civil appellate jurisdiction civil appeal number 705 of
1957.
appeal from the judgment and order dated october 5 1955 of
the bombay high companyrt in appeal number 1 of 1955.

n. rajagopal sastri and p.d. menumber for the appellants. a. palkhivala j.b. dadachanji o. c. mathur and
ravinder narain for respondents number. 1 and 2.

a. palkhivala d. n. mukherjee and b.n. ghosh for the
intervener. 1962. december 12. the following judgments were delivered. k. das j. j. l. kapur j. and a.k. sarkar j.
delivered separate judgments. the judgment of m.
hidayatullah and raghubar dayal jj. was delivered by
hidayatullah j.

k. das j. this appeal has been brought to this companyrt on
a certificate of fitness granted by the high companyrt of
bombay. the appellants are the union of india and the
income-tax officer market ward bombay. by this appeal the
appellants challenge the companyrectness of the judgment and
order of the high companyrt of bombay dated october 5 1955 by
which the high companyrt affirmed the judgment and order of a
learned single judge of the same companyrt dated december 7
1954 on a petition filed by the respondents under art. 226
of the companystitution. the relevant facts are these. the firm of purshottam
laxmidas was started on october 28 1935. this firm had two
partners dwarkadas vussonji and parmanand odhavji. dwarkadas died on april 1 1946 leaving a son vasantsen. anumberher firm by the name of vasantsen dwarkadas was
started on january 28 1941 and in that firm there were
three partners vasantsen narandas shivji and nanalal
odhavji. this firm was dissolved on october 24 1946. the
firm of vasantsen dwarkadas filed a return of its income for
the assessment year 1942-1943 and also claimed registration
as a firm. the income-tax authorities refused registration
and came to the companyclusion that the firm of vasantsen
dwarkadas belonged really to dwarkadas father of vasantsen
therefore they added the income of the firm to the income of
dwarkadas. in subsequent assessment years the firm of
vasantsen dwarkadas again applied for registration but
registration was again refused. for the assessment years
1942-1943 to 1948-1949 several appeals were filed before the
income-tax appellate tribunal by the firm vasantsen
dwarkadas both against the quantum of income assessed and
against the refusal of the income-tax officer to register
the firm of vasantsen dwarkadas. an appeal was also filed
by the firm of purshottam laxmidas against its assessment in
respect of excess profits tax and there was also an appeal
for the assessment year 1942-1943 by vasantsen as the heir
and legal representative of his father against the decision
of the income-tax authorities that the income of the firm
vasantsen dwarkadas should be included in the income of
dwarkadas. it appears that after the decision in
vasantsens case in the assessment year 1942-1943 the
income-tax officer gave a finding that the firm of vasantsen
dwarkadas was only a branch of the firm of purshottam
laxmidas and therefore the income-tax officer added the
income of vasantsen dwarkadas to the income of the firm
purshottam laxmidas. this question also came up before the
income-tax appellate tribunal in the appeals filed by
purshottam laxmidas in respect of the assessments made
against it. by a companysolidated order dated august 14 1951
the income-tax appellate tribunal disposed of all the
aforesaid appeals and it came to the companyclusion that the
business done
in the name of vasantsen dwarkadas was really the business
of the firm purshottam laxmidas. with regard to the appeal
filed by vasantsen as heir and legal representative of his
father for the assessment year 1942-1944 the tribunal
expressed the view that the income of vasantsen dwarkadas
should be deleted from the assessment of dwarkadas. it said

