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PETITIONER: COMMISSIONER OF INCOME-TAX,MADRAS

       Vs.

RESPONDENT: JANABHA MUHAMMAD HUSSAINNACHIAR AMMAL

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 1401            1964 SCR  (1) 137

ACT: Income-tax-Escaped  income-Failure to submit  return--Notice to reassess-Validity-Retrospective operation--Indian Income- tax  and Business Profits Tax (Amendment) Act, 1948  (48  of 1948),  s. 8-Indian Income-tax (Amendment) Act, 1953 (25  of 1953), s. 31-Indian Income-tax Act, 1922 (11 of 1922),s. 34, as amended.

HEADNOTE: In the year of account relevant to the assessment year 1942- 43,  the  assessee received Rs. 9,180/-,  but  submitted  no return  of  her income.  On July 25,  1949,  the  Income-tax Officer, on receipt of definite information that such income had  escaped assessment, issued a notice to her under s.  34 of the Indian Income-tax Act, 1922, as amended by the Indian Income-tax  and Business Profits Tax (Amendment) Act,  1948. Thereafter,  she  was assessed on the  aforesaid  income  on October  24,  1949.   She challenged  the  validity  of  the proceedings  under s. 34 initiated on July 25, 1949, on  the grounds,  that  the  right  to  revive  the  assessment  was governed  by the provisions of s. 34, before it was  amended in 1948, under which the period of limitation prescribed was four  years  in the case of a failure to file a  return  and that  this period having expired on March 31, 1947, and  the Amending  Act of 1948 having come into force only March  30, 1948, the eight years’ period provided therein could not  be invoked.   For the Income-tax Authorities, the  validity  of the  notice  was sought to be sustained  by  the  additional ground  that,  in any case, s. 31 of the  Indian  Income-tax (Amendment) Act, 1953, validated the notice. Held (per Sarkar, Hidayatullah and Reghubar Dayal, JJ.,  Das and Kapur,JJ., dissenting), that s. 34 of the Indian Income- tax  and  Business Profits Tax (Amendment)  Act,  1948,  was applicable  to the proceedings in the present case and  that the notice dated July 25, 1949, was valid. 138 Per   Das  and  Kapur,JJ.-The  limitation  of  eight   years prescribed  by s. 34 as amended by the Amending Act of  1948 did  not apply to the present assessee which was a  case  of

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failure to submit the return, when the period of four  years had expired before March 30, 1948, when the amendment in  s. 34 was made by the Amending Act of 1948.  Section 31 of  the %mending  Act  of  1953 did not enlarge  the  scope  of  the amended  s. 34, and did not validate the notice  dated  July 25, 1949. Per  Sarkar,  J.-By virtue of s. 31 of the Amending  Act  of 1953,  a  notice issued and an order of assessment  made  in respect  of  a year ended before April 1,  1948,  where  the proceedings were commenced after September 8, 1948, were  to be  held valid if the notice was issued in  accordance  with sub-s, (1) of s. 34 as it stood after 1948 amendment and the assessment was completed in pursuance of such notice  within the time specified in sub-s. (3).  The notice and assessment in  the  present case satisfied all  these  conditions  and, therefore, s. 34 as amended in 1948 was applicable.  Such  a notice and an assessment order valid under s. 34 as  amended in  1948  would  be valid even if  the  time  prescribed  in respect  of  them  by  s. 34 as it  stood  before  the  1948 amendment had expired. Per  Hidayatullah  and Raghubar Dayal,  JJ.-The  action  was taken  after  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.  Hence the  notice in 1949 was within eight years from 1942-43 and was  validly issued S.  C. Prashar, Income-tax Officer v.  Vasantsen  Dwarkadas, [1964] Vol.  1 S.C.R. 29., relied on.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 509 of 1958. Appeal from the judgment and order dated February 22,  1956, of the Madras High Court in Case referred No. 66/52. K. N. Rajagopal Sastri and P. D. Menon, for appellant. T. S. Venkataraman and M. K. Ramamurthi, for respondents. 139 1962.   December 12.-The following judgments were delivered. S. K. Das J., J. L. Kapur J., and A. K. Sarkar,delivered separate  judgments.  The judgment  of M.  Hidayatullah  and Raghubar Dayal, JJ., was delivered by Hidayatullah, J. S.  K. DAS, J.-The facts of this appeal have been stated  by my learned brother Kapur, J., and as I am in agreement  with him, I need not re-state the facts. The relevant assessment year was 1942-1943.  The proceedings under s. 34 of the Indian Income-tax Act,    1922,      were initiated with the issue of a notice on July 25, 1949.   The assessee’s contention was that the initiation of proceedings on July 25, 1949, was    invalid  as the department’s  right to revive the assessment was governed by old s. 34 where the period  of limitation prescribed was only four years in  the case  of a failure to file a return and this  period  having expired  on  March  31,1947, and the Amending  Act  of  1948 (XLVIII  of 1948) having come into force on March 30,  1948, the  eight  years’  provided period  therein  could  not  be invoked.  The High Court upheld this contention and said :               "In our opinion, the contention of the learned               counsel for the assessee is well founded, that               the  new  rule of limitation  of  eight  years               prescribed by the amended section 34 would not               apply to the case of the assessee before  us.,               whose was an instance of a failure to submit a

