Appeals Nos165 168 of 1956
Appeals from the judgment and order dated March 22 1955 of the Mysore High Court in Writ Petitions Nos 20 to 22 and 25 of 1954
788 H N Sanyal Addl
Solicitor General of India R Ganapathy Iyer and R H Dhebar for the appellant
A V Viswanatha Sastri K R Choudhury and G Gopalakrishnan for the respondent
April 28
The Judgment of the Court was delivered by SK DAS J
These four appeals brought by the Income tax Officer Special Circle Bangalore on a certificate granted by the High Court of Mysore are from the judgment and order of the said High Court dated March 22 1955 by which it quashed certain proceedings initiated and orders of assessment made against the respondent assesse in the matter of reassessment of income tax for the years 1945 46 1946 47 1947 48 and 1948 1949
The relevant facts are these
The respondent K N Guruswamy was carrying on business as an excise contractor in the Civil and Military Station of Bangalore hereinafter called the retroceded area in Mysore
He was assessed to income tax for each of the four years mentioned above under the law then in force in the retroceded area by the Income tax Officer having jurisdiction therein
For 1945 46 the original assessment was made on February 121946 for 1946 47 on January 21 1949 for 1947 48 on January 22 1949 and for 1918 49 also sometime in the year 1949
The tax so assessed was duly paid by the assessee
On January 5 1954 more than four years after the Income tax Officer Special Circle Bangalore served a notice on the assessee under section 34 of the Indian Income tax Act 1922 for the purpose of assessing what was described as escaped  or under assessed  income chargeable to income tax for the said years
The assessee appeared through his auditors and contested the jurisdiction of the Income tax Officer to issue the notice or make a re assessment under section 34 of the Indian Income tax Act 1922
On February 19 1954 the Income tax Officer overruled the assessee s objection and made a re assessment order for the year 1945 46
On February 25 1954 the assessee filed four writ petitions in the Mysore High Court in 789 which he challenged the jurisdiction of the Income tax Officer to take proceedings under section 34 or to make an order of re assessment in such proceedings he asked for appropriate orders or writs quashing the pending proceedings for three years and the order of re assessment for 1945 46
During the pendency of the cases in the High Court the Income tax Officer was permitted to make an assessment order for 1946 47 subject to the condition that if the assessee succeeded in establishing that the Income tax Officer had no jurisdiction that order would also be quashed
The High Court heard all the four petitions together and by its judgment and order dated March 22 1955 allowed the writ petitions and quashed the proceedings in assessment as also the two orders of reassessment holding that the Income tax Officer had no jurisdiction to initiate the proceedings or to make the orders of re assessment
The High Court however granted a certificate that the cases were fit for appeal to this Court and these four appeals have been brought on that certificate
Before us the appeals have been heard together and will be governed by this judgment
For a clear understanding and appreciation of the issues involved in these appeals it is necessary to set out in brief outline the political and constitutional changes which the retroceded area has from time to time undergone because those changes had important legal consequences
Under the Instrument of Transfer executed sometime in 1881 when there was installation of the Maharaja of Mysore by what has been called  the rendition of the State of Mysore  the Maharaja agreed to grant to the Governor General in Council such land as might be required for the establishment and maintenance of a British cantonment and to renounce all jurisdiction therein
Pursuant to that agreement the retroceded area was granted to the Governor General in Council and jurisdiction therein was exercised by virtue of powers given by the Indian Foreign Jurisdiction Order in Council 1902 made under the Foreign Jurisdiction Act 1890
The laws administered in the area included various enactments made applicable thereto from time to 790 time by the promulgation of notifications made under the aforesaid Order in Council and one of such enactments was the Indian Income tax Act 1922
The year 1947 ushered in great political and constitutional changes in India which affected not merely what was then called British India but also the Indian States such as Mysore etc
The Indian Independence Act 1947 brought into existence two independent Dominions India and Pakistan as from August 15 1947
The Act however received Royal assent on July 18 1947
