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  • provisions contained in Section 34 of the 1922 Act into sections 147, 148 and 149 in the Act of 1961
  • SECTION 148 INCOME TAX ACT 1961
  • provisions of sections 147, 148, 149, 150 and 151 of the 1961 Act
  • Sub-section (2) of Section 139 ; and the provisions of this Act
  • sections 553, 554 and 555 of the Calcutta Municipal Act, 1951,
  • provisions of Section 34 of the 1922 Act in the 1961 Act,
  • Clause (a) of Subsection (1) of Section 34 of the 1922 Act
  • "Sections 148, 148 and 149 of the Income-tax Act of 1961
  • SECTION 4 INDIAN INCOME TAX AMENDMENT ACT
  • SECTION 27 GENERAL CLAUSES ACT 1897
  • provisions of Section 34 of the old Act
  • subsection (1) of Section 34 of that Act.
  • SECTION 4 AMENDING ACT
  • provisions of Sub-section (1)
  • provisions of Section 151. (3)
  • Section 147, the Income-tax
  • Section 34 of the 1922 Act,
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
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Acts
  • provisions contained in Section 34 of the 1922 Act into sections 147, 148 and 149 in the Act of 1961
  • SECTION 148 INCOME TAX ACT 1961
  • provisions of sections 147, 148, 149, 150 and 151 of the 1961 Act
  • Sub-section (2) of Section 139 ; and the provisions of this Act
  • sections 553, 554 and 555 of the Calcutta Municipal Act, 1951,
  • provisions of Section 34 of the 1922 Act in the 1961 Act,
  • Clause (a) of Subsection (1) of Section 34 of the 1922 Act
  • "Sections 148, 148 and 149 of the Income-tax Act of 1961
  • SECTION 4 INDIAN INCOME TAX AMENDMENT ACT
  • SECTION 27 GENERAL CLAUSES ACT 1897
  • provisions of Section 34 of the old Act
  • subsection (1) of Section 34 of that Act.
  • SECTION 4 AMENDING ACT
  • provisions of Sub-section (1)
  • provisions of Section 151. (3)
  • Section 147, the Income-tax
  • Section 34 of the 1922 Act,
Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

A notice under Section 148 of the Income-tax Act, 1961, was issued and dispatched on February 24, 1970, relating to the assessment year 1961-62 to the petitioner by the Income-tax Officer, Sangrur. The petitioner did not file a return in response. The Income-tax Officer issued another notice on October 10, 1973 under section 142(1) intimating appearance on November 23, 1973. The petitioner’s counsel appeared on November 24, 1973 and obtained an adjournment to December 10, 1973 for filing a reply. The petitioner filed a reply dated December 9, 1973, supported by an affidavit stating that the alleged Section 148 notice was not served upon him and that proceedings under Section 148 were not competent because notice had not been served within eight years. The Income-tax Officer required the petitioner to appear on March 18, 1974 and ordered acceptance of the Section 148 notice; counsel refused to acknowledge receipt. The petitioner was served on May 13, 1974 with a final order dated March 21, 1974 passed under Section 144 assessing income at Rs. 48,400, and with a notice dated March 19, 1974 under Section 271 to show cause for penalty. The petitioner challenged the Section 144 order and the Section 271 notice by way of writ. At the time of the motion hearing, the writ petition was admitted to a Division Bench on the specific point of interpretation of the word "issue" occurring in Section 148 of the 1961 Act.

Legal Issues Presented

  1. Whether the word "issue" as used in Section 148 of the Income-tax Act, 1961, includes "service" of the notice (i.e., whether "issue of notice" in Section 148 should be read as including "service" for the purposes of limitation under Section 149).
  2. Whether a notice of reassessment may be treated as valid if it was issued within the prescribed time but served after the period of limitation.

Arguments of the Parties

Petitioner's Arguments

  • It was contended that the words "serve" and "issue" used in Sections 148 and 149 are interchangeable; therefore the word "issue" in a larger sense includes "service".
  • The petitioner relied on the Supreme Court decision in Banarsi Debi v. Income-tax Officer ([1964] 53 ITR 100 (SC)) as authority for treating "issue" and "serve" as interchangeable.
  • The petitioner argued that because the notice under Section 148 was not served within eight years, proceedings under Section 148 were not competent.

