Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Petns. Nos. 52 and 53 of 1953 and Writ Petns. Nos. 105 and 106 of 1954

Judges

Medapa, C.J
Mallappa, J.

Acts

Sections upto S. 33 of the Mysore Income-tax Act, or Section 43 of the Cochin Income-tax Act
S. 44, Cochin Income-tax Act, 1117, and S. 47, Travancore-Cochin Income-tax Act, 1121,
Provincial High Courts.(d) Those sections of the various Indian Acts
Ss. 23, 27, 30, 31 and 34 of the Mysore Act. These sections run:23(1)
S. 34 or S. 35.31. Section 34, Mysore Income-tax Act
provisions of the Constitution. Articles 265
sub-section (2) of sectidh 25 or section 28,(c)
S. 13, Finance Act. The Indian Income-tax Act
SECTION 13 FINANCE ACT
S. 3 of this Act, the Indian Income-tax Act
B States. Income-tax Acts the provisions
provisions of the Mysore Income-tax Act
Section 34 of the Mysore Income-tax Act
sub-s. (2) of this section, the Income-tax
S. 34 of the Mysore In-come-tax Act.35.
Indian Income-tax Act, 1922 (XI of 1922)
S. 34 of the Mysore Income-tax Act.47.
S. 34 of the Mysore In-come-tax Act,
INDIAN FINANCE ACT
S. 13(1) of the Indian Finance Act
S. 13(1) of the finance Act, 1950.
S. 6 of the General Clauses Act,
provisions of S. 13, Finance Act
SECTION 13 FINANCE ACT
S. 34, Indian Income-tax Act.18.
S. 22(4) or 23(2), or Section 37
S. 13 of the Finance Act, 1950,
sub-section read with S. 27.(2)
INCOME TAX ACT
S. 22(2), Mysore Income-tax Act.
Mysore Income-tax Act, 1923.4.
sub-section (2) of section 22,
S. 33 of the Income-tax Act
S. 34, Mysore Income-tax Act
S. 13(1) of the Finance Act
S. 13(1), Indian Finance Act,
S. 13 of the Finance Act
S. 13, Indian Finance Act
S. 6, General Clauses Act
Indian Finance Act 1950
INDIAN INCOME TAX ACT
Mysore Income-tax Act
S. 13, Finance Act, 1950,
S. 34, Income-tax Act.
S. 13, Finance Act.17.
S. 13(1), Finance Act,
S. 34, Mysore Act.21.
S. 13, Finance Act,
S. 34, Mysore Act,
S. 23, Mysore Act

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Smart Summary

Structured Summary of the Court Opinion

Factual and Procedural Background

Four petitions were presented under Article 226 of the Constitution seeking writs (prohibition or certiorari) to prevent or quash income-tax proceedings initiated by income-tax authorities under Section 34 of the Mysore Income-tax Act. The impugned proceedings were begun on 15-3-1951, 29-3-1952, 2-12-1953 and 24-2-1954 with the stated purpose of assessing "escaped income" of the petitioners. The petitioners challenged the jurisdiction of the Income-tax Officer to initiate those proceedings on two grounds: (1) that Section 34 stood repealed with effect from 1-4-1950 and therefore notices issued after repeal lacked authority; and (2) that an agreement made between the President of India and the Rajpramukh of Mysore under Article 278 forbade initiation of such proceedings. The matters were heard and decided by the High Court, which allowed the petitions, quashed the notices and directed costs and advocate's fees in each case.

Legal Issues Presented

Whether Section 34 of the Mysore Income-tax Act was effectively repealed as of 1 April 1950 by reason of the Indian Finance Act 1950 (Section 13) so that notices issued under Section 34 after that date were without authority.
Whether, independently, the agreement entered into under Article 278 between the President of India and the Rajpramukh of Mysore precluded initiation of re-opening / reassessment proceedings (under Section 34) in respect of pre-integration completed assessments.
More narrowly, whether the word "assessment" in Section 13 of the Indian Finance Act should be read to include "re-assessment" (i.e., reopening completed pre-integration assessments under Section 34 of the Mysore Act) or whether Section 13 preserved only levy, assessment and collection and thus excluded re-assessment.

Arguments of the Parties

Petitioners' Arguments

Section 34 of the Mysore Income-tax Act stood repealed from 1-4-1950 by the enactment of the Indian Finance Act 1950; therefore notices issued after that date under S.34 were without authority.
The Agreement of 28-2-1950 between the President of India and the Rajpramukh of Mysore (made under Article 278 and reflecting the recommendations of the Indian States Finances Enquiry Committee) was intended to secure finality and validity of completed proceedings under pre-existing State legislation and thus precluded reopening completed pre-integration assessments under S.34.
Under the Mysore Act an "assessment" is made under Section 23 and is completed when a notice of demand under Section 29 is served; subsequent proceedings (including those under S.34) constitute reopening/re-assessment and are not covered by the saving in Section 13 of the Finance Act.

Respondents' Arguments

Section 13 of the Indian Finance Act saved the old State income-tax laws for "the purposes of the levy, assessment and collection" and therefore proceedings under Section 34 (which uses the words "assess or re-assess") are competent, at least for the assessment of escaped income.
Words such as "levy, assessment and collection" should be understood broadly and to include re-assessment processes; several decisions and authorities were relied upon to support a broad construction.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Commr. of Income-tax, Bombay v. Messrs Khemchand Ramdas, AIR 1938 PC 175 (Privy Council)	Defines "assessment" as completed when income and tax are determined and a notice of demand issued; distinguishes final assessment from subsequent reopening save in circumstances under Ss.34–35.	The court relied on this decision to support the petitioners' contention that "assessment" (in the sense saved by S.13 Finance Act) refers to an assessment under Section 23 (completed by notice of demand), and that re-opening by S.34 is a separate process not saved by Section 13.
Rajendra Nath Mukerjee v. Commr. of Income-tax, AIR 1934 PC 30	Authority for the proposition that assessment under Ss.23 and 29 may be made after the relevant year if no final assessment has been made; deals with timing and finality of assessment.	Cited as background authority on finality and timing of assessments; used to show that a final assessment cannot be reopened except as authorised by Ss.34–35.
Nawal Kishore v. Commr. of Income-tax, AIR 1936 Lah 897	Support for view that assessment is concluded when amount of tax is determined and a demand notice issued; that post-demand proceedings do not form part of the assessment.	Adopted to buttress the view that Ss.27, 30 and 31 (which speak of cancelling, annulling, enhancing assessments) demonstrate that proceedings after demand do not form part of the original assessment.
A.N. Lekshmana Shenoy v. The Income-Tax Officer, AIR 1954 Trav-C 137 (Full Bench)	Held that words "levy, assessment and collection" include processes by which tax is ascertained and realised and that "re-assessment" comes within those words.	The court observed this decision but expressly declined to follow it, noting the Travancore-Cochin court gave no reasoning on the point and that the Privy Council authority and the agreement underlying S.13 pointed the other way.
Jagmohan Goenka v. K.D. Banerjee, AIR 1954 Cal 564	Decision that more than one re-assessment is permissible under Section 34 of the Indian Income-tax Act (on that Act's interpretation).	Noted by the court as an authority the respondents relied on; court treated it as not directly determinative of the question whether S.13 saved re-assessment under the Mysore Act.
Abdul Khadar v. Commr. of Income-tax, AIR 1953 TC 526	Interpreted S.13 as being similar in effect to S.6 of the General Clauses Act and was read as indicating a broad saving, construed in favour of applying old law for recovery in some circumstances.	Cited by respondents; the court considered it but held that S.13 of the Finance Act must be read in the light of its specific drafting and the agreement's object, not as identical to the General Clauses Act saving.
Madangopai Kabra v. Union of India, AIR 1951 Raj 94	Interpreted the scope of S.13 in a way respondents relied upon (broad saving).	Referenced by respondents through Abdul Khadar; court treated it as supporting a broad construction but concluded that S.13's specific wording and the Article 278 agreement required a narrower reading excluding re-assessment of completed proceedings.
Bhailal Amin & Sons Ltd. v. R.P. Dalai, AIR 1953 Bom 441	Held that where proceedings under State law were pending (not completed), questions of levy, assessment and collection had to be determined under the State law; "assessment" used broadly in context of pending proceedings.	Cited to show that pending proceedings begun under S.22 are to be continued under old law; court used it to distinguish pending (continued) proceedings from completed assessments which are to remain final.
C.P. & Berar Provincial Co-operative Bank Ltd. v. Commr. of Income-tax, AIR 1946 Nag 216	Principle that fiscal enactments ambiguous in meaning should be construed in favour of the subject (taxpayer).	Relied upon by the court in choosing a construction of S.13 favourable to the petitioners when the wording admitted more than one plausible interpretation.

