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PETITIONER: J.P. JANI, INCOME-TAX OFFICER, CIRCLE IV,WARD-G, AHMEDABAD &

       Vs.

RESPONDENT: INDUPRASAD DEVSHANKAR BHATT

DATE OF JUDGMENT: 20/08/1968

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. GROVER, A.N.

CITATION:  1969 AIR  778            1969 SCR  (1) 714  CITATOR INFO :  R          1973 SC2585  (13)  R          1987 SC1378  (2)

ACT: Income-tax  Act  (43 of 1961), ss. 148 and  297  (2)(d)(ii)- Right of   Income-Tax Officer to reopen assessment under  s. 34  of  the  Income-tax Act, 1922, barred  on  the  date  of commencement  of  the  1961  Act-Whether notice under s. 148 to reopen assessment could be issued.

HEADNOTE: Under s. 297(2)(d)(ii) of the Income-tax Act, 1961.  dealing with repeals and savings, notwithstanding the repeal of  the 1922-Act, where in respect of any assessment year after  the year  ending  on  31st day of March, 1940,  any  income  had escaped  assessment  and no proceedings under s. 34  of  the repealed  Act are pending at the commencement of  the  1961- Act,  a  notice under s. 148 of the 1961-Act may  be  issued for  reopening the assessment. The respondent was assessed to income-tax for the assessment year  1947-48.  Thereafter the Income-Tax Officer  issued  a notice  under s. 34(1)(a) of the Income-tax Act,  1922,  for reassessment.   There was no proper service of  the  notice, and  despite  the  respondent’s  objection,  the  Income-tax Officer determined the total income of the respondent at Rs. 89,000.   The Appellate Assistant Commissioner allowed   the respondent’s appeal by order dated 5th January, 1963 on  the ground  that there is  no valid service of the  notice.   On 1st  April,  1962  the1922-Act was repealed and the  Income- tax  Act.  1961  came into force, and the  time  for  taking action  for  reassessment was enlarged. from 8 years  to  16 years. By that date, the right of the Income-Tax Officer  to reopen  the  assessment under s. 34(1)(a)  of  the  1922-Act became   barred.  The  Income-Tax Officer however, issued  a notice  under  s.  148 of the 1961  Act  for  reopening  the assessment.    The  respondent,  thereupon  filed  a    writ petitioning  the High Court for quashing the notice and  the petition was allowed. In appeal to this Court. HELD:  On  a  proper construction of  s.  297(2)(d)(ii)  the Income-Tax  Officer cannot issue a notice under s.  148   in

