State of U.P. & Ors Vs. Lalji
Tandon  INSC 236 (29 November 1960)
CITATION: 1961 AIR 1026 1961 SCR (2) 760
CITATOR INFO :
D 1965 SC1031 (4) D 1965 SC1431 (11) D 1978
SC 209 (12)
Income Tax-Escaped income--Notice issued by
Income-tax Officer without approval of Commissioner--Subsequent amendment of
enactment providing for Commissioner's approval--Assessment based on original
notice--Validity--General Clauses Act, 1897 (10 of 1897), s. 6--Income-tax and
Business Profits Tax (Amendment) Act, 1948 (48 of 1948), ss. r, 8--Indian
Income-tax Act, 1922 (11 of 1922), s. 34, as amended by Act 48 of 1948.
The appellant who had agricultural income
from his Zamindari was assessed to income-tax for the four assessment years,
1944-45, to 1947-48. The income-tax authorities did not include in his
assessable income, interest received by him on arrears of rent, in view of a
decision of the Patna High Court, but subsequently this view of law was
reversed by the Privy Council. On August 8, 1948, the Income-tax Officer issued
notices under s. 34of the Indian Income-tax Act, 1922, for assessing the
escaped income. Before the notices were issued the Income-tax Officer had not
put the matter before the Commissioner for his approval as the section then did
not require it and the assessments were completed on those notices. In the
meantime, certain amendments were made to the Indian Income-tax Act by Act 48
of 1948, which received the assent of the Governor-General on September 8,
1948. The Amending Act substituted a new section in place of S. 34, which among
other changes, added a proviso to the effect that "the Income-tax Officer
shall not issue a notice...... unless he has recorded his reasons for doing so
and the Commissioner is satisfied on such reasons that it is a fit case for the
issue of such notice", and also made it retrospective by providing that
the new section "shall be deemed to have come into force on the 30th day
of March, 1948". The question was whether the notices issued by the
Income-tax Officer on August 8, 1948, without the approval of the Commissioner,
were rendered void by reason of the operation of the amended s. 34. The
Commissioner claimed that s. 6 of the General Clauses Act, 1897, saved the
assessments as well as the notices.
Held, that s. 6 of the General Clauses Act,
1897, was inapplicable as the Amending Act of 1948 indicated a different
intention within the meaning of that section, inasmuch as the amended S. 34 of
the Indian Income-tax Act, 1922, provided that it shall be deemed to have come
into force on March 30, 1948.
Lemm v. Mitchell,  A.C. 400,
distinguished, 761 Held, further, that the notices issued by the Income-tax
Officer on August 8, 1948, and the assessments based on them were invalid.
Venkatachalam v. Bombay Dyeing & Mfg.
Co., Ltd.,  S.C.R. 703, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 650 of 1957.
Appeal from the judgment dated July 13, 1956,
of the Patna High Court in Miscellaneous Judicial Case No. 665 of 1954.
R. Ganapathy Iyer and R. H. Dhebar, for the
A. V. Viswanatha Sastri and R. C. Prasad, for
1960. November 29. The Judgment of the Court
was delivered by HIDAYATULLAH, J.-This is an appeal by the Commissioner of
Income-tax with a certificate against the judgment and order of the High Court
at Patna answering two questions of law referred to it under s. 66(1) of the
Income-tax Act by the Tribunal, in the negative. Those questions were:
"(1) Whether in the circumstances of the
case assessment proceedings were validly initiated under s. 34 of the Indian
Income-tax Act? (2) If so, whether in the circumstances of the case the amount
received from interest on arrears of agricultural rent was rightly included in
the income of the assessee ?" The assessee, the Maharaja Pratapsingh
Bahadur of Gidhaur, had agricultural income from his zamindari for the four
assessment years 1944-45 to 1947-48. In assessing his income to income-tax, the
authorities did not include in his assessable income interest received by him
on arrears of rent. This was presumably so in view of the decision of the Patna
High Court. When the Privy Council reversed the view of law taken by the Patna
High Court in Commissioner of Income-tax v. Kamakhya Narayan Singh (1), the
Income-tax Officer issued notices under S. 34 of the (1)  16 I.T.R. 325.
762 Indian Income-tax Act for assessing the
These notices were issued on August 8, 1948.