Court's Reasoning and Analysis

The court conducted a statutory and contextual analysis that proceeded in several discrete steps:

Statutory background and chronology: Parliament enacted the Indian Finance Act 1950 (assented 31-3-1950) and on 1-4-1950 financial integration for Mysore took effect. Section 3 of that Act extended the Indian Income-tax Act, and Section 13 repealed pre-existing Part B State income-tax laws except for a limited purpose described in Section 13(1): to permit the old law to remain "for the purposes of the levy, assessment and collection" in respect of certain prior years.
Identification of competing constructions: The dispute turned on whether the word "assessment" in Section 13 includes "re-assessment" (i.e., reopening of completed pre-integration assessments under Section 34 of the Mysore Act), or whether Section 13 preserved only levy, assessment and collection in the sense of completing pending proceedings and levying and collecting taxes for previous years but not permitting re-opening of completed proceedings.
Examination of the Mysore statutory scheme: The court reviewed the Mysore Act's procedural scheme (Ss.22–34) and explained that assessment proceedings are instituted by notices under Section 22(2), carried through Sections 23–29, with appeals and revisions under Sections 30–33. Section 34 permits either assessment where income has escaped assessment entirely, or re-assessment where an assessment has been completed but income escaped or was under-assessed.
Distinction between "assessment" and "re-assessment": Drawing on authority (notably the Privy Council in Khemchand Ramdas) and commentary (A.C. Sampath Iyengar), the court treated the process of initial levy/assessment/collection (Ss.22–33) as one class of proceedings and the reopening/re-assessment under S.34 as a separate class. The court emphasized that "re-assessment" presupposes a previously completed assessment.
Purpose of the Finance Enquiry Committee and the Article 278 agreement: The court considered the Indian States Finances Enquiry Committee's recommendations and the February 28, 1950 agreement (accepted by President and Rajpramukh) which aimed at "securing legal continuity of pending proceedings and finality and validity of completed proceedings under the pre-existing State legislation." The court treated these materials as politically and constitutionally relevant background — particularly since the agreement was made under Article 278 — to construe Section 13(1) of the Finance Act.
Interpretation of Section 13(1) in context: The court found the omission of the word "re-assessment" from Section 13(1) to be significant and likely deliberate. Reading Section 13(1) in light of the Committee's recommendations and the Article 278 agreement, the court concluded that Section 13 preserved the old law for the continuation and completion of pending proceedings and for levy, assessment and collection in cases where no assessment had previously been made, but did not preserve the power to re-open completed pre-integration assessments by invoking Section 34.
Consideration of counter-authorities and policy of construing revenue statutes: The court considered decisions cited by respondents and acknowledged authorities that favored a broad construction of "assessment" and of the saving provision. Nevertheless, where authorities conflicted (for example the Travancore-Cochin Full Bench decision), the court declined to follow those authorities because they either lacked discussion of the Article 278 agreement or were in tension with the Privy Council's analysis and the object underlying S.13(1). When doubts remained, the court applied the principle that ambiguities in fiscal statutes should be resolved in favour of the taxpayer.
Conclusion: By combining textual analysis of S.13(1), the statutory scheme of the Mysore Act, authoritative precedent, commentary, and the Article 278 agreement's purpose, the court concluded that Section 13 did not save Section 34 so as to permit reopening (re-assessment) of completed pre-integration assessments. Notices issued to reopen completed assessments were therefore illegal.

Holding and Implications

Holding: The petitions were allowed; the notices issued by the Income-tax Department to re-open completed pre-integration assessments under Section 34 of the Mysore Income-tax Act were declared illegal, and writs were ordered quashing those proceedings. Costs and an advocate's fee of Rs. 250 in each case were awarded.

Implications:

Direct effect: The immediate consequence was the quashing of the specific re-opening notices and the termination of the challenged proceedings against the petitioners; awards of costs and advocate's fees were made in each case.
Statutory-construction principle applied: The decision interprets Section 13(1) of the Indian Finance Act 1950 as preserving the old State law only for the continuation and completion of pending levy/assessment/collection proceedings and for making initial assessments where no prior assessment existed, but not for re-opening (re-assessing) completed pre-integration assessments under State provisions such as Section 34 of the Mysore Act.
Broader precedent: The court relied on existing authorities (notably the Privy Council in Khemchand Ramdas) and the agreement under Article 278 to reach its view. The opinion does not purport to announce a novel constitutional principle beyond its application to the statutory and factual matrix before the court; its practical effect is to protect finality of completed assessments made under the pre-integration law from subsequent reopening under State re-assessment provisions after the Finance Act's savings came into force.

This summary is strictly limited to and derived from the content of the provided opinion. No outside facts or legal developments have been introduced.

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City Tobacco Mart, Avenue Road, Bangalore City And Others, v. Income-Tax Officer, Urban Circle, Bangalore, .

Medapa, C.J:— The petitioners in these four petitions pray under the provisions of Art. 226 of the Constitution for the issue of a writ, or prohibition against the respondents from proceeding with the enquiry pursuant to the notice under S. 34, Mysore Income-tax Act or in the alternative for a writ of certiorari for quashing the said notice. The impugned proceedings were initiated by the Income-tax Officer, Urban Circle and by the Special Income-tax Officer, Bangalore, on 15-3-1951, 29-3-1952, 2-12-1953 and 24-2-1954 respectively for the purpose of assessing under S. 34, Mysore Income-tax Act, the escaped income of the petitioners. The petitioners contend that the Income-tax Officer had no jurisdiction or authority to start such proceedings. The argument in support of this contention is two-fold:

(1) that Section 34 of the Mysore Income-tax Act stood repealed on and from April 1, 1950 and that therefore the notice issued under that section by the Income-tax Officer after its repeal was without authority, and

(2) that even otherwise, the agreement made between the President of India and the Rajpramukh of Mysore on February 2, 1950 under Art. 278 of the Constitution of India forbade the initiation of such proceedings.

