PETITIONER: S. B. JAIN, I.T.O. NAGPUR Vs. RESPONDENT: MAHANDERA DATE OF JUDGMENT07/09/1971 BENCH: ACT: Income-tax Act, 1961, s. 297(2)(d)(ii)-Income-tax Act, 1922, S. 34(1)(a)--Notice under latter Act held beyond time-..If proceedings pending within meaning of s. 297 (2) (d) (ii). HEADNOTE: The Income-tax Officer issued a notice to the respondent on January 5, 1962 under s. 34(1) (a) of the Indian income-tax Act, 1922, seeking to reopen his assessment for the assessment year 1945-47. The respondent challenged the validity of that notice. The High Court quashed the impugned notice by its order dated March 6, 1963 on the ground that the notice was issued beyond the time prescribed by law. On April 1, 1962 the Indian Income-tax Act, 1961, came into 'force. Under s. 297(2) (d) (ii) of this Act if "any income chargeable to tax had escaped assessment within the meaning of that expression in s. 147 and no proceedings under s. 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under s. 148 may .... be issued with respect to that assessment year. . . . " The Income-tax Officer again issued a notice under s. 148 of the New Act in respect of the assessment which he earlier unsuccessfully sought to reopen by means of notice under s. 34(1) (a) of the 1922 Act. The respondent again challenged the validity of the notice. The High Court quashed that notice on the ground that the Income-tax Officer was not competent to issue that notice. In appeal to this Court it was contended that the notice under s. 34(1) (a) being an invalid notice on the ground that it was barred by limitation the proceedings initiated on the basis of the notice should be considered as not pending when the new Act came into force. Dismissing the appeal, HELD : What s. 297(2)(d)(ii) requires is the factual pendency of a proceeding under s. 34 of the repealed Act. Whether that proceeding was barred by limitation or not is irrelevant. The proceedings pending before a competent authority cannot be said to be not pending merely because no relief can he granted in that proceedings because of the bar of limitation. The proceedings in the present case were initiated by a competent authority and those proceedings were quashed for the reason that the notice was issued beyond the time prescribed by law. Hence it cannot be said that no proceedings under s. 34 of the 1922 Act, either factually or legally, was pending at the time when the new Act came into force. [617 D] JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1301 of
1971 and 1981 of 1968.
Appeals by special leave from the Judgment 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. Sharma,
for the appellant (in both the appeals).
A. S. Bobde, G. L. Sanghi and B. R. Agarwal, for the
respondent (in both the appeals).
615
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 leaveto appeal against the judgment of
the High Court. The same having been granted he has brought
Civil Appeal No. 1301 of 7 1. Hence these two appeals
against the same judgment.
Now coming to the merits of the case, the Income-tax Officer
issued a notice to the respondent on January 5, 1962 under
section 34(1) (a) of the Indian Income-tax Act, 1922 seeking
to reopen his assessment for the assessment year 1946-47 the
relevant accounting year being the calender year 1945. The
assessee respondent 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. On 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
assessment which he earlier unsuccessfully 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 another 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
decision, 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 under 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
616
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 under Section
147, the Incometax Officer shall serve on the
assessee a notice containing all or any of the
requirements which may be included in 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 issued under that sub-section.
(2) The Income-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 shall 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 end of that
year, unless the case falls under sub-clause
(ii);(ii);….”
Section 297 deals with repeals and savings.
Section 297 2 (d) (ii) reads thus :-
“Notwithstanding the repeal of the Indian
Incometax 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 proceedings
under section 34 of the repealed Act in
respect of any such
617
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 not denied that such proceedings
were factually pending. But what was contended by Mr. B.
Sen, learned counsel for the department was that that notice
being 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 of the
law. We are unable to accept this contention. 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 cannot be said that no proceeding under section 34
of the 1922 Act either factually or legally was pending at
the time when the new 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(1). Therein 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 invalid for some reason. This
Court ruled that what was necessary was the factual pendency
of the appeal and 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 pending before a competent authority cannot
be said to be not pending merely because that no relief can
be granted in that proceedings because of the bar of
limitation. 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 presented under Section 30 of the Indian
Income Tax Act, 1922. This Court rejected that contention
observing :
(1) [1954] S.C.R. 384.
(2) 29 I.T.R. p. 607.
618
“it an appeal is not presented within that
time (within the prescribed time) does that
cease to be an appeal as provided under
section 30(1) ? It is well established that
rules of limitation pertain to the domain of
adjectival law, and that they operate only to
bar the remedy but not to extinguish the
right. An appeal preferred in accordance with
Section 30(1) must, therefore, be an appeal in
the eye of law, though having been presented
beyond the period mentioned in section 30(2)
it is liable to be dismissed in limine.”
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 into 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 and the same
is dismissed with costs. Civil Appeal No. 1981 of 68 is
dismissed as not being maintainable. Parties to bear their
own costs in this appeal.
K.B.N. Appeals
dismissed.
619