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High Court of Calcutta
Sinha, J.
Madanlal Jajodia – Appellant
Versus
Income Tax Officer And Anr. – Respondent
Matter No. 189 of 1962
Decided on : July 23, 1964
INCOME TAX - Reopening of assessment - Time limit - Applicability of s. 34(1)(a) or s. 34(1A) of the Income Tax Act, 1922 - Whether cases referred to the Income-tax Investigation Commission can be reopened only under s. 34(1A) - Held, no.
Fact of the Case:
The petitioner, a partnership firm, was served with a notice under s. 5(i) of the Taxation on Income (Investigation Commission) Act, 1947, for investigation and report. The petitioner filed a statement and the investigation continued up to 1951. In 1954, the Supreme Court declared sub-s. (4) of s. 5 of the said Act as void and unenforceable. Subsequently, s. 34 of the Income Tax Act, 1922, was amended by the introduction of s. 34(1A). In 1956, s. 34 was further amended by omitting the time-limit of 8 years imposed in respect of cases falling under cl. (a) of sub-s. (i) of s. 34 and adding a proviso. The petitioner received notices under s. 34 for reopening the assessment for the years 1943-44 to 1947-48 and 1940-41 to 1942-43.
Finding of the Court:
The Court held that the impugned notices were valid and within time. It was observed that the amendment in 1956 to s. 34(1)(a) was occasioned by the fact that notice could no longer be issued under sub-s. (1A), and the legislative intent was clear that, in future, notices should be issued under sub-s. (1)(a). The Court also noted that the amendment made in sub-s. (1B) by the Finance Act of 1956 showed the legislative intent that assessment or reassessment for the years in question should be governed by sub-s. (1)(a) alone. The Court further held that there was no merit in the argument that cases which were referred to the Investigation Commission would have to be governed by sub-s. (1A) and by no other provision of law.
Issues: 1. Whether the impugned notices were valid and within time? 2. Whether cases referred to the Income-tax Investigation Commission can be reopened only under s. 34(1A) of the Income Tax Act, 1922?
Ratio Decidendi: 1. The Court held that the impugned notices were valid and within time. It was observed that the amendment in 1956 to s. 34(1)(a) was occasioned by the fact that notice could no longer be issued under sub-s. (1A), and the legislative intent was clear that, in future, notices should be issued under sub-s. (1)(a). The Court also noted that the amendment made in sub-s. (1B) by the Finance Act of 1956 showed the legislative intent that assessment or reassessment for the years in question should be governed by sub-s. (1)(a) alone. 2. The Court held that there was no merit in the argument that cases which were referred to the Investigation Commission would have to be governed by sub-s. (1A) and by no other provision of law.
Final Decision: The application was dismissed and the rule was discharged.
1. THIS application and four other applications, namely Matters Nos. 190 of 1962, 191 of 1962, 192 of 1962, and 193 of 1962, involve the same facts and the same points of law. They have been heard simultaneously and will be disposed of by this judgment. The facts are briefly as follows :
2. THERE is a partnership firm carried on under the name and style of Madanlal Sohanlal at No. 207, Chittaranjan Avenue, in the town of Calcutta, the partners whereof are Madaulal Jajodia, Sohanlal Jajodia, Sampatlal Jajodia and Pannalal Jajodia. Each one of them has made a separate application and that is why these five applications have come into existence. In or about April, 1947, an Act called the Taxation on Income (Investigation Commission) Act of 1947, being Act 30 of 1947, commonly known as the IT Investigation Commission Act, was promulgated for the purpose of making suitable provisions to investigate and ascertain the actual incidence of taxation on income disclosed or undisclosed for a period covering the accounting years from 1st April, 1939, to 31st March, 1947, the corresponding assessment years being 1940-41 to 1947,48. On the 15th May, 1948, the petitioner was served with a notice by the Income-tax Investigation Commission constituted under the provisions of the IT (Investigation Commission) Act, whereby the petitioner was informed that his case has been referred to the said Commission for investigation and report under s. 5(i) of the said Act. The petitioner was asked to furnish the Commission with a statement of his total wealth and assets as they stood between the accounting years ending 15th April, 1940, and 30th March, 1947, the assessment years being 1940-41 to 1947-48. The petitioner filed a statement and the investigation and enquiry continued up to the year 1951, when a report was made some time in. November, 1951, after considering certain terms of settlement proposed by the petitioner. It is stated in the petition that the Government of India accepted the recommendation of the Investigation Commission and notice was served under s. 29 of the IT Act on or about the 9th February, 1952, demanding the payment of the. sum of Rs. 14,32,541, on account of payment of tax and a sum of Rs. 50,000 on account of penalty. This was a demand jointly payable by all the partners. On the 28th May, 1954, the Supreme Court, by its decision in Suraj Mall Mohla and Co. vs. A. V. Visvanatha Sastri (1954) 26 ITR 1 (SC), declared sub-s. (4) of s. 5 of the Taxation on Income (Investigation Commission) Act, 1947, as void and unenforceable, as being violative of Art. 14 of the Constitution. On the 17th July, 1954, s. 34 of the IT Act, 1922, was amended by the introduction of s. 34(1A).
I shall presently deal with this amendment. On the 21st day of October, 1954, the Supreme Court by its decision in Shree Meenakshi Mills Lid. vs. A. V. Visvanatha Sastri (1954) 26 ITR 713 (SC) held s. 5(i) of the said IT (Investigation Commission) Act as invalid on the ground that s. 34 of the IT Act, by the introduction of sub-s. (1A); provided an alternative remedy which dealt with the same class of persons but less severely. Sec. 5(i) was, therefore, vioIative of Art. 14 of the Constitution and was invalid. This was confirmed by another decision of the Supreme Court, M. Ct. Muthiah vs. CIT (1956) 29 ITR 390 (SC). It was held that cases which were pending on January 26, 1950, for investigation before the IT Investigation Commission could no longer be proceeded with under that Act. The petitioner's case came within the mischief of this decision. These decisions led to a further amendment of s. 34 by the Finance Act, 1956, w.e.f. the 1st April, 1956. This amendment will have to be considered in greater detail presently, but it may be mentioned here that some of the important amendments were that the time-limit of 8 years imposed in respect of cases falling under cl. (a) of sub-s. (i) of s. 34 was omitted and the first proviso was added. On 2nd March, 1959,
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