we are therefore of opinion that the addition
of rs. 623721/-to dwarkadass income or the
modification directed by the appellate assis-
tant companymissioner should be deleted from
dwarkadass income. if the income-tax officer
can include the same in the income of
purshottam laxmidas he is of companyrse at
liberty to do so. he can then apportion the
income of purshottam laxmidas amongst the
partners thereof as provided in s. 23  5  of
the act. the companymissioner of income-tax questioned the companyrectness of
the aforesaid finding of the tribunal but on a reference to
the high companyrt the latter upheld the order of the tribunal. the reference was decided on october 8 1953.
on april 30 1954 the income-tax officer companycerned who is
the appellant before us served on the firm purshottam
laxmidas a numberice under s. 34 of the indian income-tax act
1922. this numberice was in these terms
whereas i have reason to believe that your
income assessable to income-tax for the year
ending 31st march 1943 has been under-assessed
i therefore propose to re-assess to income
allowance that has been under assessed
i hereby require you to deliver to me within
35 days of the receipt of this numberice a return
in the attached form of your total income
and total world income assessable for the year
ending 31st of march 1943.
this numberice is being issued after obtaining
the necessary satisfaction of the companymissioner
of income-tax bombay city bombay. the numberice was followed by some companyrespondence between the
firm purshottam laxmidas and the income-tax officer. the
result of the companyrespondence was that the income-tax officer
informed the firm that its income was to be re-assessed in
order to give effect to the finding of the appellate
tribunal in its order dated august 14 1951 that the
business of vasantsen dwarkadas was really the business of
the firm purshottam laxmidas. on july 9 1954 vasantsen as the first petitioner and the
firm of purshottam laxmidas as second petitioner filed a
petition in the high companyrt under art. 226 of the
constitution and asked for the issue of a writ quashing the
numberice dated april 30 1954 and a writ of mandamus
restraining the union of india and the income-tax officer
concerned from taking any steps or proceedings in pursuance
of the said numberice. their main companytentions were  1  that
the income-tax officer had numberjurisdiction to issue the
numberice after the expiry of the limit of time fixed by sub-s.
 1  of s. 34  2  that the second proviso to sub-s.  3  of
s. 34 on which the income-tax officer relied did number apply
to the case  3  that there was numberprovision in the act
under which the appellate tribunal companyld give a finding in
the appeals filed by the firm of vasantsen dwarkadas or in
the appeal filed by vasantsen himself that the income in
question represented the income of the firm purshottam
laxmidas and  4  lastly that that the second proviso to
sub-s.  3  of s. 34 was bad on the ground that it violated
art. 14 of the companystitution. desai j. who heard the petition in the first instance came
to the companyclusion that the numberice was
bad and without jurisdiction because to use his own words
the income-tax officer in issuing the numberice on april 30
1954 which was clearly more than eight years from the close
of the assessment year 1942-1943 was obviously in error in
thinking that the second proviso to sub-s.  3  of s. 34
applied to the case. the learned judge held that the
proviso did number apply to orders of assessment which had
become final before the date when it came into force. it
may be here stated that the second proviso to sub-s.  3  of
s. 34 was amended by act xxv of 1953 and by s. 1  2  of the
amending act of 1953 the amended proviso came into force on
april 1 1952. desai j. further held that the proviso in
question did number violate art. 14 of the companystitution in so
far as assessees who were parties to the proceedings before
the appellate tribunal were companycerned but the proviso was
bad in so far as it affected persons other than assessees. he held however that the petitioners before him were parties
to the proceedings before the appellate tribunal and
therefore fell within the category of assessees. in view
however of his finding that second proviso to sub-s.  3  of
s. 34 did number apply to the case his final companyclusion was
that the numberice was without jurisdiction. the matter was then taken in appeal and the appeal was heard
by chagla c. j. and tendolkar j. the appellate companyrt
affirmed the finding of desai j. that the numberice under s.
34 was issued out of time and was therefore invalid. it
further held that the second proviso to sub-s.  3  of s. 34
did number apply to the case. on the question as to whether
the second proviso violated arts. 14 of the companystitution it
came to the companyclusion that numbervalid distinction companyld be
drawn between persons with regard to whom a finding or
direction is given by the appellate tribunal and persons
with regard to whom numbersuch direction or finding is given. the appellate companyrt expressed the view that both fell in the
same
category and there was numberdifficulty in having a uniform
provision of law with regard to them. the appellate companyrt
further expressed the view that for the assessment year
1942-1943 the assessee before the tribunal was vasantsen
dwarkadas as representing his father in that appeal the
firm of purshottam laxmidas was number before the tribunal and
therefore the firm was numberbetter than a stranger who was in
some way associated with the assessee. the appellate companyrt
held in the result that the second proviso to sub-s.  3  of
s. 34 offended against art. 14.
i have stated earlier that the appeal has been brought to
this companyrt from the decision of the appellate companyrt on a
certificate of fitness granted by the high companyrt. in the
original statement of the case filed on behalf of the
appellants the principal question raised was that relating
to the second proviso to sub-s.  3  of s. 34 which i shall
presently read. the appellants were however allowed by us
to file a supplementary statement of the case in which two
other points have been urged. one of these points is that
the validity of the numberice dated april 30 1954 cannumber be
challenged by reason of the provisions of s. 31 of the
amending act 1953  xxv of 1953 . the second point is that
the validity of the numberice cannumber be challenged also because
of the provisions of s. 4 of the indian income-tax
 amendment  act 1959  1 of 1959 . therefore three substantial questions fall for decision in
this appeal. the first question is whether the second
proviso to sub-s.  3  of s. 34 is companystitutionally valid and
applies to the case. the second is can the validity of the
numberice dated april 30 1954 be challenged in view of the
provisions of s. 31 of the amending act of 1953. the third
question is the effect of the provisions of the indian
income-tax  amendment  act 1959  1 of 1959 . i shall number
deal with these questions one by one. first as to the second proviso to sub-s.  3  of s. 34. s. 34
of the indian income-tax act 1922 has undergone many
amendments. it is number necessary to refer to the section as
it stood prior to 1939. the section as it stood in 1939
empowered the income-tax officer to assess or reassess
income which had escaped assessment or had been under-
assessed or had been assessed at too low a rate or had been
the subject of excessive relief under the act. the section
made a distinction between two classes of cases one in
which the income-tax officer had reason to believe that the
assessee had companycealed the particulars of his income or had
deliberately furnished inaccurate particulars thereof and in
this class of cases the income-tax officer companyld take action
as laid down in the section at any time within eight years
in all other cases the income-tax officer companyld take action
within four years of the end of the relevant assessment
year. the section was almost companypletely recast by the
income-tax and business profits tax  amendment  act 1948
 act xlviii of 1948 . for the purpose of this case all that
i need state is that the two time limits of eight years and
four years were companytinued in respect of two classes of cases
mentioned in clauses  a  and  b  of sub-s.  1  of s. 34
clause  a  related to cases of omission or failure on the
part of an assessee to make a return of his income or to
disclose fully and truly all material facts necessary for
his assessment and cl.  b  related to cases where the
income-tax officer had in companysequence of information in his
possession reason to believe that income profits or gains
chargeable to income-tax had escaped assessment etc. the
time limit of eight years applied to cases under cl.  a  and
the time limit of four years applied to cases under cl.  b . by s. 18 of the finance act 1956 more changes were intro-
duced with effect from april 1 1956. the time limit of
eight years was omitted from sub-s.  1  as regards cases
falling under cl.  a  but a proviso to sub-s.  1  of s. 34
which was substituted for the original proviso
said inter alia that the income-tax officer shall number issue
a numberice under cl.  a  of sub-s.  1  for any year if eight
years have elapsed after the expiry of that year unless the
income profits or gain 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 the act etc. amount to or are likely to amount
to rs. 100000/- or more in the aggregate for that year
etc. certain other safeguards were also introduced in the
sub-section with which we are number companycerned. put shortly
the time limit of eight years companytinued in respect of cl.  a  cases if the amount was less than rs. 100000/-. number i companye to sub-s.  3  and the second proviso thereto. prior to 1956 sub-s.  3  provided that every assessment or
re-assessment should be companypleted within eight years from
the end of the relevant assessment year in those cases where
the assessee had failed to make a return or failed to
disclose fully and truly all material facts necessary for
his assessment. in 1956 the time limit was removed and the
assessment or re-assessment in such cases might be companypleted
at any time. in all other cases the period of limitation
was still four years as it was before 1956 for companypletion
of assessment under s. 23 or of assessment or re-assessment
under s. 23 read with s.34. the second proviso after its
amendment in 1953 companystituted an exception to sub-s.  1  as
well as sub-s.  3 . the periods of limitation laid down in
sub-s.  1  for initiating proceedings and in sub-s.  3  for
making an order of assessment or re-assessment were subject
to the exception mentioned in the second proviso. i may number
read that proviso-
provided further that numberhing companytained in
this section limiting the time within which
any action may be taken or any order assess-
ment or re-assessment may be made shall
apply to a re-assessment made under section 27
or to an assessment or re-assessment made on
the assessee or any person in companysequence of
or to give effect to any finding or direction
contained in an order under section 31
section 33 section 33a section 33-b section
66 or section 66a. i have stated earlier that the second proviso as amended was
inserted by the income-tax  amendment  act 1953  xxv of
1953  with effect from april 1 1952.
number i proceed to discuss the first question as to whether
this proviso applies in the present case. the question has
two facets  1  whether the proviso is companystitutionally
valid and  2  if it is companystitutionally valid does it apply
to a case where the time limit fixed by sub-s.  1  of s. 34
had expired some time before april 1 1952 the date on
which the proviso came into effect ? with regard to the
first facet chagla c.j. has pointed out rightly in my
opinion that the persons with regard to whom a finding or
direction is given and persons with regard to whom no
finding or direction is given belong really to the same
category namely the category of persons who are liable to
pay tax and have failed to pay it for one reason or anumberher. admittedly persons who are liable to pay tax and have number
paid it companyld number be proceeded against after the period of
limitation unless a finding or direction with regard to
them was given by some tribunal under the various sections
mentioned in the proviso therefore out of the large
category of people who were liable to pay tax but failed to
pay it a certain number is selected for action by the
proviso and with regard to that small number the right of
limitation given to them is taken away. the real question
is is there any rational basis for distinguishing between
persons who are liable to pay tax and have failed to pay it
and with
regard to whom a finding or direction is given and persons
who are liable to pay tax and have failed to pay it and with
regard to whom numberfinding or direction is given. i am in
agreement with the view expressed by the learned chief
justice that numberrational basis has been made out for the
distinction between the two classes of people referred to
above who really fall in the same category and with regard
to whom there was numberdifficulty in having a uniform
provision of law. i am further in agreement with the view
of the learned chief justice that the principle laid down by
this companyrt in suraj mall mohta company v. a.v. visvanatha
sastri and anumberher  1  applies. in that case sub-s.  4  of
s. 5 of the taxation on income  investigation companymission
act was challenged and this companyrt pointed out that there
was numberhing uncommon either in properties or in
characteristics between persons who were discovered as
evaders of income-tax during an investigation companyducted
under s. 5  1  and those who were discovered by the income-
tax officer to have evaded payment of income-tax. both these
kinds of persons really belonged to the same category and
therefore required equal treatment. this companyrt pointed out
that s. 34 of the indian income-tax act and sub-s.  4  of s.
5 of the impugned act dealt with persons who had similar
characteristics and properties and therefore a different
treatment of some out of the same class offended the equal
protection clause embodied in art. 14 of the companystitution. it seems to me that the position is the same here. whether
persons who evade tax are discovered by means of a finding
given by a tribunal or they are discovered by any other
method they really belong to the same category and
therefore require equal treatment. the second proviso to
sub-s.  3  of s. 34 which came into effect from april 1
1952 patently introduced an unequal treatment in respect of
some out of the same class of persons. those whose
liability to pay tax was discovered by one method companyld be
proceeded against at any time and
 1  1955 1 s.c.r. 448.
numberlimitation would apply in their case and in the case of
others the limitation laid down by sub-s.  1  of s. 34 would
apply. this in my opinion is unequal treatment which is number
based on any rational ground. desai j. put the matter on
a somewhat narrower ground. he held that so far as
assessees were companycerned there might be a rational ground
for distinction because the appeal proceedings etc. might
take a long time and the assessee being a party to the
appeal companyld number companyplain of such delay therefore
assessees did number occupy the same position as strangers. but the learned judge field that there was numberrational
distinction so far as strangers were companycerned and there was
numberreason why they should be deprived of the benefit of the
time limit prescribed by sub.s.  1 . he therefore held that
the proviso so far as it affected persons other than
assessees number parties to the proceedings enumerated in it
must be held to be ultra vires the legislature. even on
this narrow ground it seems to me that the respondents are
entitled to succeed. the finding which the appellate
tribunal gave in its companysolidated order dated august 14
1951 was a finding given in the appeal filed by vasantsen
as heir and legal representative of his father for the
assessment year 1942-43. in that appeal the firm purshottam
laxmidas was number even a party though purshottam laxmidas
was a party to certain other appeals before the appellate
tribunal. i have some difficulty in appreciating how the
firm purshottam laxmidas can be treated as an assessee
within the meaning of the second proviso to sub-s.  3  of s.
34 for the assessment year 1942-1943. if the firm cannumber be
so treated then even on the narrow ground stated by desai
j. the proviso would be of numberhelp to the present
appellants. i number take up the second facet of the same question. on
this aspect of the case both the learned single judge
 desaij.  and the appellate companyrt  chagla c. j. and
tendolkar j.  were agreed. the
relevant assessment year was 1942-1943 and it ended on march
311943. the period of four years therefrom would end on
march 311947 and the period of eight years would end on
march 311951. number the second proviso to sub-s.  3  came
into effect as i have stated earlier on april 1 1952. in
other words the time limit fixed by sub-s.  i  had expired
some time before the amended second proviso came into
effect. desai j. has rightly pointed out that it is a
firmly established principle of income-tax law that once a
final assessment is arrived at and the assessment is
complete it cannumber be re-opened except in the circumstances
detailed in ss.34 and 35 of the act and within the time
limited by those sections. is there anything in the proviso
in question which would give it a retrospective effect
beyond april 1 1952? in my opinion there is numbere. the
second proviso came into force on april 1 1952 and before
that date the period of eight years from march 31 1943 had
already expired. the legislation which provided that from
april 1 1952 there would be numberlimitation in respect of
certain cases companyld number revive a remedy which was already
lost to the income-tax officer. it seems to me that the
proposition of law is settled beyond any doubt that although
limitation is a procedural law and although it is open to
the legislature to extend the period of limitation an
important right accrues to a party when the remedy against
him is barred by the existing law of limitation and a
vested right cannumber be affected except by express terms used
by the statute or the clearest implication following
therefrom. some reliance was placed on the decision of the
calcutta high companyrt in income-tax officer v. calcutta
discount company limited  1  which later came to this companyrt on a
different point. i am of the opinion that the decision is
of numberhelp to the present appellants. it was said in that
decision that the plain effect of the substitution of new s.
34 with effect from march 30 1948 was that from that date
the income-tax act was to be read as including the
 1  1953 23 i.t.r. 471.
new section as a part thereof the further effect of the
express language of the section was that so far as cases
coming within cl.  a  of sub-s.  1  were companycerned all
assessment years ending within eight years from march 30
1948 and from subsequent dates were within its purview. the learned chief justice of the calcutta high companyrt took
particular care in that decision to point out that what was
number within the purview of the section was an assessment
which ended-before eight years from march 30 1948. that
decision therefore does number in any way assist the present
appellants. on behalf of the appellants some distinction was sought to
be drawn between a right and the remedy thereof and it was
contended that the liability of an assessee to pay the tax
owing to the state was always there from the companymencement of
the assessment year and s. 34 of the act dealt merely with
the machinery of assessment. it was argued that a case
under s. 34 was number analogous to a time barred claim to
recover money from one individual by anumberher. in my opinion
such a distinction is entirely out of place so far as s. 34
is companycerned. the learned chief justice has rightly pointed
out that under s. 34 the income-tax officer has the right to
issue a numberice within the period of limitation fixed by sub-
s.  1  in anumberher sense it may be said that the remedy of
the income-tax officer to bring to tax escaped income is
available to him under s. 34 provided he avails himself of
the remedy within the period of limitation. numberdistinction
can be drawn so far as s. 34 is companycerned between the
right of the income-tax officer and the remedy available to
him. if the remedy is lost the right is also lost and if
the right is lost much more so is the remedy. therefore i am clearly of the view that on april 30 1954
the income-tax officer had numberjurisdiction to issue the
numberice which he did on the
firm purshottam laxmidas under the second proviso to sub-s.
 3  of s. 34 because the time limit fixed by sub-s.  1  of
s. 34 had expired long before the said proviso came into
effect and the proviso does number in express terms or by
necessary implication revive a remedy which had been lost
before april 1 1952.
this disposes of the first question argued before us. i
proceed number to the second question namely the effect of s.
31 of the indian income-tax  amendment  act 1953  xxv of
1953 . i may first set out the section
for the removal of doubts it is hereby
declared that the provisions of sub-sections
 1   2  and  3  of section 34 of the
principal act shall apply and shall be deemed
always to have applied to any assessment or
reassessment for any year ending before the
first day of april 1948 in any case where
proceedings in respect of such assessment or
re-assessment were companymenced under the said
sub-sections after the 8th day of september
1948 and any numberice issued in accordance with
sub-section  1  or any assessment companypleted in
pursuance of such numberice within the time
specified in sub-section  3  whether before
or after the companymencement of the indian
income-tax  amendment  act 1953 shall
numberwithstanding any judgment or order of any
court appellate tribunal or income-tax
authority to the companytrary be deemed to have
been validly issued or companypleted as the case
may be and numbersuch numberice assessment or re-
assessment shall be called in question on the
ground merely that the provisions of section
34 did number apply or purport to apply in
respect of an assessment or re-assessment for
any year prior to the 1st day of april 1948.
it will be numbericed that the section is in two parts the
first part is declaratory of the law and says that sub-ss.  1   2  and  3  of s. 34 shall apply and shall be deemed
always to have applied to any assessment or re-assessment
for any year ending before april 1 1948 in any case where
proceedings in respect of such assessment etc. were
commenced under the said sub-sections after september 8
1948 and any numberice issued in accordance with sub.s.  1  or
any assessment companypleted in pursuance of such numberice within
the time specified in sub-s.  3  whether before or after
the companymencement of the amending act of 1953 shall be
deemed to have been validly issued etc. the second part
says inter alia that numbersuch numberice shall be called in
question on the ground merely that the provisions of s. 34
did number apply or purport to apply in respect of an
assessment prior to april 1 1948. it should be numbericed
here that the amending act of 1948  act xlviii of 1948
completely recast s. 34 and sub-s.  2  of s. 1 of that act
which came into force on september 8 1948 provided that ss. 3 to 12 of the amending act should be deemed to have companye
into force on march 30 1948. the amendment of s. 34 was
made by s. 8 of the amending act therefore s. 34 as
amended by the amending act of 1948 operated retrospectively
from march 30 1948. in the calcutta discount company limited v.
income-tax officer  1  bose j. held that s. 34 although
described as a machinery section did number relate to procedure
pure and simple but affected the protection given to an
assessee and therefore the amended section had no
application to the assessments for 1942-1943 1943-1944 and
1944-1945. this view of bose.j. was number accepted by the
appellate companyrt in income-tax officer v. calcutta discount
co. limited  2  where the learned chief justice of the
calcutta high companyrt rightly pointed out that s. 34 as it
spoke from march 30 1948 took in all assessment years
ending within eight years from march 30 1948 and subsquent
dates but
 1  1952 21 i.t.r. 579.  2  1953 23 i.t.r. 471.
did number take in an assessment year which ended before eight
years from march 30 1948. it is worthy of numbere that the
bill which became act xxv of 1953 was introduced after the
judgment of bose j. and before the judgment of the learned
chief justice. there were really two separate and distinct
questions one was whether s. 34 as amended in 1948 applied
to assessment years prior to 1948-1919 and the second
question was whether on the footing that amended s. 34 did
apply to assessment years prior to 1948-1949 any action
could be taken under the amended section in respect of those
assessments which had become time-barred before the amended
section came into effect. bose j. answered the first
question in the negative and necessarily the second question
also in the negative. the learned chief justice answered
the first question in the affirmative but took pains to
point out that an assessment made before eight years from
march 30 1948 was number within the purview of s. 34.
i am of the opinion that in its true scope and effect. s.
31 of the amending act of 1953 puts beyond any doubt that
the view expressed by the learned chief justice in income-
tax officer v. calcutta discount company limited  1  is the
correct view and amended s. 34 applies to assessment years
prior to 1948-1949 but it does number say that an assessment
which had become final and in respect of which reassessment
proceedings had become time-barred before the amended
section came into force companyld be re-opened. this appears to
me to be clear from the first part of s. 31. that part says
that sub-ss.  1   2  and  3  of s. 34 shall apply and be
deemed always to have applied to any assessment etc. for any
year ending before april 1 1948 in any case where
proceedings in respect of such assessment etc. were
commenced under the said sub-sections after september 8
1948 and any numberice issued in accordance with sub-s.  1
shall be deemed to be valid
 1  1953 23 i.t.r. 471.
etc. the section does number say that the periods of
limitation laid down in sub-ss.  1  and  3  are being done
away with on the companytrary the first part of the section
says that the proceedings must have been companymenced after
september 8 1948  the date on which the amending act of
1948 came into force  under the said sub-sections and the
numberice must have been issued in accordance with sub-s.  1 . the income-tax officer can companymence proceedings under the
said sub-sections or issue a numberice in accordance with sub-
s.  1  only when he obeys the injunction as to time laid
down therein then only he can be said to have companymenced
proceedings or issued a numberice in accordance with the sub-
sections. if he has done that and companymenced proceedings
after september 8 1948 then the second part of the section
says that the numberice or the assessment shall number be called
in question on the ground merely that the provisions of s.
34 did number apply or purport to apply in respect of any year
prior to april 1 1948. these lines underlined in the
second part of the section also bring out its true scope and
effect. if there has been companypliance with provisions of the
sub-sections including the time limits fixed therein then
the numberice issued or assessment made is number liable to
challenge on the mere ground that amended s. 34 does number
apply in respect of a year prior to 1948-1949. in other
words s. 31 of the amending act of 1953 nullifies the
effect of the decision of bose j. in calcutta discount company
ltd. v. income- tax officer  1  and gives effect to the
decision of the learned chief justice of the calcutta high
court. the section does number abrogate the periods of
limitation laid down in the relevant sub-sections of s. 34
if it did it would be in companyflict with s. 34 and the ground
taken would be such companyflict and number merely the ground that
the provisions of s. 34 did number apply to any year prior to
1948-1949.
my companyclusion therefore is that s. 31 of the amending act
of 1953 does number validate the numberice
 1  1952 21 i.t.r. 579.
issued in the present case--a numberice issued on april 30
1954 long before which date the assessment had become final
and in respect of which reassessment proceedings had become
time-barred. the short answer to the argument based on s.
31 is that the numberice in the present case was number issued in
accordance with sub-s.  1  of s. 34 and the first part of
s. 31 requires that the numberice must be so issued before the
second part thereof can give any protection to it. i number proceed to companysider the amending act of 1959. the
indian income-tax  amendment  act 1959  1 of 1959  received
the assent of the president on march 12 1959. the relevant
provisions with which we arc companycerned are companytained in ss. 2 and 4 of the amending act. by s. 2 of the amending act a
new sub-section namely sub-s.  4  was inserted in
s. 34. this sub-section said
s. 34  4 . a numberice under clause  a  of sub-
section  1  may be issued at any time numberwith-
standing that at the time of the issue of the
numberice 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 numberice relates. s. 4 of the amending act companytained provisions regarding the
saving of numberices assessments etc. in certain cases only
and read as follows
numbernumberice issued under clause  a  of sub-sec-
tion  1  of section 34 of the principal act at
any time before the companymencement of this act
and numberassessment re-assessment or settlement
made or other proceedings taken in companysequence
of such numberice shall be called in question in
any companyrt tribunal or other authority merely
on the
ground that at the time the numberice was issued
or at the time the assessment or re-assessment
was made the time within which such numberice
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  18 of 1956  had expired. the main point argued before us on behalf of the appellants
is that s. 4 of the amending act of 1959 saves the numberice
which the income-tax officer issued in the present case on
april 30 1954. i may here state one initial difficulty
which faces the appellants. s. 4 of the amending act of
1959 refers to a numberice issued under cl.  a  of sub-s.  1
of s. 34 therefore in order to get the benefit of the
section the appellants must establish that the numberice dated
april 80 1954 was a numberice issued under cl.  a  of sub-s.
 1  of s. 34. in an earlier part of this judgment i had set
out in full the numberice which the income-tax officer had
issued on april 30 1954 that numberice said inter alia that
the income-tax officer had reason to believe that the income
of the firm purshottam laxmidas assessable to income-tax for
the year ending march 31 1943 had been under-assessed and
therefore the income-tax officer proposed to re-assess the
income. it is at least doubtful that the numberice if one
were to go by the words used in the first part thereof
would make it a numberice under cl.  a  of sub-s.  1  of s. 34
unless the satisfaction of the companymissioner referred to in
the last part makes it one. i have said earlier that cl.  a  of sub-s.  1  of s. 34 related to those cases in which
there was an omission or failure on the part of the assessee
to make a return of his income under s. 22 for any year or
to disclose fully and truly all material facts necessary for
his assessment for that year. when the calcutta discount
companys case  1  came to us we had explained what was
meant by number-disclosure of
 1  1961 2 s.c.r 241.
material facts and pointed out the distinction between
primary facts and inferences therefrom.  see calcutta
discount companypany limited v. income-tax officer companypanies
district  1  . there is numberhing in the record to show that
in the present case there was an omission or failure on the
part of the assessee to make a return of his income under s.
22 for the year 1942-1943 number is there any avertment on
behalf of the appellants that the assessee failed to
disclose fully and truly all material facts necessary for
his assessment for that year in the sense explained above. i have said earlier that there was some companyrespondence
between the income-tax officer companycerned and the firm of
purshottam laxmidas with regard to the numberice issued on
april 30 1954. the firm wanted to knumber the reason why the
numberice had been issued. in reply to the letter from the
firm the income-tax officer said  see ex. c
the income of the companycern of vasantsen
dwarkadas was originally included in the hands
of dwarkadas vassonji dwarkadas vassonji was
also a partner in the registered firm of
messrs purshottam laxmidas. the appellate
tribunal by its companysolidated order dated 14-8-
1951  i. t. number. 7836 to 7851 of 1951/52 and

