# ', I v. K. N. GURUSWAMY

- **Citation:** [1959] 1 S.C.R. 785
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeals Nos. 165-168 of 1956
- **Bench:** S. R. DAS c. J, Venkatarama Aiyar, s. K. DAS, A. K. Sarkar, Vivian Bose
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-v-k-n-guruswamy-1548
- **Pages:** 14

## Headnote

Income Tax-Re-assessment-Taxable Area'in• Mysore within
the jurisdiction of Governor-General in Council, retroceded in r947Constitutional changes resulting in Mysore becoming a Part B State
~Financial agreement between the Presideni of India and the Rajpramukh-Income:tax law applicable to Retroceded Area before and
after the 'Retrocession-Re-assessment proceedings for period prior to
r949·-Validity-Mysore Income"tax Act, r92j (Mysore Y of r923),
S; 34-Mysore Income-tax and,· Excess Profits Tax (Application to'
•
the Retroceded Area) (Emerg'ency) Act; r-948 ~Myso:·e XXXI of
April 28.
786
SUPREME COURT REPORTS
[1959]
1958
I948), ss. 3, 5 (b), 6-Retroccded Area (Application of Laws) Act,
I948 (Mysore LV II of I948), ss. 3, 4-Finance Act, I950 (XXV
The Income-lox of I950), s. I] (I)--Indian Income-tax Act, I922 (XI of I922),
Officer, Bangalore s. 34.
v.
The respondent \Vas carrying on business as an excise conJ<. N. Gurusuxony tractor in the Civil and Military Station of Bangalore in the
State of Mysore, called the retroceded area. The jurisdiction
over this area was originally exercised by the Governor-General
in Council by virtue of an agreement with the Maharaja of
Mysore, and the income-tax law applicable was the Indian
Income-tax Act, 1922. On July 26, 1947, the retroceded area
was given back to the State of Mysore but the income-tax law in
force in that area prior to that date continued to have effect and
be operative till June 30, 1948, on which date was promulgated
the Mysore Income-tax Act and Excess Profits Tax (Application
to the Retroceded Area) (Emergency) Act, 1948, the effect of
which was that the Indian Income-tax Act, 1922, stood repealed
and the Mysore Income-tax Act, 1923, came into force subject to
certain saving provisions. On August 5, 1948, was prom11lgated
the Retroceded Area (Application of Laws) Act, 1948.
Between
1947 and 1950 there were political and constitutional changes
which ultimately resulted in Mysore becoming a Part B State
within the Constitution of India. · The legal effect of these
changes was that the income-tax law applicable to the retroceded
area till June 30, 1948, was the Indian Income-tax Act, 1922 ;
from July l, 1948, the Mysore Income-tax Act, 1923, became
applicable except that the Indian Income-tax Act continued
to apply in respect of the total income chargeable to income-tax
in the retroceded area prior to July l, 1948, and the provisions of
that Act as in force in the retroceded area prior to that date
applied to all proceedings relating to the assessment of such
income upto the stage of assessment and determination of
income-tax payable thereon. This position continued till April
I, 1950, when the Finance Act, 1950, came into force and as a
result the Indian Income-tax Act, 1922, became applicable again
to the retroceded area, subject to the saving provisions of s. 13(1)
of the former Act. In respect of the assessment for the four
years between 1945 and 1949, the respondent was assessed to
income-tax under the law then in force in that area; subsequently, in 1954 the Income-tax Officer served a notice on the respondent under s. 34 of the Indian Income-tax Act, 1922, for the
purpose of assessing "escaped" or "under-assessed.. income
chargeable to income-tax for the said years. The respondent
challenged the jurisdiction of the Income-tax Officer to take proceedings under s. 34 or to make an order of re-assessment on the
grounds inter alia (1) that s. 34 of the Indian Income-tax Act,
1922, was not saved bys. 13(1) of the Finance Act, 19501 because
what was saved was the prior law "for the purposes of the
•
"levy, assesS~ent and collection of income-tax", ""·hich expression did not inclpde re-assessment proceedings, (2) that the
~
'
..
I
~
S:C:R.
SUPREME COURT'REPORTS
787
financial agreement made between- the •P,resident of India and
x958
the Rajpramukh of Mysore -dated February 28, 1950, rendered
the impugned proceedings unconstitutional and void, (3)' that
The lnco111e-taM
the .I

## Text

s:c.:R.
