S.S Sandhawalia, C.J:— Whether the limitation provision of section 149 of the Income-tax Act, 1961, envisages the issuance of a notice only, or also its actual service subsequently on the assessee as well, is the intricate and significant question necessitating this reference to the Full Bench. Particularly in issue is the correctness of the view enunciated by the Full Bench on this point in Jai Hanuman Trading Co. Pvt. Ltd. v. The commissioner of Income Tax, Patiala (AIR 1977 Punjab and Haryana 314)?
2. The assessment year in this reference was way back 1961-1962. The Revenue being of the opinion that substantial income has escaeped assessment initiated the proceeding under sections 147 and 148 of the Income-Tax Act (hereinafter to be referred to as, the Act). For that purpose a notice for re-assessment to the assessee which was actually signed on the 30th of March, 1970 was admittedly issued by registered post on the 31st of March, 1970. Though the precise date of its service is not on the record, it is a common ground that the said notice was served later in the 1st week of April, 1970. The assessee raised objection that the notice though issued within the period of limitation but having not been served within eight years from the end of the assessment year in question, the same was illegal and without jurisdiction. This was, however, rejected and the Income-tax Officer made a best judgment assessment under section 144 of the Act. The assessee went up in appeal but the appellate Assistant Commissioner rejected the same. Aggrieved thereby a further appeal was carried to the Tribunal.
3. Meanwhile in the course of re-assessment proceeding notice for levy of penalty was also issued to the assessee. Holding the assessee to be in default, the Income-tax Officer imposed a penalty restricted to 50 percent of the tax payable. The assessee appealed unsuccessfully to the appellate Assistant Commissioner and thereafter appealed to the Tribunal.
4. Both the appeals aforesaid were consolidated and disposed of by a common order dated 19th of February, 1975, by the Tribunal. Therein purporting to follow the Supreme Court judgment in Banarsi Debi v. Income-Tax Officer (53 I.T.R 100) and the views of the Gujarat and Calcutta High Courts it was held that a notice of reassessment under section 149 of the Act issued against the assessee before the limitation date but served on the assessee after such date would be without jurisdiction and thus void and inoperative. Accordingly, the re-assessment as also the penalty proceeding were annulled. Later, on the application of the Revenue the following two questions were referred to this High Court:—
(1) Whether on the facts and in the circumstances of this case, the Tribunal was correct in law in holding that the assessment for the assessment year 1961-1962 was barred by limitation?
(2) Whether on the facts and in the circumstances of this case, the Tribunal was justified in law in cancelling the penalty under-section 271(1)(a) for the assessment year 1961-1962?
5. This case had originally came before the Division Bench and it rightly noticed that the question of the legality of the levy of penalty was intricately linked with the validity of the re-assessment. Very lucidly it was pointed out that the core question was whether the issuance alone of the notice should be within the period of limitation prescribed under section 149 of the Act or whether the service of the notice actually must also be within the aforesaid period of limitation. On behalf of the Revenue while relying on the Full Bench judgment in Jai Hannman Trading Co. Pvt. Ltd. v. The Commissioner of Income Tax, Patiala (AIR 1977 Punjab and Haryana 314) the basic contention was that the Gujarat, Andhra Pradesh and the Calcutta High Courts had misconstrued the ratio of the Supreme Court judgment in Banarsi Debi's case (Supra). Noticing the significance of the question and the absence of a firm direct precedent on the point within this court the matter was referred to a larger Bench.
6. Herein, more than any other case, it becomes indeed imperative to notice in some detail the legislative history of the provisions because it is not possible to truly appreciate and construe them without doing so. It needs no great erudition to opine (as it is a matter of recent history) that over the passage of nearly four decades and as many as 62 amendments made therein the state of the law under the Indian Income-tax Act of 1922 had reached a peak of unsatisfactoriness and complexity. Way back in 1940 the Privy Council in Commissioner of Income Tax, Bengal v. Mahaliram Ramjidas (8 ITR 442) with particular reference to section 34 it observed a follows:
“Section 34 is unhappily and even ungrammatically phrased. It is expressed impersonally, and it fails to state by whom and by what procedure it is to be established that income, profits or gains have escaped assessment or have been assessed at too low rate.”