Respondents' / Revenue's Arguments

  • The respondents (revenue) argued that the words "issue" and "serve" are used in different contexts in Sections 148 and 149 and that "issue" should mean only "send" (i.e., issuance distinct from service).
  • Mr. Awasthy, counsel for the revenue, submitted that under the 1961 Act the legislature divided provisions of the earlier law (Section 34 of the 1922 Act) into Sections 147–149, and that this division indicates an intention to treat "issue" and "service" as distinct stages; he argued that the Income-tax Officer could assume jurisdiction after issuance of the notice within the prescribed period even if service occurred after limitation.
  • The revenue relied on a Full Bench judgment of the court in Seth Balkishan Das v. Commissioner of Income-tax ([1966] 61 ITR 194 (Punj)) to support aspects of their position; the opinion notes, however, that that case concerned different facts (validity of service by affixing copies) and does not assist the revenue on the specific point here.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Banarsi Debi v. Income-tax Officer, [1964] 53 ITR 100 (SC) Judicial interpretation that the expressions "issued" and "served" may be used interchangeably in the context of notices and that "issued" can include meaning of "served". The court relied on the Supreme Court's reasoning in Banarsi Debi to support the view that "issue" in Section 148 should be given the meaning that includes service, because that interpretation fits the legislative context and carries out legislative intent.
Barras v. Aberdeen Steam Trawling and Fishing Co. Ltd., [1933] AC 402 (HL) Principle that when a word of doubtful meaning has received a clear judicial interpretation, subsequent statutes using the same word in a similar context should be construed in the light of that earlier interpretation. The court invoked this principle to justify assuming that the legislature, when enacting the 1961 Act, knew of prior judicial interpretations treating "issue" and "serve" as interchangeable, and thus intended them to be understood similarly.
Shanabhai P. Patel v. R. P. Upadhyaya, Income-tax Officer, [1974] 96 ITR 141 (Guj) Held that under the 1961 Act there are not two distinct stages of issue and service; notice of reassessment is issued when it is served; a notice issued before limitation but served after limitation is without jurisdiction, void and ineffective. The court expressly agreed with the Gujarat High Court's observations and adopted the view that "issue of notice" in Section 148 should be equated with "service" for limitation purposes, supporting the conclusion that notices not served within time are void.
Induprasad Devshanker Bhatt v. J. P. Jani, [1965] 58 ITR 559 (Guj) Referenced as supporting the interchangeability of "service of notice" and "issuance of notice" under earlier provisions. The opinion notes that the Gujarat High Court cited this case in support of the interchangeable meaning; the present court accepted the same approach when construing Sections 148 and 149 of the 1961 Act.
Lilooah Steel & Wire Co. Ltd. v. Income-tax Officer, [1972] 86 ITR 611 (Cal) Single-judge decision taking a similar view that "issue" and "service" are to be treated interchangeably in the context considered. The court cited this case as another judicial authority aligning with the interchangeable interpretation and noted its concurrence with that view.
Seth Balkishan Das v. Commissioner of Income-tax, [1966] 61 ITR 194 (Punj) Full Bench decision concerning validity of service where copy of notice was not affixed at conspicuous places; the matter before that Full Bench was different from the issue in the present case. The court observed that the facts and question decided in that Full Bench reference were different and therefore the petitioner could not derive benefit from it; the decision was not treated as authority for the present issue.

Court's Reasoning and Analysis

The court began by identifying the relevant statutory provisions: Sections 147–151 of the Income-tax Act, 1961, and their roles (Section 147 confers power to reassess where income has escaped assessment; Section 148 prescribes that before making assessment under Section 147 the Income-tax Officer shall serve a notice; Section 149 prescribes time-limits for notices; Section 151 prescribes sanction requirements). The central question framed was whether the phrase "issue of notice" in Section 148 includes the act of "service" or whether "issue" and "service" denote distinct stages.