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order   to  reopen the assessment of an assessee in  a  case where the right to reopen the assessment under the  1922-Act was  barred at the date when the 1961-Act came  into  force. The reason is that unless the statute expressly so  provides or there is a necessary implication, retrospective operation should not be given to it so as to affect, alter or  destroy any right already acquired or to revive any remedy’  already lost by effluviums of time.  The 1961-Act does not  disclose in express terms or by necessary implication that there  was a  revival of the right of the Income-Tax Officer to  reopen an  assessment which was already barred under  the  1922-Act and  if the section is  construed  as reviving such a  right it  would  be  tantamount   to   giving   it   retrospective operation which is not warranted by its language.  The words ’where  in  respect of any assessment year  after  the  year ending on 31st  day  of March, 1940,’ in the section, cannot take  in their sweep all assessment years subsequent to  the year ending on 31st March, 1940 without regard 715 to  the question whether the fight to reopen the  assessment in  respect  of any assessment year was or  was  not  barred under  the  repealed  Act.   The section  must  he  read  as applicable  only  to  those cases where  the  right  of  the Income-Tax  Officer to reopen the assessment was not  barred under the repealed section. [720 H; 721 A-D; 722 G-H] S.S.  Gadgil  v.  Lal & Co. (1964)  53  I.T.R.  231  (S.C.), followed.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 972 of 1967. Appeal  from the judgment and order. dated December 14,  15, 1964 of the Gujarat High Court in Special Civil  Application No.. 54 of 1964. D.  Narsaraju, S.K. Aiyar, S.P. Nayar and, B.D. Sharma,  for the appellants. S.T. Desai, M.C. Bhandare and K. Rajendra Chaudhuri, for the respondent. The Judgment of the Court was delivered by Ramaswami, J.  This appeal is brought by certificate against the  judgment  of the Gujarat High  Court  dated   14th/15th December 1964 in Special Civil Application No. 54  of   1964 whereby  a  writ  of  mandamus was  issued  to.  quash   the notices  issued  under sections 147, 148 and 142(1)  of  the Income Tax Act, 1961 against the respondent. The  respondent was assessed by the, Income   Tax   Officer, Ward E, Circle 11, Ahmedabad for the assessment year 1947-48 by  an  assessment order dated 31-1-1952.   The  Income  Tax Officer  thereafter  received ’information  that  a  certain profit made by the assessee in the name of Natwarlal Mardial Pandit  who  was a benamidar of the respondent  had  escaped assessment by reason of the respondent not having  disclosed it  at the time of the original assessment.  The Income  Tax Officer,  therefore,  after obtaining the  approval  of  the Commissioner of Income Tax issued a notice dated 27th March, 1956  under  s.  34(1)(a)  of  the  Income  Tax  Act,   1922 (hereinafter referred to as the old Act).  The notice  could not  be  served personally, and, therefore,  was  served  by affixing  on  a conspicuous part of  the  respondents.   The respondent objected to the service of the notice and did not file a return stating that there had been no valid  service. When the Income Tax Officer threatened to proceed ex  parte, a  return was filed under protest on 16-1-19’57 and in  that return the respondent showed the same amount of income which

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was  determined  in the original  assessment.   Despite  the objection.  of  the  respondent that  there  was  no  proper service  of  notice  under s. 34( 1 ) (a),  the  Income  Tax Officer proceeded to assess the income of the respondent for the assessment year 1947-48 and made an order 716 dated  29th March, 1957 determining the total income of  the respondent at Rs. 89,000 by including the profit alleged  to have   been  earned  by  Natwarlal  Manilal   Pandit.    The respondent  preferred an appeal to the  Appellate  Assistant Commissioner who allowed the appeal and set aside the  order of assessment on the ground that there was no valid  service of  the  notice.  The’ decision of the  Appellate  Assistant Commissioner was given on 5-1-1963 by which time the  Income Tax Act, 1922 had been repealed and the Income Tax Act, 1961 (hereinafter  called the New Act) had come into  force  with effect from 1st April, 1962. The time for taking action  for assessment   or   reassessment  in case  of  escaped  income exceeding  Rs.  50,000  but  less  than Rs. ,1,00,000/-  was enlarged  from  8 years to 16 years under the new  Act.   On 4-1-1963  the  Income  Tax  Officer,  Circle  IV,  Ward   G, Ahmedabad  issued  a notice calling upon the  respondent  to show  cause why proceedings should not be taken   under   s. 147(a) of the new Act for bringing to tax the escaped profit of the respondent.  The respondent  protested  against   the new  notice on the ground that action under the old Act  had become  time barred and the new Act had no  application   to his   case. Subsequently, a notice under s. 148 of  the  new Act was issued on 13-11-1963 and this notice was followed by another notice dated 9-1-1964 issued under s. 142(1). The   respondent,   therefore,   preferred   Special   Civil Application No. 54 of 1964 in the Gujarat High Court praying for  a writ of certiorari to quash the notices dated  13-11- 1963  and 9-1-1964 by the first appellant.  The  High  Court took   the   view  that  on  a  true  construction   of   s. 297(2)(d)(ii)  of the new Act the Income Tax  Officer  could not  issue  a  notice under s. 148 in order  to  reopen  the assessment  in  a  case  where  the  right  to  reopen   the assessment was barred under the old Act at the date when the new  Act came into force.  The High Court observed that  the right of the Income Tax Officer to reopen the assessment  of the  resportdent in the present case was  admittedly  barred under   s. 34(1 )(a) of the old Act at the  commencement  of the  new  Act and it was, therefore, not  competent  to  the Income Tax Officer to issue a notice under s. 148 of the new Act in order to reopen the assessment of the’ respondent and to  reassess  the income of the respondent  relying  on  the provisions  enacted under s. 297 (2)(d)(ii) of the new  Act. The  High  Court  accordingly  allowed  the  Special   Civil Application  preferred by the respondent and set  aside  the notices dated 13-11-1963 and 9-1-1964. It  is  necessary  at this stage to  set  out  the  relevant provisions  of the two statutes.  Section 34 of  the  Income Tax  Act, 1922 (No.    11 of 1922) as it  stood  immediately prior  to its amendment by the Finance Act, 1956 is  in  the following terms :-- 717               "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