7. There, thus, arose a persistent and vociferous demand for drastic change and the simplification of the Income-tax law—both substantive and procedural. Consequently, the matter was referred by the Central Government to the law Commission then presided over by Mr. Setalvad, and it rendered its exhaustive Twelfth Report thereon suggesting radical Changes in the statute. With regard to the state of law under the earlier Act, the Commission commented as follows:
“There is hardly any Act on the Indian Statute Book which is so complicated, so illogical in its arrangement, and in some respects so obscure as the Indian Income-tax Act, 1922. Courts and commentators have commented on the illogical arrangement of the provisions of the Act.”
8. It was on the basis of the aforesaid Twelfth Report that the meaningful and some what radical changes were wrought in the law and the present Income-tax Act of 1961 found its way on the statute book whilst totally repealing the earlier 1922 Act.
9. It is neither possible nor, perhaps, desirable to range over the larger conspectus of such comples legislation as the Income-tax Act of 1961. For our present purpose, it suffices to note that the old, exhaustive and interminable section 34 of the 1922 Act was entirely substituted by as many as a corresponding sections 147 to 152 of the 1961 Act.
10. However, the very meaningful change mine law and the explicit departure from the old one, with which we are concerned, was that of section 149 of the Act which in a way corresponds to clause (b) of sub-section (1) of section 34 of the old Act. For clarity sake, the old and the new provisions may be juxtaposed against each other:
1922 Act
“34. Income escaping assessment.—(1)
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information is his possession reason to believe that income, profits or gain chargeable to “Income-tax have ascaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time 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:”
1961 Act
“149. Time limit for notice.
(1) No notice under section 148 shall be issued.—
(a) in cases falling under clause (a) of section 147—
(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (ii);
(ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or likely to amount to rupees fifty thousand or more for that year:
“(b) in cases falling under clause (b) of section 147, at any time after the expiry of four years from the end of the relevant assessment year.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be served in person treated as the agent of a non-resident under section 163 and the assessment, re-assessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year.”
11. Apart from the above, sub-section (1A) of section 34 of the old Act had again expressly employed the terminology of “served on the assessee, or, if the assessee is a company, on the principal officer thereof a notice containing all.” Again the proviso to sub-section (3) of the old section 34 was in the terms following:
“Provided that where a notice under clause (b) of sub-section (1) has been issued within the time therein limited, the assessment or re-assessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even it at the time of the assessment or re-assessment the four years aforesaid have already elapsed.”
12. It would be manifest from the above that Parliament was well aware of the phraseology employed in section 34 of the 1922 Act, which expressly mentions the service on the assessee. However, in the substituted section 149(1) the use of such phraseology and the word ‘served’ scrupulously excluded. Instead, the language employed in term mentions the issue of notice alone and the time limit therefor. Again in sub-section (3) of section 149 it is only the issue of the notice which is made subject to section 151. Similarly a reference to sub-section (3) of section 149 would show that the Legislature drew a clear distinction betwixt the words “served” and “issued” and employed them with different meanings therein.
13. Now, it is a sound cannon of construction that the Legislature does not waste its words. By 1961 the old Act of 1922 had held the field for well-high 40 years. The designed change in its language by substituting section 149 could not but be intended to bring a change in the law. Parliament did not abandon the phrase “served on the assessee” used in the old Act and substituted it by “no notice under section 148 shall be issued” if it had in tended to mean the identical thing. A clear departure from the language in this context involved an equally clear change in the law. That such departure from the old law was intended has been authoritatively so held by their Lordships of the Supreme Court itself in the following words in Income-tax Officer, I Ward, Distt. VI, Calcutta v. Lakshmani Mewal Das (103 I.T.R 437 at page 444):—
“The provisions of sections 147 id 153 of the Act correspond to those of section 34 of the Indian Income-tax, Act, 1922. There have been some points of, departure from the old law, but it is nor necessary for the purpose of the present case to refer to them.”
