# [1966] 3 S.C.R. 379

- **Citation:** [1966] 3 S.C.R. 379
- **Court:** Supreme Court of India
- **Decided:** 1966-01-19
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1966-3-s-c-r-379-3720
- **Pages:** 14

## Headnote

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A
COMMISSIONER OF INCOME-TAX, PATIALA & ORS.
B
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D
E
F
G
H
v.
M/s. SHAHZADA NAND & SONS & ORS.
January 19, 1966
[K. SUBBA RAO. M. HIDAYATULLAH AND
R. S. BACHAWAT, JJj
Indian Income-tax Act, 1922 (11 of 1922), &. 34, sub-s. 34(l)(a) as
amended by the Finance Act 1956; sub"S. 34(1A)-Field of operation of
the two sub-sections whether overlapping in respect of war years-Whether s. 34(1A) as a special provision over-rides s. 34(1) (a) in respect of
.the -war ytars.
On March 26,
1954 the Income-tax authorities issued a notice to the
respondents under s. 34(1) (a) of the Indian Income-tax Act, 1922 in
respect of assessment year 1945-46. The assessment made pursuant to
the notice was set aside by the appellatte authorities on the ground that
the notice under s. 34(1)(a) was time baned because the assessment year
in question was beyond the period of 8 years covered bys. 34(l)(a).
Sub-s<>. (IA) to (ID) were imerted in s. 34 by the Income-tax (Amendment) Act 1954. By sub-s. (IA) power was given
to the Income-tax
authorities to issue notice in respect of escaped income of the previous
years within the period September 1, 1939 to March 31,
1946. By the
Finance Act 1956 with effect from April 1, 1956 s. 34(1) (a) was amended so that notices in respect of """!IPed income could be issued 'at any
time' subject to certain conditions. ·-0n July 25,
1958
tho Income-tax
Officer again issued a notice to the respondents calling upon them to
file a return for tho as3CSSment year 1945-46. An appeal to the Centrll
Board of Revenue by some of respondents failed. Thereupon they filed a
petition und"" Art. 226 of the Constitution challenging the notice on
various grounds. Their main contention
Wat that no notice
under
s. 34(l)(a) couid be issued in respect of the war years as tbe escapee.I
income of the said war years was governed by '· 34(lA), whereunder
notices could be issued only up to March 31, 1956. The High Coutt
having taken a view favourable to the respondents, the Revenue appealed
to this Court by special leave.
It was contended on behalf of the appellant that the terms of s.
34(1)(a) after its amendment in 1956 were clear and unambiguous and
the scope of the expression 'at any time' could not be curtailed by cons'
truction and that s. 34( IA) did not operate to restrict the operation of
s. 34(1)(a) in respect of the war years. On behalf of tbe respondents
it was contended thats. 34(1A) was a species of which s. 34(1)(a) was
genus that in respect of the war years
th..-e was a conflict between. the
two sub-sections, and that in view of the maxim, generalia specialibus non
_derogant, s. 34( IA) should prevail.
HElD:
(i) It would not be appropriate to describe subJS. (IA) aJJ
one carved out of sub-s. (l)(a) or to call it a species of which sub-s.
(!)(a) is the genus.
When s. 34(1A) was enacted s. 34(1)(a) bad
practically ceased to function in respect of the war years.
Again wheri
S· 34(1)(a) was amended
with effect from April 1,
1956 s. 34(1A)
had practically ceased to operate as no notices under it could be issued
after March 31, 195 6.
There is no conflict between the two sub-sections.
after that date. The wide phraseology of the amended s. 34(1) (a) take•.
379
380
SUPREME COURT REPORTS
(1966] 3 S.C.R.
in all the escaped concealed incomes during all the yeara oommencing from
1941 and confers power on the lncome-iax Officer to give notice there·
under in respect of the •aid income without any bar of limitation.
[390 C-FJ
(ii) Sub.Section (IA) does not really preocribe any period of lirnita·
tion. It enables the Income-tu Officer to !&kc proceedings within a
panicular time, though the period of limitation had expired. It conferred
a special power on the Income-tax Officer which expired on April I,
1956. The non.obstante clause in llllH. (IA) indicatea that it waa enacted
to operate notwithstanding that the period of 8 yoan had expired. The
1aid sub-section served its purpose only when the period of 8 yeara governed a notice under su

## Text

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A
COMMISSIONER OF INCOME-TAX, PATIALA & ORS.
