Case: J.P. Jani, Income-Tax Officer, Circle Iv,Ward-G, Ahmedabad Vs. Induprasad Devshankar Bhatt

2. The respondent was assessed by the Income Tax Officer, Ward E, Circle II, 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 it the name of Natwarlal Manilal 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 34 (1) (a) 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 house. 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-l957 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 S. 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 dated 29th March, 1957 determining the total income of the respondent at Rs. 89,000 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 found that there was no valid service of the notice. The decision of the Appellate Assistant Commissioner was given on 5-1-1963 by which timethe Income Tax Act, 1922 had been repealed and the Income Tax Act 1961 (hereinafter called the new Act) had come into force with effect from lst April, 1962. The time for taking action for assessment or re-assessment in case of escaped income exceeding Rs. 50,000 but less than Rs. 1,00,000 was enlarged from 8 years to 16 years under the new Act. On 4-1-l963 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 147 (a) 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-l964 issued under Section 142 (1).3. 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.

Reasoning: The High Court took the view that on a true construction of S. 297 (2) (d) (ii) 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 respondent in the present case was admittedly barred under Section 34 (1) (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 re-assess the income of the respondent relying on the provisions enacted under Section 297 (2) (d) (ii) 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 andour opinion, the argument put forward by Mr. Narasaraju is not warranted. It is admitted in this case that the right of the Income Tax Officer to re-open the assessment for the year 1947-48 was barred under the old Act before the new Act came into force.In our opinion it is not permissible to construe Section 297 (2) (d) (ii) of the Act as reviving the right of the Income Tax Officer to re-open the assessment which was already barred under the old Act. The reason is that such a construction of Section 297 (2) (d) (ii) would be tantamount to giving of retrospective operation to that Section which is not warranted either by the express language of 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 ofour 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 re-open an assessment which was already barred under the old Act.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 297 (2) (d) (ii) of the new Act, the Income Tax Officer cannot issue a notice under Section 148 in order to re-open the assessment of an assessee in a case where the right to re-open 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 Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court by the grant of a writ.