Income-tax Amendment  Act, 1953 (Act 25 of 1953), hereinafter  referred to  as the Amending Act 1953." That Act also made  provision for saving of notices and assessments in certain cases.   By s.  18  of  the  Finance Act of 1956,  s.  34(1)  was  again amended.   By  Income tax (Amendment) Act, 1959  (Act  9  of 1959)  hereinafter referred to as the Amending Act of  1959" s.  34 was further amended, this time by addition of  sub-s. (4) to that section and provision 60 was  also  made for the validation of  certain  notices  and assessment in certain cases.  These various changes will  be discussed in detail at appropriate places. The  Amending  Act  of  1953  received  the  assent  of  the President   on   May   24,  1953,  but   came   into   force retrospectively  as  from April 1, 1952.  By  that  Act  the second proviso to s. 34(3) of the Act was amended. A  notice under s. 34(1)(a) was issued to respondent  No.  2 which has been set out above.  Thereupon Vasantsen Dwarkadas filed  a petition under Art. 226 of the Constitution in  the Bombay High Court being Misc.  Application No. 266-X of 1954 challenging  its legality.  S. T. Desai, J., who  heard  the petition in the first instance held that the Amending Act of 1953  which became operative as from April 1, 1952,  had  no retrospective effect so as to enable the Income-tax  Officer to reopen the assessment of the firm Purshottam Laxmidas for the  assessment  year 1942-43 which had  become  time-barred before April 1, 1952, and therefore the Income-tax Officer’s action was barred and without jurisdiction; that the  second proviso  to  s. 34(3) of the Act " or so far as  it  affects persons other than assessees not parties to the proceedings" was  ultra vires of the Constitution being in violation  of’ Art.  14  of  the  Constitution;  that  on  the  facts   and circumstances of the case the present respondents could  not be  regarded  as strangers to the proceedings in  which  the findings  were  given  by the Tribunal.   The  Appeal  Court confirmed  the decision of Desai, J., and further held  that the  firm  Purshottam  Laxmidas against  whom  the  impugned action  was  taken  was a stranger to the  appeal  filed  by Vasantsen  Dwarkadas.  Against this judgment and  order  the Income-tax Officer has brought the present appeal. The  appellant in this court filed a supplemental  Statement of Case in which he sought  to challenge  61 the  correctness of the judgment of the High court on two additional grounds: (1) that s. 31 of the Amending     Act of 1953 had been overlooked and (2) that s.2 of the Amending Act  of  1959 had the effect of removing the  bar  of  eight years’ period in regard to notices under s. 34(1)(a) and  s. 4  of that Act (Amending Act of 1959) validated all  notices including the impugned notice.  The respondents filed  their supplemental Statement of Case on October 5, 1960. Before  taking  up the construction of ss. 2 and  4  of  the Amending  Act  of 1959, it will be helpful  to  examine  the circumstances in which the Amending Act was enacted.   After the  Amending Act of 1948 for the purposes of taking  action in  respect of escaped incomes a period of eight  years  was applicable  to all escaped incomes under s. 34(1)(a) of  the Act, the two conditions requisite for taking action under s. 34(1)(a)  being (1) notice within eight years of  assessment year  and (2) Income-tax Commissioner’s  previous  sanction.

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By s. 18 of the Finance Act of 1956 the words "eight  years" were  removed from sub-s. (1) of s. 34 and were inserted  in the  proviso  which  was substituted in  place  of  the  old proviso  to s. 34(1) which took effect from April  1,  1956. Then  came the Calcutta case Debi Dutta Moody v. T.  Bellan, (1), which held that notices which were time barred when the Amending Act of 1956 came into force remained time barred in spite  of the new enactment.  In that case the  notice  when issued  was  within time but when served it  was  barred  by time. The two provisions of the Amending Act of 1959 which have to be  construed  are ss. 2 and 4. By s.  2  anew  sub-section- sub.s. (4) was added to s. 34 of the Act.  It provides :-               "(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 (1)  A.I.R. 1959 Cal, 567, 62               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 that Act provides for saving and validation  of notices,  assessments etc., in certain cases.  The  relevant portion  of the section applicable to notices issued  tinder s. 34 (1) (a) of the Act is as follows :-               "No  notice issued under clause (a) of  sub-s.               (1) of s. 34 of the principal Act at any  time               before the commencement of this Act  shall  be               called in question in any court merely on  the               ground that at the time the notice was issued the               time within which such notice should have been               issued  ...... under that section as in  force               before  its amendment by cl. (a) of s.  18  of               the  Finance  Act,  1956  (18  of  1956)   had               expired." The  new proviso which was substituted in place of  the  old proviso to s. 34 (1) by s. 18 of the Finance Act, 1956,  may conveniently be given here.It reads as follows:--               "Provided  that the Income-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  eight  years   have               elapsed after the expiry of that year,  unless               the  income,  profits or gains  chargeable  to               income-tax which have 63               escaped assessment or have been under-assessed               or  assessed  at too 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  ending               before the 31st day 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

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             is satisfied on such reasons recorded that  it               is a fit case for the issue of such notice." The  appellant  contended that as a consequence of  the  new sub-section 4 of s. 34 of the Act (i.e. s. 2 of the Amending Act  of  1959)  the impugned notice became  a  valid  notice notwithstanding the fact that at the time of the issuing  of the notice the period of eight years specified in s. 34  (1) (a) before its amendment by s. 18 of the Finance Act of 1956 had  expired.   This contention is not  well-founded.   Sub- section  (4) is prospective and therefore operates  as  from March  12,  1959,  and it does  not  affect  notices  issued previous to that date.  That is the effect of the words  tea notice  under  cl. (a) of sub-s. (1) may be  issued  at  any time."  In the context these words refer to  notices  issued after the coming into force of the Amending Act of 1959  and not to notices already issued. The appellant next contended that the effect of s. 4 of  the Amending Act of 1959 is that it abrogates 64 and supersedes that statutory period prescribed for  notices under  a 34 (1) (a) for all past years whether  the  notices were issued before or after the amendment by the Finance Act of  1956.  This contention is also not  well-founded..  This section applies to notices under cl. (a) of sub-section  (1) s.  of 34.  The notice issued in the present case  does  not mention  the  clause under which the notice was  issued  and there is nothing to indicate that it was under cl. (a).  The respondents  in  their supplemental  Statement  specifically raised  the point that the notice was not under cl. (a)  and could  only be under cl. (b).  The language of that  section shows (1) that it applies to all notices under s. 34 (1) (a) issued at any time before the Amending Act, 1959, i.e. March 12,  1959, and(2) its effect is that notices  issued  before the  Amending  Act 1959 cannot be challenged merely  on  the ground  that at the time the notices were issued  they  were barred  under s. 34 (1) (a) of the Act as it was before  its amendment  by  s.  18 of the Finance  Act,  1956.   Now  the legislature  has  not  said that the notices  shall  not  be challenged on the ground that a period of eight years  under s.  34 (1) (a) as in force after the Amending Act  1948  had elapsed.   It has deliberately used the words "’as in  force before its amendment by the Finance Act 1956".  These  words indicate  that the legislature intended to give full  effect to  the amendment made by the Finance Act of 1956 in  s.  34 (1) (a) removing the bar of the lapse of eight years’ period in  cases  of certain incomes.  The notices to  which  s.  4 applies  and which are validated are those that were  issued between  the periods mentioned in that Act i.e.  before  the Amending  Act,  1959, and after the Finance  Act,  1956,  in spite  of the expiry of the eight years’ period  before  the amendment by the Finance Act, of 1956.  Thus whereas  sub-s. (4) of s. 34 applies to and authorises the taking of  action after the coming into force of the Amending Act of 1959,  s. 4 of that Act validates action taken after the amendment  by the Finance 65 Act of 1956.  It is not the effect, of s. 4 to abrogate  and supersede  the time limit provided by s. 34 (1) (a)  of  the Act in all the past years.  All it does is that it validates those notices which were issued within the two limits  above mentioned. In  this  connection  Mr. Palkhivala submitted  that  it  is necessary  to see why the Amending Act of 1959 was  enacted. According to his submission the reason for and the intention of  the enactment was to nullify the effect of the  judgment

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of  the Calcutta High Court in Debi Dutta Moody’s (1)  case. In  that  case a notice issued under s. 34 (1)  (a)  to  the assessee before April 1, 1956, when the Finance Act of  1956 became  operative was served a day later, i.e. April 2,  and it was contended in the High Court that the period of  eight years having by then elapsed the notice was invalid.  It was held that in construing the retrospective operation of the statute the nature of the right affected must beconsidered and   where  there  is  a  vested  right  an  amendment   is perspective so as not to affect a vested right ; that at the time  when the amendment by the Finance Act of  1956  became operative  the  right to proceed had already  become  barred under the Act of 1948 and that it could not be revived as  a result of the amendment of 1956 unless there was an  express provision  to  the  contrary.  It was  the  effect  of  that decision  which was sought to be nullified by  the  Amending Act of 1959.  In construing an enactment and determining its true  scope  it is permissible to have regard  to  all  such factors  as  can  legitimately  be  taken  into  account  to ascertain  the  intention  of the legislature  such  as  the history  of  the  Act, the reason which  led  to  its  being passed,  the mischief which had to be cured as well  as  the cure  as also the other provision; of the statute.  That  is the rule in Heydon’s (2) case which was accepted in R. M. D. Chamarbaugwalla  v.  The  Union of  India(3).   Taking  this principle into account it appears that the object (1) A.I.R. 1959 Cal. 567.  (2) (1584) 3 Co. Rep. 7a: 76 E.R. 637.                 (3) [1957] S.C.R. 930, 936. 66 of  the amendment was to validate certain notice  after  the amendment and after the lapse of eight years from the end of the  assessment year and also to nullify the effect  of  the Calcutta judgment above mentioned. Mr.  Rajagopal Sastri relied next on the amendment to s.  34 (3)  of the Act by the amending Act of 1953 which came  into effect  as  from April 1, 1952.  By s. 18 of  that  Act  the second  proviso to sub-s. (3) of s. 34 was  amended  whereby certain  changes were made in regard to the period  of  time for taking action in consequence of or to give effect to any finding or direction contained in an order under the various sections therein mentioned one of them being an order of the Income-tax Appellate Tribunal.  The proviso as amended reads as follows :-               "Provided  further that nothing  contained  in               this  section limiting the time  within  which               any action may be taken or any order,  assess-               ment  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 any person in consequence of or to               give  effect to any finding or direction  con-               tained  in an order under section 31,  section               33,  section 33A, section 33B, section  66  or               section 66 A". It  was contended that because action was taken against  the respondent  in  consequence of an order  of  the  Income-tax Appellate Tribunal there was no time limit and therefore the impugned  notice was not hit by the period of  eight  years. It  was  further argued that for the purpose  of  validating certain  notices and assessments, s. 31 of the Amending  Act of 1953 was enacted the relevant portion of which is as follows               "Validity of certain notices and asessments.               For  the  removal  of  doubts  it  is   hereby

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             declared 67               that  the provisions of sub-sections (1),  (2)               and (3)of section 34 of the principal Act (the               Indian Income-tax Act, (1922) shall apply  and               shall be deemed always to have applied to  any               assessment or reassessment for any year ending               before the 1st day of April 1948, in any  case               where   proceedings   in   respect   of   such               assessment  or  reassessment  were   commenced               under the said sub-sections after the 8th  day               of  September  1948 and any notice  issued  in               accordance          with           sub-section               (1)   ............   ......    ...............               whether  before or after the  commencement  of               the  Indian Income-tax (Amendment) Act,  1953,               shall,  notwithstanding any judgment or  order               of any Court, Appellate Tribunal or Income-tax                             authority  to the contrary, be deemed to  have               been validity issued ............  and no such               notice   shall  be called in question  on  the               ground  merely that the provisions of  section               34  did  not  apply or  purport  to  apply  in               respect  of an assessment or reassessment  for               any year prior to the 1st day of April 1948." This  section,  so  it was argued,  validated  the  impugned notice even though the period of limitation expired on March 31, 1951. I  shall first deal with the argument based on s. 31 of  the Amending Act of 1953.  By s. 8 of the Amending Act of 1948 a new  s.  34 (1) was substituted for the old s. 34  (1)  with effect from March 30, 1948.  Bose, J.. of the Calcutta  High Court  in  a  petition under Art. 226  of  the  Constitution reported as Calcutta Discount Co. v. Income-tax Officer (1), held  that a notice served under the substituted s.  34  (1) for  any assessment year prior to the coming into  force  of the  Amending  Act  of 1948 was invalid  as  the  Income-tax Officer had (1)  [1952] 21 I.T.R. 579. 68 no  jurisdiction  to proceed with the  reassessment  on  the ground that s. 34 (1) as amended in 1948 had no  application to  assessments for the years prior to 1948 even though  the period  of  eight years had not elapsed.  It was  also  held that   the   Amending  Act  of  1948  was   expressly   made retrospective  as  from March 30, 1948, it  had  no  further retrospectivity and therefore the notice issued under s.  34 (1) were without jurisdiction.  Against that judgment  which was  dated  March 26, 1952, an appeal was  taken  which  was decided  on  March 25, 1953, and is reported  as  Income-tax Officer, Companies District I, Calcutta v. Calcutta Discount Co. Ltd., (1).  But in the meanwhile i.e. the period between the two judgments a bill was introduced in 1952 to amend  s. 34 so as to nullify the effect of the judgment of Bose,  J., in the Calcutta case.  This resulted in the enactment of the Amending  Act  of  1953 which received  the  assent  of  the President  on  May  24, 1953, but  was  given  retrospective effect as from April 1, 1952. Section  31 of the Amending Act of 1953 can be divided  into two  parts.  The first part beginning with the words "it  is hereby  declared"  to the words " were commenced  under  the said  sub-section  after the 8th day of September  1948"  is merely   declaratory.   It  declares  the  section   to   be applicable  to assessments for any year ending before  April

