S. C. Prashar, Income-Tax Officer, Market Ward, Bombay and Vs. Vasantsen Dwarkadas & Ors [1962] INSC 368 (12 December 1962)
DAS, S.K.
KAPUR, J.L.
SARKAR, A.K.
HIDAYATULLAH, M.
DAYAL, RAGHUBAR
CITATION: 1963 AIR 1356 1964 SCR (1) 29
CITATOR INFO :
RF 1963 SC1394 (2,9,10) F 1963 SC1399 (13) F 1963 SC1401 (3,7) R 1964 SC1742 (9) R 1965 SC 342 (20,25) D 1965 SC1267 (9) OPN 1967 SC1552 (5) E 1968 SC 139 (4) RF 1969 SC 340 (1) D 1971 SC 147 (15) F 1971 SC1256 (18) RF 1972 SC 83 (11) R 1973 SC2585 (13)
ACT:
Income Tax-Escaped income-Re-assessment-Validity of notice Statute providing for saving of notices-Retrospective operation-Indian Income-tax (Amendment) Act, 1948 (48 of 1948), s. 8-Indian Income-tax (Amendment) Act, 1953 (25 of 1953 s. 31-Finance Act 1956 (18 of 1956), s. 18-Indian Income-tax (Amendment) Act, 1959 (9 of 1959), s. 2, 4-Indian Income-tax Act, 1922 (11 of 1922), s. 34, as amended.
HEADNOTE:
The first respondent's father, D, and another were partners doing business in the name of P.L. since 1935. D died in 1946 but the firm was continued with the first respondent as a partner. In 1941 another firm in the name of V. D. was started by the first respondent and two others, and for the assessment year 1942-43 the firm made a return of its income and also claimed registration. The Income-tax Officer, being of the view that the firm belonged really to D refused registration and added the income of the firm to the individual income of D. In 1943-44 the Income-tax Officer came to a different conclusion and held that the firm V.D. was a branch of the firm P.L. For the subsequent years of assessment 1942-43 to 1948-49 also the firm V.D. applied for registration bat was refused, and for those several years appeals were filed before the Appellate Tribunal. An appeal was filed by the firm P.L. against its assessment in respect of excess profits tax. There was also an appeal against the assessment for the year 1942-43 by the first respondent as the heir and legal representative of his father against the decision that the income of the firm V.D. should be included in the income of his father. All these appeals were heard together and decided by the Appellate Tribunal by its order dated August 14, 1931. In that order the Tribunal gave a finding that the business of the firm V.D. really belonged to the firm P.L. This decision was confirmed by the High Court on reference on October 8, 1953. In order to give effect to the finding of the Tribunal the Income-tax Officer issued a notice on April 30, 1954, to the firm P.L. under s.
34 of the Indian Income-tax Act, 1922, that the income for the year ending 30 March 31, 1943, had been under-assessed, and that he proposed to reassess the income. The respondents challenged the validity of the notice on the grounds (1) that the Income-tax Officer had no jurisdiction to issue a notice after the expiry of the limit of time fixed by sub-s. (1) of s. 34, (2) that the second proviso to sub-s. 3) of s. 34 on which the Income-tax Officer relied did not apply to the case, and in any case, it was bad on the ground that it violated Art. 14 of the Constitution of India, and (3) that there was no provision in the Act under which the Appellate Tribunal could give a finding in the appeals filed by the firm V.D. or in the appeal filed by the first respondent himself that the income in question represented the income of the firm P.L. The validity of the notice was sought to be sustained on the grounds that, in any case, it could not be challenged by reason of the amendments made in s. 34 of the Indian Income. tax Act, by the provisions of s. 31 of the Indian Income-tax 'Amendment) Act, 1953, s. 18 of the Finance Act, 1956, and s. 4 of the Indian Income-tax (Amendment) Act, 1959.
Held, (per Sarkar, Hidayatullah and Raghubar Dayal, JJ., Das and Kapur, JJ., dissenting), that the notice dated April 30, 1954, was valid and its validity could not be called in question in any Court or Tribunal in view of the provisions in s. 4 of the Indian Income-tax (Amendment) Act, 1959.
Per Das and Kapur, JJ.-(1) The second proviso to s. 34 (3) of the Indian Income-tax Act, 1922, as amended by the Amending Act of 1933, was hit by Art. 14 of the Constitution of India and was invalid.
(2) The Income-tax Officer had no jurisdiction to issue the notice on April 30, 1954, and could not rely on the second proviso to sub-s. (3) of s. 34 because the time limit fixed by sub-S. (1) of s. 34 had expired long before the said proviso came into effect and the proviso did not revive a remedy which had been lost before April 1, 1952.
(3) Section 31 of the Indian Income-tax (Amendment) Act, 1953, did not validate the notice dated April 30, 1954.
(4) The notices to which s. 4 of the Indian Income-tax (Amendment) Act, 1959, were applicable and which were validated were those that were issued between the date of the amendment of the Finance Act, 1956, and that of the Amending Act of 1959. It is not the effect of s. 4 to abrogate and supersede the time limit provided by s. 34 (1) (a) for all the past years.
31 Per Das, J.-The evidence did not show that the notice dated April 30, 1954, was issued under s. 34 (1) (Amendment) Act, 1959, was not applicable.
Per Kapur, J.-The principle of the law of limitation was applicable to s. 34 of the Indian Income-tax Act, 1922, that if the period prescribed for taking action had already expired, subsequent change in the law did not make it so retrospective in its effect as to revive the power of an Income-tax Officer to take action under the new law.
Per Sarkar,J.-The second proviso to s. 34 (3) as amended in 1953, in so far as it affected persons other than the assessee was void as violating Art. 14 of the Constitution, and could not be relied on in support of the notice in the present case.
Per Hidayatullah and Raghubar Dayal, JJ.-(1) The different periods indicated under s. 34 cannot be treated as periods of limitation, in the sense that the expiry of the periods grants prescriptive title to defaulting tax-payers or a vested right arises in the assessee. The liability to the State is independent of any consideration of time and, in the absence of any provision restricting action by a time limit, it can be enforced at any time.
(2) Under the Indian Income-tax and Business Profits Tax (Amendment) Act, 1948, which came into force on March 30, 1948, the Income-tax Officer could take action retrospectively in all cases in which the assessment years ended within eight years of the date of his action and in which there was an escapement of an assessment for the reasons indicated in cl. (a) o s. 34 (1), as amended.
