Appeal No 972 of 1967
Appeal from the judgment and order
dated December 14 15 1964 of the Gujarat High Court in Special Civil Application No 54 of 1964
D Narsaraju SK Aiyar SP Nayar and BD Sharma for the appellants
ST Desai MC Bhandare and K Rajendra Chaudhuri for the respondent
The Judgment of the Court was delivered by Ramaswami J
This appeal is brought by certificate against the judgment of the Gujarat High Court dated 14th15th December 1964 in Special Civil Application No 54 of 1964 whereby a writ of mandamus was issued to
quash the notices issued under sections 147 148 and 1421 of the Income Tax Act 1961 against the respondent
The respondent was assessed by the Income Tax Officer Ward E Circle 11 Ahmedabad for the assessment year 1947 48 by an assessment order dated 31 1 1952
The Income Tax Officer thereafter received information that a certain profit made by the assessee in the name of Natwarlal Mardial Pandit who was a benamidar of the respondent had escaped assessment by reason of the respondent not having disclosed it at the time of the original assessment
The Income Tax Officer therefore after obtaining the approval of the Commissioner of Income Tax issued a notice dated 27th March 1956 under section 341a of the Income Tax Act 1922 hereinafter referred to as the old Act
The notice could not be served personally and therefore was served by affixing on a conspicuous part of the respondents
The respondent objected to the service of the notice and did not file a return stating that there had been no valid service
When the Income Tax Officer threatened to proceed ex parte a return was filed under protest on 16 1 19 57 and in that return the respondent showed the same amount of income which was determined in the original assessment
Despite the objection
of the respondent that there was no proper service of notice under section 34 1  a the Income Tax Officer proceeded to assess the income of the respondent for the assessment year 1947 48 and made an order 716 dated 29th March 1957 determining the total income of the respondent at Rs 89000 by including the profit alleged to have been earned by Natwarlal Manilal Pandit
The respondent preferred an appeal to the Appellate Assistant Commissioner who allowed the appeal and set aside the order of assessment on the ground that there was no valid service of the notice
The  decision of the Appellate Assistant Commissioner was given on 5 1 1963 by which time the Income Tax Act 1922 had been repealed and the Income Tax Act 1961 hereinafter called the New Act had come into force with effect from 1st April 1962
The time for taking action for assessment or reassessment in case of escaped income exceeding Rs 50000 but less than Rs 100000 was enlarged from 8 years to 16 years under the new Act
On 4 1 1963 the Income Tax Officer Circle IV Ward G Ahmedabad issued a notice calling upon the respondent to show cause why proceedings should not be taken under section 147a of the new Act for bringing to tax the escaped profit of the respondent
The respondent protested against the new notice on the ground that action under the old Act had become time barred and the new Act had no application to his case
Subsequently a notice under section 148 of the new Act was issued on 13 11 1963 and this notice was followed by another notice dated 9 1 1964 issued under section 1421
The respondent therefore preferred Special Civil Application No 54 of 1964 in the Gujarat High Court praying for a writ of certiorari to quash the notices dated 13 11 1963 and 9 1 1964 by the first appellant
The High Court took the view that on a true construction of section 2972dii of the new Act the Income Tax Officer could not issue a notice under section 148 in order to reopen the assessment in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force
The High Court observed that the right of the Income Tax Officer to reopen the assessment of the resportdent in the present case was admittedly barred under section 341 a of the old Act at the commencement of the new Act and it was therefore not competent to the Income Tax Officer to issue a notice under section 148 of the new Act in order to reopen the assessment of the  respondent and to reassess the income of the respondent relying on the provisions enacted under section 297 2dii of the new Act
The High Court accordingly allowed the Special Civil Application preferred by the respondent and set aside the notices dated 13 11 1963 and 9 1 1964
It is necessary at this stage to set out the relevant provisions of the two statutes
Section 34 of the Income Tax Act 1922 No 11 of 1922 as it stood immediately prior to its amendment by the Finance Act 1956 is in the following terms  717 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 for that year or have been underassessed 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 m consequence of information in his possession reason to believe that income profits or gains chargeable to income tax have escaped assessment for any year or have been underassessed or assessed at too low a rate or have been made the subject of excessive relief under this Act or that excessive loss or depreciation allowance has been computed 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 or if the assessee is a company on the principal officer thereof 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 reassess such income profits or gains or recompute the loss or depreciation allowance and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section Provided that  1  the Income Tax Officer shall not issue a notice under this sub section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it  is a fit case for the issue of such notice
Provided further that nothing in this section limiting the time within which any action may be taken or any order assessment or reassessment may be made shall app ly to a reassessment made under section 27 or to an assessment or reassessment made on the assessee 718 or any person in consequence of Or to give effect to any finding or direction contained in an order under section 31 section 33 section 33A section 33B section 66 or section 66A
By the Finance Act 1956 certain amendments were made in section 34 with effect from 1st April 1956
