1962 (12) TMI 55 - SC - Income Tax

Invalidation of Section 34 proceedings due to expired limitation period; retrospective application of amended law dismissed

Commissioner of Income-tax Versus Janab Mohammad Hussain Nachiar Ammal

The High Court held that the proceedings initiated under Section 34 on July 25, 1949, were invalid as the original four-year limitation period had expired ... Whether the proceedings under section 34 of the Indian Income-tax Act initiated on 25th July 1949 to assess the amount of Rs. 9,180/which escaped assessment during the year 1942-43 by failure to submit a voluntary return are valid in law ? Held that:- Appeal allowed. Sec 34 of the principal Act as amended in 1948 applies to the notice-issued and the assessment order made in this case. Both of them are valid under s. 34 as so amended. The High 'Court should have answered the question framed in the affirmative. Issues Involved:1. Validity of proceedings under Section 34 of the Indian Income-tax Act, 1922.2. Applicability of the amended Section 34 by the Amending Act of 1948.3. Relevance of Section 31 of the Income-tax (Amendment) Act, 1953.4. Retrospective operation of the amended Section 34.Detailed Analysis:1. Validity of Proceedings under Section 34 of the Indian Income-tax Act, 1922:The primary issue was whether the proceedings initiated on July 25, 1949, under Section 34 of the Indian Income-tax Act, 1922, were valid. The assessee argued that the initiation was invalid because the period of limitation prescribed by the old Section 34, which was four years for failure to file a return, had expired on March 31, 1947. The High Court upheld this contention, stating, 'the new rule of limitation of eight years prescribed by the amended section 34 would not apply to the case of the assessee before us.'2. Applicability of the Amended Section 34 by the Amending Act of 1948:The amendment to Section 34 by the Amending Act of 1948 extended the period of limitation to eight years. However, the High Court ruled that this amended period could not be invoked for the assessee's case because the original four-year period had already expired before the amendment came into force on March 30, 1948. The court stated, 'the period of four years had run out long before 30th March 1948 when the amended section 34 came into force.'3. Relevance of Section 31 of the Income-tax (Amendment) Act, 1953:The Department's counsel referred to Section 31 of the Income-tax (Amendment) Act, 1953, to support the validity of the notice issued on July 25, 1949. However, the High Court found that Section 31 did not enlarge the scope of the amended Section 34 nor did it amend it. The High Court concluded, 'Section 31 of Act XXV of 1953 does not therefore affect the question at issue.'4. Retrospective Operation of the Amended Section 34:The appeal also questioned whether the amended Section 34 could be applied retrospectively. The High Court held that the amended section could not be given retrospective operation to validate the notice and the order of assessment. However, one judge dissented, arguing that Section 31 of the 1953 Act made the amended Section 34 applicable retrospectively. The dissenting opinion stated, 'Section 31 of the 1953 Act clearly gives s. 34 of the principal Act as amended in 1948 such retrospective operation.'Conclusion:The majority opinion upheld the High Court's decision that the proceedings initiated under Section 34 on July 25, 1949, were invalid due to the expiration of the original four-year limitation period before the amendment came into force. The appeal was dismissed with costs, affirming that the amended Section 34 could not be applied retrospectively to the assessee's case. The judgment emphasized that the legislative amendments did not extend the period of limitation for cases where the original period had already expired.Final Judgment:The appeal was dismissed, and the appellant was ordered to pay the costs of the respondent, as agreed. The court concluded, 'In accordance with the opinion of the majority, the appeal is allowed. The appellant will pay the costs of the respondent as was agreed to by the parties.'