(3) The Income-tax (Amendment) Act, 1953, enabled action at any time if there was a finding or direction of the character indicated in the second proviso to sub-s. (3) of s. 34, and s. 31 of the Amendment Act applied the 'amended s. 34 to all assessments commenced after September 8, 1948, and saved all notices issued and assessments made in respect of any year prior to April 1, 1948, whether the notices were issued or the assessments made before or after April 1, 1952.
(4) The second proviso to s. 34 (3), as amended in 1953, was not discriminatory and did not offend Art. 14 of the Constitution.
(5) The notice issued against the firm P. L. was validly issued under the amended second proviso to s. 34 (3).
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 705 of 1957.
Appeal from the judgment and order dated October 5, 1955 of the Bombay High Court in Appeal No. 1 of 1955.
K.N. Rajagopal Sastri and P.D. Menon, for the appellants.
N. A. Palkhivala, J.B. Dadachanji, O. C. Mathur, and Ravinder Narain, for respondents Nos. 1 and 2.
N. A. Palkhivala, D. N. Mukherjee and B.N. Ghosh, for the intervener.
1962. December 12. The following judgments were delivered.
S. K. Das, J., J. L. Kapur, J., and A.K. Sarkar, J., delivered separate judgments. The judgment of M. Hidayatullah and Raghubar Dayal, JJ., was delivered by Hidayatullah, J.
S. K. DAS, J. This appeal has been brought to this court on a certificate of fitness granted by the High Court of Bombay. The appellants are the Union of India and the Income-tax Officer, Market Ward, Bombay. By this appeal the appellants challenge the correctness of the judgment and order of the High Court of Bombay dated October 5, 1955, by which the High Court affirmed the judgment and order of a learned single judge of the same court dated December 7, 1954, on a petition filed by the respondents under Art. 226 of the Constitution.
The relevant facts are these. The firm of Purshottam Laxmidas was started on October 28, 1935. This firm had two partners, Dwarkadas Vussonji and Parmanand Odhavji.
Dwarkadas died on April 1, 1946, leaving a son, Vasantsen.
Another firm by the name of Vasantsen Dwarkadas was 33 started on January 28, 1941, and in that firm there were three partners, Vasantsen, Narandas Shivji and Nanalal Odhavji. This firm was dissolved on October 24, 1946. The firm of Vasantsen Dwarkadas filed a return of its income for the assessment year 1942-1943 and also claimed registration as a firm. The Income-tax authorities refused registration and came to the conclusion that the firm of Vasantsen Dwarkadas belonged really to Dwarkadas, father of Vasantsen; therefore they added the income of the firm to the income of Dwarkadas. In subsequent assessment years the firm of Vasantsen Dwarkadas again applied for registration, but registration was again refused. For the assessment years 1942-1943 to 1948-1949 several appeals were filed before the Income-tax Appellate Tribunal by the firm Vasantsen Dwarkadas both against the quantum of income assessed and against the refusal of the Income-tax Officer to register the firm of Vasantsen Dwarkadas. An appeal was also filed by the firm of Purshottam Laxmidas against its assessment in respect of excess profits tax, and there was also an appeal for the assessment year 1942-1943 by Vasantsen as the heir and legal representative of his father against the decision of the Income-tax authorities that the income of the firm Vasantsen Dwarkadas should be included in the income of Dwarkadas. It appears that after the decision in Vasantsen's case in the assessment year 1942-1943, the Income-tax Officer gave a finding that the firm of Vasantsen Dwarkadas was only a branch of the firm of Purshottam Laxmidas and therefore the Income-tax Officer added the income of Vasantsen Dwarkadas to the income of the firm Purshottam Laxmidas. This question also came up before the Income-tax Appellate Tribunal in the appeals filed by Purshottam Laxmidas in respect of the assessments made against it. By a consolidated order dated August 14, 1951, the Income-tax Appellate Tribunal disposed of all the aforesaid appeals, and it came to the conclusion that the business done 34 in the name of Vasantsen Dwarkadas was really the business of the firm Purshottam Laxmidas. With regard to the appeal filed by Vasantsen as heir and legal representative of his father for the assessment year 1942-1944, the Tribunal expressed the view that the income of Vasantsen Dwarkadas should be deleted from the assessment of Dwarkadas. It said :
"We are therefore of opinion that the addition of Rs. 62,3721/-to Dwarkadas's income or the modification directed by the Appellate Assistant Commissioner should be deleted from Dwarkadas's income. If the Income-tax Officer can include the same in the income of Purshottam Laxmidas, he is of course at liberty to do so. He can then apportion the income of Purshottam Laxmidas amongst the partners thereof as provided in s. 23 (5) of the Act." The Commissioner of Income-tax questioned the correctness of the aforesaid finding of the Tribunal, but on a reference to the High Court the latter upheld the order of the Tribunal.
The reference was decided on October 8, 1953.
On April 30, 1954, the Income-tax Officer concerned who is the appellant before us served on the firm Purshottam Laxmidas a notice under s. 34 of the Indian Income-tax Act, 1922. This notice was in these terms :
"Whereas I have reason to believe that your income assessable to income-tax for the year ending 31st March 1943 has been under-assessed I therefore, propose to re-assess to income allowance that has been under assessed :
I hereby require you to deliver to me within 35 days of the receipt of this notice a return in the attached form of your total income 35 and total world income assessable for the year ending 31st of March, 1943.
This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Bombay City, Bombay." The notice was followed by some correspondence between the firm Purshottam Laxmidas and the Income-tax Officer. The result of the correspondence was that the Income-tax Officer informed the firm that its income was to be re-assessed in order to give effect to the finding of the Appellate Tribunal in its order dated August 14, 1951 that the business of Vasantsen Dwarkadas was really the business of the firm Purshottam Laxmidas.
On July 9, 1954, Vasantsen as the first petitioner and the firm of Purshottam Laxmidas as second petitioner filed a petition in the High Court under Art. 226 of the Constitution and asked for the issue of a writ quashing the notice dated April 30, 1954, and a writ of mandamus restraining the Union of India and the Income-tax Officer concerned from taking any steps or proceedings in pursuance of the said notice. Their main contentions were (1) that the Income-tax Officer had no jurisdiction to issue the notice after the expiry of the limit of time fixed by sub-s. (1) of s. 34, (2) that the second proviso to sub-s. (3) of s. 34 on which the Income-tax Officer relied did not apply to the case, (3) that there was no provision in the Act under which the Appellate Tribunal could give a finding in the appeals filed by the firm of Vasantsen Dwarkadas or in the appeal filed by Vasantsen himself, that the income in question represented the income of the firm Purshottam Laxmidas and (4) lastly, that that the second proviso to sub-s. (3) of s. 34 was bad on the ground that it violated Art. 14 of the Constitution.
