Mudholkar, J. - (1.) This is an appeal by special leave against the judgment of the Bombay High Court in a writ petition challenging the notice issued under S. 34(1) of the Indian Income-tax Act, 1922 by the First Income-tax Officer, Bombay, who is the appellant before us. In the writ petition various grounds were urged by the respondent in support of the contention that the notice was bad in law. The High Court, however, dealt with only one of those contentions, accepted it and did not permit the respondents' counsel Mr. Mehta to put forward the other contentions urged in the writ petition by the respondents.
(2.) The appellant had issued notice to the respondents under S. 34 (1) (A) of the Income-tax Act in respect of an escaped income of Rs. 47,595/- for the assessment year 1944-45. This notice was issued by him on March 27, 1957. On behalf of the respondents, it is contended that the notice was bad because, though it was in respect of an amount of less than Rs. 1 lakh it was issued after the expiry of the assessment year and that the sanction of the Central Board of revenue for issuing that notice had not been obtained by the Income-tax Officer as required by cl. (iii) of the proviso to S. 34(1) of the Act. It is not disputed before us that the case falls under Section 34(1)(a). That provision reads thus: "(1) If - (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under S. 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or .... he may in cases falling under cl. (a) at any time .........serve on the assessee .......... a notice containing all or any of the requirements which may be included in a notice under sub-sec. (2) of S. 22 and may proceed to assess or reassess such income, profit or gains or recompute the loss or depreciation allowance; and the provision of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section:" We have quoted only the relevant portion. Then follows the first proviso which runs thus: "provided that the Income-tax Officer shall not issue a notice under cl. (a) of sub-sec. (1) (i) for any year prior to the year ending on the 31st day of March 1941; (ii) for any year, if eight years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income-tax which have escaped assessment or have been under-assessed or assessed at too law a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year and any other year or years after which or after each of which eight years have elapsed, not being a year or years ending before the 31st day of March 1941; (iii) for any year, unless he has recorded his reasons for doing so, and, in any case falling under cl. (ii), unless the Central Board of Revenue, and, in any other case, the Commissioner, is satisfied on such reasons recorded that it is a fit case for the issue of such notice:" It will thus be seen that where the Income-tax Officer has reason to believe that due to any act of the assessee a full and accurate declaration was not made by the assessee for any year, with the result that part of his income has escaped for that year, the Income-tax Officer may issue a notice under cl. (a) at any time.
(3.) The respondents contention before the High Court was that the notice was bad because it had not complied with the two conditions laid down in the proviso to S. 34(1). Adverting to this contention the High Court has observed thus: "Before the amendment of this section which was in force on the 27th March 1957 the period of limitation of eight years was provided with regard to the issue of notices under S. 34(1)(a) and a period of four years for cases falling under S. 34(1)(b). By the amendment the period of limitation was removed and the Legislature provided that if the case fell under S. 34(1)(a) a notice can be served at any time. But while removing any bar of limitation, the Legislature provided some safeguard for the assessee and these safeguards were three in number and they were set out in the proviso. The first safeguard was that a notice shall not be issued for any year prior to the year ending on the 31st day of March 1941; the second safeguard was that if eight years had elapsed then the notice should not be issued for an escaped income which aggregated to less than one lakh of rupees; and the third safeguard was that the Central Board of Revenue had to be satisfied on reasons to be recorded that this was a fit case for the issue of a notice, which was for a period beyond eight years. Now, admittedly, this notice is for an amount which is less than a lakh of rupees and admittedly the Central Board of Revenue has not considered this matter at all. Therefore, there does not seem to be any answer to the contention put forward by the petitioner." The High Court is right in saying that a notice cannot be issued where the income which has escaped assessment is less than a lakh of rupees and where more than eight years have elapsed from the assessment year. To this, however, there is one exception and that is where the matter would fall to be governed by the second proviso to S. 34(3). To this aspect we will, however, come little later. But before that what we must consider is the view of the High Court that the sanction of the Central Board of Revenue was also necessary. Under cl. (iii) of the proviso to S. 34 (1) a notice can issue only if the Central Board of Revenue is satisfied with the reasons recorded by the Income-tax Officer for issuing a notice. For convenience we are describing this process as sanction of the Central Board of Revenue. The sanction under this clause is, however, necessary only where the notice in question is issued under cl. (ii) of the proviso. That is evidently what the Legislature meant when it says "in any case falling under cl. (ii)". For, cl. (ii) has to be read with the opening words of the proviso:"Provided that the Income-tax Officer shall not issue a notice under cl. (a) of sub-sec. (I)". So read it will be clear that the words "in any case" used in cl. (iii) only mean a case in which notice can be issued under cl. (ii). Such a notice can be issued only when the escaped income is of one lakh of rupees and over. It was, however, contended by Mr. Shroff that cl. (ii) of the proviso dealt not only with the escaped assessment of one lakh of rupees and over but also with assessments which were less than one lakh of rupees and that, therefore, even in the present case the sanction of the Central Board of Revenue was required. By excluding action with respect to escaped assessment of less than one lakh of rupees, cl. (ii) can, in one sense, be regarded as dealing with escaped assessment of this kind. But it would be wrong to say that because of this, cl. (iii) requires the obtaining of the sanction of the Central Board of Revenue for a notice to be issued with respect to it. As already pointed out, cl. (iii) requires such sanction where the notice is issued under cl. (ii) and when on a construction of cl. (ii), no notice can be issued with respect to a class of escaped assessments, there can possibly be no requirement of the sanction of the Central Board of Revenue. If a notice is issued by virtue of some other provision such as the second proviso to sub-sec. (3) of S. 34, it would be a notice "in any other case" referred to in cl. (iii) of the proviso to sub-s. (1) of S. 34 and in such a case the sanction which is required is only that of the Commissioner. Such a sanction was obtained in this case and, therefore, the notice cannot be said to be bad because the sanction of the Central Board of Revenue has not been obtained. Now, we will come to the other aspect of the matter.;