TaxTMI 
TaxTMI 
1961 (9) TMI 95
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...., to Ward-A by the Income-tax Commissioner. The Income-tax Officer (A-Ward) on March 26, 1954, issued notice under section 34 of the Income-tax Act to the firm, through Sahib Dyal, on the ground that he had reason to believe that its income for 1945-46 had escaped assessment. This notice was issued after obtaining the necessary certificate of the Commissioner of Income-tax, Simla. This notice was contested by the firm. The Income-tax Officer by order dated March 29, 1955, added Rs. 3,62,000 to the income, originally assessed after rejecting all the objections raised by the firm. The firm appealed and the Appellate Assistant Commissioner accepted the appeal and annulled the assessment on the ground that the notice was served oh the firm after expiry of the period fixed in section 34 of the Income-tax Act. The Appellate Assistant Commissioner, however, decided also the other objections on merits raised by it but they were decided against the firm. Both sides appealed to the Appellate Tribunal. The appeal filed by the income-tax authorities was dismissed by the Appellate Tribunal because in its opinion the notice was served after expiry of limitation. The appeal of the firm was, howev....
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....tisfaction has been obtained from the Central Board of Revenue. The assessment relates to 1945-46 (year ending March 31, 1946). Section 34(1)(a) as amended in 1956, under which a notice can be issued at any time, applies generally to assessments of all years subsequent to March 31, 1941. Section 34(1A) applies to all periods beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946. It is, therefore, clear that the present case is governed by both these provisions. If the notice is held to be issued under section 34(1)(a), then it must be held to be one within time. If, however, it is held that it is issued under section 34(1A), then it is barred by time because under that provision notice cannot be issued after March 31, 1956. The learned counsel for the petitioners urged that section 34(1)(a ) was a general section while section 34(1A) applies to only certain matters and, therefore, the enactment relating to a special period should prevail over the general section. On the other hand, it is urged on behalf of the income-tax authorities that section 34(1A) expired in effect on the 31st day of March, 1956, and, therefore, it cannot affect the applicat....
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....ter because in the present case it has been held between the parties that the first notice was barred by time, that is, it was no notice in the eye of law. That being so, the impugned notice cannot be considered to be a second notice but must be held to be the first valid notice. In that view, article 19 of the Constitution has got no application. It was then urged that section 34(1)(a) had no application as the petitioner had disclosed at the time of the original assessment all the facts relevant for the purpose. This is, however, denied by the respondents. It is a question which must be more appropriately decided by the Income-tax Officer in the course of proceedings under section 34 if it be held that that notice was within time. It was then urged that the transfer from Ward C to Ward A was illegal. This transfer was made by the Income-tax Commissioner on March 18, 1954, and it is stated by the respondents that this transfer was made at the instance of the Income-tax Officer (Ward C). The learned counsel urged that as no case was pending before the Income-tax Officer on March 18, 1954, the order of transfer was bad. There is no substance in it as is clear from the Explanat....
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....ch after deciding some other points on the merits. The case was then placed before a division bench consisting of Bishan Narain J. and myself, but without any discussion it was considered that the question had better be decided by a still larger bench, and it is as a result of the order of the division bench that the present full bench has been constituted. The facts as stated in the writ petition are that Messrs. Shahzada Nand and Sons (defunct Hindu undivided family), petitioner No. 1, used to be assessed as Hindu undivided family through Sahib Dyal, son of Shahzada Nand, petitioner No. 2, as its karta until the assessment of 1945-46. By the end of March, 1945, according to the petition, the Hindu undivided family was dissolved completely after partition amongst its members consisting of petitioners Nos. 2 to 5. According to the allegations in the petition, a new firm described as Shahzada Nand and Sons (a partnership concern consisting of three brothers, Shri Chaman Lal, Shri Madan Gopal and Shri Harbans Lal, petitioners Nos. 3 to 5) took over the business of the Hindu undivided firm. This partnership firm, according to the petitioners, has been assessed to income-tax as a fi....