Desai, J., who heard the petition in the first instance came to the conclusion that the notice was 36 bad and without jurisdiction because, to use his own words, the Income-tax Officer in issuing the notice on April 30, 1954, which was clearly more than eight years from the close of the assessment year 1942-1943 was obviously in error in thinking that the second proviso to sub-s. (3) of s. 34 applied to the case. The learned judge held that the proviso did not apply to orders of assessment which had become final before the date when it came into force. It may be here stated that the second proviso to sub-s. (3) of s. 34 was amended by Act XXV of 1953 and by s. 1 (2) of the Amending Act of 1953 the amended proviso came into force on April 1, 1952. Desai, J., further held that the proviso in question did not violate Art. 14 of the Constitution in so far as assessees who were parties to the proceedings before the Appellate Tribunal were concerned ; but the proviso was bad in so far as it affected persons other than assessees.
He held however that the petitioners before him were parties to the proceedings before the appellate Tribunal and therefore fell within the category of assessees. In view however of his finding that second proviso to sub-s. (3) of s. 34 did not apply to the case, his final conclusion was that the notice was without jurisdiction.
The matter was then taken in appeal and the appeal was heard by Chagla, C. J., and Tendolkar J. The appellate court affirmed the finding of Desai, J., that the notice under s. 34 was issued out of time and was therefore invalid. It further held that the second proviso to sub-s. (3) of s. 34 did not apply to the case. On the question as to whether the second proviso violated Arts. 14 of the Constitution it came to the conclusion that no valid distinction could be drawn between persons with regard to whom a finding or direction is given by the appellate Tribunal and persons with regard to whom no such direction or finding is given.
The appellate court expressed the view that both fell in the same 37 category and there was no difficulty in having a uniform provision of law with regard to them. The appellate court further expressed the view that for the assessment year 1942-1943 the assessee before the Tribunal was Vasantsen Dwarkadas as representing his father ; in that appeal the firm of Purshottam Laxmidas was not before the Tribunal and therefore the firm was no better than a stranger who was in some way associated with the assessee. The appellate court held in the result that the second proviso to sub-s. (3) of s. 34 offended against Art. 14.
I have stated earlier that the appeal has been brought to this Court from the decision of the appellate court on a certificate of fitness granted by the High Court. In the original statement of the case filed on behalf of the appellants, the principal question raised was that relating to the second proviso to sub-s. (3) of s. 34 which I shall presently read. The appellants were however allowed by us to file a supplementary statement of the case in which two other points have been urged. One of these points is that the validity of the notice dated April 30, 1954, cannot be challenged by reason of the provisions of s. 31 of the Amending Act, 1953 (XXV of 1953). The second point is that the validity of the notice cannot be challenged also because of the provisions of s. 4 of the Indian Income-tax (Amendment) Act, 1959 (1 of 1959).
Therefore, three substantial questions fall for decision in this appeal. The first question is whether the second proviso to sub-s. (3) of s. 34 is constitutionally valid and applies to the case. The second is, can the validity of the notice dated April 30, 1954, be challenged in view of the provisions of s. 31 of the Amending Act of 1953. The third question is the effect of the provisions of the Indian Income-tax (Amendment) Act, 1959 (1 of 1959). I shall now deal with these questions one by one.
38 First as to the second proviso to sub-s. (3) of s. 34. S. 34 of the Indian Income-tax Act, 1922, has undergone many amendments. It is not necessary to refer to the section as it stood prior to 1939. The section as it stood in 1939 empowered the Income-tax Officer to assess or reassess income which had escaped assessment or had been under assessed or had been assessed at too low a rate or had been the subject of excessive relief under the Act. The section made a distinction between two classes of cases; one in which the Income-tax Officer had reason to believe that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof and in this class of cases the Income-tax Officer could take action as laid down in the section at any time within eight years;
in all other cases the Income-tax Officer could take action within four years of the end of the relevant assessment year. The section was almost completely recast by the Income-tax and Business Profits Tax (Amendment) Act, 1948 (Act XLVIII of 1948). For the purpose of this case all that I need state is that the two time limits of eight years and four years were continued in respect of two classes of cases mentioned in clauses (a) and (b) of sub-s. (1) of s. 34;
clause (a) related to cases of omission or failure on the part of an assessee to make a return of his income or to disclose fully and truly all material facts necessary for his assessment, and cl. (b) related to cases where the Income-tax Officer had in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax had escaped assessment etc. The time limit of eight years applied to cases under cl. (a) and the time limit of four years applied to cases under cl. (b).
By s. 18 of the Finance Act, 1956, more changes were introduced with effect from April 1, 1956. The time limit of eight years was omitted from sub-s. (1) as regards cases falling under cl. (a) but a proviso to sub-s. (1) of s. 34 which was substituted for the original proviso 39 said inter alia that the Income-tax Officer shall not issue a notice under cl. (a) of sub-s. (1) for any year if eight years have elapsed after the expiry of that year unless the income, profits or gain 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 the Act etc. amount to or are likely to amount to Rs. 1,00,000/or more in the aggregate for that year etc. Certain other safeguards were also introduced in the sub-section with which we are not concerned. Put shortly, the time limit of eight years continued in respect of cl. (a) cases if the amount was less than Rs. 1,00,000/-.
Now, I come to sub-s. (3) and the second proviso thereto.
Prior to 1956 sub-s. (3) provided that every assessment or re-assessment should be completed within eight years from the end of the relevant assessment year in those cases where the assessee had failed to make a return or failed to disclose fully and truly all material facts necessary for his assessment. In 1956 the time limit was removed and the assessment or re-assessment in such cases might be completed at any time. In all other cases the period of limitation was still four years, as it was before 1956, for completion of assessment under s. 23 or of assessment or re-assessment, under s. 23 read with s.34. The second proviso, after its amendment in 1953, constituted an exception to sub-s. (1) as well as sub-s. (3). The periods of limitation laid down in sub-s. (1) for initiating proceedings and in sub-s. (3) for making an order of assessment or re-assessment were subject to the exception mentioned in the second proviso. I may now read that proviso" Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or re-assessment may be made, shall 40 apply to a re-assessment made under section 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 section 31, section 33, section 33A, section 33-B, section 66 or section 66A." I have stated earlier that the second proviso as amended was inserted by the Income-tax (Amendment) Act, 1953 (XXV of 1953), with effect from April 1, 1952.