Section 7 set out the consequences of the setting up of the two new Dominions one such consequence was that the suzerainty of His Majesty over the Indian States lapsed and with it lapsed all treaties agreements etc between His Majesty and the rulers of Indian States including all powers rights authority or jurisdiction exercisable by His Majesty in an Indian State by treaty grant usage suffrage etc
In view of the aforesaid provision perhaps in anticipation of it the retroceded area was given back to the State of Mysore on July 26 1947 by a notification Made by the Crown Representative under the Indian Foreign Jurisdiction Order in Council 1937
This did not however mean that the Mysore laws at once came into force in the retroceded area
On August 4 1947 the Maharaja of Mysore enacted two laws the Retrocession Application of Laws Act 1947 being Act XXIII of 1947 and the Retrocession Transitional Provisions Act 1947 being Act XXIV of 1947
The combined effect of these laws was this all laws in force in the retroceded area prior to the the date of retrocession which was July 26 1947 continued to have effect and be operative in the retroceded area vide section 3 of Act XXIII of 1947 and the Mysore officers were given jurisdiction to deal with proceedings under the laws in force prior to the date of retrocession see section 12 of Act XXIV of 1947
This state of affairs continued till June 30 1948 on which date was promulgated the Mysore Income tax and Excess Profits Tax Application to the Retroceded Area Emergency Act 1948 being Act XXXI of 1948
Section 3 of this Act said 791 Notwithstanding anything to the contrary in section 3 of the Retrocession Application of Laws Act 1947 i the Mysore Income tax Act 1923 and ii the Mysore Excess Profits Tax Act 1946 except sub section 4 of section 2 and all rules orders and notifications made or issued tinder the aforesaid Acts and for the time being in force shall with effect from the first day of July 1948 and save as otherwise provided in this Act take effect in the Retroceded Area to the same extent and in the same manner as in the rest of Mysore
 Section 6 said  Subject to the provisions of this Act the Indian Income tax Act 1922 and the Excess Profits Tax Act 1940 as continued by the Retrocession Application of Laws Act 1947 are hereby repealed
 The repeal of the Indian Income tax Act 1922 effected by section 6 aforesaid was subject to other provisions of Act XXXI of 1948 and one such provision which is material for the dispute before us was contained in section 5 the relevant portion whereof was in these terms  section 5
Notwithstanding anything to the contrary in the Mysore Income tax Act 1923 or the Mysore Excess Profits Tax Act 1946 a          bin respect of the total income or profits chargeable to income tax or excess profits tax in the Retroceded Area prior to the first day of July 1948 but which has not been assessed until that date the provisions of the Indian Income tax Act 1922and the Excess Profits Tax Act 1940 as in force in the Retroceded Area immediately before that date shall apply to proceedings relating to the assessment of such in come or profits until the stage of assessment and the determination of the income tax and excess profits tax payable thereon and the Mysore Income tax Act 1923 or the Mysore Excess Profits Tax Act 1946 as the case may be shall apply to such proceedings after that stage  101 792 c   d   e  
The effect of sections 3 5 b and 6 of Mysore Act XXXI of 1948 inter alia was that though the Indian Incometax Act 1922 stood repealed and the Mysore Incometax Act 1923 came into effect from July 1 1948 the former Act as in force in the retroceded area prior to July 1 1948 continued to apply in respect of the total income chargeable to income tax in the retroceded area prior to July 1 1948 but which had not been assessed until that date and it further applied to all proceedings relating to the assessment of such income until the stage of assessment and the determination of incometax but the Mysore Act 1923 applied to such proceedings after that stage
On August 5 1948 was promulgated the Retroceded Area Application of Laws Act LVII of 1948 which came into effect from August 15 1948
Sections 3 and 4 of Act LVII of 1948 are material for our purpose and may be quoted section 3
Except as hereinafter in this Act provided 3 all laws in force in Mysore shall apply to the Retroceded Area and bthe laws in force in the Retroceded Area immediately before the appointed day shall not from that day have effect or be operative in the Retroceded Area  section 4
The enactments in force in Mysore which are set out in the first column of Schedule A to this Act shall apply to the Retroceded Area subject to the modifications and restrictions specified in the second column of the said Schedule and the provisions of this Act
 Schedule A paragraph 2 sub paragraph b repeated  in substance what was stated earlier in section 5 b
of Act XXXI of 1948
It read  2