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1,  1948  in any case where proceedings in respect  of  such assessment  or re-assessment "were commenced" under  sub-ss. 1,  2 and 3 of s. 34 after September 8, 1948.  According  to the  appellant the effect of the first part of  the  section was  to  apply the provisions of s. 34(1), (2)  and  (3)  to every  proceeding  for assessment or  reassessment  whenever commenced  after September 8, 1918 even though  reassessment proceedings  in regard to them had become time barred.   The contention on behalf of the respondents, on the other  hand, was that the use of the words "were commenced" (1)  [1953] 23 I.T.R. 471. 69 under  sub-ss.  (1),  (2) and (3) of s.  34  prescribes  the limits  for  the  retrospective application  of  those  sub- sections  and that period was between September 8, 1948  and April  1952 when the Amending Act of 1953 became  operative. The contention of the respondents’ counsel is well  founded. Section  31 does not make sub-ss. (1), (2) and (3) of s.  34 applicable  to  any and every  assessment  or  re-assessment whenever commenced after September 8, 1948.  The use of  the words  ""were commenced", limits the retrospectivity to  the period  between September 8, 1948, and April 1, 1952.   This part  of s. 31 therefore is of no assistance to  making  the Amending Act of 1953 applicable to the present case in which the notice was given on April 30, 1954. The second part of s. 31 deals with the validity of notices. It  firstly provides that any notice issued  "in  accordance with"  s.  34 (1) whether issued before or  after  April  1, 1952,  shall, notwithstanding, any judgment or order of  any court  to the contrary, be deemed to be validly  issued  and secondly that such notice shall not be challenged merely  on the ground that provisions of s. 34 do not apply or  purport to  apply in respect of an assessment for any year prior  to April  1, 1948.  In this second part of s. 31 the  important words are "in accordance with" which mean and imply that the notice  issued  was in conformity with sub-s. (1) of  s.  34 which would include all formalities and limitations  therein mentioned.  Consequently it has to be a notice within  eight years’  period  . As the impugned notice was  issued  beyond that  period, it cannot be called a notice  ""in  accordance with" and therefore the deeming provision as to validity  is not  applicable  to  the present case.   Further  the  words notwithstanding  any  judgment etc. are  indicative  of  the purpose of this provision to be this that if the notice  was in  conformity  with  s. 34 (1) it will  be  valid  notwith- standing any judgment etc.  That this was the 70 purpose  and  meaning of this second part  is  further  made clear by the provisions against such notice being challenged on  the ground of its being in respect of an  assessment  or reassessment  for  any year prior to April  1,  1948.   Thus these  words  only nullified the effect of the  judgment  of Bose,  J., in Calcutta Discount Co’s. (1) case, and did  not validate time barred notices. Moreover  in  the  present  case the  notice  is  not  being impugned  on  the  ground of s.  34  being  inapplicable  in respect of the assessment year 1942-43.  On the contrary the plea  raised against the validity of the notice is that  the provisions as to eight years in s. 34(1) are applicable;  in other words the attack on the legality of the notice is that it  is barred by the provisions of s. 34 (1).  This part  of s. 31 also does not validate the notice issued to respondent No. I after a lapse of eight years from the assessment year. In  my  opinion  therefore neither the first  part  nor  the second  part  of  s. 31 is applicable to the  facts  of  the

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present case. I shall next consider the appellant’s argument based on  the second  proviso  to  s. 34 (3) as amended by s.  18  of  the Amending  Act of 1953.  The assessment year in  the  present case is 1942-43 and therefore the eight years’ period  under the  Act  expired  on  March 31,  1951,  and  order  of  the Appellate Tribunal was August 14, 1951 i. e. after the lapse of  8  years.  It was contended by the appellant that  as  a result  of  this proviso the limitation as  to  time  within which any action could be taken in regard to any  assessment or  reassessment was removed if assessment  or  reassessment was made in consequence of or to give effect to a finding or direction contained inter alia in the order of an Income-tax Appellate  Tribunal under s. 33. In the present case, so  it was  contended by the appellant, there was a finding by  the Appellate  Tribunal in the order dated August 14,  1951,  to the (1)  [1952] 21 I.T.R. 579. 71 effect  that  the  business in the name  of  firm  Vasantsen Dwarkadas  belonged to firm Purshottam Laxmidas and that  if the  Income-tax  Officer could include that  income  in  the income  of Purshottam Laxmidas he was at liberty to  do  so. This  order,  it  was submitted, removed by  virtue  of  the second proviso to sub-s. (3) of s. 34 the bar of the  period of  eight  years under sub-s. (1) (a) of s. 34 of  the  Act. The  correctness of this contention will depend  on  whether the  language  of the second proviso is retroactive  in  its operation  and  revives barred rights or barred  actions  or removes  the bar of eight years under s. 34 (1) (a)  of  the Act.   There  is nothing in the words used  in  the  proviso which  gives  it  retroactive  operation  expressly  or   by necessary intendment but it was argued that any  enlargement of time for taking action under s. 34 of the Act revives the liability  of  an assessee to be taxed  notwithstanding  the expiry  of the period during which action could be taken  by the  Income-tax  Officer.  It was also  submitted  that  the eight  years’  period in s. 34 (1) (a) was not a  period  of limitation but just created a fetter on the exercise of  the power  of  the Income-tax Officer and when that  fetter  was removed the ability to exercise the power was revived. The first argument above brings us to the general principles of  the law of limitation whether a change in the period  of limitation takes away the existing finality of the  immunity against  actions which had already been barred by the  lapse of the period of limitation.  The Statute of Limitation  has been termed a statute of ’repose, peace and justice’ and its intention  was  stated  by Sir Richard  Couch  in  Hurrinath Chatterji v. Mohunt Mothoor Mohun Goswami (1) as follows :-               "The  intention of the law of  limitation  is,               not  to  give  a right whether  there  is  not               one,but  to  interpose a bar after  a  certain               period  to  a  suit  to  enforce  an  existing               right." (1)  (1893) L.R. 20 I.A. 183, 192. 72 In  Kr.   Kr.   Kr.  Ramanathan Chettiar  v.  N.  M.Kandappa Goundan  (1), it was held that if a right to sue had  become barred  by the provisions of the Limitation Act in force  on the  date  of  the  coming into force  of  a  new  Act  then such  barred rights cannot be revived by the application  of the  new  enactment and it cannot be said that  because  the remedies are barred but the rights are not extinguished such rights  can  be  revived by mere change  in  the  period  of limitation  and become enforceable in a court of law.   This

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decision  has the support of the observations of  the  Privy Council  in cases which were decided on  general  principles applicable to limitation and were not based on any statutory provision  such  as s. 28 of the Limitation Act of  1908  by which  as a result of lapse of the period of limitation  the rights  are extinguished.  In Appasami Odayar v.  Subramanya Odayar (2), it was observed :-               "By sect. 1, clause 13, of Act XIV of 1859,  a               suit  for a share of the family  property  not               brought  within twelve years from the date  of               the  last participation in the profits  of  it               would be barred.  This Act continued in  force               until the 1st July, 1871, when Act IX of  1871               came  into force.  Consequently, if there  was               no  participation of profits between 1837  and               1871  the suit would be barred, and the  later               Acts  for  limitation  of suits  need  not  be               referred  to.   If they altered the  law  they               would not revive the right of suit." Later in Mohesh Narain Moonshi v. Taruck Nath Moitra (3), the same principle was stated by Lord Shand in the following words :---               "It  is  clear that, on the 1st day  of  April               1873,  the  plaintiff’s  suit  was  barred  by               limitation under the Act of 1871, and the  Act               of 1877 (1) I.L.R. 1951 Mad. 581. (2) (1888) L.R. 15 I.A. 167,169. (3)  (1892) L.R. 20 I.A. 30,38. 73               could  not  revive the  Plaintiff’s  right  so               barred-  a point which was  indeed  decided,in               regard to the Limitation Acts of 1859 and 1871               in  the case of Appasami Odayar v.  Subramanya               Odyar(1) In Khunni Lal v. Govind Krishna Narain Mr. Ameer Ali said :-               "No suit could be brought, even if the  enact-               ments  referred to above had permitted it,  to               enforce  the right after the lapse  of  twelve               years  "’from  the time the  cause  of  action               arose"  (s. 12, Act XIV of 1859).  Nothing  in               Art.  142 of Act IX of 1871 or of Art. 141  of               Act  XV  1877 could lead to the revival  of  a               right that had already become barred." The same principle has been applied by the Privy Council  in the  Case  of  decree ’in Sachindra  Nath  ,Boy  v.  Maharaj Bahadur Singh (3).  There the question was which of the  two Limitation Acts, Act 25 of 1877 or Act 9 of 1908 applied  to a decree obtained on August 26, 1905.  It was held that  the former applied and therefore the decree became unenforceable according  to the law as it stood before the Limitation  Act of 1908.  Lord Atkinson observed at p. 345 :-               "There  is  no provision in this  latter  Act"               (Act  9  of  1908) "so  retrospective  in  its               effect  as  to  revive and  make  effective  a               judgment or decree which before that date  had               become unenforceable by lapse of time." In  Delhi  Cloth  & General Mills  Co.  Ltd.  v.  Income-tax Commissioner,  Delhi  (6), it was held that  no  appeal  lay against the decision of, a High Court if it was given before appeals  to  the Privy Council were provided for.   In  that connection Lord Blanesburgh observed at p. 425 : (1)  (1888)  L.R. 15 I.A. 167,169. (2)  (1911)  L.R. 38 I.A. 87, 102.

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(3)  (1921) L.R. 48 I.A. 335. (4) (1927) L.R. 54 I.A. 421, 425. 74               "Their  Lordships  can  have  no  doubt   that               provisions       which,       if       applied               retrospectively,would    deprive   of    their               existing  finality  orders  which,  when   the               statute  came  into  force,  were  final,  are               provisions which touch existing rights." In  all  these  cases the Privy  Council  proceeded  on  the principle  that  if the right of action  hid  become  barred according  to  the law of limitation  in  force,  subsequent enlargement  of  the  period of time ’does  not  revive  the remedy  to  enforce  the rights already  barred.   The  same principle,  in  my  opinion,  would  apply  to  the  periods specified  in s. 34 of the Act and if the period  prescribed for taking action had already expired, subsequent change  in the law does not, make it so retrospective in its effect  as to revive the power of an Income-tax Officer to take  action under  the new law- It is one of the canons of  construction of  statute  of limitation that in the  absence  of  express words  or necessary intendment no change in, the  period  of limitation  can  revive the right to sue  which  has  become barred nor can it impair the immunity from any action  which had  become final after the lapse of a specified  period  of time. The  Calcutta  High  Court in Nepal Chandra  Roy  v.  Niroda Sundari  Ghose  (1),  held that the right  of  the  judgment debtor to make an application for setting aside an ex  parte decree  could not be revived by a change in the law  if  the right to apply had already become barred before the new  law came  into  force.   Similarly  in  Mohamed  Mehdi  Faya  v. Sakunabai  (2), it was held that a remedy which  had  become barred under the old Limitation Act would not be revived  by the passing of a new Limitation Act.  This was a case  where the right to sue for restitution of conjugal rights was held to be barred. The Bombay High Court in Dhondi Shitvaji Rajivade v. Lakhman Mhaskuji Khaire (3), (1) I.L.R. 39 Cal. 506. (2) I.L.R. 37 Bom. 393. (3) A.I.R. 1930 Bom. 55. 75 held that where the mortgagor’s right to sue, for redemption of the mortgage was barred subsequent acknowledgement  would not  extend the period of limitation as the  acknowledgement ought to have been made in writing within 60 years from  the date; of the mortgage.  The court also held that the  remedy and right of the mortgagor having been extinguished  nothing contained in the subsequent Limitation Act would affect  the operation of the previous enactment.  In this connection the court referred to s. 6 of the General Clauses Act, 1897. The Madras High Court in two cases applied this principle in K.  Simrathmul v. Additional Income-tax Officer,  Ootacamund (1), to proviso (ii) of s. 34(3).  The Punjab High Court  in Pran  Nath v. Commissioner of Income-tax Punjab (2),  at  P. 600 also applied this principle to the same provision.   But it appears that in a later judgment, Commissioner of Income- tax v. R. B. L. Ishar Das (3), a contrary view was taken but it does not appear that the previous judgment was brought to the  notice  of  the  court nor  does  it  appear  that  the attention of the learned judges was drawn to the  principles laid  down  in  the decisions of  the  Privy  Council.   The Official  Liquidator  of  the  Benaras  Bank  Ltd.  v.   Sri Prakasha(4),  relied  on  by Mr. Rajagopal  Sastri  did  not

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decide  the question that subsequent change in the  law  can revive  barred rights.  It proceeded on the construction  of the  amended  s. 235 of the Indian Companies Act.   He  also relied  on two judgments of the Patna High Court :  Baleswar Prasad  v. Latafat (5), and Jagdish v. Saligram  (6).In  the former it was held that the law of limitation which  governs an  action  is the law which prevails on the date  when  the action  is brought and therefore acknowledgement made  on  a pronote  executed  in 1934 would be governed by the  law  in force at the time the suit was brought.  In the latter  also it  was held that the law relating to acknowledgement  under s. 20 was the one which was (1) [1959] 36 I.T.R. 41, 45. (2) [1960] 38 I.T.R. 595, 600. (3) [1962] 44. I.T.R. 629. (4) I.L.R. [1946] All. 461. (5) (1944) I.L.R. 24 Pat. 249. (6) (1945) I.L.R. 24 Pat. 391. 76 in  force at the time of the bringing of suit.  But it    is significant to note that S. K. Das, J., (now a judge of this Court)  did  not agree with that view but did  not  disagree with  the  decision  as the matter  had  been     previously decided in the judgment above referred to. He expressly said :               "I  would personally have come to a  different               conclusion  if the matter were not covered  by               the aforesaid decisions of this Court." Another argument raised on behalf of the appellant was  that the eight years’ period prescribed in s. 34 is not a rule of limitation  but merely a fetter on the power of the  Income- tax  Officer  to take action and the removal of  the  fetter revives  the  power of the Officer.  This really  is  not  a different  argument  but the same argument of revival  of  a right to sue which has been discussed above.  Change in  the law  as  to  the period in which a suit can  be  brought  to recover  a  debt or action can be taken  by  the  Income-tax Officer  to commence an assessment or reassessment does  not impair the rights already acquired by the bar of  limitation or  revive  the power of the Income-tax  Officer  which  has already  become  incapable of being exercised  by  laspe  of time.   The two stand on the same footing and have the  same effect i. e. provide immunity and place a bar on any  attack on  the rights of the defendant or the assessee as the  case may be. The  next  question raised is the constitutionality  of  the second proviso to s. 34 (3) of the Act.  For that purpose it is  necessary  to restate some of the salient facts  of  the present  case.  The firm, Vasantsen Dwarkadas of  which  the partners  were Vasantsen respondent No. 1,  Narandas  Shivji and  Nanalal  Odhavji  filed  a  voluntary  return  for  the assessment year 1942-43 and also applied for registration of the firm which was refused on the ground that the firm                              77 was not a genuine firm but belonged to Dwarkadas Vussonji  , the  father  of  respondent No. 1,  who  was  the  principal partner  in the firm Purshottam Laxmidas and the  Income-tax Officer  therefore  added  the  income  of  firm   Vasantsen Dwarkadas  to the individual income of  Dwarkadas  Vussonji. This happened in regard to the assessment for the subsequent year also.  Appeals were filed for that year and  subsequent years  by  the  firm Vasantsen Dwarkadas  both  against  the quantum of the assessed income and refusal of the Income-tax Officer to register the firm.  These appeals and the  Excess Profits Tax appeal of firm Purshottam Laxmidas for the  year

