Appeal No 322 of 1963
Appeal from the Judgment and order dated April 1 1958 of the former Bombay High Court in Miscellaneous Application No 327 of 1957
KN Rajagopala Sastry and R N Sachthey for the appellant
74 Bishan Narain section P Mehta J B Dadachanji 0
C Mathar and Ravinder Narain for the respondent
April 30 1964
The Judgment of the Court was delivered by SHAH J
Ms Lal and Company hereinafter called the assessee carry on business in Bombay as commission agents
In the course of assessment proceedings for the year 1954 55 the assessee s books of account were examined by the Income tax Officer and it was noticed that the assessee had business connections with certain non resident parties
On March 12 1957 the Income tax Officer issued a notice calling upon the assessee to show cause why in respect of the assessment year 1954 55 the assessee should not be treated under section 43 of the Indian Income tax Act 1922 as an agent in respect of twenty five non resident parties named in the notice
The assessee denied that he had direct dealings with any non resident party and that in any event the proposed action was barred because the period prescribed for initiation of proceeding had expired and requested the Income tax Officer to drop the proceeding
The Income tax Officer B III Ward Bombay issued on March 27 1957 a notice under section 34 of the Indian Income tax Act for assessment of the assessee as an agent of the twentyfive named non resident parties
The assessee submitted a return showing his income as nil
The Income tax Officer held that the transactions disclosed from the books of account of the assessee clearly showed that the assessee had regular business connection with non resident parties that through the assessee those non resident parties were receiving income profits and gains and section 43 was clearly applicable to the assessee there being definite business connection between the assessee and the named non residents
He therefore treated the assessee as agent of the non resident parties under section 43 of the Act
The Income tax Officer also rejected the contention of the assessee that action under section 34 was barred at the date of the notice issued to the assessee
Relying upon the first proviso to section 341 b iii inserted by the Finance Act 1956 the Income tax Officer held that the Legislature had 75 by amendment extended the time limit in clear and express terms so as to cover action under section 34 against a person on whom the assessment or reassessment is to be made as an agent of a non resident person under section 43 of the Act for the assessment year 1954 55 and accordingly assessed the income of the assessee at Rs 60684 estimating the income of the parties residing outside the taxable territories in the absence of accounts to be Rs 50000
The asessee then filed a petition under article 226 of the Constitution in the High Court of Judicature at Bombay praying that a writ in the nature of mandamus or prohibition do issue restraining and prohibiting the Income tax Officer from giving effect to or taking any steps or proceedings by way of recovery or otherwise in pursuance of the orders of assessment
The assessee pleaded inter alia that the proceedings for assessment under section 34 of the Act commenced by the Income tax Officer after the expiry of one year from the end of the assessment year 1954 55 were without the authority of law
The High Court of Bombay following its earlier judgment in section C Prashar vs Vasantsen Dwarkadas1 held that at the date when the notice was issued by reason of the proviso which was in operation under section 341 in respect of the assessment year 1954 55 the notice was out of time and that the period provided thereby could not be extended by the Finance Act of 1956 so as to authorise the Income tax Officer to issue a notice for assessment or reassessment of the assessee as statutory agent of a party residing outside the taxable territory
In the view of the High Court the notice dated March 27 1957 was invalid and a valid notice being a condition precedent to the exercise of jurisdiction under section 34 the proceeding under section 34 was not maintainable
Against the order of the High Court issuing writs prayed for by the assessee with certificate of fitness this appeal is preferred by the Income tax Officer Bombay
In order to appreciate the contention raised by the assessee and which has found favour with the High Court it is necessary to refer to the relevant provisions of section 34 76 as they stood before the section was amended by the Finance Act 1956
The clauses relevant prescribing the period within which notice may be issued read as follows 1 a If x x x b x x x he may in cases falling under clause a at any time within eight years and in cases falling under clause b at any time within four years of the end of that year serve on the assessee x x x a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 22 and may proceed to assess or re assess such income profits or gains or recompute the loss or depreciation allowance x x x Provided that i x x x ii x x x iii Where the assessment made or to be made is an assessment made or to be made on a person deemed to be the agent of non resident person under section 43 this sub section shall have effect as if for the periods of eight years and four years a period of one year was substituted
 By section 18 of the Finance Act 1956 section 34 was extensively amended and cl
iii of the proviso was substituted by the following proviso Provided further that the Income tax Officer shall not issue a notice under this sub section for any year after the expiry of two years from that year if the person on whom an assessment or reassessment is to be made in pursuance of the notice is a person deemed to be an agent of non resident person under section 43 Initially a notice of assessment or re assessment under section 341 against a person deemed to be an agent of a non 77 resident person under section 43 could not be issued after the expiry of one year from the end of the year of assessment under the amended section this period was extended to two years from the end of the relevant assessment year
In the course of assessment to income tax for the year 1954 55 the relevant law applicable prescribed that a notice of assessment or re assessment against a person deemed to be an agent under section 43 could not be issued after the expiry of one year from the end of the assessment year
