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Petitions Nos. 478, etc. of 1963 and 8 of 1964, decided on 25th August 1964.
Income-tax Act (XI of 1922), S. 34 (2-B) [as introduced by Finance Act, 1964] - Not authorise reopening of annulled assessment-Provisions not retrospective in operation.
No doubt section 34 (2-B), Income-tax Act permits the Assessing Officers to assess income-tax in respect of the years mentioned therein even after the expiry of four years but there is no authority to re-open cases in which assessment had been made but annulled by the Appellate Authorities.
Section 34 (2-B) applies only to cases falling within the periods mentioned therein if in respect thereof no assessment had been made before the 1st July 1963. The cases in regard to which assessment had been made before that date do not come within its purview.
S. R. Pal, Abu Backkar, B. B. Roy and Ismailuddin Sarkar for Petitioner (in Petitions Nos. 478, 489, 507, 490 and 508 of 1963).
Asrarul Hossain, Nurul Huq, Abdul Azim and R. Huq for Petitioner (in Petitions Nos. 497, 505, 522, 523, 526, 528, 529, 531 and 532 of 1963 and 8 of 1964).
K. A. Bakr for Petitioner (in Petitions Nos. 502, 503 and 504 of 1963).
Md. Nurul Huda, Deputy Attorney-General and Abdul Matin Khan Chowdhury for Respondents (in all the Petitions).
Dates of hearing : 24th and 25th August and 1st December 1964.
These applications are under Article 98 (2) of the Constitution. They have been heard together and disposed of by one judgment as the points raised are common.
In each of these cases the petitioner has challenged the authority of the Income-tax Officer concerned in issuing two notices, one under section 22 (4) and another under section 23 (2) of the Income-tax Act.
The facts relevant for the purpose of the disposal of these cases may shortly be stated as follows : The petitioner in each of these cases submitted Return under section 22 of the Income-tax Act in respect of one year or more as the case may be out of the years ending at any time between the 31st March 1955, and the 30th June 1959. The order of assessment in each of these cases was made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable. The order was challenged and assessment was annulled on the ground of limitation as provided in section 34 (2) of the Income-tax Act either by the Appellate Assistant Commissioner or the Tribunal following the decision of the Supreme Court in the case of Nagina Silk Mill, Lyallpur v. The Income-tax Officer, A-Ward, Lyallpur (P L D 1963 S C 322).
Thereafter, by the Finance Act, 1963, subsection (2-B) ,has added to section 34 of the Income-tax Act, This section came into force on the 1st of July 1963. It is after this that the impugned notices were issued.
Mr. Sabita Rajan Pal appears in Petitions Nos. 478, 489, 490, 507 and 508 of 1963 for petitioner ; Mr. Asrarul Hossain appeares in Petitions Nos. 497, 505, 522, 523, 526, 528, 529, 531 and 532 of 1963 and 8 of 1964; and Mr. K. A. Bakr appears in Petitions Nos. 502, 503 and 504 of 1963.
Learned Advocates for the petitioners have argued that subsection (2-B) of section 34 which was added by the Finance Act, 1963, does not authorise the Income-tax Officer to issue notices under sections 22 (4) and 23 (2) of the Act in respect of the years in regard to which assessment had been made but annulled. Subsection (2-B) of section 34, as introduced by the Finance Act, 1963, runs as follows :-
"Notwithstanding anything in subsections (1) and (2) limiting the time within which any notice may be issued or any assessment or re-assessment made or any action taken, such notice may be issued assessment or re-assessment made or action taken as respects the assessment (including re-assessment for any year ending at any time between the thirty-first day of March 1955, and the thirtieth day of June 1959 (both days inclusive) on or before the thirty-first day of December 1963."
It is argued that the order passed on appeal in each of these cases is an order annulling assessment which is different from an order setting aside assessment. When an order of assessment is set aside either under section 31 (4) (b) or under section 33 (4) (e) by the Appellate Assistant Commissioner of Income-tax or by the Tribunal the Appellate Authority directs to make a fresh assessment. In the case of annulment, however, the position is different. It is a declaration either that the assessee is not liable to be assessed with income-tax or his liability has come to an end. It has, therefore, been argued that, as the assessment in each of these cases was annulled, the question of fresh assessment, only because the period of limitation was extended by the Finance Act of 1963, does not arise. It has further been contended that the section is not retrospective in operation and does not authorise re-opening of the cases in which assessment was made but. annulled. There is considerable force in this argument. This subsection, no doubt, permits the Income-tax Officer to assess income tax in respect of the years mentioned therein even after the, expiry of four years as contemplated by section 2, but we find no authority in this subsection to re-open cases in which assessment had been made but annulled by the Appellate Authorities, under the Income-tax Act.
Mr. Nurul Huda who appears for the respondents in these cases has contended that, as the period within which assessment could be made was extended by subsection (2-B) of section 34 until the 31st December 1963, the Income-tax Officer concerned was within his rights to issue the notices in question. We are afraid this argument, on a careful reading of subsection (2-B) of section 34 as introduced in the Finance Act of 1963, cannot be accepted. We are of the view that subsection (2-B) applies only to cases falling within the period mentioned in that subsection in respect of which no assessment was made before the 1st July 1963. It follows, therefore, that cases in regard to which assessment had already been made before the 1st July 1963, do not come within its purview. Regard being had to these conclusions of ours, we cannot but declare that the notices in question were issued at the relevant time without jurisdiction, having regard to the state of law that existed then.
It has come to our notice that subsection (2-B) of section 34 has been further amended by the Finance Act, 1964. It came into force during the pendency of these petitions. As no point with regard to the effect of the said amendment on the cases of the petitioners has been raised by the respondents in the affidavits-in-opposition or by filling further affidavits, we have found it unnecessary to decide the same in these eases, We must not be understood to have expressed any opinion as to the right of the Income-tax Officer to re-open cases in respect of which assessment was annulled by the Appellate Authorities on the authority of the amendment of 1963. We must not also be understood to have considered the effect of the amendment of subsection (2-B) by the Finance Act of 1964 on the orders of assessment if any, passed in regard to these petitioners after the issue of the impugned notices. We have decided these cases on the basis of the law as it stood on the dates on which the impugned notices were issued without taking into account the effect of the amendment of subsection (2-B) by Finance Act, 1964.
We, therefore, make the rule absolute and declare that the impugned notices which were purported to have been issued on the authority of subsection (2-B) of section 34, as introduced by the Finance Act of 1963, was done without any lawful authority.
Regard being had to the facts of the cases, we direct the parties to bear their own costs.
1.12.64.
This judgment was delivered on 25-8-64 but not signed. After delivery of the judgment, we thought that the parties should be given a further hearing and therefore, the rules were set for further hearing today (1-12-1964). After having heard the parties again today, we do not find anything to add to what we have already said in the judgment, which stands unmodified.
M. N. Petitions accepted.
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