Case: S. S. Gadgil, Income-Tax Officer, Bombay Vs. Lal And Company

in terms imposes a fetter upon the power of the Income-tax Officer to bring to tax escaped income. If prescribed different periods in different classes of cases for enforcement of the right of the State to recover tax. It was observed by this Court in Ahmedabad Manufasturing and Calico Printing Co. Ltd. v. S. G. Mehta, 1963-48 ITR (SC) 154 at p. 171 : (AIR 1963 SC 1436 at pp. 1445-46)."It must be remembered that if the Incometax Act prescribed 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 (S. 35) or to reassess where there has been an escapement of assessment income for one reason or another (S. 34). Both these sections which enable reopening of back assessments provide their own periods of time for action but all these periods of time, whether for the first assessment or for rectification, or for reassessment, merely create a bar when that time passed against the machinery set up by the Income-tax 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 eligible if the bar is removed and the "taxpayers is brought within the jurisdiction of the said machinery by reason of a new power. This is, of course, subject to the condition, 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. "11. Counsel for the Commissioner sough to derive some support from Income-tax Officer, Companies District I, Calcutta v. Calcutta Discount Co. Ltd., 1953-23 ITR 471 : (AIR 1953 Cal 721 ) in which Chakravarti C. J. dealing with effect of the Income-tax and Business Profits Tax (Amendment) Act, 1948, observed :"The plain effect of the substitution of the new S. 34 with effect from 30-3-1948 is that from that date the Income-tax Act is not to be read 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-sec. (I ) are concerned all assessment years ending, within eight years from 30-3-1948 and from subsequent dates, are within its preview and it will apply to them, provided the notice contemplated is given within such eight years. What is not within the purview of the section is assessment year which ended before eight years from 30-3-1948."But it may be recalled that the amending Act of 1948 with which the Court was concerned in Calcutta Discount Companys case, 1953-23 ITR 471 : (Al R 1953 Cal 721 ) came into force on September 8, 1948, but S.1 (2) prescribed that the amendment in S. 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 S.34(3) 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.12. In considering whether the amended statute applies, the question is one of interpretation i.e. to ascertain whether it was the intention of the Legislature to deprive a tax payer 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 reassess 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 Companys case, 1953-23 ITR 471 : (AIR 1953 Cal 721 ).13. 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 S.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 S. 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 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 S. 18 of the Finance Act 1956, only a limited retrospective operation i.e. 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 retrospectively than is expressly mentioned, nor to authorise the come-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred.14

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]12. In considering whether the amended statute applies, the question is one of interpretation i.e. to ascertain whether it was the intention of the Legislature to deprive a tax payer 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 reassess 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 Companys case, 1953-23 ITR 471   : (AIR 1953 Cal 721  ).13. 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 S.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 S. 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 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 S. 18 of the Finance Act 1956, only a limited retrospective operation i.e. 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 retrospectively than is expressly mentioned, nor to authorise the come-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred.A proceeding for assessment is not a suit for adjudication of a civil dispute. That anproceeding is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. Theauthorities who have power to assess and recover tax are not acting as judges deciding a litigation between the citizen and the State: 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: Commissionerof Inland Revenue v. Sneath, (1932) 17 Tax Cas 149 at p.64 and ShellCo. of Australia Ltd. v. Federal Commissioner of Taxation, 1931 ACit may be recalled that the amending Act of 1948 with which the Court was concerned in Calcutta Discount Companys case,ITR 471 : (Al R 1953 Cal 721  ) came into force on September 8, 1948, but S.1 (2) prescribed that the amendment in S. 34 of theAct, 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 S.34(3) 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