14. It is, therefore, wrong to assume that the structural and meaningful changes made in the law by substitution of section 149 and the deliberate omission of the old phraseology “served on the assessee” from the new Act was either otiose or meaningless. Indeed, in construing the two Acts, the celebrated rule in Heyden's case is at once attracted. We must see what was the state of the existing law before, the, Act of 1961, what was the mischief or defect for, which the law had not been provided earlier and what remedies Parliament had provided, thereafter. Applying the said rule, it is plain that a change from the old law was actually intended. This seems to have been fairly and squarely directed to hit at the mischief of the dialatory tactics of avoiding service by manipulating assessee in order to creep out of the limitation provision. To my mind, the evil sought to be remedied was clearly the long delayed and studied avoidance of service of notice by, assessees, whose income had eacaped assessment, which would render the limitation provisions of the old law virtually nugatory and may well have proved to be a paradise for tax-evaders. It would thus follow that the remedy provided by Parliament in this context was to take the service of the notice out of the ambit of limitation and draw a clear and sharp line betwixt the date of the issuance of the notice on the one hand and the uncertain and fluctuating date of service on the assesses on the other. Mr. Rajgarhia, the learned counsel for the Revenue, had righly highlighted that it is impossible to estimate the time within which a legal and valid service can be effected on a recalcitrant assessee whose ascaped income is sought to be brought within the not again. To bring something so nebulous within the clear confines of limitation provision is in itself anomalous and, therefore, Parliament intended a clear change in the law by fixing limitation from the firm date of the issuance of notice as against actual service on the assessee under the old law. It inevitably follows that to read the clear and categoric change of language in section 149 of the Act as meaning the same thing as earlier in the old Act in distinctly different phraseology would be patently violative of the sound cannons of construction.
15. As would appear hereinafter, the whole controversy and, with the greatest respect, a fallacy herein has stemmed from a misapprehension of the import of the observations of their lordships in Panarsi Devi v. Income-tax Officer (53 ITR 100 : AIR 1364 SC 1742). It is, therefore, act to consider this judgment at the very outset. Therein what fell for construction was section 4 of the Indian Income-tax (Amendment) Act, 1959. They did not even remotely consider section 149 or the 1961 Act at all. Their lordships came to the conclusion in the peculiar circumstances of the case that unless the word ‘issued’ in section 4 aforesaid was given a wider meaning to include its service as well, the whole of the validating and amending provision would fall to the ground and be rendered nugatory. In terms it was observed as follows:—
“As the notice mentioned in section 4 of the Amending Act is linked with the time prescribed under the Act, the section becomes unworkable if the narrow meaning is given to the expression ‘issued’. On the other hand, if we give a wider meaning to the word, the section would be consistent with the provisions of section 34(I) of the Act. Moreover, the narrow meaning would introduce anomalies in the section: while the notice, assessment or re-assessment were saved, the intermediate stage of service would be avoided.”
16. It was in the light of the aforesaid compulsions that their Lordships, by interpretation, gave a strained and wider meaning to the word ‘issued’ in order to save the Indian Income-tax (Amendment) Act, 1959 from being rendered nugatory. It is a sound cannon of construction, that any interpretation, which would frustrate one or all the provisions of a statute, has to be avoided. Conforming to the said salutary rule, their Lordships have concluded that since the word ‘issued’ had both a wider and a limited meaning, they were compelled to choose the wider connotation to include the service of the notice as well in section 4 aforesaid. Their Lordships did not and, perhaps, could not possibly have said that the word ‘issued’, whenever and wherever used, means ‘served’. They did not hold that the two distinct words ‘issued’ and ‘served’ are either synonyms or are identical. It is true that they observed that in certain Indian statutes these words had been employed in interchangeable terms. That solitary observation, in my view, cannot possibly be picked upon to do patent violence to the language by holding that ‘issued’ always means ‘served’ as well. As was rightly pointed out by lord Halsbury, L.C Quinn v. Leathern (1901 Appeal Cases 495), a decision is only an authority for what it actually decides, and the quintessence thereof is its ratio and not every observation found therein nor what logically follows from the various observations made in it. In approving that view, their Lordships in State of Orissa v. Sudhansu Sekhar Misra (AIR 1968 Supreme Court 647) further warned that it was not a profitable task to extract a sentence here and there from a judgment and to build upon it. Consequently, Banarsi Devi's case (supra) is no warrant for the obstruse proposition that the word ‘issued’ dehors its context must always mean ‘issued’ and served’ in every statute or in section 149 of the Act.
17. This very question was considered in depth by the Full Bench in Jai Hannman Trading Co. Pvt. Ltd. v. The Commissioner of Income Tax, Patiala, (AIR 1977 Punjab and Haryana 314), O. Chinnappa Reddy. J., speaking for the Court, after an exhaustive analysis of Banarsi Debi's case in paragraphs 6 to 9, concluded as under:—
“The decision of the Supreme Court in Banarsi Devi's case, (AIR 1964 SC 1742), therefore, was that the expression ‘issued’ had a wide as well as a narrow meaning and that in the context of S. 34(1) which provided for service of notices within a period of eight years and in the context of the object of the Amending Act, the expression ‘issued’ could only be given a wider meaning of S. 4 of the Amending Act. The Supreme Court did not lay down that the expression ‘issued’ whenever and wherever it occurred in the Income-tax Act, carried the wider meaning.