p.t.a. number. 13 to 17 of 1950/51  has companye to
the finding that the companycern of vasantsen
dwarkadas is the branch of messrs purshottam
laxmidas. the income of the firm has
therefore to be reassessed. the aforesaid reply does number make out any case that the
numberice was issued under cl.  a  of sub-s.  1  of s. 34. when
we allowed the appellants to file a supplementary statement
of the case urging new points we also granted time to the
respondents to file a supplementary statement of case if
any on their behalf. the respondents filed a supplementary
statement of their case and said therein that the numberice
 1  1961 2 s.c.r. 241.
dated april 30 1954 was number and companyld number be issued under
cl.  a  of sub-s.  1  of s. 31 but was and companyld only be
issued under cl.  b  or sub-s.  1  of s. 34. therefore it
seems to me that the appellants have number established without
any doubt that the numberice in this case was issued under cl.  a  of sub-s.  1  of s. 34 so as to give them the
protection of s. 4 of the amending act of 1959. the point
taken is indeed a point of law namely whether the
appellants are entitled to the benefit of s. 4 of the
amending act of 1959. but the applicability of s. 4 depends
on certain facts and those facts must first be found. it is
true that in the judgment of the high companyrt there is a
reference to eight years period of limitation but numbere of
the parties raised any question as to whether the numberice
dated april 30 1954 was issued under cl.  a  or cl.  b  of
sub-s.  1  of s. 34. the parties joined issue only on the
question whether the second proviso to sub-s.  3  of s. 34
applied or number. the necessary facts were number investigated
and numberfinding was given as to whether the numberice came
within cl.  a  or cl.  b  of sub-s.  1  of s. 34.
i am of the opinion that this is enumbergh to dispose of the
claim put forward by the appellants that the numberice dated
april 30 1954 is saved by s. 4 of the amending act of
1959. numberfoundation on facts having been laid for the
claim it must be rejected. the matter was however argued before us at great length on
the supposition that the numberice dated april 30 1954 was a
numberice issued under cl.  a  of sub-s.  1  of s. 34. 1 am of
the opinion that even on that supposition the appellants are
number entitled to succeed. it is manifest that sub-s.  4  of
s. 34 does number help the appellants. that sub-section is
clearly prospective and is intended to authorise action
after the companying into force of the 1959 amendment there-
fore sub-s.  4  of s. 34 cannumber validate a numberice issued in
1954. number the question is what about
s. 4 of the amending act of 1959? it has been very
strenuously argued before us that section by reason of the
unambiguous language used therein saves the numberice. it is
pointed out that the section in its first part refers inter
alia to a numberice issued under cl.  a  of sub-s.  1  of s. 34
at any time before the companymencement of the 1959 act and in
its second part says that numbersuch numberice shall be called in
question in any companyrt etc. merely on the ground that at the
time the numberice was issued the time within which such
numberice should have been issued under s. 34 as in force
before its amendment by s. 18 of the finance act 1956 had
expired. the argument is that the language of the section
is such that it clearly saves the numberice issued on april 30
1954 because  1  it fulfils the requirement of the first
part of the section in as much as the numberice was issued
before the companymencement of the 1959 act and  2  the second
part of the section says that the numberice cannumber be called in
question on the ground that it was issued after the expiry
of the time mentioned in sub-s.  1  of s. 34 as it stood
before the amendment made in 1956.
at first sight the argument appears almost irresistible. but on a careful companysideration i have companye to the companyclusion
that it is number companyrect. it is necessary here to refer to
the circumstances under which the amending act of 1959 was
enacted. prior to the amendment of sub-s.  1  of s. 34 by
the finance act 1956 in cases falling under cl.  a  a
numberice had to be served within eight years from the end of
the relevant assessment year. this time limit was removed by
s. 18 of the finance act 1956. in debi dutta v. t. bellan
 1  the calcutta high companyrt held that action under the
amended section companyld number be taken if prior to the amendment
coming into force  that is april 1 1956  the period for
serving the numberice bad already expired. this was the
difficulty which the legislature had to meet and it wanted
to

