Commissioner of Income-Tax, Madras v. Janabha Muhammad Hussain Nachiar Ammal

KAPUR, J. -This is an appeal against the judgment and order of the High Court of Madras. The appellant is the Commissioner of Income·tax and the respondent is the asse3See and the year of assess. ment is 1942.43.

The respondent is the wife of one Sheikh Abdul Khadar who was residing abroad in Bangkok from September 1940 to July 1947. During that period he remitted moneys in the name of his agent for payment to the respondent. In the account year the aggre· gate amount so remitted was Rs. 9,180/·. The respondent submitted no return of her income as she was bound to do and the amount became taxable (I) [1964) Vul.18,C.R. 29.

under s. 4 (2) of the Income-tax Act, hereinafter 1962 referred to as the "Act''. In 1949 the Income-tax Commissiontr of Officer on receipt of definite information that such Income-tax, Madras v. income had escaped asse55ment issued a notice under J an<blui Muluimmdd s. 34 of the Act as amended by the Amending Act of Hussain N acJiiar 1948 and an appeal was taken to the Appellate Ammal Assistant Commissioner but the assessment was con-Kapur, J. firmed. A further appeal to the Income-tax Appel· late Tribunal Madras, was also unsuccessful. The reference was thereupon made to the High Court and one of the questions referred was :-

"Whether the proceedings under section 34 of the Indian Income-tax Act initiated on 25th July, 1949 to assess the amount of Rs. 9,180/- which escaped assessment during the year 1942-43 by failure to submit a voluntary return are valid in law"?

It was held that the limitation of eight years prescribed bys. 34 as amended by the Amending Act of 1948 did not apply to the case of the assessee which was a case of failure to submit the return and the period of four years' had expired before March 30, 1948, when the amendment in s. 34 was made by Amending Act of 1948. It was also held that s. 31 of the Amending Act of 1953 was not applicable and the question was therefore answered in the negative.

Against that judgment and order the Commissioner of Income-tax has come in appeal to this Court.

This case is governed by the decision in C. A.

No. 7 J5/57 (S. 0. Prashar, Income-tax Officer v.

Vasantsen Dwa.rkadas) (1) the judgment in which has been delivered today. The appeal is therefore dis-missed with costs. The appellant was granted the certificate by the High Court expressly on the condi-tion that he would pay the costs of this appeal in any event to which he had agreed.

(I) (1964] Vol, I ~.C.R. 29.

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142 SUPREME COURT REPORTS [1964) VOL.

, . ..!!!!__ SARKAR, J.-The respondent jn this appeal is Commis,;,.,,. ef -the assessee. She is the wife _of ,one Sheikh Abdul Incom.-iax, Mulras _ Khader who lived in Siam. _ In the year 19!1-42, J cnalha M•hammad she received from her husband from Siam a sum of Hus•;t;:.,:;chiar : Rs. 9,180/-• .. It is not disputed that this amount

- constituted,"income" in her hands withins. 4 (2) of Sarkar, 1._ the Income-tax Act; 1922. , She. did not however submit any return in respect of it. On July 25, 19-19, - a notice· under s. 34 of the Act was issued to her asking .her .. to file a -return. Thereafter she . was assessed on the aforesaid-income on -.October 24, 1949. She appealed from that order but was unsuccessful in having the assessment set aside. At her request, the 'Appellate Tribunal submitted the ·following question'to .the . High Court at 11adras for ' '•.-Whether 'the procee~i~gs under section 34 o - the Indian lnc<inie-taX: Act· initiated on 25th July 1949 ._to .assess the amount of Rs. 9,180/- J.·,<': __ -which escaped assessment during the year 1942- . 43 by failure to submit· a voluntary return -- are valid in law ?'" · · · jj-I ··.i ''--'

The Hlgh : Court answered the question in the negative; . · The revenue. authorities have, therefore, : come up, in appeal. . · - -- I SectiOn 3-1 contains· provisions _for_ assessment . and re-assessment· in cases where income for. any

