Judgement
BHAGWATI, J. :- This petition is directed against a notice dated 13th November 1963 issued by the Income-tax Officer, Circle IV, Ward-G, Ahmedabad, under S. 148 of the Income-tax Act, 1961, (hereinafter referred to as the new Act). The notice is impugned as Invalid on three grounds which we shall presently state. But in order to understand and appreciate those grounds, it is necessary to state briefly a few facts. The petitioner was assessed to tax as an individual for the assessment year 1947-48 and his assessment was completed by the Income-tax Officer, Ward E, Circle II. Ahmedabad, by an order of assessment dated 31st January 1952. The Income-tax Officer thereafter received information that a certain profit alleged to have been made by one Natwarlal Manilal Pandit on sale of a plot of land bearing Survey No. 63 at Vastrapur really belonged to the petitioner since Natwarlal Manilal Pandit was merely a benumidar of the petitioner and that the said profit had escaped assessment by reason of the petitioner not having disclosed it at the time of the original assessment. The Income-tax Officer, therefore after obtaining the approval of the Commr. of Income-tax issued a notice dated 27th March 1956 under S. 34(1)(a) of the Income-tax Act, 1922. (hereinafter referred to as the old Act). The notice was attempted to be served by the process server on the petitioner at his residence on or about 31st March 1956. The petitioner was, however, not at his residence, having temporarily gone out of Ahmedabad to Vatwa in order to attend the meeting of the Vatwa Panchayat of which he was the Sarpanch and the notice could not, therefore, be served on him personally at that time. On the process server making a report to that effect, the Income-tax Officer directed the process server to effect service by affixing the notice on a conspicuous part of the petitioners house and pursuant to this direction, the process server affixed the notice on the door of the petitioners house at about 9.00 A.M. on 31st March 1956 in the presence of two witnesses, who identified the house as that of the petitioner. The petitioner thereafter received a letter dated 13th September 1956 from the Income-tax Officer in which it was alleged that in respect of the sale of the plot of land at Vastrapur, Natwarlal Manilal Pandit was a benamidar of the petitioner and that the income earned by him on the sale of that plot of land was really the income of the petitioner and was. therefore, liable to be taxed as income in the hands of the petitioner and the petitioner was accordingly called upon to submit a return of his income for the assessment year 1947-48. In reply to this letter the petitioner pointed out to the Income Tax Officer that no notice under S. 34(1)(a) was served on him and he was, therefore, not liable to furnish a return of his income, but since the Income-tax Officer threatened to make an ex parte assessment, the petitioner filed a return of his income under protest on 16th January 1957. In the return the petitioner showed the same amount of income which was determined in the original assessment. Despite the objection raised by the petitioner that notice under S. 34(1)(a) was not served on him, the Income-tax Officer proceeded to re assess the income of the petitioner for the assessment year 1947-48 and passed an order dated 29th March 1957 determining the total income of the petitioner at Rs. 89,000 by including the profit alleged to have been earned by Natwarlal Manilal Pandit on the sale of the plot of land at Vastrapur as income of the petitioner. The petitioner preferred an appeal to the Appellate Assistant Commissioner against the order of assessment and one of the grounds raised by the petitioner in the appeal was that the order of assessment was bad since notice under S. 34(1)(a) was not served on the petitioner as required by the Section. This ground was upheld by the Appellate Assistant Commissioner who took the view that the service of the notice purported to be effected by affixing it on the door of the petitioners house was not valid inasmuch as the condition on which such service could be effected, namely, that the party to be served could not be found, was not fulfilled in the present case and the order of assessment made by the Income-tax Officer without serving notice under S. 34(1)(a) on the petitioner was, therefore, bad in law and liable to be set aside. The Appellate Assistant Commissioner accordingly cancelled the assessment made by the Income-tax Officer without going into the merits of the assessment. The Revenue accepted the decision of the Appellate Assistant Commissioner and did not carry the matter higher in appeal to the Tribunal. Now this decision was given by the Appellate Assistant Commissioner on 5th January 1963 by which time the old Act had been repealed and the new Act had come into force with effect from 1st April 1962. The time for taking action for assessment or reassessment in case of escaped Income exceeding Rs. 50,000 but less than Rs. 1,00,000 was enlarged from eight years to sixteen years under the new Act and the Income-tax Officer, Circle IV, Ward G, Ahmedabad, therefore, issued a notice dated 4th July 1963 calling upon the petitioner to show cause why proceedings should not be taken under s. 147(a) of the new act for bringing to tax the escaped profit of the petitioner on the sale of the plot of land at Vastrapur. The petitioner by his letter dated 15th July 1963 disputed the jurisdiction of the Income-tax Officer to initiate proceedings under S. 147(a) but the Income-tax Officer, it appears, was not impressed by the arguments put forward by the petitioner and he accordingly issued the impugned notice dated 13th November 1963 under S. 148 for reassessing the income of the petitioner for the assessment year 1947-48 and served it on the petitioner. This notice was followed by another notice dated 9th January 1964 issued under S. 142(1). The petitioner, therefore, filed the present petition against the Income-tax Officer and the Commissioner of Income-tax as respondents challenging the validity of the two notices dated 13th November 1963 and 9th January 1964 and praying for issuance of an appropriate writ to quash and set aside those notices. Though the validity of both the notices was challenged, the main attack was against the notice dated 13th November 1963 and the challenge to the notice dated 9th January 1964 was only consequential. The question which, therefore, arises in the petition is whether the notice dated 13th November 1963 was a valid notice.