2. It would be necessary to state certain admitted facts to understand and appreciate the contentions put forward on either side. A Committee known as the Indian States Finances Enquiry Committee was appointed by the Union Government to examine and report among other matters—

Matters affecting most ‘federal’ subjects including taxes on income. 9. Our suggestion concerning legal and other matters of general importance, affecting most federal subjects (including taxes on income) which will arise in connection with federal financial integration in all States, have been set out in Paragraph 11 of chapter II in Part II of our Report. Those relating to legal matters are, however, reproduced below for convenient reference:

(a) on the desirability of integrating Federal Finance in Indian States and Union of States with that of the rest of India for the purpose of establishing a uniform system of Federal Finance throughout what then was the Dominion of India; and

(b) as regard the legislative ground work and the administrative organisation necessary for the imposition, assessment and collection of Federal Taxes.

3. The said Committee made its report to the Government of India on 22-7-1949 in which it recommended among other matters that when the Federal Financial Integration came into effect, the items of Central Revenues specified on page 13 of Part I of the Report should be taken over from the States by the Central Government—Item 2 in that list being income-tax. On the date of this report, income-tax in Mysore was being levied and collected under the then existing State, law, viz., the Mysore Income-tax Act, 1923.

4. The President of India after the commencement of the Constitution, that is to say, on 28-2-1950 entered into an agreement with the Rajpramukh of Mysore under Arts. 278, 291, 295 and 306 of the Constitution of India, by which, subject to certain modifications, they accepted the recommendations of the Indian States Finances Enquiry Committee (which will hereafter be referred to as the Committee) contained in Part I of its Report read with Chapters I, II and III of Part II of its Report in so far as they applied; to Mysore, together with the recommendations-contained in Chapter IV of Part II thereof. In the annexure to Part I of their Report, the Committee made the following recommendation:

“III. Technical matters relating to income-tax.

‘(5) Apart from the ‘constitutional’ requirements in connection with the integration of federal finances in State—Vide paragraphs 37 and 40 of Part I of our Report certain important issues of a legal nature will arise in connection with the actual taking over of ‘federal’ subjects in the States by the Centre. This is a difficult subject upon which we are not qualified to offer competent advice. We have endeavoured, however, to indicate below the main features of what we conceive will be required in order to establish ‘continuity of proceedings’ in regard to all ‘federal’ subjects—whether relating to revenues, expenditure or Service Departments—at the point of their transition from the States to the Centre,……

(a) Almost every ‘federal’ subject is dealt with in the States as in the rest of India, under powers conferred by appropriate legislation consisting of relevant Codes, Acts, Ordinances and Statutory Rules and Regulations. Subject to the limitations indicated below,—which are designed to secure legal ‘continuity’ of pending proceedings and ‘finality and validity’ of completed proceedings under the pre-existing State legislation—we think the whole body of State legislation relating to ‘federal ‘subjects should, be repealed and the corresponding body of Central legislation extended ‘proprio vigore’ to the States, with effect from the prescribed date or as and when the administration of particular ‘federal’ subjects is assumed by the Centre.

(b) For the above purpose, as well as for future ‘federal’ administration in States, it may be necessary specifically to extend not merely the legislative, but also the executive and administrative competence of the Centre, its officers and ‘authorities’, and the judicial authority of its Courts, to the territories of the-States.

(c) Such State Courts (except Courts of ‘final’ appeal from orders of the State High Courts) as may in fact correspond to particular grades and classes of ‘British Indian’ Courts (Civil and Criminal) may have to be statutorily ‘recognised’ as ‘corresponding judicial authorities’ for purpose of dealing with cases arising in the States under the ‘federal’ laws of the Union of India; and the Supreme Court in India will have to be made the Court of final appeal from decisions of the State High Courts to the same extent as in the case of Provincial High Courts.

(d) Those sections of the various Indian Acts and Ordinances which set out their territorial ‘extent of application’ will require amending so as to include State territories with effect from the prescribed date.

(e) It will be necessary to provide that all matters and proceedings pending under, or arising out of, the pre-existing State Acts shall be disposed of under ‘those’ Acts, by so far as may be, the ‘corresponding authorities’, (nominated by the Chief Executive Authority) under the corresponding Indian Acts.”

5. The recommendations contained in this Part of the Report are also reiterated in other Parts of it to which it is unnecessary to refer.

6. The Parliament thereafter enacted the Indian Finance Act 1950, to which the President accorded his assent on 31-3-1950. The financial integration of the State of Mysore with the Union of India came into effect on and from 1-4-1950. By S. 3 of this Act, the Indian Income-tax Act was extended to the whole of India except the State of Jammu and Kashmir and by S. 13, the income-tax laws in force in Part B States before 1-4-1950, were repealed except for a limited purpose. Section 13 runs:

“13(1) If immediately before the 1st day of April 1950 there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch-Behar any law relating to income-tax or super-tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922 (XI of 1922) for the year ending on the 31st day of March 1951, or for any subsequent year, or, as the case may be, the levy, assessment and collection of the tax on profits of business for any chargeable accounting period ending on or before the 31st day of March 1949: * * *”

7. The position therefore was that after 1-4-1950, the provisions of the Mysore Income-tax Act could not be used by the income-tax authorities for any purpose other than the levy, ‘assessment’ and collection of income-tax and super-tax, in respect of the pre-integration period.

8. The respondents contend that the purpose of the proceedings started against the petitioner under S. 34, Mysore Act, was to make an assessment of the petitioner's escaped income within the meaning of the word ‘assessment’ occurring in S. 13, Finance Act and the proceedings are, therefore, competent. The petitioner contends that the assessment provided for by S. 13, Finance Act, refers only to an assessment to be made under S. 23, Mysore Act and not to proceedings under S. 34. It is urged that under S. 34, the Income-tax Officer does not make an assessment but re-opens an assessment already made and completed. If this contention is correct, the proceedings initiated by the Income-tax Officer under the Mysore Act would be without jurisdiction or authority for, S. 13, Finance Act, does not save the Mysore Act for that purpose.

9. The soundness of the contention urged on either side depends, therefore, on the meaning of the word ‘assessment’ occurring in S. 13 of the Finance Act. According to the petitioners, assessment proceedings under the Mysore Act commence under S. 23 and become complete when the Income-tax Officer serves on the assessee a notice of demand under S. 29 of the Act. To appreciate this contention it would be necessary to refer here to Ss. 23, 27, 30, 31 and 34 of the Mysore Act. These sections run:

“23(1) If the Income-tax Officer is satisfied that a return made under S. 22 is correct and complete, he shall assess the total income of the assessee and shall determine the sum payable by him on the basis of such return.

(2) If the Income-tax Officer has reason to believe that a return made under S. 22 is incorrect or incomplete, he shall serve on the person who made the return a notice requiring him on a date to be therein specified either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which such person may rely in support of the return.

(3) On the day specified in the notice issued under sub-s. (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment.

(4) If the principal officer of any company or any other person fails to make a return under sub-s. (1), or sub-s. (2) of S. 22, as the case may be, or fails to comply with all the terms of a notice issued under sub-s. (4) of the same section or, having made a return, fails to comply with all the terms of a notice issued under sub-s. (2) of this section, the Income-tax Officer shall make the assessment to the best of his judgment.