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             chargeable   for  that  year  or   have   been               underassessed, 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               (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 m 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               underassessed, 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  reassess 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 :--               (1 ) 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.               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  app ly  to  a               reassessment  made under section 27 or  to  an               assessment   or  reassessment  made   on   the               assessee 718               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". By  the  Finance Act, 1956 certain amendments were  made  in section 34 with effect from 1st April, 1956.  The time limit of 8 years in sub-section (1 ) in respect of  cases  failing within  clause  (a) was removed and the  following  provisos were substituted for the existing proviso in sub-section  (1 ) :--               "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

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             income, profits or gains chargeable to income-               tax which have escaped assessment or have been               underassessed 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  is  satisfied  on  such  reasons               recorded  that it is a fit case for the  issue               of such notice; The  Income Tax Act, 1961 (No. 43 of 1961) came  into  force from  1st April, 1962.  Sub-section ( 1 ) of section 297  of the  new Act repealed the old Act and by sub-section (2)  of that  section the new Act enacted certain saving  provisions consequent  upon  the repeal of the old Act.   The  material provision is set out in clause (d):               "297. Repeals and savings :-               (1)........               (2)  notwithstanding  the   repeal   of    the               Indian Income Tax Act 11 of 1922  (hereinafter               referred to as the repealed Act) :--              719               (d)  where in respect of any  assessment  year               after  the  year  ending on the  31st  day  of               March, 1940---               (i) a notice under section 34 of the  repealed               Act’ had been issued ’before the  commencement               of  this Act, the proceedings in pursuance  of               such  notice may be continued and disposed  of               as if this Act had not been passed;               (ii) any income chargeable to tax had  escaped               assessment   within   the  meaning   of   that               expression, in section 1.47 and no proceedings               under  section  34  of  the  repealed  Act  in               respect of any such income are pending at  the               commencement  of  this  Act,  a  notice  under               section  148  may, subject to  the  provisions               contained  in section 149 or section  150,  be               issued  with respect to that  assessment  year               and all the provisions of this Act shall apply               accordingly". Sections 147 to 150 referred to in section 297(2)(d)(ii) and sections  151  to  153 were the provisions of  the  new  Act corresponding to section 34 of the old Act.  In the new Act, section 34 of the old Act was split up into sections 147  to 153.   Section  147  empowered the  Income  Tax  Officer  to assess   or   reassess escaped income in the  same  kind  of cases  in  which he could do so under section  34  but  that right  could  be  exercised subject  to  the  provisions  of sections  148  to  153.   Sub-section  (1)  of  section  148 provided  that before making any assessment or  reassessment under  s.  147, the Income Tax Officer shall  serve  on  the assessee a notice containing all or any of the  requirements which  may be included in a notice under section 139(2)  and sub-section (2) of that section imposed an obligation on the