…We are clearly of the opinion that in the context of the provisions or the Income-tax Act, 1961, the expression ‘issued’ occurring in S. 149 cannot be given the meaning ‘served’. We dissent from the views expressed by the Gujarat and Andhra Pradesh High Courts and we overrule the decision of the Punjab and Haryana High Court in Tikka Khushwant Singh's case.”
18. We are in respectful and unhesitating agreement with the aforesaid view. Equally it deserves notice that the said judgment has been subsequently followed by the Delhi High Court in New Bank of India Ltd. v. Income-tax Officer, Company Circle v. New Delhi (136 ITR 679) in preference to the contrary view.
19. In fairness to Mr. Jain, the learned counsel for the respondent assessee, one must advert, to his primal reliance on the judgments of the Gujarat High Court which have been followed in Andhra Pradesh and a passing observation of the Calcutta High Court. It would appear that in the Gujarat High Court earlier in Madanlal Mathuradas v. Chunilal, Income-tax Officer (44 ITR 328) Chief Justice Desai, speaking for the Bench, on an in depth consideration of the matter, held that in the first proviso to section 24 itself substituted by finance Act, of 1956) the word ‘issue’ could mean ‘serve’ with the following pointed observation:—
“Mr. Shah had, therefore, to fall back on the sheer argument that the expression ‘issue’ in the initial words of the proviso should be equated with the expression ‘serve’ notwithstanding the amendments in the section and the insertion of the proviso to sub-section (1). The decision so strenuously relied on in support of the petitioner's case cannot advance the argument canvassed before us as the expressions ‘issue’ and ‘serve’ had there to be read in a wholly different context. In the context and collocation before us, we must read the words as used correctly and exactly and not loosely and inexactly and in the present context there is nothing to show that we should prefer the loose and inexact meaning of those words by an impermissible equation. As they now stand after the amendments of 1956, the relevant parts of the section relating to time-limit seem to us to be plain and certain and we do not read in them any uncertainty or obscurity. We have to read this expression ‘issue’ in the initial part of the proviso in the context and the setting in which it finds place.”
20. The reasoning aforesaid, to my mind, remains undimmed with time. However, the authority of the aforesaid judgment was whittled down later in Induprasad Devshankar Bhatt v. J.P Jain (58 ITR 559) not on any independent reasoning but, with the greatest respect, on a misinterpretation of the true ratio, in Banarsi Debi's case. It was observed that Madanlal's case was no longer good law solely on the assumption, which is not warranted, that the Final Court had declared the distinct words ‘issued’ and ‘served’ to be synonymous. That view was then inevitably followed by the Division Bench of the Gujarat High Court in Shanabhai B. Patel v. R.K Upadhyaya, Income-tax Officer (96 ITR 141). The Andhra Pradesh High Court in Commissioner of Income-tax, A.P v. Smt. Kailaso Devi and Smt. Rukmini Bai (105 ITR 479) again slipped into the same error in merely, following the aforesaid view purporting the same to be based on the binding precedent of Banarsi Debi's case. It seems also to be assumed that in the new Act sections 147 to 153 merely bifurcated the earlier section 34 without any change in the law. This assumption is obviously erroneous when reference is made to the 12th Report of the Law Commission in which extensive changes and departure from the old law were advocated generally and with particular regard to section 34 of the old Act, which was later adopted and enacted. Equally this assumption is now in headlong conflict with the binding observations of the Final Court in Income-tax Officer, I Ward, Distt. VI, Calcutta v. Lakshmani Mewal Das (103 ITR 437) that a distinct departure from the old law was intended by the substitution of sections 147 to 153 of the new Act in place of section 34 of the old Act. Lastly, there is again a passing observation in Lilooah Steel & Wire Co. Ltd. v. Income-tax Officer, ‘B’ Ward, Dist. 11(1), Calcutta (86 ITR 611), without any detailed discussion or rationale, which also tends to take the same view as the Gujarat and Andhra Pradesh High Courts. For the detailed reasons recorded earlier and those that follow hereinafter, I feel compelled to record a very respectful dissent from these authorities.