year· has not in the relevant assessment year been fully assessed for the reasons mentioned in it. With . , these reasons. it is· not' necessary to trouble ourselves in this appeal. Sub:section (1) of s. 34 deals with the period of time_ within which a notice calling for a return of the .escaped income may be served and _ sub-s. (3) deals with time within -which the assess- ' ment can be made. This section was amended by the Income-tax and Business Profits Tax (Amend-ment) Act, 19-18. ' This Act was . passed on. September 8, 1948 but the section which amended 1961 s. 34, of the Incqme-tax Act was brought into force Com11.irsionn of retrospectively from March 30, 1948. It is not in Income-lax, Matlra1 dispute that under s. 34, as it stood before the v. J.,..bha Muhammad amendment, the time to issue the notice calling for a HwsaiG N ach~ return and to make the assessment in this case had .4.mmal expired on March 31, 1947, that is, on the expiry of Sarw, J. four years after the year in which the escaped income was first assessable, namely, 1942-43. It is not in dispute either that under s. 34, as it stood after the amendment in 1948, the notice could be served and an assessment made within eight years from the end of that year, that is, in this case, within March 31, 1951. The notice and the assessment order impugned in this case have, therefore, to be held to be valid if s. 3 ! after its amendment in 1946 was applicable.

It is the contention of the appellant that it was so applicable. The High Court held that the time having already expired under the existing law, the amended section 34 could not be given retrospective operation to validate the notice and the order of assessment.

Now, on May 24, 1953, was passed the Income-tax (Amendment) Act, 1953, (XXV of 1953) which was brought into force retrospectively from April l, 1952. This Act contained a section, namely, s. 31, which to my mind makes s. 34 as amended by the 1948 amending Act, applicable to the proceedings in this case. I am unable to accept the High Court's view to the contrary and regret my inability to comprehend the reasons on which that view is based.

That section also amended sub-s. (3) of s. 34 so as to include in it provisions regarding the time of the issue of the notice but we will not be concerned with this amendment in this appeal. Now, s. 31 is in these terms :

Section 31. "For the removal of doubts it is hereby declared that the provisions of

1962 sub-sections (1), (2) and (3) of section 34 of CommissiOfltr of the principal Act shall apply and shall be l"omt·tax1 •• Mtzihas deemed always to have applied to any assess-JtJltdha Aluhamrnad ment or re-assessment for any year ending HUJSJJiJJ }{achi# before the 1st day of April, I !l48, in any case

A mm al where proceedings in respect of such assessment or re.assessment were commenced under the said sub-sections after the 8th day of September, 1948, and any notice issued in accordance with sub-section (I) or any assessment completed in pursuance of such notice within the time specified in sub-section(3), whether before or after the commencement of the Indian Income-tax (Amendment) Act, 1953, shall, notwithstanding any judgment or order of any Court, Appellate Tribunal or Income-tax authority to the contrary, be deemed to have been validly issued or completed, as the case may be, and no such notice, assessment or re-assessment shall be called in question on the ground merely that the provisions of section 34 did not apply or purport to apply in respect of an assessment or re-assessment for any year prior to the 1st day of April 1948."

No question as to sub-s. (2) of s. 34 mentioned in this seclion arises in this appeal and that sub-section may be left out of consideration.

It seems to me quite plain that s. 31 of the 1953 Act applies sub-ss. (I) and (3) of s. 34 of the Income-tax Act, l!J22 (hereafter called the principal Act), as it stood after the 194H amendment, to assess-ment proceedings in respect of years ending before April l, I 948 where the proceedings commenced after September 8, 19+8 and makes the validity of the proceedings depend on that section as so amen-ded. Indeed, the contrary has not been contended at the bar. It has to be remembered that the amen-ding Act of 1948 was passed on September 8, 1948 but it was given retrospective effect from March 30, IJ61 I 948. It may be stated that the amending Act repealed CommisJW.,, of the existing s. 34 of the principal Act and substituted ln&am1-ta, MWM for it a new section. I think it is quite clear that •• 1.,.,,i,1ia M.Mmm.J the pre-existing s. 34 which was repealed by theJ948 Hus1ain N•dail amendment could not have applied to proceedings bullllJ commenced after repeal. There was no question of Sar"'6, J. applying the pre-existing law to such proceedings.

But where the proceedings related to a period when the per-existing law was in force, there might be some doubt as to which law was to apply.

Section 31 was enacted to remove that doubt and to make s. 34 of the principal Act as it stood after the l 948 amendment applica':>le to these proceedings.

That is why the words "shall always be deemed to have applied" are used; they emphasise that the amen· ded section is deemed always to have applied to proceeding• even in respect of a period when the amendment had not been made. The latter part of s. 31 also makes this view equally clear. It says that no notice or order of assessment shall be called in question on the ground that s. 34 did not apply in respect of assessment for a year prior to April 1, 1948. Section 34 here contemplated must be the section as amended in 1948, for if it was not so, then it would be the pre-existing section which of course would have applied, if not repealed, to an assessment for a year ending prior to April l, 1948 and no question of its not so applying would have arisen.