Now, I proceed to discuss the first question as to whether this proviso applies in the present case. The question has two faces : (1) whether the proviso is constitutionally valid and (2) if it is constitutionally valid, does it apply to a case where the time limit fixed by sub-s. (1) of s. 34 had expired some time before April 1, 1952, the date on which the proviso came into effect ? With regard to the first facet, Chagla, C.J., has pointed out, rightly in my opinion, that the persons with regard to whom a finding or direction is given and persons with regard to whom no finding or direction is given belong really to the same category, namely, the category of persons who are liable to pay tax and have failed to pay it for one reason or another.
Admittedly, persons who are liable to pay tax and have not paid it could not be proceeded against after the period of limitation, unless a finding or direction with regard to them was given by some tribunal under the various sections mentioned in the proviso; therefore out of the large category of people who were liable to pay tax but failed to pay it, a certain number is selected for action by the proviso and with regard to that small number the right of limitation given to them is taken away. The real question is, is there any rational basis for distinguishing between persons who are liable to pay tax and have failed to pay it and with 41 regard to whom a finding or direction is given, and persons who are liable to pay tax and have failed to pay it and with regard to whom no finding or direction is given. I am in agreement with the view expressed by the learned Chief justice that no rational basis has been made out for the distinction between the two classes of people referred to above, who really fall in the same category and with regard to whom there was no difficulty in having a uniform provision of law. I am further in agreement with the view of the learned Chief justice that the principle laid down by this court in Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri and another (1) applies. In that case sub-s. (4) of s. 5 of the Taxation on Income (Investigation Commission) Act, was challenged and this Court pointed out that there was nothing uncommon either in properties or in characteristics between persons who were discovered as evaders of income-tax during an investigation conducted under s. 5 (1) and those who were discovered by the Income-tax Officer to have evaded payment of income-tax. Both these kinds of persons really belonged to the same category and therefore required equal treatment. This Court pointed out that s. 34 of the Indian Income-tax Act and sub-s. (4) of s.
5 of the impugned Act dealt with persons who had similar characteristics and properties and therefore a different treatment of some out of the same class offended the equal protection clause embodied in Art. 14 of the Constitution.
It seems to me that the position is the same here. Whether persons who evade tax are discovered by means of a finding given by a tribunal or they are discovered by any other method, they really belong to the same category and therefore require equal treatment. The second proviso to sub-s. (3) of s. 34 which came into effect from April 1, 1952, patently introduced an unequal treatment in respect of some out of the same class of persons. Those whose liability to pay tax was discovered by one method could be proceeded against at any time and (1) [1955] 1 S.C.R. 448.
42 no limitation would apply in their case, and in the case of others the limitation laid down by sub-s. (1) of s. 34 would apply. This in my opinion is unequal treatment which is not based on any rational ground. Desai, J., put the matter on a somewhat narrower ground. He held that so far as assessees were concerned, there might be a rational ground for distinction because the appeal proceedings etc. might take a long time and the assessee being a party to the appeal could not complain of such delay, therefore, assessees did not occupy the same position as strangers.
But the learned judge field that there was no rational distinction so far as strangers were concerned and there was no reason why they should be deprived of the benefit of the time limit prescribed by sub.s. (1). He therefore held that the proviso, so far as it affected persons other than assessees not parties to the proceedings enumerated in it, must be held to be ultra vires the legislature. Even on this narrow ground it seems to me that the respondents are entitled to succeed. The finding which the Appellate Tribunal gave in its consolidated order dated August 14, 1951, was a finding given in the appeal filed by Vasantsen as heir and legal representative of his father for the assessment year 1942-43. In that appeal the firm Purshottam Laxmidas was not even a party, though Purshottam Laxmidas was a party to certain other appeals before the Appellate Tribunal. I have some difficulty in appreciating how the firm Purshottam Laxmidas can be treated as an assessee within the meaning of the second proviso to sub-s. (3) of s. 34 for the assessment year 1942-1943. If the firm cannot be so treated, then even on the narrow ground stated by Desai, J., the proviso would be of no help to the present appellants.
I now take up the second facet of the same question. On this aspect of the case both the learned single judge (Desai,J.) and the appellate court (Chagla, c. J., and Tendolkar, J.) were agreed. The 43 relevant assessment year was 1942-1943 and it ended on March 31,1943. The period of four years therefrom would end on March 31,1947, and the period of eight years would end on March 31,1951. Now the second proviso to sub-s. (3) came into effect, as I have stated earlier, on April 1, 1952. In other words, the time limit fixed by sub-s. (i) had expired some time before the amended second proviso came into effect. Desai, J., has rightly pointed out that it is a firmly established principle of income-tax law that once a final assessment is arrived at and the assessment is complete, it cannot be re-opened except in the circumstances detailed in ss.34 and 35 of the Act and within the time limited by those sections. Is there anything in the proviso in question which would give it a retrospective effect beyond April 1, 1952? In my opinion there is none., The second proviso came into force on April 1, 1952, and before that date the period of eight years from March 31, 1943, had already expired. The legislation which provided that from April 1, 1952, there would be no limitation in respect of certain cases could not revive a remedy which was already lost to the Income-tax Officer. It seems to me that the proposition of law is settled beyond any doubt that although limitation is a procedural law and although it is open to the legislature to extend the period of limitation, an important right accrues to a party when the remedy against him is barred by the existing law of limitation, and a vested right cannot be affected except by express terms used by the statute or the clearest implication following there from. Some reliance was placed on the decision of the Calcutta High Court in Income-tax Officer v. Calcutta Discount Co., Ltd., (1) which later came to this Court on a different point. I am of the opinion that the decision is of no help to the present appellants. It was said in that decision that the plain effect of the substitution of new s. 34 with effect from March 30, 1948, was that from that date the Income-tax Act was to be read as including the (1) [1953] 23 I.T.R. 471.
44 new section as a part thereof, the further effect of the express language of the section was that so far as cases coming within cl. (a) of sub-s. (1) were concerned, all assessment years ending within eight years from March 30, 1948, and from subsequent dates, were within its purview.
the learned Chief justice of the Calcutta High Court took particular care in that decision to point out that what was not within the purview of the section was an assessment which ended-before eight years from March 30, 1948. That decision therefore does not in any way assist the present appellants.
On behalf of the appellants, some distinction was sought to be drawn between a right and the remedy thereof and it was contended that the liability of an assessee to pay the tax owing to the State was always there from the commencement of the assessment year and s. 34 of the Act dealt merely with the machinery of assessment. It was argued that a case under s. 34 was not analogous to a time barred claim to recover money from one individual by another. In my opinion such a distinction is entirely out of place so far as s. 34 is concerned. The learned Chief justice has rightly pointed out that under s. 34 the Income-tax Officer has the right to issue a notice within the period of limitation fixed by subs. (1); in another sense, it may be said that the remedy of the Income-tax Officer to bring to tax escaped income is available to him under s. 34 provided he avails himself of the remedy within the period of limitation. No distinction can be drawn, so far as s. 34 is concerned, between the right of the Income-tax Officer and the remedy available to him. If the remedy is lost, the right is also lost and if the right is lost, much more so is the remedy.