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             return, when the period of four years had  ran               out  long  before  30th March  1948  when  the               amended section 34 came into force as part  of               the Income-tax Act with effect from that date,               30th March 1948.               The  learned counsel for the  Department  next               referred to section 31 of Act XXV of 1953 140               in support of his contention, that ’the notice               issued    on  25th July 1949  was  valid.   The               learned  counsel himself had to  realise  that               section 31 of Act XXV of 1953 did not  enlarge               the  scope of the amended section 34; nor  did               it  purport to amend it.  The validity of  the               notice,  dated 25th July 1949 will still  have               to be decided with reference to the provisions               of the amended section 34.  Section 31 of  Act               XXV  of  1953 does not  therefore  affect  the               question at issue, whether the extended period               of  limitation of eight years would  apply  to               the  assessee  when the period  of  limitation               applicable to the assessee had expired  before               the amended section 34 came into force on 30th               March 1948." For  the  reasons given by me in S. C.  Prashar,  Income-tax Officer  v.  Vasantsen Dwarkadas (1) (C.   A.  705/1957)  in which  judgment has been delivered today, I think  that  the High Court correctly answered the question referred to it. I would therefore dismiss the appeal with costs. KAPUR,  J.-This is an appeal against the judgment and  order of  the  High  Court  of’  Madras.   The  appellant  is  the Commissioner  of  Income-tax  and  the  respondent  is   the assessee and the year of assessment is 1942-43. The  respondent is the wife of one Sheikh Abdul  Khadar  who was  residing abroad in Bangkok from September 1940 to  July 1947.  Daring that period he remitted moneys in the name  of his  agent  for payment to the respondent.  In  the  account year the aggregate amount so remitted was Rs. 9,180/-.   The respondent  submitted  no return of her income  as  she  was bound to do and the amount became taxable (1)  [1964] Vol, 1 S.C.R. 29. 141 under  s. 4 (2) of the Income-tax Act, hereinafter  referred to as the "Act in 1949 the Income-tax Officer on receipt  of definite information that such income had escaped assessment issued  a  notice under s. 34 of the Act as amended  by  the Amending  Act  of  1948  and an  appeal  was  taken  to  the Appellate Assistant Commissioner but the assessment was con- firmed.   A  further  appeal  to  the  Income-tax  Appellate Tribunal  Madras, was also unsuccessful.  The reference  was thereupon  made to the High Court and one of  the  questions referred was :-               "Whether  the proceedings under section 34  of               the  Indian Income-tax Act initiated  on  25th               July, 1949 to assess the amount of Rs. 9,180/-               which escaped assessment during the year 1942-               43 by failure to submit a voluntary return are               valid in law"? It was held that the limitation of eight years prescribed by s.  34 as amended by the Amending Act of 1948 did not  apply to  the case of the assessee which was a case of failure  to submit the return and the period of four years’ had  expired before March 30, 1948, when the amendment in s. 34 was  made by Amending Act of 1948.  It was also held that s. 31 of the Amending Act of 1953 was not applicable and the question was