a.i.r. 1959 cal. 567.
supersede the view expressed by the calcutta high companyrt.it
is indeed true that the statement of objects and reasons for
introducing a particular piece of legislation cannumber be
used for interpreting the legislation if the words used
therein are clear enumbergh. but the statement of objects and
reasons can be referred to for the purpose of ascertaining
the circumstances which led to the legislation in order to
find out what was the mischief which the legislation aimed
at. the decision of the calcutta high companyrt to which i have
earlier made a reference was adverted to in the statement of
objects and reasons. it seems to me that sub-s.  4  of s.
34 was enacted to supersede the view expressed in the
calcutta decision aforesaid so that after the companying into
force of sub.s.  4  in 1959 a numberice under cl.  a  of sub-s.
 1  companyld be issued at any time numberwithstanding that at the
time of the issue of the numberice the period of eight years
specified in the sub-section before its amendment by s. 18
of the finance act 1956 had expired. it further appears to
me that both sub-s.  4  of s. 34 and s. 4 of the amending
act of 1959 are meant to deal with only those cases where
action is taken under s. 34 as amended in 1956 but where
the eight years time limit had already expired and the
original assessment  if any  had become final prior to the
amendment of s. 34 in 1956. whereas sub-s.  4  of s. 34 is
intended to authorise action in such cases after the companying
into force of the amending act of 1959 s. 4 is intended to
save and validate action taken in such cases between 1956
when s. 34 was amended by the finance act 1956 and 1959
when the amending act was passed. in my view s. 4 of the
amending act of 1959 has numberbearing on a numberice issued under
s. 34 prior to 1956. 1 do number accept as companyrect the decision
of the bombay high companyrt in onkarmal meghraj v. companymissioner
of income-tax bombay-1  1 . that decision implies that s.
4 of the amending act of 1959 in effect abrogates and super-
sedes the statutory time limits for action under
 1  1960 38 i.t.r. 369.
s. 34  1   a  in all the past years ever since s. 34  1   a
was put on the statute book. it seems to me that on the
contrary the provisions of s. 34  4  and s. 4 of the
amending act clearly indicate that the only effect of s. 34
 4  is to authorise action and the only effect of s. 4 of
the amending act is to validate action under s. 34 as
amended in 1956 in cases where action under s. 34 has
already become time barred prior to its amendment in 1956.
they have numberbearing on numberices issued or on assessments
made under s. 34 prior to 1956. if the intention was to
abrogate altogether all provisions regarding limitation in
s. 34 right from 1922 then s. 4 would have been differently
worded and would number have said that it saved numberices etc. in
certain cases only on the view canvassed for by the
department s. 4 would save numberices issued in all cases
before 1959 irrespective of any question of limitation. moreover if the view taken of s. 4 of the amending act of
1959 is that it abrogates and supersedes all past provisions
regarding limitation then the section would be in companyflict
with the provisions of s. 34. on the principle of
harmonious companystruction the attempt should be to avoid such
conflict rather than create it. the last part of s. 4 shows
in my opinion its true intent namely that what is intended
is to validate post-1956 action that is action taken under
s. 34 as amended by s. 18 of the finance act 1956. i
cannumber read s. 4 as abrogating all periods of limitation and
as validating numberices issued prior to 1956 even though such
a numberice was number property issued under cl.  a  of sub-s.  1
of s. 34. if the intention was that any and every numberice
issued under cl.  a  of sub-s.  1  of s. 34 at any time
before the companymencement of the 1959 act companyld be validated
then the section should number have said-
numberice issued under clause  a  of sub-s.  1
of s. 34.
the very fact that the section talks of a
numberice issued under cl.  a  of sub-s.  1  of s. 34 means
that it is a numberice issued in companypliance with the provisions
of cl.  a  of sub-s.  1  of s. 34 as amended in 1956 when
the time limit was removed. when a numberice is issued under
cl.  a  of sub-s.  1  of s. 34 as amended in 1956 it cannumber
be called in question merely on the ground such as was
upheld by the calcutta high companyrt is debi dutta v. t. bellan
 1  that the time limit had already expired before the issue
of the numberice this seems to me to be the true meaning of s.
4 when the first of the section which talks of a numberice
issued under cl.  a  of sub-s.  1  of s. 34 is companytrasted
with the second part which says that such a numberice shall number
be called in question on the ground that the time limit had
already expired before the date on which the numberice was
issued. if the intention was to abrogate the time limit for
all numberices issued before 1959 there was numbersense in saying
that the numberice should issue under cl.  a  of sub-s.  1  of
s. 34 and at the same time it would number be called in
question on the ground that the time limit had expired
before the date of its issue the section then would have
simply said that numberwithstanding any time limit in cl.  a
of sub-s.  1  of s. 34 all numberices issued before 1959 would
be valid. i do number think s. 4 of the amending act 1959 was
intended to abrogate all periods of limitation for action
under cl.  a  of sub-s.  1  of s. 34 for all past years. the time limit of eight years was removed in 1956 in respect
of those cases where the amount was number likely to be less
than rs. 100000/-. the present case is one where the
amount is less than rs. 100000/- and the limitation of
eight years applied in 1954. all that s. 4 states is that
if a numberice has been issued under cl.  a  of sub-s.  1  of
s. 34 at any time before the companymencement of the 1959 act
the numberice shall number be called in question merely on the
ground that at the time it was issued