The assessments after the returns were filed, were completed on August 26,
1948. Before the notices were issued, the Income-tax Officer had not put the
matter before the Commissioner for his approval, as the section then did not
require it, and the assessments were completed on those notices. Section 34 was
amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948 (No. 48
of 1948), which received the assent of the Governor-General on September 8,
1948. The appeals filed by the assessee were disposed of on September 14 and
15, 1951, by the Appellate Assistant Commissioner, before whom no question as
regards the validity of the notices under s. 34 was raised. The question of the
validity of the notices without the approval of the Commissioner appears to
have been raised before the Tribunal for the first time. In that appeal, the
Accountant Member and the Judicial Member differed, one holding that the
notices were invalid and the other, to the contrary.
The President agreed with the Accountant
'Member that the notices were invalid, and the assessments were ordered to be
The Tribunal then stated a case and raised and
referred the two questions, which have been quoted above. The High Court agreed
with the conclusions of the majority, and the present appeal has been filed on
a certificate granted by the High Court.
Section 34, as it stood prior to the
amendment Act No. 48 of 1948, did not lay any duty upon the Income-tax Officer
to seek the approval of the Commissioner before issuing a notice under s. 34.
The amending Act by its first section made ss. 3 to 12 of the amending Act
retrospective by providing "sections 3 to 12 shall be deemed to have come
into force on the 30th day of March, 1948........ Section 8 of the amending Act
substituted a new section in place of s.
34, and in addition to textual changes with
which we are not concerned, also added a proviso to the following effect :
"Provided that763 (1) the Income-tax
Officer shall not issue a notice under this sub-section unless he has recorded
his reasons for doing so and the Commissioner is satisfied on such reasons that
it is a fit case for the issue of such notice." The question is whether
the notices which were issued were rendered void by the operation of this
proviso.-' The Commissioner contends that s. 6 of the General Clauses Act, particularly
cls. (b) and (c) saved the assessments as well as the notices. He relies upon a
decision of the Privy Council in Lemm v. Mitchell (1), Eyre v. Wynn-Mackenzie
(2) and Butcher v. Henderson (3) in support of his proposition.
The last two cases have no bearing upon this
matter; but strong reliance is placed upon the Privy Council case. In that
case, the earlier, action which had been commenced when the Ordinance had
abrogated the right of action for criminal conversation, had already ended in
favour of the defendant and no appeal there from was pending, and it was held
that the revival of the right of action for criminal conversation did not
invest the plaintiff with a right to begin an action again and thus expose the
defendant to a double jeopardy for the same act, unless the statute expressly
and by definite words gave him that right. The Privy Council case is thus
No doubt, under s. 6 of the General Clauses
Act it is provided that where any Act repeals any enactment, then unless a
different intention appears, the repeal shall not affect the previous operation
of any enactment so repealed or anything duly done there under or affect any
right, obligation or liability acquired, accrued or incurred under any
enactment so repealed. It further provides that any legal proceedings may be
continued or enforced as if the repealing Act had not been passed. Now, if the
amending Act had repealed the original s. 34, and merely enacted a new section
in its place, the repeal might not have affected the operation of the original
section by virtue of s. 6. But the amending Act goes further than this. It (1)
 A.C. 400. (2) (1896) 1 Ch. 135.
(3) (1868) L.R. 3 Q. B. 335.
764 repeals the original s. 34, not from the
day on which the Act received the assent of the Governor-General but from a
stated day, viz., March 30, 1948, and substitutes in its place another section
containing the proviso above mentioned. The amending Act provides that the
amending section shall be deemed to have come into force on March 30, 1948, and
thus by this retrospectively, indicates a different intention which excludes
the application of s. 6.
It is to be noticed that the notices were all
issued on August 8, 1948, when on the statute book must be deemed to be
existing an enactment enjoining a duty upon the Income tax Officer to obtain
prior approval of the Commissioner, and unless that approval was obtained, the
notices could not be issued The notice were thus invalid. , The principle which
was applied by this Court in Venkatachalam v. Bombay Dyeing & Mfg. Co. Ltd.
(1) is equally applicable here.
No question of law was raised before us, as
it could not be in view of the decision of this Court in Narayana Chetty v. Income-tax
Officer (2), that the proviso was not mandatory in character. Indeed, there was
time enough for fresh notices to have been issued, and we fail to see why the
old notices were not recalled and fresh ones issued.
For these reasons, we are in agreement with
the High, Court in the answers given, and dismiss this appeal with costs.
A appeal dismissed.
(1)  S.C.R. 703. (2)  35 I.T.R.