Mahadeo Prasad Bais (Dead} v. Income-Tax Officer 'A' Ward, Gorakhpur And Atjr

MAHADEO PRASAD BAIS (DEAD} INCOME-TAX OFFICER 'A' WARD, GORAKHPUR AND AtJR. SEPTEMBER 12, 1991 [S. RANGANATHAN, V. RAMASWAMI AND N.D. OJHA, JJ.] Income Tax Act, 1961-Sections 148, 150 and 297(2)(d)(ii)--Reas-sessment--Limitati01r-Removal of bar of limitation-When arises. The appellant (since deceased) was being assessed as the Karta of the Hindu Undivided Family consisting of himself, his mother, his wife c and three sons until the assessment years 1948-49. For the assessment year 1949-50 and subsequent years upto i961-62 he filed a return in his individual capacity claiming that there had been a total partition of the family and that he was assessable in respect of the income from the properties of the family that fell to his share on partition; in the D alternative he claimed partial partition. Both of his -claims having been negatived, the entire income was assessed in the hands of the Hindu Undivided Family and the returns filed by the appellant in his individual capacity were finalised on-the footing that there was no income assessable in his individual capacity. The Hindu Undivided Family went up in appeals and ultimately the Tribunal accepted the claim of partial partition E in rtspect of some of the properties. The conclusion of the Tribunal was affirmed by the High Court, with the result that the income from some of the erstwhile family properties stood excluded from the assessment of the Hindu Undivided Family and bec;ame liable to be included in the hands of the appellant. The original assessments made on the appellant as an individual for the assessment upto 1961-62 had been completed under the F Income-tax Act, 1922 and in these assessments no income from the etstwhile joint family properties had been included as the Income Tax 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or pending under Section 34 of the 1922 Act in respect of these assessment years as on 1.4.1962, when the 1922 Act was repealed by the 1962 Act. The Income Tax Officer G therefore, served a notice for reassessment on the appellant, invoking the provisions of Section 297(2)(d)(ii) of the Act. The appellant resisted the reassessment proceedings on the ground that notice was barred by limitation while the department contended that the reassessment proceedings in this case were saved by the provisions of Section 150(1) of the 1961 Act. The High Court accepted tile contention of the department. H 10 SUPREME COURT REPORTS [1991) SUfP. 1 S. C. R A Dismissing the assessee's appeal, this Court, HELD : The provisions of Section 150(1) have been specially made applicable and operative in respect of a notice under section 148 issued in pursuance of Section 297(2)(d)(ii). The application of the provisions of Section 297(2)(d)(ii) gives rise to two sets of situations to one of which the B language of Section 150(1) would squarely apply. Section 150(1) will operate to lift the time bar in cases where the reassessment is initiated under section 148 to give effect to an order passed under the 1961 Act. Section 297(2) is a provision enacted with a view to provide for continuity of proceedings in the context of repeal of one Act by a fresh one broadly C containing analogous provisions and the transitory provisions should as far as possible, be construed so as to affect such continuity and not so as to create a lacuna. It will therefore be appropriate to so read the words of section 297(2)(d)(ii) as to permit the applicability of section 150 (or section 153) with the necessary modifications. (18 G, 19A-B, D-E] 10 " 297 ( 1 ) XXX XXX 12 "297(1) XXX XXX XXX D The last words of Section 297(2)(d)(ii) should be read to mean that where the proceedings initiated under Section 148, subject to the relaxations and limitation ofSections149and150, all the provisions of the Act shall apply accordingly: that is to say, in the same manner as they would apply in case of proceedings normally initiated under these E provisions. Since reassessment proceedings. so initiated ·to give effect to orders on appeal, revision or reference will not be subject to a time limit, the proceedings likewise initiated· under Section 297(2)(d)(ii) read with Section 149 will also not. oo subject to any limitations save to the extent mentioned in Section 150(2). (19 E-F] F Income Tax Officer v. Eastem Coal Co. Ltd., (1975) 101 I.T.R. 477; Commissioner of Income Tax v. Kamalapat Motilal, (1977) 110 I.T.R. 769; Ambaji Traders v. Income Tax Officer, (1976) 105 I.T.R. 273; Commissioner of Income Tax v. T.P. Asrani, (1980) 122 I.T.R. 735; Jain v. Mahendra, (1972) 83 I.T.R. 104; Govinddas v. Income Tax Officer, (1976) 103 I.T.R. 123; Seth Gujannal Modi v. Commissioner of Income Tax, (1972) 84 I.T.R. G 261; Third Income Tax Officer v. Damodar Bhat, (1969) 71 I.T.R. 806; Jain Bros. v. Union of India, (1970) 77 I.T.R.107, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1934 of. 1978. From the Judgment and Order dated 21.12.1977 of. the Allahabad MAHADEO PRASAD v. l.T.O. GORAKHPUR [RANGANAIBAN, J.) 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 neces-sitated 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 C thereafter. The legislature, however, evolved a more complicated proce-dure. While section 297(1) of the new Act declared that the Indian In-come-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 D 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 (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 {11 of 1922) (hereinaf~er i:_eferred to as 'the repealed F 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 pur-suance of such notice may be continued and disposed of as if this Act had not been passed; [1991] SUPP. 1 S. C. R (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 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 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 recom-putation 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." 14 (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, repre-sented by his legal representatives) challenging reassessment proceedings E initiated against him for the assessment years 1953-54 to 1963-64. The ap-peal 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 F 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 asses-sable 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 G Family. The returns filed by the appellant in his individual capacity were finalised by holding that there was no income assessable in his individual capacity. 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 H Malzadeo Prasad Bois v. Income-tax Officer, (1972) 84 ITR 48 which related to the assessment years 1956-57 to 1958-59. Consequent on these decisions A of the Tribunal and the High Court, the income from some of the erstwhile family properties stood excluded from the assessment of the Hindu Un-divided 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. B 16 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. C 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 some-time 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 D 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, how-ever, 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 reassess-E ment 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 cir-cumstances 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 A 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-tions of this Court in differing contexts. But it will be best to have a look at the statutory prQvisions first, in the context of the facts of the present case.