SUPREME 'boURT ·REPORTS
785
above ~lirow vefr little light. There is, indeed, a dis-
;9ss
tinction between h.n original or normal assessment
k •. h· --
,
d
23
d
d
· 3
b
La s mana Snenoy
un er s.
an a re-assessment un er s. 4; ut we . ·
v.
··
·
have shown that the word "assessment" has been The Income-tax
used in more than one sense in Income-tax law, and Officer. Ernakulam
so far as s. 13 (1) of the Finance Act, 1950, is concerned,. there is ·no doubt that the expression 'levy,
5· K. Das J.
assessment and collection of income-tax' has been
used in a comprehensive sense so as to include the
whole procedure for imposing liability upon the
taxpayer.
Result:
The final result, therefore, is-(a) the TravancoreCochin appeals (Civil Appeals 143 to 145 of 1954) are'
dismissed with costs; and (b) the. Mysore appeals
(CivU-Appeals 27 to 30 of 1956 and Civil Appeals 161
to 164 of 1956) are allowed and the judgment and
orders of the Mysore High Court are set aside.
The
appellants in these Mysore appeals will be entitled to
their costs in this Court and the High Court of
Mysore.
Appeals Nos.143 to 145. dismissed.
Appeals No. 27 to 30 arul 161to164 allowed .
. THE INCOME-TAX OFFICER, BANGALORE
z958
', I ,
v.
K. N. GURUSWAMY
(S. R. DAS c. J., VENKATARAMA AIYAR, s. K. DAS,
A. K. SARKAR and VIVIAN BOSE JJ.)
Income Tax-Re-assessment-Taxable Area'in• Mysore within
the jurisdiction of Governor-General in Council, retroceded in r947Constitutional changes resulting in Mysore becoming a Part B State
~Financial agreement between the Presideni of India and the Rajpramukh-Income:tax law applicable to Retroceded Area before and
after the 'Retrocession-Re-assessment proceedings for period prior to
r949·-Validity-Mysore Income"tax Act, r92j (Mysore Y of r923),
S; 34-Mysore Income-tax and,· Excess Profits Tax (Application to'
•
the Retroceded Area) (Emerg'ency) Act; r-948 ~Myso:·e XXXI of
April 28.
786
SUPREME COURT REPORTS
[1959]
1958
I948), ss. 3, 5 (b), 6-Retroccded Area (Application of Laws) Act,
I948 (Mysore LV II of I948), ss. 3, 4-Finance Act, I950 (XXV
The Income-lox of I950), s. I] (I)--Indian Income-tax Act, I922 (XI of I922),
Officer, Bangalore s. 34.
v.
The respondent \Vas carrying on business as an excise conJ<. N. Gurusuxony tractor in the Civil and Military Station of Bangalore in the
State of Mysore, called the retroceded area. The jurisdiction
over this area was originally exercised by the Governor-General
in Council by virtue of an agreement with the Maharaja of
Mysore, and the income-tax law applicable was the Indian
Income-tax Act, 1922. On July 26, 1947, the retroceded area
was given back to the State of Mysore but the income-tax law in
force in that area prior to that date continued to have effect and
be operative till June 30, 1948, on which date was promulgated
the Mysore Income-tax Act and Excess Profits Tax (Application
to the Retroceded Area) (Emergency) Act, 1948, the effect of
which was that the Indian Income-tax Act, 1922, stood repealed
and the Mysore Income-tax Act, 1923, came into force subject to
certain saving provisions. On August 5, 1948, was prom11lgated
the Retroceded Area (Application of Laws) Act, 1948.
Between
1947 and 1950 there were political and constitutional changes
which ultimately resulted in Mysore becoming a Part B State
within the Constitution of India. · The legal effect of these
changes was that the income-tax law applicable to the retroceded
area till June 30, 1948, was the Indian Income-tax Act, 1922 ;
from July l, 1948, the Mysore Income-tax Act, 1923, became
applicable except that the Indian Income-tax Act continued
to apply in respect of the total income chargeable to income-tax
in the retroceded area prior to July l, 1948, and the provisions of
that Act as in force in the retroceded area prior to that date
applied to all proceedings relating to the assessment of such
income upto the stage of assessment and determination of
income-tax payable thereon. This position continued till April
I, 1950, when the Finance Act, 1950, came into force and as a
result the Indian Income-tax Act, 1922, became applicable again
to the retroceded area, subject to the saving provisions of s. 13(1)
of the former Act. In respect of the assessment for the four
years between 1945 and 1949, the respondent was assessed to
income-tax under the law then in force in that area; subsequently, in 1954 the Income-tax Officer served a notice on the respondent under s. 34 of the Indian Income-tax Act, 1922, for the
purpose of assessing "escaped" or "under-assessed.. income
chargeable to income-tax for the said years. The respondent
challenged the jurisdiction of the Income-tax Officer to take proceedings under s. 34 or to make an order of re-assessment on the
grounds inter alia (1) that s. 34 of the Indian Income-tax Act,
1922, was not saved bys. 13(1) of the Finance Act, 19501 because
what was saved was the prior law "for the purposes of the
•
"levy, assesS~ent and collection of income-tax", ""·hich expression did not inclpde re-assessment proceedings, (2) that the
~
'
..