2. In order to appreciate the contentions that have been urged before us, it is necessary to refer briefly to the relevant provisions of the old Act and the new Act. Section 34 of the old Act as it stood immediately prior to its amendment by the Finance Act 1956, was in so far as it is material for our present purpose, in the following terms :
"34. (1) If -
(a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under S. 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed, or
(b) notwithstanding that there has been no omission or failure as mentioned in C|. (a) on the part of the assessee, the Income tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income tax have escaped assessment for any year, or have been underassessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed,
he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assesses, 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 S. 22 and may proceed to assess or re-assess such income, profits or gains or recompute the loss or depreciation allowance, and the provisions of this Act shall, so far as may be apply accordingly as if the notice were a notice issued under that Sub-Section :
Provided that :
(1) the Income-tax Officer shall not issue a notice under this Sub-Section, unless ho has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice :
XX XX XX XX
XX XX XX XX
Provided further that nothing in this section limiting the time within which any action may be taken, or any order, assessment or re-assessment may be made, shall apply to a re-assessment made under S. 27 or to an assessment or re-assessment made, on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under S. 31, S. 33, S. 33A. S. 33B. S. 66 or S 66A."
This was the form in which S. 34 stood at the time when the notice dated 27th March 1956 was issued by the Income-tax Officer under Cl. (a) of Sub-Section (1) of that Section. By the Finance Act, 1956, certain amendments of a far-reaching character were made in S. 34 with effect from 1st April 1956. The time limit of eight years in Sub-Section (1) in respect of cases falling within clause (a) was removed and the following provisos were substituted for the existing proviso in Sub-Section (1) :
"Provided that the Income-tax Officer shall not issue a notice under clause (a) of sub-section (1) -
(i) for any year prior to the year ending on the 31st day of March, 1941 :
(ii) for any year, it eight years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income-tax which have escaped assessment 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 the joss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed, not being a year or years ending before the 31st day of March, 1941 :
(iii) for any year, unless he has recorded his reasons for doing so, and, in any case falling under clause (ii), unless the Central Board of Revenue, and, in any other case, the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice :
xx xx xx xx"
On the Section so amended, the question arose whether after the deletion of the time limit of eight years, in cases involving escapement of income exceeding Rs. 1 lac, a notice could issue under clause (a) of Sub-Section (1) of S. 34 even though such notice was barred by reason of the expiration of the period of eight years at the date when the amendment made by the Finance Act, 1956, came into force. The High Court of Calcutta held in Debi Dutt v. T. Bellan, AIR 1959 Cal 567, that once the right of the Income-tax Officer to proceed under clause (a) of Sub-Section (1) of S. 34 as it stood prior to its amendment by the Finance Act, 1956, was barred by reason of the expiration of the period of eight years, it was not revived by the deletion of the time limit of eight years from clause (a) of Sub-Section (1) of S. 34. This decision led to the passing of an Ordinance and later the Indian Income-tax (Amendment) Act, 1959. This Amending Act added Sub-Section (4) to S. 34 providing for issue of notice under clause (a) of sub-section (1) at any time notwithstanding the expiration of the period of eight years provided under the Section as it stood prior to its amendment by the Finance Act, 1956, and also enacted S. 4 for validating notices issued prior to the commencement of the Amending Act even though at the time when such notices were issued, the time within which such notices should have linen issued under clause (a) of Sub-Section (1) of S. 34 as in force before its amendment by the Finance Act, 1956, had expired. These were the relevant provisions of S. 34 as they stood at the time when the new Act came into force from 1st April 1962. By Sub-Section (1) of S. 297 the new Act repealed the old Act and by Sub-Section (2) of that Section the new Act enacted certain saving provisions consequent upon repeal of the old Act, of which the material one is that set out in clause (d). It was in the following terms :
"297 Repeals and savings :
(1) xx xx xx
(2) Notwithstanding the repeal of the Indian Income-tax Act, 11 of 1922 (hereinafter referred to as the repealed Act), -
XX XX XX XX
(d) where in respect of any assessment year after the year ending on the 31st day of March 1940. -
(i) a notice under s. 34 of the repealed act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed;
(ii) any income chargeable to tax had escaped assessment within the meaning of that expression in S. 147 and no proceedings under s. 34 of the repealed act in respect of any such income are pending at the commencement of this Act, a notice under S. 148 may, subject to the provisions contained in S. 149 or S. 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly."
