Subba Rao, J. - (1.) These two appeals, one by special leave and the other by certificate, raise the question whether notice can be issued at any time for reassessment under S. 34 (1) (a), as amended by the Finance Act, 1956, of the Indian Income-tax Act, 1922, hereinafter called the Act, in respect of a concealed income to which S. 34 (1A) thereof applied.
(2.) The facts may be briefly stated. M/s. Shahzada and Sons, the 1st respondent in both the appeals, was an undivided Hindu family Firm and it was assessed in that capacity upto the assessment year 1945-46. It is alleged that subsequently there was a partition in the family and a new firm came into existence, which took over the business of the family. On March 26, 1954, the Income-tax Authorities issued a notice to the members of the defunct Hindu undivided family under S. 34 (1) (a) of the Act in respect of the assessment year 1945-46 on the ground that certain income of the said family had escaped assessment. Pursuant to the proceedings so initiated, a sum of Rs. 3,63,000 was added to the original assessment of the said family. The assessee took up the matter on appeal to the Appellate Assistant Commissioner, who held that the said notice was barred by time, though on the merits he confirmed the order of the Income-tax Officer. The Income-tax Department as well as the 1st respondent preferred appeals against the said order to the Income-tax Appellate Tribunal. The Tribunal held that the notice was barred by time and, therefore, the income-tax authorities had no jurisdiction to give a finding on the merits. Meanwhile S. 34 (1) (a) of the Act was amended by the Finance Act, 1956, with effect from April 1, 1956, whereunder, subject to certain conditions, a notice under S. 34 (1) (a) could be issued at any time. Thereafter on July 25, 1958, the Income-tax Officer issued a notice to the 1st respondent calling upon the members who constituted the undivided family to the return for the assessment year 1945-46. Respondents 2 to 5, who were the members of the said undivided Hindu family, appealed to the Central Board of revenue for redress without any success. Thereafter, they filed a petition under Art. 226 of the Constitution in the High Court of Punjab challenging the notice on various grounds. Their main contention was that no notice under S. 34 (1) (a) could be issued in respect of the war years, as the escaped income during the said years was governed by S. 34 (1A) of the Act whereunder a notice could be issued only before March 31, 1956. The writ petition came up before a single Judge of the High Court, who referred the following question to a larger Bench: "Whether or not in the circumstances of the present case the notice under S. 34 issued on 25th July 1958, was barred by time." The Division Bench, in its turn, referred the said question to a Full Bench. The Full Bench, inter alia, held that S. 34 (1A) was a special provision whereas S. 34 (1) (a) was a general provision and that, as the escaped income of the year 1945-46 was governed by S. 34 (1A), no notice under S. 34 (1) (a) could be issued. In the result, after expressing that view, the Full Bench sent back the case to the single Judge before whom it came in the first instance. Dua, J., who heard the petition, following the view expressed by the Full Bench, allowed the petition. The appellant's thereafter, preferred a Letters Patent appeal against that order to a Division Bench, which dismissed the same. Civil Appeal No. 494 of 1964 has been filed by the Revenue by special leave against the order of the Full Bench, dated September 8, 1961, and Civil Appeal No. 495 of 1964, has been filed, by certificate, by the Revenue against the order of the Division Bench confirming that of Dua, J.
(3.) At the outset it will be convenient to read the material provisions of S. 34 fo the Act as amended by the Finance Act, 1956, and by the Income-tax (Amendment) Act, 1959. Section 34 (1) If - (a) the Income-tax Officer has reason to believe that the 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, he may in cases falling under Cl. (a) at any time...... serve on the assessee ..... a notice containing all or any the requirements which may be included in a notice under sub s. (2) of S. 22 and proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under the sub-section: Provided that the Income-tax Officer shall not issue a notice under Cl. (a) of sub-s. (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 low 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 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: ********** (1A) If in the case of any assessee, the Income-tax Officer has reason to believe - (i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September 1939, and ending on the 31st day of March 1946, and (ii) that the income, profits or gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one lakh of rupees or more ; he may, notwithstanding that the period of eight years or, as the case may be, four years specified in sub-s. (1) has expired in respect thereof, serve on the assessee ......... a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of S. 22, and may proceed to assess or re-assess the income, profits or gains of the assessee for all or any of the year referred to in Cl. (i), and thereupon the provisions of this Act [excepting those contained in Cls. (i) and (iii) of the proviso to sub-s. (1) and in sub-ss. (2) and (3) of this section], shall so far as may be, apply accordingly. Provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice ; Provided further that no such notice shall be issued after the 31st day of March 1956. (1B) Where any assessee to whom a notice has been issued under Cl. (a) of sub-s. (1) or under sub-s. (1A) for any of the years ending on the 31st day of March of the years 1941 to 1948 inclusive applies to the Central Board of Revenue at any time within six months from the receipt of such notice or before the assessment or reassessment is made, whichever is earlier, to have the matters relating to his assessment settled, the Central Board of Revenue may, after considering the terms of settlement proposed and subject to the previous approval of the Central Government, accept the terms of such settlement, and, if it does so, shall make an order in accordance with the terms of such settlement specifying among other things the sum of money payable by the assessee. (1C) Any sum specified in a settlement arrived at in pursuance of sub-s. (1B) may be recovered and any penalty for default in making payment of any such sum may be imposed and recovered in the manner provided in Chap. VI. (1D) Any settlement arrived at under this section shall be conclusive as to the matters stated therein; and no person, whose assessments have been so settled, shall be entitled to reopen in any proceeding for the recovery of any sum under this Act or in any subsequent assessment or reassessment proceeding relating to any tax chargeable under this Act or in any other proceeding whatsoever before any Court or other authority any matter which forms part of such settlement. (4) A notice under Cl. (a) of sub-s. (1) may be issued at any time notwithstanding that at the time of the issue of the notice the period of eight years specified in that sub-section before its amendment by Cl. (a) of S. 18 of the Finance Act, 1956 (18 of 1956) had expired in respect of the year to which the notice relates. Sub-section (1A) was inserted in S. 34 of the Act by the Income-tax (Amendment) Act, 1954, and it came into force on July 17, 1954. Clause (a) of sub-s. (1) of S. 34 was amended by the Finance Act, 1956, with effect from April 1, 1956. Sub-section (1B) of S. 34, which was inserted by the Income-tax (Amendment) Act, 1954, was also amended by the Finance Act, 1956, whereunder the words "to whom a notice has been issued under Cl. (a) of sub-s. (1) or under sub-s. (1A) for any of the years ending on the 31st day of March of the year 1941 to 1948 inclusive" were substituted for the words "to whom a notice has been issued under sub-s. (1A)". Sub-section (4) was added by the Income-tax (Amendment) Act, 1959.;