B
c
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F
G
H
v.
M/s. SHAHZADA NAND & SONS & ORS.
January 19, 1966
[K. SUBBA RAO. M. HIDAYATULLAH AND
R. S. BACHAWAT, JJj
Indian Income-tax Act, 1922 (11 of 1922), &. 34, sub-s. 34(l)(a) as
amended by the Finance Act 1956; sub"S. 34(1A)-Field of operation of
the two sub-sections whether overlapping in respect of war years-Whether s. 34(1A) as a special provision over-rides s. 34(1) (a) in respect of
.the -war ytars.
On March 26,
1954 the Income-tax authorities issued a notice to the
respondents under s. 34(1) (a) of the Indian Income-tax Act, 1922 in
respect of assessment year 1945-46. The assessment made pursuant to
the notice was set aside by the appellatte authorities on the ground that
the notice under s. 34(1)(a) was time baned because the assessment year
in question was beyond the period of 8 years covered bys. 34(l)(a).
Sub-s<>. (IA) to (ID) were imerted in s. 34 by the Income-tax (Amendment) Act 1954. By sub-s. (IA) power was given
to the Income-tax
authorities to issue notice in respect of escaped income of the previous
years within the period September 1, 1939 to March 31,
1946. By the
Finance Act 1956 with effect from April 1, 1956 s. 34(1) (a) was amended so that notices in respect of """!IPed income could be issued 'at any
time' subject to certain conditions. ·-0n July 25,
1958
tho Income-tax
Officer again issued a notice to the respondents calling upon them to
file a return for tho as3CSSment year 1945-46. An appeal to the Centrll
Board of Revenue by some of respondents failed. Thereupon they filed a
petition und"" Art. 226 of the Constitution challenging the notice on
various grounds. Their main contention
Wat that no notice
under
s. 34(l)(a) couid be issued in respect of the war years as tbe escapee.I
income of the said war years was governed by '· 34(lA), whereunder
notices could be issued only up to March 31, 1956. The High Coutt
having taken a view favourable to the respondents, the Revenue appealed
to this Court by special leave.
It was contended on behalf of the appellant that the terms of s.
34(1)(a) after its amendment in 1956 were clear and unambiguous and
the scope of the expression 'at any time' could not be curtailed by cons'
truction and that s. 34( IA) did not operate to restrict the operation of
s. 34(1)(a) in respect of the war years. On behalf of tbe respondents
it was contended thats. 34(1A) was a species of which s. 34(1)(a) was
genus that in respect of the war years
th..-e was a conflict between. the
two sub-sections, and that in view of the maxim, generalia specialibus non
_derogant, s. 34( IA) should prevail.
HElD:
(i) It would not be appropriate to describe subJS. (IA) aJJ
one carved out of sub-s. (l)(a) or to call it a species of which sub-s.
(!)(a) is the genus.
When s. 34(1A) was enacted s. 34(1)(a) bad
practically ceased to function in respect of the war years.
Again wheri
S· 34(1)(a) was amended
with effect from April 1,
1956 s. 34(1A)
had practically ceased to operate as no notices under it could be issued
after March 31, 195 6.
There is no conflict between the two sub-sections.
after that date. The wide phraseology of the amended s. 34(1) (a) take•.
379
380
SUPREME COURT REPORTS
(1966] 3 S.C.R.
in all the escaped concealed incomes during all the yeara oommencing from
1941 and confers power on the lncome-iax Officer to give notice there·
under in respect of the •aid income without any bar of limitation.
[390 C-FJ
(ii) Sub.Section (IA) does not really preocribe any period of lirnita·
tion. It enables the Income-tu Officer to !&kc proceedings within a
panicular time, though the period of limitation had expired. It conferred
a special power on the Income-tax Officer which expired on April I,
1956. The non.obstante clause in llllH. (IA) indicatea that it waa enacted
to operate notwithstanding that the period of 8 yoan had expired. The
1aid sub-section served its purpose only when the period of 8 yeara governed a notice under su!H. (I) (a). But when that bar of limilation was
removed, sub-s. (IA) bad become otiose.