Sections 147 to 150 referred to in S. 297(2)(d)(ii) and Ss. 151 to 153 were the provisions of the new Act corresponding to S. 34 of the old Act. In the new act s. 34 of the old act was split up into Ss. 147 to 158. Section 147 empowered the Income tax Officer to assess or re-assess escaped income in the same kind of cases in which he could do so under S. 34 but that right could be exercised only subject to the provisions of Sections 148 to 153. Sub-Section (1) of S. 148 provided inter alia that before malting any assessment or reassessment under S. 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under S. 139(2) and Sub-Section (2) of that Section imposed an obligation on the Income-tax Officer, before issuing such notice, to record his reasons for doing so. Section 149 laid down different time limits for issuing notice and in cases falling within cl. (a) of S 147 corresponding to Q. (a) of Sub-Section (1) of S. 34 time limits were prescribed in the following words :
"149. Time limit for notice : (1) No notice under S. 148 shall be issued,
(a) in cases falling under clause (a) of S. 147 -
(ii) 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;
xx xx xx xx"
Section 150, Sub-Section (1) made an exception in cases where assessment or reassessment is sought to be made in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision and provided that in such cases there shall be no time limit and notice under S. 148 may be issued at any time unless of course the case fell within Sub-Section (2) of S. 150. Section 151 made it a condition precedent to the issue of notice under S. 148 that the Income-tax Officer should obtain the previous sanction of the Central Board of Revenue or the Commissioner of Income-tax according as the notice is proposed to be issued after the expiry of eight years from the end of the relevant assessment year or after the expiry of four years from the end of the relevant assessment year. Sections 152 and 153 made other provisions in regard to assessment and reassessment but they are not material and we need not, therefore, refer to them. These are the relevant provisions which have a bearing on the determination of the question before us and it is in the light of these provisions that we must examine the validity of the notice dated 13th November 1963.
3. Now the notice dated 13th November 1963 was admittedly issued under S. 148 and it is, therefore, clear that the Income-tax Officer by issuing the notice proposed to reassess the income of the petitioner under S. 147. Section 147, however. by its express language applies only to assessment years subsequent to the coming into force of the new Act for clause (1) makes it a condition of its applicability that the escapement from assessment should have taken place by reason of omission or failure on the part of the assessee to make a return under S. 139 for the relevant assessment year and no return for the relevant assessment year could be filed under S. 139 unless the relevant assessment year fell to be governed by the new Act. On its own terms, therefore, S. 347 could not be invoked by the Revenue for reassessing the income of the petitioner for the assessment year 1947-48. But reliance was placed on behalf of the Revenue on S. 297(2)(d)(ii) and it was contended that by virtue of that provision the Income-tax Officer was entitled to issue notice under S. 148 for reopening the assessment of the petitioner for the assessment year 1947-48 and the impugned notice was, therefore, within jurisdiction. It was not disputed that if the right to reopen the assessment could not be found in S. 297(2)(d)(ii) there was no other provision in the new Act which empowered the Income-tax Officer to reopen the assessment by issuing notice under S. 148 and in that event the impugned notice would be bad. The validity of the impugned notice thus depended on the true interpretation of the scope and effect of S. 297(2)(d)(ii). If the impugned notice was covered by S. 297(2)(d)(ii), it would be valid but not so, if it was not covered by that Section.
4. Mr. B.G. Thakore, learned advocate appearing on behalf of the petitioner, therefore, attacked the applicability of S. 297(2)(d)(ii) at three points. In the first place he contended that proceedings initialed by the Income-tax Officer by issue of the notice dated 27th March 1956 under S. 34(1)(a) were pending at the commencement of the new Act and the conditions requisite for the applicability of S. 297(2)(d)(ii) were, therefore, not satisfied so as to authorize the Income-tax Officer to issue the impugned notice under S. 148. When his attention was drawn to the order of the Appellate Assistant Commissioner, he agreed that it was undoubtedly true that by that order the re-assessment of the income of the petitioner under S. 34(1)(a) was cancelled but he pointed out that the reason for which the reassessment was cancelled was not that the notice was bad but that the notice was not duly served on the petitioner. He urged that the only effect of the order of the Appellate Assistant Commissioner was to declare the service of the notice bad and not to quash or set aside the notice and the notice, therefore, remained pending and along with it remained pending the proceedings under S. 34(1)(a) initiated by the issue of the notice. It may be, he argued, that the proceedings could not be continued further under S. 34(1)(a) because the time-limit for the service of the notice having expired on 31st March 1956, the notice could not be served on the petitioner but that did not mean that the proceedings initiated by the issue of the notice ceased to exist. This contention was based on the premise that the stage of issue of notice was anterior in point of time to the stage of service of notice and proceedings under S. 34 commenced on the issue of the notice and the commencement of the proceedings had nothing to do with the service of the notice. This premise was sought to be supported by reference to the provisions of S. 34 where the legislature has used at some places the word "served" and at other places the word "issued" and the argument was that the fact that the Legislature has used two different words in the same Section showed that the Legislature wanted to convey different meanings by those words and that the stages denoted by those words were, therefore, distinct and different stages, the stage of issue of notice being the first stage and the stage of service of notice being the next stage following upon the first stage of issue of notice. In this connection reliance was also placed on a decision of a Division Bench of this Court in Madanlal Mathurdas v. Chunilal, Income-tax Officer, Ward C (1662) 44 ITR 325 : (AIR 1960 Guj 27), where Desai, C.J., as he then was and Miabhoy J., took the view while interpreting the first proviso to S. 34 as amended by the Finance Act, 1956, that the word "issue" in that proviso could not be equated with the word "serve" and that the issue of the notice was a different and an anterior stage and the service of the notice followed upon the issue of the notice. It was contended in the basis of this decision that since the issue of the notice was the first stage in the initiation of proceedings under S. 84, the proceedings under S. 34 must be held to commence on the issue of the notice irrespective of the question as to whether and when the notice was served.
