# HUSSAIN BHAI AND OTHERS v. COMMISSIONER OF INCOME TAX, MADRAS

- **Citation:** [1971] Supp. 1 S.C.R. 390
- **Court:** Supreme Court of India
- **Decided:** 1971-04-16
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hussain-bhai-and-others-v-commissioner-of-income-tax-madras-5257
- **Pages:** 7

## Headnote

1190
HUSSAIN BHAI AND OTHERS
v.
COMMISSIONER OF INCOME TAX, MADRAS.
April 16, 1971
s
rs. M. s1i;:R1, c. 1 .• G. K .. MrITER, K. s. HEGDE, A. N. GRovEil:
c
D
E
F
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AND P. 1AGANMOHAN REDDY, 11.J
Income tax Act, (II of 1922), s. 34(1)(a) and lncome-ta'1: (Amendment)
Act, 1959, s. 4--Effer:t on bar of limitation.
Notioe under s. 34(1) (a) of the Income-tax Act, 1922 was served in
February 1957 on the appellant with respect to escaped income of Rs.
40,000 for the assessment year 1948-49. On appeal the Appellate Assistant
Commissioner held that the proceedings were illegal. On July 9. 1958,.
the Income-tax Officer issued another notice and assessed the assess.:e's income including therein the Rs. 40,000, to tax.
. When the matter came up before the High Court on reference, the
High Court held that the notice dated July 9, 1958 was a fresh notice·
but that it was saved from the bar· of limitation by s. 4 of the Income tax
(Amendment) Act, 1959.
In appeal to this Court,
HELD: Section 4 of the 1959-Act refers to all notices issued under
s. 34(1) la) of the 1922 Act at any time before the commencement of the·
1959-Act. The notice dated July 9, 1958, in the present case, fell within
that description. But s. 4 of the 1959-Acl. does not save such notices from
attack on all grounds whatsoever; the only ground of attack which cannot
be taken is that at the time the notice 'Nas issued. the period prescribed
by s. 34(1) (a) of the 1922-Act, as in force before its amendment by the
Finance Act, 1956, had expired. But in the present case, what the assessee
was saying wa.s, that a notice under s. 34(1) (a) as amended by the Finance
Act of 1956, could have been issued under that Act in respect of the assessment year 1948-49 till April l, 1957; but when the Finance Act "f 1956,
came into force, he came to be governed by the 8 year period prescribed by
the Act as amended by the 1956 Act and not the 8 year period prescribed
by the Act as it stood before the amendment in 1956. Accordingly the
escaped income being less than a lakh, the assessee's ground of attack
was that the 8 years prescribed by s. 34 as amended after 1956 had already
expired before July 9, 1958. The assessee"s stand was correct, and the·
notice was barred. (3958-F].
Observations of Sarkar, J. in S.C. Prashar v. Vasantani Dwan1kadas,
[1964] I S.C.R. 29. 90, applied.
CIVIL APPELLATE JURISO!Cf!ON : Civil Appeal No. 1097 o(
1967.
Appeal from the judgment and order dated December I, 1965
of the Madras High Court in Tax Case No. 17S of 1963 (Reference;
No. 49 of 1963).
HUSSAIN BHAI v. C.I.T. (Sikri, C.J.)
T. A. Ramachandran, for the appellants.
Jagadish Swarup, Solicitor-General, S. Mitra, P. L. Juneja and
R. N. Sachthey, for the respondent.

## Text

1190
HUSSAIN BHAI AND OTHERS
v.
COMMISSIONER OF INCOME TAX, MADRAS.
April 16, 1971
s
rs. M. s1i;:R1, c. 1 .• G. K .. MrITER, K. s. HEGDE, A. N. GRovEil:
c
D
E
F
G
H
AND P. 1AGANMOHAN REDDY, 11.J
Income tax Act, (II of 1922), s. 34(1)(a) and lncome-ta'1: (Amendment)
Act, 1959, s. 4--Effer:t on bar of limitation.
Notioe under s. 34(1) (a) of the Income-tax Act, 1922 was served in
February 1957 on the appellant with respect to escaped income of Rs.
40,000 for the assessment year 1948-49. On appeal the Appellate Assistant
Commissioner held that the proceedings were illegal. On July 9. 1958,.
the Income-tax Officer issued another notice and assessed the assess.:e's income including therein the Rs. 40,000, to tax.
