1962 Supreme(SC) 233

SUPREME COURT OF INDIA
K. SUBBA RAO, M. HIDAYATULLAH AND R.S. BACHAWAT, JJ.
The Commissioner of Income-tax, Patiala, Appellant
Versus
M/s. Shahzada Nand and Sons and others, Respondents.
1. Kudilal Govindram Sakseria and others, 2. Rustomji. 3. Mathurdas, 4. Damodar Chuntahabhai Patel, 5. Bhutoria Bros. (P) Ltd., Interveners.
Civil Appeals Nos. 494 and 495 of 9164.
Advocates appeared
Mr. S. T. Desai, Senior Advocate, (M/s. R. Ganapathy Iyer and R. N. Sachthey, Advocates, with him), for Appellant; Mr. N. A. Palkhivala, Senior Advocate, (M/s. I. M. Nanavati and T. A. Ramachandran, Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Respondents.
Mr. N. A .Palkhivala, Senior Advocate, (M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Interveners Nos. 1 and 2; Mr. I. M. Nanavati, Advocate, and M/s. j. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of 1344 M/s. J. B. Dadachanji and Co., for Intervener No. 3; Mr. N. A. Palkhivala, Senior Advocate, (Mr. R. J, Kolah, Advocate, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Intervener No. 4; Mr. D. N. Mukherjee, Advocate, for Intervener No. 5.

The amended S. 34 (1) (a) of the Indian Income-tax Act, 1922, lifted the ban of limitation also in respect of the escaped income of the war years.

Headnote:

INCOME TAX - Reassessment - Concealed income - Notice for reassessment - Time limit - Whether notice can be issued at any time for reassessment under S. 34 (1) (a), as amended by the Finance Act, 1956, of the Indian Income-tax Act, 1922, in respect of a concealed income to which S. 34 (1A) thereof applied.

Fact of the Case:

The assessee, a Hindu undivided family, was assessed upto the assessment year 1945-46. Subsequently, there was a partition in the family and a new firm came into existence, which took over the business of the family. On March 26, 1954, the Income-tax Authorities issued a notice to the members of the defunct Hindu undivided family under S. 34 (1) (a) of the Act in respect of the assessment year 1945-46 on the ground that certain income of the said family had escaped assessment. Pursuant to the proceedings so initiated, a sum of Rs. 3,63,000 was added to the original assessment of the said family. The assessee took up the matter on appeal to the Appellate Assistant Commissioner, who held that the said notice was barred by time, though on the merits he confirmed the order of the Income-tax Officer. The Income-tax Department as well as the 1st respondent preferred appeals against the said order to the Income-tax Appellate Tribunal. The Tribunal held that the notice was barred by time and, therefore, the income-tax authorities had no jurisdiction to give a finding on the merits. Meanwhile S. 34 (1) (a) of the Act was amended by the Finance Act, 1956, with effect from April 1, 1956, whereunder, subject to certain conditions, a notice under S. 34 (1) (a) could be issued at any time. Thereafter on July 25, 1958, the Income-tax Officer issued a notice to the 1st respondent calling upon the members who constituted the undivided family to the return for the assessment year 1945-46. Respondents 2 to 5, who were the members of the said undivided Hindu family, appealed to the Central Board of revenue for redress without any success. Thereafter, they filed a petition under Art. 226 of the Constitution in the High Court of Punjab challenging the notice on various grounds. Their main contention was that no notice under S. 34 (1) (a) could be issued in respect of the war years, as the escaped income during the said years was governed by S. 34 (1A) of the Act whereunder a notice could be issued only before March 31, 1956. The writ petition came up before a single Judge of the High Court, who referred the following question to a larger Bench: "Whether or not in the circumstances of the present case the notice under S. 34 issued on 25th July 1958, was barred by time." The Division Bench, in its turn, referred the said question to a Full Bench. The Full Bench, inter alia, held that S. 34 (1A) was a special provision whereas S. 34 (1) (a) was a general provision and that, as the escaped income of the year 1945-46 was governed by S. 34 (1A), no notice under S. 34 (1) (a) could be issued. In the result, after expressing that view, the Full Bench sent back the case to the single Judge before whom it came in the first instance. Dua, J., who heard the petition, following the view expressed by the Full Bench, allowed the petition. The appellants thereafter, preferred a Letters Patent appeal against that order to a Division Bench, which dismissed the same. Civil Appeal No. 494 of 1964 has been filed by the Revenue by special leave against the order of the Full Bench, dated September 8, 1961, and Civil Appeal No. 495 of 1964, has been filed, by certificate, by the Revenue against the order of the Division Bench confirming that of Dua, J.

Finding of the Court:

The Court held that the notice issued under S. 34 (1) (a) of the Act, as amended by the Finance Act, 1956, was not barred by time and that the Income-tax Officer had jurisdiction to issue the said notice in respect of the concealed income of the assessment year 1945-46, even though the said income was governed by S. 34 (1A) of the Act.

Issues: Whether notice can be issued at any time for reassessment under S. 34 (1) (a), as amended by the Finance Act, 1956, of the Indian Income-tax Act, 1922, in respect of a concealed income to which S. 34 (1A) thereof applied.

Ratio Decidendi: The Court held that S. 34 (1) (a) of the Act, as amended by the Finance Act, 1956, conferred a power on the Income-tax Officer to give notice thereunder in respect of the escaped concealed incomes during all the years commencing from 1941 without any bar of limitation. The Court further held that S. 34 (1A) of the Act ceased to be operative after April 1, 1956, and, therefore, there was no conflict between S. 34 (1) (a) and S. 34 (1A) after the said date.

Final Decision: The Court allowed the appeals and dismissed the petition filed under Art. 226 of the Constitution.