21. Mr. Jain had then place reliance on a short order passed in limine whilst declining to grant special leave to appeal by their Lordships of Supreme Court in Commissioner of Wealth-tax, U.P v. Kundan Lal Behari Lal (99 ITR 581). Assuming entirely for argument's sake, in the first instance, that the said order is a judgment, it may be pointedly noticed that this was rendered basically under section 17 of the Wealth-tax Act, 1957. Now, there is no manner of doubt that from its very enforcement clause (b) of sub-section (1), of section 17, in express term, required the service of a notice within the prescribed period on the assessee. Clearly enough, in the said section both the issue of the notice and its service by express mandate, have to be within the prescribed time of 4 years or 8 years as the case may be. Section 18 of the Wealth-tax Act and, in particular, sub-section (2A) thereof (which stands omitted with effect from the 1st of April, 1976) is plainly subsidiary to section 17. Equally it deserves notice that sub-section (2) of section 14 of the Wealth-tax which has been referred to in clause (b) of section 17(1) required the service of a notice upon the person and not the mere issuance of such a notice. One, therefore, does not see how the brief observations made by their Lordships in the context of section 17 or 18 of the Wealth-tax Act are in any way applicable to the entirely different provision of section 149 of the Income-tax Act, 1961, and therefore, how the brief observations of their lordships in 99 ITR 581 (supra) would, not in any way, advance the case of the respondent. The said case is, therefore, plainly distinguishable and it is well to recall that the Delhi High Court in New Bank of India's case (supra) referred to the same and explained its inapplicability in the context of section 149 of the Act.
22. Now, apart from the above, Mr. Jain's stand that even a short order dismissing a special leave petition in limine, without notice to the other side, would be a binding judgment within Article 141 does not seem to be tenable. It is settled beyond cavil that a judgment of a Court of law derives its legal sanctity from the direct canvassing of opposite views in the open Court and the adjudication made thereon. It has been rightly a judicial mandate that a Court should not pronounce on matters which have been directly raised and debated before it. A great constitutional authority has forcefully opined that no amount of individual research and opinion is a substitute for a full-dress argument in Court and, indeed such an attempt should be avoided. It is significant to recall that their Lordships in declining leave on a special leave petition are not at all obliged to give reasons and in their discretion can do so for a wide variety of considerations. As is evident from the order in the case of The Commissioner of Wealth Tax, U.P v. Kundan Lal Behari Lal (supra) their Lordships did not consider that the point arising out of the judgment required any further examination and were disinclined to grant leave, but on being pressed and invited to give the reasons they briefly did so orally. It appears from the report that no notice was given to the other side nor a full dress debate on the point was raised. In my humble view, such an ex parte short order declining to grant a discretionary leave to appeal under Article 136 is not strictu sensu a judgment which is either binding or within the ambit of Article 141. To seek to cull from such an order any considered principle of law on a point, on which there is a deep country-wide controversy, would, in my view, be uncalled for and, with the greatest respect, would amount to some distortion of the hallowed rule of binding precedents.
23. Though reference to commentaries is uncalled for, Mr. Jain attempted to adopt the cryptic reasoning in Kanga and Palkhivala's law and Practice of Income-tax in Supplement to Seventh Edition at page 180 of Volume I. Therein in the form of a foot note it is very simplistically said that Jai Hanuman Trading Co. Ltd. v. Commissioner of Income-tax (110 ITR 36—Full Bench) is incorrectly decided on this point and has overruled Tikka Khushwant Singh v. Commissioner of Income-tax (101 ITR 106) because the Court's attention was not drawn to Commissioner of Income-tax v. Kundan Lal Behari Lal (99 ITR 581). I have already in detail above distinguished the said case and have also respectfully opined that the same cannot be a binding authority of the point, Consequently, the mere comment even though from a standard work is of little significance.