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1942-43  were all consolidated and decided by the  order  of the Incometax Appellate Tribunal dated August 14, 1951.   At that   stage  Dwarkadas  being  dead,  Vasantsen   Dwarkadas respondent  No. 1 was substituted in place of his father  in the appeal of Purshottam Laxmidas.  The order in the  appeal of  firm  Vasantsen Dwarkadas against  the  firm  Purshottam Laxmidas was not an order to which firm Purshottam  Laxmidas as  such was a party and consequently any finding  given  in regard  to the income of firm Vasantsen Dwarkadas being  the income  of the firm Purshottam Laxmidas was an order  passed against   a  third  party  who  was  not  heard   in   those proceedings.  It was contended on behalf of respondents that the second proviso to s. 34 (3) is unconstitutional  because it  infringes  Art. 14 of the Constitution in so far  as  it deprives  such  third party of the  immunity  given  against assessment  or  reassessment by the period  of  eight  years mentioned in s. 34 (1) (a) and it results in prejudging  the merits of the third party’s case before he is even heard and that  there is no reasonable basis for  distinguishing  such third party from any other person escaping income-tax.   The words  used in the section are "assessment  or  reassessment made on the assessee in consequence of or to give effect  to any  finding  contained  in  an  order."  Any  person  there mentioned must mean a person other 78 than the assessee.  The consequences of giving effect to the second proviso to s. 34 (3) are that the protection, of  the time limit given by the proviso to sub-s. (1) of s. 34  will disappear qua those falling within the proviso and would  be available  to other assessees who fall within s. 34 (1)  (a) of the Act.  It was submitted that assessees who fall  under this  category cannot form a different class based  ’on  any real  and  substantial distinction ; and that  there  is  no nexus between the classification and the object sought to be achieved  and therefore Art. 14 is violated.   Reliance  was placed on the judgment of this Court in Surajmal Mohta v. A. V.  Viswanatha  Sastri  (1);  Shree  Meenakshi  Mills   Ltd. Madurai  v.  Shree A. V. Visvanatha Sastri (2)  and  M.  Ct. Muthiah v. The Commissioner of Income-tax, Madras (3). It  was  argued  that  there was  no  reasonable  basis  for classification  in  this  case  because  there  was  nothing peculiar  in properties of characteristics of  persons  with regard  to whom a finding or a direction is given under  the proviso  and then action is taken against them under  s.  34 (3)  and those who have evaded tax and in regard to whom  no such direction is given and fall under s. 34 (1) (a).   Both of  them have common qualities, common  characteristics  and common   peculiarities  and  traits.  There  is  little   to distinguish one from the other and in support counsel relied on  the  observations  of  Mehr Chand  Mahajan,  C.  J.,  in Surajmal Mlohta’s (1), case where it was observed that there was  no  difference in characteristics between  persons  who were  discovered  as substantial evaders  of  income  during investigation conducted under s. 5 (1) of Taxation on Income (Investigation  Commission) Act (Act 30 of 1947)  and  those who are discovered by the Income-tax Officer to have  evaded payment  of income-tax.  The question of classification  was again  raised in Shree Meenakshi Mills’ (2) case.   In  that case the Court had to decide whether persons (1) [1955] 1 S.C.R. 448, 461. (2) [1955] 1 S.C.R. 787. (3) [1955] 2 S.C.R. 1247 79 who came within the scope of s. 5 (1) of Act 30 of 1947  and those who came within s. 34 of the Income tax Act as amended

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by  the-Income-tax  (Amendment) Act 1954 (Act  33  of  1954) formed distinct classes.  It was held that after the  coming into  force of the amended s. 34 which operates in the  same field as s. 5 (1) of Act 30 of 1947 both classes were inclu- ded  within the ambit of amended s. 34 and the two  sections overlapped.,  Therefore  according to the two  cases  above- mentioned if there are no particular qualities and  elements which  distinguish  one set of evaders of  income-tax,  from another  and  both have evaded income-tax their  cases  fall under  s. 34 (1) before and after 1948 or before  and  after 1953.  From the mere fact that in regard to one a  direction is given or an order is made within the second provise to s. 34 (3) and in regard to another it is not given, no reasona- ble  basis  for  classification arises  as  their  essential characteristics are the same.  But it was argued that in  A. Phangal  Kunju Musaliar v. M. Venkatachalam Potti (1),  such classification  was made.  In that case a native  of  Quilon within  the Travancore State was given a notice under  s.  5 (1)  of  the  Travancore  Act  XIV  of  1124,  a   provision corresponding  to s. 5 (1) of the Indian Act 30 of 1947  for investigation  but  before  the report  could  be  made  the Constitution  of  India  became  applicable  to  Travancore, State.  The assesee filed a petition in the Travancore  High Court  for a writ of prohibition prohibiting the  Commission from  holding an inquiry in regard to evasion and  then  the matter  was  brought in appeal to this Court.  It  was  held that  s. 5 (1) of Travancore Act is not  discriminatory  and violative of rights under Art. 14 when read in juxtaposition with s. 47 of the Travancore Income-tax Act corresponding to s.  34  of  the Indian Income-tax Act.  Section  47  of  the Travancore Income-tax Act was directed only against  persons concerning   whom   definite  information  came   into   the possession of the Income-tax Officer in consequence of which that (1)  [1955] 2 S.C.R. 1196. 80 officer  discovered the escaped income and such clan  was  a definite  class  and it was not confined to  those  who  had escaped  from assessment of income-tax made during  the  war period i.e. 1939 to 1946.  On the other hand s. 5 (1) of the Travancore  Act sought to reach that class of persons  which was comprised only of those about whom there was no definite information and no discovery of any item or items of  income which  escaped taxation but against whom the Government  had only  a prima facie reason to believe that they  had  evaded payment of tax of substantial amounts.  Further action under the latter Act was limited to evasion of payment of tax made during  war  period.  Section 5 (1) of  the  Travancore  Act therefore  was not discriminatory in comparison with  s,  47 (1)  of  the  Travancore Income-tax  Act.   The  reason  for holding  that  there  was a  definite  characteristic  which distinguished  that class i.e. those who had escaped  income to  a  substantial degree during the war  period  and  those failing  under s. 34 of the Income-tax Act was that  in  the case of the former the Government had reason to believe that they  had evaded payment of tax to a substantial degree  and that  it  was limited to evasion of payment of  taxation  on income  made during the war period.  In the case  of  ’those falling  under  s. 47 (1) of the Travancore  Income-tax  Act there  had to be definite information in the  possession  of the  Income-tax Officer in consequence of which the  Income- tax   Officer  discovered  that  the  income   had   escaped assessment.   The  two classes were distinct  and  therefore Musaliar’s  (1),  case  cannot apply to  the  facts  of  the present case.  Later in N. Ct.  Muthiah v. The  Commissioner

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of  Income-tax Madras (3), ’this court pointed out  that  if the provision of s. 34 (1) of the Act as it stood before its amendment  by  the Amending Act of 1948 had  been  the  only provision  to be considered the rule in Musaliar’s (1)  case would have applied but the position was materially  affected by reason of the two amendments made in s. 34 (1), by (1) [1955] 2 S.C.R. 1196. (2) [1955] 2 S.C.R. 1247. 81 Amending   Act  1948  and  the  other  by   the   Income-tax (Amendment)  Act,  Act  33 of 1954.  In  that  case  it  was contended and it was so held that s. 5 (1) of Act 30 of 1947 was ultra vires of the Constitution as it was discriminatory and  violative  of Art. 14 by reason of the  two  amendments above  referred to.  The submission of the respondents  that there  is  no reasonable basis  for  classification  between those  who have escaped assessment under s. 34 (1)  (a)  and those  third  parties who have escaped income-tax  but  with regard to whom a direction or an order is made under proviso (ii)  to  s.  34  (3) is  well  founded  and  therefore  the provision is unconstitutional and hit by Art. 14. Lastly it was argued that the second proviso contemplates  a valid  finding  or  direction and that it  cannot  be  given against  a non-assessee at all.  It was also submitted  that such  a  finding  must  be necessary  but  there  is  little substance   in  this  submission.   Whether  a  finding   is necessary  or not must depend on the circumstances  of  each case  and it cannot be said as a matter of law that  finding is or is not necessary. For  the reasons given above, the appeal must  be  dismissed with costs.  In any case the appellant had undertaken to pay the  costs of the respondents irrespective of the result  of the appeal and he must pay the costs of the respondents. SARKAR,  J.-This appeal arises out of a petition under  Art. 226  of the Constitution for the issue of writs  restraining the  revenue authorities from making an assessment  under  a notice  dated April 30, 1954, served under s. 34 (1) (a)  of the  Income-tax  Act,  1922,  on  Purshottam  Laxmidas,  the respondent firm, in respect of the assessment year  1942-43. It  is contended that the notice had been issued  after  the period prescribed for it by the section 82 had  expired and was, therefore, invalid.  This, it  may  be conceded, is so but it seems to me that the notice was  none the less made valid by a subsequent enactment, namely, s.  4 of Act 1 of 1959 to which I will later refer. Purshottam  Laxmidas is the assessee.  It had two  partners, Dwarkadas and Parmanand.  Vasantsen is the son of Dwarkadas. It appears that in 1941 another business was started in  the name  of Vasantsen Dwarkadas.  Vasantsen claimed it to  have been  an independent partnership business carried on by  him with two other persons.  For the year 1942-43, this business had filed a return of income of its own and had applied  for registration  as  a  firm under  the  Income-tax  Act.   The Income-tax Officer rejected these claims by the business  of Vasantsen Dwarkadas and added its income for the year to the income  of Dwarkadas taking the view that it was a  business solely  belonging to him.  Vasantsen Dwarkadas (the  alleged firm) appealed from this decision.  There was also an appeal against  the  assessment on Dwarkadas individually  for  the year 1942-43.  In 1943-44, the Income-tax Officer came to  a different conclusion and held that Vasantsen Dwarkadas was a branch  of Purshottam Laxmidas.  The alleged firm of  Vasan- tsen Dwarkadas repeated its aforesaid contention in  several years  from 1943-44 onwards and went up in  appeals  against

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its rejection. In 1951, various appeals concerning the parties named  above came  up  before the Income-tax Appellate  Tribunal.   These appeals consisted of the said appeals by the alleged firm of Vasantsen  Dwarkadas,  Appeals by Vasantsen as the  son  and heir  of  Dwarkadas  who  had died in  1946  in  respect  of assessments  on him for 1942-43 and 1943-44, and appeals  by the firm of Purshottam Laxmidas in respect of assessments on it  for  various  years under the Excess  Profits  Tax  Act. These appeals were disposed’ of by a 83 common  judgment passed by the Tribunal on August 14,  1951. The  appeals  by the firm of Vasantsen  Dwarkadas  were  all dismissed  as  it  was held that it was  not  a  partnership between  the persons alleged.  In the appeals by  Purshottam Laxmidas,  it  was  held  that  the  business  of  Vasantsen Dwarkadas  was one of its branches.  In the appeals  against the assessment on Dwarakadas, it was held that the income of the  business of Vasantsen Dwarkadas had wrongly been  added to  his  income  for the assessment  year  1942-43  and  the addition  should be deleted.  It was also said referring  to the  income  of  Vasantsen  Dwarkadas  in  respect  of   the assessment year 1942-43, that ,If the Income-tax Officer can include this sum in the income of Purshottam Laxmidas he  is of  course  at  liberty to do so " It  is  because  of  this observation  that  the  impugned notice was  served  on  the respondent  firm of Purshottam Laxmidas.  It was,  thereupon that  the  firm of Purshottam Laxmidas  and  Vasantsen,  the latter  representing  his father’s estate,  moved  the  High Court  at  Bombay  under Art. 226 for  the  reliefs  earlier mentioned.   The  respondents  to  the  petition  were   the appellants, the Income-tax Officer, Bombay and the Union  of India.  Parmanand, the other partner in Purshottam Laxmidas, was  also made a respondent to the petition but he does  not seem to have taken any interest in the proceedings at all. When the matter was heard in the High Court, the Act of 1959 had not been passed.  The revenue authorities relied on  the second proviso to s. 34 (3) of the Income-tax Act as amended by Act 25 of 1953 for the validity of the notice.  The  High Court did not accept this contention and issued the writs as prayed.  The revenue authorities have now come up in  appeal which  is  being  opposed  by  the  respondents,  Purshottam Laxmidas  and Vasantsen.  As I think that the appeal  should be  allowed  because  of  s. 4- of Act  1  of   1959,  which provision  the  High Court had no occasion to  consider,  it would be to no purpose 84 to discuss the reasons on which the High Court based  itself or the second proviso to sub-s. (3) of s. 34. I  think  I  ought to refer at this stage to s.  34  of  the Income-tax Act.  That section authorises assessment and  re- assessment  in respect of past years where for one or  other of the reasons mentioned in it, income has not been assessed to the full amount of tax payable on it.  A general idea  of some  of  the provisions of s. 34 may now  be  given.   Sub- section (1) of this section provides that before making  the assessment  a  notice  has to be  served  on  the  assessees concerned  asking for a return of the income of the year  in which it escaped assessment and this within a certain number of years from the end of that year.  Then sub-s. (3) of this section  provides that the order of assessment  pursuant  to the  notice has to be made within a certain number of  years from  the  end  of the year in which the  income  was  first assessable.   These  are  two conditions which  have  to  be satisfied before assessment under s. 34 can be made.  In the