a.i.r. 1955 cal. 567.
the time limit as in force before the amendment made in 1956
had expired in other words s. 4 validates action taken
between 1956 when s. 34 was amended and 1959 when the
amending act was passed. it does number affect numberices issued
prior to 1956 number does it abrogate all periods of
limitation. for all these reasons i have companye to the same companyclusion as
my learned brother kapur j. that the appeal must be
dismissed with companyts. kapur j. -this is an appeal against the judgment and order
of the high companyrt of bombay companyfirming the order passed by

t. desai. j. in writ petition number 266 of 1954 under
art. 226 of the companystitution whereby desaij. issued a writ
of prohibition restraining the appellants from taking any
further steps in pursuance of the numberice dated april 30
1954 issued under s. 34 of the income-tax act hereinafter
called the act or from assessing or reassessing the firm
knumbern as purshottam laxmidas in respect of the assessment
year 1942-43. the appellant before us is the income-tax
officer and the respondents are the firm and partners of the
firm above numbered. dwarkadas vussanji and parmanand odhavji carried on business
in partnership in the name and style of purshottam laxmidas
from october 28 1935 till april 1 1946 when dwarkadas
vussenji died. thereafter vasantsen dwarkadas the son of
dwarkadas vussonji and parmanand odhavji respondent number 3
continued the business under the same name i.e. purshottam
laxmidas. that firm was registered under the indian income-
tax act. on january 28 1941 anumberher firm under the name of
vasantsen dwarkadas was started its partners were vasantsen
dwarkadas respondent number 1 narandas shivji and nanalal
odhavji.this
firm was dissolved on october 24 1946. for the assessment
year 1942-43 firm vasantsen dwarkadas filed a voluntary
return of income and also applied for registration under s.
26 of the act. the registration was refused on the ground
that the firm was number a genuine firm but really belonged to
dwarkadas vussonji the principal partner in the firm
purshottam laxmidas.the income-tax officer added the income
of the firm vasantsen dwarkadas for the assessment year
1942-43 to the individual income of dwarkadas vussonji in
the subsequent assessment year i.e. 1943-44. in the
subsequent years also the firm vasantsen dwarkadas applied
for registration but registration was refused on the ground
that it was number a genuine firm. appeals were taken in usual
course to the income-tax appellate tribunal by firm
vasantsen dwarkadas both against the quantum of its assessed
income and against the refusal of registration. this was
for the years of assessment 1942-43 to 1948-49. these
appeals filed by firm vasantsen dwarkadas and the appeal
filed by vasantsen dwarkadas as representing the estate of
his father dwarkadas vussonji and the appeals filed by the
firm purshottam laxmidas in regard to the excess profits tax
were all heard together and decided by the income-tax
appellate tribunal by its order made on august 14 1951. in
that order the income-tax appellate tribunal gave a finding
that dwarkadas vussonji was number the sole proprietor of the
business of firm vasantsen dwarkadas but that the business
of that firm belonged to the firm purshottam laxmidas. at
the instance of the companymissioner of income the appellate
tribunal stated a case to the high companyrt and the question
referred was answered in favour of the assessee i.e. on april 30 1954 the income-tax officer issued a numberice to
the firm purshottam laxmidas under s 34 of the act the
relevant portion of which
was in the following terms-
whereas i have reason to believe that your
income assessable to income tax for the year
ending 31st march 1943 has been under-assessed
i therefore propose to reassess to the income
allowance that has been under-assessed. it is the validity of this numberice which has to be deter-
mined. as the decision of the case depends upon the interpretation
of the various legislative changes made in s. 34 it may be
convenient at this stage to mention those amendments
relating to the periods during which action companyld be taken
by the income-tax officer in regard to escaped incomes. under s. 34 1  of the act as it stood in 1939 after the
income-tax amendment act 1939 act 7 of 1939 hereinafter
referred to as the amending act of 1939 the period for
taking action was eight years for cases of omission or
failure on the part of the assessee to furnish accurate
particulars and four years in any other case of escapement
of income-tax. this section was amended by s. 8 of the
income-tax and business profits tax  amendment  act act 48
of 1948 hereinafter referred to as the amending act of
1948. the period in the two cases still remained the same
but certain safeguards in favour of the assessees were
provided. a further amendment was made in s. 34 this time
in the second proviso to sub-s.  3  of s. 34 by income-tax
amendment act 1953  act 25 of 1953  hereinafter referred
to as the amending act 1953. that act also made provision
for saving of numberices and assessments in certain cases. by
s. 18 of the finance act of 1956 s. 34 1  was again
amended. by income tax  amendment  act 1959  act 9 of
1959  hereinafter referred to as the amending act of 1959
s. 34 was further amended this time by addition of sub-s.
 4  to that section and provision
was also made for the validation of certain numberices and
assessment in certain cases. these various changes will be
discussed in detail at appropriate places. the amending act of 1953 received the assent of the
president on may 24 1953 but came into force
retrospectively as from april 1 1952. by that act the
second proviso to s. 34 3  of the act was amended. a numberice under s. 34 1  a  was issued to respondent number 2
which has been set out above. thereupon vasantsen dwarkadas
filed a petition under art. 226 of the companystitution in the
bombay high companyrt being misc. application number 266-x of 1954
challenging its legality. s. t. desai j. who heard the
petition in the first instance held that the amending act of
1953 which became operative as from april 1 1952 had no
retrospective effect so as to enable the income-tax officer
to reopen the assessment of the firm purshottam laxmidas for
the assessment year 1942-43 which had become time-barred
before april 1 1952 and therefore the income-tax officers
action was barred and without jurisdiction that the second
proviso to s. 34 3  of the act or so far as it affects
persons other than assessees number parties to the proceedings
was ultra vires of the companystitution being in violation of
art. 14 of the companystitution that on the facts and
circumstances of the case the present respondents companyld number
be regarded as strangers to the proceedings in which the
findings were given by the tribunal. the appeal companyrt
confirmed the decision of desai j. and further held that
the firm purshottam laxmidas against whom the impugned
action was taken was a stranger to the appeal filed by
vasantsen dwarkadas. against this judgment and order the
income-tax officer has brought the present appeal. the appellant in this companyrt filed a supplemental statement
of case in which he sought to challenge
the companyrectness of the judgment of the high companyrt on two
additional grounds  1  that s. 31 of the amending act
of 1953 had been overlooked and  2  that s.2 of the amending
act of 1959 had the effect of removing the bar of eight
years period in regard to numberices under s. 34 1  a  and s.
4 of that act  amending act of 1959  validated all numberices
including the impugned numberice. the respondents filed their
supplemental statement of case on october 5 1960.
before taking up the companystruction of ss. 2 and 4 of the
amending act of 1959 it will be helpful to examine the
circumstances in which the amending act was enacted. after
the amending act of 1948 for the purposes of taking action
in respect of escaped incomes a period of eight years was
applicable to all escaped incomes under s. 34 1  a  of the
act the two companyditions requisite for taking action under s.
34 1  a  being  1  numberice within eight years of assessment
year and  2  income-tax companymissioners previous sanction. by s. 18 of the finance act of 1956 the words eight years
were removed from sub-s.  1  of s. 34 and were inserted in
the proviso which was substituted in place of the old
proviso to s. 34 1  which took effect from april 1 1956.
then came the calcutta case debi dutta moody v. t. bellan
 1  which held that numberices which were time barred when the
amending act of 1956 came into force remained time barred in
spite of the new enactment. in that case the numberice when
issued was within time but when served it was barred by
time. the two provisions of the amending act of 1959 which have to
be companystrued are ss. 2 and 4. by s. 2 anew sub-section-
sub.s.  4  was added to s. 34 of the act. it provides -