24. Once the maze of precedent is out of the way, one might as well examine the issue refreshingly on principle. To my mind, the fallacy that seems to have crept in this context is to suggest that (barring some very peculiar or compulsive textual compulsion) explain ordinary English the word ‘issue’ and the word ‘serve’ are synonyms or identical terms. With great respect, it is not so. Their plain dictionary meaning runs directly contrary to any such assumption. No dictionary says that the issuance of an order is necessarily the service of such order on a person as well or, in reverse, that the service of an order on a person is the mathematical equivalent to its issuance. In Chambers's Twentieth Century Dictionary, the relevant meanings given to the word ‘issue’ are act of sending out; to put forth, to put into circulation, to publish, to give out for use. On the other hand, the word ‘serve’ in the same dictionary has been given the meaning, as a term of law, to deliver or present formally or give effect to. Similarly, in the New Illustrated Dictionary the relevant meaning attributed to the word ‘issue’ is come out, be published, send forth, publish, put into circulation whilst the relevant meanings attributed to the word ‘serve’ are to supply a person with, make legal delivery of (writ etc.), deliver writ etc. to a person. Thus, it would appear that the words ‘issue’ and ‘serve’ are distinct and separate and, indeed the gap between the two may be wide both in point of time and place. An order or notice may be issued today but may be served 2 years later. An order or notice may be issued at one place and may be served at a point of 1000 or more miles away. An order issued may not require any service at all. An example may be taken of order issued in the shape of notification in the official gazettes which do not require any service on the person affected by it. A statute may require that the issuance of a general order be conveyed by publication in the locality without individual service. Reference in this connection may be made to section 4 of the land Acquisition Act which, apart from notification, requires the publication only of the order in the vicinity, of the area sought to be acquired. Therefore, the issuing of an order is not a necessary concomitant of its actual service upon any one in particular. Merely because a statute may provide that an order issued should also be properly served subsequently on the person directly affected would not, in my view, in any way render the words ‘issue’ and ‘serve’ as either synonymous or identical. A very peculiar situation in a statute and the compulsion of sound cannon of construction may sometime require the enlargement or extension of a word to save the legislation from being rendered nugatory. That, indeed, was the situation in 53 ITR 100 (supra). However, this cannot possibly be any warrant or authority for saying that the distinctioned separate words of the English language, namely, ‘issue’ and ‘serve’ are in any way synonymous.
25. Again we are called upon to construe the word ‘issue’ not in isolation but in the context of section 149 of the Act. Plainly enough, it is an express limitation provision creating a precise bar with regard to the re-opening of assessments. As its heading in term says, it provides a time limit for notice. Now, barring exceptions, the hall-mark or a limitation provision is that the same must have a clear cut and fixed termini at both ends. It has been rightly said that a limitation provision would lose its effect unless it has a terminus a qua and a terminus ad quem. How, admittedly section 149 fixes the terminus a quo from the end of the relevant assessment year, i.e, on the 31 March of said year. On the other hand, the terminus ad quern under clauses (a) and (b) is fixed at 4 year, 8 years and 12 years, from the fixed date of 31st March, of the relevant assessment year. It is within these precise parameters that a notice under section 148 is mandated to be issued. If the notice is issued beyond these inflexible polestars, the same would transgress the limitation provision of section 149. However, if the argument canvassed on behalf of respondent assessee is to be accepted, it leads to a grave fallacy by making the terminus ad quem wholly nebulous and utterly uncertain. It is manifest that the time when a reluctant and manipulating tax evading assessee, whose income has escaped assessment, can be served for re-opening of his assessment would always remain problematic and is becoming progressively so. Therefore, to suggest them the terminus ad quem of section 149 would not be the date of issuance of the notice but its valid service on a recalcitrant assessee, would, in a way, be violating the sounder norms of construction for a precise limitation statute. Clearly enough, if the terminus ad quo is fixed as the relevant assessment year, namely, 31st March of the said year, the other terminus must equally be fixed with regard to the fixed date of the issuance of the notice, which is precise and predicable. Indeed, the construction canvassed by the respondent may well frustrate the very object of this limitation provision as would be indicated in some detail herein after.
26. As has already been noticed, the core of the respondent assessee's stand is that after Banarsi Debi's case the word ‘issue’ is the 1961 Act must, wherever and whenever, it is used be read as ‘served’ and in any case it should be so in sections 147 to 153 of the Act which have supplanted section 34 of the old Act. Now, the gravely anomalous and, if one may say so, absurd results, which would ensue, if such a construction were to be accepted, deserve to be highlighted. Reference in this connection may first be made to sub-section (2) of section 148 which reads as follows:
“148. Issue of notice where income has escaped assessment.
(2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so.”