That period expired on March 31 1956 and after that date no notice could be issued relying upon the law as it stood before amendment for assessment or re assessment treating the assessee as an agent of a non resident under section 43
But the Income tax Officer sought recourse to the amended provision which gave him a period of two years from the end of the assessment year for initiating assessment proceedings and the authority of the Income tax Officer to so act is challenged by the assessee
Section 18 of the Finance Act 1956 is it is common ground not given retrospective operation before April 1 1956
The question then is whether the Income tax Officer may issue a notice of assessment to a person as an agent of a non resident party under the amended provision when the period prescribed for such a notice had before the amended Act came into force expired Indisputably the period for serving a notice of re assessment under the unamended section had expired and there was in the Act as it then stood no provision for extending the period beyond the end of one year from the year of assess ment
The Income tax Officer could therefore commence a proceeding under section 34 on March 27 1957 only if the amended section applied and not otherwise
The amendin Act came into force after the period provided for the issue of a notice under section 34 before it was amended had expired
It is true that there was no determinable point of time between the expiry of the prescribed time within which the notice could have been issued against the assessee under section 34 proviso iii before it was amended
But there was no overlapping period either
Prima facie on the expiry of the period prescribed by section 34 as it originally stood there was no scope for issuing a notice unless the 78 Legislature expressly gave power to the income tax Officer to issue notice under the amended section notwithstanding the expiry of the period under the unamended provision or unless there was overlapping of the period within which notice could be issued under the old and the amended pro vision
But counsel for the Commissioner submitted that at no time was the Income tax Officer bereft of authority to issue a notice under section 34 of the Indian Income tax Act 1922
He submitted that till the mid night of March 31 1956 notice could be issued in exercise of the powers con ferred by section 34 proviso iii before it was amended and notice of assessment or re assessment could also be issued under the amended provision immediately thereafter in exercise of the powers conferred by section 18 of the Finance Act 1956
Counsel relied upon the rule contained in section 53 of the General Clauses Act that unless the contrary is expressed a Central Act or Regulation shall be construed as coming into operation immediately on the expiration of the day preceding its commencement
It was submitted that this is merely a statutory recognition of the rule which is well settled that where a statute names a date on which it shall come into operation it shall be deemed to come into force immediately on the expiration of the previous day and the law does not take into consideration fractions of a day
Reliance was placed by counsel upon Tomlinson vs Bullock  and English vs Cliff2
In Tomlinson s case  the question was whether an order of affiliation could be made on an application made in respect of a child born at any time of the day an August 10 1872 under the Bastardy Act 35  36 Vict
c 65
In an application made for an order of affiliation it was held that the order could competently be made in respect of a child born at any time of the day on the 10th of August 1872 because the Act in the contemplation of law for this purpose came into effect from the commencement of the day on which it received the royal assent and that normally an Act which comes into operation becomes law as soon as it commences
In English vs Cliff 2 it was held by the Court of Chancery 1 2 79 that the trustees under a deed of settlement dated May 13 1892 who stood possessed of an estate during the term of twenty one years from the date of settlement upon trust to apply the rents and profits mentioned therein and who were authorised at the expiration of the said period to sell the estate could competently sell it and their action was not liable to be challenged as infringing the rule of per petuity
It was held in that case that the determination of the term of twenty one years and the conunencement of the trust for sale arising at one and the same moment the trust was not void for remoteness on the ground that it was limited to take effect at the expiration of the term
Neither of these cases has in our judgment any application to the principle applicable in the present case
The power to issue a notice under the unamended Act came to an end on March 31 1956
Under that Act no notice could thereafter be issued
It is true that by the amendment made by section 18 of the Finance Act 1956 a notice could be issued within two years from the end of the year of assessment
But the application of the amended Act is subject to the principle that unless otherwise provided if the right to act under the earlier statute has come to an end it could not be revived by the subsequent amendment which extended the period of limitation
The right to issue a notice under the earlier Act came to an end before the new Act came into force
There was undoubtedly no determinable point of time between the expiry of the earlier Act and the commencement of the new Act but that would not in our judgment affect the application of this rule
Reliance was also placed by counsel for the Commissioner upon the rule which has prevailed in the Supreme Court of the United States of America that a new statute should be construed as a continuation of the old one with the modifications contained in the new one although it formally repeals the old statute when it re enacts its substantial provisions and the two statutes are almost identical Bear Lake  River Water Works  irrigation Company and Jarvis Conklin Mortgage Trust Company vs William Garland and Corey Brothers  Co 