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present  case,  we  are concerned with the  first  of  these conditions only, that is, whether the notice had been issued within  the time provided for it for no order of  assessment was ever made.  I ought to have said that the second proviso to  sub-s.  (3)  of s. 34 as amended  in  1953  enlarged  in certain  cases the time for issuing the notice and also  for making the order of assessment.  That is why the High  Court had to deal with this proviso in this case. Now, s. 34(1) has been amended on a number of occasions.   A reference  to some of the amendments would be  useful.   The first amendment to which I desire to draw attention is  that made  by the Income-tax (Amendment) Act, 1939.   Under  that amendment  where  the revenue authorities thought  that  the assessee had concealed his income or deliberately  furnished inadequate  particulars, they could issue the notice  within eight  years of the year in which the income is supposed  to have escaped assessment  86 and in other cases, within four years of that year. Sub-section (1) of s. 34 was next amended by the  Income-tax and  Business Profits Tax (Amendment) Act, 1948.   This  Act was passed on September 8, 1948, but s. 8 which  substituted a  new  section  for the existing s. 34,  was  brought  into operation retrospectively from March 30, 1948.  The new sub- section (1) was divided into two clauses.  Clause (a)  dealt with cases of omission on the part of an assessee to make  a return  or his failure to disclose fully his income for  any year as a result of which income escaped assessment.  Clause (b)  dealt with cases where there was no such  omission  but the Income-tax Officer in consequence of information in  his possession  believed  that income of any  year  had  escaped assessment.  It was provided that in a case coming under cl. (a)  the notice might be issued within eight years and in  a case  coming under cl. (b) within four years of the  end  of the year in which the income escaped assessment.  There  was a proviso to this sub-section which said that the Income-tax Officer  could not issue the notice unless he  recorded  his reasons  for doing so and the Commissioner of Income-tax,  a superior  revenue officer, was satisfied on the  reasons  so recorded that it was a fit case for the issue of the notice. Then  came the amendment by s. 18 of the Finance Act,  1956, passed   on   April  27,  1956,  but  brought   into   force retrospectively  from  April 1, 1956.  As a result  of  this amendment it was provided in a case coming under cl. (a)  of s. 34(1) the clause with which this case is  concerned--That (1)  no  notice should issue for a year prior  to  the  year ending  on  March 31, 1941, (2) nor for any  year  if  eight years  had elapsed after the expiry of that year unless  the income which had escaped assessment was likely to amount  to Rs. 1,00,000/- or more and (3) nor unless 86 the Income-tax Officer had recorded the reasons for  issuing the  notice and where the amount of the escaped  income  was Rs.  1,00,000/- or more, the Board of Revenue, and in  other cases  the Commissioner, was satisfied on such reasons  that the case was a fit one for the issue of the notice. It  seems  to  me  that the 1956  amendment  made  two  real changes.   First, it removed altogether the prescription  of time  for the issue of a notice in a case where the  escaped income  was likely to be Rs. 1,00,000/- or more.  Under  the 1948  amendment no notice for a year from the end  of  which eight  years  had expired could be issued at  all.   As  the amending  Act of 1948 came into force on March 30, 1948,  no notice  could be issued under it for any year prior  to  the year  ending on March 31, 1941.  Therefore the provision  in

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the  1956 amendment that no notice could issue for any  year prior  to  the year ending on March 31, 1941, made  no  real alteration  in the law.  The other change was that in  cases involving  escaped  income of Rs. 1,00,000/-  or  more,  the approval of the Board of Revenue to the issue of the  notice was  made  necessary.   This alteration in the  law  has  no bearing on the quest ion that I propose to discuss. Now the present is not a case where the revenue  authorities contend that the income which escaped assessment was  likely to  be  Rs.  1,00,000/-  or more.  The  notice,  it  may  be remembered, was issued on April 30, 1954, in respect of  the year  1942-43.  It was a notice therefore which was  invalid both under the 1948 and 1956 amendments of s. 34 (1). I  will  now refer to the Act of 1959 which I  have  earlier mentioned.   That is the Income-tax (Amendment)  Act,  1959. It  was  passed on March 12, 1959.  Section 2  of  this  Act introduced a new  87 sub-section in s. 34, namely, sub-s. (4).  That  sub-section was in these terms :               Sub-s. 4 "A notice under Cl. (a) of sub-s. (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,  had               expired  in respect of the year to  which  the               notice relates." Section 4 of this amending Act on which I propose to rest my judgment in this case runs as follows :-               S. 4. "’No notice issued under cl. (a) of sub-               s.  (1) of s. 34 of the principal Act  at  any               time  before the commencement of this Act  and               no  assessment,  re-assessment  or  settlement               made or other proceeding 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 cl. (a) of s. 18 of the  Finance               Act, 1956, had expired." Quite  clearly the new sub-s. (4) of s. 34 cannot  apply  to the  notice with which we are concerned for the  sub-section by  its own terms deals only with notices issued  after  the 1959  Act  came into force and the notice in this  case  was issued before that date. Now, s. 4 of the 1959 Act prevents a notice issued under  s. 34 (1) (a) of the principal Act being held to be invalid  on the ground that it was issued 88 after the time within which it should have been issued under that  section  as  it stood before it  was  amended  by  the Finance  Act  of  1956.  In other words, s.  4  validates  a notice issued under s. 34 (1) (a) even though it was invalid for  the reason that it was issued after the expiry  of  the eight years prescribed for it under the 1948 amendment, that being the section as it stood before the 1956 amendment. The  first requirement then of the applicability of s. 4  is that  there must be a notice issued under s. 34 (i)  (a)  of the  principal  Act.  I do not think that it  was  seriously contended at the bar that the notice in the present case has

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not been issued under cl. (a) of s. 34 (1).  I feel no doubt that  it  was  so issued.  The provision  that  we  have  to consider for this purpose is s. 31 (1) (a) as it stood as  a result  of  the 1948 amendment for that was the  section  in force  on the date the notice was issued.  The notice  would have  been  one issued under cl. (a) of that section  as  so amended if it was a case where income had escaped assessment because  of the failure of Purshottam Laxmidas  to  disclose fully  its  income for the year 1942-43.  There  can  be  no doubt on the facts of this case that Purshottam Laxmidas had failed  to disclose fully its income for the  year  1942-43. On the facts found, the income of the business of  Vasantsen Dwarkadas was the income of Purshottam Laxmidas.   Therefore Purshottam Laxmidas should have disclosed in its return  for 1942-43  the income made by it on the business done  in  the name  of  Vasantsen Dwarkadas.  What happened was  that  the income  of Vasantsen Dwarkadas for 1942-43 was shown as  the income  of its own as an independent firm and this was  done by  Vasantsen.  Obviously, Vasantsen, his  father  Dwarkadas and Parmanand, the latter’s partner in Purshottam  Laxmidas, were all acting together.  It would perhaps be more  correct to say that things had been left to Dwarkadas 89 and Vasantsen to manage.  They had three-fourth interest  in the   business,   while  Parmanand   had   only   one-fourth Furthermore, Parmanand has taken no interest in   the present proceedings.  It would follow from all this that  if Vasantsen  Dwarkadas’s income had been shown separately,  it could  not  have  been  included  in  the  return  filed  by Purshottam  Laxmidas.   Therefore,  it is a  case  in  which Purshottam Laxmidas’s income for 1942-43 escaped  assessment because  of its failure to disclose its income fully.   That is  why  I  think it beyond doubt that  the  notice  in  the present case had been issued under cl. (a) of s. 34 (1).  It is none the less so because it was issued in consequence  of the  direction of the Tribunal that the  Income-tax  Officer was  at  liberty if he could in law do so,  to  include  the income  of Vacantsen Dwarkadas for 1942-43 in the income  of Purshottam  Laxmidas.   The order could not have  enabled  a notice  to  issue.   The notice had to  be  issued  under  a statutory provision.  That provision was s. 34 (1) (a). The next requirement of s. 4 of the Act of 1959 is that  the notice  must  have  been  issued  at  any  time  before  the commencement of that Act.  The present notice which had been issued in 1954 had clearly been so issued.  When the section uses the word "at any time", I suppose it means at any time; it  does not thereby say that the notice must be  issued  at any time before the 1959 Act but after a certain other point of time.  The other limit is not to be found in the  section at  all;  all that it requires is that the  notice  must  be issued before the 1959 Act. It is however contended that the proper construction of s. 4 is  that the notice must have been issued after the  Finance Act  of  1956  came into force and amended s.  34.   I  find nothing  in  s. 4 on which to rest this  construction.   Mr. Palkhivala appearing for the respondent, said that the words "under that section as in force before its amendment by  cl. (a) of 90 s.   18 of the Finance Act, 1956" led to this  construction. I  do  not  see  why and I am not able  to  deal  with  this contention  more fully for I do not see the reason on  which it is based.  To my mind, all that these words mean is  that the  section  to be considered is the section  as  it  stood before it was amended by the ]Finance Act, 1956, that is  to

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say, the section as it stood as a result of the amending Act of 1948, for that was the section which was in force immedi- ately  before  the amendment affected by  the  Finance  Act, 1956. Then it was said that if the notice contemplated was not one issued after the Finance Act, 1956, then under s. 34 (1) (a) all  years  without  any  limitation  could  be  brought  to assessment.   If that is the result of the words used in  s. 4, the words must have that effect.  That would be no reason to  say that s. 4 applies only to notices issued  after  the 1956 Act came into force.  No doubt the words " at any time" would  comprehend  a  notice  whenever  issued  before   the commencement of the 1959 Act.  But the section protects such notice only against the invalidity caused by s. 34 (1) as it stood  after  the  1948  amendment,  that  is,  against  the invalidity caused by reason of the notice having been issued after  the  expiry  of the time prescribed  for  it  in  the section  as it then stood.  Section 4 does riot protect  the notice  from invalidity otherwise attaching to it.   Now  it will  be  remembered that the 1939 amendment of s.  34  also prescribed  a  period of time for the issue of  the  notice. That  prescription  had to be  obeyed  whenever  applicable. Section 4 provided for no immunity against a breach of  that prescription.   So,  though  s. 4 of the 1959  Act  freed  a notice  from the bar of limitation in respect of it  imposed by  the 1948 amendment, it did not altogether do  away  with all  prescriptions  of  time.  Inspite of  s.  4,  a  notice contemplated  by it would be subject to the prescription  of time as to its issue under the 1939 Act and may be, under s. 34 as it stood 91 before  the 1939 amendment.  If the notice was issued  after the  1956,  amendment  it  would  also  be  subject  to  the prescription as to time provided by that amendment. Then  it  was said that if s. 4 applied to a  notice  issued more  than  eight years after the year in which  the  income escaped  assessment but before the 1956 amendment came  into force  in  a case where the escaped income of the  year  was less than Rs. 1,00,000/-, the position. would be curious.  A notice  issued  in a similar case after the  1956  amendment would be bad under s. 34 as it then stood and s. 4 could not save  it  for it saved notices only from the effect  of  the 1948  amendment.  The position then would be that in a  case involving  the  same amount of escaped income for  the  same year,  a  notice issued before 1956  amendment  and  invalid under  the  1948  amendment would be validated  and  a  more recent  notice  equally invalid under both the  earlier  and present laws would remain invalid.  Assume that the position is somewhat curious or incongruous.  But that seems to me to be the result of the words used.  For all we know that might have been intended.  However strange, if at all, the  result may  be,  I  do not think the Courts  can  alter  the  plain meaning of the language of the statute only on the ground of incongruity  if  there is nothing in the words  which  would justify  the  alteration.  As I have said earlier,  in  this case there is nothing to justify the alteration of the plain meaning.  Consider this.  In a case where the escaped income is Rs. 1,00,000/- or over, no incongruity as in the case  of escaped income below Rs. 1,00,600/- arises.  In such a  case the 1956 amendment removes the bar of limitation  altogether and what had not been previously barred cannot become at all barred.   So  no question of more  recent  notices  becoming barred  and  earlier notices made valid arises:  If  on  the ground of the alleged incongruity notices issued before 1956 in cases of escaped income of less than

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92 Rs.  1,00,000/- have to be left out of the scope of s. 4  of the Act of 1959, I suppose we must hold that such notices in cases of escaped income of Rs. 1,00,000/or over must also be left  out  of  the scope of s. 4, for  clearly  the  section cannot  be read as treating the notices in these  two  cases differently.   But in the latter kind of cases, there is  no incongruity.  It would indeed be absurd to hold that notices issued before 1956 in cases where the escaped income was Rs. 1,00,000/-  or  over were excluded from s. 4,  for  in  such cases notices may be clearly issued after the 1959 Act under sub-s. (4) of s. 34 introduced by that Act.  Sub-section (4) of  s. 34 was enacted by the Act of 1959 which also  enacted s. 4. If a year’s escaped income could be brought to tax  by a  notice  issued after the 1959 Act under  sub-s.  (4),  it could not be that it was intended that the same income could not  be brought to tax by a notice earlier issued and  prima facie made valid by s. 4. There would be no reason to make a distinction  between the two cases.  If a distinction  could not  be made between the two cases, and in one case  notices issued before 1956 were covered by s. 4, s. 4 must apply  to all  notices  issued  before the 1956  amendment  came  into force. I  may, before I conclude, as well say that for the  reasons mentioned  in  the judgment in the case of  Commissioner  of Income-tax v. Sardar Lakhmir Singh (C.  As.  Nos. 214-215 of 1958),  that I shall presently read today, I think that  the second proviso to s. 34 (3) of the Income-tax Act is invalid and cannot therefore support the notice. The  result  is  that I think that the  present  notice  was validated by s. 4 of the Income-tax (Amendment) Act of 1959. The appeal will, therefore, be allowed.  As the  certificate under  which the appeal was admitted so provides by  consent of parties, the appellant will pay the costs of  Respondents Nos.   1  and 2, of this appeal.  The orders of  the  Courts below are set aside. 93 HIDAYATULLAH, J.-In this judgment we shall deal also with C. As. 214, 215 and 509 all of 1958 and C. A. 585 of 1960.  The appellant  is  the Commissioner of Income-tax,  Bombay.   In Civil  Appeal Nos. 214 and 215 of 1958 the  Commissioner  of Income-tax.,  Bihar,  and  in  C. A. No.  509  of  1958  the Commissioner of Income-tax, Madras, are the appellants.   In Civil  Appeal  No.  585  of  1960  the  Income-tax  Officer, Ahmednagar,  and  the  Union of India  are  the  appellants. These  appeals  are directed against divers  respondents  to whom  reference will be made later.  This appeal and  C.  A. No. 585 of 1960 are appeals against the orders of the Bombay High  Court  in  the  exercise of  the  power  conferred  by Articles  226  and 227 of the  Constitution,  the  remaining arise  out of regular proceedings for assessment  under  the Income-tax Act, culminating in references to the High  Court under s. 66, Income-tax Act, and orders passed therein.   In all these appeals assessments made or notices issued,  under s.  34  of the Income-tax Act were  successfully  called  in question  by the respondents and orders appropriate  to  the nature  of  the proceedings were passed by  the  High  Court concerned,  either  declaring  the  assessments  illegal  or quashing  the  notice by a writ.  In  these  cases,  however commenced,  the validity of the assessments or  the  notices under  s. 34 was questioned on the ground  of  ’limitation’. The  High Courts held that the notices or  assessments  with which  they were dealing were out of time.  The Bombay  High Court further held that the 2nd proviso to s. 34 (3) of  the Income-tax   Act   was  ultra  vires  Article  14   of   the