(390 G-391 Al
Funher sub-s. (IB) as
amended by the Fmance Act of 1956 and
111b-1. 4 added by tho In4i1D Ino- tu Act (Alllendmcat) Act 19St,
also reinforces the construction that su!H. 34(l)(a) as amended in 1956
was applicable to the war years despite sub~. 34(1A). (391 B., D-E]
(iii) The reason why su!H. (IA) wea retained in the statute even
after the Finance Act of 1956 was that though DD new notices could be
isimed under that sulH;ection after April 1, 1956, notices already issued
before that date were pending. They could be disposed of in the manner
prescribed by su!Hls. (IA), (IB), (IC), and (IDl of s. 34.
All the
aid 111b«ctions formed an intq1al code. 11io lcPiature, premmably,
intended to keep the said sub-oectiOlllJ whercunder proceedings had already
been initiated and make available to the said proceedings the procedure
prescribed under the said provisions. It may also be that sub,,. (IA) wea
kept in super abundant caution. What.ever that may be, it cannot, in
the circumstances, detract from the clear provisions of sub-s.
(I) (a).
1391 F, G]
Case law referred to.
Qvn. APPFH.ATE JtJP.ISDICTION
and 495 of 1964.
Civil Appeals Nos. 494
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Appeals by special leave from the judgment and order datod
September 26, 1961 of the Punjab High Court in Civil Writ
No. 80lof1959.
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S. T. Desai, R. Ganapathy Tyer and R. N. Sachthey, for the
appellant.
N. A. Palkhiva/a, l. M. Nanavati, T. A. Ramachandran, J. B.
Dadachanji, 0. C. Mathur and Ravinder Narain, for the respon-
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N. A. Palkhivala, J. B. Dadachanji, 0. C. Mathur and Ravinder
Narain, for intervener Nos. I and 2.
[, M. Nanavali, J. B. Dadachanji, 0. C. Mathur and Ravirtder
Narain, for intervener No. 3.
N. A. Palkhivala, R. J. Ko/ah, J.B. Dadachanji, 0. C. Mathur
H
and Rll'linder Narain, for intervener No. 4.
D. N. Mukherjee, for intervener No. 5.
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C.I.T. v. SHAHZADA NAND (Subba Rao,/.)
381
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The judgment of the Court was delivered by
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Sobba Rao, J. 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.
The facts may be briefly stated. Messrs. Shahzada and Sons,
the lst respondent in both the appeals, was an undivided Hindu
Family firm and it was assessed in that capacity up to the assessment year 1945-46. It is alleged that subsequently there was a
partition in the family and a new firm came into existence, whic\
took over the business of. the family. On March 26, 1954, the
Income-tax
authorities issued a notice to the members of the
clefunct Hindu undivided family under s. 34(1)(a) of the Act i11
respect of the assessment year 1945-46 on the ground that certain
•ncome 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 l st 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 l, 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 file a 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(l)(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 section 34 issued on 25th July 1958
was barred by time."
382
SUPREME COURT REPORTS
{1966] 3 S.C.R.
The Division Bench, in its turn, referred the said queation 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
Bene.Ii, allowed the petition. The appellants, 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
!iled 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.
At the outset it will be convenient to read the material pro'
visions of s. 34 of the Act as amended by the Finance Act, 1956,
and by the Income-tax (Amendment) Act, 1959.
Stction 34.
(I} 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 y(:ar, 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 clause (a) at any time
................ serve on the asscssee .............. ..
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 the Income-tax Officer shall not issue a notice
under clause (a) of sub-section (1)-
(i) for eny 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
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C.I.T. V. SHAHZADA NAND (Subba Rao, J.)