The court examined competing contentions: petitioner’s counsel maintained that the words are interchangeable and relied on the Supreme Court decision in Banarsi Debi; respondents contended the words have different contextual meanings and that "issue" should mean only "send".

The court analysed authoritative material relied upon in the cited cases. It reproduced and relied upon the Supreme Court's reasoning in Banarsi Debi that the expressions "issued" and "served" have been used interchangeably in legislative practice, and that dictionary meanings and Section 27 of the General Clauses Act, 1897 show Parliament treating "serve", "give" and "send" interchangeably. The court also relied on the well-known principle (illustrated by Barras v. Aberdeen) that when words have received a clear judicial interpretation, subsequent statutes using the same words in a similar context are to be interpreted in that light; thus, it assumed the legislature knew of the prior judicial interpretation when enacting the 1961 Act.

The court further noted and adopted the view of a Division Bench of the Gujarat High Court in Shanabhai P. Patel v. R. P. Upadhyaya, which held that under the 1961 Act there are not two distinct and separate stages of "issue" and "service" of a reassessment notice, and that a notice issued before limitation but served after limitation is without jurisdiction and void. The court observed that analogous decisions from the Calcutta High Court (Lilooah Steel & Wire Co.) supported the same approach.

Addressing the revenue’s argument (that the legislative division of earlier Section 34 into Sections 147–149 indicates a change of meaning), the court rejected that contention, stating that a reading of Sections 148 and 149 "clearly shows" that an Income-tax Officer cannot assume jurisdiction unless the notice has been issued and served within the prescribed time-limit. Based on the collected authorities and statutory construction, the court concluded that "issue" in Section 148 must be given the meaning that includes "service".

Holding and Implications

The court held that the words "issue" and "serve" are interchangeable and that the word "issue" in Section 148 of the Income-tax Act, 1961, is to be understood in the same sense in which the word "serve" has been used.

Implications and direct consequences (as stated in the opinion):

  • The Income-tax Officer cannot assume jurisdiction to make an assessment, reassessment or recomputation unless the notice has been issued and served within the time-limit prescribed by Sections 148 and 149; a notice issued before limitation but served after limitation would be without jurisdiction, void and ineffective (as adopted from the Gujarat High Court view).
  • The writ petition was confined to the interpretation of the word "issue" and was disposed of accordingly. It was noted that an appeal against the Income-tax Officer's order dated March 21, 1974 has been filed and remains pending; that appeal will be decided by the appellate authority in accordance with law.

The court made no order as to costs. The opinion did not purport to decide the pending appeal; it was concerned only with the interpretive question admitted to the Division Bench.

Judge: Man Mohan Singh Gujral, J. (concurring note: "I agree.").

    Major Tikka Khushwant Singh, v. The Commissioner Of Income-Tax, Patiala And Another,

    1. Briefly, the facts of the present case are that a notice under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the 1961 Act"), was issued and despatched on February 24, 1970, relating to the assessment year 1961-62 to the petitioner by the Income-tax Officer, Sangrur. No return was filed by the petitioner in response to the notice. The Income-tax Officer, therefore, issued another, notice on October 10, 1973, under section 142(1) of the aforesaid act in which he was intimated to appear on November 23, 1973. The counsel for the petitioner appeared on November 24, 1973, and got the case adjourned to December 10, 1973, for filing a reply. The petitioner filed a reply dated December 9, 1973, supported by an affidavit stating therein that the alleged notice under Section 148 was not served upon him. He further stated that no proceedings were competent against him under section 148 of the 1961 act, as notice was not served upon him within eight years. The petitioner was required by the Income-tax Officer, respondent No. 2, to appear before him on March 18, 1974, when he was ordered to accept notice under Section 148. Counsel for the petitioner refused to acknowledge the receipt of the notice. The petitioner also submitted his written reply regarding the aforesaid matter. On May 13, 1974, he has been served with a final order dated March 21, 1974, passed under section 144 of the 1961 act, whereby the income of the petitioner has been assessed at Rs. 48,400. He had also been served with notice dated March 19, 1974, under Section 271 to show cause as to why an order imposing a penalty be not passed against him. The petitioner challenged the order passed under Section 144 of the Act and the notice dated March 19, 1974. At the time of motion hearing, the motion Bench admitted the petition to a Division Bench on the point of interpretation of the word "issue" occurring in section 148 of the 1961 act.