27. Where an assessee or, in the case of a company, the principal officer thereof, within one month from the service of a notice of demand issued as hereinafter provided, satisfies the Income-tax Officer that he was prevented by sufficient cause from making the return required by S. 22, or that he did not receive the notice issued under sub-s. (4) of S. 22, or sub-s. (2) of S. 23, or that he had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying, with the terms of the last mentioned notices, the Income-tax Officer shall cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of S. 23.

30. (1) Any assessee objecting to the amount or rate at which he is assessed under S. 23 or S. 27, or denying his liability to be assessed under this Act, or objecting to a refusal of an Income-tax Officer to make a fresh assessment under S. 27, or to any order against him under sub-s. (2) of S. 25 or S. 28, made by an Income-tax Officer, may appeal to the Deputy Commissioner against the assessment or against such refusal or order:

Provided that no appeal shall lie in respect of an assessment made under sub-s. (4) of S. 23 or under that sub-section read with S. 27.

(2) The appeal shall ordinarily be presented within thirty days of receipt of the notice of demand relating to the assessment or penalty objected to, or of the date of the refusal to make a fresh assessment under S. 27, as the case may be; but the Deputy Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.

(3) The appeal shall be in the prescribed form, and shall be verified in the prescribed manner.

31. (1) The Deputy Commissioner shall fix a day and place for the hearing of the appeal, and may from time to time adjourn the hearing.

(2) The Deputy Commissioner may before disposing of any appeal, make such further inquiry as he thinks fit, or cause further inquiry to be made by the Income-tax Officer.

(3) In disposing of an appeal, the Deputy Commissioner may, in the case of an order of assessment,—

(a) confirm, reduce, enhance, or annul the assessment; or

(b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Deputy Commissioner may direct and the Income-tax Officer shall thereupon proceed to make such fresh assessment;

or in the cases of an order under sub-section (2) of sectidh 25 or section 28,

Provided that the Deputy Commissioner shall not enhance an assessment unless the appellant has had a reasonable opportunity of showing cause against such enhancement.

34. If for any reason, income, profits or gains chargeable to income-tax has escaped assessment in any year, or has been assessed at too low a rate, the Income-tax Officer may, 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, or in the case of 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, 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 tax shall be charged at the rate at which it would have been charged, had the income, profits or gains, not escaped assessment, or full assessment, as the case may be.”

10. The petitioner contends that it is S. 23, Mysore Act that confers the power on the Income-tax Officer to make an assessment and that the words “cancel the assessment” occurring in S. 27, and “set aside the assessment” occurring in S. 31 of the Act, support the view that the issue of a demand notice under S. 29 of the Act completes the assessment and that the proceedings thereafter do not form part of it. The respondents urge that all proceedings initiated by the Income-tax Officer for the determination of the taxable income and the tax payable thereon, whether under S. 23 or S. 34 of the Act have to be regarded as assessment proceedings, and support for this view is sought to be derived from the words “assess or re-assess” used in S. 34 of the Act.

11. It is significant that the word “re-assessment” is not found in S. 13, Finance Act. It is true that S. 34, Mysore Act, provides for the taxation of income which has either escaped assessment or has been assessed at too low a rate. The argument for the respondents is that when an Income-tax Officer deals with an escaped income under S. 34 of the Act, he assesses it and when he deals with an income which had been assessed at too low a rate he re-assesses it. That is the explanation offered for the use of the words “assess or re-assess” in S. 34 of the Act. If that can be a correct explanation, it would still have to be explained why S. 13, Finance Act which, according to the respondents, saves S. 34, Mysore Act for the assessment of escaped income did not save it for the purpose of re-assessing income which had been assessed at too low a rate. The intendment of the Act could not be to save only a part of S. 34 of the repealed Mysore Act, and not the whole of it.

12. The decision of the Privy Council reported in — ‘Commr. of Income-tax, Bombay v. Messrs Khemchand Ramdas’, AIR 1938 PC 175 (A) seems to support the contention of the petitioner that the word ‘assessment’ used in S. 13, Finance Act refers only to an assessment under S. 23, Mysore Act and not to proceedings under S. 34. In their judgment, their Lordships of the Privy Council have observed as follows:

In order to answer them, it is essential to bear in mind the method prescribed by the Act for making an assessment to tax, using the word ‘assessment’ in its comprehensive sense as including the whole procedure for imposing liability upon the tax-payer. The method consists of the following steps. In the first place, the taxable income of the tax-payer has to be computed. In the next place, the sum payable by him on the basis of such computation has to be determined. Finally, a notice of demand in the prescribed form specifying the sum so payable has to be served upon the tax-payer. The second of these steps involves the determination of two sums, namely the sum payable for income-tax and the sum payable for super-tax. The notice of demand in the prescribed form also provides for the sums payable for income-tax and super-tax being specified separately. Considerable discussion accordingly took place before the High Court on the question whether a demand for super-tax in order to be valid ought to be made simultaneously with the demand for income-tax. Aston A.J.C considered that the demand for super-tax should be made within a reasonable time of the assessment for income-tax, meaning no doubt, by assessment the service of the notice of demand for income-tax which normally completes the assessment.

Rupchand Bilaram A.J.C was of opinion that the demand for super-tax should be made within a reasonable time, and therefore almost simultaneously with the demand for income-tax. Both of them held for this reason (amongst others) that the service of the notice of demand of 4th May 1929 was illegal and inoperative to impose liability upon the respondents. Their Lordships do not find it necessary to express any opinion upon this point inasmuch as in their view and for the reasons which they will now proceed to give it does not call for determination in the present case.

It had been argued on behalf of the appellant that the Act nowhere imposes any limit of time within which an assessment under the provisions of Ss. 23 and 29 is to be made, and that the service of the notice of demand can therefore be made at any time. This is true. It had, in effect, been so determined by this Board in — ‘Rajendra Nath Mukerjee v. Commr. of Income-tax’, AIR 1934 PC 30 (B). But it is not true that after a final assessment under those sections has been made, the Income-tax Officer can go on making fresh computations and issuing fresh notices of demand to the end of all time. It is possible that the final assessment may not be made until some years after the close of the fiscal year. Questions of difficulty may arise and cause considerable delay. Proceedings may be taken by way of appeal and cause further delay. Until all such questions are determined and all such proceedings have come to an end there can be no final assessment. But when once a final assessment is arrived at, it cannot, in their Lordships' opinion be reopened except in the circumstances detailed in Ss. 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections.

In the present case, the liability of the respondents both for income-tax and for super-tax was determined by the Income-tax Officer on 17th Jan. 1927. In the order made by him on that date he assessed the respondents to income-tax at the maximum rate, but as the respondents were at that time a registered firm he held, as he was bound to hold, that no supertax was to be levied. On some date before the end of March 1927, he served on the respondents a notice of demand for the tax that he had determined was properly leviable. The assessment having been made under section 23(4) no appeal lay in respect of it. The assessments of the respondents was therefore final both in respect of income-tax and super-tax. Their liability in respect of both taxes had been finally determined, and none the less because the question of their liability to super-tax had been determined in their favour. It was, indeed, contended before their Lordships that the assessment could not be regarded as having been determined inasmuch as the Commissioner might at any time, and apparently after any lapse of time however long, cancel the registration of the respondents as a registered firm and so subject the respondents to liability to pay super-tax. Their Lordships would, in any case, hesitate long before acceding to a contention that would lead to so extravagant results….”