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Constitution  and thus void.  The High Courts certified  the respective  cases as fit for appeal to this Court and  these appeals have been filed. We  have  had  the benefit of  reading  the  judgments  just delivered  by our learned brethren Das and Kapur,  JJ.,  who have ordered the dismissal of all the appeals.  We have  the misfortune to differ 94 from  them  as  we are of opinion that  these  appeals  must succeed.  The point of law which arises in these appeals  is common  though  it  arises in different  settings.   We  are concerned  with  s. 34 of the Indian Income-tax  Act  as  it stood  between  1939 and 1959.  This section  has  been  the subject of repeated amendments in 1939, 1948, 1953, 1956 and 1959.   It has, while enabling the bringing to tax,  income, profits and gains which escape assessment, always provided a period or periods of time for such action though after  1956 it  has  done away with the restriction of time  in  certain classes  of cases.  We are not concerned with the  state  of law prior to the Amending Act of 1939 or the amendments made later  than the Act of 1959.  During the intervening  twenty years,  the Indian Legislature and Parliament have not  only amended  s. 34 but have passed at intervals validating  laws and  these cases involve the interpretation and  application of  the  section  as  amended from  time  to  time  and  the determination  of the effect of the  validating,  provisions with  a  view  to  seeing whether  any  impugned  notice  or assessment  is  saved by any validating provision.   In  our opinion,  the provisions taken all-in-all are sufficient  to uphold  the validity of the divers notices issued  in  these cases  and the assessments, if any, made as  a  consequence. If  the notices and the assessments are held to be  in  time and  thus valid, there is nothing in these  appeals  besides the  constitutionality  of the second proviso to s.  34  (3) which  was raised successfully in the appeals  from  Bombay. If  the constitutionality is also upheld then these  several judgments and orders must be reversed and that indeed is our opinion.  We shall now   give the facts of this appeal. In this case there was a firm of two partners (i) Dwarkadas Vussonji  and  (ii)  Parmanand  Odhavji,  bearing  the  name "Purshottam  Laxmidas." This firm did business from  October 28,  1935, to April 1, 1946.  On the latter date Dwarka  das died. A new 95 partnership firm bearing the same name came into being  with Vasantsen  Dwarkadas the son of the deceased partner.   This firm  was  registered.   Another  firm  by  name  "Vasantsen Dwarkadas"  was  started  on January 28, 1941,  and  it  was dissolved  on  October 24, 1946.  Its partners  were  :  (i) Vasantsen Dwarkadas (ii) Naraindas Shivji and (iii)  Nanalal Odhavji. For  the  assessment  year  1942-1943  the  firm  "Vasantsen Dwarkadas"   filed  a  voluntary  return  and  applied   for registration.   This registration was refused on the  ground that  the  firm  was not genuine.  The income  of  the  firm relative  to that assessment year was added to the  personal income of Dwarkadas Vussonji in the assessment year 1943-44. This also happened in subsequent years.  A number of appeals were  heard  together  and disposed  of  by  the  Income-tax Appellate  Tribunal by its order on August 14, 1951.   These appeals were filed by the firm "Vasantsen Dwarkadas" for the assessment years 1942-43 to 1948-49, by Vasantsen  Dwarkadas representing  the  estate  of his father  and  by  the  firm Purshottam   Laxmidas"  concerning  excess   profits.    The Tribunal held that not Dwarkadas Vussonji alone but the firm

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"Purshottam Laxmidas" owned the firm "Vasantsen  Dwarkadas." A case was stated but the High Court upheld this  conclusion on October 8, 1953.  A notice was then issued under s. 34 of the  Income-tax  Act to the firm  "Purshottam  Laxmidas"  on April  30,  1954,  that it had been  under-assessed  in  the relevant year.  This notice was challenged before the Bombay High   Court  by  a  petition  under  Article  226  of   the Constitution.  The first contention was that the notice  was out of time and the second was that the 2nd proviso to s. 34 (3) was ultra vires Article 14 of the Constitution in so far as it applied to persons other than the assessees.  Both the points  were accepted by the learned single judge who  heard the petition.  He, however, held that the firm 96 "Purshottam  Laxmidas" could not be called "’a stranger"  to the assessment proceedings.  A Divisional Bench of the  High Court upheld the conclusions of the learned single judge but held  further  that the said firm was "a  stranger"  to  the proceedings before the Tribunal.  The validity of the notice was sought to be established under s. 34 as amended in  1948 and  also  by  invoking  s.  31  of  the  Indian  Income-tax (Amendment)  Act 1953, Act XXV of 1933.  In this Court by  a supplemental   statement the amendments made by the  Finance Act  of  1956  (18 of 1956) and  by  the  Indian  Income-tax (Amendment)  Act, 1959 (1 of 1959) were also brought to  our notice.  The amount involved in this case was Rs. 62,732. In  the  companion appeals the full facts of which  will  be given  in-this  judgment later the position  was  this.   In Civil  Appeal  No. 585 of 1960, notices were issued  to  the respondent   on  February  18,  1957,  in  respect  of   the assessment years 1944-45,1945-46 and 194647, as a result  of a  direction by the Appellate Assistant  Commissioner.   The notices were quashed by the Bombay High Court following  the decision  just  mentioned.  The amounts  involved  were  Rs. 14,000;  14000 and 38,000.  In Civil Appeal No. 509 of  1958 the  notice was issued in 1949 to a lady whose  husband  had remitted Rs. 9,180 to her from Bangkok in the year  relative to  the assessment year 1942-43.  She had omitted to file  a return.   In  Civil  Appeal Nos. 214 and  215  of  1958  the assessment  years were 1946-47 and 1947-48.  The  assessment of  the  respondent as individual was made on  November  17, 1953, as a result of a direction by the Appellate  Assistant Commissioner on March 20, 1953.  These assessments were held barred  under s. 34 (3) as it stood before the Amending  Act of 1953.  The amounts involved were Rs. 28,284 (1946-47) and Rs. 21,141 (1947-48). The  above are the relevant facts of the five  appeals  with which we are dealing.  We shall deal 97 with  each appeal separately later.  For the present  it  is sufficient  to  note  the  dates  of  the  assessment  years involved,,  the date of the direction (if any) issued  by  a superior  officer or Tribunal and the date of the  issue  or service  of the notices and date of the assessment, if  any, in  each  case.   This will serve to  determine  under  what amendment  or amendments the matter falls to be  considered. We  shall revert to these dates after analysing s.  34  with reference to the amendments made from time to time. In determining the effect of the provisions of the  amending Acts  and  the validating enactments contained  in  some  of them,  it is altogether more satisfactory to start with  the Income-tax  Act (hereafter the Principal Act) as amended  in 1939,  and then to proceed chronologically.  Each case  then falls for consideration in its appropriate period.   Section 34 before its amendment in 1939 provided for a period of one

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year  for bringing to tax income, profits or gains  escaping assessment  in  any year.  In 1939, the  whole  section  was substituted by another.  The material portion of it read  as follows:--               "34 (1) If in consequence of definite informa-               tion  which has come into his  possession  the               Income-tax  Officer  discovers  that   income,               profits or gains chargeable to income-tax have               escaped  assessment in any year, or have  been               underassessed,  or have been assessed  at  too               low  a  rate,  or have  been  the  subject  of               excessive relief under this Act the Income-tax               Officer  may,  in  any case in  which  he  has               reason  to  believe  that  the  assessee   has               concealed  the  particulars of his  income  or               deliberately furnished inaccurate  particulars               thereof, at any time within eight years and in               any  other case at any time within four  years               of  the end of that year, serve on the  person               liable  to pay tax on such income, profits  or               gains............ a notice......... and may 98               proceed  to assess or re-assess  such  income,               profits  or gains, and the provisions of  this               Act shall, so far as may be, apply accordingly               as  if the notice were a notice  issued  under               that sub-section."            x   x    x    x      x     x It  will  be  noticed that the  Income-tax  Officer  was  to proceed on definite information that there was an escapement of  assessment before he took action.  The section  provided two periods in which action could be taken-(1) an eight year period and (ii) a four year period.  The first was to  apply to  cases  in  which the Income-tax Officer  had  reason  to believe (a) that the assessee had concealed the  particulars of  his  income  or  (b)  furnished  inaccurate  particulars thereof.   The second was to apply in all other cases.   The terminus a quo in either case was the end of the  assessment year  and  the terminus ad quem the service of  the  notice. The section remained in force till March 30, 1948, when  the Income-tax  and  Business Profits Tax (Amendment)  Act  1948 (passed  on September 8, 1948) substituted a new section  in place of the old.  That section in so far as it is  material to our purpose read:-- "34. (1) If-               (a)  the  Income-tax  Officer  has  reason  to               believe  that  by reason of  the  omission  or               failure  on the part of an assessee to make               a  return of his income under section  22  for               any  year or to disclose fully and  truly  all               material  facts necessary for his.  assessment               for  that  year,  income,  profits-  or  gains               chargeable   to   income-tax   have    escaped               assessment for that year, or have been  under-               assessed.,  or assessed at too low a rate,  or               have been made the subject of excessive relief               under   the   Act,  or   excessive   loss   or               depreciation allowance has been computed, or 99               (b)   notwithstanding  that there has been  no               omission or failure as mentioned in clause (a)               on  the part of the assessee,  the  Income-tax               Officer  has in consequence of information  in               his possession reason to believe that  income,               profits or gains chargeable to income-tax have

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             escaped assessment for any year, or have  been               under-assessed, or assessed at too low a rate,               or  have  been made the subject  of  excessive               relief under this Act, or that excessive  loss               or depreciation allowance has been computed, he may in cases falling under clause (a) at any time  within eight  years  and in cases falling under clause (b)  at  any time within four years of the end of that year, serve on the assessee or, if the assessee 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  such income, profits or gains or recompute the  loss or  depreciation allowance; and the provisions of  this  Act shall, so far as may be, apply accordingly as if the  notice were a notice issued under that sub-section:               Provided that :-               (i)   the Income-tax Officer shall not issue a               notice  under this sub-section, unless he  has               recorded  his  reasons for doing  so  and  the               Commissioner  is  satisfied  on  such  reasons               recorded  that it is a fit case for the  issue               of such notice;               x     x     x      x               Explanation.-Production before the  Income-tax               Officer  of  account-books or  other  evidence               from  which  material  facts  could  with  due               diligence have been discovered by the  Income-               tax Officer will not necessarily amount 100               to  disclosure  within  the  meaning  of  this               section.               (2)   x     x     x     x               (3)   No order of assessment under section  23               to  which  clause (c) of  sub-section  (1)  of               section  28  a Plies or of assessment  or  re-               assessment in cases falling within clause  (a)               of  sub-section (1) of this section  shall  be               made  after the expiry of eight years, and  no               order  of  assessment or reassessment  in  any               other  case 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 sub-section               (1)  has been issued within the  time  therein               limited, the assessment or re-assessment 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 such  period               exceeds  the  period of eight  years  or  four               years, as the case may be :               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." This  new section created different conditions precedent  to action  in the two kinds of cases to which the periods of  8 and 4 years were applicable.               8   years:  Income-tax  Officer  should   have               reasons to believe  that escapement was due to               omission  or  failure  on  the  part  of   the               assessee-  101

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             (i)   to  make a return of his income for  the               year;                                   or               (ii)  to disclose fully and truly all material               facts  necessary  for  his  assessment.    The               explanation made it clear that the  disclosure               must be positive.               4  years:This  comprised all  other  cases  in               which there was no omission or failure on  the               part  of  the  assessee  but  the   Income-tax               Officer was in possession of information which               led   him  to  believe  that  there   was   an               escapement of assessment. In  both  cases  the Income-tax Officer had  to  record  his reasons  in  writing  and the Commissioner  had  to  satisfy himself that the reasons were good. The  section  as  enacted by the Amending Act  of  1948  was amended  again in 1953 by the Indian Income-tax  (Amendment) Act,  1953 which in the absence of special provision in  any section  came  into force from the 1st day of  April,  1952. Section  18  of Amending Act amended the second  proviso  to sub-section (3) which has been quoted above and it read :-               "Provided further that nothing 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 re-               assessment  made  under section 27  or  to  an               assessment   or  reassessment  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." 102 The Act also enacted a provision for the validity of certain notices and assessments.  This was section 31 which read :-               "31.   For the removal of doubts it is  hereby               declared  that the provisions  of  sub-section               (1),  (2)  and  (3)  of  section  34  of   the               principal Act shall apply and shall be  deemed               always  have applied to any assessment or  re-               assessment for any year ending before the  1st               day   of  April,  1948,  in  any  case   where               proceedings  in respect of such assessment  or               re-assessment  were commenced under  the  said               sub-sections  after the 8th day of  September,               1948, and any notice issued in accordance with               subsection (1) or any assessment completed  in               pursuance  of  such  notice  within  the  time               specified in subsection (3), whether before or               after  the commencement of the Indian  Income-               tax     (Amendment)    Act,    1953     shall,               notwithstanding  any judgment or order of  any               court,   Appellate  Tribunal   or   Income-tax               authority  to the contrary, be deemed to  have               been  validly issued or completed as the  case               may be, and no such notice, assessment or  re-               assessment shall be called in question on  the               ground  merely that the provisions of  section               34  did  not  apply or  purport  to  apply  in               respect of an assessment or re-assessment  for               any year prior to the 1st day of April, 1948." The effect of these provisions will have to be seen in cases in  which notices and assessments took place after  the  1st day of April, 1952, particularly as a result of a  direction