Notwithstanding anything to the contrary in the Mysore
Income tax Act 1923 or the Mysore Excess Profits Tax Act 1946 a    793 b in respect of the total income or profits chargeable to income tax or excess profits tax in the Retroceded Area prior to the first day of July 1948 but which has not been assessed until that date the provisions of the Indian Income tax Act 1922 and the Excess Profits Tax Act 1940 as in force in the Retroceded Area immediately before that date shall apply to proceedings relating to the assessment of such income or profits until the stage of assessment and the determination of the income tax and excess profits tax payable thereon and the Mysore Incometax Act 1923 or the Mysore Excess Profits Tax Act 1946 as the case may be shall apply to such proceedings after that stage  There were further far reaching political and constitutional changes in 1949 50
The Maharaja of Mysore had acceded to the Dominion of India in 1947 this however did not empower the Dominion legislature to impose any tax or duty in the State of Mysore or any part thereof
By a proclamation dated November 25 1949 the Maharaja of Mysore accepted the Constitution of India as from the date of its commencement as the Constitution of Mysore which superseded and abrogated all other constitutional provisions inconsistent therewith and in force in the State
On January 26 1950 the Constitution of India came into force and Mysore became a Part B State within the Constitution of India
On February 28 1950 there was a financial agreement between the Rajpramukh of Mysore and the President of India in respect of certain matters governed by articles 278 291 295 and 306 of the Constitution
Under article 277 of the Constitution however all taxes which immediately before the commencement of the Constitution were being levied by the State continued to be so levied notwithstanding that those taxes were mentioned in the Union List until provision to the contrary was made by Parliament by law
Such law was made by the Finance Act 1950 by which the whole of Mysore including the retroceded area became  taxable territory  within the meaning of the Indian Income tax Act 1922 from April 1 1950 and the 794 Indian Income tax Act again came into force in the retroceded area from the aforesaid date
Section 13 of the Finance Act 1950 dealt with repeals and savings
As the true scope and effect of sub section
1 of section 13 is one of the questions at issue before us it is necessary to read it
 If immediately before the 1st day of April 1950 there is in force in any Part B State other than Jammu and Kashmir or in Manipur Tripura or Vindhya Pradesh or in the merged territory of CoochBehar any law relating to income tax or super tax or tax on profits of business that law shall cease to have effect except for the purposes of the levy assess ment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income tax Act 1922 for the year ending on the 31st day of March 1951 or for any subsequent year or as the case may be the levy assessment and collection of the tax on profits of business for any chargeable accounting period ending on or before the 31st day of March 1949 Provided that any reference in any such law to an officer authority tribunal or court shall be construed as a reference to the corresponding officer authority tribunal or court appointed or constituted under the said Act and if any question arises as to who such corresponding officer authority tribunal or court is the decision of the Central Government thereon shall be final Now the legal effect of the constitutional changes referred to above so far as it has a bearing on the present dispute may be briefly summarised as follows the Indian Income tax Act 1922 remained in force in the retroceded area till June 30 1948  from July 1 1948 the Mysore Income tax Act 1923 applied subject to this saving that the Indian Income tax Act continued to apply in respect of the total income chargeable to income tax in the retroceded area prior to July 1 1948 and the provisions of that Act as in force in the retroceded area prior to that date applied to all proceedings relating to the assessment of such income 795 upto the stage of assessment and determination of income tax payable thereon
This position continued till April 1 1950 when the Finance Act 1950 came into force and the Indian Income tax Act 1922 again came into force in the retroceded area subject to the saving mentioned in section 131 thereof
The principal question before us as it was before the High Court is one of jurisdiction
Did the Income tax Officer concerned have jurisdiction to issue the notice under section 34 of the Indian Income tax Act 192 and to make a re assessment order pursuant to sue notice  The High Court pointed out that though the notice did not clearly say so the Income tax Officer clearly acted under section 34 of the Indian Income tax Act 1922 as it was in force in the retroceded area prior to July 1 1948 and the writ applications were decided on that footing
