1962 (12) TMI 54 - SC - Income Tax

Appeals dismissed: Assessments beyond time limit barred; Second proviso unconstitutional.

Commissioner of Income-tax Versus Sardar Lakhmir Singh

The appeals were dismissed, ruling that assessments made beyond the prescribed time under section 34(3) of the Income-tax Act, 1922 were barred by ... Whether having regard to the return dated the 7th March, 1951, by Sardar Lakhmir Singh in his individual capacity and to the provisions of section 34(3), the assessment made on him on the 27th November, 1953, is validly made ? Held that:- Appeal dismissed. It is not necessary in this case to say that the proviso is bad as making a hostile discrimination against the assessee mentioned in it and I do not do so. The respondent, Lakhmir Singh, was not the assessee in the section 31 proceedings in consequence of which the assessment order against him was made. The assessee was his father as the karta of a non-existent family. The proviso is invalid against the respondent, Lakhmir Singh. Issues Involved:1. Validity of assessment orders made beyond the prescribed time under section 34(3) of the Income-tax Act, 1922.2. Applicability of the second proviso to section 34(3) as amended by the Amending Act of 1953.3. Applicability of section 31 of the Amending Act of 1953.4. Constitutional validity of the second proviso to section 34(3) under Article 14 of the Constitution.Detailed Analysis:1. Validity of Assessment Orders Made Beyond the Prescribed Time:The assessment orders for the years 1946-47 and 1947-48 were made on November 27, 1953. According to section 34(3) of the Income-tax Act, 1922, the assessments should have been completed within four years, i.e., by March 31, 1951, and March 31, 1952, respectively. Since the assessments were made beyond this period, they were prima facie barred by limitation.2. Applicability of the Second Proviso to Section 34(3) as Amended by the Amending Act of 1953:The Tribunal relied on the second proviso to section 34(3) as amended by the Amending Act of 1953, which came into force on April 1, 1952. The proviso states that the time limit for assessments does not apply to reassessments made in consequence of or to give effect to any finding or direction contained in an order under section 31, among other sections. However, it was held that this proviso does not revive a remedy that became barred before April 1, 1952. Since the period of four years had already ended before this date, the assessments were barred.3. Applicability of Section 31 of the Amending Act of 1953:The appellant argued that section 31 of the Amending Act of 1953 validated the assessments. Section 31 states that the provisions of sub-sections (1), (2), and (3) of section 34 shall apply to any assessment or reassessment for any year ending before April 1, 1948, if proceedings were commenced after September 8, 1948. However, it was held that this question was not raised before the High Court and was not included in the grounds of appeal. Moreover, there was no evidence to show that the proceedings commenced after September 8, 1948. Therefore, section 31 did not apply to the present case.4. Constitutional Validity of the Second Proviso to Section 34(3) under Article 14:It was argued that the second proviso to section 34(3) violated Article 14 of the Constitution as it discriminated against certain taxpayers. The proviso allowed assessments to be made at any time if they were in consequence of an order under section 31, creating a hostile discrimination against such taxpayers compared to other tax evaders who were protected by the time limit in the substantive part of section 34(3). The Court held that the proviso lacked an intelligible differentia with a rational relation to the object of the statute and was therefore void to the extent it affected persons other than the assessee in the section 31 proceedings.Conclusion:The appeals were dismissed, and it was held that the assessments were barred by limitation as they were made beyond the prescribed period under section 34(3) of the Income-tax Act, 1922. The second proviso to section 34(3) as amended by the Amending Act of 1953 did not apply to revive the barred assessments, and section 31 of the Amending Act of 1953 was not applicable to the present case. Additionally, the second proviso to section 34(3) was found to be unconstitutional under Article 14 of the Constitution to the extent it discriminated against certain taxpayers.