It appears 1 I64 US 1 80 to have been recognised in the Supreme Court of the United states of America in Pacific Mail section section Co vs jolifee1 that repeal in terms of a former statute does not necessarily indicate an intention of the legislature thereby to impair right which had arisen under the act which was repealed
As the provisions of the new act took effect simultaneously with the repeal of the old one the Supreme Court held that the new one might more properly be said to be substituted in the place of the old one and to continue in force with modifications the provisions of the old act instead of abrogating or annulling them and re enacting the same as a new and original act
Apart from the question whether the rule so enunciated is applicable to the interpretation of Indian statutes in this case we are not concerned with re enactment of a statute
The statute abrogates one rule of limitation and enacts another rule with a limited retrospective operation
To such a case the rule enunciated by the Supreme Court of America assuming it applies attributing to the Legislature an intention to continue in force the provisions of the old Act with a modification so as to give to the new statute in substance operation retrospectively from the date on which the old statute was enacted can have no application
We do not think that any such intention may be attributed to the Legislature in enacting section 18 of the Finance Act 1956 so as to make it the basis of a liability to taxation after the expiry of the period prescribed in that behalf by the Legislature 
Counsel also submitted that section 34 lays down a rule of limitation for commencing an action for assessment or re assessment and that in the absence of an express provision to the contrary a statute of limitation in operation at a given time governs all proceedings from the moment of its enactment even though the cause of action on which the proceeding was based came into existence before the Act was enacted
Equating a proceeding under section 34 of the Indian Income tax Act with a suit or a proceeding in a civil court counsel said that the law of limitation being a law of procedure assessment proceedings including proceedings for re assessment are governed by the law in force 1 69 US 81 at the date on which they are instituted and that the rule that the repeal of a statute without express words or clear implication in the repealing statute cannot take away a right vested in a party acquired under the repealed statute when it was in force is a rule of prescription and not of procedure and notwithstanding general observations to the contrary in certain decisions applies only to those actions in which by the determination of the period prescribed a right to institute an action for possession of property is extnguished
Counsel relies in support of the plea on Baleswar vs Latafat1
It is unnecessary to dilate upon this argument in any detail or to enter upon an analysis of the numerous cases which were mentioned at the Bar to determine whether the rule that without an express pro vision or a clear implication arising from the amending statute rights acquired under the repealed statute by the determination of the period of limitation prescribed thereby cannot be deemed to be revived applies to suits for posses sion only
It may be sufficient to make two comments on the argument
The rule has in fact been applied to suits other than suits for possession eg
Mahomed Mehdi Faya vs Sakinabai2 a suit for restitution of conjugal rights M Krishnaswami Nalcker vs A Thiruvengada Muddaliar3 a suit for recovery of a debt Shambhoonath Saha vs Guruchurn Lahiri 4 an application for execution and Nepal Chandra Roy Chowdhury vs Niroda Sundari Ghose5 an application for setting aside an ex parte decree
Again soon after it was delivered the the authority of Baleswar s case  was weakened by the judgment in Jagdish vs Saligram6 where the Court doubted the correctness of the earlier view
A proceeding for assessment is not a suit for adjudication of a civil dispute
That an income tax proceedings it the nature of a judicial proceeding between contesting parties is a matter which is not capable of even a plausible argument
The Income tax authorities who have power to assess and recover tax are notacting as judges deciding a 1 ILR 24 Pat
383 3 AIR 1935 mad
2454 ILR 5 ILR 6 ILR 24 Pat
391 51 SC 6
82 litigation between the citizen and the States they are administrative authorities whose proceedings are regulated by statute but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate
Tax legislation necessitates the setting up of machinery to ascertain the taxable income and to assess tax on the income but that does not impress the proceeding with the character of an action between the citizen and the State The Commissioner of Inland Revenue vs Sneath1 and Shell Company of Australia Ltd vs Federal Commissioner of Taxation 
Again the period prescribed by section 34 for assessment or re assessment is not a period of limitation
The section in terms imposes a fetter upon the power of the Income tax Officer to bring to tax escaped income
It prescribes different periods in different classes of cases for enforce ment of the right of the State to recover tax
It was observed by this Court in Ahmedabad Manufacturing and Calico Printing Co Ltd vs section C Mehta
income tax Officer and another  It must be remembered that if the Income tax Act prescribes a period during which tax due in any particular assessment year may be assessed then on the expiry of that period the department cannot make an assessment
Where no period is prescribed the assessment can be completed at any time but once completed it is final
Once a final assessment has been made it can only be reopened to rectify a mistake apparent from the record section 35 or to reassess where there has been an escapement of assessment of income for one reason of another section 34
Both these sections which enable reopening of back assessments provided their own periods of time for action but all these periods of time whether for the firs assessment or for rectification or for reassess ment merely create a bar when that time passe 1 164 2 1931 AC 275 3 1963 SUPP
2 SCR 92117 118 83 against the machinery set up by the Incometax Act for the assessment and levy of the tax
They do not create an exemption in favour of the assessee or grant an absolution on the expiry of the period