I thus arrive at the conclusion that under s. 31 of the 1953 Act, the provisions of sulrss. (1) and (3)-I leave sub-s. (2) out a5 irrelevant-of s. 34 of the principal Act as amended in 1948 are to be applied and deemed always to have applied to assess-ment proceedings in respect of a year ended before April l, 1948 where the proceedings were commenced after September 8, 1948, A notice issued and an order of assessment made in such proceedings are to

1962 be held valid if the notice is issued "in accord~nce CommissiOfttr of with sub-section (l)" of s. 34 as it stood after the lf&COmt·tax, Madras 1948 amendment and the assessment is "completed

v. in pursuance of such notice within the tim(' specified J1·n~h"4 Mu!ramm,,d Hussafri Nathiar in sub-section (3)" of the sames. 34. Now the notice

Arnmal and assessment in the present case satisfy all these S<tlcn, J. conditions. To them, therefore, s. 34 as amended

in 1948 applies. Judged by that section, admittedly the notice and assessment order are unexceptionable. 1 t is true that in the present case when the notice was issued and the assessment made, the time to do either under the law as it stood before the 1948 amendment had expired. It may be that that law would have applied to it if the 1953 Act had not been passed. It may also be, as was said in the Calcutta Discount Co. (') case, that by itself, the 1948 amendment of s. 34 would not have permitted assessment proceedings in respect of 1942-43 to be commenced in 1949 when under the previous law the time to issue a notice and to make an assessment for that year had expired before the 1948 amendment had come into force. All this however is to no pur· pose. No such question arises here. The legislature had undoubtedly the power to makes. 34 as amended in 1948 apply to an assessment for 1942-43 by giving it a retrospective operation inspite of the time to issue a notice and to make an assessment fixed by the pre· existing law having expired before the amendment came into effect. The question really is one of inter-pretation, namely, whether the legislature had given such retrospective operation.

Now it seems to me that s. 31 of the 1953 Act clearly gives s. 34 of the principal Act as amended in 1948 such retrospective operation. It plainly makes s. 34 as so amended applica hie to assessment~ for years ended before the amendment came into force. It does not 'say thats. 34 as amended is to apply :; to assessments for these years only when the time to (I) l.A.R. (1953) Col. ;2i.

issue the notice or make the assessment in respect of 1961 these years under the pre-existing law had not expired. It applies the amended s. 34 "to any assess· C.mmissioner of /tuomt--lffx, Maira.J ment ..................... for any year ending before the v. lst day of April, 1948 in an case where proceedings Janabha Muhammali Hussain Nachiar . . . . . . . . . . . .. . . were commenced ..................... after Ammal the 8th day of September 1948". Likewise any Sarkar, J. notice and any assessment in respect of any year end-ing before April 1, 1948 is to be held valid, if valid under s. 34 as amended in 1948. I find no justifi-cation in view of the language used to interpret s. 31 as applying s. 34 as amended in 1948 only to cases where the time to issue the notice and make the assess-ment had not expired while the pre-existing law waa in force. The latter part of s. 31 seems to lead independently to the same conclusion. It makes "any notice issued in accordance with sub-section (1) or any ~sessment completed in pursuance of such notice within the time specified in sub-section (3)"

valid. All that is ·necessary is that all notices and assessment orders in · respect of years ending before April 1, 1948 in proceedings commenced after April 8, 1948 shall comply with the provisions of s. 34 as amended in 1948. So a notice and an assess-ment order valid under s. 34 as amended in 1948 would be valid even if the time prescribed in respect of them by s. 34 as it stood before the 1948 amend-ment, had expired.

In my view, for these reasons, s. 34 of the principal Act as amended in 1948 applies to the notice issued and the assessment order made in this case. Both of them are valid under s. 34 as so amended. The High Court should have answered the question framed in the affirmative.

In the result, I would allow the appeal and set aside the order of the High Court. The appellant will however pay the respondent's costs of this appeal as it had agreed to do so as appears from the certi-ficate on which this appeal has been admitted.

1962 [For the Judgment of Hidayatullah and CommiuiONr of Raghubar Dayal, JJ., see S. 0. Prashar, Jnwme.tax lneom1-1ax, Modrtir Officer v. Vasantsen Dv.:arkadas, ante p. 29.]

Y.