I
~
S:C:R.
SUPREME COURT'REPORTS
787
financial agreement made between- the •P,resident of India and
x958
the Rajpramukh of Mysore -dated February 28, 1950, rendered
the impugned proceedings unconstitutional and void, (3)' that
The lnco111e-taM
the .Indian Income-tax Act, 1922, as in force in the retroceded Officer, Bangalore
area stood repealed onJune 30, 1948, by the Mysore, Income-tax
v.
and Excess Profits (Application
to the Retroceded Area) K. N. Guruswamy
(Emergency) Act, 1948,'and the saving provisions ins. Slb) thereof or in para (2), sub-para (b) of Sch. A to the Retroceded
Area (Applicatio~ of Laws) Act, 1948, did not save s. 34 in so far
as it permitted re-assessment proceedings in respect of years in
which there had been an assessment already, and (4) that after
June 30, 1948, a,μd until f.,pril l, 1950, the Income-tax Officer in
the retroceded area could re-qpen the assessment under s. 34 of
,_
the Mysore Income-tax Act, 1923, within a period of four years
specified therein,' but there was no authority to re-open the
assessment under,s: 34 of the Indian Income-tax Act.
Held: (1) that-the expression "levy, assessment and collection of income-tax" in s. 13(1) of the Finance Act, 1950, was
wide .enough to comprehend re-assessment -proceedings under
s. 34 of the I_ndian Income"tax Act, 1922, and that the. financial
agreement between the President of India and the Rajpramukh
of Mysore, on a true construction of the recommendations of the
Indian States Finance Enquiry Committee, did not render the
impugned proceedings unconstitutional or void;
Lakshmand Shenoy v. The Income-tax Officer, Ernakulam,
[1g59] S.C.R. 751, followed.
(2) that the saving provisions in the Mysore Income-tax and
Excess Profits (Application to the Retroceded Area) (Emergency)
Act,.1948, and the Ret_roceded Area. (Application of Laws) Act,
1948, made the prior law available in all cases in which the income was assessed or was assessable according to that law before
July I, · 1948, and, therefore, they saved s. 34 of"the Indian
Income-tax Act, 1922, with regard to re-assessment proceedings ;
City Tobacco Mart and Others ;/. I1tcome-tax Officer, Urban
Circle, Bangalore, A:l.R 1955 Mys. 49, overruled.
,
. Hirjibhai Tribhu-wandas v. Income-tax Officer, Rajnandgaon
and another, A.LR 1957 M. P. 171, approved.
(3) that the Inco~e-tax Officer had the authority to re-open
the assessments in the present case because the period of limitation was that laid down in s. 34 of the Indian l!'come-tax Act, as
it was in force in the retroceded area, prior to July I, 1948.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
165-168 of 1956.
·
:Appeals from the,judgment and order dated March
22, 1955, of the Mysore High Court in Wri~ Petitions •
Nos. 20.to 22-and 25 of .1954.
788
SUPREME ·cOURT REPORTS
[1959)
i95S
H. N. Sanyal, Addl. Solicitor-General of India, R.
Th• Income-tax Ganapathy Iyer and R. H. Dhebar, for the appellant.
Officer; Bangalore
A. V. Viswanatha Sastri, K. R. Choudhury and G.
v.
Gopalakrishnan, for the respondent.
K. N. G·uruswatny
1958. April 28.
The Judgment of the Court was
delivered by
s. I<. Das J.
S. K. Das J.-These four appeals brought by the
Income-tax Officer, Special Circle, Bangalore, on a
certificate granted by the High Court of Mysore, are
from the judgment and order of the said High Court
dated March 22, 1955, by which it quashed certain
proceedings initiated, and orders of assessment made,
against the respondent assessee in the matter of reassessment of income-tax for the years 1945-46,
1946-47, 1947-48, and 1948-1949.
The relevant facts are these. The respondent ,
K. N. Guruswamy was carrying on business as an
excise contractor in the Civil and Military Station of
Bangalore, hereinafter called the retroceded area, in
Mysore.