. When the matter came up before the High Court on reference, the
High Court held that the notice dated July 9, 1958 was a fresh notice·
but that it was saved from the bar· of limitation by s. 4 of the Income tax
(Amendment) Act, 1959.
In appeal to this Court,
HELD: Section 4 of the 1959-Act refers to all notices issued under
s. 34(1) la) of the 1922 Act at any time before the commencement of the·
1959-Act. The notice dated July 9, 1958, in the present case, fell within
that description. But s. 4 of the 1959-Acl. does not save such notices from
attack on all grounds whatsoever; the only ground of attack which cannot
be taken is that at the time the notice 'Nas issued. the period prescribed
by s. 34(1) (a) of the 1922-Act, as in force before its amendment by the
Finance Act, 1956, had expired. But in the present case, what the assessee
was saying wa.s, that a notice under s. 34(1) (a) as amended by the Finance
Act of 1956, could have been issued under that Act in respect of the assessment year 1948-49 till April l, 1957; but when the Finance Act "f 1956,
came into force, he came to be governed by the 8 year period prescribed by
the Act as amended by the 1956 Act and not the 8 year period prescribed
by the Act as it stood before the amendment in 1956. Accordingly the
escaped income being less than a lakh, the assessee's ground of attack
was that the 8 years prescribed by s. 34 as amended after 1956 had already
expired before July 9, 1958. The assessee"s stand was correct, and the·
notice was barred. (3958-F].
Observations of Sarkar, J. in S.C. Prashar v. Vasantani Dwan1kadas,
[1964] I S.C.R. 29. 90, applied.
CIVIL APPELLATE JURISO!Cf!ON : Civil Appeal No. 1097 o(
1967.
Appeal from the judgment and order dated December I, 1965
of the Madras High Court in Tax Case No. 17S of 1963 (Reference;
No. 49 of 1963).
HUSSAIN BHAI v. C.I.T. (Sikri, C.J.)
T. A. Ramachandran, for the appellants.
Jagadish Swarup, Solicitor-General, S. Mitra, P. L. Juneja and
R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by
391
Sikri, C. 1~
This appeal by certificate granted by the Madras
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High Court under Section 66A (2) of the Indian Income-tax Act.
1922, hereinafter referred to as the Act, is from the judgment of
the Madras High Court in a reference made to it under Section 66
(I) of the Act by the Income-tax Appellate Tribunal, Madras
Bench.
The Tribunal referred the following question .
"Whether the present proceedings initiated under
Section 34(1) (a) of the Act against the assessees are valid
in law?"
The relevant facts may now be stated.
For the assessment
year 1948-49 (accounting year ending November 12, 1947) an
assessment was made on Abdullabhai Fazalali in the status of an
individual on September 30, 1948, on a total income of Rs. 9,102.
The sour~es of income consideted in the assessment were share
income from the firm of S. A. Bhagat and Co., and property income.
Subsequently, it came to light that Abdullabhai Fazalali
had deposited Rs. 40,000 in cash on July 28, 1947 in the branch
of the Bank of India Ltd. at Palanpur, now in North Gujarat.
Abdullabhai Fazalali died on August I, 1954.
Notice under Seetion 34 (1) (a) of the Act was served on February 9. 1957 on
Hussainbhai Abdullabhai as legal heir and representative of the
estate of the late Abdullabhai Fazalali. On March 9, 1957 a return
was filed showing the income as Rs. 8,237. but in Column 'D' the
sum of Rs. 40,000 aforesaid was mentioned.
While the proceedings were pending under Section 23(2) of
the Act a petition was filed in the High Court challenging the
validity of the proceedings under Section 34(1)(a).
On March
15, 1957 assessment was made.
An appeal to the Appellate Assistant Commissioner under Section 30 of the Act was filed on April
15, 1957.
On March 15, 1958 the High Court dismissed the writ
petition on the ground that the assessee had already availed himself
of the ordinary remedies provided under the Act. It appears from
the order of Appellate Assistant Commissioner dated April 29,
1958 that the High court expressed the view that the proceedings
under Section 34 (!) (a) were illegal. The appellate Assistant
Commissioner, by this order following the finding of the High
Court regarding the illegality of the proceedings under Section 34
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SUPREME COURT REPORTS
[1971] SUPP. s.c.R.
set aside the assessment on the ground that the proceedings intiated under Section 34 were illegal and not valid.