5. Now it is undoubtedly true that according to the decision of Desai C.J., as he then was and Miabhoy J., in 1962-44 ITR 326 : (AIR 1960 Guj 27) (supra) the words "Issue" and "serve" as used in S. 34 cannot be equated with each other and that the stage of issue of notice is a distinct and different stage from the stage of service of notice and ordinarily this decision being a decision of a Division Bench of this Court would be binding upon us, but having regard to the subsequent decision of the Supreme Court in Banarasi Debi v Income-tax Officer. (1964) 53 ITR 100 : (AIR 1964 SC 1742), this decision can no longer be regarded as good law and its authority must be held to have been impliedly overruled, though we may point out that even if the view taken by the Gujarat High Court in this decision were correct, we should still have found considerable difficulty in accepting the contention that the proceedings under S. 34 commence on the issue of the notice. The Supreme Court in the decision to which we have just referred pointed out that the words "issued" and "served" are used as interchangeable terms in the context of notices issued under S. 34 and that where the Legislature has used the word "issued" in the context of such notices, that word is used in the same sense as the word "served". This decision of the Supreme Court made it clear that so far as notices under S. 34 are concerned, there are no two distinct and separate stages such as the stage of issue of notice and the stage of service of notice the notice is issued to the assessee when it is served upon him. If that be the position, the entire foundation on which the superstructure of the argument urged on behalf of the petitioner is based must disappear. There being only one stage, whether it be described as issue of notice or as service of notice, the proceedings under S. 34 would commence when the step envisaged in that stage is taken and that would be when the notice is served on the assessee. As a matter of fact when we turn to S. 34(1) we find that the first step which the Income-tax Officer is required to take where he decides to initiate proceedings for assessment or reassessment of the income of the assesses is to serve notice on the assessee. The service of the notice on the assessee being the first step contemplated by S. 34(1), it must follow that the proceedings under S. 34(1) commence only when the notice is served on the assessee. This apart, it is difficult to see how any proceedings under S. 34(1) can be regarded as having commenced when the notice is merely prepared and signed by the Income-tan Officer and not served on the assessee. The notice may remain in the drawer of the Income-tax Officer for any length of time without being served on the assessee and even if it is handed over by the Income-tax Officer to the process-server for service, it may be lost by the process-server or it may remain unserved with the process-server and the assessee may not come to know about it for a considerable period of time : in such a case, in the absence of service of the notice on the assessee. it would not be possible to say that the proceedings have commenced against the assessee. The proceedings must commence by some overt act on the part of the Income-tax Officer and that overt act can only be service of the notice on the assessee. It is, therefore, clear that the proceedings under S. 34(1) commence only on the service of the notice on the assessee and until the notice is served on the assessee, it is not possible to say that there are any proceedings under S. 34(1) pending against the assessee. Now what the order of the Appellate Assistant Commissioner did was to declare the service of the notice bad with the result that the notice remained as it was drawn up and prepared by the Income-tax Officer but not served on the petitioner. Unless the notice was served on the petitioner, no proceedings under S. 34(1)(a) could be said to have started against the petitioner and there were, therefore, no proceedings under S. 34(1)(a) pending against the petitioner at the commencement of the new Act. This attack against the applicability of S. 297(2)(d)(ii) must, therefore, fail.