He was assessed to income-tax for each of
the four years mentioned above under the law then in
force in the retroceded ·area by the Income-tax Officer
having jurisdiction therein. For 1945-46 the original
assessment was made on February 12, 1946, for 1946-47
on January 21, 1949, for 1947-48on January 22, 1949,
and for 1948-49 also sometime in the year 1949. The
tax so assessed was duly paid by the assessee. On
January 5, 1954, more than four years after, the
Income-tax Officer, Special Circle, Bangalore, served a
notice on the assessee under s. 34 of the Indian·
Income-tax Act, 1922, for the purpose of assessing
..
. what was described as ' escaped ' or 'under-assessed ' '
income chargeable to income-tax for the said years.
The assessee• appeared through his auditors and
contested the jurisdiction of the Income-tax Officer to
issue the notice or make a re-assessment under s. 34
of the Indian Income-tax Act, 1922. On February 19,
1954, the Income-tax Officer overruled the asstJssee's
objection, and made a re-assessment order for the
• year 1945-46. On February 25, 1954, the assessee
filed four wr_it petitions in the Mysore High Court in
I
"'
{,
' +
S.C.R.
St;J'PRE;ME COURT REPORTS
789
which he challenged the ju:\isdiction of the Income-tax
r958
Officer to take : proceedi~gs under s. 3~ or to make an The Income-tax
order·of re-asse~sment m suqh proceedn;1gs; hl:l,.asked Officer,
Ba.;galore
for appropriate orders or writs quashing the pending
v.
proceedings for three ,years and the order of re-assesi;i;-1K. N. Guruswamy
ment for 1945-46, During the. pendency of the cases
in the High Court, the Income-tax Officer was permit5· K. Das f.
ted to.make an assessment order for 1946-47, subject
to 1 the conditiop. th.at if the· .a&sessee succeedeQ.: in
establishing that the Income-tax . Officer had ~·no
jurisdiction, that order would. also be quashed., Th~
High Court heard all the four petitions together, and
by its judgment and order dated March 22, 1955,
allowed the writ petitions and ~ashed the proceedings
in· assessment as ali;io the tw~ oraers of re-assessment,
holdh1g that the. Income"'L1'.tf Ofμcer had no jurisdiction
to ip.itiate the p:i;oceedings or to ma,ke the orders· of
re-assessment. The High Court, however, granted a
certificate that the cases were fit for appeal to this
Court, and these, four appeals have been brought on
t}la.t certificate .. Before us, the appeals have been.
heard together and will be governed by this judgment.
For a clear understanding and appreciation of the
is_sues involved in these appeals, it is necessary to set
qμt, in brief outline, the political and constitutional
changes which the retroceded area has from time to
ti:me ,undergone ; because those changes had important
legal consequences. Undei: the Instrument of Transfer
executed sometime in 1881, when there was installation of the l\faharaja of Mysore by what has been
called " the rendition of the State of Mysore ", the
l\1ahi;traja agreed to grant to the Governor-General in
Coun,ci.1 such land as .might be required for the
establishment and maintenance of a British cantonment arn;l .to renounce all jurisdiction therein. ·Pursuant
to tha~ agreement, the retroceded area was g:\!l!nted to.
the 1 Gov-ernor-Genera~' in C0m;icil, and jurisdiction
ther.ein· was. .exercised by virtue of powers given by
the Ini.lian (Foreign Jurisdiction) Order in Council,
190~, made. under the Foreign Jurisdiction, A_ot, 1890.
The laws administered in the area. included .various· •
enactments made 'applical!le. 'thereto '.:fi:o~. ·t~me to
790
SUPREME COURT REPORTS
[1959]
r958
time by the promulgation of notifications made under
, -
the aforesaid Order in Council, and one of such
T"' Income-tax
h I d'
I
A
Officer,
Bangalore enactments was t e n ian ncome-tax
ct, 1922.
v.
The ye:tr 194 7 ushered in great political and constiK. N. G"rnswamy tutional changes in India, which affected not merely
what was then called British India but also the Indian
s. K. Das J.
States, such as Mysore etc. The Indian Independence
Act, 194 7, brought into existence two independent
Dominions, India and Pakistan, as from August 15,
1947. The Act, however, received Royal assent on
July 18, 194 7.
