CHHATTURAM Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The Appellate Tribunal at the instance of the assesses has referred to us the following question under Section 66(1), Income-tax Act, 1922: Whether the Notification dated 26-5-1940, read with the Chota Nagpur Division and Santal Pargannas District Validating Regulation, 1941, issued by the Governor of Bihar is competent in law to validate the proceeings initiated and completed for the assessment of the applicant under the Income-tax Act, 1922, as amended by the Income-tax (Amendment) Act, 1939, for the assessment year 1940-41.

(2.) The facts of this case are somewhat similar to the facts in Misc. Judicial case No. 130 of 1944 disposed of today but the relevant dates are different. In this case, the assessee has been assessed for year 1940-41, his previous year being 1939-40. On 20-4-1940, a notice under Section 22(2) of the Act was served upon the assessee requiring him to furnish a return in the prescribed form. On 22-4- 1940, a notice under Section 22(1) was published in the press requiring persons generally to submit returns in the prescribed form. By that time the Indian Finance Act of 1940, which is applicable to this assessment, had not been extended to the excluded area concerning this assessment. On 26-5-1940, the Governor of Bihar by notification under Section 92(1), Government of India Act, 1935, enacted that the Indian Finance Act of 1940 and some other Income-tax Amendment Acts should be deemed to have been applied to the Santal Pargannas and the Chota Nagpur Division with effect retrospectively from the date on which these Acts came into force in other parts of the Province of Bihar. To remove doubts as to the applicability retrospectively of the Indian Finance Act and other Acts mentioned therein the Governor of Bihar acting under Section 92(2), Government of India Act, made Regn. 1 of 1941 for the peace and good government of the area in question directing that the Income-tax Law Amendment Act, 1940, the Excess Profits Tax Act, 1940, and the Indian Finance Act, 1940, should be deemed to have come into force in the area to which this Regulation extended on 26-3-1940, 13 4-1940 and 6-4-1940, respectively. This was done with the consent of the Governor-General. The assessment proceedings which had been started as aforesaid were completed on 9-3-1941. The appeal of the assessee was dismissed by the Appellate Assistant Commissioner on 30-12-1942, and the further appeal to the Tribunal was dismissed on 27-7-1943.

(3.) We have heard most elaborate and learned arguments by the Advocate General on behalf of the assessee. His contentions may be summarised as follows: (1) The notification and the Regulation cannot apply retrospectively to this assessment on a plain reading of the terms of the two enactments, and (2) even if the Act and the Regulation can be so interpreted, the Governor has no power to give a retrospective effect either acting under Section 92(1) or acting under Section 92(2) Government of India Act. In our opinion these contentions are not fit to succeed in this case. It cannot be doubted that from the date of the notification under Section 92(1), Finance Act of 1940 must apply to these proceedings. The assessment therefore, which was actually completed on 9-3-1941, was valid as on that date Finance Act of 1940 was in force in the area in question. It is, therefore, unnecessary to consider the question so ably raised in the argument of the learned Advocate-General except to the extent about to be noticed. The learned Advocate- General next contended that the notification in question is not expressed to be retrospective in the sense that it does not expressly declare that all assessment proceedings which have already begun (the proceedings in this case began on 20- 4-1940) must be deemed to have validly begun, and draws attention as an illustration to Ordinance 45 of 1944 by which the Government of India expressly validated the notices which were issued under Section 22(2). This Ordinance was passed to obviate the difficulties created by the case in Commr. of Income-tax V/s. Ekbal and Co. A.I.R. 1945 Bom. 316 which decided that such notices were invalid as they allowed the assessee a period of less than 30 days within which the return should be filed. But the short answer to this contention is that no liability to tax attached or attaches before the Finance Act of the relevant year is passed. Therefore, in the present case, the liability to tax arose at least on 26-5-1940, and the proceedings thereafter were entirely valid. In these circumstances the question whether the notification issued on that date could not be legally made retrospective does not arise for consideration.