13. The view taken by the Privy Council was that an assessment became complete when the Income-tax Officer determined the amount due by the assessee and issued a notice of demand under S. 29. The mere fact that the Commissioner of Income-tax could exercise his powers of revision under S. 33 of the Income-tax Act or that the Income-tax Officer at any time within one year from the date of any demand may make rectifications and correct mistakes in his assessment did not make the assessment under S. 23 of the Act any the less final or the proceedings under the Income-tax Act incomplete.

14. The Lahore High Court in a case reported in — ‘Nawal Kishore v. Commr. of Income-tax’, AIR 1936 Lah 897 (C) took the view that an assessment is concluded when the amount of tax payable by the assessee has been determined and a demand notice issued to him. On p. 900 while referring to another Privy Council case reported in AIR 1934 PC 30 (B) they said as follows:

““It must however be remembered that this observation was made by their Lordships to repel the contention raised on behalf of the appellant to the effect that assessment is a definite act and that if an assessment is not made on income within the tax year, then that income has ‘escaped assessment’ within that year and can be subsequently assessed only under S. 34 within its time limitation. In that case no order of assessment had ever been made against Burn & Co., and their income had at one time been included in the income of Martin & Co. and thereafter excluded from such assessment. What was really decided in that case was that an assessment can be made under S. 23(1) of the Act, more than a year, in fact at any time, after the assessment year, if in the meantime no final assessment has been made. AIR 1934 PC 30 (B) does not justify an inference that an assessment is not concluded when the amount of tax payable by the assessee has been determined and a demand notice issued to him. The use of the words ‘Cancel the assessment, make a fresh assessment, and ‘annul or enhance the assessment’ in Ss. 27, 30 and 31 shows that the proceedings after the issue of the demand notice do not form part of the assessment ……”

15. The respondents rely on a decision of a Travancore-Cochin High Court reported in — ‘A.N Lekshmana Shenoy… v. The Income-Tax Officer….’, AIR 1954 Trav-C 137 (FB) (D) in support of their contention that the word ‘assessment’ in S. 13, Finance Act, includes proceedings under S. 34, Income-tax Act. The only discussion in the judgment on this question is contained in paragraph 10 of the judgment which runs:

“(10) Point (b): Both the words ‘assessed’ and ‘re-assessed’ occur in S. 44, Cochin Income-tax Act, 1117, and S. 47, Travancore-Cochin Income-tax Act, 1121, and the contention of the petitioner is that as ‘re-assessment’ is not specified in S. 13, Finance Act, 1950, the power to ‘reassess’ has ceased to exist and is not available any longer. This also is a contention which we are not prepared to accept. The words ‘levy, assessment and collection’ as we understand, them include all the processes by which the tax is ascertained, demanded and realised and ‘reassessment’, being one of those processes comes within the ambit of the phraseology employed.”

16. The Privy Council decision reported in AIR 1938 PC 175 (A) does not appear to have been cited before the learned Judges of the Travancore-Cochin High Court and it appears to have been more or less assumed that a re-assessment came within the ambit of the phraseology of the words employed in S. 13, Finance Act.

17. The respondents rely on another judgment of the Calcutta High Court reported in —‘Jagmohan Goenka v. K.D Banerjee’, AIR 1954 Cal 564 (E). All that was decided by the Calcutta High Court in that case was that more than one re-assessment was permissible under S. 34, Indian Income-tax Act.

18. The petitioner is, therefore, justified, in my opinion, in contending that S. 13, Indian Finance Act which repeals the Mysore Income-tax Act does not save Section 34 of the Mysore Income-tax Act so as to entitle the Income-tax Officer to re-open under that section pre-integration assessments.

19. The petitioner, as already stated, contends further that the proceedings initiated by the Income-tax Officer are incompetent for another reason. This contention is based on the recommendations of the Indian States Finance Enquiry Committee read with the agreement entered into between the President of India and the Rajpramukh of Mysore on 28-2-1950. It is urged that the recommendations of the Committee referred to in the agreement and accepted by the parties thereto, preclude the re-opening of the pre-integration assessments made under the Mysore Law. In support of this argument reliance is placed on the recommendation of the Report of the Committee contained on pages 44 and 45 of Part I which has been extracted above.

20. The petitioner submits that it is clear from this part of the Report that the Committee while suggesting that the Mysore Income-tax Act should be repealed and the corresponding body of Central Legislation extended to the Mysore State, was definitely of the view that the State legislation should be saved only for securing the legal continuity of pending proceedings under the State legislation and that proceedings completed under the State law should be treated as final and valid. The argument on behalf of the petitioners is that clauses (b) to (e) printed on p. 45 of the Report are, as stated in clause (a) on that page, were designed to ‘secure legal continuity of pending proceedings’ and “finality and validity of completed proceedings under the pre-existing State legislation.” It is therefore contended that pre-integration assessments which are proceedings completed under the Mysore Act, were agreed to be treated as ‘final and valid’ without being liable to be reopened under S. 34, Mysore Act.

21. It is further submitted that the agreement between the Rajpramukh and the President of India who accepted this recommendation of the Committee, was entered into under Art. 278 of the Constitution and continues to be in force for a period of ten years unless terminated by the President after the expiration of five years, and that the legislative power of the Parliament conferred by Art. 245 of the Constitution is, as provided by that Article, subject to the other provisions of the Constitution and therefore subject to Art. 278 under which the agreement was made. The argument for the petitioner is that if, by enacting S. 13, Finance Act, the Parliament empowered the Income-tax Officer to re-open such completed assessments, they exceeded their legislative competence thereby rendering the provisions of S. 13, Finance Act unconstitutional and void. This argument of the learned counsel for the petitioners cannot be said to be devoid of merit; but I have already come to the conclusion that the absence of the word ‘re-assessment’ in S. 13, Finance Act made it incompetent for the Income-tax Officer to issue the notices complained of, to the petitioners. The omission of the word ‘reassessment’ in the said section must be deemed to be intentional as it was necessary to implement the recommendations of the Committee and the Agreement between the President and the Rajpramukh. In this view, it is unnecessary, for the disposal of these cases, to consider the arguments in support of the contention that S. 13, ‘if it is deemed’ to include the power to issue notices for re-assessment, will be ‘ultra vires’ of the Constitution.

22. In the result, the petitions are allowed with costs. The writs prayed for will be issued. Advocate's fee Rs. 250/- in each case.

Mallappa, J.