6. Mr. B.G. Thakore then contended-and this was an alternative contention under the same head as the previous contention that, in any event, at the date of the commencement of the new Act, the appeal preferred by the petitioner against the order of assessment made by the Income-tax Officer under S. 34(1)(a) was pending and the appeal being merely a continuation of the original proceedings, the proceedings under S. 34(1)(a) must be said to be pending at the commencement of the new Act. Now this contention ignores the true effect, of the order of the Appellate Assistant Commissioner. As we have pointed out above the Appellate Assistant Commissioner held that the notice was not served on the petitioner and, therefore, the proceedings which resulted in the order of assessment were null and void. Since the notice was not served on the petitioner, no proceedings actually commenced against the petitioner and it was for that reason that the order of assessment passed by the Income-tax Officer was cancelled by the Appellate Assistant Commissioner. There were, therefore, no proceedings under S. 34 pending at the commencement of the new Act of course an appeal was pending but the appeal was not a proceeding under S. 34. When S. 297(2)(d)(ii) says that no proceedings under S. 114 should be pending at the commencement of the Act, the reference is to valid proceedings and not to proceedings which are null and void and are, therefore, no proceedings at all. If we turn to S. 297(2)(d) we find that sub clauses (i) and (ii) of S. 297(2)(d) deal with two different kinds of cases which are in a sense complementary and supplementary to each other. Where at the commencement, of the new Act proceedings under S. 34 are pending, they must be continued and disposed of under the old Act and this proposition postulates that the proceedings must be such as can be continued and disposed of under the old Act, that is, they must be valid proceedings. But where no valid proceedings are pending under S. 34 at the commencement of the new Act which can terminate in an order of assessment under an old Act, the right to reopen the assessment which can not longer be exercised under S. 34 since the old Act is repealed, can now be exercised by resort to the machinery provided in S. 147 subject to the conditions set out in Ss. 148 to 150. It is, therefore, clear that the proceedings which are contemplated by these sub-clauses of S. 297(2)(d) are valid proceedings under S. 34 and since in the present case there were no valid proceedings under S. 34 pending at the commencement of the new Act as held by the Appellate Assistant Commissioner in an order which has been accepted by both sides, the applicability of S. 297(2)(d)(ii) cannot be repelled be the petitioner on such ground.
7. The second point at which the applicability of S. 297(2)(d)(ii) was attacked on behalf of the petitioner was that there was no escapement of income from assessment within the meaning of that expression as used in S. 147 so as to attract the applicability of S. 297(2)(d)(ii). The argument was that so long as any proceedings are pending for assessment or reassessment of the income of an assessee, such income cannot be said to have escaped assessment, for it may be brought to tax as a result of an order of assessment which might be made in those proceedings. The argument was that proceedings for bringing to tax escaped income of the petitioner were pending since the notice dated 27th March 1956 was not quashed or set aside and until those proceedings terminated in an order of assessment, it could not be said that the income of the petitioner had escaped assessment. Now this contention suffers from a double fallacy. In the first place as we have already pointed out above, no proceedings under S. 34 were pending either at the commencement of the new Act or at the date when the impugned notice was issued by the Income-tax Officer and the foundation for the argument urged on behalf of the petitioner is, therefore, lacking. Moreover, even if the view be taken that proceedings were initiated by the issue of the notice and that the notice not having been quashed or set aside, the proceedings were pending, they admittedly could not be continued under S. 34 inasmuch as the time within which the notice was required to be served under Cl. (a) of Sub-Section (1) of S. 34 expired on 31st March 1956 and the notice could not be served thereafter and if the proceedings could not be continued so as to result in an order of assessment. it is difficult to see how it can be said that the income of the petitioner had not escaped assessment. The income of the petitioner was not brought to tax at the time of the original assessment and it, therefore, escaped assessment at that time and it also could not be brought to tax by the issue of the notice under S. 34(1)(a) since the notice could not be served within time and if, therefore, remained income which had escaped assessment. This contention urged on behalf of the petitioner must, therefore, be rejected.
8. The third head of attack against the applicability of S. 297(2)(d)(ii) was that the right of the Income-tax Officer to reopen the assessment of the petitioner for the assessment year 1947-48 was barred under the old Act before the new Act came into force and S. 297(2)(d)(ii) did not revive the right of the Income-tax Officer to reopen the assessment which was already barred under the old Act. It was contended on behalf of the petitioner that to construe S. 297(2)(d)(ii) as reviving the right of the Income-tax Officer to reopen an assessment which was already barred under the old Act would be to give retrospective operation to the Section which the Court should be disinclined to give unless such retrospective operation is required to be given either by express words used in the Section or by necessary intendment. The argument was that there were no express words nor was there any necessary intendment of the Legislature which can be gleaned from the language used in the Section which showed that the Legislature intended to revive the right of the Income-tax Officer which was already barred under the old Act and the Section must, therefore, be read as applicable only to those cases where the right of the Income-tax Officer to reopen the assessment was not barred and in such cases that right which was alive at the dale of the commencement of the new Act could be exercised under S. 297(2)(d)(ii) by resort to the machinery provided in Ss. 147 to 150. The validity of this contention was disputed by file learned Advocate General appearing on behalf of the Revenue and his argument was that S. 297(2)(d)(ii) was wide in its sweep and it took in all assessment years after the year ending on 31st March 1940 irrespective of the fact whether the right to reopen the assessment in respect of any such assessment years was barred or not under the old Act at the dale when the new Act came into force. According to him the legislative intent was that once the new Act came into force, the question whether the assessment in respect of any assessment year after the year ending on 31st March 1940 should be liable to be reopened or not should be decided by reference to the provisions of the new Act and if the provisions of the new Act authorized the reopening of such assessment, such reassessment should be reopened whatever might have been the position in regard to the right to reopen such assessment under the old Act. These rival contentions raised an interesting question in regard to the retrospective operation of S. 297(2)(d)(ii).