27. Plainly enough, this requires that the Officer must first record his reasons before he formally issue the notice under this section. If the word ‘issuing’ in this section is to be read as ‘serving’, it would lead to a patent absurdity. This would imply that the Officer may record his reasons after issuing the notice but serving it on the assessee. It is not easy to imagine that Legislature intended any such strange result. Reference may then be made to sub-section (3) of section 149 itself. There in the first line itself the word employed is ‘served’ whilst in the penultimate line the word employed is ‘issued’. Thus, in the same short sub-section the Legislature itself is using words as distinct and separate. If, as is sought to be canvased on behalf of the respondent, these words are synonymous or identical, the Legisluture would not land itself in the anomaly of using different words if it was intended to mean the same thing. Yet, again, the word ‘issued’ has been employed in both sub-section (1) and (2) of section 151, which read as under:
“151. Sanction for issue of notice.—(1) No notice shall be issued under section 148 after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice.
(2) No notice shall be issued under section 148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice.”
28. The plain scheme of the section is that as the case may be, the satisfaction or the sanction of the Commissioner or the Board on the reason recorded by the Income-tax Officer is necessary before the notice under section 148 is sent out. If the word ‘issued’ used in both these sub-sections is read as ‘served’, it will lead to the strange phenomena that even after the Income-tax Officer has recorded his reason and issued the notice, the sanction therefore may be recorded before its service on the assessee. It is thus manifest that in this very statute and, in particular, in sections 147 to 153 the Legislature did not intend and, indeed, could not have intended that the word ‘issued’ therein should always be read as ‘served’. Once that is so, than plainly enough the ordinary meaning of ‘issued’ must be given to section 149 and for reasons already recorded whilst discussing this limitation provision it is indeed essential to read it only as ‘issued’ and not as ‘served’.
29. 18A. Iastly, in this context, one must candidly highlight that the true construction of a provision like section 149 undoubtedly is coloured and governed by the line of approach to taxation laws. That approach has been recently corrected and highlighted by the Constitution Bench in McDowell and Co. Ltd. v. Commercial Tax Officer (154 ITR 148). In particular the incisive and refreshing observations of Chinnappa Reddy, J., with regard to the somewhat continuing archaic approach to taxing statutes deserve notice in extenso:—
“We think that the time has come for us to depart from the Westminster principle as emphatically as the British courts have done and to dissociate ourselves from the observations of Shah, J., and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next, there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is ‘the large hidden loss’ to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the best brains in “the country being involved in the perpetual war wages between the tax-avoider and his expert team of advisers, lawyers, and accountants on the one side and the tax-gatherer and his perhaps not so skillful advisers on the other side. Then again there is the ‘sense of injustice and inequality which tax avoidance arouses in the broasts of those who are unwilling or unable to profit by it, Last, but not the least is the ethics (to be precise the lack of it) of transferring the burden of tax liability to the shoulders of the guide less, good citizens from those of the ‘artful dodgars’. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, “Taxes are what we pay for a civilized society. I like to pay taxes. With them I buy civilization. But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminster and the alluring logic of tax avoidance. We now live in a welfare State whose financial needs, if backed by the law, have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it stands on no less a moral plane than honest payment of taxation. In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited “by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai, J., in Wood-Folymer Ltd., In re Bengal Hotels Limited. In re (1977) 47 Comp Cas 597 (Guj), where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.”
30. If this could be said of what was known as lawful tax avoidance, it is more pertinently and more stringently applicable to tax evation. It is thus now held authoritatively that in the commercial world of modern times and, in particular, in India where tax evasion is rampant. The early victorian approach that the taxing statutes must invariably be tilted in favour of the assessee has to be given a go by. Once this approach is accepted, as it must be, within this jurisdiction because of binding precedent, it seems plain that the provisions of section 149 are directed, inter alia, against assessees who directly avoid their duty to pay tax or in any case against income which has escaped assessment earlier. Mr. Rajgarhia for the Revenue was not for wrong in contending that section, 149 and its allied provisions are attracted not in the case of honest assessees but are directed against dishonest assessees who have amassed wealth and are ultimately caught up by the discovery of evasion and escapement of their income. Is such a provision to be construed in a manner by which its very purpose may be eroded or it be rendered nugatory on the technical ground of limitation by avoiding service of notice issued under section 148? It was forcefully pointed out that with all care and competence the service of a notice on recalcitrant assessee wishing to avoid the same is not entirely in the hands of the Department. It is usually easy for a manipulating and tax-evading assessee to delay or avoid service when it is on the brink of limitation which, if crossed, would absolve him from further proceeding. Therefore, to fix the terminus ad quern under section 149 on valid service on an assessee, whose case is to be reopened for escaped assessment, may well be placing a premium on tax-evasion. It was rightly and forcefully argued on behalf of the Revenue that the recording of reason and issuance of notice within the time prescribed is in the hands of the Department. The Legislature mandates that the Income-tax Officer must apply his mind and direct the issue of notice within the fixed time from the last date of the relevant assessment year and the Revenue must comply therewith. However, service on an evasive assessee is not and cannot inevitably be in the hands of the Department. It was with this object in view that the Legislature designedly abandoned the word ‘served’ employed in the old section 34 and pointedly used the word ‘issued’ alone in section 149 of the Act. Even now, to read section 149 as requiring service would, therefore, be running against the intent and the mandate of Parliament and equally tending to a construction which may defeat and frustrate its attempt to curb tax-evasion.