    2. In order to decide the question, it is necessary to notice some of the sections of the 1961 act. section 147 empowers the Income-tax Officer, who has reason to believe .that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or inconsequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, subject to the provisions of sections 148 to 153, to assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. Section 148 relates to issue of notice where income has escaped assessment, Section 149 to time-limit for notice and Section 151 to sanction for issue of notice. The aforesaid sections are as follows :

    "148. (1) Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139 ; 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.

    (2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so."

    "149. (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 is 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 is a person treated as the agent of a non-resident under Section 163 and the assessment, reassessment 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."

    "151. (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."

    3. Before taking action under Section 147, the Income-tax Officer is required to follow the procedure under the subsequent sections. Under Section 148, he is to serve on the assessee a notice before making the assessment, reassessment or recomputation. Section 149 prescribes the period in which the notice under Section 148 can be issued. The question for determination is: whether the words "issue of notice" used in Section 148 will include service thereof or not. It is contended by the learned counsel for the petitioner that the two words, namely, "serve" and "issue", used in sections 148 and 149 are interchangeable words and the word "issue" in a larger sense also will include "service". He has further argued that the Supreme Court interpreted the word "issue" in Banarsi Debi v. Income-tax Officer, [1964] 53 ITR 100 (SC), wherein the same interpretation was taken. On the other hand, the learned counsel for the respondents has argued that the two words have been used in the two sections in different contexts and the word "issue" will mean only "send".

    4. We find force in the contention of the learned counsel for the petitioner. The provisions of sections 147, 148, 149, 150 and 151 of the 1961 Act are in pari materia with those of Section 34 of the 1922 Act, In Banarsi Debi's case, the Supreme Court was interpreting Section 4 of the Indian Income-tax (Amendment) Act, 1959, by which the notice issued under Clause (a) of Subsection (1) of Section 34 of the 1922 Act before the commencement of the aforesaid amending Act, and assessment, reassessment or settlement made, or other proceedings taken in consequence of such notice, could not be challenged on the ground that the notice had been issued or reassessments were made after the prescribed period of limitation, as given in subsection (1) of Section 34 of that Act. K. Subba Rao J., as he then was, while speaking for the Supreme Court, observed as follows :

    "Section 4 of the amending Act was enacted for saving the validity of notices issued under Section 34(1) of the Act. When that section used a word interpreted by courts in the context of such notices it would be reasonable to assume that the expression was designedly used in the same sense. That apart, the expressions 'issued' and 'served' are used as interchangeable terms both in dictionaries and in other statutes. The dictionary meaning of the word ' issue' is 'the act of sending out, put into circulation, delivery with authority or delivery.' Section 27 of the General Clauses Act, 1897 (X of 1897), read thus :

    'Where any Central Act or Regulation made after the commencement of this Act authorises or requires any document to be served by post, whether the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.' It would be seen from this provision that Parliament used the words 'serve', 'give' arid 'send' as interchangeable words. So too, in sections 553, 554 and 555 of the Calcutta Municipal Act, 1951, the two expressions 'issued to' or 'served upon' are used as equivalent expressions. In the legislative practice of our country the said two expressions are sometimes used to convey the same idea. In other words, the expression 'issued' is used in a limited as well as in a wider sense. We must, therefore, give the expression 'issued' in Section 4 of the amending Act that meaning which carries out the intention of the legislature in preference to that which defeats it. By doing so we will not be departing from the accepted meaning of the expression, but only giving it one of its meanings accepted, which fits into the context or setting in which it appears."

    5. It is the principle of law that when certain words are judicially interpreted, it will be assumed that the legislature knew the meanings of those words, while using them in subsequent statutes. In this view I am supported by the observations of Viscount Buckmaster in Barras v. Aberdeen Steam Trawling and Fishing Co. Ltd., [1933] AC 402 (HL), wherein it was observed as follows :

    "It has long been a well-established principle to be applied in the consideration of the Act of Parliament that where a word of doubtful meaning has received a clear judicial interpretation, the subsequent statute which incorporates the same word or the same phrase in a similar context, must be construed so that the word or phrase is interpreted according to the meaning that has previously been assigned to it."