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....titioners are not sure as to who has sanctioned the renewed proceedings under section 34 (Central Board of Revenue, respondent No. 1, of the Commissioner of Income-tax, respondent No. 2) because certified copies of the order sanctioning fresh proceedings under section 34 and of the statements of the relevant banks under section 20A of the Act have not been supplied, though demanded by the petitioners ; the ground for refusal being that they are confidential documents. The petitioners have then alleged that, they cannot expect justice or fair treatment from the respondents with the result that they have no other alternative but to approach this court by means of a writ petition. As the learned single judge has finally decided all the other points arising in the case, we are not called upon at this stage to pronounce upon their correctness or otherwise. I, however, cannot help observing that the procedure adopted by Bishan Narain J. cannot be considered satisfactory or even desirable. His decision on those points, unless set aside on appeal, is final; at the same time no Letters Patent Appeal would appear to be competent against the decisions of those points at this stage because ....
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....supplied to them. The answer to the question referred really depends on the construction to be placed on section 34(1)(a) and on section 34(1A) of the Income-tax Act. It is, in the circumstances, necessary to reproduce section 34 in its entirety so that we may have a complete picture of the scheme of this section : "34. (1) If (a)the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or (b)notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped asse....
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....ave been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be. Explanation.-Production before the Income-tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section. (1A) If, in the case of any assessee, the Income-tax Officer has reason to believe- (i)that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946 ; and (ii)that the income, profits or gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one lakh of rupees or more ; he may, notwithstanding that the period of eight years or, as the case may be, four years specified in sub-section (1) has expired in respect thereof, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice con....
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.... circumstances falling under clause (b) of sub-section (1), the assessee may, if he has not impugned any part of the original assessment order for that year either under section 30 or under section 33A, claim that the proceedings under sub-section (1) of this section shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the items alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made : Provided that in so doing he shall not be entitled to reopen matters concluded by an order under section 33B or section 35, or by a decision under section 66 or section 66A. (3) No order of assessment or re-assessment, other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or an order of assessment or re-assessment in cases falling within clause (a) of sub-section (1) or sub-section (1A) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable : Provided that where a notice under ....
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....come under section 22. The counsel's contention is that sub-section (1)(a) deals with special cases and sub-section (1A) deals with more general cases and, therefore, sub-section (1)(a), being an exception, should be held to cover the case. Now these are the two rival contentions which call for scrutiny and determination. It is unnecessary to notice certain decisions of the Supreme Court and of this court which were cited on behalf of the petitioners in support of the proposition that the courts must construe the various provisions of a statute harmoniously in order to ascertain the true legislative intent, for, this proposition is not disputed on behalf of the respondents. As a matter of fact, counsel for both the parties have based their respective submissions on the rule of harmonious construction, and each one of them has tried to find support from this rule for his own point of view. It is a cardinal and elementary rule of statutory construction that if possible, within the ambit of reason, full force, meaning, significance and effect must be accorded to every word, clause, section and provision of a statute, so that no part of it becomes inoperative or superfluous or i....
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.... escaped assessment, etc., being one lakh of rupees or more. For this class of cases there is no limitation, but for those in which the income, profits and gains that have escaped assessment are less than one lakh of rupees a notice must be issued within a period of eight years. In clause (iii) of the first proviso, it is further provided that the Central Board of Revenue, where the escaped income is one lakh of rupees or more, and in other cases the Commissioner, if satisfied for reasons to be recorded, may declare a case to be fit for issuing such a notice. Sub-section (1A), on the other hand, is confined to a very limited sphere. It only covers the period between September 1, 1939, and March 31, 1946, which appears to be the period covered by the Second World War. The legislature seems apparently to be conscious of the provisions of section 34(1)(a) and the proviso to it, but has nevertheless made a special provision in the form of sub-section (1A) added in 1954. For the special cases so provided by the new provision an outside limit for issuing notices has also been fixed from which it is obvious that the Parliament desired the tax authorities to act more promptly in the cases ....