1961 (7) TMI 84 - HC - Income Tax

Court validates reassessment notice served in 1956 under amended law

Belland Versus Smt. Banarasi Debi

Belland Versus Smt. Banarasi Debi - [1962] 46 ITR 28 (CAL.) Issues Involved:1. Validity of the reassessment notice under section 34(1)(a) of the Indian Income-tax Act.2. Interpretation of the terms 'issued' and 'served' in the context of section 34.3. Retrospective application of legislative amendments.Issue-wise Detailed Analysis:1. Validity of the Reassessment Notice under Section 34(1)(a) of the Indian Income-tax Act:The primary issue was whether the reassessment notice served on the respondent on April 2, 1956, was valid, given that it was issued on March 19, 1956, but served beyond the eight-year limitation period prescribed by section 34(1)(a) of the Indian Income-tax Act. The respondent argued that the notice was invalid as it was served two days after the limitation period ended on March 31, 1956. The court noted that the assessment was initially completed in 1948, and no tax was payable by the respondent. However, a reassessment notice was later issued, which led to the legal challenge.2. Interpretation of the Terms 'Issued' and 'Served' in the Context of Section 34:The court examined the interpretation of the terms 'issued' and 'served' as used in section 34. The appellants argued that the term 'issued' should be equated with 'served,' meaning that the notice was valid if it was issued within the limitation period, even if served later. The court referred to prior judgments, including the Bombay High Court's decision in Commissioner of Income-tax v. D. V. Ghurye, which supported the view that 'issued' and 'served' should be considered interchangeable. The court also noted that other statutes and judicial interpretations have treated these terms as equivalent, reinforcing the argument that the notice was valid despite being served after the limitation period.3. Retrospective Application of Legislative Amendments:The court considered the retrospective application of amendments to section 34 introduced by the Finance Act, 1956, and further amendments by Act I of 1959. The appellants argued that the court should decide the appeal based on the law as it stood at the time of the hearing, which included the retrospective amendments. The court agreed, citing precedents from the Federal Court and the Judicial Committee, which established that appellate courts must consider legislative changes made during the pendency of an appeal. Specifically, section 4 of Act I of 1959 barred challenges to notices on the ground of limitation, thus protecting the notice in question.The court concluded that the notice served on April 2, 1956, was valid under the amended provisions of section 34, as the term 'issued' included 'served,' and the retrospective amendments applied to the case. Consequently, the appeal was allowed, the judgment of Sinha J. was set aside, and the application under article 226 of the Constitution was dismissed. There was no order as to costs.