S. B. Jain, I.T.O. Nagpur v. Mahandera

Judgment

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1301 of 1971 and 1981 of 1968. Appeals by special leave from the judgml1nt and order dated November 15, 1956 of the Bombay High Court, Nagpur Bench in Special Civil Application No. 150 of 1963. B. Sen, J. Ramamurthy, R. N. Sachthey and B. D. Slwrma, for the appe!lant (in both the appeals). A. S. Bobde, G. L. Sangh! and B. R. Agarwal, for the respo.ndent (in both the appeals). s. B. JAIN v. MAHANDERA (Hegde, J.) 61 5 The Judgment of the Court was delivered by Hegde, J. Civil Appeal No. 1301 (NCT) of 71 is by special leave. This appeal was filed under the following circumstances : Civil Appeal No. 1981 of 1968 was brought on the strength of a certificate issued by the High Court. That certificate, being :not in accordance with law in as much as the High Court gave no reason in support of the same, the appeal filed on the strength of that certificate turned out to be not maintainable.

Hence the appellant had to move this Court for special leave to appeal against the judgment O·f the High Court. The same having been granted he has brought Civil Appeal No. 1301 of 71. Hence these two appeals. against the same judgment. Now coming to the merits of the case, the Jjncome-tax Officer issued a notice to the respondent on January 5, 1962 under section 34 ( 1) (a) of the India1n Income-tax Act, 1922 seeking to reopen his assessment for the assessment year 1946-4 7 the relevant accounting year being the calender year 1945. The assessee responde;nt challenged the validity of that notice by means of a writ petition under Article 226 of the Constitution before the High Court of Bombay. The High Court accepted that writ petition and quashed the impugned notice by its order dated March 6, 1963. Qn April 1, 1962 the Income-tax Act, 1961 came into force.

Thereafter the Income-tax Officer again issued a notice on March 26, 1963 under section 148 of the new Act in respect of the very 'tSsessment which he earlier U;nsuccessfully sought to reopen by means of a notice under section 34 ( 1) (a) of the 1922 Act. The assessee again challenged the validity of the notice issued to him by means of a:nother writ petition, before the High Court of Bombay. The High Court quashed that notice on the ground that the Income-tax Officer was not competent to issue that notice. It is against that decisioo, the present appeals have been brought to this Court. Section 147 of the 1961 Act provides:

If- ( a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return Uillder Section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or ( b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153 assess or re-assess such income or re-compute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in Sections 148 to 153 referred to as the relevant assessment year)". Section 148 reads :- " ( 1)

Before making the assessment, re-assessment or re-computation ll:Ilder Section 147, the Incometax Officer sha!J serve on the assessee a notice containing all or any of the requirements which may be included ~n a notice under sub-section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issuec! under that sub-section. ( 2) The lncome-tax Officer shall, before issuing any notice under this section record his reasons for doing so." Section 149 prescribes the time limit for issuing a notice under Section 148. Sub-section (i) of Section 149 says: "No notice under Section 148 shal! be issued- ( a) in cases falling under Clause (a) of Section 147- (i) for the relevant assessment year, if eight years have elapsed from the eind of that year, unless the case falls under sub-clause (ii); ........ " Section 297 deals with repeals and savings.

Section 297 2(d)(ii) reads thus:- "Notwithstanding the repeal of the Indian lncometax Act 1922 (ii) of 1922 (hereinafter referred to as the repealed Act) ........ (d) where in respect of any assessment year after the year ending on the 31st day of March 1940 :- (i) ............. . (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceeding$ under section J4 of the repealed Act in respeci of any such' s. B. JAIN V. MAHANDERA (Hegde, I.) 61 7 income are pending at the commencement of this Act, a notice under Section 148 may, subject to the provisions contained in Section 149 or section 150, be issued with respect to that assesment year and all the provisions of this Act shall apply accordingly". (Emphasis supplied). The only question for decision in these appeals is whether the proceedings initiated by the notice under section 34(1) (a) of the 1922 'Act were pending at the time when the new Act came into force.

It is mot denied that such proceedings were factually pending. But what was contended by Mr. B. Sen, learned counsel for the department was that that notice be\ng an invalid notice on the ground that that was barred by limitation, the proceedings initiated on basis of that notice should be considered as not pending in the eye o.f the law. We are unable to accept this contentio,n. What section 297(2) (a)( ii) requires is the factual pendency of a proceeding under section 34 of the repealed Act. The question whether that proceeding was barred by limitation or not is irrelevant. It is not denied that those proceedings were initiated by a competent authority. Those proceedings were quashed for the reason that notice under section 34 of 1922 Act was issued beyond the time prescribed by law. Hence it ca,nnot be said that no proceeding under section 34 of the 1922 Act either factually or legally was pending at the time when the mew Act came into force.

Our above conclusion receives support from the decision of this Court in Raja Kulkarni and others v. The State of Bombay('). There\n the question that arose for decision was whether an appeal under section 24 of the Industrial Disputes Act, 1950 can be said to have been pending if that appeal was incompetent or i,nvalid for some reason. This Court ruled that what was necessary was the factual pendency of the appeal a;nd not that it should have been a valid or competent one under the provisions of the limitation Act or such other adjectival law. The proceedings pe;nding before a competent autho•ity cannot be said to be not pending merely became that no relief can be granted in that proceedings because of the bar of limitatio,n. In Mela Ram & Sons v. Commissioner of Income Tax, Punjab(') it was contended before this Court that any appeal which is barred by limitation cannot be considered as an appeal properly pre;ented under Sectia;n 30 of the Indian Income Tax Act, 1922.

This Court rejected that contention observing : (I) [1954] S.C.R 384. (2) 29 I.T.R. p. 607. [1972] l .s.c.R. "ii an appeal is not presented within that time (withlill the prescribed time) does that cease to be an appeal as provided under section 30 (I ) ? It is well established that rules of limitation pertain to the domai;n of adjectival law, and that they operate only to bar the remedy but not to extinguish the right. An appeal preferred in accordance with Sectio1n 30(1) must, therefore, be an appeal in the eye of law, though having been presented beyond the period mentioned in sectiQ!l 30(2) it is liable to be dismissed in /imine.'' We have no doubt in our mind that the proceedings initiated under Section 34(1) (a) of the 1922 Act were pending at the time 1961 Act came i!llto force and that being so the Income-tax Officer was not competent to issue any fresh notice under section 148 of the 1961 Act. In the result Civil Appeal No. 1301 of 71 fails aind the same is dismissed with costs.

Civil Appeal No. 1981of68 is dismissed as not being maintainable. Parties to bear their own costs in this appeal. K.B.N. Appeals dismissed.