Therefore, I am clearly of the view that on April 30, 1954, the Income-tax Officer had no jurisdiction to issue the notice which he did on the 45 firm Purshottam Laxmidas under the second proviso to sub-s. (3) of s. 34, because the time limit fixed by sub-s. (1) of s. 34 had expired long before the said proviso came into effect and the proviso does not in express terms or by necessary implication revive a remedy which had been lost before April 1, 1952.
This disposes of the first question argued before us. I proceed now to the second question, namely, the effect of s. 31 of the Indian Income-tax (Amendment) Act, 1953 (XXV of 1953). I may first set out the section :
"For the removal of doubts it is hereby declared that the provisions of sub-sections (1), (2) and (3) of section 34 of the principal Act shall apply and shall be deemed always to have applied to any assessment or reassessment for any year ending before the first day of April, 1948, in any case 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 (1) 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 reassessment 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." 46 It will be noticed that the section is in two parts : the first part is declaratory of the law and says that sub-ss.
(1), (2) and (3) of s. 34 shall apply and shall be deemed always to have applied to any assessment or re-assessment for any year ending before April 1, 1948, in any case where proceedings in respect of such assessment etc. were commenced under the said sub-sections after September 8, 1948, and any notice issued in accordance with sub.s. (1) or any assessment completed in pursuance of such notice within the time specified in sub-s. (3), whether before or after the commencement of the Amending Act of 1953, shall be deemed to have been validly issued etc.; the second part says inter alia that no such notice shall be called in question on the ground merely that the provisions of s. 34 did not apply or purport to apply in respect of an assessment prior to April 1, 1948. It should be noticed here that the Amending Act of 1948 (Act XLVIII of 1948) completely recast s. 34; and sub-s. (2) of s. 1 of that Act which came into force on September 8, 1948 provided that ss.
3 to 12 of the Amending Act should be deemed to have come into force on March 30, 1948. The amendment of s. 34 was made by s. 8 of the Amending Act ; therefore, s. 34 as amended by the Amending Act of 1948 operated retrospectively from March 30, 1948. In the Calcutta Discount Co. Ltd. v.
Income-tax Officer (1), Bose, J., held that s. 34 although described as a machinery section did not relate to procedure pure and simple but affected the protection given to an assessee and, therefore, the amended section had no application to the assessments for 1942-1943, 1943-1944 and 1944-1945. This view of Bose.J., was not accepted by the Appellate Court in Income-tax Officer v. Calcutta Discount Co. Ltd. (2), where the learned Chief justice of the Calcutta High Court rightly pointed out that s. 34 as it spoke from March 30, 1948, took in all assessment years ending within eight years from March 30, 1948, and subsequent dates, but (1) [1952] 21 I.T.R. 579.
(2) [1953] 23 I.T.R. 471.
47 did not take in an assessment year which ended before eight years from March 30, 1948. It is worthy of note that the Bill which became Act XXV of 1953 was introduced after the judgment of Bose, J., and before the judgment of the learned Chief Justice. There were really two separate and distinct questions one was whether s. 34 as amended in 1948 applied to assessment years prior to 1948-1919 and the second question was whether, on the footing that amended s. 34 did apply to assessment years prior to 1948-1949, any action could be taken under the amended section in respect of those assessments which had become time-barred before the amended section came into effect. Bose, J., answered the first question in the negative and necessarily the second question also in the negative. The learned Chief Justice answered the first question in the affirmative, but took pains to point out that an assessment made before eight years from March 30, 1948, was not within the purview of s. 34.
I am of the opinion that in its true scope and effect., s. 31 of the Amending Act of 1953 puts beyond any doubt that the view expressed by the learned Chief justice in Income-tax Officer v. Calcutta Discount Co. Ltd. (1), is the correct view and amended s. 34 applies to assessment years prior to 1948-1949, but it does not say that an assessment which had become final and in respect of which reassessment proceedings had become time-barred before the amended section came into force could be re-opened. This appears to me to be clear from the first part of s. 31. That part says that sub-ss. (1), (2) and (3) of s. 34 shall apply and be deemed always to have applied to any assessment etc. for any year ending before April 1, 1948 in any case where proceedings in respect of such assessment etc. were commenced under the said sub-sections after September 8, 1948, and any notice issued in accordance with sub-s. (1) shall be deemed to be valid (1) [1953] 23 I.T.R. 471.
48 etc. The section does not say that the periods of limitation laid down in sub-ss. (1) and (3) are being done away with ; on the contrary, the first part of the section says that the proceedings must have been commenced after September 8, 1948 (the date on which the Amending Act of 1948 came into force) under the said sub-sections and the notice must have been issued in accordance with sub-s. (1).
The Income-tax Officer can commence proceedings under the said sub-sections or issue a notice in accordance with subs. (1) only when he obeys the injunction as to time laid down therein; then only he can be said to have commenced proceedings or issued a notice in accordance with the subsections. If he has done that and commenced proceedings after September 8, 1948, then the second part of the section says that the notice or the assessment shall not be called in question on the ground merely that the provisions of s. 34 did not apply or purport to apply in respect of any year prior to April 1, 1948. These lines underlined in the second part of the section also bring out its true scope and effect. If there has been compliance with provisions of the sub-sections including the time limits fixed therein, then the notice issued or assessment made is not liable to challenge on the mere ground that amended s. 34 does not apply in respect of a year prior to 1948-1949. In other words, s. 31 of the Amending Act of 1953 nullifies the effect of the decision of Bose, J. in Calcutta Discount Co. Ltd. v. Income tax Officer, (1) and gives effect to the decision of the learned Chief Justice of the Calcutta High Court. The section does not abrogate the periods of limitation laid down in the relevant sub-sections of s. 34;
if it did, it would be in conflict with s. 34 and the ground taken would be such conflict and not merely the ground that the provisions of s. 34 did not apply to any year prior to 1948-1949.
My conclusion, therefore, is that s. 31 of the Amending Act of 1953 does not validate the notice (1) [1952] 21 I.T.R. 579.
49 issued in the present case--a notice issued on April 30, 1954 long before which date the assessment had become final and in respect of which reassessment proceedings had become time-barred. The short answer to the argument based on s. 31 is that the notice in the present case was not issued in accordance with sub-s. (1) of s. 34, and the first part of s. 31 requires that the notice must be so issued before the second part thereof can give any protection to it.