The liability is not enforceable but the tax may again become exigible if the bar is removed and the taxpayer is brought within the jurisdiction of the said machinery by reason of a new power
This is of course subject to the condition that the law must say that such is the jurisdiction either expressly or by clear implication
If the language of the law has that clear meaning it must be given that effect and where the language expressly so declares or clearly implies it the retrospective operation is not controlled by the commencement clause
 Counsel for the Commissioner sought to derive some support from Income tax Officer Companies District I Calcutta and another vs Calcutta Discount Company Ltd  in which Chakravartti CJ dealing with the effect of the Income tax and Business Profits Tax Amendment Act 1948 observed The plain effect of the substitution of the new section 34 with effect from 30th March 1948 is that from that date the Income tax Act is to be re ad as including the new section as a part thereof and if it is to be so read the further effect of the express language of the section is that so far as cases coming within cl
a of sub section
1 are concerned all assessment years ending within eight years from 30th March 1948 and from subsequent dates are within its purview and it will apply to them provided the notice con templated is given within such eight years
What is not within the purview of the section is an assessment year which ended before eight years from 30th March 1948
1 84 But it may be recalled that the amending Act of 1948 with which the Court was concerned in Calcutta Discount Company s case1 came into force on September 8 1948 but section 12 prescribed that the amendment in section 34 of the Income tax Act 1922 shall be deemed to have come into force on March 30 1948 and the period under the unamended section within which notice could be issued under section 343 against the assessee company ended on March 31 1951
Before that date the amending Act came into operation and at no time had the right to re assess become barred
In considering whether the amended statute applies the question is one of interpretation ie to ascertain whether it was the intention of the Legislature to deprive a taxpayer of the plea that action for assessment or re assessment could not be commenced on the ground that before the amending Act became effective it was barred
Therefore the view that even when the right to assess or re assess has lapsed on account of the expiry of the period of limitation prescribed under the earlier statute the Income tax Officer can exercise his powers to assess or re assess under the amending statute which gives an extended period of limitation was not accepted in Calcutta Discount Company s case 
As we have already pointed out the right to commence a proceeding for assessment against the assessee as an agent of a non resident party under the Income tax Act before it was amended ended on March 31 1956
It is true that under the amending Act by section 18 of the Finance Act 1956 authority was conferred upon the Income tax Officer to assess a person as an agent of a foreign party under section 43 within two years from the end of the year of assessment
But authority of the Income tax Officer under the Act before it was amended by the Finance Act of 1956 having already come to an end the amending provision will not assist him to commence a proceeding even though at the date whenhe issued the notice it is within the period provided by that amending Act
This will be so notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the 1 85 commencement of the amending Act
The Legislature has given to section 18 of the Finance Act 1956 only a limited retrospective operation ie upto April 1 1956 only
That provision must be read subject to the rule that in the absence of an express provision or clear implication the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is xpressly mentioned nor to authorise the Income tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred
The appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The appellant company was carrying on business in Bombay as commission agents
In the course of assessment proceedings for the year 1954 55 the Income tax Officer noticed from the ssee s boo s of account that the assessee had business connections with certain nonresident parties and found that the transactions disclosed that through the assessee those non resident parties were receiving income profits and gains
He considered that section 43 of the Indian Income tax Act 1922 was applicable to the assessee and issued on March 27 1957 a notice under section 34 of the Act for assessment of the assessee as an agent of the said non resident parties
The assessee pleaded inter alia that the proceedings intiated by the Income tax Officer under section 34 were barred since the notice issued by him was after the expiry of one year from the end of the assessment year 1954 55 but the Income tax Officer rejected the contention relying on the amendment made to the proviso to section 34lbiii by the Finance Act 1956 under which the period of one year was changed to two years
The amendment was given retrospective operation upto April 1 1956 but since the power to issue a notice under the unamended Act had come to an end on March 31 1956 the question was whether the Income tax Officer could issue a notice of assessment to a person as an agent of a non resident party under the amended provision when the period prescribed for such a notice had before the amended Act came into force expired
HELDThe proceedings initiated by the Income tax Officer by the notice dated March 27 1957 were barred the authority of the Incometax Officer under the Indian Income tax Act before it was amended by the Finance Act of 1956 having come to an end the amending provision would not entitle him to commence a proceeding even though at the date when he issued the notice it was within the period provided by the amendment
Notwithstanding the fact that there was no determinable point of time between the expiry of the time provided under the old Act and the commencement of the Amendment Act in the absence of an express provision or clear implication the legislature could not be said to have intended to attribute to the Amending provision a greater retros pectivity than was expressly mentioned