The Income Tax Officer then issued a fresh notice under Section 34 (1) (a) on July 9, 1958 to all the legal representatives of the
deceased Abdullabhai Fazalali.
By his order dated December 14,
1960, the Income-tax Officer held that the cash deposit of
Rs. 40,000 in the Bank of India in Palanpur came from undisclosed sources of income of the assessee in the then taxable territories
and assessed it accordingly.
We may mention that no reference was made to the lncometax (Amendment) Act, 1959 (I of 1959) by himThe assessee appealed to the Appellate Assistant Commissioner and inter alia contended that the assessment was time-barred.
The Appellate Assistant Commissioner held that the Appellate
Assistant Commissioner's order passed in respect of the original
proceedings under Section 34 did not conUlin any finding or direction within the meaning of Section 34 (3) and accordingly the
assessment order dated December 14, 1960 was vitiated.
The Revenue then filed an appeal, before the Incomo-tax Appellate Tribunal.
The Appellate Tribunal set aside the order of
the Appellate Assistant Commissioner holding that the proceedings
under Section 34 (!) (a) had been properly initiated by the notices
issued on July 9, 1958, and directed him to decide the other is.~ucs
raised according to law.
We may mention that on the point of limitation the only _point
debated before the Appellate Tribunal was regarding the effect of
the proviso to Section 34(3) of the Act.
The Appellate Tribunal
came to the conclusion that the order of the Appellate Assistant
Commissioner dismissing the original proceedings under Section 34
(!) (a) against Hussainbhai Abdullabhai, who legally represented
the assessee, could be construed as giving a direction to the Incometax Officer to initiate fresh proceedings.
The High Court in the reference, however, came to the conclusion that the second proviso to Section 34 (3) would be inapplicable. The High Court observed :
"There was no direction or finding in the Order of
the Appellate Assistant Commissioner dated April 24,
1958 as would attract that proviso._
A finding for the
purpose of that proviso should be one on a point at issue
ill the assessment proceedings or in the appeal".
HUSSAIN BHAI J. C.I.T. (Sikri, C. J.)
393
It was contended before the High Court that a fresh notiL'C
A
served under Section 31 (4) (a) beyond eight years of the assessment order was barred by time.
The Revenue contended that
Section 4 of the Income Tax (Amendment) Act, 1959 (I of 1959)
saved a fresh notice from the bar of limitation.
The High Court
held that Section 4 of Act I of 1959 saved the notice under Section 34 (1) (a) issued on July 9, 1958 from the bar of limitation,
B
.and accordingly answered the question against the assessee.
The short question before us is whether Section 4 of the
Indian Income-tax (Amendment) Act, 1959 saves the fresh notice
from the bar of limitation. But in order to fully deal with thl:
point it is necessary to set out the relevant portion of Section 34
(!) (a) as it existed at various times.
C
The relevant portion of Section 34 (I), as amended in 1948,
:reads as follows :
34. (!). H
(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 . . . .
he may in cases falling under clause (a) at any time
within eight years and in cases falling under clause (b) at
any time within four years of the end of that year, serve
on the assessee, or, ... a notice containing all or any
of the requirements which may be included in a notice
under sub-section (2) of Section 22 . . . . "
The relevant portion of Section 34 (I) as amended by the Finance
Act, 1'56 (Act XVIII <,>f 1956) reads thus :
"34. (!) If
(a) the Income-tax Officer has reason to believe that
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by reason of the omission or failure on the part of an
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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. . ..
he may in cases falling under clause (a) at any time
H
and in cases falling under clause (b) at any time within
four years of the end of that year, serve on the assessee
394
SlJPRBMB COURT RBPORTS
[1971] SUPP. S.C.S..
11.
• • . • • • a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22.
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Provided that the Income-tax Officer shall not issue
a notice under clause (a) of sub-section (!)-.
(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 . . . . . . .
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
..
Section 34(4) of the Act as inserted by the Indian Incometax !Amendment) Act. 1959 reads as follows :
"(4) A notice under clause (a) of sub-section (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 clause (a) of
section 18 of the Finance Act, 1956 (18 of 1956) had expired in respect of the year to which the notice relates."
Section 4 of the Indian Income-tax (Amendment) Act, 1959 ..
provided :
"4. Saving of notices, assessments, etc., in certain
cases.-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, re-asessment 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 re-assessment was made, the time
within which suoh·notice should have been issued or the
assessment or re-assessment should have been made under
that section as in force before its amendment by clause (a)
of section 18 of the Finance Act 1956 ([8 of 1956), had
expired."