I now proceed to consider the Amending Act of 1959. The Indian Income-tax (Amendment) Act, 1959 (1 of 1959) received the assent of the President on March 12, 1959. The relevant provisions with which we arc concerned are contained in ss. 2 and 4 of the amending Act. By s. 2 of the amending Act, a new sub-section, namely, sub-s. (4) was inserted in s. 34. This sub-section said :
"S. 34 (4). A notice under clause (a) of subsection (1) may be issued at any time notwithstanding that at the time of the issue of the notice the period of eight years specified in that sub-section before its amendment by clause(a) of section 18 of the Finance Act, 1956 (18 of 1956), had expired in respect of the year to which the notice relates." S. 4 of the amending Act contained provisions regarding the saving of notices, assessments etc., in certain cases only and read as follows :
"No notice issued under clause (a) of sub-section (1) of section 34 of the principal Act at any time before the commencement of this Act and no assessment, re-assessment or settlement made or other proceedings taken in consequence of such notice shall be called in question in any court, tribunal or other authority merely on the 50 ground that at the time the notice was issued or at the time the assessment or re-assessment was made, the time within which such notice should have been issued or the assessment or re-assessment should have been made under that section as in force before its amendment by clause (a) of section 18 of the Finance Act, 1956 (18 of 1956), had expired." The main point argued before us on behalf of the appellants is that s. 4 of the amending Act of 1959 saves the notice which the Income-tax Officer issued in the present case on April 30, 1954. I may here state one initial difficulty which faces the appellants. S. 4 of the amending Act of 1959 refers to a notice issued under cl. (a) of sub-s. (1) of s. 34; therefore, in order to get the benefit of the section the appellants must establish that the notice dated April 80, 1954 was a notice issued under cl. (a) of sub-s. (1) of s. 34. In an earlier part of this judgment I had set out in full the notice which the Income-tax Officer had issued on April 30, 1954, That notice said inter alia that the Income-tax Officer had reason to believe that the income of the firm Purshottam Laxmidas assessable to income-tax for the year ending March 31, 1943 had been under-assessed and therefore the Income-tax Officer proposed to re-assess the income. It is at least doubtful that the notice, if one were to go by the words used in the first part thereof, would make it a notice under cl. (a) of sub-s. (1) of s. 34 unless the satisfaction of the Commissioner referred to in the last part makes it one. I have said earlier that cl. (a) of sub-s. (1) of s. 34 related to those cases in which there was an omission or failure on the part of the 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. When the Calcutta Discount Company's case (1) came to us, we had explained what was meant by non-disclosure of (1) [1961] 2 S.C.R, 241.
51 material facts and pointed out the distinction between primary facts and inferences there from. (see Calcutta Discount Company Limited v. Income-tax Officer, Companies District, (1)). There is nothing in the record to show that in the present case there was an omission or failure on the part of the assessee to make a return of his income under s. 22 for the year 1942-1943; nor is there any avertment on behalf of the appellants that the assessee failed to disclose fully and truly all material facts necessary for his assessment for that year in the sense explained above.
I have said earlier that there was some correspondence between the Income-tax Officer concerned and the firm of Purshottam Laxmidas with regard to the notice issued on April 30, 1954. The firm wanted to know the reason why the notice had been issued. In reply to the letter from the firm, the Income-tax Officer said (see Ex. C) :
"The income of the concern of Vasantsen Dwarkadas was originally included in the hands of Dwarkadas Vassonji; Dwarkadas Vassonji was also a partner in the registered firm of Messrs Purshottam Laxmidas. The Appellate Tribunal by its consolidated order dated 14-81951 (I. T. Nos. 7836 to 7851 of 1951/52 and E.P.T.A. Nos. 13 to 17 of 1950/51) has come to the finding that the concern of Vasantsen Dwarkadas is the branch of Messrs Purshottam Laxmidas. The income of the firm has therefore to be reassessed." The aforesaid reply does not make out any case that the notice was issued under cl. (a) of sub-s. (1) of s. 34. When we allowed the appellants to file a supplementary statement of the case urging new points, we also granted time to the respondents to file a supplementary statement of case, if any, on their behalf. The respondents filed a supplementary statement of their case and said therein that the notice (1) [1961] 2 S.C.R. 241.
52 dated April 30, 1954 was not and could not be issued under cl. (a) of sub-s. (1) of s. 31 but was and could only be issued under cl. (b) or sub-s. (1) of s. 34. Therefore, it seems to me that the appellants have not established without any doubt that the notice in this case was issued under cl.
(a) of sub-s. (1) of s. 34, so as to give them the protection of s. 4 of the Amending Act of 1959. The point taken is indeed a point of law, namely, whether the appellants are entitled to the benefit of s. 4 of the Amending Act of 1959. But the applicability of s. 4 depends on certain facts and those facts must first be found. It is true that in the judgment of the High Court there is a reference to eight years' period of limitation but none of the parties raised any question as to whether the notice dated April 30, 1954 was issued under cl. (a) or cl. (b) of sub-s. (1) of s. 34. The parties joined issue only on the question whether the second proviso to sub-s. (3) of s. 34 applied or not. The necessary facts were not investigated and no finding was given as to whether the notice came within cl. (a) or cl. (b) of sub-s. (1) of s. 34.
I am of the opinion that this is enough to dispose of the claim put forward by the appellants that the notice dated April 30, 1954, is saved by s. 4 of the Amending Act of 1959. No foundation on facts having been laid for the claim, it must be rejected.
The matter was however argued before us at great length on the supposition that the notice dated April 30, 1954 was a notice issued under cl. (a) of sub-s. (1) of s. 34. 1 am of the opinion that even on that supposition the appellants are not entitled to succeed. It is manifest that sub-s. (4) of s. 34 does not help the appellants. That sub-section is clearly prospective and is intended to authorise action after the coming into force of the 1959 amendment; therefore, sub-s. (4) of s. 34 cannot validate a notice issued in 1954. Now the question is, what about 53 s. 4 of the Amending Act of 1959? It has been very strenuously argued before us that section by reason of the unambiguous language used therein saves the notice. It is pointed out that the section in its first part refers inter alia to a notice issued under cl. (a) of sub-s. (1) of s. 34 at any time before the commencement of the 1959 Act and in its second part says that no such notice shall be called in question in any court etc. merely on the ground that at the time the notice was issued, the time within which such notice should have been issued under s. 34 as in force before its amendment by s. 18 of the Finance Act, 1956 had expired. The argument is that the language of the section is such that it clearly saves the notice issued on April 30, 1954 because (1) it fulfills the requirement of the first part of the section in as much as the notice was issued before the commencement of the 1959 Act and (2) the second part of the section says that the notice cannot be called in question on the ground that it was issued after the expiry of the time mentioned in sub-s. (1) of s. 34 as it stood before the amendment made in 1956.