23. The Petitioner in C.Ps 52 and 53 of 1953 was assessed to income-tax for the years 1946-1947 and 1947-1948 respectively, while the petitioners in Writ Petitions 105 & 106/53 were assessed for the year 1949-1950 and the income-tax due as per assessment made was recovered. Notices have been issued to them for purposes of reassessment under S. 34, Mysore Income-tax Act within the period of four years as prescribed in that Section, but subsequent to the enactment of the Indian Finance Act 1950 which came into force from the 1-4-1950. It is not disputed that but for the enactment of the Indian Finance Act 1950, the Petitioners are liable to be proceeded against under S. 34 of the Mysore Income-tax Act. But it has been provided in S. 13(1), Indian Finance Act, that the State enactments like the Mysore Income-tax Act should cease to have effect “except for the purposes of the levy, assessment and collection of income-tax and super-tax” in respect of certain previous years. It is clear that in respect of the years for which income-tax has been recovered from the petitioners, assessment could have been levied and collected from the petitioners under S. 13(1) if assessment had not been previously levied and collected from them, as S. 13(1), Indian Finance Act provides that the Mysore Income-tax Act shall continue to have effect “for purposes of the levy assessment and collection of income-tax and super-tax” for the years under consideration.

24. What is contended on behalf of the petitioners is that the Mysore Income-tax Act ceased to have effect except for purposes of levy, assessment and collection of income-tax, and as the exception does not refer to ‘re-assessment, it must be held that the Mysore Income-tax ceased to have effect for purposes of ‘re-assessment’ under the provisions of the Mysore Income-tax Act. On the other hand, it is contended for the respondents that the words “levy, assessment and collection” are wide enough to include ‘re-assessment’ under S. 34, Mysore Income-tax Act. The main point for consideration, therefore, is whether the right under the State Act in respect of “levy, assessment and collection” of income-tax of previous years saved under S. 13(1), Indian Finance Act includes the right to re-assess under S. 34 of the Mysore In-come-tax Act, the assessee from whom income-tax has already been collected.

25. It will be noticed that S. 13(1), Indian Finance Act was enacted in accordance with the agreement entered into between the President of India and the Rajpramukh of Mysore. That agreement is again in accordance with the recommendations of the Indian States Finances Enquiry Committee. It will also be noticed that in para 9 of the “Annexure Memorandum concerning matters relating to taxes on income”, it is stated that

‘Subject to the limitations indicated below — which are designed to secure legal continuity of pending proceedings and finality and validity of completed proceedings under the pre-existing State — legislation — we think the whole body of State legislation relating to federal subjects should be repealed and the corresponding body of Central legislation extended”.

26. It is clear that the object of the Committee, and hence that of the agreement, was that pending proceedings should be continued under the old law, but that finality and validity in respect of completed proceedings should be secured. It is with this object that S. 13(1), Indian Finance Act which refers to the repeal of the old Act except for certain purposes, was enacted. Hence S. 13(1), Indian Finance Act must be deemed to be in accordance with what was intended by the Indian States Finance Enquiry Committee. It must be noticed that S. 13(1), Indian Finance Act was framed with the intention “to secure legal continuity of pending proceedings”, as well as to “secure finality and validity of completed proceedings”, under the pre-existing State legislation. This is made clear by S. 13(1) of the Indian Finance Act which states that the State legislation shall cease to have effect except for levy, assessment and collection of income-tax and super-tax in respect of some previous years. There could hardly be any doubt that what is intended is that the old law would be applied for completing all pending proceedings. It may even be that there could be levy, assessment and collection of income-tax for the previous years if no proceedings had been started and income-tax remained uncollected. It is equally clear, however, that the old Act cannot be applied so as to disturb “finality and validity of completed proceedings” under the pre-existing State legislation; and this means, if proceedings had been begun and completed, nothing could be done under the old Act such as re-assessment as finality had to be secured for completed proceedings under the pre-existing State legislation.

27. The point for consideration, therefore, is what is the difference between ‘pending proceedings’ and ‘completed proceedings’ and what is meant by saying that ‘finality of completed proceedings should be secured.’ The proceedings to recover Income-tax under the State legislation are begun by issue of a notice under S. 22(2), Mysore Income-tax Act. An assessment is made under Ss. 23 to 27 and the collection is made by issuing a notice under S. 29. The proceedings are complete if no appeal is filed, but otherwise they are completed by appeal, a second appeal and review under Ss. 30 to 33. Though the proceedings are thus completed, the matter is not final as the completed proceedings may be re-opened under S. 34 or 35 of the Act. The object of framing S. 13(1), Indian Finance Act, as is clear by the Finance Committee's recommendation which was adopted for the agreement, on which S. 13(1) is based, is that once proceedings are completed under Ss. 22 to 33, they cannot be re-opened under S. 34 or 35 but that where these proceedings are still pending and are incomplete, the provisions of the old Act are made applicable for levy, assessment and collection in such cases. The old Act is also made applicable for levy, assessment and collection in respect of income of previous years for starting and completing proceedings when previous proceedings had not been started and completed and the income had totally escaped assessment. In such a case, no question of re-assessment under S. 34 arises, it being a case of assessment under that Section on the ground that the entire income had escaped assessment.

28. The point as to there being two distinct proceedings is clarified in the commentary on the Indian Income-tax Act by A.C Sampath lyangar while dealing with the scope of S. 34 in para 981:

“An additional assessment comes in only when there is in respect of the assessee a valid assessment for the tax year ‘ex hypothesi’ insufficient. If hence the first assessment proceedings started duly by the issue of a notice under S. 22(2), should not have reached the stage of an assessment order, there is no scope for an additional assessment. What the Income-tax Officer need do in such a case would be simply to include the newly discovered item in the assessment to be made and for that purpose he may issue notices under S. 22(4) or 23(2), or Section 37 in order to gather materials in respect of the new item. The position would be the same if an assessment having been made in the first instance was subsequently set aside either by the Income-tax Officer himself acting under Section 27, or by an appellate or revisional authority, or by the High Court. The consequence of such setting aside would be to enable the Income-tax Officer to continue his labours from the stage of a re-consideration of a return, if one had been made, or to again call for a return, if one had not been furnished, under the ordinary procedure of S. 23, and not under this section. If, on the other hand, no assessment proceedings had at all been started during the tax year by issue of notice under S. 22(2), then the case would be one of escaped income.”

29. It will be noticed that two stages are contemplated one being a case of first assessment and the other a case of re-assessment. The proceedings which are started under S. 22(2) are pending till they reach the stage of assessment order and if materials required to proceed under S. 34, are discovered before an assessment order is finally made, that could be enquired into and order of assessment rectified in the proceedings previously instituted after going through the procedure laid down in Ss. 22 to 33. This is a case of first assessment. If the proceedings have been initiated under S. 22(2) and have been completed, the matter could be re-opened under S. 34, or a mistake rectified under S. 35, as completed proceedings are not necessarily final but liable to reopening under S. 34 or S. 35. The re-opening is a case of re-assessment as there was previously a completed proceeding in which assessment had been recovered.

30. The above commentary makes it clear that if matter that entitles the income-tax authorities to re-assess under S. 34 comes to their knowledge before the original proceedings are completed, the assessment is rectified by including the assessment that is due on account of the new information. In such a case, no question of making a re-assessment under S. 34 arises as the original proceedings for recovery of assessment are not complete and as re-assessment can only be conceived after there has been a previous levy, assessment and collection. Para 982 of the above commentary refers to the re-opening of the proceedings under S. 34. In other words, it is made clear that proceedings are initiated under S. 22(2) and they are completed by being continued up to the stage of S. 33. The completion of the proceedings does not make the assessment final or unalterable as the matter could be reopened for re-assessment under S. 34 or S. 35.

