1964 (3) TMI 11 - SC - Income Tax

Court upholds validity of notices served beyond time under Income-tax Act

Banarsi Debi And Another Versus Income-Tax Officer, District IV, Calcutta, And Others

The court dismissed the appeals, upholding the validity of notices served beyond the prescribed time under section 4 of the Indian Income-tax (Amendment) ... True construction of the provisions of section 4 of the Indian Income-tax (Amendment) Act, 1959 (1 of 1959) questioned Held that:- The clear intention of the legislature is to save the validity of the notice as well as the assessment from an attack on the ground that the notice was given beyond the prescribed period. That intention would be effectuated if the wider meaning is given to the expression ' issued '. The dictionary meaning of the expression ' issued ' takes in the entire process of sending the notice as well as the service thereof. The said word used in section 34(1) of the Act itself was interpreted by courts to mean ' served '. The limited meaning, namely, ' sent ' will exclude from the operation of the provision a class of cases and introduce anomalies. In the circumstances, by interpretation, we accept the wider meaning the word ' issued ' bears. In this view, though the notices were served beyond the prescribed time, they were saved under section 4 of the Amending Act. Appeal dismissed. Issues Involved:1. True construction of the provisions of section 4 of the Indian Income-tax (Amendment) Act, 1959.2. Validity of notices issued under section 34(1) of the Indian Income-tax Act, 1922, beyond the prescribed time.3. Interpretation of the term 'issued' in section 4 of the Amending Act.Detailed Analysis:1. True Construction of the Provisions of Section 4 of the Indian Income-tax (Amendment) Act, 1959:The primary issue in these appeals was the interpretation of section 4 of the Indian Income-tax (Amendment) Act, 1959, which aimed to save the validity of notices issued under section 34(1) of the Indian Income-tax Act, 1922. The appellants contended that the notices served beyond the prescribed time were not saved by the Amending Act, while the respondents argued otherwise. The court analyzed the relevant provisions before and after the amendment to determine the legislative intent and the true construction of section 4.2. Validity of Notices Issued Under Section 34(1) of the Indian Income-tax Act, 1922, Beyond the Prescribed Time:The appellants were served notices under section 34(1) of the Indian Income-tax Act, 1922, for escaped assessment beyond the 8-year period from the end of the relevant assessment year. The court examined whether these notices were valid under the amended provisions of the Act. The court referred to section 34(1)(a) of the Act, which allowed the Income-tax Officer to serve notices within 8 years for escaped income. Section 4 of the Amending Act aimed to debar courts from questioning the validity of such notices merely on the ground that they were issued beyond the prescribed time.3. Interpretation of the Term 'Issued' in Section 4 of the Amending Act:A significant point of contention was the interpretation of the term 'issued' in section 4 of the Amending Act. The appellants argued that 'issued' should mean 'served,' while the respondents contended that it encompasses the entire process of sending and serving the notice. The court referred to judicial precedents and rules of construction of fiscal statutes. The court noted that a taxing statute must be expressed in clear and unambiguous language. However, provisions dealing with the machinery of assessment should be construed to give effect to the legislative intent.The court observed that the term 'issued' had been judicially interpreted in the context of section 34(1) to mean 'served.' The court also noted that the legislative intent behind section 4 of the Amending Act was to save the validity of notices issued for escaped income, even if served beyond the prescribed time. The court emphasized that giving a narrow meaning to 'issued' would defeat the purpose of the amendment and introduce anomalies.The court concluded that the term 'issued' in section 4 of the Amending Act should be given a wider meaning, encompassing both the sending and serving of the notice. This interpretation aligns with the legislative intent and avoids anomalies. Consequently, the notices served beyond the prescribed time were saved under section 4 of the Amending Act.Conclusion:The appeals were dismissed, and the court upheld the validity of the notices served beyond the prescribed time, interpreting the term 'issued' in section 4 of the Amending Act to include both sending and serving of the notice. The court emphasized the importance of interpreting fiscal statutes in a manner that effectuates the legislative intent and avoids anomalies. The appeals were dismissed with costs, and there was one hearing fee.