At first sight the argument appears almost irresistible.
But on a careful consideration I have come to the conclusion that it is not correct. It is necessary here to refer to the circumstances under which the amending Act of 1959 was enacted. Prior to the amendment of sub-s. (1) of s. 34 by the Finance Act, 1956, in cases falling under cl. (a) a notice had to be served within eight years from the end of the relevant assessment year. This time limit was removed by s. 18 of the Finance Act, 1956. In Debi Dutta v. T. Bellan (1), the Calcutta High Court held that action under the amended section could not be taken if prior to the amendment coming into force (that is, April 1, 1956) the period for serving the notice bad already expired. This was the difficulty which the Legislature had to meet and it wanted to (1) A.I.R. 1959 Cal. 567.
54 supersede the view expressed by the Calcutta High Court. It is indeed true that the Statement of Objects and Reasons for introducing a particular piece of legislation cannot be used for interpreting the legislation if the words used therein are clear enough. But the Statement of Objects and Reasons can be referred to for the purpose of ascertaining the circumstances which led to the legislation in order to find out what was the mischief which the legislation aimed at. The decision of the Calcutta High Court to which I have earlier made a reference was adverted to in the Statement of Objects and Reasons. It seems to me that sub-s. (4) of s. 34 was enacted to supersede the view expressed in the Calcutta decision aforesaid, so that after the coming into force of sub.s. (4) in 1959 a notice under cl. (a) of sub-s. (1) could be issued at any time notwithstanding that at the time of the issue of the notice the period of eight years specified in the sub-section before its amendment by s. 18 of the Finance Act, 1956 had expired. It further appears to me that both sub-s. (4) of s. 34 and s. 4 of the Amending Act of 1959 are meant to deal with only those cases where action is taken under s. 34 as amended in 1956, but where the eight years' time limit had already expired and the original assessment (if any) had become final prior to the amendment of s. 34 in 1956. Whereas sub-s. (4) of s. 34 is intended to authorise action in such cases after the coming into force of the Amending Act of 1959, s. 4 is intended to save and validate action taken in such cases between 1956 when s. 34 was amended by the Finance Act, 1956 and 1959 when the Amending Act was passed. In my view, s. 4 of the Amending Act of 1959 has no bearing on a notice issued under s. 34 prior to 1956. 1 do not accept as correct the decision of the Bombay High Court in Onkarmal Meghraj v. Commissioner of Income-tax, Bombay-1 (1). That decision implies that s. 4 of the Amending Act of 1959 in effect abrogates and supersedes the statutory time limits for action under (1) [1960] 38 I.T.R. 369.
55 s. 34 (1) (a) in all the past years ever since s. 34 (1) (a) was put on the Statute Book. It seems to me that on the contrary, the provisions of s. 34 (4) and s. 4 of the Amending Act clearly indicate that the only effect of s. 34 (4) is to authorise action, and the only effect of s. 4 of the Amending Act is to validate action, under s. 34 as amended in 1956 in cases where action under s. 34 has already become time barred prior to its amendment in 1956.
They have no bearing on notices issued or on assessments made under s. 34 prior to 1956. If the intention was to abrogate altogether all provisions regarding limitation in s. 34 right from 1922, then s. 4 would have been differently worded and would not have said that it saved notices etc. in certain cases only; on the view canvassed for by the department, s. 4 would save notices issued in all cases before 1959 irrespective of any question of limitation.
Moreover, if the view taken of s. 4 of the Amending Act of 1959 is that it abrogates and supersedes all past provisions regarding limitation, then the section would be in conflict with the provisions of s. 34. On the principle of harmonious construction the attempt should be to avoid such conflict rather than create it. The last part of s. 4 shows in my opinion its true intent, namely that what is intended is to validate post-1956 action, that is, action taken under s. 34 as amended by s. 18 of the Finance Act, 1956. I cannot read s. 4 as abrogating all periods of limitation and as validating notices issued prior to 1956, even though such a notice was not property issued under cl. (a) of sub-s. (1) of s. 34. If the intention was that any and every notice issued under cl. (a) of sub-s. (1) of s. 34 at any time before the commencement of the 1959 Act could be validated, then the section should not have said" notice issued under clause (a) of sub-s. (1) of s. 34." The very fact that the section talks of a 56 notice issued under cl. (a) of sub-S. (1) of s. 34 means that it is a notice issued in compliance with the provisions of cl. (a) of sub-s. (1) of s. 34 as amended in 1956 when the time limit was removed. When a notice is issued under cl. (a) of sub-s. (1) of s. 34 as amended in 1956; it cannot be called in question merely on the ground such as was upheld by the Calcutta High Court is Debi Dutta v. T. Bellan (1) that the time limit had already expired before the issue of the notice; this seems to me to be the true meaning of s. 4 when the first of the section which talks of a notice issued under cl. (a) of sub-s. (1) of s. 34 is contrasted with the second part which says that such a notice shall not be called in question on the ground that the time limit had already expired before the date on which the notice was issued. If the intention was to abrogate the time limit for all notices issued before 1959, there was no sense in saying that the notice should issue under cl. (a) of sub-s. (1) of s. 34 and at the same time it would not be called in question on the ground that the time limit had expired before the date of its issue; the section then would have simply said that notwithstanding any time limit in cl. (a) of sub-s. (1) of s. 34, all notices issued before 1959 would be valid. I do not think s. 4 of the Amending Act 1959 was intended to abrogate all periods of limitation for action under cl. (a) of sub-s. (1) of s. 34 for all past years.
The time limit of eight years was removed in 1956 in respect of those cases where the amount was not likely to be less than Rs. 1,00,000/-. The present case is one where the amount is less than Rs. 1,00,000/and the limitation of eight years applied in 1954. All that s. 4 states is that if a notice has been issued under cl. (a) of sub-s. (1) of s. 34 at any time before the commencement of the 1959 Act, the notice shall not be called in question merely on the ground that at the time it was issued (1) A.I.R. 1955 Cal. 567.
57 the time limit as in force before the amendment made in 1956 had expired, in other words, s. 4 validates action taken between 1956 when s. 34 was amended and 1959 when the Amending Act was passed. It does not affect notices issued prior to 1956 nor does it abrogate all periods of limitation.
For all these reasons I have come to the same conclusion as my learned brother Kapur, J., that the appeal must be dismissed with costs.