31. Section 34, Mysore Income-tax Act deals with two kinds of cases. One may be a case where the entire income of a person has escaped assessment in any year. As observed in the commentary of A.C Sampath Iyengar referred to above, the case would be one of escaped income. In such a case, notice under sub-s. (2), S. 22 will be issued as stated in S. 34, and the Income-tax Officer will proceed to assess the income, profits or gains that has escaped assessment. That would be a case of assessment under S. 34 as distinguished from a case of re-assessment under that section. If proceedings have already begun, and completed but a portion of the income has escaped assessment or the entire income has been assessed at too low a rate, a notice would be issued under S. 22(2) and the Income-tax Officer will proceed to re-assess such income. That would be a case of re-assessment under S. 34. That is why both the words ‘assess’ and ‘re-assess’ are used in S. 34. When no assessment has at any time been made under Ss. 22 to 33, it is a case for the Income-tax Officer to assess. If he has already passed an order of assessment in proceedings under Ss. 22 to 33, the question of re-assessing arises either because a portion of the income has escaped assessment or the entire income has been assessed at a low rate.

32. In other words, the word ‘assess’ in S. 34 is used for assessment under S. 34 when an assessee has not been previously assessed, and the word ‘re-assess’ is used when the assessee has been once assessed and has to be re-assessed either because a portion of his income has escaped assessment or because he has been assessed at too low a rate.

33. What is intended in the recommendations of the Finance Enquiry Committee and the agreement between the Rajpramukh and the President of India, is to secure finality in respect of completed proceedings while providing; for the continuity of pending proceedings in other words while pending proceedings are allowed to be proceeded with under the old Act, finality has been secured for completed proceedings, by not permitting under S. 34 the re-opening of completed proceedings under Ss. 22 to 33 and that is why it will be noticed that the word ‘reassessment’ is not used in S. 13 of the Finance Act along with the words ‘levy, assessment and collection.’ This is supported by the following, statement in para 19 of the Commentary on the-Indian Income-tax Act by Sampath Iyengar:

“All completed assessments in the Part B States-prior to the appointed day, are left undisturbed; the rest awaiting to be completed as on that date are taken over by the Union.”

34. It may be added that even without reference to the agreement on the basis of which S. 13, Indian Finance Act was enacted the same conclusion could be arrived at by considering S. 13, Finance Act. The Indian Income-tax Act as well, as the Mysore Income-tax Act clearly refer to ‘assessment’ and ‘re-assessment’ and if it was intended that for purposes of recovering reassessment the Mysore Income-tax Act should subsist even after the Indian Income tax Act came into force, that fact would have been clearly stated in S. 13, Indian Finance Act. The fact that S. 13 refers only to assessment and not to re-assessment makes it clear that what was in-tended is to secure finality of completed proceedings under the Mysore Income-tax Act and not permitting re-opening of completed proceedings for re-assessment under S. 34 of the Mysore In-come-tax Act.

35. Sri B.M Chandrasekhar who ably put forth the case on behalf of the respondents, contended that the words ‘levy, assessment and collection’ must generally be understood in a broad sense and that these words must be taken as including ‘re-assessment’. He relied for the purpose on some decisions which may here be referred to. In — ‘Abdul Khadar v. Commr. of Income-tax’, AIR 1953 TC 526 (F), it was observed:

“The rule enunciated in S. 13 is virtually the same as that contained, in S. 6, General Clauses Act that normally the repeal of an enactment shall not affect any liability incurred under the repealed enactment. With reference to the assessment proceedings of any year prior to the assessment for 1950-1951 chargeability arose under the old State Law though assessment and recovery had to be under the new Central Law. An assessment does not become final until all the proceedings provided in respect thereof are exhausted or the time limit prescribed for such proceedings expired.

The scope and amplitude of S. 13 of the Finance Act, 1950, is, if we may say so with respect, clearly explained in — ‘Madangopai Kabra v. Union of India’, AIR 1951 Raj 94(2)(G).”

36. It is not clear that their Lordships intended to lay down that after 1-4-50 re-assessment under S. 34 could be levied and recovered in respect of incomes of the previous years under Part B States. Income-tax Acts the provisions of which have been to some extent saved by S. 13(1) of the Finance Act, 1950. It is, no doubt, true that if S. 13, Finance Act, had not been enacted, S. 6, General Clauses Act, would have made the old Act applicable for recovery of income-tax for which certain persons had become liable and it may be that under S. 6 of the General Clauses Act, it was open even after the new Act came into force, to make re-assessment under S. 34 of the old Act. Section 13, Finance Act, has however been enacted with reference to the point as to what extent the old Act is saved and it is that section that settles the question. In fact, the two sections are differently worded and their scope, it must be stated with respect, cannot be the same. Section 13 of the Finance Act, does not say that the old Act was saved for purposes of re-assessment and its levy and collection where as it is stated in it that the old Act is saved for ‘levy, assessment and collection’. The fact that S. 13 was enacted with a particular object and that it was enacted in pursuance of an agreement referred to previously cannot be ignored.

37. Anyway, the above decision does not go to the length of holding that re-assessment that could have been recovered under the old Act could be levied or collected after S. 13, Finance Act, was enacted. Following is the portion relied on in the decision — ‘Bhailal Amin & Sons, Ltd. v. R.P Dalai’, AIR 1953 Bom 441 (H):

“The Indian Income-tax Act was only made applicable from 1-4-1949, and therefore the petitioners' assessment could not be determined under that Act. Under S. 7 the Baroda Income-tax Law ceased to have effect except for the purposes mentioned in that section and those purposes were the purposes of the levy, assessment and collection of income-tax and supertax. Therefore, to the extent that any question arose with regard to the levy, assessment or collection of income-tax from the petitioners, the question had to be determined according to the Baroda Law. In this context, obviously, “assessment” is used in its widest connotation. An assessment in this context is not merely the ascertainment of the amount due or payable by the assessee, but it also means all the procedure that has to be followed for the purpose of arriving at the amount for which the assessee is liable, and when the matter was pending before the Huzur Adalat of the Baroda Court it was in the course of the assessment of the petitioners, and until the Huzur Adalat had given its final decision, the assessment of the petitioners would not be complete.”

38. From the above, it is seen that this decision refers to proceedings commenced under S. 22 and not completed, as they were pending decisions under some of the sections corresponding the Sections upto S. 33 of the Mysore Income-tax Act, or Section 43 of the Cochin Income-tax Act and this observation appears to apply also to AIR 1953 Trav-C 526 (F). Moreover, the Bombay decision makes it clear that proceedings begun under S. 22 would be complete only after the final decision in appeal or revision or review under Ss. 30 to 33.

39. Next the following observation in AIR 1954 Cal 564 (E) was relied on by Sri Chandrasekhar:

“The word ‘assessment’ is not to be taken to too narrow a sense, and does not mean merely the order of assessment but the whole process culminating in the order. AIR 1934 PC 30 (B).”

40. If what is contended is that AIR 1934 PC 30 (B) lays down that ‘assessment’ means ‘re-assessment’, it must be said that it is not so, as has been clearly shown in AIR 1936 Lah 897 (C) by the following extract:

“The learned Counsel for the Commissioner relied on the following observation in the judgment of their Lordships of the Privy Council:

“That the word ‘assessment’ is not confined in the statute to the definite act of making an order of assessment appears from S. 66 which refers to the course of any assessment’.