Section 7 set out the consequences of
the setting up of the two new Dominions : one such
consequence was that the suzerainty of His Majesty
over the Indian State~ lapsed, and with it lapsed all
treaties, agreements etc.; J-J.Ktween His Majesty and the
rulers of Indian States, incTuding all powers, rights,
authority or jurisdiction exercisable by His Majesty in
an Indian State by treaty, grant, usage, suffrage etc.
In view of the aforesaid provision-perhaps in
anticipation of it, the retroceded area was given back
to the State of Mysore on July 26, '1947 by a notification made by the Crown Representative under the
Indian (Foreign Jurisdiction) Order in Council, 1937.
This did not, however, mean that the Mysore laws at
once came into force in the retroceded area. On
August 4, 1947, the J\faharaja of Mysore enacted two
laws: the Retrocession (Application of Laws) Act 1947,
being Act XXIII of 1947, and the Retrocession
(Transitional Provisions) Act, 194 7 being Act XXIV
of 1947. The combined effect of these laws was this:
all laws in force in the '.retroceded area prior to the
the date of retrocession,. which was July 26, 1947,
continued to have effect and be operative in the retroceded area (vide s. 3 of Act XXIII of 1947) and the
Mysore office~s were g1 ven jurisdiction to deal with
proceedings under the laws in force prior to the date
of retrocession (see s. 12 of Act XXIV of 1947).
This state of affairs continued till June 30, 1948, on
which date was promulgated the Mysore Income-tax
\tnd Exce,ss Profits Tax (Application to the Retroceded
• Area) (Emergency) Act, 1948, being 'Act XXXI of
1948. Section a of this A'ct said-.
S.C.R.
SUPREME COURT REPORTS
791
'
· "Notwithstanding· anything to the ·contrary in
z958
section 3 of the Retrocession (Application of Laws) The Income-tax
Act, 1947,
Officer, Bangalore
(i) the Mysore Income-tax Act, 1923, and
v.
(ii) the 'Mysore Excess Profits Tax Act, 1946, K. N. Guruswamy
except sub-section (4) of section 2, and all rules, orders
and notifications niade or issued under the aforesaid
s. K. Das J.
Acts and for the time being in force shall with effect
from the first day of July, 1948, and save as otherwise
provided in this · Act, take effect in the Retroceded
Area to the same extent and in the same manner as
in the rest of Mysore."
Section 6 said-
· ~
· " Subject to the provisioBs~fthis Act, the Indian
Income-tax Act, 1922, and the Excess Profits Tax
Act, 1940, as continued by the Retrocession (Application of Laws) Act, 1947, are hereby repealed."
. The repeal of the Indian Income-tax Act, 1922,
effected by s. 6 aforesaid, was subject to other provisions of Act XXXI of 1948, and one such pi·ovision
which is material for the dispute before us was contained in s. 5, the relevant portion whereof was in
these terms-
· ·
"S. 5. Notwithstanding anything to the contrary
in the Mysore Income-tax Act, 1923, or the Mysore
Excess Profits Tax Act, 1946,-
·
. (a) ., ................................... ;;; ..................... .
(b) in respect of the· total income · or profits
chargeable to income-tax or excess profits tax in the
Retroceded Area prior to the first day of July, 1948,
but which has not been assessed until that date, the
provisions of the Indian Income-tax Act, 1922, and the
Excess Profits Tax Act, 1940, as in force in the 'Retroceded Area immediately before thatdate shall apply to
proceedings relating to the assessment of such income
or profits until the stage of assessment, and the determination ofthe income-tax and excess profits tax payable thereon, and the Mysore Income-tax Act, 1923, or
the Mysore Excess Profits Tax Act, 1946, as the case
may be, shall apply to sue~ proceedings af1ler that
stage;
.1
IOI
•
792
SUPREME COURT REPORTS
[1959]
(c) ................. ········· ....................... ············.
(d) ............................................................. .
O~~:r~n~::;~;;e
(e) ''' ······ · ·'''' · ··· ·····'' ··''' ··· ····'' · · ·''' ····· ···' ·' ···r· ·.
v.
The effect of ss. 3, 5 (b) and 6 of Mysore Act, XXXI
K. N. Gurnswamy of 1948, inter alia, was that though the Indian Incometax Act, 1922, stood repealed and the Mysore Incomes. K. Das J.
tax Act, 1923, came into effect from July 1, 1948 the
former Act as in force in the retroceded area prior to
July 1, 1948, continued to apply in respect of the total
income chargeable to income-tax in the retroceded area
prior to .July 1, 1948 but which had not been assessed
until that date, and it further applied to all proceedings
relating to the assessment of such income until the
stage of assessment a~ .the determination of incometax but the Mysore Act, 1923, applied to such proceedings after that stage. On August 5, 1948, woe,s promulgated the Retroceded Area (Application of Laws)
Act, LVII of 1948, which came into effect from
August 15, 1948. Sections 3 and 4 of Act LVII of
1948, are material for our purpose and may be
•
quoted-
" s. 3.
vided,-
Except as hereinafter in this Act pro-
(3) all laws in force in Mysore shall apply to the
Retroceded Area ; and
(b) the laws in force· in the Retro ceded Area
immediately before the appointed day shall not, from
that day, ha.ve effect or be operative in the Retroceded Area."