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Income  Tax  Officer before issuing such notice,  to  record ’his reasons for  doing  so. Section 149 laid down different time limits for issuing notices and in cases falling  within clause ( a ) of section 14 7 corresponding to clause (a)  of sub-section  (1  )  of  section 34  the  time  limits.  were prescribed as follows :--               "149.  Time limit for notice :--(a) No  notice               under section 148 shall be issued,               (a)  in  cases failing under  clause  (a)   of               section 147--               (i) for the relevant assessment year, if eight               years have elapsed from the end of that  year,               unless the ease falls under sub-clause (ii);                (ii) for the relevant assessment year,  where               eight years, but not more than sixteen  years,               have elapsed from the end of that year, unless               the income chargeable 720               to tax which has escaped assessment amounts to               or  is  likely  to  amount  to  rupees   fifty               thousand or more for that year; Section 150(1) makes an exception in cases where  assessment or reassessment is sought to be made in consequence of or to give  effect  to any finding or direction  contained  in  an order  passed by any authority in any proceeding  under  the Act  by  way of appeal, reference or revision  and  provided that in such cases there should be no time limit and  notice under section 148 may be issued at any time unless of course the  case  fell  within  sub-section  (2)  of  section  150. Section  151 made it a condition precedent to the  issue  of the  notice  under section 148 that the Income  Tax  Officer should  obtain the previous sanction of the  Central   Board of  Revenue or the Commissioner of Income Tax  according  as the  notice is proposed to be issued after the expiry  of  8 years from the end of the relevant assessment year or  after the  expiry  of  4  years  from  the  end  of  the  relevant assessment year. On  behalf  of the appellants Mr.  Narasaraju  stressed  the argument  that the High Court was in error in  holding  that the provisions of the new Act of 1961 were not applicable in cases where the time limit fixed in the old Act had  expired before  the  coming  into force of the  new  Act.   It   was contended   that  section 297(2) (d)(ii) of the new Act  was wide in its sweep and it took in all assessment years  after the  year  ending on 31st March, 1940  irrespective  of  the question  whether  the  right to reopen  the  assessment  in respect  of  any such assessment years, was  barred  or  not under  the  old Act at the date when the new Act  came  into force. According to Mr. Narasaraju the legislative intention was  that  once the new Act came into force,  the   question whether   the assessment in respect of any  assessment  year after  the year ending on 31st March, 1940 was liable to  be reopened  or  not should be decided with  reference  to  the provisions  of the new Act.  It was argued that the new  Act authorised such assessment to be reopened whatever might  be the  position  in  regard  to  the  right  to  reopen   such assessment under the old Act.  In our opinion, the  argument put  forward  by  Mr. Narasaraju is not  warranted.   It  is admired  in  this  case that the right  of  the  Income  Tax Officer  to reopen the assessment for the year  1947-48  was barred under the old Act before the new Act came into force. In  our  opinion, it  not permissible  to  construe  section 297(2)(d)(ii)  of the new Act as reviving the right  of  the Income  Tax  Officer  to reopen  the  assessment  which  was already barred under the old Act.  The reason is that such a