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therefore  answered in the negative.  Against that  judgment and order the Commissioner of Income-tax has come in  appeal to this Court. This  case is governed by the decision in C. A. No. 705  /57 (S.  C. Prashar, Income-tax Officer v. Vasantsen  Dwarkadas) (1)  the  judgment in which has been delivered  today.   The appeal is therefore dismissed with costs.  The appellant was granted  the certificate by the High Court expressly on  the condition that he would pay the costs of this appeal in  any event to which he had agreed. (1)[1964] Vol.  1 S.C.R. 29. 142 SARKAR,  J.-The respondent in this appeal is  the  assessee. She  is  the wife of one Sheikh-Abdul Khader  who  lived  in Siam.   In the year 1941-42, she received from  her  husband from  Siam  a sum of Rs. 9,180/-.  It is not  disputed  that this  amount constituted "’income" in her hands within s.  4 (2) of the Income-tax Act, 1922.  She did not however submit any  return  in respect of it.  On July 25, 1949,  a  notice under s. 34 of the Act was issued to her asking her to  file a  return.   Thereafter she was assessed  on  the  aforesaid income  on October 24, 1949.  She appealed from  that  order but was unsuccessful in having the assessment set aside.  At her request, the Appellate Tribunal submitted the  following question to the High Court at Madras for its decision:               "Whether  the proceedings under section 34  of               the  Indian Income-tax Act initiated  on  25th               July 1949 to assess the amount of Rs.  9,180/-               which escaped assessment during the year 1942-               43 by failure to submit a voluntary return are               valid in law ?" The  High Court answered the question in the negative.   The revenue authorities have, therefore, come up in appeal. Section  34  contains  provisions  for  assessment  and  re- assessment in cases where income for any year has not in the relevant assessment year been fully assessed for the reasons mentioned in it.  With these reasons it is not necessary  to trouble ourselves in this appeal.  Sub-section (1) of s.  34 deals with the period of time within which a notice  calling for a return of the escaped income may be served and  sub-s. (3) deals with time within which the assessment can be made. This  section  was amended by the  Income-tax  and  Business Profits Tax (Amendment) Act, 1948. This Act was passed on  143 September  8, 1948 but the section which amended s.  34,  of the  Income-tax Act was brought into  force  retrospectively from March 30, 1948.  It is not in dispute that under s. 34, as  it  stood before the amendment, the time  to  issue  the notice  calling for a return and to make the  assessment  in this  case  had expired on March 31, 1947, that is,  on  the expiry  of  four years after the year in which  the  escaped income was first assessable, namely, 1942-43.  It is not  in dispute  either  that  under s. 34, as it  stood  after  the amendment  in  1948,  the  notice could  be  served  and  an assessment  made  within eight years from the  end  of  that year,  that  is, in this case, within March 31,  1951.   The notice and the assessment order impugned in  this case have, therefore, to be held to be valid if s. 34     after     its amendment in 1946 was applicable. It    is the contention of the  appellant  that it was so applicable.  The  High  Court held that the time having already expired under the existing law, the amended section 34 could not be given retrospective operation   to  validate  the  notice  and  the   order   of assessment. Now, on May 24, 1953, was passed the Income-tax  (Amendment)

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Act,  1953,  (XXV  of 1953) which  was  brought  into  force retrospectively  from April 1, 1952.  This Act  contained  a section,  namely,  s. 31, which to my mind makes  s.  34  as amended  by  the  1948  amending  Act,  applicable  to   the proceedings  in this case.  I am unable to accept  the  High Court’s  view  to the contrary and regret  my  inability  to comprehend  the reasons on which that view is  based.   That section also amended sub-s. (3) of s. 34 so as to include in it provisions regarding the time of the issue of the  notice but  we  will not be concerned with this amendment  in  this appeal.  Now, s. 31 is in these terms : Section  31.   "For  the  removal of  doubts  it  is  hereby declared that the provisions of 144 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 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 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 Incometax 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." No  question  as to sub-s. (2) of s. 34  mentioned  in  this section  arises in this appeal and that sub-section  may  be left out of consideration. It  seems  to  me quite plain that s. 31  of  the  1953  Act applies sub -ss. (1) and (3) of s. 34 of the Income-tax Act, 1922 (hereafter called the principal Act), as it stood after the 1948 amendment, to assessment proceedings in respect  of years  ending  before April 1, 1948  where  the  proceedings commenced after September 8, 1948 and makes the validity  of the  proceedings  depend  on that  section  as  so  amended. Indeed, the contrary has not been contended at the bar.   It has  to  be  remembered that the amending Act  of  1948  was passed on September 8, 1948  145 but  it was given retrospective effect from March 30,  1948. It may be stated that the amending Act repealed the existing s.  34  of the principal Act and substituted for  it  a  new section.  I think it is quite clear that the pre-existing s. 34  which was repealed by the 1948 amendment could not  have applied to proceedings commenced after repeal.  There was no question   of   applying  the  pre-existing  law   to   such proceedings.  But where the proceedings related to a  period when the per-existing law was in force, there might be  some doubt as to which law was to apply.  Section 31 was  enacted to remove that doubt and to make s. 34 of the principal  Act as  it  stood after the 1948 amendment applicable  to  these proceedings.  That is why the words "shall always be  deemed to  have applied" are used; they emphasise that the  amended section is deemed always to have applied to proceedings even in respect of a period when the amendment had not been made. The latter part of s. 31 also makes this view equally clear. It  says  that  no notice or order of  assessment  shall  be

