MAHADEO PRASAD BAIS (DEAD} v. INCOME-TAX OFFICER 'A' WARD, GORAKHPUR AND ATJR

Citation: [1991] SUPP. 1 S.C.R. 9

Court: Supreme Court of India

Bench: S. RANGANATHAN, N.D. OJHA, V. RAMASWAMI

Case summary

Judgment text

The Judgment of the Court was delivered by RANGANATHAN, J. The Income-tax Act, 1%1 replaeed the Indian Income-tax Act, 1922 w. e. f. 1. 4. 1962. The repeal of the earlier Act necessitated the enactment of transitional provisions to facilitate the change . over. Perhaps the simplest course would have been to provide that the new Act would apply to all proceedings for the assessment year 1962-63 and thereafter. The legislature, however, evolved a more complicated procedure. While section 297(1) of the new Act declared that the Indian Income-tax Act, 1922 stood repealed by the new Act, sub-section (2) of the above section made detailed. and meticulous provisions in clauses (a) to (m) as to whether the new Act or the old Act will govern in the various situations dealt with therein. These provisions have led to a lot of litigation and the controversy in this appeal also arises out of one such provision.

We are concerned here with the scope of proceedings for reassessment in respect of assessment years prior to 1962-63 and the answer to the question before us turns on the provisions of the following two sections of the 1%1 Act: Section 297 "297(1) xxx xxx xxx (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 {11 of 1922) (hereinaf~er i:_eferred to as 'the repealed Act') xxx xxx xxx xxx (d) where in respect of any assessment year after the year ending on the 31st day of March 1940 (i) a notice under section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not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 true had escaped assessment within the · meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect ofany such income are pending at· the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section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 1~0 be issued with respect to that assessment year and all the provisions of this Act shaU apply accordingly.

" Section 150 "150(1) Notwithstanding anything contained in section 149, the notice under s~ction 148 may be issued at any time f~r the purpose of making an assessment or reassessment or recomputation in consequence or, or to give effect to, any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision. " (underlining ours) \- We may proceed now to set out how the question arises in the present case: The appeal arises out of an order of the High Court in a writ petition filed by one Mahadeo Prasad Bais (since deceased, represented by his legal representatives) challenging reassessment proceedings initiated against him for the assessment years 1953-54 to 1963-64. The appeal is, however, restricted to the assessment years 1953-54 to 1961-62. Upto assessment year 1948-49, the appellant was being assessed as the Karta of a Hindu Undivided Family consisting of himself, his mother, his wife and three sons.

For the assessment year 1949-50 and subsequent years upto 1961-62 he had filed a return in his individual capacity on the footing that there had been a total partition of the family ~ithin the meaning of Section 25A of the Indian Income-tax Act, 1922 and that he was assessable in respect of the income from the properties of the family allotted to him at the partition. In the alternative, he claimed partial partition of some of the joint family properties. Both these claims were initially negatived and the entire income was assessed in the hands of the Hindu Undivided Family. The returns filed by the appellant in his individual capacity were finalised by holding that there was no income assessable in his individual . rcapacity. The Hindu Ugdivided Family went up in appeals and ultimately the Tribunal accepted the claim of partial partition in respect of some of the properties with effect from different dates.

This conclusion of the Tribunal was also affirmed by the High Court in the decision reported as Malzadeo Prasad Bois v. Income-tax Officer, (1972) 84 ITR 48 which related MAHADEO PRASAD v. l. T. O. GORAKHPUR [RANGANATHAN, J. ) 13 to the assessment years 1956-57 to 1958-59. Consequent on these decisions of the Tribunal and the High Court, the income from some of the erstwhile family properties stood excluded from the assessment of the Hindu Undivided Family and became liable to be included in the hands of the present appellant. The assessment for 1949-50 and subsequent years upto 1961-62 on the family had been completed and the appeals and reference disposed of under the Indian Income-tax Act, 1922. The original assessments made on the appellant as an individual for the assessment years 1953-54 to 1961-62 had been completed under the Indian Income-taJc Act, 1922.

In these assessments no income from the erstwhile joint family properties had been included as the officer was of the view, as in 1949-50, that it was assessable in the hands of the family. There were no proceedings initiated or pending under Section 34 of the 1922 Act in respect of these assessment years as on 1. 4. 1962. Quite sometime after the High Court had decided the reference for 1949- 50 in the case of the family, the Income-tax Officer thought of steps to include the income assessable in the hands of the appellant consequent on the decisions of the Tribunal a~d the High Court which he had failed to assess earlier. He, therefore, served on the appellant on 19. 3. 1977 notices for reassessment, as required by section 297(2)(d)(ii), under section 148 of the 1961 Act. The appellant resisted these proceedings, fitter alia, on the ground that the notices were barred by limitation.

The department, however, contended that, though normally reassessment proceedings had to be initiated within a period of four, eight or sixteen years as the case may be, under the then provisions of Section 149 of the 1961 Act, the reassessment proceedings in this case were saved by the provisions of Section 150(1) of the 1961 Act set out earlier. This contention of the department has been accepted by the High Court in the decision under appeal before us which is reported in (1980) 125 ITR 49. ! The issue involved in this appeal is basically a short one turning on the language of section 150(1). Before considering the interpretation of this section, we may, however, point out that, on this question, there appears to . be a conflict of judicial opinion between the several High Courts. The Allahabad High Court, in the decision presently under appeal (1980)125 I. T. R. 49 and the Calcutta High Court in l. T. O. v. Eastem Coal Co. Ltd.

, (1975) 101 ITR 477 have taken the view that a reassessment in such circumstances is saved by the provisions of Section 150(1) of the 1961 Act. An earlier Allahabad decision in C. l. T. v. Kamalapat Motilal, (1977)110 I. T. R. 769 and an earlier Bombay decision inAmbaji Traders v. l. T. O. , (1976)105 l. T. R. 273 took a similar view on the analogous provision contained in section 153(3) of the 1961 Act but a contrary view was taken by the latter High Court in the latter case reported as CIT v. T. P. Asrani, (1980) 122 ITR 735. Both sets of decisions have placed reliance on certain observa- ·-- ments initiated for the same purpose, the legislature goes further than section 150 (1) and makes specific reference to particular provisions of the new Act; (3) The provisions of s. 150 (1) will not become redundant if read in the manner contended for by the assessee.

While no doubt the proceedings are initiated, in all cases covered by section 297 (2) (d) (ii), under the new Act, the orders, for giving effect to a findfog or direction in which such proceedings are initiated, may belong to either category- they may be orders passed under the old Act or they may be orders passed under the new Act. The terms of section 150 (1) will be effective in the latter category of cases; and (4) The provisions contained in Ss. 150 (1) and 153 (3) are provisions exempting the applicability ofa normal rule of limitation otherwise applicable to actions for reassessment and such provisions should be construed strictly. On the other hand, it is contended for the department that the object of the provision being very obvious, namely, that where reassessment proceedings are initiated to give effect to orders on appeal, reierence or