41. It must, however, be remembered that this observation was made by their Lordships to repel the contention raised on behalf of the appellant to the effect that assessment is not made on income within the tax year, then that income has “escaped assessment” within that year and can be subsequently assessed only under S. 34 within its time limit. In that case, no order of assessment had ever been made against Burn & Co., and their income had at one time been included in the income of Martin & Co., and thereafter excluded from such assessment. What was really decided in that case was that an assessment can be made under S. 23(1) of the Act, more than a year, in fact, at any time, after the assessment year, if in the meantime no final assessment has been made. 61 Cal 285 (also reported in AIR 1934 PC 30 (B)) does not justify an inference that an assessment is not concluded when the amount of tax payable by the assessee has been determined and a demand notice issued to him. The use of the words ‘cancel the assessment, make a fresh assessment’ and ‘annul’ or enhance the assessment in Ss. 27, 30 and 31 shows that the proceedings after the issue of the demand notice do not form part of the assessment.”

42. On the other hand, their Lordships in AIR 1938 PC 175 (A) have made it clear what is meant by an assessment. Their Lordships have observed:

“One of the peculiarities of most Income-tax Acts is that the word “assessment”, is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payer.”

43. These observations made in general terms as-found in other decisions too, would appear to allow an argument that assessment includes reassessment and its collection. But that no such thing is intended is made clear later. Their Lordships were proceeding with a case in which a firm had not sent a return in compliance with the notice issued by the Income-tax Officer. The Income-tax Officer proceeded to “make the assessment to the best of his judgment as prescribed by S. 23(4)”. The firm was an unregistered firm and unregistered firms are liable to pay super-tax. But an application had been filed for registration and before making an assessment under S. 23(4), the firm was registered and the Assessing Officer made an assessment under S. 23(4) stating that “The firm having applied for registration is registered, therefore, no super-lax is levied”. Later on, the registration of the firm was cancelled and the authorities proceed to levy super-tax which should have been levied previously but for the fact that the previous officer had passed an order registering the firm and had held that on that account no super-tax was due. In that connection, the point arose as to when it could be said that an assessment is finally made. Their Lordships observed as follows:

“It had been argued on behalf of the appellant that the Act nowhere imposes any limit of time within which an assessment under the provisions of Ss. 23 and 29 is to be made, and that the service of the notice of demand can therefore be made at any time. This is true. It had, in effect, been so determined by this Board in 61 IA 10 (same as AIR 1934 PC 30 (B)). But it is not true that after a final assessment under those sections has been made, the Income-tax Officer can go on making fresh computations and issuing fresh notices of demand to the end of all time. It is possible that the final assessment may not be made until some years after the close of the fiscal year. Questions of difficulty may arise and cause considerable delay. Proceedings may be taken by way of appeal and cause further delay. Until all such questions are determined and all such proceedings have come to an end there can be no final assessment. But when once a final assessment is arrived at, it cannot, in their Lordships' opinion be re-opened except in the circumstances detailed in Ss. 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections.”

44. It will be noticed that, as observed by their Lordships of the Privy Council, an assessment is finally made in proceedings under S. 23(4) when no return is sent. No question of appeal arises in cases of that kind as no appeal is provided for. An assessment may be finally made in proceedings under Ss. 22 to 29 when a return is sent and these proceedings become complete when no appeals are filed. If appeals are filed on the matter is subjected to review or revision and those proceedings are terminated, the proceedings become then complete. But the proceedings are not final as they can be re-opened under Section 34 or 35. This supports the conclusion that the proceedings of assessment are complete before the question of re-opening the matter arises under S. 34 or 35. The Privy Council decision makes it clear that two distinct proceedings are contemplated for recovery of income-tax, one being that of levy, assessment and collection under Ss. 22 to 33, and the other being one of reopening the first assessment previously made and making a re-assessment under S. 34. This justifies the inference that when under S. 13(1), Finance Act, the applicability of the State Act for purposes of levy, assessment and collection of income-tax is saved, it does not mean that the applicability of that Act is also saved for purposes of re-assessment under S. 34. It is, no doubt, true that a point exactly similar to the one before us arose before the Travancore-Cochin High Court, and it has been laid down in AIR 1954 Trav-C 137 (FB) (D):

“The words ‘levy, assessment and collection’ in S. 13, Finance Act, 1950, include all the processes by which the tax is ascertained, demanded and realised and ‘re-assessment’ being one of these processes comes within the ambit of the phraseology employed.”

45. No reasoning has been given for the opinion of their Lordships and it is not clear whether there is any agreement between the President of Indiai and the Rajpramukh of the State of Travancore-Cochin and, if so, whether the object of enacting S. 13, Finance Act, was brought to the notice of their Lordships. We, with very great respect, therefore, cannot follow this decision, though we would ordinarily follow a decision of another High Court in such matters as this when it is desirable to lay down a common policy. When the wording of the section is not clearly in favour of a decision against the tax-payer and it is, to say the least, a case of doubt, the statute has to be interpreted in favour of the subject as we are dealing with a case of fiscal enactment. In — ‘C.P & Berar Provincial Co-operative Bank Ltd., Nagpur v. Commr. of Income-tax, C.P, AIR 1946 Nag 216 (I), it was held:

“The Income-tax Act is a fiscal measure and as such many of its provisions are of necessity arbitrary. Where the provisions of a fiscal enactment are plain and unambiguous, Courts' duty is to interpret them according to their plain meaning regardless of the consequences; but if there is any ambiguity the provision should be construed in favour of the subject.”

46. Though the objects and reasons for the enactment of a statute may not be looked into when the wording of a statute is clear, it is not unusual to rely on the objects and reasons for its enactment when the meaning of the words of the section is open to more than one interpretation. Moreover, in this case, one cannot avoid taking note of the object as found in the agreement between the President and the Rajpramukh of Mysore as the agreement is one recognised by the Constitution. In fact, if any section in the Indian Finance Act is not in accordance with the agreement referred to above, it is open to the objection that it is constitutionally bad. Article 245 states that the power of the Parliament to make laws is subject to the provisions of the Constitution. Articles 265 and 278 are two such provisions. Article 265 states that no tax shall be levied or collected except by authority of law while Art. 278 authorises the Government of India to enter into an agreement with the Government of a Part B State and provides for the provision of the chapter in which Articles 265 and 278 are found to have effect subject to the terms of such agreement. Since such an agreement has been entered into and it is found that according to the terms of that agreement, the State legislation, such as the Mysore Income-tax Act, should only survive for fulfilling the object “to secure legal continuity of pending proceedings and finality and validity of completed proceedings under the preceding State legislation”, it cannot be said that taking into consideration this aspect of the matter is of no importance. Giving anxious consideration to the wording of S. 13(1) of the Finance Act and the object of the agreement, on the basis of which it is enacted, we do not feel any doubt that finality of completed proceedings which were not otherwise final but are subject to re-opening and re-assessment, was secured by S. 13(1) of the Finance Act, by not providing for re-opening and re-assessment under S. 34 of the Mysore Income-tax Act.

47. In the result, the notices issued by the Income-tax Department to re-open the proceedings are declared illegal, and as such, writs will issue quashing the proceedings of the Income-tax authorities as prayed for with costs. Advocate's fee Rs. 250/- in each case.

D.R.R

Applications allowed.

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