383'
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 Joss or depreciation allowance which has been
computed in excess, amount to, or likely to amount to,
one Jakh 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 3 Ist day of March,
1941;
(iii) for any year, unless he has recorded his reasons
for doing so, and, in any case falling under clause (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 :
(IA). If in the case of any assessee, the Income-tax
Officer has reason to believe :-
(i) that income, profits or gains chargeable to incometax have escaped assessment for any year in respect of which
the relevant previous year falls wholly or partly within the
period beginning on the !st 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 Jakh of rupees or more,
he may, notwithstanding that the period of eight years or, as the·
case may be, four years specified in sub-section (I) 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-section (2) of section 22, and
may proceed to assess or re-assess the income, profits or gains of·
the assessee for all or any of the years referred to in clause (i), and
thereupon the provisions of this Act [excepting those contained in
clauses (i) and (iii) of the proviso to sub-section (I) and in subsections (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 ~ a fit ease for the issue of such notice :
Provided further that no such notice shall be issued after the
3.lst day of March, J 956 •
384
SUPREME COURT REPORTS
[1966] 3 S.C.R.
(IB) Where any assessee to whom a
notice has
been issued under clause (a) of sub-section (I) or under
sub-section (IA) 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
re-assessment is made, whichever is earlier, to have the
matters relating to his
a~sessment 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.
(IC) Any sum specified in a settlement arrived at in
pursuance of sub-section (IB) 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
Chapter VI.
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(ID) 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 he entitled to re-open in any proceeding for the recovery of any
sum under this Act or in any subsequent assessment or reE
.assessment 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 clause (a) of sub-section (I) may he
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 clause (a) of
section 18 of the Finance Act, 1956 (18of1956) had expired
in respect of the year to which the notice relates.
Sub-section (I A) was inserted in s. 34 of the Act by the Income-tax
(Amendment) Act, 1954, and it came into force on July 17, 1954.
aause (a) of sub-s. (I) of s. 34 was amended by the Finance Act,
1956, with effect from April I, 1956. Sub-section (IB) of s. 34,
which was inserted by the Income-tax (Amendment) Act, 1954,
was also amended by the Finance Act, 1956, whereunder the wordi
"to whom a notice has been issued under clause (a) of sub-section
(I) or under sub-section (IA) for any of the years ending on the
31st day of March of the years 1941 to 1948 inclusive" were substituted for the words "to whom a notice has been issued under subF
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C.I.T. v. SHAHZADA NAND (Subba Rao, !.)
385
section (lA)." Sub-section (4) was added by the Income-tax
(Amendment) Act, 1959.
The gist of the relevant provisions may be stated thus :
Under s. 34(l)(a), before it was amended by the Finance Act, 1956,
in the case of concealed income a notice for re-assessment could be
issued within 8 years of the end of the relevant year; and after the
said amendment, notice in respect of the said income could be
issued at any time, but it was subject to three conditions, namely,
(i) it would not be issued for any year prior to the year ending on
March 31, 1941, (ii) such concealed income amounted to one lakh
of rupees or more in the aggregate, and (iii) the Income-tax Officer
gave reasons for doing so and obtained the consent of the Central
Board of Revenue. Sub-section (IA) of s. 34 did not undergo any
change after the Finance Act, 1956. Escaped assessment for any
year in respect of which the relevant previous year fell within the
period beginning on September I, 1939, and ending on March
31,
1946, could be reached by issuing a notice thereunder: but, it
was subject to the condition that the income which escaped assessment for any year amounted to or was likely to amount to rupees
one lakh or more; it was subject to a further condition that no such
notice should be issued after March 31, 1956. Sub-section (lB)
of s. 34, as amended in 1956, enabled an assessee to whom a notice
has been issued under cl. (a) of sub-s. (l) or sub-s. (IA) for any of
the years ending on March 31 of the years 1941 to 1948 inclusive,
to apply to the Central Board of Revenue for a settlement of the
amount of tax payable by him, Sub-section (4), which was inserted in 1959, emphasized the fact that a notice could be issued
under s. 34(1)(a), notwithstanding that the time of 8 years had
expired before the Finance Act, 1956, came into force.
We may at this stage notice the arguments advanced by learned counsel on the interpretation of the said provisions.
The arguments of Mr. S. T. Desai, learned counsel for the
~evenue, may be summarized thus : The terms of s. 34(l)(a), after
its amendment by the Finance Act, 1956, are clear and unambiguous and the scope of the expression "at any time" cannot be
curtailed by construction. So construed, proceedings for re-assessment in respect of escaped income contemplated by the said clause
can be initiated without any restriction of time. The legislative
history of the fasciculus of sub-sections, namely,
sub-ss. (l)(a),
(IA), (lB), (1 C) and (ID) of s. 34, supports the said construction
and explains the relative scope of s. 34(l)(a) and s. 34(1A)-the
former, as amended by the Finance Act, 1956, operated after s.
