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Civil Reference No. 3 of 1964, decided on 8th November 1965.

S. 34(2), (2-B) [as amended by Finance Act (V of 1964)]-Assessment for year 1955-56 made on 29-6-1960-Held, not hit by bar of limitation originally existing in subsection (2).

Barnala Commission Shop, Chak Jhumra v. Income-tax Officer, B- Ward, Lyallpur P L D 1963 Lah. 311 ref.

Nagina Silk Mill, Lyallpur v. Income-tax Officer, A-Ward, Lyallpur P L D 1963 S C 322 held not applicable.

Muhammad Amin Butt for Applicant.

Sh. Abdul Haque for Respondent. .

Date of hearing: 8th November 1965.

The assessee, an individual, carries on business in silver, gold ornaments and bullion at Multan. He is an assessee since 1945-46 and being an illiterate person, has maintained no accounts whatsoever. The Assessing Officer estimated his income pertaining to the assessment years 1953-54 to 1959-60 by taking into consideration his wealth statement as on 31st of March 1953, and on 31st of March 1959, and the quantity of gold seized by the Custom Authorities as a result of raids conducted at his premises in July, 1956 and October 1958. The figures were spread in a specified manner as income of the relevant seven years at a total of Rs. 1,83,000. The assessee also filed a revised wealth statement before the Appellant Assistant Commissioner but the authorities including the Tribunal preferred to rely on the first two statements and ignored the third one which was filed with the intention to correct some of the entries of the first two. While dealing with the third wealth statement, the Tribunal observed as follows: ---

"These are mere bald statements unsupported by any evidence and it is a fact worthy of notice that the appellant has admittedly not maintained any accounts. As regards the second wealth statement the certificate of the Habib Bank produced before us merely states the position of the out stan dings on 16th June 1958, whereas the material date is 31st March 1959, the wealth position disclosed in this statement being as on that date. The certificate does not, however, say whether the loan had been paid during the period from 17th June 1958 to 31st March 1959, or was still outstanding on the latter date."

2. The Tribunal, however, accepted the contention of the assessee that his admission in the wealth statements which were relied upon by the assessing authority should be accepted as a whole and not only inculpatory portions and as a result thereof the amount of Rs. 17,000.00 should .not have been taken into consideration in determining his assessable income for the years 1954-55 to 1957-58. The amount was spread over these four years and his income was reduced accordingly.

3. On an application under section 66 (1) of the Income-tax Act of 1922, the assessee requested the Tribunal to refer as many as five questions pertaining to the assessment years 1953-54 to 1.959-60, all of them were considered as questions of facts and the request of the assessee was rejected. However, the Tribunal decided that in the facts and circumstances of the case the only question which arises from their order was of limitation regarding the assessment year 1955-56. The assessment for that year was completed on the 29th June 1960, whereas four years from the end of the assessment year during which assessee's income, etc. first became assessable ended on 31st March. 1960, within the meaning of subsection (2) of section 34 of the Income-tax Act. The Tribunal while holding the assessment in time, had relied on the decision of this Court in Barnala Commission Shop, Chak Jhumra v. Income-tax Officer, B-Ward, Lyallpur (1), wherein the year 1958-59 was held to be a period of 15 months (beginning on the 1st day of April 1.958, and ending the 30th day of June 1959). In Nagina Silk Mills, Lyallpur v. Income-tax Officer, A-Ward, Lyallpur (2) the Supreme Court did not agree with this view and it was held that a year meant a period of 365 days only. Accordingly the Tribunal referred the following question of law-to this Court for opinion: ----

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding the assessment for the charge period 1955-56 to be valid and in time within the meaning of section. 34 (2) of the Income-tax Act, 1922 "

4. In order to ascertain the correct position of law, during the period under consideration in which the assessment could have been validly made, it is desirable to set out the relevant provisions of section 34 as it stood at the relevant time: ----

(2) No order of assessment under section 23 or of assessment or re-assessment under subsection (P L D 1963 Lah. 311) of this section shall be made after the expiry . . . . . . . . . of the year in which the income, profits, or gains were fist assessable." ;

By an amendment introduced by the Finance Ordinance, 1959, a proviso was added to subsection (P L D 1963 S C 322) of section 34 in the following words

"Provided that where a notice under section (1) was issued within the time-limit specified in that subsection, the assessment or re-assessment as the case may be, may be made in pursuance of such notice within one year from the date of the service of such notice."

Evidently this proviso was added to give sufficient time to the assessing authority to complete the assessment in those cases where information was not received within time. This proviso made it possible to complete the assessment within one year from the date of the notice issued within the four years mentioned in subsection (2) of section 34.

5. In Nagina Silk Mill's case, referred to above, it was held that the assessment made on the 29111 of June 1960, for the year 1955-56, was nullity and without jurisdiction. The facts of that case are quite similar to the present case because the assessment for the year 1955-56 in this case was also made on the 29th of June 1960. However, after the decision of the Supreme Court, the position of law has undergone a considerable change and by Finance Act XVI of 1963, the following subsection (2-B) has been added: ---

"34 (2-B). 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."

By section 14 of -Finance Act V of 1964, subsection (2-B) was further amended in the following terms :-

"(a) In subsection (2-B), for the figures "1963" the figures "1964" shall be substituted and the said subsection as so amended, shall be deemed to have been inserted on the first day of April 1955 and no assessment or re-assessment or any order made, proceeding taken or notice issued at any time after the said day shall be called in question in any Court, tribunal or other authority merely on the ground that, at the time the assessment or re-assessment or order was made, proceeding taken or notice issued, as the case may be, the time within which the assessment or re-assessment or order should have been made or proceeding taken or notice issued under the .Act, as in force before its -amendment, had expired."

6. It is thus obvious that the Legislature has, with retrospective effect, amended the provision of section 34 (2-B) of the Income-tax Act to cover all those cases which would have been affected by the decision of the Supreme Court in Nagina Silk Mill's case. The assessment, in the instant case, was therefore, not hit by the bar of limitation as it originally existed in section 34 (2) of the Income-tax Act of 1922. The question raised in the reference is, therefore, answered in the affirmative There is no order as to costs.

S. Q.

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