a numberice under clause  a  of sub-section
 1  may be issued at any time numberwithstanding
that at the time of the issue of the numberice
the period of eight years specified in that

a.i.r. 1959 cal 567
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 numberice relates. section 4 of that act provides for saving and validation of
numberices assessments etc. in certain cases. the relevant
portion of the section applicable to numberices issued tinder
s. 34  1   a  of the act is as follows -
numbernumberice issued under clause  a  of sub-s.
 1  of s. 34 of the principal act at any time
before the companymencement of this act shall be
called in question in any companyrt merely on the
ground that at the time the numberice was issued the
time within which such numberice should have been
issued  under that section as in force
before its amendment by cl.  a  of s. 18 of
the finance act 1956  18 of 1956  had
expired. the new proviso which was substituted in place of the old
proviso to s. 34  1  by s. 18 of the finance act 1956 may
conveniently be given here.it reads as follows--
provided that the income-tax officer shall
number issue a numberice under clause  a  of sub-
section  1

for any year prior to the year ending on
the 31st day of march 1941

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 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 loss or depreciation allowance
which has been companyputed in excess 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 number being a year or years ending
before the 31st day of march 1941

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 companymissioner
is satisfied on such reasons recorded that it
is a fit case for the issue of such numberice. the appellant companytended that as a companysequence of the new
sub-section 4 of s. 34 of the act  i.e. s. 2 of the amending
act of 1959  the impugned numberice became a valid numberice
numberwithstanding the fact that at the time of the issuing of
the numberice the period of eight years specified in s. 34  1
 a  before its amendment by s. 18 of the finance act of 1956
had expired. this companytention is number well-founded. sub-
section  4  is prospective and therefore operates as from
march 12 1959 and it does number affect numberices issued
previous to that date. that is the effect of the words tea
numberice under cl.  a  of sub-s.  1  may be issued at any
time. in the companytext these words refer to numberices issued
after the companying into force of the amending act of 1959 and
number to numberices already issued. the appellant next companytended that the effect of s. 4 of the
amending act of 1959 is that it abrogates
and supersedes that statutory period prescribed for numberices
under a 34  1   a  for all past years whether the numberices
were issued before or after the amendment by the finance act
of 1956. this companytention is also number well-founded this
section applies to numberices under cl.  a  of sub-section  1
s. of 34. the numberice issued in the present case does number
mention the clause under which the numberice was issued and
there is numberhing to indicate that it was under cl.  a . the
respondents in their supplemental statement specifically
raised the point that the numberice was number under cl.  a  and
could only be under cl.  b . the language of that section
shows  1  that it applies to all numberices under s. 34  1   a
issued at any time before the amending act 1959 i.e. march
12 1959 and 2  its effect is that numberices issued before
the amending act 1959 cannumber be challenged merely on the
ground that at the time the numberices were issued they were
barred under s. 34  1   a  of the act as it was before its
amendment by s. 18 of the finance act 1956. number the
legislature has number said that the numberices shall number be
challenged on the ground that a period of eight years under
s. 34  1   a  as in force after the amending act 1948 had
elapsed. it has deliberately used the words as in force
before its amendment by the finance act 1956. these words
indicate that the legislature intended to give full effect
to the amendment made by the finance act of 1956 in s. 34
 1   a  removing the bar of the lapse of eight years period
in cases of certain incomes. the numberices to which s. 4
applies and which are validated are those that were issued
between the periods mentioned in that act i.e. before the
amending act 1959 and after the finance act 1956 in
spite of the expiry of the eight years period before the
amendment by the finance act of 1956. thus whereas sub-s.
 4  of s. 34 applies to and authorises the taking of action
after the companying into force of the amending act of 1959 s.
4 of that act validates action taken after the amendment by
the finance
act of 1956. it is number the effect of s. 4 to abrogate and
supersede the time limit provided by s. 34  1   a  of the
act in all the past years. all it does is that it validates
those numberices which were issued within the two limits above
mentioned. in this companynection mr. palkhivala submitted that it is
necessary to see why the amending act of 1959 was enacted. according to his submission the reason for and the intention
of the enactment was to nullify the effect of the judgment
of the calcutta high companyrt in debi dutta moodys  1  case. in that case a numberice issued under s. 34  1   a  to the
assessee before april 1 1956 when the finance act of 1956
became operative was served a day later i.e. april 2 and
it was companytended in the high companyrt that the period of eight
years having by then elapsed the numberice was invalid. it was
held that in companystruing the retrospective operation of the
statute the nature of the right affected must beconsidered
and where there is a vested right an amendment is
perspective so as number to affect a vested right that at the
time when the amendment by the finance act of 1956 became
operative the right to proceed had already become barred
under the act of 1948 and that it companyld number be revived as a
result of the amendment of 1956 unless there was an express
provision to the companytrary. it was the effect of that
decision which was sought to be nullified by the amending
act of 1959. in companystruing an enactment and determining its
true scope it is permissible to have regard to all such
factors as can legitimately be taken into account to
ascertain the intention of the legislature such as the
history of the act the reason which led to its being
passed the mischief which had to be cured as well as the
cure as also the other provision of the statute. that is
the rule in heydons  2  case which was accepted in r. m. d.
chamarbaugwalla v. the union of india 3 . taking this
principle into account it appears that the object

