The judgment of the court was delivered by
SUBBA RAO J.----These two appeals filed by special leave
raise the question of the true construction of the provisions of section 4 of
the Indian Income-tax (Amendment) Act, 1959 (1 of 1959), hereinafter called the
Amending Act. The material facts lie in a small compass and they are as follows.
For the assessment year 1947-48 the appellant in Civil Appeal No. 142 of 1963
filed a return of her income before the Income-tax Officer, District IV,
Calcutta, and the assessment was completed some time in 1948 as a result whereof
it was found that no tax was payable by her. On April 2, 1956, the Income-tax
Officer served on her a notice dated March 19, 1956, under section 34(1) of the
Indian Income-tax Act, 1922, hereinafter called the Act, on the ground of
escaped assessment. The date of the notice fell within 8 years from the end of
the relevant assessment year, i.e., March 31, 1948, but it was served beyond 8
years from that date and, therefore, was clearly out of time under the
provisions of the said section.
In Civil Appeal No. 143 of 1963, for the assessment year
1947-48 the appellant was assessed on a total income of Rs. 28,993 on December
30, 1948, by the Income-tax Officer and the tax thereon amounting to Rs.
4,747-13-0 was deposited on behalf of the appellant in the Reserve Bank of
India. On April 2, 1956, the appellant was served with a notice dated March 19,
1956, by the Income-tax Officer purporting to be under section 34 of the Act on
the ground of escaped assessment. The date of the notice fell within 8 years
from the end of the relevant assessment year, i.e., March 31, 1956 ; but it was
served beyond 8 years from that date and was, therefore, clearly out of time
under the provisions of the said section.
The appellants in the two appeals filed two petitions in
the High Court of Calcutta under article 226 of the Constitution for quashing
the said notices and for other appropriate reliefs. On March 20, 1957, Sinha J.
of that court issued rules nisi on the said two applications to the Income-tax
Officer, the Commissioner of Income-tax and the Union of India. On September 11,
1958, the said judge made the rules absolute. The respondents to the
applications preferred appeals from the judgment of Sinha J. to a Division Bench
of that court. Pending the appeals, on March 12, 1959, section 34 of the Act was
amended by section 2 of the Amending Act. After the said amendment the appeals
were heard by a Division Bench of the High Court, consisting of Bose C. J. and
G. K. Mitter J. Relying upon the said amendment the learned judges held that the
said notices, though served on the appellants after the prescribed time, were
saved under section 4 of the Amending Act. In that view they set aside the
orders of Sinha J. and dismissed the writ petitions. Hence the appeals.
Learned counsel for the appellants contends that the
notices under section 34(1) of the Act were served on the appellants beyond 8
years from the end of the assessment year and, therefore, were barred and that
on a true construction of the provisions of section 4 of the Amending Act, the
said notices were not saved thereunder. To appreciate the contention it is
necessary to read the relevant provisions of the Act before and after the
amendment.
Section 34(1) of the Indian Income-tax Act, 1922, before
it was amended by the Finance Act, 1956 (XVIII of 1956) :
" 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 section 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 underassessed, 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
(b) he may in cases falling under clause (a) at any time
within eight years . . . . serve on the assessee . . . . a notice containing all
or any of the requirements which may be included in a notice under sub-section
(2) of section 22 and may 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 that sub-section . . .
Provided that where a notice under sub-section (1) has
been issued within the time therein limited, the assessment or reassessment to
be made in pursuance of such notice may be made before the expiry of one year
from the date of the service of the notice even if such period exceeds the
period of eight years or four years, as the case may be."
Section 4 of the Amending Act (1 of 1959) :
" No notice issued under clause (a) of sub-section
(1) of section 34 of the principal Act at any time before the commencement of
this Act and no assessment, reassessment or settlement made or other proceedings
taken in consequence of such notice shall be called in question in any court,
tribunal or other authority merely on the ground that at the time the notice was
issued or at the time the assessment or reassessment was made, the time within
which such notice should have been issued or the assessment or reassessment
should have been made under that section as in force before its amendment by
clause (a) of section 18 of the Finance Act, 1956 (18 of 1956), had
expired."
Section 34(1)(a) of the Act empowered the Income-tax
Officer to assess concealed income which escaped assessment by serving a notice
on the assessee at any time within 8 years of the end of the assessment year in
respect whereof the said income has escaped assessment. Section 4 of the
Amending Act debars the court from questioning the validity of a notice issued
or the assessment or reasssessment made under sub-section (1)(a) of section 34
of the Act on the ground that the time for the issue of such notice or the
making of such assessment or reassessment had expired under the said sub-section
before it was amended by section 18 of the Finance Act of 1956.
Learned counsel for the appellants contends that section 4
of the Amending Act only saves a notice issued after the prescribed time but
does not apply to a situation where notice is issued within but served out of
time. Learned counsel for the respondents argues that the expression "
issued " means " served " and that, in any view, it is
comprehensive enough to take in the entire process of giving and serving of
notice.