The time limit of 8 years in sub section 1  in respect of cases failing within clause a was removed and the following provisos were substituted for the existing proviso in sub section 1   Provided that the Income Tax Officer shall not issue a notice under clause a of sub section 1 i for any year prior to the year ending on the 31st day of March 1941 ii for any year if eight years have elapsed after the expiry of that year unless the income profits or gains chargeable to income tax which have escaped assessment or have been underassessed or assessed at too low a rate or have been made the subject of excessive relief under this Act or the loss or depreciation allowance which has been computed in excess amount to or are likely to amount to one lakh of rupees or more in the aggregate either for that year or for that year and any other year or years after which or after each of which eight years have elapsed not being a year or years ending before the 31st day of March 1941 iii for any year unless he has recorded his reasons for doing so and in any case falling under clause ii unless the Central Board of Revenue and in any other case the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice The Income Tax Act 1961 No 43 of 1961 came into force from 1st April 1962
Sub section  1  of section 297 of the new Act repealed the old Act and by sub section 2 of that section the new Act enacted certain saving provisions consequent upon the repeal of the old Act
The material provision is set out in clause d 297
Repeals and savings  1  2 notwithstanding the repeal of the Indian Income Tax Act 11 of 1922 hereinafter referred to as the repealed Act  719 d where in respect of any assessment year after the year ending on the 31st day of March 1940 i a notice under section 34 of the repealed Act  had been issued before the commencement of this Act the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed ii any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act a notice under section 148 may subject to the provisions contained in section 149 or section 150 be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly
Sections 147 to 150 referred to in section 2972dii and sections 151 to 153 were the provisions of the new Act corresponding to section 34 of the old Act
In the new Act section 34 of the old Act was split up into sections 147 to 153
Section 147 empowered the Income Tax Officer to assess or reassess escaped income in the same kind of cases in which he could do so under section 34 but that right could be exercised subject to the provisions of sections 148 to 153
Sub section 1 of section 148 provided that before making any assessment or reassessment under section 147 the Income Tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 1392 and sub section 2 of that section imposed an obligation on the Income Tax Officer before issuing such notice to record his reasons for doing so
Section 149 laid down different time limits for issuing notices and in cases falling within clause  a  of section 14 7 corresponding to clause a of sub section 1  of section 34 the time limits
were prescribed as follows  149
Time limit for notice  a No notice under section 148 shall be issued a in cases failing under clause a of section 147 i for the relevant assessment year if eight years have elapsed from the end of that year unless the ease falls under sub clause ii ii for the relevant assessment year where eight years but not more than sixteen years have elapsed from the end of that year unless the income chargeable 720 to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year Section 1501 makes an exception in cases where assessment or reassessment is sought to be made in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal reference or revision and provided that in such cases there should be no time limit and notice under section 148 may be issued at any time unless of course the case fell within sub section 2 of section 150
Section 151 made it a condition precedent to the issue of the notice under section 148 that the Income Tax Officer should obtain the previous sanction of the Central Board of Revenue or the Commissioner of Income Tax according as the notice is proposed to be issued after the expiry of 8 years from the end of the relevant assessment year or after the expiry of 4 years from the end of the relevant assessment year
On behalf of the appellants Mr Narasaraju stressed the argument that the High Court was in error in holding that the provisions of the new Act of 1961 were not applicable in cases where the time limit fixed in the old Act had expired before the coming into force of the new Act
It was contended that section 2972 dii of the new Act was wide in its sweep and it took in all assessment years after the year ending on 31st March 1940 irrespective of the question whether the right to reopen the assessment in respect of any such assessment years was barred or not under the old Act at the date when the new Act came into force
According to Mr Narasaraju the legislative intention was that once the new Act came into force the question whether the assessment in respect of any assessment year after the year ending on 31st March 1940 was liable to be reopened or not should be decided with reference to the provisions of the new Act
It was argued that the new Act authorised such assessment to be reopened whatever might be the position in regard to the right to reopen such assessment under the old Act
In our opinion the argument put forward by Mr Narasaraju is not warranted
It is admired in this case that the right of the Income Tax Officer to reopen the assessment for the year 1947 48 was barred under the old Act before the new Act came into force
In our opinion it not permissible to construe section 2972dii of the new Act as reviving the right of the Income Tax Officer to reopen the assessment which was already barred under the old Act
The reason is that such a construction of section 2972dii would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of 721 the section or by necessary implication
The principle is based on the well known rule of interpretation that unless the terms of the statute expressly so provide or unless there is a necessary implication retrospective operation should not be given to the statute so as to affect alter or destroy any right already acquired or to revive any remedy already lost by efflux of time
On behalf of the appellants reference was made to the opening phrase where in respect of any assessment year after the year ending on the 31st day of March 1940 occurring in section 2972dii of the new Act but these general words cannot take in their sweep assessment years subsequent to the year ending on 31st March 1940 without regard to the question whether the right to reopen the assessment in respect of any assessment year was or was not barred under the repealed Act
We consider that the language of the new section must be read as applicable only to those cases where the right of the Income Tax Officer to reopen the assessment was not barred under the repealed section