31. In Commissioner of income-tax, A.P v. Smt. Kailasa Devi and Smt. Rukmini Bai (105 ITR 479) the Andhra Pradesh High Court expressed the view that unless ‘issued’ was read as ‘served’ in section 149, it may give the option to the Department to withlold service of the order for an inordinately and interminably long period and extend the same for reopening the assessment. With the greatest respect, it is always the rule that a statute it not to be construed on the presumption that its provisions will be abused or misused. It has rightly been said that there is no provision of law which is not capable of being misused. Courts, therefore, cannot proceed on the assumption that public authorities vested with such power would necessarily abuse their authority. It was rightly and forcefully argued by Mr. Rajgarhia on behalf of the Revenue that the Department would not have the least motivation to withhold or delay service after the Officer first duly recorded a reasoned order for the issuance of a notice for reopening the assessment under section 148. If at all; they would be motivated in the expeditious execution of their decision in this context. The boot, indeed, would be entirely on the other leg because an assessee sought to be proceeded against under sections 147 and 148 may wish to evade service and if possible, cross the barrier of limitation. Equally in the eye of law there is a presumption under section 114 of the Evidence Act that all official acts are regularly performed. Even though there may be some fall in official standard, one cannot go to the length of reversing that presumption by acting on the assumption that statutory power will be used or misused by public authority. With the greatest respect, the apprehension of the Andhra Pradesh High Court on this score would, perhaps, be hardly acceptable. If such a view tilted their decision as it obviously has, one must respectfully record a dissent therefrom.
32. Before parting with this judgment, reference must be made to the Division Bench judgment of this Court in Commissioner of Income tax v. Mohammad Quddus & sons-(1985) 44 CTR (Pat.) 121. In the said case, the notice under section 148 was sent not through registered post on 29th of March, 1976, put was served on the assessee on the 3rd of April, 1976. The Tribunal held that since the service of the notice was beyond the time prescribed in the Act, the proceedings were barred by the limitation provision of section 149. In assailing the finding, firm reliance was placed on behalf of the Revenue on Jai Hannman Trading Co. Ltd. v. Commissioner of Income-tax, Patiala, (110 ITR 36) and New Bank of India Ltd. v. Income-tax Officer, Company Circle v. New Delhi (136 ITR 679), without adverting in depth to the said judgments, the stand of the Revenue was rejected and the Tribunal's view was affirmed. With the greatest respect, the judgment has not laid down the law correctly in view of the detailed reasons recorded above and has, therefore, to be overruled.
33. To finally conclude, the answer to the question posed at the very outset is rendered in the term that the limitation provisions of section 149 of the Income-tax Act, 1961 envisage the issuance of a notice only to the assessee and not its actual service subsequently on him as well.
34. In the light of the above, the answer to question no. 1 referred to the High Court is rendered in the negative, and it is held that the Tribunal was not correct in law in holding that the assessment for the assessment years 1961-1962 was barred by limitation that is, in favour of the Revenue and against the assessee. Equally, the answer to question no. 2 is rendered in the negative and it is held that the Tribunal was not justified in cancelling the penalty under section 271(1)(a) for the assessment years 1961-1962; i.e, in favour of the Revenue and against the assessee. The Revenue will be entitled to costs of this reference.
35. Uday Sinha, J.:— I agree.
36. Nazir Ahmad, J.:— I agree.