Before construing the section it will be useful to notice
the relevant rules of construction of a fiscal statute. In Oriental Bank
Corporation v. Wright the judicial Committee held that if a statute professed to
impose a charge, the intention to impose a charge on the subject must be shown
by clear and unambiguous language. In Canadian Eagle Oil Co. v. R Viscount Simon
L. C. observed :
" In the words of Rowlatt J ............... in a
taxing Act one has to look merely at what is clearly said. There is no room for
any intendment. There is no equity about a tax. The is no presumption as to a
tax. Nothing is to be read in, nothing is to be implied. One can only look
fairly at the language used."
In other words, a taxing statute must be couched in
express and unambiguous language. The same rule of construction has been
accepted by this court in Gursahai Saigal v. Commissioner of Income-tax, wherein
it was stated :
" ..... it is well recognised that the rule of
construction that if a case is not covered within the four corners of the
provisions of a taxing statute, no tax can be imposed by inference or by analogy
or by trying to probe into the intentions of the legislature and by considering
what was the substance of the matter, applies only to a taxing provision and has
no application to all provisions in a taxing statute. It does not apply to a
provision not creating a charge for the tax but laying down the machinery for
its calculation or procedure for its collection. The provisions in a taxing
statute dealing with machinery for assessment have to be construed by the
ordinary rules of construction, that is to say, in accordance with the clear
intention of the legislature, which is to make a charge levied effective."
In that case, the court was called upon to construe the
provisions of section 18A of the Income-tax Act, 1922, which laid down the
machinery for assessing the amount of interest, and, therefore, this court did
not apply the stringent rule of construction. Apart from the emphasis on the
letter of the law, the fundamental rule of construction of a taxing statute is
not different from that of any other statute and that rule is stated by Lord
Russell of Killowen C.J. in Attorney-General v. Carlton Bank, thus :
"The duty of the court is ... to give effect to the
intention of the legislature, as that intention is to be gathered from the
language employed having regard to the context in connection with which it is
employed."
To the present case the general rule of construction of
fiscal Acts would apply, and not the exception engrafted on that rule : for
section 4 of the Amending Act cannot be described as a provision laying down the
machinery for the calculation of tax. In substance it enables the Income-tax
Officer to reassess a person's income which has escaped assessment, though the
time within which he could have so assessed had expired under the Act before the
amendment of 1959. It resuscitates barred claim. Therefore, the same stringent
rules of construction appropriate to a charging section shall also apply to such
a provision.
Before the Amending Act of 1959 was passed Income-tax
Officers issued notices before April 1, 1956, and also after that date for
reopening assessments made beyond 8 years from the issue of such notices. The
validity of such notices was questioned. To save the validity of such notices
the Amending Act was passed. This court in S. C. Prashar v. Vasantsen Dwarkadas
held on a construction of section 4 of the Amending Act that it operated and
validated the notices issued under section 34(1)(a) of the Act as amended in
1948, even earlier than April 1, 1956. In other words, notices issued under
section 34(1)(a) of the Act before or after April 1, 1956, could not be
challenged on the ground that they, were issued beyond the time limit of 8 years
from the respective assessment years prescribed by the 1948 Amendment Act.
Section 4 of the Amending Act of 1959, therefore, was enacted for the sole
purpose of saving the validity of such notices in respect of all escaped incomes
relating to any year commencing from the year ending on March 31, 1941, though
they were issued beyond the prescribed time. If the construction sought to be
placed by the learned counsel for the appellants be accepted, it would defeat
the purpose of the amendment in some cases. If the words were clear and exclude
the class of cases where the notices were sent before 8 years from the date of
assessment, but served thereafter, this court has to give them the said meaning.
This brings us to the question of construction of the
provisions of section 4 of the Amending Act. The crucial word in the said
section is " issued ". The section says that though a notice was
issued beyond the time within which such notice should have been issued, its
validity could not be questioned. If the word " issued " means "
sent ", we find that there is no provision in the Act prescribing a
time-limit for sending a notice, for, under section 34(1)(a) of the Act, a
notice could be served only within 8 years from the relevant assessment year. It
does not provide any period for sending of the notice. Obviously, therefore, the
expression " issued " is not used in the narrow sense of " sent
". Further, the said expression has received, before the amendment, a clear
judicial interpretation, Under section 34(1)(a) of the Act the Income-tax
Officer may in cases falling under clause (a) at any time within 8 years serve
on the assessee a notice. The proviso to that section says that where the notice
under section 34(1)(a) is within time therein limited, the assessment or
reassessment to be made in pursuance of such notice may be made before the
expiry of one year from the date of the service of the notice even if such
period exceeds the period of 8 years or 4 years, as the case may be. In
Commissioner of Income-tax v. D. V. Ghurye, it was argued that a notice sent
before 8 years, though served beyond 8 years, was in compliance with the section
; and in support of that argument the expression " issued " in the
proviso was relied upon to limit the meaning of the word " served " in
the substantive part of the section. Rejecting the argument, Chagla C. J.,
speaking for the court, observed :
" In other words, the attempt is to equate the
expression ' served ' used in section 34 with the expression ' issued ' used in
the proviso to sub-section (3). Now we must frankly confess that we find it
difficult to understand why the legislature has used in the proviso the
expression ' where a notice under sub-section (1) has been issued within the
time therein limited '. In sub-section (1) no time is limited for the issue of
the notice : time is only limited for the service of the notice ; and therefore
it is more appropriate that the expression ' issued ' used in the proviso to
sub-section (3) should be equated with the expression ' served ' rather than
that the expression ' served ' used in sub-section (1) should be equated with
the expression ' issued ' used in the proviso to sub-section (3)."
