Sinha, C.J. - (1.) The facts in this case are briefly as follows: The petitioner before us is Messrs. M. M. Ispahani Ltd. It was a company incorporated in India in 193-1, but in 1947 it transfrred its registered office to Chitagong, Eastern Pakistan, For the accounting years 1939 to 1946 (assessment years 19-10 41 to 1947-48), the petitioner filed returns under the Indian Income-tax Act, 1922 and was assessed to tax. In the year 1950, proceedings were commenccd against the petitioner under the Taxation of Income (Investigation Commission) Act, 1947 inter alia for the accounting years 1939 to 1946. After the Supreme Court declared Section 5 (4) of the Taxation of Income (Investigation Commission) Act, 1947 as ultra vires, the proceedings started against the petitioner were dropped, After the Supreme Court Judgment of Surajmull Mohta and Co. v. A. V. Visvanatha Sastri, the Ineome-tax Act, 1922 was amended inter alia by the inclusion of Sub-sections (1-A) and (1-B) to Section 34. Eight separate notices under Section 34 (1-A) of the Income-tax Act, 1922 dated 15th June 1955 were served upon the petitioner on June 30/31, 1955 relating to the accounting years 1939 to 1946. The petitioner at first challenged the notices by questioning the validity of Section 34 (1-A) by a writ petition under Article 226 of the Constitution. This petition, however, failed and an appeal preferred against it also failed. In the meantime, on or about 18th January 1960 the petitioner filed eight separate returns pursuant to the said notices under Section 34 (1-A). The reassessment proceedings are still continuing. On April 1, 1962 the Income-tax Act, 1961 came into operation and repealed the earlier Act of 1922, subject to certain savings. We are concerned in this case with Section 297 of the 1961 Act, the relevant part whereof is set out below:-- "297. (1) The Indian Income-tax Act, 1922 (11 of 1922), is hereby repealed. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred to as the repealed Act)- (a) where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed; (d) where in respect of any assessment year after the year ending on the 31st day of March, 1940- (i) a notice under Section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed; (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under Section 34 of thy repealed Act in respect of any such income are pending at the commencement of this Act, a notice under Section 140, may, subject to the provisions contained in Section 149 or Section 150, he issued with respect to that assessment year and all the provisions of this Act shall apply accordingly; What is argued before us is that the provisions of Section 297 (2) (d) (i) are ultra vires, as being violative of the provisions of Article 14 of the Constitution. The matter came up before Banerjee, J. who was of the opinion that the application involves a substantial question of law as to the interpretation of the Constitution and should be heard by a larger Bench. He has, therefore, made a report under Chapter V, Rule 3 of the Original Side Rules of this Court, This is how the matter has come up before us for hearing. The way that Mr. Sen appearing on behalf of the petitioner before us has argued, is as follows; He argues that assessees who are liable to pay tax and whose income has escaped assessment of tax for the period 1st April 1940 to 31st March 19(i) are being divided into two Groups namely-- (i) in respect of whom notices under Section 34 of the repealed Act have been issued before 1st April 1961 and (ii) those in respect of whom no such notice has been issued. It is argued that the provisions under Section 34 (l-A) of the Act of 1922 were more onerous than those contained in the relevant sections of the 1961 Act, and yet a distinction is made between the same class of assessees, namely those whose income had escaped assessment, and while those upon whom notice has been issued under Section 34 are to be governed by the old and more onerous provisions of law, others belonging to the same class and upon whom no such notice has been served, are to be governed by the less onerous provisions of the 1961 Act, and this is a clear discrimination, violative of the provisions of Article 14 of the Constitution. Before we proceed to examine this argument, we make it clear that Section 297 speaks about a number of circumstances e.g. where a return of income has been filed before the commencement of the Act etc. We are, however, concerned in this case with one circumstance only, namely where a notice under Section 34 of the 1922 Act had been served before 1st of April, 1962 when the 1961 Act came into operation. Our decision will be confined to this circumstance only. Mr. Gupta appearing on behalf of the respondent has argued that the provisions of Section 297 (2) (d) (i) are valid because it is a well-known principle of legislation that when an old Act is repealed and a new Act is introduced in its place, "pending proceedings" are exempted from the operation of the new Act, unless the provisions are made expressly retrospective in operation. In this particular case, "pending proceedings" including proceeding for reassessment, where notices under Section 34 had been issued under the old Act, have been expressly excluded from the operation of the new Act. 1 shall now deal with the arguments advanced. In order to consider the points raised, two things will have to be decided. The first point to be decided is as to whether, issue of a notice under Section 34, (in the instant case--notice under Section 34 (1-A)) can be said to initiate a proceeding which could be said to be pending when the said Act came into operation. The second point that has to be considered is as to whether persons who are subject, to such pending proceedings, can be reasonably classified in a separate group for the purpose of legislation. The basic principle to be applied in such cases has been laid down in the Supreme Court decision of, Budhan Choudhry v. State of Bihar. where it has been held that Article 14 forbids class legislation, but it does not forbid reasonable classification for the purposes of legislation. But such classification must be based on an intelligible differentia which distinguishes a class of persons from others and that differentia must have a relationship with the object sought to be achieved by the statute.
(2.) The 1961 Act is an Act to consolidate and amend the law relating to income-tax and super tax. It provides for levy of such taxes, and lays down the machinery for determination of such taxes and the collection thereof. When the Act of 1961 came into operation there must have been innumerable assessees against whom proceedings under Section 34 of the 1922 Act had been taken, but had not been completed. There must also have been assessees who were liable to be proceeded under Section 34, but against whom no proceedings had in fact been taken. The point is as to whether, the Act of 1961 which is a consolidating and amending Act, can take into account these two types of cases and provide for a method and machinery as to how they should be dealt with, after the coming into operation of the new Act.
(3.) Coming now to the general law, we have Section 6 of the General Clauses Act It is provided therein, that where an Act has been repealed, then unless a different intention appears, the repeal shall not ........... (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed. (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactmeat so repealed. In the case of the repealed Act of 1922, we find from the provisions of Section 297 (2) (d) (i) of the 1961 Act, that not only there is no expression of a "different intention", but that there is an express provision which prevents the retrospective operation of the 1961 Act to reassessment proceedings already started under the 1922 Act. The first thing that should be noticed is that it is admitted that notices under Section 34 (l-A) have been issued as long ago as June 1955, and these notices are not by themselves challenged. There is no provision in the new Act that notices for reassessment already issued under Section 34 would lapse and that a fresh notice should be given under the new Act.;