34(1A) ceased to operate so far as the escaped concealed income of
war years was concerned. The amendment of s. 34(1B) by the
said Act and the introduction of s. 34(4) by the Income-tax
(Amendment) Act, 1959, reinforces the said construction, namely,
·386
SUPREME COURT
REPORTS
[1966] 3 S.C.R.
that the amended s. 34(1)(a) lifted the ban of limitation also in
respect of the escaped income of the war year,. The retention of
s. 34(1A) on the statute became necessary as proceedings taken
thereunder were pending at the time the Finance Act, 1956, came
into force and the consequentiai provisions, such as, s. 34(1 B) etc .•
~ith whlch s. 34(1A) "as integrally connected could not be applied
1f the latter was omitted.
Further, the said sub-sections still applied to incomes falling under s. 34( l)(b) in respect of war years.
In any view. it must have been retained in superabundant caution
and that fact could not restrict the scope of an otherwise clearly
expressed provision, ri::.,
s. 34(1)(a). The construction accepted
by the High Court led to the anomalous position of the Legislature
prescribing a shorter period of limitation in the case of tax-evaders
during the war years and no p!riud of limitation for evaders of such
income during the pre-war and post-war years.
This could not
have been the intention of the Legislature, as the evasion of tax
during the war years was comparatively of larger amounts than
during the other periods and for that very reason it has passed
the Taxation of Income (Investigation Commission) Act, 1947,
which was declared to be void by this Court. This contention
was accepted by the Bombay and Calcutta High Courts in Laxminarayan R. Rachi v. Income-tax Officer, Poona (') and Mandanlal
Jajodia v. Income-tax Officer, Dist. IT(l), Calcutta (2) respectively,
Mr. Palkhivala, learned counsel for the respondents, answered
this criticism thus.
In a taxing Act one has to look merely what is
clearly stated and, if the interpretation is open to doubt, the construction most beneficial to the subject must be adopted. Section
34(l)(a), before it was amended in 1956, provided for the genus out
of which, hy the Income-tax (Amendment) Act, 1959, the species of
'· 34(1A) was carved out. Whiles. 34(1 )(a) was a general provision.
s. 34(1A) was a special provision. On the principle of genera/ia
specia/ibus 11011 deroganr, the field covered by s. 34(1A) should be
excluded from that covered by s. 34(1)(a). If that was the legal
position before the 1956 amendment, the argument proceeded. the
same position would continue thereafter, as Parliament retained
s. 34(1A), along with ih provisos. as it stood before the amendment
and amended only s. 34(1)(a). The lifting of the han of limitation,
therefore, sh<>uld, on the basis of the said dnctrine, he confined
to the field co1·ered bys. 34(1)(a) hcfore the amendment. If Parliament intended to do away with the period of limitation in respect of
the escaped incomes during the \\·ar period, it
would not h:ive
retained s. 34(1A) on the statute hook; for, in that event, it would
serve no purpose. It "ould be wrong to say that it ceased to be
operative after April I, 1956, for the period of limitation would still
apply to proceedings in respect of escaped incomes of the war years.
Sub-s. (4) added ins. 34 in the year 1959 ands. 34(16), as amended
(I) (1964) s2 r:r.R. 2s4.
(2) (1965) 58 I.T.R. 693.
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387
in 1956, would not throw any light on the question, but in a way
would support the view that they were concerned only with the
escaped incomes covered by s. 34(\)(a), excluding thereform those
covered bys. 34(1A). The argument based on the alleged anomaly
led nowhere and indeed the retention of s. 34(1A) on the statute
book was intentionally done, as the Parliament, having already
placed a particular class of assessees under a special and heav.y
burden, did not think fit to make any provision which was likely
to harass
them further. The ambiguity in the section, if any,
should go for the benefit of the tax-payer and not the tax-gatherer.
This argument was accepted by the Madhya Pradesh and Gujarat
High Courts in Rustomji v. Income-tax Officer, Special Investigation Circle, lndore(I), and Mathurdas Govinddas v. G. N. Gadgil,
Income-tax Officer, Special Investigation Office, Ahmedabad (2).