This decision equated the expression " issued "
with the expression " served ". The Allahabad High Court in Sri Niwas
v. Income-tax Officer has also interpreted the word " issued " to mean
" served ". The relevant rule of construction is clearly stated by
Viscount Buckmaster in Barras v. Aberdeen Steam Trawling and Fishing Co. Ltd.,
thus :
" It has long been a well-established principle to be
applied in the consideration of Act of Parliament that where a word of doubtful
meaning has received a clear judicial interpretation, the subsequent statute
which incorporates the same word or the same phrase in a similar context, must
be construed so that the word or phrase is interpreted according to the meaning
that has previously been assigned to it."
Section 4 of the Amending Act was enacted for saving the
validity of notices issued under section 34(1) of the Act. When that section
used a word interpreted by courts in the context of such notices it would be
reasonable to assume that the expression was designedly used in the same sense.
That apart, the expressions " issued " and " served " are
used as interchangeable terms both in dictionaries and in other statutes. The
dictionary meaning of the word " issue " is " the act of sending
out, put into circulation, delivery with authority or delivery". Section 27
of the General Clauses Act, 1897 (X of 1897), reads thus :
" Where any Central Act or Regulation made after the
commencement of this Act authorises or requires any document to be served by
post, whether the expression ' serve ' or either of the expressions, ' give ' or
' send ', or any other expression is used, then, unless a different intention
appears, the service shall be deemed to be effected by properly addressing,
prepaying and posting by registered post, a letter containing the document, and
unless the contrary is proved, to have been effected at the time at which the
letter. would be delivered in the ordinary course of post."
It would be seen from this provision that Parliament used
the words serve ", " give " and " send " as
interchangeable words. So too, in sections 553, 554 and 555 of the Calcutta
Municipal Act, 1951, the two expressions " issued to " or "
served upon " are used as equivalent expressions. In the legislative
practice of our country the said two expressions are sometimes used to convey
the same idea. In other words, the expression " issued " is used in a
limited as well as in a wider sense. We must, therefore, give the expression
" issued " in section 4 of the Amending Act that meaning which carries
out the intention of the legislature in preference to that which defeats it. By
doing so we will not be departing from the accepted meaning of the expression,
but only giving it one of its meanings accepted, which fits into the context or
setting in which it appears.
With this background let us give a closer look to the
provisions of section 4 of the Amending Act. The object of the section is to
save the validity of a notice issued beyond the prescribed time. Though the time
within which such notice should have been issued under section 34(1) of the Act,
as it stood before its amendment by section 18 of the Finance Act of 1956, had
expired, the said notice would be valid. Under section 34(1) of the Act, as we
have already pointed out, the time prescribed was only for service of the
notice. As the notice mentioned in section 4 of the Amending Act is linked with
the time prescribed under the Act, the section becomes unworkable if the narrow
meaning is given to the expression " issued ". on the other hand, if
we give a wider meaning to the word, the section would be consistent with the
provisions of section 34(1) of the Act. Moreover, the narrow meaning would
introduce anomalies in the section : while the notice, assessment or
reassessment were saved, the intermediate stage of service would be avoided. To
put it in other words, if the proceedings were only at the stage of issue of
notice, the notice could not be questioned, but if it was served, it could be
questioned : though it was served beyond time, if the assessment was completed,
its validity could not be questioned. The result would be that the validity of
an assessment proceeding would depend upon the stage at which the assessee seeks
to question it. That could not have been the intention of the legislature. All
these anomalies would disappear if the expression was given the wider meaning.
To summarize : The clear intention of the legislature is
to save the validity of the notice as well as the assessment from an attack on
the ground that the notice was given beyond the prescribed period. That
intention would be effectuated if the wider meaning is given to the expression
" issued ". The dictionary meaning of the expression " issued
" takes in the entire process of sending the notice as well as the service
thereof. The said word used in section 34(1) of the Act itself was interpreted
by courts to mean " served ". The limited meaning, namely, " sent
" will exclude from the operation of the provision a class of cases and
introduce anomalies. In the circumstances, by interpretation, we accept the
wider meaning the word " issued " bears. In this view, though the
notices were served beyond the prescribed time, they were saved under section 4
of the Amending Act. No other point was raised before us.
In the result, the appeals fail and are dismissed with
costs. There will be one hearing fee.
Appeals dismissed
