Saving clause in income tax law preserves reassessment machinery, but not substantive deeming provisions altering tax liability.

Section 297(2)(d)(ii) of the Income-tax Act, 1961 was interpreted as preserving only the procedural machinery for reassessment of escaped income under the repealed 1922 Act, not substantive provisions that create or alter tax liability. Section 68, which deems unexplained cash credits to be income of the relevant previous year and thereby changes the taxable year and burden, was treated as a substantive provision and therefore did not apply to cash credits relating to assessment year 1960-61 in reassessment proceedings under section 147.

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Issues: Whether section 68 of the Income-tax Act, 1961 could be applied to cash credits relating to assessment year 1960-61 in proceedings initiated under section 147 of the Income-tax Act, 1961 by virtue of section 297(2)(d)(ii) of the Income-tax Act, 1961.

Analysis: The liability to tax had arisen when the Indian Income-tax Act, 1922 was in force. The expression "all the provisions of this Act shall apply accordingly" in section 297(2)(d)(ii) of the Income-tax Act, 1961 was held to extend only to the machinery for assessment of escaped income and not to substantive provisions creating rights or liabilities. Section 68 alters the basis on which unexplained cash credits are treated by deeming them income of the previous year for which the books are maintained, thereby affecting the taxable year, the quantum of income, and the resulting tax burden. That change was treated as substantive and therefore not attracted in a reassessment governed by the saving clause.

Conclusion: Section 68 of the Income-tax Act, 1961 was not applicable to the reassessment of the cash credits for assessment year 1960-61, and the question was answered in the negative.

Ratio Decidendi: A saving provision preserving reassessment under a repealed income-tax statute does not incorporate substantive provisions of the successor Act that alter the year of accrual and taxable liability; only procedural machinery of assessment is attracted.

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