J..,nbh2 Muliammad H11sr .;., .,Varhiar BY CouRT : In accordance with the opinion of

.1Jtm111l the Omajority, the appeal is allowed. The appellant Sa1kar, /, will pay the costs of the respondent as was agreed to by the parties.

..4. ppeal allowed.

COMMISSIONER OF INCOME-TAX

1962 Dr(tmber, 12, "·

SARDAR LAKHMIR SINGH

(S. K. DAS, J. L. KAPUR, A. K. SARKAR,

M. HIDAYATULLAJI an:! RAGHUBAR DAYAL, JJ.)

lncom<!·lax-Limitntion-A•aeumenl made after /OW' year.•-IJ barred-Provi.1ion aat-ing assessment in rup<<ll of aome persons-If di..criminatory-lndian lncom<!0 ta:r A<ll, 1922 (11 of 1922), 1. 31, 34(3)-lndi.an lncome-ta:r (A>nendment) Act, 1953 (25 of 1953), ••· 18, 31-Conatitution of India, Art. 14.

The asscssee and hi• father filed separate returns for the year 1946.47 and the father al'° filed a return as Karta of the Hindu undivided family in which the income was declared as nil on the ground that the Hindu undivided family had ceased 1, to exist. On March 15, 19jl, the Income-tax Officer amal-gamated the incomes of the assessee and his father and assessed them on the total income as the income of a Hindu undivided family but he did not make any asscs1ment of the assessee as an individual. On appeal by the father the Appel-late Assistant Commissioner, on March 20, l9j3, held that there v.'a'J no Hindu undivided family, set aside that assessment and directed a rea~sessrnent of the assessee and his father as individuals. Thcreuoon the Income-tax Officer, by order dJted ~ >vember 27, 1953, assessed the assessee as an individual.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 509 of 1958.

Appeal from the judgment and order dated February 22, 1956, of the Madras High Court in Case referred No. 66/52.

K. N. Rajagopal Sastri and P. D. Menon, for appellant.

T. S. Venkataraman and M. K. Ramamurthi, for respondents.

1962. December 12.-The following judgments 1962 were delivered. S. K. Das J., J. L. Kapur J., and A. K. Sarkar, J., delivered separate judgments. The Cornm-issi"1rer of lnu17U-tat) Madras judgment of M. Hidayatullah aud Raghubar Dayal, Y, JJ., was delivered by Hidayatullah, J. Janahha Muhammad Hussain Nachiar Ammal S. K. DAs, J.-The facts of this appeal have Das, 1. been stated by my learned brother Kapur, J., and as I am in agreement with him, I need not re-state the facts.

The relevant assessment year was 1942-194:l.

The proceedings under s. 34 of the Indian Income-tax Act, 1922, were initiated with the issue of a notice on July 25, 1949. Th,e assessee's contention was that the initiation of proceedings on July 25, 1949, was invalid as the department's right to revive the assessment was governed by old s. 34 wh'ere the period of limitation prescribed was only four years in the case of a failure to file a return and this period having expired on March 31,1947, and the Amending Act of 1948 (XLVIII of 1948) having come into force on March 30, 194S, the eight years'

provided period therein could not be invoked. The High Court upheld this contention and said :

"In our opinion, the contention of the learned counsel for the assessee is well founded, that the new rule of limitation of eight years prescribed by the amended section 34 would not apply to the case of the assessee before us, whose was an instance of a failure to submit a return, when the period of four years had ran out long before 30th March 1948 when the amended section 34 came into force as part of the Income-tax Act with effect from that date, 30th March 1948.

The learned counsel for the Department next referred to section 31 of Act XXV of 1953

1911 in support of his contention, that )he notice issued on 25th July 1949 was valid. The C.-iui-qf learned counsel himself had to realise that 1--1o,Modru •• section 31 of Act XXV of 1953 did not enlarge J..ulu.MrJo.,.,..d the scope of the amended section 34; nor did llwm. Nacl#.1<

A...i it purport to amend it. The validity of the notice, dated 25th July 1949 will still have to Da, J. be decided with reference to the provisions of the amended section 34. Section 31 of Act XXV of I 953 docs not therefore affect the question at issue, whether the extended period of limitation of eight years would apply to the assessee when the period· of limitation applicable to the assessee had expired before the amended section 34 came into force on 30th March 1948."

For the reasons given by me in S. C. Prashar, bwome.tax Officer v. Vasantsen Dwarkadas (1) (C. A. 705/1957) in which Judgment has been delivered to· day, I think that the High Court correctly answered the question referred to it.

I would therefore dismiss the appeal with costs.