    6. Thus, it will be assumed that while enacting the 1961 Act, the legislature knew that the words "serve" and "issue" were being used interchangeably according to the judicial interpretation. In spite of the knowledge it preferred to use the words in the aforesaid Act. Mr. Awasthy, the learned counsel for the revenue, has argued that in the 1961 Act, the two words have been used in two different sections. According to him before making the assessment, reassessment or recomputation under Section 147, it is the duty of the Income-tax Officer to serve a notice on the assessee as required by Section 148, whereas he can assume jurisdiction after issuance of the notice within the prescribed period under Section 149 even though the same may not be served upon the assessee. He also submits that by dividing the provisions of Section 34 of the 1922 Act in the 1961 Act, the intention of the legislature has become clear. We express our inability to accept the contention of the learned counsel for the revenue. A reading of Sections 148 and 149 clearly shows that the Income-tax Officer cannot assume jurisdiction to make assessment, reassessment of recomputation unless the notice has been issued and served within the time-limit prescribed under the aforesaid sections. The same question came up before a Division Bench of the Gujarat High Court in Shanabhai P. Patel v. R. P. Upadhyaya, Income-tax Officer, [1974] 96 ITR 141 (Guj), B. K. Mehta J., while speaking for the court, observed as follows:

    "Sections 148, 148 and 149 of the Income-tax Act of 1961 confer the power of reassessment on the Income-tax Officer. This scheme of power was originally comprehended in the provisions of Section 34 of the Act of 1922. The division of the provisions contained in Section 34 of the 1922 Act into sections 147, 148 and 149 in the Act of 1961 does not in any way indicate that the legislature intended to depart from or materially alter the position as it emerged from the provisions of Section 34 of the old Act regarding notice of reassessment. The Supreme Court held in Banarsi Debi v. Income-tax Officer and the Gujarat High Court in Induprasad Devshanker Bhatt v. J. P. Jani, [1965] 58 ITR 559 (Guj), that the words, 'service of notice' or 'issuance of notice ' in Section 34 have no fixed connotation but are interchangeable. The same meaning should be given to the words ' issue of notice' in Section 148 and 'service of notice' in Section 149.

    Under the Act of 1961 also there are no two distinct and separate stages of issue of notice and service of notice. Notice of reassessment is issued to the assessee when it is served on him. A notice of reassessment issued against the assessee before limitation but served on the assessee after limitation would be without jurisdiction, void and ineffective."

    7. We are respectfully in agreement with the above observations. Similar view was taken by a learned single judge of the Calcutta High Court in Lilooah Steel & Wire Co, Ltd. v. Income-tax Officer, [1972] 86 ITR 611 (Cal). Mr. Awasthy has placed reliance on a Full Bench judgment of this court in Seth Balkishan Das v. Commissioner of Income-tax, [1966] 61 ITR 194 (Punj). In that case the question referred to this court was : whether on the facts and in the circumstances of the case the service of the notice under Section 34 on the assessee was invalid at law as copy of the notice was not affixed at any conspicuous place in the court-house or at any conspicuous place in the income-tax office. The matter for decision before the Fall Bench was absolutely different. The learned counsel cannot derive any benefit from that case. In view of the aforesaid discussion, we are of the opinion that the words "issue" and "serve" are interchangeable and that the word "issue" has been used in section 148 of the 1961 act in the same sense in which the word "serve" has been used.

    8. It is stated that an appeal has been filed against the order dated March 21, 1974, of the Income-tax Officer and the same is still pending. The writ petition was admitted to interpret the word "issue" as occurring in section 148 of the 1961 act only. The appeal will be decided by the appellate authority in accordance with law. The writ petition is disposed of accordingly with no order as to costs.

    Man Mohan Singh Gujral, J.

    9. I agree.

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    Major Tikka Khushwant Singh, v. The Commissioner Of Income-Tax, Patiala And Another,
    (Nov 6, 1974)