9. Now it is settled law that if the right of the Income tax Officer to reopen an assessment is barred under the law for the time being in force, no subsequent enlargement of the time can revive, such right in the absence of express words or necessary intendment. This principle is really based on the well known rule of interpretation that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to affect, alter or destroy any right already acquired or so as to revive any remedy already lost by efflux of time. It is always presumed in such case that the Legislature does not intend to deprive a person from pleading that the right or remedy sought to be enforced against him as become barred before the new provision of law come into operation. This principle was applied by the Calcutta High Court in AIR 1959 Cal 567 (supra). In that case the question was whether the deletion of the time limit of eight years in Cl. (a) of Sub-Section (1) of S. 34 by the Finance Act, 1956, entitled the Income-tax Officer to reopen an assessment where the right to do so had become barred under the Section as it stood prior to its amendment by the Finance Act, 1956. Strong reliance was placed on behalf of the Revenue on the general words used in the amended S. 34(1)(a) because those words applied to any assessment year after the year ending on 31st March 1940 and it was contended that those general words took within their sweep all assessment years subsequent to the year ending on 31st March 1940 without any reference to the question whether the right to reopen the assessment in respect of any such assessment years was or was not barred under the unamended Section. This contention of the Revenue was, however, rejected by the Calcutta High Court which look the view that as soon as the time within which notice could be served under the unamended Section expired, the right of the Income-tax Officer to reopen the assessment came to an end and the assessee was entitled to tell the Revenue that the Revenue was not entitled to reopen the assessment any more and unless the language of the amended Section provided in express terms or by necessary implication that the right of the Income-tax Officer to reopen the assessment was revived and correspondingly the right of the assessee not to have the finality of his assessment disturbed by any reopening of the assessment was taken away, the general words used in the amended Section could not be read as achieving any such effect. The general words of the amended Section must be read as applicable only to those cases where the right of the Income-tax Officer to reopen the assessment was not barred under the unamended Section and in such cases the right of the Income-tax Officer to reopen the assessment not having been lost, there would be no question of giving retrospective operation to the amended Section and the right of the Income-tax Officer to reopen the assessment could be exercised under the amended Section. The same principle was also applied by the Bombay High Court in S.C. Prashar v. Vasantsen Dwarkadas, 58 Bom LR 184 : (1956) 29 ITR 857 : ((S) AIR 1956 Bom 530) where the Bombay High Court look the view that once the right of the Income-tax Officer to reopen the assessment under S. 34 as it stood prior to its amendment by the Income tax (Amendment) Act, 1956 was burred by lapse of time it could not be revived by reason of the newly amended proviso to S. 34(8) which did away with time limit in certain cases. This decision was of course taken in appeal and was reversed by the Supreme Court, but on this point, out of five Judges, two Judges expressed one view, two Judges expressed another view and the fifth Judge did not express any view at all with the result that the decision of the Bombay High Court stood unreversed so far as this point is concerned. This principle was also applied by us in a decision given last year in Mathuradas Govinddas v. G.N. Gadgil, (1964) 5 Guj LR 746.
10. But apart from the authority of the decision of the Bombay High Court in 58 Bom LR 184 : 1956-29 ITR 857 : (AIR 1956 Bom 530) (supra), and the authority of the decision of this High Court in 1964 5 Guj LR 746 (supra), we have now the authority of the decision of the Supreme Court in S.S. Gadgil v. Lal and Co., 1964-53 ITR (SC) 231 : (AIR 1965 SC 171). That was a case where a notice of re-assessment was issued against the assessee as agent of a non-resident on 27th March 1957 and that notice related to the assessment year 1954-55. Under Cl. (iii) of the proviso to S. 34(1) as it stood prior to its amendment by the Finance Act, 1956, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident after the expiry of one year from the end of the year of assessment. The right to commence a proceeding for assessment against the assesses as agent of a non-resident for the assessment year 1954-55 therefore ended on 31st March 1956 under the Act before it was amended in 1956. This provision was, however, amended by the Finance Act, 1956, and under the amended provision the period of limitation was extended to two years from the end of the assessment year. The amendment was made on 8th September 1958 but was given retrospective effect from 1st April 1956. Since the time within which notice could be issued against a person deemed to be an agent of a non-resident was extended to two years from the end of the assessment year, the Revenue contended that the notice issued by the Income-tax Officer was within the terms of the amended provision and was, therefore, a valid notice. Now the notice having been issued on 27th March 1957, was clearly within a period of two years from the end of the assessment year 1954-55 and if the amended provision applied, the notice would be a valid notice. The Supreme Court, however, took the view that the notice was not a valid notice inasmuch as the right of the Income-tax Officer to reopen the assessment of the assessee under the unamended provision became barred on 31st March 1956 and the amended provision did not operate retrospectively so as to authorize the Income-tax Officer to commence proceedings for reopening the assessment of the assessee in cases where before the amended provision came into force, the proceedings had by the expiry of the period provided in the unamended provision become barred. Shah J., delivering the judgment of the Supreme Court observed :
"The power to issue a notice under the unamended Act came to an end on March 31, 1956. Under that Act no notice could thereafter be issued. It is true that by the amendment made by S. 18 of the Finance Act, 1956, a notice could be issued within two years from the end of the year of assessment. But the application of the amended Act is subject to the principle that, unless otherwise provided, if the right to act under the earlier statute has come to an end, it could not be revived by the subsequent amendment which extended the period of limitation. The right to issue a notice under the earlier Act came to an end before the new Act came into force...."