The four main lines of argument on which the respondent assessee rested his contention that the Incometax Officer concerned had no jurisdiction were these  firstly it was urged that section 34 of the Indian Incomtax Act 1922 was not saved by section 131 of the Finance Act 1950 because what was saved was the prior law  for the purposes of the levy assessment and collection of income tax  which expression did not include re assessment proceedings secondly it was argueed that even otherwise the financial agreement made between the President of India and the Rajpramukh of Mysore on February 28 1950 which received constitutional sanctity in article 278 of the Constitution rendered the impugned proceedings unconstitutional and void thirdly it was submitted that the Indian Income tax Act 1922 as in force in the retroceded area stood repealed on June 30 1948 by Mysore Act XXXI of 1948 and the saving provisions in section 5b thereof or in paragraph 2 sub paragraph b of Schedule A to Mysore Act LVII of 1948 did not save section 34 in so far as it permitted re assessment proceedings in respect of years in which there had been an assessment already and lastly it was contended that after June 30 1948 and until April 1 1950 the Income tax Officer in the retroceded area could re open 796 the assessment under section 34 of the Mysore Incometax Act 1923 within a period of four years specified therein but there was no authority to re open the assessment under section 34 of the Indian Income tax Act
Following its own decision City Tobacco Mart and Others vs Income tax Officer Urban Circle Bangalore 1 on certain earlier writ petitions nos 52 and 53 of 1953 and 105 and 106 of 1954 the High Court held in favour of the assessee on the construction of section 13 1 of the Finance Act 1950 and also oil the effect of the saving provisions in section 5 b of Mysore Act XXXI of 1948 and paragraph 2 sub paragraph b of Schedule A to Mysore Act LVII of 1948
On these findings it held that the Income tax Officer concerned had no jurisdiction or authority to start the impugned pro ceedings or to make the impugned orders of assessment
It did not feel called upon to pronounce on the validity of the argument founded on the financial agreement dated February 28 1950
In Civil Appeals 143 145 of 1954 Civil Appeals 27 to 30 of 1956 and Civil Appeals 161 to 164 of 1956 Lakshmana Shenoy vs The Income tax Officer Ernakulam 2 in which judgment has been delivered today we have fully considered the arguments as to the true scope and effect of section 131 of the Finance Act 1950 and of the financial agreement of February 28 1950 taken along with the recommendations of the Indian States Finances Enquiry Committee
We have held therein that the expression I levy assessment and collection of income tax in section 13 1 is wide enough to comprehend re assessment proceedings under section 34 and that the financial agreement aforesaid on a true construction of the recommendations of the Enquiry Committee does not render the impugned proceedings Unconstitutional and void
That decision disposes of these two arguments in the present appeals
The two additional points which remain for consideration depend on the interpretation to be put on the saving provisions in section 5b of Mysore Act XXXI of 1948 and paragraph 2 sub paragraph b of Schedule 1 AIR 1955 MYS
2 1959 SCR 751
797 A to Mysore Act LVII of 1948
These provisions are expressed in identical terms and the question is if they save section 34 of the Indian Income tax Act with regard to re assessment proceedings
We think that they do
It is worthy of note that the saving provisions say that the Indian Income tax Act 1922 as in force in the retroceded area prior to July 1 1948 shall apply in respect of the total income chargeable to income tax prior to that date and it shall apply to proceedings relating to the assessment of Such income until the stage of assessment and determination of income tax payable thereon Total income  means the total amount of income profits and gains computed in the manner laid down in the Act and there are no good reasons why the word assessment  occurring in the saving provisions should be restricted in the manner suggested so as to exclude proceedings for assessment of escaped income or under assessed income
On behalf of the assessee our attention has been drawn to the words in respect of the total income chargeable to income tax  but which has not been assessed until that date  occurring in the saving provisions and the argument is that those words show that there was no intention to permit reopening of assessments which had been made already
We are unable to accept this argument
In its normal sense I to assess  means to fix the amount of tax or to determine such amount 