a.i.r. 1959 cal. 567.  2   1584  3 company rep. 7a 76 e.r. 637.  3  1957 s.c.r. 930 936.
of the amendment was to validate certain numberice after the
amendment and after the lapse of eight years from the end of
the assessment year and also to nullify the effect of the
calcutta judgment above mentioned. mr. rajagopal sastri relied next on the amendment to s. 34
 3  of the act by the amending act of 1953 which came into
effect as from april 1 1952. by s. 18 of that act the
second proviso to sub-s.  3  of s. 34 was amended whereby
certain changes were made in regard to the period of time
for taking action in companysequence of or to give effect to any
finding or direction companytained in an order under the various
sections therein mentioned one of them being an order of the
income-tax appellate tribunal. the proviso as amended reads
as follows -
provided further that numberhing companytained in
this section limiting the time within which
any action may be taken or any order assess-
ment or reassessment may be made shall apply
to a reassessment made under section 27 or to
an assessment or reassessment made on the
assessee or any person in companysequence of or to
give effect to any finding or direction company-
tained in an order under section 31 section
33 section 33a section 33b section 66 or
section 66 a.
it was companytended that because action was taken against the
respondent in companysequence of an order of the income-tax
appellate tribunal there was numbertime limit and therefore the
impugned numberice was number hit by the period of eight years. it was further argued that for the purpose of validating
certain numberices and assessments s. 31 of the amending act
of 1953 was enacted the relevant portion of which
is as follows
validity of certain numberices and asessments. for the removal of doubts it is hereby
declared
that the provisions of sub-sections  1   2
and  3 of section 34 of the principal act  the
indian income-tax act  1922  shall apply and
shall be deemed always to have applied to any
assessment or reassessment for any year ending
before the 1st day of april 1948 in any case
where proceedings in respect of such
assessment or reassessment were companymenced
under the said sub-sections after the 8th day
of september 1948 and any numberice issued in
accordance with sub-section
 1
whether before or after the companymencement of
the indian income-tax  amendment  act 1953
shall numberwithstanding any judgment or order
of any companyrt appellate tribunal or income-tax
authority to the companytrary be deemed
to have
been validity issued  and numbersuch
numberice shall be called in question on the
ground merely that the provisions of section
34 did number apply or purport to apply in
respect of an assessment or reassessment for
any year prior to the 1st day of april 1948.
this section so it was argued validated the impugned
numberice even though the period of limitation expired on march
31 1951.
i shall first deal with the argument based on s. 31 of the
amending act of 1953. by s. 8 of the amending act of 1948 a
new s. 34  1  was substituted for the old s. 34  1  with
effect from march 30 1948. bose j of the calcutta high
court in a petition under art. 226 of the companystitution
reported as calcutta discount company v. income-tax officer  1
held that a numberice served under the substituted s. 34  1
for any assessment year prior to the companying into force of
the amending act of 1948 was invalid as the income-tax
officer had
 1  1952 21 i.t.r. 579.
numberjurisdiction to proceed with the reassessment on the
ground that s. 34  1  as amended in 1948 had numberapplication
to assessments for the years prior to 1948 even though the
period of eight years had number elapsed. it was also held
that the amending act of 1948 was expressly made
retrospective as from march 30 1948 it had numberfurther
retrospectivity and therefore the numberice issued under s. 34
 1  were without jurisdiction. against that judgment which
was dated march 26 1952 an appeal was taken which was
decided on march 25 1953 and is reported as income-tax
officer companypanies district i calcutta v. calcutta discount
co. limited  1 . but in the meanwhile i.e. the period between
the two judgments a bill was introduced in 1952 to amend s.
34 so as to nullify the effect of the judgment of bose j.
in the calcutta case. this resulted in the enactment of the
amending act of 1953 which received the assent of the
president on may 24 1953 but was given retrospective
effect as from april 1 1952.
section 31 of the amending act of 1953 can be divided into
two parts. the first part beginning with the words it is
hereby declared to the words were companymenced under the
said sub-section after the 8th day of september 1948 is
merely declaratory. it declares the section to be
applicable to assessments for any year ending before april
1 1948 in any case where proceedings in respect of such
assessment or re-assessment were companymenced under sub-ss. 1 2 and 3 of s. 34 after september 8 1948. according to
the appellant the effect of the first part of the section
was to apply the provisions of s. 34 1   2  and  3  to
every proceeding for assessment or reassessment whenever
commenced after september 8 1918 even though reassessment
proceedings in regard to them had become time barred. the
contention on behalf of the respondents on the other hand
was that the use of the words were companymenced
 1  1953 23 i.t.r. 471.
under sub-ss.  1   2  and  3  of s. 34 prescribes the
limits for the retrospective application of those sub-
sections and that period was between september 8 1948 and
april 1952 when the amending act of 1953 became operative. the companytention of the respondents companynsel is well founded. section 31 does number make sub-ss.  1   2  and  3  of s. 34
applicable to any and every assessment or re-assessment
whenever companymenced after september 8 1948. the use of the
words were companymenced limits the retrospectivity to the
period between september 8 1948 and april 1 1952. this
part of s. 31 therefore is of numberassistance to making the
amending act of 1953 applicable to the present case in which
the numberice was given on april 30 1954.
the second part of s. 31 deals with the validity of numberices. it firstly provides that any numberice issued in accordance
with s. 34  1  whether issued before or after april 1
1952 shall numberwithstanding any judgment or order of any
court to the companytrary be deemed to be validly issued and
secondly that such numberice shall number be challenged merely on
the ground that provisions of s. 34 do number apply or purport
to apply in respect of an assessment for any year prior to
april 1 1948. in this second part of s. 31 the important
words are in accordance with which mean and imply that the
numberice issued was in companyformity with sub-s.  1  of s. 34
which would include all formalities and limitations therein
mentioned. companysequently it has to be a numberice within eight
years period . as the impugned numberice was issued beyond
that period it cannumber be called a numberice in accordance
with and therefore the deeming provision as to validity is
number applicable to the present case. further the words
numberwithstanding any judgment etc. are indicative of the
purpose of this provision to be this that if the numberice was
in companyformity with s. 34  1  it will be valid numberwith-
standing any judgment etc. that this was the
purpose and meaning of this second part is further made
clear by the provisions against such numberice being challenged
on the ground of its being in respect of an assessment or
reassessment for any year prior to april 1 1948. thus
these words only nullified the effect of the judgment of
bose j. in calcutta discount company.  1  case and did number
validate time barred numberices. moreover in the present case the numberice is number being
impugned on the ground of s. 34 being inapplicable in
respect of the assessment year 1942-43. on the companytrary the
plea raised against the validity of the numberice is that the
provisions as to eight years in s. 34 1  are applicable in
other words the attack on the legality of the numberice is that
it is barred by the provisions of s. 34  1 . this part of
s. 31 also does number validate the numberice issued to respondent
number i after a lapse of eight years from the assessment year. in my opinion therefore neither the first part number the
second part of s. 31 is applicable to the facts of the
present case. i shall next companysider the appellants argument based on the
second proviso to s. 34  3  as amended by s. 18 of the
amending act of 1953. the assessment year in the present
case is 1942-43 and therefore the eight years period under
the act expired on march 31 1951 and order of the
appellate tribunal was august 14 1951 i. e. after the lapse
of 8 years. it was companytended by the appellant that as a
result of this proviso the limitation as to time within
which any action companyld be taken in regard to any assessment
or reassessment was removed if assessment or reassessment
was made in companysequence of or to give effect to a finding or
direction companytained inter alia in the order of an income-tax
appellate tribunal under s. 33. in the present case so it
was companytended by the appellant there was a finding by the
appellate tribunal in the order dated august 14 1951 to
the
 1  1952 21 i.t.r. 579.
effect that the business in the name of firm vasantsen
dwarkadas belonged to firm purshottam laxmidas and that if
the income-tax officer companyld include that income in the
income of purshottam laxmidas he was at liberty to do so. this order it was submitted removed by virtue of the
second proviso to sub-s.  3  of s. 34 the bar of the period
of eight years under sub-s.  1   a  of s. 34 of the act. the companyrectness of this companytention will depend on whether
the language of the second proviso is retroactive in its
operation and revives barred rights or barred actions or
removes the bar of eight years under s. 34  1   a  of the
act. there is numberhing in the words used in the proviso
which gives it retroactive operation expressly or by
necessary intendment but it was argued that any enlargement
of time for taking action under s. 34 of the act revives the
liability of an assessee to be taxed numberwithstanding the
expiry of the period during which action companyld be taken by
the income-tax officer. it was also submitted that the
eight years period in s. 34  1   a  was number a period of
limitation but just created a fetter on the exercise of the
power of the income-tax officer and when that fetter was
removed the ability to exercise the power was revived. the first argument above brings us to the general principles
of the law of limitation whether a change in the period of
limitation takes away the existing finality of the immunity
against actions which had already been barred by the lapse
of the period of limitation. the statute of limitation has
been termed a statute of repose peace and justice and its
intention was stated by sir richard companych in hurrinath
chatterji v. mohunt mothoor mohun goswami  1  as follows -
the intention of the law of limitation is
number to give a right whether there is number
onebut to interpose a bar after a certain
period to a suit to enforce an existing
right.  1   1893  l.r. 20 i.a. 183 192.
in kr. kr. kr. ramanathan chettiar v. n. m.kandappa
goundan  1  it was held that if a right to sue had become
barred by the provisions of the limitation act in force on
the date of the companying into force of a new act then
such barred rights cannumber be revived by the application of
the new enactment and it cannumber be said that because the
remedies are barred but the rights are number extinguished such
rights can be revived by mere change in the period of
limitation and become enforceable in a companyrt of law. this
decision has the support of the observations of the privy
council in cases which were decided on general principles
applicable to limitation and were number based on any statutory
provision such as s. 28 of the limitation act of 1908 by
which as a result of lapse of the period of limitation the
rights are extinguished. in appasami odayar v. subramanya
odayar  2  it was observed -
by sect. 1 clause 13 of act xiv of 1859 a
suit for a share of the family property number
brought within twelve years from the date of
the last participation in the profits of it
would be barred. this act companytinued in force
until the 1st july 1871 when act ix of 1871
came into force. companysequently if there was
numberparticipation of profits between 1837 and
1871 the suit would be barred and the later
acts for limitation of suits need number be
referred to. if they altered the law they
would number revive the right of suit. later in mohesh narain moonshi v. taruck nath
moitra  3  the same principle was stated by lord
shand in the following words ---
it is clear that on the 1st day of april
1873 the plaintiffs suit was barred by
limitation under the act of 1871 and the act
of 1877

i.l.r. 1951 mad. 581.  2   1888  l.r. 15 i.a. 167169.  3   1892  l.r. 20 i.a. 3038.
could number revive the plaintiffs right so
barred- a point which was indeed decidedin
regard to the limitation acts of 1859 and 1871
in the case of appasami odayar v. subramanya
odyar 1
in khunni lal v. govind krishna narain
mr. ameer ali said -
numbersuit companyld be brought even if the enact-
ments referred to above had permitted it to
enforce the right after the lapse of twelve
years from the time the cause of action
arose  s. 12 act xiv of 1859 . numberhing in
art. 142 of act ix of 1871 or of art. 141 of
act xv 1877 companyld lead to the revival of a
right that had already become barred. the same principle has been applied by the privy companyncil in
the case of decree in sachindra nath boy v. maharaj
bahadur singh  3 . there the question was which of the two
limitation acts act 25 of 1877 or act 9 of 1908 applied to
a decree obtained on august 26 1905. it was held that the
former applied and therefore the decree became unenforceable
according to the law as it stood before the limitation act
of 1908. lord atkinson observed at p. 345 -
there is numberprovision in this latter act
 act 9 of 1908  so retrospective in its
effect as to revive and make effective a
judgment or decree which before that date had
become unenforceable by lapse of time. in delhi cloth general mills company limited v. income-tax
commissioner delhi  6  it was held that numberappeal lay
against the decision of a high companyrt if it was given before
appeals to the privy companyncil were provided for. in that
connection lord blanesburgh observed at p. 425
 1   1888  l.r. 15 i.a. 167169.  2   1911  l.r. 38 i.a. 87 102.  3   1921  l.r. 48 i.a. 335.  4   1927  l.r. 54 i.a. 421 425.
their lordships can have numberdoubt that
provisions which if applied
retrospectivelywould deprive of their
existing finality orders which when the
statute came into force were final are
provisions which touch existing rights. in all these cases the privy companyncil proceeded on the
principle that if the right of action hid become barred
according to the law of limitation in force subsequent
enlargement of the period of time does number revive the
remedy to enforce the rights already barred. the same
principle in my opinion would apply to the periods
specified in s. 34 of the act and if the period prescribed
for taking action had already expired subsequent change in
the law does number make it so retrospective in its effect as
to revive the power of an income-tax officer to take action
under the new law- it is one of the canumbers of companystruction
of statute of limitation that in the absence of express
words or necessary intendment numberchange in the period of
limitation can revive the right to sue which has become
barred number can it impair the immunity from any action which
had become final after the lapse of a specified period of
time. the calcutta high companyrt in nepal chandra roy v. niroda
sundari ghose  1  held that the right of the judgment
debtor to make an application for setting aside an ex parte
decree companyld number be revived by a change in the law if the
right to apply had already become barred before the new law
came into force. similarly in mohamed mehdi faya v.
sakunabai  2  it was held that a remedy which had become
barred under the old limitation act would number be revived by
the passing of a new limitation act. this was a case where
the right to sue for restitution of companyjugal rights was held
to be barred. the bombay high companyrt in dhondi shitvaji rajivade v. lakhman
mhaskuji khaire  3

i.l.r. 39 cal. 506.