"S. 4.
The enactments in force in Mysore which
are set out in the first column of Schedule A to this
Act shall apply to the Retroceded Area subject to the
modifications and restrictions specified in the second
column of the said Schedule and the provisions of
this Act." •
· · ·
Schedule A, paragraph (2), sub-paragraph (b) repeated
in substance what was stated earlier in s. 5 (b) of Act
XXXI of 1948. It read-
" 2. Notwithstanding anything to the .contrary
in the Mysore Income-tax Act, 1923, or the Mysore
Excess Profits Tax Act, 1946-
(a) ., ..... ,· ..................................................... .
.,...
S.C.R.
SUPREME COURT REPORTS
793
· (b) in respect of the total income or profits charger95B
able to income-tax or excess profits tax in the RetroTh .IA
.
h
d
·f J l 19 8 b
e ncome-tax
ced~d rea pr10r to t e first,
~y o
u y . 4 ,
ut Officer, Bangalore
which has not been assessed until that date, the prov.
visions of the Indian Income-tax Act, 1922, and the K. N. Guruswamy
Excess Profits Tax Act, 1940, as in force in the
Retroceded Are'a, immediately. before that date shall
5· K. D«s J.
apply to proceedings relating to the assessment of
such income or profits until the stage of assessment,
and the determination of the income-tax and excess
profits tax payable thereon, and the Mysore Incometax Act, 1923, or the Mysore Excess Profits Tax Act,
1946, as the case may be, shall apply to such proceedings after that stage;"
, ·
There were further far-reaching political and constituticmal changes in 1949-50.
The Maharaja of
Mysore had acceded to the Dominion of India in 1947;
this, however, did not empower the Dominion legislature to impose any tax or duty in the State of Mysore
or any part thereof.
By a proclamation dated
November 25, 1949, the lVIaharaja of Mysore accepted
the Constitution of India, as from the date of its
commencement, as the Constitution of Mysore, which
superseded and abrogated all oth~r constitutional provisions inconsistent therewith and in force in the State.
On January 26, .1950, the Constitution of India came
· into force, and Mysore became a Part B State within
the Co;nstitution of India. On February 28, 1950, there
was a financial agreement between the Rajpramukh
of Mysore and the President of India in respect of
certain, matters governed by Arts. 278, 291, 295 and
306 of the Constitution. Under Art. 277 of the Constitution, however, all taxes which immediately before
the commencement of the Constitution were being
levied by the State continued to be• so .Jevied,
notwithstanding that those taxes . were mentioned
in the Union List, until provision. to the contrary
was made by Parliament by law. Such law was
made by the Finance .Act, 1950, by which the whole
of Mysore including the' retroceded . area ,became
" taxable territory " within the meaning of the Indian
Income-tax Act, 1922, from April !• ·1950., and the
•
794
SUPREME COURT REPORTS
[1959]
z95B
Indian Income-tax Act again came into force in the
Th T
I
retroceded area from the aforesaid date. Section 13
e nconie- ax
.
·
d
Officer Bangalore of the Frnance Act, 1950, dealt with repeals an
• v.
savings. As the true scope and effect of sub-s. (1) of
K. N. Guruswamy s. 13 is one of the questions at issue before us, it is
necessary to read it. .
.
5 · I(. Das J.
"If immediately before the 1st day of April, 1950,
•
there is in ·force in any Part B State other than
Jammu and Kashmir or in Manipur, Tripura or
Vindhya Pradesh or in the merged territory of Cooch.