KAPUR, J. -This is an appeal against the judgment and order of the High Court of Bombay confirming the order passed by S.T. Desai,. J., in Writ Petition No. 266 of 1954 under Art. 226 of the Constitution whereby Desai,J., issued a writ of prohibition restraining the appellants from taking any further steps in pursuance of the notice dated April, 30, 1954, issued under s. 34 of the Income-tax Act, hereinafter called "the Act" or from assessing or reassessing the firm known as Purshottam Laxmidas in respect of the assessment year 1942-43. The Appellant before us is the Income-tax Officer and the respondents are the firm and partners of the firm above noted.
Dwarkadas Vussanji and Parmanand Odhavji carried on business in partnership in the name and style of Purshottam Laxmidas from October 28, 1935, till April 1, 1946, when Dwarkadas Vussenji died. Thereafter Vasantsen Dwarkadas, the son of Dwarkadas Vussonji, and Parmanand Odhavji respondent No. 3 continued the business under the same name i.e. Purshottam Laxmidas. That firm was registered under the Indian Income-tax Act.
On January 28, 1941, another firm under the name of Vasantsen Dwarkadas was started, its partners were Vasantsen Dwarkadas respondent No. 1, Narandas Shivji and Nanalal Odhavji.This 58 firm was dissolved on October 24, 1946. For the assessment year 1942-43 firm Vasantsen Dwarkadas filed a voluntary return of income and also applied for registration under s. 26 of the Act. The registration was refused on the ground that the firm was not a genuine firm but really belonged to Dwarkadas Vussonji, the principal partner in the firm Purshottam Laxmidas.The Income-tax Officer added the income of the firm Vasantsen Dwarkadas for the assessment year 1942-43 to the individual income of Dwarkadas Vussonji, in the subsequent assessment year i.e. 1943-44. In the subsequent years also the firm Vasantsen Dwarkadas applied for registration but registration was refused on the ground that it was not a genuine firm. Appeals were taken in usual course to the Income-tax Appellate Tribunal by firm Vasantsen Dwarkadas both against the quantum of its assessed income and against the refusal of registration. This was for the years of assessment 1942-43 to 1948-49. These appeals filed by firm Vasantsen Dwarkadas and the appeal filed by Vasantsen Dwarkadas as representing the estate of his father Dwarkadas Vussonji and the appeals filed by the firm Purshottam Laxmidas in regard to the Excess Profits Tax were all heard together and decided by the Income-tax Appellate Tribunal by its order made on August 14, 1951. In that order the Income-tax Appellate Tribunal gave a finding that Dwarkadas Vussonji was not the sole proprietor of the business of firm Vasantsen Dwarkadas but that the business of that firm belonged to the firm Purshottam Laxmidas. At the instance of the Commissioner of Income the Appellate Tribunal stated a case to the High Court and the question referred was answered in favour of the assessee i.e. On April 30, 1954, the Income-tax Officer issued a notice to the firm Purshottam Laxmidas under s, 34 of the Act the relevant portion of which 59 was in the following terms:"Whereas I have reason to believe that your income assessable to income tax for the year ending 31st March 1943 has been under-assessed I therefore, propose to reassess to the income allowance that has been under-assessed." It is the validity of this notice which has to be determined.
As the decision of the case depends upon the interpretation of the various legislative changes made in s. 34 it may be convenient at this stage to mention those amendments relating to the periods during which action could be taken by the Income-tax Officer in regard to escaped incomes.
Under s. 34(1) of the Act as it stood in 1939, after the Income-tax Amendment Act, 1939, Act 7 of 1939, hereinafter referred to as "the Amending Act of 1939", the period for taking action was eight years for cases of omission or failure on the part of the assessee to furnish accurate particulars and four years in any other case of escapement of income-tax. This section was amended by s. 8 of the Income-tax and Business Profits Tax (Amendment) Act, Act 48 of 1948, hereinafter referred to as "'the Amending Act of 1948". The period in the two cases still remained the same but certain safeguards in favour of the assessees were provided. A further amendment was made in s. 34, this time in the second proviso to sub-s. (3) of s. 34 by Income-tax Amendment Act, 1953 (Act 25 of 1953), hereinafter referred to as the Amending Act 1953." That Act also made provision for saving of notices and assessments in certain cases. By s. 18 of the Finance Act of 1956, s. 34(1) was again amended. By Income tax (Amendment) Act, 1959 (Act 9 of 1959) hereinafter referred to as the Amending Act of 1959" s. 34 was further amended, this time by addition of sub-s. (4) to that section and provision 60 was also made for the validation of certain notices and assessment in certain cases. These various changes will be discussed in detail at appropriate places.
The Amending Act of 1953 received the assent of the President on May 24, 1953, but came into force retrospectively as from April 1, 1952. By that Act the second proviso to s. 34(3) of the Act was amended.
A notice under s. 34(1)(a) was issued to respondent No. 2 which has been set out above. Thereupon Vasantsen Dwarkadas filed a petition under Art. 226 of the Constitution in the Bombay High Court being Misc. Application No. 266-X of 1954 challenging its legality. S. T. Desai, J., who heard the petition in the first instance held that the Amending Act of 1953 which became operative as from April 1, 1952, had no retrospective effect so as to enable the Income-tax Officer to reopen the assessment of the firm Purshottam Laxmidas for the assessment year 1942-43 which had become time-barred before April 1, 1952, and therefore the Income-tax Officer's action was barred and without jurisdiction; that the second proviso to s. 34(3) of the Act " or so far as it affects persons other than assessees not parties to the proceedings" was ultra vires of the Constitution being in violation of' Art. 14 of the Constitution; that on the facts and circumstances of the case the present respondents could not be regarded as strangers to the proceedings in which the findings were given by the Tribunal. The Appeal Court confirmed the decision of Desai, J., and further held that the firm Purshottam Laxmidas against whom the impugned action was taken was a stranger to the appeal filed by Vasantsen Dwarkadas. Against this judgment and order the Income-tax Officer has brought the present appeal.
The appellant in this court filed a supplemental Statement of Case in which he sought to challenge 61 the correctness of the judgment of the High court on two additional grounds: (1) that s. 31 of the Amending Act of 1953 had been overlooked and (2) that s.2 of the Amending Act of 1959 had the effect of removing the bar of eight years' period in regard to notices under s. 34(1)(a) and s. 4 of that Act (Amending Act of 1959) validated all notices including the impugned notice. The respondents filed their supplemental Statement of Case on October 5, 1960.
Before taking up the construction of ss. 2 and 4 of the Amending Act of 1959, it will be helpful to examine the circumstances in which the Amending Act was enacted. After the Amending Act of 194