Before we advert to the said arguments, it will be convenient to
notice the relevant rules of construction. The classic statement
of Rowlatt, J., in Cape Brandy Syndicate v. I.R.C. (3).
still holds
the field. It reads :
"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. There 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."
To this may be added a rider : in a case of reasonable doubt, the
construction most . beneficial to the subject is to be adopted.
But even so, the fundamental rule of construction is the same for
all statutes, whether fiscal or otherwise. "The underlying principle
is that the meaning and intention of a statute must be collected from
the plain and unambiguous expression used therein rather than
from any notions which may be entertained by the court as to what
is just or expedient." The expressed intention must guide the court.
Another rule of construction which is relevant to the present enquiry
is expressed in the maxim, generalia specialibus non derogant, which
means that when there is a conflict between a general and a speciai
provision, the latter shall prevail. The said principle has been
stated in Craies on Statute Law, 5th Edn., at P. 205, thus :
"The rule is, that whenever
there is a particular
enactment and a general enactment in the same statute, and
the latter, taken in its most comprehensive sense, would
overrule the former, the particular enactment must be
operative, and the general enactment must be taken to
· 1
affect only the other parts of the statute to which it may
. properly apply."
(I). [1964] 54 I.T.R. 461
(2) [1965] 561.T.R. 6;!1!
(3) [1921] I K.B. 64, 71.
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[1966) 3 S.C..R.
But this rule of construction is not of universal application. It
A
is subject to the condition that there is nothing in the general
provision, expressed or implied, indicating an intention to the contrary : see Maxwell on Interpretation of Statutes, I Ith Edn., at
pp. 168-169. When the words of a section are clear, but its
scope is sought to be curtailed by construction, the approach suggested by Lord Coke in lleydons case('), yield better results :
B
"To arrive at the real meaning, it is always necessary
to get an exact conception of the aim, scope, and object
of the whole Act : to consider, according to Lord Coke :
(1) What wasthelawbeforetheAct was passed; (2) What
was the mischief or defect for which the law had not provided ; (3) What remedy Parliament has appointed : and
c
(4) Thereasonoftheremedy."
With these rules of construction in mind, let us now tackle
the problem raised in this case.
Under s. 34{1)(a), after it was
amended by the Finance Act, 1956, a notice in respect of an escaped
concealed income could be issued at any time. The terms of cl.
(a) and the expression "at any time" are clear and unambiguous
and, if there is nothing in the Act detracting from the width of the
said terms, it is clear that a notice can be issued at any time in
respect of the concealed income of any year not being a year ending
before March 31, 1941. But s. 34(1A) provides for the issue of
notice in respect of escaped income of the previous years within
the period beginning on September I, 1939, and ending on March
31, 1946.
Does this sub-section detract from the generality of
s. 34(l)(a) ? The history of the said provision may usefully be
noticed. As we have stated earlier, the Parliament passed the Taxation of Income (Investigation Commission) Act, 1947, mainly to
catch the escaped incomes of the war profiteers. This Court in
Suraj Mall Moh ta and Co. v. A. V. Viswanatha Sastri (2) and
Muthiah v. C.1.T. (l) held that s. 5(4) and 5(1) of the said Act became void on the commencement of the Constitution as offending
Art. 14 thereof. The first decision led to the insertion of sub-ss.
(lA) to (lD) ins. 34 by the Income-tax (Amendment) Act, 1954, with
effect from July 17, 1954. The object of the Amending Act was
to provide for the assessment or re-assessment of persons who
had, to a substantial extent, evaded payment of taxes during the war
years and for matters connected therewith. But at the time sub-s.
(IA) was inserted in s.34, the period of limitation provided with
regard to issue of notices under s. 34(l)(a) was 8 years and for cases
falling under s. 34(1)(b) it was 4 years; but, as the Income-true
(Amendment) Act, 1954, came into force only on July 17, 1954,
tk said periods of limitation prescribed in respect of escaped concealed incomes during the said period had run out except in respect
(1) [!584! 3 Rep. 7b.
(2) [1955) t S.C.R. 448.