In our view the new statute does not disclose in express terms or by necessary implication that there was a revival of the right of the Income Tax Officer to reopen an assessment which was already barred under the old Act
This view is borne out by the decision of this Court in SS Gadgil vs Lal  Company1
In that case a notice was issued against the assessee as an agent of a non resident on 27th March 1957 and that notice related to the assessment year 1954 55
Under clause iii of the proviso to section 34 1  as it stood prior to its amendment by the Finance Act 1956 a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non resident after the expiry of one year from the end of the year of assessment
The right to commence a proceeding for assessment against the assessee as agent of a non resident for the assessment year 1954 55 therefore ended on 31st March 1956 under the new Act before its amendment in 1956
This provision was however amended by the Finance Act 1956 and under the amended provision the period of limitation was extended to two years from the end of the assessment year
The amendment was made on 8th September 1958 but was given effect from 1st April 1956
Since the time within which notice could be issued against a person deemed to be an agent of a non resident was extended to two years from the end of the assessment year it was contended on behalf of the Income Tax Officer that the notice issued by him was within the terms of the amended provision and was therefore a valid notice
Now the notice issued on 27th March 1957 was clearly within a period of two years from the end of the assessment year 1954 55 and if the amended provision applied the notice would be a valid notice
It was however held by this Court that notice was 1 722 not a valid notice inasmuch as the right of the Income Tax Officer to reopen the assessment of the assessee under the unmended provision became barred on 31st March 1956 and the amended provision did not operate against him so as to authorise the Income Tax Officer to commence proceedings for reopening the assessment of the assessee in a case where before the amended provision came into force the proceedings had become barred under the unamended provision
At page 240 of the Report Shah J speaking for the Court observed as follows  As we have already pointed out the right to commence a proceeding for assessment against the assessee 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 th e 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 when he 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 commencement of the amending Act
The legislature has given to section 18 of the Finance Act 1956 only a limited retrospective operation ie up to 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 retrospective than is expressly 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
In our opinion the principle of this decision applies in the present Case and it must be held that on a proper construction of section 2972dii of the new Act the Income Tax Officer cannot issue a notice under section 148 in order to reopen the assessment of an assessee in a ease where the right to reopen the assessment was barred under the old Act at the
date when the new Act came into force
It follows therefore that the notices dated 13 11 1963 and 9 1 1964 issued by the Income Tax 723 Officer Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court by the grant of a writ
For the reasons expressed we hold that the judgment of the
High Court of Gujarat dated 14th15th December 2964 is correct and this appeal must be dismissed with costs
VPS Appeal dismissed


Summary:
Under section 2972dii of the Income tax Act 1961
dealing with repeals and savings notwithstanding the repeal of the 1922 Act where in respect of any assessment year after the year ending on 31st day of March 1940 any income had escaped assessment and no proceedings under section 34 of the repealed Act are pending at the commencement of the 1961 Act a notice under section 148 of the 1961 Act may be issued for reopening the assessment
The respondent was assessed to income tax for the assessment year 1947 48
Thereafter the Income Tax Officer issued a notice under section 341a of the Income tax Act 1922 for reassessment
There was no proper service of the notice and despite the respondent s objection the Income tax Officer determined the total income of the respondent at Rs 89000
The Appellate Assistant Commissioner allowed the respondent s appeal by order dated 5th January 1963 on the ground that there is no valid service of the notice
On 1st April 1962 the1922 Act was repealed and the Income tax Act
1961 came into force and the time for taking action for reassessment was enlarged
from 8 years to 16 years
By that date the right of the Income Tax Officer to reopen the assessment under section 341a of the 1922 Act became barred
The Income Tax Officer however issued a notice under section 148 of the 1961 Act for reopening the assessment
The respondent thereupon filed a writ petitioning the High Court for quashing the notice and the petition was allowed
In appeal to this Court
HELD On a proper construction of section 2972dii the Income Tax Officer cannot issue a notice under section 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment under the 1922 Act was barred at the date when the 1961 Act came into force
The reason is that unless the statute expressly so provides or there is a necessary implication retrospective operation should not be given to it so as to affect alter or destroy any right already acquired or to revive any remedy  already lost by effluviums of time
The 1961 Act does not disclose in express terms or by necessary implication that there was a revival of the right of the Income Tax Officer to reopen an assessment which was already barred under the 1922 Act and if the section is construed as reviving such a right it would be tantamount to giving it retrospective operation which is not warranted by its language
The words where in respect of any assessment year after the year ending on 31st day of March 1940  in the section cannot take in their sweep all assessment years subsequent to the year ending on 31st March 1940 without regard 715 to the question whether the fight to reopen the assessment in respect of any assessment year was or was not barred under the repealed Act
The section must he read as applicable only to those cases where the right of the Income Tax Officer to reopen the assessment was not barred under the repealed section
720 H 721 A D 722 G H SS Gadgil vs Lal  Co  followed