The process of re assessment is to the same purpose and is included in the connotation of the term  assessment 
The reasons which led us to give a comprehensive meaning to the word  assessment  in section 13 1 of the Finance Act 1950 operate equally with regard to the saving provisions under present consideration
We agree with the view expressed in Hirjibhai Tribhuvandas vs Income tax Officer Rajnandgaon and another 1 that section 34 of the Income _tax Act contemplates different cases in which the power to assess escaped income has been given where there has been no assessment at all the term  assessment  may be appropriate and where there was assessment at too low a rate or with 1 AIR 1957 MP 171
798 unjustified exemptions the term re assessment  may be appropriate and it may have been necessary to use two different terms to cover with clarity the different cases dealt with in the section  but this does not mean that the two terms should be treated as mutually exclusive or that the word assessment  in the saving provisions should be given a restricted meaning
The object of the saving provisions was obviously to make the prior law available in all cases in which the income was assessed or was assessable according to that law before July 1 1948 and it is difficult to see why only a part of the process of assessment should be saved and the other part repealed
We therefore hold that the saving provisions save section 34 of the Indian Income tax Act 1922 in its entirety as it was in force in the retroceded area prior to July 1 1948 and the contention of the respondent that it stood repealed from that date is not correct
As to the period of limitation it would be the period laid down in section 34 of the Indian Income tax Act as it was in force in the retroceded area prior to July 1 1948
The result therefore is that these appeals succeed and the judgment and order of the High Court of Mysore dated March 22 1955 are set aside and the writ petitions filed by the respondent assessee are dismissed
The appellant will get his costs in this Court and the High Court
Appeals allowed


Summary:
Central Reserve Police Force comprises of officers dra wn from two channels direct recruits and Emergency Commi s sioned Officers ECOs
There was dispute regarding fixati on of inter se seniority of these officers which was ultimate ly resolved by the Delhi High Court by the judgment und er appeal
The High Court by the impugned judgment held in favour of ECOs and directed implementation of its decisi on regarding seniority as also grant of benefits to ECOs
As a result of the High Court s judgment 37 direct recruits w ho are at present holding the posts of Commandants that is to say 22 as Commandants Selection Grade and 15 as Comma n dants Non Selection Grade by virtue of upgradation of 88 posts of Commandants Non Selection Grade will have to be reverted
Being aggrieved by the High Court s judgment th ey have appealed to this Court after obtaining Special Leave 
The main contention advanced by the appellants is th at as they were not parties in the Contempt Proceedings where in the High Court has rendered the judgment in question th at order is not binding upon them and as such the matter be remitted back to the High Court
To avoid delay that will be caused in the matter if the case is sent back the Court as also the parties desired that the dispute be amicably se t tled
Accordingly both the direct recruits and ECOs he ld negotiations amongst themselves with a view to arrive at an acceptable settlement and after a great deal of endeavou r they put up the terms of agreement before the Court
T he Court thereupon gave time to the Union of India to consid er the acceptability of the agreement reached between t he contesting parties
The Union of India conveyed to the Cou rt that the agreement was not acceptable to it though it was in favour of amicable settlement
It suggested two other alte r natives which were not found to be favourable to ECOs
15 This Court considered the respective terms of the se t tlement and disposing of the appeals in terms thereof HELD
Central Reserve Police Force is a sensitive for ce and there should not be any dispute and differences amo ng the members of such force
It is the duty of the Governme nt to maintain peace and harmony in the force by trying to resolve any dispute among the members of the force in publ ic interest
17B While it may be desirable that the present position of the direct recruits should be protected the giving of su ch protection should not be to the prejudice of the ECOs
17 E In order to establish peace and amity between the co n tending parties and for ends of justice the Court direct ed that in modification of the judgment of the High Court t he appeals be disposed of in accordance with the terms of settlement as agreed to by the direct recruits and t he ECOs set out in this Court s judgment hereinbelow
17E F