(3) (1955] 2 S.C.R. 1247.
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389·
of one or two years. So, with the twin object of extending the time
and expediting the assessment, the second proviso was introduced
therein to the effect that no such notice should be issued after March
31, 1956. But, notwithstanding the said Act, presumably notices
could not have been issued against all the evaders of tax with incomes
of rupees one lakh or more during the said period. Parliament
also wanted to bring to tax escaped concealed incomes during the
period not covered by the said years. With that object, in 1956
s. 34 was amended by the Finance Act, 1956, by which it was provided that notice under s. 34(l)(a) can be issued at any time. But
sub-s. (IA) was retained, including the second proviso. This amendment, along with the other amendments, made by the said Act
came into force on April I, 1956. In 1959, the said section was again
amended by the Indian Income-tax
(Amendment) Act,
1959.
Under sub-s. (4), as amended by the 1959 amendment Act, notice
under sub-s. (!)(a) might be issued at any time notwithstanding
that at the time of the issue of notice the period of 8 years specified
in that sub-section before its amendment by the Finance Act,
1956, had expired in respect of the year to which
the notice
related. This amendment was necessitated by the judgments
of the Bombay and ca!cutta High Courts in Debi Dutt v. T. Belan(I)
and S. C. Prashar v. Vasantsen (2) respectively holding that if the
right of the Income-tax Officer to reopen an as~essment was barred
under the law for the time being in force, no subsequent enlargement of the time could revive such right in the absence of express
words or necessary
intendment. Sub-section ( 4) was added to·
s. 34 to make it abundantly clear that notice under s. 34(1)(a) could
be issued at any time notwithstanding that the said right was barred
before the Amendment Act of 1956. This history of the legislation leaves no room for doubt that the intention of the Legislature
was to bring the escaped concealed income of rupees one lakh
and more to tax without any time limit. Before the 1956 Act was
passed, the period of limitation prescribed for proceeding against
concealed incomes of rupees one lakh and more during the war
years and the earlier years had expired. The Legislature stepped
in to prevent evasion of taxes on such incomes and lifted the ban of
limitation in respect thereof, subject to certain conditions.
But the crucial question is, whether the Legislature by making
the relevant amendments has succeeded to effectuate its intention.
To state it differently, ·do the amended provisions carry out its
intention ?
Section 34(l)(a), as it now stands on the statute book, expressly
states that in cases falling under cl. (a) of sub-s. (I) notice can be
served thereunder on an assessee at any time. The terms of s. 34(a)
read with the 2nd proviso, take in the concealed incomes of all the
(I) [1959] 35 I.T.R. 781.
(2) [1956] 29 I.T.R. 857
390
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[1966] 3 S.C.R.
years commencing from the year ending on March 31, 1941. It
does not exclude the incomes of the war years, but the said incomes
are sought to be excluded on the principle of genera/ia specia/ibus
non derogant.
As we ha\'e pointed out earlier, the said doctrine
embodies a rule of construction, but it has no universal application.
To invoke it, the general and special provisions shall occupy the
same field.
In this case, hoth during the period between the amendments of 1954 and 1956 and thereafter they occupied different
fields.
By July 17, 1954, when sub-s. (IA) was introduced ins. 34,
no proceedings under s. 34(l)(a) could be initiated except for the
assessment year 1946-47 in respect of the previous years that fell
within the period beginning on September J, 1939, and ending on
March 31, 1946, for they were barred under the unamended
section. Sub-section (IA),
therefore, practically
governed a
situation that was not governed by the provisions of s. 34\l)(a).
It was intended to catch escaped incomes of the war years which
were out of the reach of s. 34(1 )(a). It is not, therefore, appropriate to describe suh-s. (IA) as one carved out of sub-s. (l)(a) or
to call it a species of which sub-s. (a)(!) is the genus.
Sub-section
(IA) operated where sub-s. (l)(a) practically ceased to function.