HUSSAIN BHAI •• c.1.r. (Sikri, c. J.)
The learned counsel for the State quite rightly does not rely
on Section 34 (4) of the Act to validate the notice because this
contemplate a notice issued after the coming into force of the
1959 Act.
It seems to us that Section 4 of the Amending Act of 1959
does not save the notice under Section 34 (1) (a) issued on July
9, 1958.
In this case we are concerned with an income less than
l lac mentioned in Section 34 as amended by Finance, Act, 1956.
It is no doubt true, as urged by the learned counsel for the Revenue, that the first sentence of Section 4 includes all notices issued
under Clause (a) of sub-section (1) of Section 34 of the Act at
any time before the commencement of the 1959 Act and the notice
dated I uly 9, 1958 falls within this description.
But in our view
the section does not save such notices from attack on all grounds
whatsoever ; the only ground which cannot be taken to attack the
validity of the notice is that at the time the notice was issued the
period prescribed under Section 34 (I) (a), as in force before its
amendment by Section 18 of the Finance Act, 1956, had expired.
Is the assessee then raising this ground ? It seems to us that he
is not.
What he is saying is that a notice under Section 34 (!)
(a), as amended by the Finance Act of 1956, could have been
issued under that Act in respect of the assessment year 1948-49
till April I, 1957, and when the Finance Act of 1956 came into
force he came to be governed by the 8 year period prescribed by
the Act as amended by the 1956 Act and not the 8 year period
pre>cribed by the Act as it existed before the amendments made
in 1956.
Accordingly the assessee's ground of attack .is that the
8 years prescribed by Section 34 as amended after 1956 have
exrired and not that 8 years prescribed by Section 34 before il•
amendment by Finance Act, 1956 have expired.
In our view the
stud taken by the assessee is correct.
We are supported in the view we have taken by certain observation of Sarkar, J., as be then was, in S. C. Prashar, I. T. C. v.
JI as1111tsen Dwarkadas ('). The Court in that case was not concerned with assessment years in respect of which a notice could
be issued under Section 34 (1) (a) of the Act as amended by the
Finance Act of 1956, but the present case was visualised by
Sarkar. J., in that case.
He observed :
"So though Section 4 of the 1959 Act freed a notice
from the bar of limitation in respect of it imposed by the
1948 amendment, it did not altogether do away with all
prescriptions of time. In spite of Section 4, a notice contemplated by it would be subject to the prescription of
(1) [1964] IS. C.R. 29, 90.
391
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396
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SUPRBME COURT REPORTS
(1971) SUPP. S.C.R.
lime as to its issue under the 1939 Act and may be, under
Section 34 as it stood before the 1939 amendment. If the
notice was issued after the 1956 amendment it would also
be subject to the prescription as to time provided by that
amendmelll. (emphasis supplied.).
Then it was said that if Section 4 applied to a notice
issued more than eight years after the year in which the
income escaped assessment bu\ before the 1956 amendment came into force in a case where the escaped income
of the year was less than Rs. 1,00,000 the position would
be curious. A notice issued in a similar case after the 1956
amendment would be bad under Section 34 as it then
stood and Section 4 could not save it for it saved notices
only from the effect of the 1948 amendment. The position
then would be that in a case involving the same amount
of escaped income for the same year, a notice issued
before 1956 amendment and invalid under the 1948
amendment would be validated and a more recent notice
equally invalid under both the earlier and present laws
would remain invalid. Assume that the position is somewhat curious or incongruous. But that seems to me to be
the result of the words used.
For all we know that might
have been intended. However strange, if at all, the result
may be, I do not think the Courts can alter the plain
meaning of the language of the statute only on the
ground of incongruity if there is nothing in the words
which would justify the alteration.
As I have said earlier, in this case there is nothing to justify the alteralion
of the plain meaning."
We agree with the ebservations of the learned Judge.
But,
as we have said, this Court was not concerned with· a case governed by period of limitation as prescribed in 1956 and acoordingly we do not find it necessary to refer to the reasoning of the
other learned Judges.
Accordingly we set aside the judgment of the High Court and
answer the question in favour of the assessee, with costs through·
out.
V. P. S.
Appeal alluwe4l.