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such  as is mentioned in the second proviso  to  sub-section (3) of s. 34 as amended by this Act. By the Finance Act 1956, the section was again amended  from the  1st day of April, 1956.  The most  significant  changes were the omission of  103 the time-limit of eight years in sub-section (1) in  respect of  cases falling under clause (a) and the  substitution  of certain provisos to sub-section (1).  The section as amended in so far as material to our purpose is reproduced:               "34. (1) If-               (a)   The  Income-tax  Officer has  reason  to               believe  that  by reason of  the  omission  or               failure  on the part of an assessee to make  a               return of his income under section 22 for  any               year  or  to  disclose  fully  and  truly  all               material  facts necessary for  his  assessment               for  that  year,  income,  profits  or   gains               chargeable   to   income-tax   have    escaped               assessment for that year, or have been  under-               assessed,  or assessed at too low a  rate,  or               have been made the subject of excessive relief               under the Act,or excessive depreciation  allo-               wance has been computed, or               (b)   notwithstanding  that there has been  no               omission or failure as mentioned in clause (a)               on  the part of the assessee,  the  Income-tax               Officer  has in consequence of information  in               his possession reason to believe that  income,               profits or gains chargeable to income-tax have               escaped assessment for any year, or have  been               under-assessed, or assessed at too low a rate,               or  have  been made the subject  of  excessive               relief under this Act, or that excessive  loss               or depreciation allowance has been computed, he  may in cases falling under clause (a) at any time x x  x and in cases falling under (b) at any time within four years of  the end of that year, serve on the assessee, or, if  the assessee  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 such income,  profits or 104 gains  or recompute the loss or depreciation allowance;  and the  provisions  of this Act shall, so far as may  be  apply accordingly as if the notice were a notice issued under that sub-section: Provided  that  the  Income-tax Officer shall  not  issue  a notice under clause (a) of sub-section (1)-               (i)   for any year prior to the year ending on               March 31, 1941;               (ii)  for  any  year,  if  eight  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 under assessed or assessed  at  too               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

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             elapsed,  not  being a year  or  years  ending               before March 31, 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 :               Proviso   ......       (omitted)               Proviso   ......       (omitted) Explanation.-Production  before  the Income-tax  Officer  of account-books or other evidence from 105 which  material  facts could with due  diligence  have  been discovered  by the Income-tax Officer will  not  necessarily amount to disclosure within the meaning of this section. That  this  section was to operate on back period  does  not admit  of any doubt.  No clearer language could be used  for the  purpose.   The first proviso to sub-section  (1)  makes this  abundantly clear by allowing notices to be issued  ’at any  time’ for any year later than the year ending on  March 31,  1941, and then limiting action to eight years from  the end of the year in cases coming in clause (a) involving less than rupees one lakh.  Though the section came into force on April 1, 1956, it covered in this way years going right back to  1941,  of course, subject to  the  conditions  indicated there. For those cases in which there was no default on the part of the  assessee  the  period continued to  be  four  years  as before.   The  deletion of the time limit  of  eight  years, allowing  action to be taken at any time in cases  involving more  than rupees one lakh and limiting time to eight  years in   all  cases  coming  within  clause  (a)  led  to   some controversy as to whether the issuance of a notice under the section  as amended by the Amending Act of 1956  but  served beyond  eight years as laid down in the 1948 Amendment,  and the reopening of cases right back to 1941 which were subject to  a  time limit under the 1948 Amendment  which  time  had expired,  was legal.  The Calcutta High Court in Debi  Dutta Moody  v.  T. Bellan (1) held that notices  which  were  not served  within  the time limited for action under  the  1948 amendment  could  not  be  validly  served  after  the  1956 amendment which removed the time limit in certain cases.  In that case a notice was issued before but served after  April 1, 1956, when the 1956 amendment came into force. (1)  A.I.R. 1959 Cal. 567. 106 This led to the passing of an Ordinance and later the Indian Income-tax  (Amendment) Act, 1959.  This Amending Act  added sub-section (4) to s. 34 which read:--               "(4) A notice under cl. (a.) of sub-s. (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 had  expired  in               respect  of  the  year  to  which  the  notice               relates."               It also enacted by s. 4 as follows :-               "No notice issued under cl. (a) of sub-s.  (1)               of  s.  34 of the principal Act  at  any  time               before  the commencement of this ’Act  and  no               assessment,  re-assessment or settlement  made               or  other proceeding taken in  consequence  of

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             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 cl. (a) of s. 18 of the  Finance               Act, 1956, had expired." These  repeated  amendments, in so far as  relevant  to  the present   cases,  were  in  two  directions.   It  will   be remembered  that  by the Amendment of 1939  two  periods  in which  action  could be taken were  created:  an  eight-year period applying to the concealment or deliberate  furnishing of  inaccurate particulars by the assessee and  a  four-year period applying to all other cases.  The 1948 Amendment  did not make any change in these two periods but stated that the eight-year period applied also to a  107 failure  to  furnish a return.  All  other  provisions  sub- stantially remained the same.  In a case in which the return was not made, it would have been a question which of the two periods  in  the  section  as amended  in  1939  would  have applied.  The 1948 Amendment said the action could be  taken within  eight years.  Another question thus  arose,  namely, whether  the  four-year  period  as  provided  by  the  1939 Amendment which had expired applied or the eight year period as  provided  by  the 1948 Amendment.  The  answer  to  this question  depended on the further question whether the  1948 Amendment was retrospective in its operation. The  Amending Act of 1948 was passed on September  8,  1948, and  came into force from March 30, 1948.  In some cases  it has  been  held that its retrospectivity cannot  be  carried further than March, 30, 1948.  That is true in one sense but not in the sense how its provisions were to work in relation to the assessees.  The section was meant to enable the issue of  notices  with a view to re-assessing  income  which  had escaped  assessment and allowed the re-assessment of  income for back years.  It was meant to operate retrospectively for eight years in some cases and four years in others.  In  our opinion  it had retrospective operation in respect  of  back years  according to its own provisions.  It the 1948  Amend- ment could be treated as enabling the Income-tax Officer  to take  action  at  any  point of  time  in  respect  of  back assessment years within eight years of March 30, 1948,  then such  cases  were within his power to tax.  We have  such  a case  here  in  C.A. No. 509 of 1958 where  the  notice  was issued  in 1948 to the lady whose husband had  remitted  Rs. 9,180  to  her  from Bangkok in the  year  relative  to  the assessment  year  1942-43.   That  lady  was  assessable  in respect  of this sum under s. 4 (2) of the  Income-tax  Act. She  did not file a return.  If the case stood  governed  by the 1939 Amendment the 108 period applicable would have been four years if she had  not concealed the particulars of the income.  She had of  course not  deliberately furnished inaccurate particulars  thereof. If  the  case was governed by the 1948 Amendment  she  would come  within the eight-year rule because she had  failed  to furnish  a return.  Now, we do not think that we  can  treat the  different periods indicated under s. 34 as  periods  of limitation, the expiry of which grant prescriptive title  to defaulting  tax-payers.  It may be said that  an  assessment once made is final and conclusive except for the  provisions

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of  ss. 34 and 35 but it is quite a different matter to  say that a "vested right" arises in the assessee.  On the expiry of the period the assessments, if any, may also become final and  conclusive but only so long as the law is  not  altered retrospectively.   Under the scheme of the Income-tax Act  a liability  to  pay  tax is incurred when  according  to  the Finance Act in force the amount of income, profits or  gains is  above the exempted amount.  That liability to the  State is  independent  of any consideration of time  and,  in  the absence of any provision restricting action by a time limit, it  can  be enforced at any time.  What the law does  is  to prevent  harassment  of  assessees to the  end  of  time  by prescribing  a  limit of time for its own officers  to  take action.   This limit of time is binding upon  the  officers, but  the  liability under the charging section can  only  be said  to  be unenforceable after the expiry  of  the  period under  the  law as it stands.  In other  words,  though  the liability  to pay tax remains it cannot be enforced by.  the officers  administering the tax laws.  If the disability  is removed  or  according  to a new law a  new  time  limit  is created   retrospectively,  there  is  no  reason  why   the liability  should not be treated as still enforceable.   The law does not deal with concluded claims or their revival but with  the  enforcement  of a liability to  the  State  which though  existing remained to be enforced.  This  aspect  was admirably summed up by 109 Chakravartti,  C.J., (Sarkar, J., concurring) in  Income-tax Officer v. Calcutta Discount Co. Ltd. (1) as follows :-               "The  plain effect of the substitution of  the               new  Section  34  with effect  from  the  30th               March,  1948,  is  that  from  that  date  the               Income-tax Act is to be read as including  the               new section as a part thereof and if it is  to               be so read, the further effect of the  express               language  of  the section is that  so  far  as               cases coming within clause (a) of  sub-section               (1) are concerned, all assessment years ending               within eight years from the 30th March,  1948,               and  from  subsequent dates,  are  within  its               purview  and it will apply to  them,  provided               the  notice contemplated is given within  such               eight  years.  What is not within the  purview               of  the  section is an assessment  year  which               ended before eight years from the 30th  March,               1948." We entirely agree with these observations and in our opinion after  the  passing of the 1948 Amendment  which  came  into force  on March 30, 1948, the Income-tax Officer could  take action  in  all cases in which the  assessment  years  ended within  eight years of the date of his action and  in  which there  was  an escapement of-an assessment for  the  reasons indicated in cause (a) of the section as amended.  In  other words,  action could be taken retrospectively in  the  cases indicated by Chakravartti, C..J. If there be any doubt about the powers of the Income-tax Officer the validating  section passed in 1953 (S. 31) quite clearly indicates that  section 34 as amended in 1948 was to be read in this manner. We  come  now to the next amendment in 1956.  It  created  a change of a far-reaching character by removing the limit  of time for action where the sum likely to be taxed amounted to rupees one lakh or (1)  [1953] 23 I.T. R. 471, 482. 110 more either for a single year or for a group of years  going

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back to the year ending on March 31, 1941.  These cases were governed  by the eight-year rule under the  1948  amendment. In other words, the eight-year period was retained for cases involving less than one lakh of rupees and the limit of time was removed for those cases in which the amount involved was one  lakh  rupees  or more.  We are not  concerned  at  this moment  with the sanctions necessary before action could  be taken.   That  is  a separate matter.  If  no  sanction  was obtained  then the notice would be bad for that  reason  but not  on  the ground of a limit of time.  What we  have  said above  about the amendment of 1948 applies mutatis  mutandis also  to the amendment of 1956.  That provision was also  to operate  retrospectively as has been stated by  us  earlier. There is good reason to think that this is the correct  view because  when  the  Calcutta High Court in  the  Debi  Dutta Moody’s  (1)  case  held that the  1956  amendment  was  not applicable  to  the cases, Parliament passed  the  1959  Act nullifying that decision.  By the same Act, Parliament  gave power  to issue a notice at any time in all these  cases  in which  the eight-year period under the principal Act  as  it stood  prior to the 1956 Amendment had expired.   The  words "at  any  time"  mean what they say.  There  is  no  special meaning  to be attributed to them.  "’Any time"  thus  meant action  to  be taken without any limit of time.   A  similar result was reached in certain cases under the 1953 Amendment of the second proviso to sub-section (3) of section 34.   It provided  : nothing in the section limiting the time  within which  any action may be taken shall apply 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 already mentioned.  This proviso was challenged under Article 14 of the  Constitution but  that  is  a  different  matter.   If  the  section   is constitutionally enacted then it also means (1)  A.I.R. 1959 Cal. 567.  111 what  it  says.  It is hardly possible  to  imagine  clearer language than the one used.  It says that the limit of  time mentioned in section 34 is removed in certain cases, that is to say, action can be taken at any time in these cases.   In our judgment, each case of a notice must be judged according to  the  law existing on the date the notice was  issued  or served, as the law may require.  So long as the notice where the  notice  is in question, and the assessment,  where  the assessment  is in question, are within the time  limited  by the law, as it exists when the respective actions are taken, the actions cannot be questioned provided the law is clearly retrospective.  The only case in which no further action can be taken is one in which action was not taken under the  old law  within the period prescribed by that law and  which  is not  also within the period mentioned in the new law if  its operation is retrospective.  All other cases are covered  by the  law in force at the time action is taken.  It  is  from these view points that these appeals, in our opinion, should be judged. We  shall  now take up first this appeal and later  in  this judgment  the  other appeals separately and  deal  with  the special   points  raised  in  them.   In  this  appeal   the assessment  year in question was 1942-43.  We  have  already described how the firm "Purshottam Laxmidas" was held to own the firm "Vasantsen Dwarkadas".  The final order in the case was made by the High Court on October 8, 1953.  By that date the period of time prescribed by s. 34 of the principal  Act as amended in 1948 had expired.  But s. 34 of the  principal Act  was amended by the Indian Income-tax  (Amendment)  Act,

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1953, from April 1, 1952.  The action in the case was  taken on April 30, 1954, after the amendment.  The second  proviso to  sub-section (3) of s. 34 was by then amended to  provide that  nothing in the section limiting the time within  which action might be taken, was to apply to an assessment or  re- assessment made 112 on  any  person in consequence of or to give effect  to  any finding or direction contained in an order under s. 66.   of course,  if  the  law as it stood prior  to  this  amendment applied the time for action would have expired in 1951,  and any action on April 30, 1954, would have been clearly out of time.   But the Income-tax Officer derived his  jurisdiction from the second proviso and that made S. 34 applicable with- out the limit of time.  There was also s. 31 of the Amending Act  of 1953, which made s. 34 of the principal  Act  (which meant the Income-tax Act as amended till that date including the  amendments  made  by the Amending Act of  1953  in  the second  proviso to s. 34(3) ), applicable to any  assessment or re-assessment for any year ending before April 1,   1948, where proceedings were commenced after  September  8,  1948. It also saved all notices     issued  or  assessments  made, whether before or after the commencement of the Amending Act of 1953 (1-4-1952) from the attack that the provisions of s. 34  (as  amended  up  to  1-4-1952)  did  not  apply  to  an assessment  or re-assessment for any year prior to April  1, 1948. The  effect of the amendment of the year 1953 on  this  case may be stated shortly thus : The assessment year being 1942- 43,  the  notice  under s. 34 had to issue in  1951  at  the latest.   After that year notice could not issue unless  the limit  of time was increased or removed.  But the fact  that the notice could not be issued after 1951 did not clothe the assessee  with  a  right not to pay the  tax  if  it  became legally  claimable again.  If the law conferred a  power  on the  income-tax  Officer  to  deal with  such  a  case,  the assessee would again be exposed to proceedings, provided  it said in clear terms that the law was retrospective.  This is what the law did in precise and clear terms.  In 1953 an Act was  passed amending s. 34 which enabled action at any  time if there 113 was a finding or direction of the character indicated in the second proviso to sub-s. (3) of s. 34.  Section 31 also made this  position  clear by applying the amended s. 34  to  all assessments commenced after September 8, 1948, and saved all notices  issued and assessments made in respect of any  year prior  to April 1, 1948, whether the notices were issued  or the assessments were made before or after April 1,1952. The  Department in this case had relied on the Amending  Act of  1953  before  the High Court.   Though  the  High  Court considered the case from the angle of the second proviso  to sub-s.   (3)   of  s.  34  and  also  struck  it   down   as unconstitutional  it did not take into consideration s.  31. It  was  argued  before us that we cannot take  s.  31  into account if it was not referred to by the High Court.  But  a Court is required to take judicial notice of statutes and if s. 31 of the Act of 1953 said that sub-ss. (1), (2) and  (3) of  s.  34  of the principal Act (including  of  course  the amendments as made by the 1953 Act) shall apply and shall be deemed  always  to  have applied to any  assessment  or  re- assessment for any year ending before April, 1948, it is the duty of Courts and Tribunal to read s. 34 in that manner and in  no  other.  In our opinion it was not open to  the  High Court  to  read  s.  34 without  s.  31  which  contained  a