Behar any law relating to income-tax or super-tax or
tax on profits of business that law shall cease to have
effect except for the purposes of the levy,
assess.
ment and collection of income-tax and super-tax in
respect of any period not included in the previomi
year for . the purposes of assessment under the• Indian
Income.tax Act, 1922, for the year ending on the
31st day of March, 1951, or for any subsequent year,
or, as the case may be, the levy, assessment and
collection of the tax on profits of business for any
chargeable accounting period ending on or before the
31st day of March, 1949:
Provided that any reference in any such law to
an officer, authority, tribunal or court shall be construed as a reference to the corresponding officer,
authority, tribunal or court appointed or constituted
under the said Act, and if any question arises as to·
who such corresponding officer, authority, tribunal or
court is, the decision of the Central Government
thereon shall be final : "
Now, the legal effect of the. constitutional changes
referred to above, so far as it has a bearing on the
present dispute, may be briefly summarised as follows:
the Indian Income-tax Act, 1922, remained in force in
the retroceaed area till June 30, 1948; from J nly l, 1948,
the Mysore Income.tax Act, 1923, applied, subject to
this saving that the Indian Income-tax Act continued
to apply in respect of the total income chargeable to
income tax in the retroceded area prior to Ju];· l, 1948,
and the provisions of that Act as in force in the
retroceded area prior to that date applied to all proceedings .i:elating to. the assessment of such income
•
,.
..
S.C.R.
SUPREME COURT REPORTS
795
upto the stage of assessment and determination of
I958
income- ~ax payable thereon .. This position continued The Income-tax
till April 1, 1950, when the Fmance Act, 1950, came Officer,- Bangalore
into force and the Indian Income-tax Act, 1922, again
v.
came into force in the retroceded area, subject to the K. N. Guruswam;
saving mentioned in s. 13(1) thereof.
The principal question before us, as it was before
5· I<. Dai f.
the High Court, is one of jurisdiction. Did the Incometax Officer concerned have jurisdiction to issue the
notice under s. 34 of the Indian Income-tax Act, 1922,
and to make a re-assessment order pursuant to such
notice ? The High Court pointed out that though the
notice did not clearly say so, the Income-tax Officer
clearly acted under s. 34 of the Indian Income-tax
Act, 1!)22, as it was in force in the retroceded area
prier to July 1, 1948, and the writ applications were
decided on that footing.
.
The four main lines of argument on which the respondent assessee rested his contention that the Incometax Officer concerned had no jurisdiction were these :
firstly, it was urged thats. 34 of the Indian Incometax Act, 1922, was not saved by s.13(1) of the Finance
Act, 1950, because what was saved was the prior law
"for the purposes of the levy, assessment and collection of income-tax", which expression did not include
re-assessment proceedings; secondly, it was argued
that, . even otherwise, the financial agreement made
between the President of India and the Rajpramukh
i
of Mysore on February 28, 1950, which received constitutional sanctity in Art. 278 of the Constitution,
rendered the impugned proceedings unconstitutional
and void; thirdly, it was submittoo that the Indian
Income-tax Act, 1922, as in force in the retroceded
area stood repealed on June 30, 1948, by Mysore Act
XXXI of 1948,. and the saving provisions ins. 5 (b)
thereof or in paragraph (2), sub-paragraph (b), of
Schedule A to Mysore Act LVII of 1948, did not save
s. 34 in so far as it permitted re-assessment proceedings.in respect of years in which there had been an
assessment already; and lastly, it was contended that
after June 30, 1948, and until April 1, Hf50, the In-.
come-tax Officer in the retroceded area. could re-open
796
SUPREME COURT REPORTS
[1959]
z958
the assessment under s. 34 of the Mysore IncomeT! I
t
tax Act, 1923, within a period of four years specified
Je
neome~ax
]
.
b
h
,
Officer Bangalore t ierem,
ut t ere was no authority to re-open the
• v.
assessment under s. 34 of the Indian Income-tax
r\, N. Guruswamy A.ct.
Following its own decision, City Tobacco Mart and
5· IC Das 1·
Others v. Income-tax Officer, Urban Circle, Bangalore('),
on certain earlier writ petitions (nos. 52 and 53 of 1953
and 105 and 106 of 1954), the High Court held in
favour of the assessee on the construction of s. 13 (1)
of the Finance Act, 1950 and also on the effect of the
saving provisions ins. 5 (b) of Mysore Act XXXI of
1948, and paragraph (2), sub-paragraph (b) of Schedule A to Mysore Act LVII of 1948. On these findings,
it held that the Income-tax Officer concerned had no
jurisdiction or authority to start the impugned proceedings or to make the impugned orders of assessment.
It did not feel called upon to pronounce op the validity of the argun1;ent founded on the financial agreement dated February 28, 1950.