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called in question on the ground that s. 34 did not apply in respect  of  assessment for a year prior to April  1,  1948. Section 34 here contemplated must be the section as  amended in  1948,  for if it was not so, then it would be  the  pre- existing section which of course would have applied, if  not repealed, to an assessment for a year ending prior to  April 1,  1948 and no question of its not so applying  would  have arisen. I thus arrive at the conclusion that under s. 31 of the 1953 Act,  the provisions of sub-ss. (1) and (3) I  leave  sub-s. (2)  out  as  irrelevant-of s. 34 of the  principal  Act  as amended in 1948 are to be applied and deemed always to  have applied to assessment proceedings in respect of a year ended before  April 1, 1948 where the proceedings  were  commenced after  September  8, 1948, A notice issued and an  order  of assessment made in such proceedings are to 146 be  held valid if the notice is issued ",in accordance  with sub-section  (1)"  of  s.  34 as it  stood  after  the  1948 amendment and the assessment is ’,completed in pursuance  of such notice within the time specified in sub-section (3)" of the  same  s.  34.  Now the notice  and  assessment  in  tie present  case  satisfy  all  these  conditions.   To   them, therefore, s. 34 as amended in 1948 applies.  Judged by that section,  admittedly  the notice and  assessment  order  are unexceptionable. It  is  true that in the present case when  the  notice  was issued and the assessment made, the time to do either  under the  law as it stood before the 1948 amendment had  expired. It may be that law would have applied to it if the 1953  Act had  not  been passed.  It may also be, as was said  in  the Calcutta  Discount  Co. (1) case, that by itself,  the  1948 amendment  of  s.  34 would not  have  permitted  assessment proceedings  in respect of 1942-43 to be commenced  in  1949 when  under the previous law the time to issue a notice  and to  make an assessment for that year had expired before  the 1948 amendment had come into force.  All this however is  to no purpose.  No such question arises here.  The  legislature had  undoubtedly  the power to makes. 34 as amended in  1948 apply   to  an  assessment  for  1942-43  by  giving  it   a retrospective  operation  inspite  of the time  to  issue  a notice  and to make an assessment fixed by  the  preexisting law  having expired before the amendment came  into  effect. The  question  really  is  one  of  interpretation,  namely, whether   the  legislature  had  given  such   retrospective operation. Now it seems to me that s. 31 of the 1953 Act clearly  gives s.  34  of  the  principal  Act  as  amended  in  1948  such retrospective  operation.   It  plainly makes s.  34  as  so amended applicable to assessments for years ended before the amendment  came into force.  It does not say that s.  34  as amended is to apply to assessments for these years only when the time to (1)  I.A.R. (1953) Cal. 721. 147 issue the notice or make the assessment in respect of  these years  under  the  pre-existing law  had  not  expired.   It applies  the amended s. 34 "to any assessment  for any  year ending  before the 1st day of April, 1948 in an  case  where proceedings ............... were commenced after the 8th day of September 1948".  Likewise any notice and any  assessment in respect of any year ending before April 1, 1948 is to  be held valid, if valid under s. 34 as amended in 1948.  I find no  justification in view of the language used to  interpret s.  31  as applying s. 34 as amended in 1948 only  to  cases

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where thetime  to issue the notice and make the  assessment hadnot expired while the pre-existing law was in force.The latter part of s. 31 seems to lead independently to the same conclusion.  It makes "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)" valid.   All  that  is necessary is  that  all  notices  and assessment orders in respect of years ending before April 1, 1948  in  proceedings  commenced after  April  8,1948  shall comply with the provisions of s. 34 as amended in 1948.   So a  notice  and  an assessment order valid  under  s.  34  as amended  in 1948 would be valid even if the time  prescribed in  respect  of them by s. 34 as it stood  before  the  1948 amendment, had expired. In my view, for these reasons, s. 34 of the principal Act as amended  in  1948  applies  to  the  notice-issued  and  the assessment order made in this case.  Both of them are  valid under  s.  34 as so amended.  The High  ’Court  should  have answered the question framed in the affirmative. In  the result, I would allow the appeal and set  aside  the order of the High Court.  The appellant will however pay the respondent’s costs of this appeal as it had agreed to do  so as  appears  from the certificate on which this  appeal  has been admitted. 148 [For  the judgment of Hidayatullah and Raghubar Dayal,  JJ., see   S.  C.  Prashar,  Income-tax  Officer   v.   Vasantsen Dwarkadas, ante p. 29.] By COURT : In accordance with the opinion of the  Omajority, the appeal is allowed.  The appellant will pay the costs  of the respondent as was agreed to by the parties.                                        Appeal allowed.