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legislative construction and made s. 34 retrospective.  This omission has vitiated the High Court’s reasoning. To-day  we  are  faced with the  provisions  of  the  Indian Income-tax  (Amendment)  Act, 1959.  These  provisions  have already  been set out by us.  Section 4 of the Amending  Act of  1959  precludes  Courts and Tribunals  from  calling  in question notices and assessments made even though ’the  time within  which  that  action was taken  was  more  than  that prescribed by the principal Act as amended in 1948. 114 Mr.  Palkhivala raised five propositions in connection  with the  1959  Act which were applied mutatis  mutandis  to  the Amending  Acts  of 1953 and 1956 by other  learned  counsel. These  five  propositions  were intended to  show  that  all amendments  in the time limit by the various  amending  Acts were  meant  to operate on assessment  years  following  the commencement  of the Acts and not on back  assessment  years which  continued to be governed by the old  provisions.   He also  contended that even if an assessment year  was  within the  time  indicated in the new law, the new law  could  not take  note of it, if under the old law that assessment  year was  out  of time.  He also contended  that  the  validating sections operate on the assessment years between the Act  as amended  by the last preceding amendment and the  validating section.  Thus according to him s. 4 of the Amending Act  of 1959  operated  to  validate action  taken  after  the  1956 amendment  and sub-s. (4) introduced in s. 34 operated  from the  date of introduction.  Mr. Palkhivala tried to  support these  contentions  by  a  textual  interpretation  of   the sections,  the  history  of legislation on  the  subject  of income,  profits  and  gains escaping  assessment,  and  the marginal notes to the sections.  What lie argued in relation to the 1959 Act was applied with suitable adaptations in the interpretation of the amendments of 1948, 1953 and 1956. To  begin  with  we  do not accept  the  contention  of  Mr. Palkhivala  that s. 4 of the 1959 Act is retrospective  only up  to 1956.  That section is of course retrospective up  to that  year  but it operates on notices issued  even  earlier than  the  Act  of  1956 or in other  words  in  respect  of assessment  years  prior to March 31, 1956.  There  is  good reason  to think that it covers all the period between  1941 and  1959.   Since  it is conceded that it  does  cover  the period 1956-1959, all that we have to consider is whether it covers  the  period 1941-1956.  For this purpose,  we  shall analyse the section into its component parts.  115 The  section first says: "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, re-assessment............  made......... in  consequence  of such notice".  This means that it is speaking of all notices issued  earlier  than  the enactment of  the  1959  Act  and assessments made as consequence.  The section sets no  limit to  the time but says "at any time".  By the  words  (clause (a)  of  sub-s. (1) of s. 34 of the principal  Act"  and  by defining "principal Act" to mean the Indian Income-tax  Act, 1922,  the Act refers to the Income-tax Act as amended  till then.   The  section  then  says  that  such  a  notice   or assessment  made  in  consequence, shall not  be  called  in question  on the ground that the time prescribed for  action under  the section as it stood before the amendment of  1956 had expired.  This clearly shows that it meant to operate on cases  which  would be governed by the 1948  Amendment  even though  the time limit prescribed by the 1948 amendment  had expired  and that the notices and the assessments made as  a

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consequence, were to be saved. Now the changes made by the 1956 amendment were two: (a) the eight  year  limit was to operate in all  cases  falling  in clause (a) of sub-s. (1) under the 1948 amendment but  under the  1956 amendment it was not to apply to  cases  involving Rs. one lakh or more.  This power could not be exercised for any year prior to the year ending on March 31, 1941 and  (b) the satisfaction of the Board had to be obtained before  the Income-tax Officer could take action. By  the  validating section 4 of the 1959  Act,  any  notice issued before 1959 could not be challenged even if under the 1948 Act they would be out of time.  The Amending Act  cured not  a  defect  arising under the  1956  amendment  but  one arising under the 1948 amendment.  It is impossible to  say, as contended, that the last words of s. 4 of the 116 Amending Act of 1959 limit retrospectivity only up to  1956, even   though  the  words  are  "at  any  time  before   the commencement  of this Act." Further, by sub-s. (4) added  to s.  34, the Amending Act gave power to issue  fresh  notices which under the 1948 amendment would have been barred.   The sub-section reads :-               "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." The  last words definitely refer to an year which  would  be governed by the 1948 amendment. This  is  a law made in 1959 and it speaks  of  notices  not complying with the time limit as prescribed by the 1948 Act. To  test whether the retrospectivity goes back only to  1956 we  can  look  at the matter this way.  The  time  limit  in clause (a) of s. 34 (1) for all cases was eight years  under the  1948 amendment.  The years on which the 1948  amendment which  came.  into force on  30-3-1948  operated  admittedly included  the year 31-3-1948 to 31-3-1949 as the first  year and  so  on  till  the 31-3-1956  to  31-3-1957.   The  1956 amendment  came  into force on 1-4-1956.   Working  backward from 1959 for eight years we come to 1951.  The years  1951- 1952 to 1955-56 admittedly were governed by the 1948 Act and were  still  within  the eight-year period  under  the  1948 amendment (if it applied) till 31-3-1960 to 31-3-1961.   The years  1956-59 were within time because there was either  no limit  or a limit of eight years which would give  room  for action till 1964-1967.  Where was the need for the  117 validating provisions or the addition of sub-s. (4) of s. 34 in  1959  ? Action under the 1948 amendment could  be  taken till  the  year of assessment 1951-52  and  all  intervening assessment  years  till  the year  ending  March,  31  1956. Similarly  action  under the 1956 amendment could  be  taken till 19651968 in respect of years 1956-57, 1957-58 and 1958- 59.  This is true of all cases under the  eight-years  limit whether   provided  by  the  1948  amendment  or  the   1956 amendment.   The  validating section was hardly  needed  and sub-s.  (4)  added to s. 34 not at all.  It  is,  therefore, quite   clear  that  the  construction  suggested  for   the respondent cannot be accepted and the two provisions in  the 1959 Act mean what they say. It will, however, be noticed that though the time limit  was removed  there  was  no validation in  respect  of  want  of

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sanction  by the Board of Revenue in cases above rupees  one lakh.  In cases started between 1956-1959 the Commissioner’s sanction  in  cases below rupees one lakh  and  the  Board’s sanction in cases above rupee, one lakh was needed.  But the Commissioner’s  sanction  was  needed even  under  the  1948 amendment.   So all cases in which there was  Commissioner’s sanction  would  be validated unless the case  required  the Board’s  sanction.  Such cases would be those  above  rupees one lakh and in view of the removal of the time limit by  s. 34 (4) it was possible to issue fresh notice after obtaining the  sanction.   In this way the continuity of the  law  was obtained.   It had earlier been achieved in 1953 when  there was  a  changeover  from  the 1939  amendment  to  the  1948 amendment.   What  we  have said here  repels  an  identical argument on the 1953 amendment. Where the language of an enactment is clear there is  hardly any  need to go to the marginal note or the history  of  the law  before the amendment.  Even if the history be  examined one thing is quite 118 clear.   It is that at intervals the Indian Legislature  and Parliament have been at pains to save notices issued to, and assesments  made on, defaulting tax-payers and have  enabled fresh  action to be taken and saved notices  and  assessment out of time. The provisions made in 1959 were not present before the High Court.  The High Court decided this case in 1956 but we must take notice of them and give effect to s. 4 thereof.  In any case,  the provisions of s. 34, as amended by  the  Amending Act of 1953 read with s. 31 of that Act, were sufficient  to save notice issued against the firm of "Purshottam Laxmidas" unless  the amendment to the second proviso to s. (3) of  s. 34 was unconstitutional.  We are of opinion that the proviso was not unconstitutional and we shall give our reasons in  a latter part of this judgment.  That is a matter which can be dealt with separately. In  our  judgment  notice against the  firm  of  "Purshottam Laxmidas"  was  validly  issued  under  the  amended  second proviso  to s. 34 (3) and its validity cannot be  called  in question in any Court or Tribunal in view of the  provisions of  s. 4 of the Amending Act of 1959.  We  would  therefore, allow Civil Appeal No. 705 of 1957.        C. A. No. 509 of 1958. We have already referred to this appeal by the  Commissioner of  Income-tax,  Madras.  The respondent  is  a  lady  whose husband  resided in Bangkok between September 1940 and  July 1947.   In the year relative to the assessment year  1942-43 he  remitted through his agent in India a sum of  Rs.  9,180 for  payment  to  the respondent.  The  respondent  did  not submit  a  return  of this sum which was deemed  to  be  her income  under s. 4 (2) of the Income-tax Act.  In  the  year 1949, a notice was served on her under s. 34 of the  Income- tax Act as amended by the Amending 119 Act of 1948.  The question was whether the amendment of 1948 applied  to the notice.  The Tribunal held that it  did  but the  High Court of Madras took the contrary view,  According to the High Court the period of four years was applicable to her  case  under the Income-tax Act as amended in  1939  and that period expired on 31-3-1947 and the 1948 amendment  did not  revive  the right to take action which had  died.   The Amending Act of 1953 (Act 25 of 1953) had come into force by the time the High Court decided the case (22-2-1956) and  s. 31 of that Act was brought to the notice of the High  Court. The High Court however held that the validity of the  notice

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had to be tested with reference to the law existing on  July 25,1949,  when  the notice was issued and the  Act  of  1953 could not be taken into account. We  have  already shown why the decision of the  High  Court cannot  be sustained.  The action was taken after  the  1948 amendment  by  which  income, profits and  gains  which  had escaped  assessment by reason of the omission or failure  of the assessee to make a return of the income could be brought to  tax after serving a notice within eight years  from  the end  of  the  relevant year.  Here the notice  in  1949  was within  eight  years from 1942-43 and  was  validly  issued. Even if an omission or failure to make a return was governed by  the  four-year  period under  the  1939  Amendment,  the assessee  did not get immunity except if no fresh  power  to bring to tax such special income was created.  Such a  power to tax was brought into being by the 1948 Amendment and  the notice being within the fresh eight-year period was  validly issued.  In our judgment the order of the High Court  cannot be upheld.  We would, therefore, allow the appeal.         C.A. No. 585 of 1960. The  assessee in this appeal (Jagannath Fakirchand)  is  the manager of a Hindu undivided family. 120 He  was  assessed as karta for the assessment  year  194445, 1945-46  and 1946-47.  These assessments were  completed  in 1949  and  1950.   Later those cases were  remanded  by  the Appellate   Assistant  Commissioner.   In  respect  of   the assessment  year 1945-46 a notice under s. 34 (1)  was  also issued but it was withdrawn.  Some of these cases are  still pending but we are not concerned with them. The  assessee filed a suit against one Jagannath Ram  Kishan for rendition of accounts as a munim.  Jagannath Ram  Kishan claimed  to be a partner.  The suit was dismissed as it  was not proved that Jagannath Ram Kishan was a munim.  Jagannath Ram  Kishan died and his widow Kalavati was  substituted  as legal representative.  The Income-tax Officer issued notices under s. 34 (1) to Kalavati for the assessment year 1944-45, 1945-46  and 1946-47.  In the appeals arising therefrom  the Appellate  Assistant  Commissioner  held that  there  was  a partnership  between  Jagannath Ramkishan and  the  assessee which lasted till August 26, 1945, and directed the  Income- tax Officer to assess the partnership.  Notices under s.  34 were  then issued on February 18, 1957, to  the  partnership and  also  to Jagannath  Fakirchand.   Jagannath  Fakirchand filed  a  petition under Article 226/227 in the  High  Court contending that the notices were out of time and the  second proviso to s. 34 (3) was unconstitutional.  The Bombay  High Court following its decision in the previous case,  accepted both the contentions.  The sums involved in these cases were Rs.   14,000;  14,000  and  30,800  for  the   three   years respectively. The  assessment in this case was the result of  a  direction and  the second proviso to s. 34 (3) as amended in 1953  and s.  31 of the Amending Act of 1953 governed this case.   The notice  is  also  further saved by  the  provisions  of  the Amending  Act of 1959 as it was issued after 1956  (February 18, 1957).  It was 121 not  contended before us that these provisions do not  apply to  a  notice  given  after  April  1,  1956.  In  fact  the contention  was that the provisions of the 1959  Act  enable notices  to be sent out at any time after 1956 and  validate all  notices so sent.  In view of what we have held in  this appeal,  Civil Appeal No. 585 of 1960 must be  allowed.   We would,  therefore, allow this appeal.  We may  mention  here