In Civil Appeals 143-145 of 1954, Civil Appeals 27
to 30 of 1956 and Civil Appeals 161 to 164 of 1956,
Lakshmana Shenoy v. The Income-tax O,tJicer, Ernakulam ('), in which judgment has been delivered today,
we have fully considered the arguments as to the true
scope and effect of s. 13(1) of the Finance Act, 1950,
and of the financial agreement of February 28, 1950,
taken along with the recommendations of the Indian
States Finances Enquiry Committee. We have held
therein that the expression 'levy, assessment and
collection of income-tax' ins. 13 (1) is wide enough to
comprehend re-assessment proceedings under s. 34 and
that the financial agreement aforesaid, on a true
construction of the recommendations of the Enquiry
Committee, does not render the impugned proceedings
unconstitutional and void. That decision disposes of
these two arguments in the present appeals.
The two additional points which remain for consideration depend on the interpretation to be put QU the
saving pro_visions in s. 5(b) of Mysore Act XXXI of
• l!J48 and paragraph (2), sub-paragraph (b) of Schedule
(1) A.l.R. 195_:; Mys,49.
(2) [1959] S.C.R. 751.
•
•
S.C.R.
SUPREME COURT REPORTS
797
A to Mysore Act LVII of 1948. These provisions are
z95B
expressed in identical terms, and the question is if 1.h 1
t
3
f
h
I d.
I
A
. h
e ncome.- a:I'
they save s. 4 o t e
n ian .ncome-tax .ct wit
Officer, Bangalor4
regard to re-assessment proceedmgs. We thmk that
v.·
·
they do. It is worthy of note that the saving provi- K. N. Guruswamy
sions say that the Indian Income-tax Act, 1922, as in
force in the retroceded area prior to July 1, 1948, shall s. K. pas f.
apply in respect of the total income chargeable to
income tax prior to that date and it shall apply to
proceedings relating to the assessment of such income
until the stage of assessment and determination of
income-tax payable thereon. ' Total income ' means
the tota,l amount of income, profits and gains computed in the manner laid down in the Act, and there are
no good reasons why the word' assessment' occurring
in the saving provisions should be restricted in the
manner suggested so as to exclude proceedings for
assessment of escaped income or under-assessed· income. On behalf of the assessee our attention has
been drawn to the words "in respect of the total
income chargeable to income-tax ............ but which
has not been assessed until that date " occurring in
the saving provisions and the argument is that those
words show that there was no intention to permit· re:
opening of assessments which had been made already.
We are unable to accept this argument. In its normal
sense, ' to assess ' means 'to fix the amount of tax or
to determine such amount'. The.process of re-assessment is to the same purpose and is included in the
connotation of the term" assessment". The reasons
which led us to give a comprehensive meaning to the
word "assessment" in s. 13 (1) ·of the Finance Act,
1950, operate equally with regard to the saving provisions under present consideration. We agree with the
view expressed in Hirjibhai Tribhuvand:as v. Incometax Officer, Rajnandgaon and another (1), thats. 34 of
the Income-tax Act contemplates different cases in
which the power to assess escaped income has been
given.; wliere there has been no assessment at all, the
term "assessment" may be appropriate and whete
there was assessment at too low a rate or with •
(x) A.I.R. 1957 M.P. 171.
798
SUPREME COURT REPORTS
[1959]
x958
unjustified exemptions, the term' re-assessment' may
Th I
_1
be appropriate, and it may have been necessary to use
' "'ome ax t
d"""
t t
· h 1 ·
h
d"""
Offiee>. Bangalore wo . I11eren
erms to cover wit c anty t e
111erent
v.
cases dealt with in the section; but this does not mean
·K. N. Guruswamy that the two terms should be treated as mutually
exclusive or that the word 'assessment' in the saving
s. K. Das J.
provisions should be given a restr~cted meaning.
The
object of the saving provisions was obviously to make
the prior law available in all cases in which the income
was assessed or was assessable according to that law
before July 1, 1948, and it is difficult to see why only
.,.
•
a part of the process of assessment should be saved
and the other part repealed.
We, therefore, hold that the saving provisions save
s. 34 of the Indian Income-tax Act, 1922, in its
entirety, as it was in force in the retroceded area prior
to July 1, 1948, and the contention of the respondent
that it stood repealed from that date is not correct.
As to the period of limitation, it would be the period
laid down in s. 34 of the Indian Income-tax Act as it
was in force in the retroceded area prior to July 1,
1948.
The result, therefore, is that these appeals succeed
and the judgment and order of the High Court of
Mysore dated March 22, 1955, are set aside and the
writ petitions filed by the respondent assessee are dismissed.
The appellant will get his costs in this Court
and the High Court.
Appeals allowed .
•
..
. '