Again towards the end, the learned Judge observed :
". . . .The legislature has given to S. 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., upto April 1, 1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectively than is expressly mentioned, nor to authorise the Income tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred." The Supreme Court thus approved of the principle that where the right of the Income-tax Officer to recover tax by reopening the assessment of an assessee has come to an end under the law for the time being in force, such right would not be revived by the provision of an extended time limit in a new Act unless there is express provision or clear implication to that effect. The Supreme Court of course held that the period prescribed by S. 31 is not a period of limitation but it pointed out that the Section in terms imposes a fetter on the power of the Income-tax Officer to bring to tax escaped income. To quote the words of Shah, J., S. 34 prescribes "different periods in different classes of cases for enforcement of the right of the State to recover tax". Once this right of the State to bring to tax escaped income comes to an end by reason of lapse of the time limit provided for taking of action under the law for the time being in force, then unless there is express provision or necessary implication, a subsequent Act which enlarges the time for enforcement of the right to bring to tax escaped income, does not revive the right to bring to tax escaped income which has already come to an end before the subsequent Act came into force. The learned Advocate General appearing on behalf of the Revenue, however, contended that the ratio of this decision can have no application to the present case since in the present case there was no amendment of S. 34 as was the case before the Supreme Court, but the whole of the old Act was repealed and a new Act had taken its place and the principle laid down by the Supreme Court in this decision should not, therefore, be applied in the interpretation of S. 297(2)(d)(ii) of the new Act. We cannot accept this contention. So far as the application of the principle laid down by the Supreme Court in this decision is concerned, we do not see any difference between a position where a Section in a statute is amended and a position where a statute is repealed and another statute takes its place. The rule of interpretation on which this principle is based is, as we have already pointed out above, that no statute should be construed at retrospective in operation if it has the effect of altering, modifying or affecting existing rights unless the statute says so in express words or by necessary implication. This rule of interpretation is equally applicable whether the occasion which calls for its application is an amendment of an existing statute or the repeal of an existing statute by enactment of a new statute. We are, there fore, of the opinion that the principle of this decision of the Supreme Court must apply in the present case and we must ask ourselves the question whether there are any express words or there is any necessary intendment which would show that the Legislature intended to attribute to S. 297(2)(d)(ii) a retrospective operation so as to revive the right of the Income-tax Officer to reopen an assessment which was already barred under the old Act. That is a pure question of construction of S. 207(2)(d)(ii) to which we will now address ourselves.
11. Now one thing is clear from the authorities to which we have referred above, that mere general words in a Section are not enough to warrant any retrospective operation being given to the section as a matter of construction. As we have pointed out above., the words in S. 34(1)(a) as amended by the Finance Act, 1956, which came up for consideration in AIR 1959 Cal 567 (supra) were general in scope. So also were the words in the amended proviso to S. 34(3) which came up for consideration in 58 Bom LR 184 : 1956-29 ITR 857 : ((S) AIR 1956 Bom 530) (supra), general in character. And yet it was held in both these cases that they were not sufficient to indicate that the Legislature intended to give a retrospective operation to the provisions in question. There must be same definite indication in the language of the provision showing that the Legislature intended that the provision should have a retrospective operation. We do not find any such indication in S. 297(2)(d)(ii) either in its express words or by way of necessary intendment. On the contrary there is, in our opinion, the clearest legislative intent that S. 297(2)(d)(ii) should not have a retrospective operation. Of course we must make it clear that when we say that Section 297(2)(d)(ii) has no retrospective operation, we do not wish to suggest that it does not operate in respect of past assessment years. On its own terms and by its express language, it operates in respect of past assessment years. Where income chargeable to tax has escaped assessment in respect of any past assessment year after the year ending 31st March 1940 and no proceedings under S. 34 in respect of such income are pending at the commencement of the new Act, a notice under S. 148 may be issued with respect to such assessment year. But where the right to reopen the assessment in respect of any such assessment year was barred under the old Act, the Revenue cannot take shelter behind S. 297(2)(d)(ii) for the purpose of proceeding in respect of such assessment year. It is only in such a case that the question of giving retrospective operation arises in a case where the right to reopen the assessment was not barred under the old Act, there would be no existing right of the assessee which would be liable to be affected nor would there he any question of reviving a right already lost and hence there would be no question of giving retrospective operation to S. 297(2)(d)(ii). It is only where the right to reopen the assessment was barred under the old Act and the assessee had acquired the right to