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construction of section 297(2)(d)(ii) would be tantamount to giving  of retrospective operation to that section which  is not warranted either by the express language of 721 the  section or by necessary implication.  The principle  is based  on the well-known rule of interpretation that  unless the  terms  of the statute expressly so  provide  or  unless there is  a  necessary implication, retrospective  operation should not be given to the statute so as to affect, alter or destroy  any right already acquired or to revive any  remedy already lost by efflux of time.  On behalf of the appellants reference  was  made  to  the   opening   phrase  "where  in respect of any assessment year after the year ending on  the 31st  day of March 1940" occurring in section  297(2)(d)(ii) of the new Act, but these general words cannot take in their sweep   assessment  years subsequent to the year  ending  on 31st March, 1940 without regard to the question whether  the right to reopen the assessment in respect of any  assessment year  was  or  was not barred under the  repealed  Act.   We consider  that the language of the new section must be  read as  applicable  only to those cases where the right  of  the Income  Tax Officer to reopen the assessment was not  barred under  the repealed section.  In our view, the  new  statute does   not  disclose  in  express  terms  or  by   necessary implication  that  there was a revival of the right  of  the Income Tax Officer to reopen an assessment which was already barred  under  the old Act.  This view is borne out  by  the decision  of this Court in S.S. Gadgil v. Lal &  Company(1). In that case, a notice was issued against the assessee as an agent of a non-resident on 27th March, 1957 and that  notice related to the assessment year 1954-55.  Under clause  (iii) of  the proviso to section 34( 1 ) as it stood prior to  its amendment  by the Finance Act, 1956, a notice of  assessment or reassessment could not be issued against a person  deemed to  be  an agent of a non-resident after the expiry  of  one year  from the end of the year of assessment. The  right  to commence a proceeding for assessment against the assessee as agent  of  a non-resident for the  assessment  year  1954-55 therefore ended on 31st March, 1956 under the new Act before its amendment in 1956.  This provision was, however, amended by the Finance Act, 1956 and under the amended provision the period of limitation was extended to two years from the  end of  the  assessment  year.  The amendment was  made  on  8th September,  1958 but was given effect from 1st April,  1956. Since the time within which notice could be issued against a person deemed to be an agent of a non-resident was  extended to  two  years from the end of the assessment year,  it  was contended  on  behalf  of the Income Tax  Officer  that  the notice  issued  by him was within the terms of  the  amended provision and was; therefore, a valid notice. Now the notice issued  on 27th March, 1957 was clearly within a  period  of two years from the end of the assessment year 1954-55 and if the amended provision, applied, the! notice would be a valid notice.  It was, however, held by this Court that notice was (1) (1964) 53 I.T.R. 231. 722 not  a  valid notice inasmuch as the right of   the   Income Tax  Officer to reopen the assessment of the assessee  under the unmended provision became barred on 31st March, 1956 and the  amended provision did not operate against him so as  to authorise the Income Tax Officer to commence proceedings for reopening  the  assessment of the assessee in a  case  where before   the   amended  provision  came  into   force,   the proceedings had become barred under the unamended provision. At  page 240 of the Report, Shah, J. speaking for the  Court

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observed as follows :-               "As we have already pointed out, the right  to               commence  a proceeding for assessment  against               the assessee an agent of a non-resident  party               under  the  Income  Tax  Act  before  it   was               amended,  ended on March 31, 1956. It is  true               that  under the amending Act by section 18  of               the Finance Act, 1956, authority was conferred               upon the Income Tax Officer to assess a person               as  an agent of a foreign party under  section                             43 within two years from the end of th e year of               assessment.   But authority of the Income  Tax               Officer under the Act before it was amended by               the  Finance Act of 1956, having already  come               to  an  end, the amending provision  will  not               assist  him  to  commence  a  proceeding  even               though  at the date when he issued the  notice               it  is  within  the period  provided  by  that               amending    ACt.     This    will   be so,               notwithstanding  the fact that there has  been               no  determinable  point of  time  between  the               expiry of the time provided under the old  Act               and  the  commencement  of  the amending  Act.               The legislature has given to section 18 of the               Finance    Act,   1956,   ’only   a    limited               retrospective  operation, i.e. up to April  1,               1956  only.   That  provision  must  be   read               subject to the rule that in’ the absence of an               express  provision or clear  implication,  the               legislature  does not intend to  attribute  to               the amending provision a greater retrospective               than is expressly mentioned, nor to  authorise               the Income Tax Officer to commence proceedings               which  before the new Act came into force  had               by  the expiry of the period  provided  become               barred". In  our opinion, the principle of this decision  applies  in the  present  Case  and it must be held  that  on  a  proper construction  of section 297(2)(d)(ii) of the new  Act,  the Income  Tax Officer cannot issue a notice under section  148 in order to reopen the assessment of an assessee ,in a  ease where  the right to reopen the assessment was  barred  under the  old Act at the. date when the new Act came into  force. It  follows therefore that the notices dated 13-11-1963  and 9-1-1964 issued  by  the  Income  Tax 723 Officer,  Ahmedabad  were illegal and ultra vires  and  were rightly quashed by the Gujarat High Court by the grant of  a writ. For the reasons expressed, we hold that the judgment of the. High  Court  of Gujarat dated 14th/15th  December,  2964  is correct and this appeal must be dismissed with costs. V.P.S.                                    Appeal dismissed. sup CI/68--15 724