MATHURDAS GOVINDDAS Vs. G N GADGIL ITO

JUDGEMENT

(1.) THESE petitions involve common questions of law and are founded on the same facts and it could, therefore, be convenient to dispose them of by a single judgment. Certain notices were issued against the petitioners by the Income -tax Officer, Special Circle, Ahmedabad, on 31st January, 1962, under section 34(1)(a) of the Income -tax Act, 1922. The reason for issuing the notices was that, according to Income -tax Officer, the following income of each petitioner had escaped assessment in the assessment year mentioned against the respective incomes by reason of the omission or failure to disclose fully and truly all material facts necessary for his assessment for such assessment year : Rs. 41,000 in the assessmentyear 1943 -44.)Each of the petitioners in )Special Civil Applications ) Rs. 91,575 in the assessmentNos. 370, 371 and 372 1962. ) year 1946 -47.Rs. 36,535 in the assessmentyear 1950 -51) Rs. 84,520 in the assessmentThe petitioner in Special ) year 1943 -44.Civil Application No. 373 )of 1962. ) Rs. 1,40,370 in the assessmentyear 1946 -47.Rs. 55,122 in the assessmentyear 1950 -51.The petitioner in Special )Civil Application No. 374 )of 1962. ) Rs. 1,60,740 in the assessmentyear 1943 -44. and the Income -tax Officer, therefore, proposed to reassess such escaped income by reopening the assessment of each petitioner for the respective assessment years. There were separate notices to each petitioner in respect of each assessment year and it was stated in each of the notices that it was issued after obtaining the necessary satisfaction of the Commissioner of Income -tax, Gujarat, or the Central Board, of Revenue, New Delhi, as the case may be. The petitioners were of the view that the notices were illegal and void and they, therefore, preferred the present petitions challenging the validity of the respective notices issued against them.

(2.) THE notices were admittedly issued under sub -section (1)(a) of section 34 and the main ground on which the validity of the notices was challenged was that, having regard to the provisions of sub -section (1A) of the section 34, the Income -tax Officer, had no jurisdiction to issue notices to the petitioners under sub -section (1)(a) of section 34 in respect of the assessment years 1943 -44 and 1946 -47 for which the corresponding previous years fell wholly within the period 1st September, 1939, to 31st March, 1946, and that so fare as the assessment year 1950 -51 was concerned, the condition precedent to the jurisdiction of the Income -tax Officer to issue notice under sub -section (1)(a) of the section 34 was not satisfied and the Income -tax Officer had, therefore, no jurisdiction to issue notices to the petitioners in respect of that assessment year. Now this ground depended primarily on the determination of the true scope and ambit of sub -sections (1)(a) and (1A) of section 34 as they stood at the material time but in order to appreciate the implications and consequences of various arguments which have been addressed to us on this question of the construction, it is necessary to trace briefly the history of section 34 and to see how it stood at different points of time. Section 34, prior to its amendment in 1939, provided for a period of one year of bringing to tax income, profits or gains escaping assessment in any year. In 1939 the whole section was substituted by another section which provided for the first time the limits of eight years and four years but it is not necessary to refer to the same since the section with which we are concerned is the section after its amendment by the Income -tax and Business Profits tax (Amendment) Act, 1948. This Act was passed on 8th September, 1948, and it substituted a new section in place of the old and the material part of the material part of that section as subsequently amended by the Income -tax (Amendment) Act, 1953 (which came in force 1st April, 1952), was as follows :

(3.) SUB -section (1B) was also amended by the substitution of the words 'to whom a notice has been issued under clause (a) of sub -section (1) or under sub -section (1A) for any of the years ending on the 31st day of March of the years 1941 to 1948, inclusive' for the existing words 'to whom a notice has been issued under sub -section (1A)'. On the section so amended the question arose whether after the deletion of he time -limit of eight years in cases involving escapment of income exceedings Rs. 1 lakh, a notice could issue under sub -section (1)(a) even though such notice was time -barred by reason of the period of eight years at the date when the amendment made by the Finance Act, 1956, came into force. The High Court of Calcutta held in Debi Dutt v. Belan, that once the right of the Income -tax Officer to proceed under sub -section (1)(a) as it stood prior to its amendment by the Finance Act, 1956, was barred by reason of the expiration of the period of eight years, it was not revived by the deletion of the time -limit of eight years from sub -section (1)(a). This decision led to the passing of an ordinance and later the Indian Income -tax (Amendment) Act, 1959. This Amending Act added sub -section (4) to section 34, providing for issue of notice under sub -section (1)(a) at the any time notwithstanding the expiration of the period of eight years provided under the section as it stood prior to its amendment by the Finance Act, 1956, and also enacted section 4 in the following terms for validation of notices issued prior to the commencement of the Amending Act :