tell the Revenue that the assessment was final and could not be reopened, that the question would arise whether this right was intended to be taken away by the Legislature by enacting S. 297(2)(d)(ii). Now it is significant to note that S. 297(2)(d)(ii) occurs as a saving provision. Sub-Section (1) of S. 297 repeals the old Act and Sub-Section (2) of that Section enacts various saving provisions consequent on the repeal of the old Act. Now there may be two classes of cases at the commencement of the new Act. One class of cases may be where a notice to reopen the assessment under S. 34 may have already been issued and the proceedings in pursuance of such notice may be pending at the commencement of the new Act. In such a case S. 297(2)(d)(i) provides that such proceedings shall be continued and disposed of under the, old Act. This provision had to be made because otherwise the old Act being repealed, the proceedings commenced under the old Act would also fall along with the old Act and, therefore, a saving provision was enacted that notwithstanding the repeal of the old Act, the proceedings shall be continued and disposed of under the old Act. The other class of cases may be where the Income-tax Officer had the right to reopen the assessment, but that right was not exercised by issue and service of notice under S. 34. In such a case on the repeal of the old Act, the right of the Income-tax Officer to reopen the assessment would also go along with the old Act and the Income-tax Officer would not, thereafter, be entitled to reopen the assessment. The right of the Income-tax Officer to reopen the assessment would be destroyed by reason of the repeal of the old Act. The Legislature, with a view to saving this right, enacted S. 297(2)(d)(ii) and provided that in such a case where no proceedings under S. 34 were pending, the Income-tax Officer may exercise the right to reopen the assessment by resorting to the machinery provided in the new Act. The Legislature thus saved the right of the Income-tax Officer to reopen the assessment and made it exercisable by him by issuing notice under S. 148 subject to the provisions contained in Ss. 149 and 150. But where the right of the Income-tax Officer to reopen the assessment was already lost by reason of lapse of time under the old Act, there was nothing to be saved and S. 297(2)(d)(ii) which enacted a saving provision could not have been intended to revive such right of the Income-tax Officer. It must be remembered that in effect and substance Section 297(2)(d)(ii) is a saving provision and it would not be right to say that the Legislature in the guise of a saving provision enacted a provision conferring a new right on the Income-tax Officer to reopen an assessment in cases where his right to reopen the assessment was lost before the new Act came into force and be had no such right at the dale of the commencement of the new Act. If the Legislature wanted to confer such right the Legislature would have enacted an appropriate provision lining appropriate language and would not have left its intention to be gathered by doubtful implication from the language of a provision relegated to the Section dealing with repeals and savings.
12. The learned Advocate General on behalf of the Revenue laid strong emphasis on the words "where in respect of any assessment year after the year ending on the 31st day of March, 1940" occurring at the commencement of S. 297(2)(d)(ii) but these general words cannot, as we have pointed out above, avail the Revenue. There is no doubt a reference made in the Section to past assessment years right upto the assessment year immediately after the year ending on 31st March 1940, but that reference had to be made because under S. 34 as it stood immediately prior to the coming into force of the new Act, the reopening of the assessment could not extend to assessment years prior to the assessment year ending 31st March 1941 and since the intention of the Legislature in enacting S. 297(2)(d)(ii) was to save only the existing right of the Income-tax Officer to reopen an assessment and not to extend it further backwards, the Legislature introduced the same limitation also in S. 297(2)(d)(ii). In a case falling under S. 150 there would be no limitation of time and the Income-tax Officer could, therefore, go as Car back as he liked, but the Legislature obviously wanted to stick to the policy which it had evolved under the old Act and if, therefore, provided that the Income-tax Officer should not be entitled to go further backwards than the assessment year ending 31st March 1941. The reference to the past assessment years upto the assessment year ending 31st March 1941 does not therefore throw any light on the question whether the Legislature intended to revive the right of the Income-fax Officer to reopen an assessment which was already barred under the old Act.
13. We are, therefore, of the view that on a true construction of S. 297(2)(d)(ii), the Income-tax Officer cannot issue a notice under S. 148 in order to reopen the assessment of an assessee in cases where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. The right of the Income-tax Officer to reopen the assessment of the petitioner in the present case was admittedly barred under S. 34(1)(a) at the commencement of the new Act and it was, therefore, not competent to the Income-tax Officer to issue a notice under Section 148 in order to reopen the assessment of the petitioner and to reassess the income of the petitioner by relying on the provision enacted in S. 297(2)(d)(ii). The notice dated 13th November 1963 was, therefore, beyond jurisdiction and must be set aside. Along with that notice, the subsequent notice dated 16th January 1964 must also fall.
14. In the result we allow the petition and issue a writ of mandamus quashing and selling aside the notices dated 13th November 1963 and 16th January 1964 issued against the petitioner. The respondent will pay the costs of the petition to the petitioner.
Petition allowed.