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that  in this case also the second proviso to s. 34  (3)  as amended  in  19’03 was declared  unconstitutional.   In  our opinion  that decision cannot be upheld.  We shall give  our reasons presently.         C.A. Nos. 214 and 215 of 1958. These appeals arise out of the judgment of the High Court on a reference on the question:               "Whether having regard to the return dated the               7th March, 1951, by Sardar Lakhmi Singh in his               individual  capacity and to the provisions  of               section 34 (3), the assessment made on him  on               the 27th November, 1953, is validly made?" The  assessments  are  for the years  1946-47  and  1947-48. Lakhmir  Singh was the son of one Nechal Singh and  the  two used  to be assessed as a Hindu undivided family.  From  the assessment year 1944-45 two separate returns were filed  and claimed  under s. 25A of the Income-tax Act was made.   This claim  was rejected but there was an assessment  of  Lakhmir Singh  as  an individual out of abundant  caution.   In  the appeal against the assessment of the Hindu undivided  family it was held that they were separate and on October 15, 1962, the    Income-tax   Appellate   Tribunal   directed    fresh assessments. For  the assessment year 1946-47 three returns  were  filed. Lakhmir Singh’s return was voluntary and was filed on  March 15, 1951.  Another return 122 was filed by Nechal Singh.  A third return under protest was filed  on  March 9, 1951, by Nechal Singh on behalf  of  the Hindu undivided family, showing income "’nil".  On March 15, 1951, the Hindu undivided family was assessed by the Income- tax  Officer by grossing up the income as disclosed  in  the returns filed by Lakhmir Singh and Nechal Singh as  ’indivi- duals.’ The voluntary return of Lakhmir Singh as  individual remained  on  file.   There  was  an  appeal  by  the  Hindu undivided  family  and the assessment was set aside  by  the Appellate  Assistant  commissioner on March  20,  1953,  who directed assessment of Lakhmir Sigh as an individual.   This was  done  on  November 17, 1953, on  the  voluntary  return already  filed  by him.  On appeal by Lakhmir Singh  it  was contended that the assessment was barred under the unamended second proviso to s. 34 (3) which provided a period of  four years.  The appeals were dismissed as it was held that there was no limitation for an assessment under s. 31 (3) in  view of  the new proviso.  The High Court held on reference  that the  Amending Act of 1953 did not apply and the  assessments were  barred under the unamended s. 34 (3) as the  amendment came  into force on April 1, 1952, after the assessment  was barred already.  The 1947-48 assessment was also held barred for the same reason.  No reference was made to s. 31 of  the Amending Act of 1953. The  Department contended before us that the assessment  was valid under s. 31 of the Act 25 of 1953 and that the amended proviso  applied.  Section 31 applied the amended s.  34(1), (2)  and  (3) of the Income-tax Act to assessments  and  re- assessments  for  any year ending before 1st day  of  April, 1948,   in  which  the  proceedings  were  commenced   after September 8, 1948.  It was contended by the assessee  before us  that  the section cannot apply because (a)  it  was  not relied  upon  before the High Court and (b) that  there  was nothing to show that the proceedings 123 commenced after September 8, 1948. We  shall first consider whether the questions  referred  to the  High  Court embraced the application of s.  31  of  the

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Amending Act of 1953.  These questions in the two references were :               Whether  having  regard to  the  return  dated               March 7, 1961, by Sardar Lakhmir Singh in  his               individual  capacity and to the provisions  of               section  34(3), the assessment made on him  on               the November 27, 1953, is validly made ?               and Whether having regard to the return  dated               14-1-1952  by  Sardar  Lakhmir  Singh  in  his               individual  capacity and to the provisions  of               section  34(3) the assessment made on  him  on               27-11-53 is validly made ? In  both the questions emphasis is placed upon the  date  of the  assessment and the date of the return.’ The return  for the  year 1946-47 was filed on March 15, 1951, and that  for the  year  1947-48 on January 14, 1952.  The  assessment  in either case was made on November 27, 1953.  The returns were filed after September 8, 1948, and the assessments were made after  the amendment of the second proviso to section  34(3) by removing the limit of four years in it. It must be  noted that  the  returns  filed by Lakhmir  Singh  were  voluntary returns.   Till  that  time the Department  had  refused  to recognise  the ’individual’ status claimed by Lakhmir  Singh and  Nechal Singh under s. 25A of the Principal Act.   These assessees  had  also filed tinder protest  returns  for  the Hindu undivided family. The questions as framed refer to the provisions of S.  34(3) of  the  Income-tax Act.  They also mentioned  two  sets  of dates: namely, the dates of the returns (7-3-1951 and  14-1- 1952) and the date of the 124 assessment (17-11-1953).  Now we know that before the  first day  of  April,  1952,  there  was  a  four-year  limit  for assessments  or re-assessments under sub-s. 3 of s.  34  but thereafter that limit was removed by the proviso added by s. 18 of the Amending Act of 1953 and by s. 31 of the same  Act assessments  made  before or after the commencement  of  the Amending  Act  of  1953 (1-4-1952) were  declared  valid  if proceedings commenced after September 8, 1948.  The question as framed cannot be answered without reference to s. 31  and even if parties did not bring it to the notice of High Court it  was  the  duty  of  the High  Court  to  look  into  the validating  provisions of s. 13.  If the High Court did  not we know of no rule or decision of this Court which  prevents us from looking into a validating provision which existed at the time of the High Court’s decision and was overlooked  by it and which by itself furnished the answer to the  question propounded  for the opinion of the High Court.  No  decision of this Court lays down that in determining the true  answer to a  question referred under s. 66, this Court is  confined only  to  those sections to which the Tribunal or  the  High Court referred.  Indeed, there are many cases which say  the contrary: see Kusumben Mahadevia v. Commissioner of  Income- tax Zoraster & CO. V. Commissioner of Incometax   and    the recent case of Scindia Steam Navigation Co. v.  Commissioner of Income-tax (3).  We must,  therefore, look into s. 31  to determine these appeals. It  remains  only to consider now  whether  the  proceedings commenced after September 8, 1948.  The application of s. 31 depends on this circumstance.  Here the facts are plain  and admit  of no doubt whatever and the complaint that there  is no finding is of no avail.  The voluntary returns were filed in  1951 and 1952, twenty-nine and thirty-nine months  after the datum line mentioned in s. 31.  These returns were filed with returns for the Hindu un-

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(1) [1960] 3 S.C.R. 417. (2) [1961] 1 S.C.R. 210, (3) [1961] 42 I.T.R. 589.  125 divided  family which were, filed under protest.   A  return tan  be  voluntary only if no action has been taken  by  the Department.  The Department, till the success of the  appeal by  the Hindu undivided family ignored the returns filed  as individuals.   There could not have been and there  were  in fact no proceedings against Lakhmir Singh in his capacity as an individual till he himself filed his returns in 1951  and 1952.   In  our opinion it is futile to contend  that  these admitted facts required a finding or that the foundation for the  application  of s. 31 of the Act of 1953 was  not  laid down  in these appeals.  In our judgment the High Court  was not  right in the answer it gave to the two questions  which ought to have been answered against the assessee.  We would, therefore,  allow these two appeals.  It may be pointed  out that   in   these   appeals  also  the   question   of   the constitutionality  of  the second proviso to s. 34  (3)  was raised but the High Court refrained to give its decision. Before dealing with this question we wish to say a few words about  the well-known principle that subsequent  changes  in the period of limitation do not take away an immunity  which has  been  reached under the law as it was  previously.   In this  sense statutes of limitation have  been  picturesquely described  as  "’statutes of repose".  We were  referred  to many  cases in which this general principle has been  firmly established.  We do not refer to these cases because in  our opinion it is somewhat inapt to describe s. 34 with its many amendments and validating sections as a "section of repose". Under  that section there is no repose till the tax is  paid or  the  tax  cannot be collected.  What  the  law  does  by prescribing certain periods of time for action is to  create a  bar against its own officers administering the  law.   It tries to trim between recovery of tax and the possibility of harassment  to an innocent person and fixes a  duration  for action from these two points of views.  These periods 126 are occasionally readjusted to cover some cases which  would otherwise  be  left  out and  hence  these  amendments.   An assessment can be said to become final and conclusive if  no action can touch it but where   the language of the  statute clearly   reopens  closed  transactions  there  can  be   no finality.   We would not raise these prescribed  periods  to the  level of those periods of limitation which  confer  not only immunity but also give titles by the passage of time. The  attack on the second proviso to sub-s. (3) of s. 34  is threefold.  It is contended that (a) it deprives a party  of the  ordinary  period of limitation (b) it  results  in  the prejudging of the merits of a case before the party is heard and  (c) there is discrimination between a stranger  to  the proceedings  in  which a finding or direction is  given  and other  persons about whom there is no finding or  direction. It is said that the latter are protected by "a rule of limi- tation"  but  not  the former.  The  finding  also  is  cha- racterised as without authority of law and thus  inoperative on  the ground that a finding in respect of other  years  or other persons is not possible under the Income-tax Act.   In support of the plea of discrimination reliance is placed  on Surajmal  Mohota  v.  A.  V.  Vishwanath  Sastri  (1),  Shri Meenakshi Mills Ltd.  Madurai v. A.V. Vishwanath Sastri (2 ) and  M. C. Muthiah v. Commissioner of Income-tax  (3).   The other   side  relies  on  A.   Thangal  Kunju  Musaliar   v. M.Venkitachalam Potti (4).

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Before  dealing  with  the contentions  raised  we  find  it necessary  to say a few words about the manner in which  the problem  of discrimination should be approached.   One  must first  find  out the object of the  impugned  provision  and compare  it  with the topic of legislation and then  try  to discover  if  there is a connection between the  two  and  a reasonable  basis for making a difference between  different classes of persons affected by the law, in keeping with  the topic (1)  [1955] 1 S. C. R. 448. (3)  [1955] 1 S. C. R. 787. (2)  [1955] 2 S. C. R. 1247. (4) [1955] 2 S. C. R. 1196. 127 of   legislation  and  the  object  of  the  enactment.    A difference  which is aimless, arbitrary or unreasonable  and which  is unconnected with the object in view must remain  a discrimination and incapable of being upheld.  In all  cases in which laws were struck down under Article 14 this was the approach.   It is hardly necessary to refer to the  previous cases because each provision to be tested, must be tested in its own setting and no two cases can be alike. We  are  dealing  here with a  distinct  class  of  persons, namely,  those whose tax liability has not  been  discharged for  one reason or another.  Some escape payment of tax  not because  they  have  omitted  or  failed  to  make  a   true disclosure  but  because  in spite of their  full  and  true disclosure  some portion of the income  escapes  assessment. For such persons there is a smaller period for assessing the escaped income.  But those who are guilty of an omission  or failure  or  who give incorrect particulars or  conceal  the particulars of their income must stand exposed to action for a  longer time.  The difference between these two  cases  is understandable.   Those  who  are  deliberately  in  default generally  cover  up  their action and it  takes  longer  to detect them and open proceedings against them.  They  cannot be  allowed to say that theirs is a case on par with  a  man who  acts innocently.  The section also draws a  distinction between  two more classes one above rupees one lakh and  the other below it.  In the former there is no limit of time ex- cept  that the income-tax officer cannot go beyond the  year ending  on  the March 31, 1941, arid that he must  take  the sanction  of the Board of Revenue.  In the other  cases  the Income-tax  Officer can take action within eight  years  and must  obtain  the sanction of his Commissioner.   These  two distinctions have never been challenged as discriminatory. What  is  challenged  is  the  provision  that  if  in   the assessment  proceedings  against  A there is  a  finding  or direction against B, proceedings can be started 128 against  B  at  any time while the  time  limit  for  action otherwise is either four years or eight years.  But it  must be  remembered that the law is dealing with the  subject  of tax  evasion.  No uniform system applicable to all kinds  of defaulters can be made.  The methods of tax evaders are both ingenious  and  varied.  One such method is to  confuse  the issue  by  mixing up incomes, profits and gains  of  several parties so that the income of A may appear to be the  income of B or of A B. There is of course always the chance that it may not be discovered to be the income of either A or B or A B. The cases with which we have dealt are admirable examples of  such  actions.  Whether the firm  "Vasantsen  Dwarkadas" belonged to its three partners, or to Dwarkadas alone or  to the firm "Purshottam Laxmidas"; whether Jagannath  Ramkishan was a munim of Jagannath Fakirchand or his partner;  whether

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Lakhmir Singh or Nechal Singh from a Hindu undivided  family or were seperate are questions the answers to which may  not be  known till some Court or Tribunal finds the  true  facts and  there  is no reason why a law should not be  framed  in such a way as to give more time for action.  If A keeps  his money  with B and this fact is discovered in the  assessment proceedings against B and a finding to that effect is given, a situation arises in which the law thinks that A should  be brought  to  book even though, if action  against  him  were commenced  in  the ordinary way,-it would have been  out  of time.   The  finding does not hurt A. He need not  be  heard before  the finding is given because he is heard in his  own proceedings and the finding given earlier does not bind him. All  that happens is that he is faced with an inquiry  which he  would  have  avoided  if the true  facts  had  not  been discovered.   He would have faced an inquiry if  the  matter had  been  discovered earlier independently of  the  finding within a shorter period. He now faces   the same enquiry but without the limit of time.    He  need not  compare  himself with others but     only with himself. The  different  129 treatment  arises  under different  circumstances  and  they serve  the object which is to bring to tax the  tax  evader. In this connection, reference may be made to the decision in A.  Thangal  Kunju Musaliar v. M.  Venkitachalam  Potti  (1) where  two classess of tax evaders contemplated by s. 47  of the   Travancore  Income  Tax  Act  XXIII  of  1121,   which corresponded to s. 34 (1) of the Income-tax Act as it  stood before  the  amendment  of  1948, and by s.  5  (1)  of  the Travancore Taxation on Income (Investigation Commission) Act XIV  of  11 24, were held to be different  classes  and  not falling  within the same category on the ground that  action against  the  former class could be taken on  the  basis  of definite  information coming into possession of the  Income- tax  Officer that income had escaped, while, in the case  of the  latter,  the Government could refer the  cases  to  the Commission  on  finding prima facie reason to  believe  that they had evaded payment of tax to a substantial amount.  The persons  who came under s. 34 (1) (a) of the Income-tax  Act after  the amendment of 1948 are those in respect  of  whose income the Income-tax Officer has reason to believe that due to  certain conduct on their part their income  has  escaped assessment,  while action can be taken against  the  persons contemplated  by  the second proviso to sub-s.  (3)  against those  persons  alone with respect to whose  escaped  income some  authority  had given a finding or  directions.   These latter  persons  would therefore correspond to  the  persons contemplated  by  s. 47 of the  Travancore  Income-tax  Act, while  the  other tax evaders contemplated by s. 34  (1)  as amended in 1948 would correspond to persons contemplated  by s.  5  (1) of the Investigation Commission Act.  We  see  no reason to hold that the second proviso to s. 34 (3)  offends Article 14. In  the result, as we have already said, we would allow  all these appeals.  We would also grant costs of the  appellants both here and in the High (1)  [1955] 2 S.C.R. 1196. 130 Court in C. A. No. 585 of 1960 and C. As.  No#. 214 and  215 of  1958  but in view of the undertaking given in  the  High Court  by the Department the appellants in C. A. No. 705  of 1957   shall  bear  the  costs  of  the  first  and   second respondents in this Court and also in C. A. No. 509 of  1958 we  would make a similar order in view of the order of  the, High Court granting the certificate.

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By COURT : In accordance with the opinion "of the  majority, the  appeal  is allowed.  The appellants will pay  costs  of respondents  1 and 2 as per consent of the parties  referred to in the certificate, granted by the High Court.                                          Appeal allowed.