Now, coming to the period after the Finance Act, 1956, was
passed, i.e., after April I, 1956, a different situation arose. The
extended period given under the second proviso to sub-s. (IA) expired on March 31, 1956. Thereafter, sub-s. (IA) ceased to be
operative in the sense that no notice could thereafter be given thereunder. It worked itself out. The Legislature could have extended
the period under the second proviso to sub-s. (IA), but it did not do
so. It did not give a further lease of life to it; instead it removed
the period of limitation under sub-s. (l)(a), as sub-s. (IA) had become practically defunct. The wide phraseology of sub-s. (l)(a)
takes in all the escaped concealed incomes during all the years
commencing from 1941 and confers a power on the Income-tax
Officer to give notice thereunder in respect of the said income~
without any bar of limitation. There is, therefore, no conflict after
April I, 1956, between sub-s. (l)(a) and sub-s. (IA), as the latter
ceased to be operative.
There is another way of looking at the problem. Sub-section
(IA) does not really prescribe any period of limitation. It enables
the Income-tax Officer to take proceedings within a particular time,
though the period of limitation had expired. Jn this view, no question of carving out a species out of a genus arises. It conferred a
special power on the Income-tax Officer and the said power expired
on April I. l 956.
There is yet another way of looking at the problem. The nonobstante clause in sub-s. (IA) indicates that it was enacted to operate
notwithstanding that the period of 8 years had expired. The said
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sub-section served its purpose only when the period of 8 years governed a notice under sub-s. (!)(a). But when that bar of limitation
was removed, sub-s. (IA) had become otiose .
Sub-section (IB), as amended by the Finance Act of 1956,
also throws some light on the interpretation of s. 34. Before it was
amended, an assessee to whom a notice had been issued under sub-s.
(l)(a) could apply to the Central Board of Revenue for settlement
of the amount of tax payable by him. After the amendment, an
assessee to whom a notice was given under sub-s. (!)(a) and under
sub-s. (IA) for any of the years ending on March 31, 1941 to 1948
could apply for such a relief to the Central Board of Revenue. The
years 1941 to 1948 are the war years. This sub-section, therefore,
assumes that notice could be issued in respect of the war years
under sub-s. (l)(a). The notice contemplated by sub-s. (IB) could
only be a notice after the amendment of 1956, for such notice could
not have been issued earlier under sub-s. (!)(a) in respect of the said
years. The notice under sub-s. (IA) obviously refers to the notice
issued before the amendment of 1956 and pending disposal.
Sub-section (4) added by the Indian Income-tax (Amendment)
Act, 1959, also reinforces the said construction. As indicated earlier, that sub-section was added to get over the legal objection that
proceedings barred before 1956 were not revived underthe 1956 Act.
It is true that sub-s. (4) refers only to sub-s. (!)(a), but the subsection indicates that the Legislature assumed that proceedings
after 1956 could only be taken under sub-s. (!)(a).
It was asked, with some plausibility, if the Legislature assumed
that sub-s. (IA) ceased to be operative, why it was retained along
with its proviso prescribing a period of limitation in the amended
section. Though no new notices could be issued under that sub-·
section after April I, 1956. notices aleady issued before that date
were pending. They would be disposed of in the manner prescribed by sub-ss. (IA), (IB), (IC) and (ID) of s. 34. All the
said sub-sections formed an integral code. The Legislature, presumably, intended to keep the said-sub-sections whereunder proceedings had already been initiated and make available to the said
proceedings the procedure prescibed under the said
provisions.
It may also be that sub-s. (IA) was kept iq super-abundant caution.
Whatever that may be, it cannot, in the circumstances mentioned
by us, detract from the clear provisions of sub-s. (l)(a).
--1
We have carefully· gone through the judgments of the various
H
High Courts, namely, Bombay, Madhya Pradesh, Gujarat and Calcutta, cited at the Bar.
We received considerable help from the
reasonings contained in the said judgments. As we have in the
course of the judgment dealt \vith the conflicting reasons given by
M 10 Sup. C.1./66-12.
39 2
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[1966] 3 S.C.R.
the High Courts, \\e do not think it necessary to consider each of the
A
four judgments in detail.
For the reasons mentioned above, we
agree with the conclusion arrived at by the Bombay and Calcutta
High Courts in preference to those reached by the Madhya Pradesh
and Gujarat High Courts.
In the result, the order of the High Court is set aside and the
8
petition filed under Art. 226 of the Constitution is dismissed. The
appeals are allowed with costs one hearing fee.
Appeal" allowed.
·