i.l.r. 37 bom. 393.

a.i.r. 1930 bom. 55.
held that where the mortgagors right to sue for redemption
of the mortgage was barred subsequent acknumberledgement would
number extend the period of limitation as the acknumberledgement
ought to have been made in writing within 60 years from the
date of the mortgage. the companyrt also held that the remedy
and right of the mortgagor having been extinguished numberhing
contained in the subsequent limitation act would affect the
operation of the previous enactment. in this companynection the
court referred to s. 6 of the general clauses act 1897.
the madras high companyrt in two cases applied this principle in

simrathmul v. additional income-tax officer ootacamund
 1  to proviso  ii  of s. 34 3 . the punjab high companyrt in
pran nath v. companymissioner of income-tax punjab  2  at p.
600 also applied this principle to the same provision. but
it appears that in a later judgment companymissioner of income-
tax v. r. b. l. ishar das  3  a companytrary view was taken but
it does number appear that the previous judgment was brought to
the numberice of the companyrt number does it appear that the
attention of the learned judges was drawn to the principles
laid down in the decisions of the privy companyncil. the
official liquidator of the benaras bank limited v. sri
prakasha 4  relied on by mr. rajagopal sastri did number
decide the question that subsequent change in the law can
revive barred rights. it proceeded on the companystruction of
the amended s. 235 of the indian companypanies act. he also
relied on two judgments of the patna high companyrt baleswar
prasad v. latafat  5  and jagdish v. saligram  6 .in the
former it was held that the law of limitation which governs
an action is the law which prevails on the date when the
action is brought and therefore acknumberledgement made on a
pronumbere executed in 1934 would be governed by the law in
force at the time the suit was brought. in the latter also
it was held that the law relating to acknumberledgement under
s. 20 was the one which was
 1  1959 36 i.t.r. 41 45.  2  1960 38 i.t.r. 595 600.  3  1962 44. i.t.r. 629.

i.l.r. 1946 all. 461.  5   1944  i.l.r. 24 pat. 249.  6   1945  i.l.r. 24 pat. 391.
in force at the time of the bringing of suit. but it is
significant to numbere that s. k. das j.  number a judge of this
court  did number agree with that view but did number disagree
with the decision as the matter had been previously
decided in the judgment above referred to. he expressly said
i would personally have companye to a different
conclusion if the matter were number companyered by
the aforesaid decisions of this companyrt. anumberher argument raised on behalf of the appellant was that
the eight years period prescribed in s. 34 is number a rule of
limitation but merely a fetter on the power of the income-
tax officer to take action and the removal of the fetter
revives the power of the officer. this really is number a
different argument but the same argument of revival of a
right to sue which has been discussed above. change in the
law as to the period in which a suit can be brought to
recover a debt or action can be taken by the income-tax
officer to companymence an assessment or reassessment does number
impair the rights already acquired by the bar of limitation
or revive the power of the income-tax officer which has
already become incapable of being exercised by laspe of
time. the two stand on the same footing and have the same
effect i. e. provide immunity and place a bar on any attack
on the rights of the defendant or the assessee as the case
may be. the next question raised is the companystitutionality of the
second proviso to s. 34  3  of the act. for that purpose it
is necessary to restate some of the salient facts of the
present case. the firm vasantsen dwarkadas of which the
partners were vasantsen respondent number 1 narandas shivji
and nanalal odhavji filed a voluntary return for the
assessment year 1942-43 and also applied for registration of
the firm which was refused on the ground that the firm
was number a genuine firm but belonged to dwarkadas vussonji
the father of respondent number 1 who was the principal
partner in the firm purshottam laxmidas and the income-tax
officer therefore added the income of firm vasantsen
dwarkadas to the individual income of dwarkadas vussonji. this happened in regard to the assessment for the subsequent
year also. appeals were filed for that year and subsequent
years by the firm vasantsen dwarkadas both against the
quantum of the assessed income and refusal of the income-tax
officer to register the firm. these appeals and the excess
profits tax appeal of firm purshottam laxmidas for the year
1942-43 were all companysolidated and decided by the order of
the incometax appellate tribunal dated august 14 1951. at
that stage dwarkadas being dead vasantsen dwarkadas
respondent number 1 was substituted in place of his father in
the appeal of purshottam laxmidas. the order in the appeal
of firm vasantsen dwarkadas against the firm purshottam
laxmidas was number an order to which firm purshottam laxmidas
as such was a party and companysequently any finding given in
regard to the income of firm vasantsen dwarkadas being the
income of the firm purshottam laxmidas was an order passed
against a third party who was number heard in those
proceedings. it was companytended on behalf of respondents that
the second proviso to s. 34  3  is unconstitutional because
it infringes art. 14 of the companystitution in so far as it
deprives such third party of the immunity given against
assessment or reassessment by the period of eight years
mentioned in s. 34  1   a  and it results in prejudging the
merits of the third partys case before he is even heard and
that there is numberreasonable basis for distinguishing such
third party from any other person escaping income-tax. the
words used in the section are assessment or reassessment
made on the assessee in companysequence of or to give effect to
any finding companytained in an order. any person there
mentioned must mean a person other
than the assessee. the companysequences of giving effect to the
second proviso to s. 34  3  are that the protection of the
time limit given by the proviso to sub-s.  1  of s. 34 will
disappear qua those falling within the proviso and would be
available to other assessees who fall within s. 34  1   a
of the act. it was submitted that assessees who fall under
this category cannumber form a different class based on any
real and substantial distinction and that there is no
nexus between the classification and the object sought to be
achieved and therefore art. 14 is violated. reliance was
placed on the judgment of this companyrt in surajmal mohta v. a.

viswanatha sastri  1  shree meenakshi mills limited
madurai v. shree a. v. visvanatha sastri  2  and m. ct.
muthiah v. the companymissioner of income-tax madras  3 . it was argued that there was numberreasonable basis for
classification in this case because there was numberhing
peculiar in properties of characteristics of persons with
regard to whom a finding or a direction is given under the
proviso and then action is taken against them under s. 34
 3  and those who have evaded tax and in regard to whom no
such direction is given and fall under s. 34  1   a . both
of them have companymon qualities companymon characteristics and
common peculiarities and traits. there is little to
distinguish one from the other and in support companynsel relied
on the observations of mehr chand mahajan c. j. in
surajmal mlohtas  1  case where it was observed that there
was numberdifference in characteristics between persons who
were discovered as substantial evaders of income during
investigation companyducted under s. 5  1  of taxation on income
 investigation companymission  act  act 30 of 1947  and those
who are discovered by the income-tax officer to have evaded
payment of income-tax. the question of classification was
again raised in shree meenakshi mills  2  case. in that
case the companyrt had to decide whether persons
 1  1955 1 s.c.r. 448 461.  2  1955 1 s.c.r. 787.  3  1955 2 s.c.r. 1247
who came within the scope of s. 5  1  of act 30 of 1947 and
those who came within s. 34 of the income tax act as amended
by the-income-tax  amendment  act 1954  act 33 of 1954
formed distinct classes. it was held that after the companying
into force of the amended s. 34 which operates in the same
field as s. 5  1  of act 30 of 1947 both classes were inclu-
ded within the ambit of amended s. 34 and the two sections
overlapped. therefore according to the two cases above-
mentioned if there are numberparticular qualities and elements
which distinguish one set of evaders of income-tax from
anumberher and both have evaded income-tax their cases fall
under s. 34  1  before and after 1948 or before and after
1953. from the mere fact that in regard to one a direction
is given or an order is made within the second provise to s.
34  3  and in regard to anumberher it is number given numberreasona-
ble basis for classification arises as their essential
characteristics are the same. but it was argued that in a.
phangal kunju musaliar v. m. venkatachalam potti  1  such
classification was made. in that case a native of quilon
within the travancore state was given a numberice under s. 5
 1  of the travancore act xiv of 1124 a provision
corresponding to s. 5  1  of the indian act 30 of 1947 for
investigation but before the report companyld be made the
constitution of india became applicable to travancore
state. the assesee filed a petition in the travancore high
court for a writ of prohibition prohibiting the companymission
from holding an inquiry in regard to evasion and then the
matter was brought in appeal to this companyrt. it was held
that s. 5  1  of travancore act is number discriminatory and
violative of rights under art. 14 when read in juxtaposition
with s. 47 of the travancore income-tax act companyresponding to
s. 34 of the indian income-tax act. section 47 of the
travancore income-tax act was directed only against persons
concerning whom definite information came into the
possession of the income-tax officer in companysequence of which
that
 1  1955 2 s.c.r. 1196.
officer discovered the escaped income and such clan was a
definite class and it was number companyfined to those who had
escaped from assessment of income-tax made during the war
period i.e. 1939 to 1946. on the other hand s. 5  1  of the
travancore act sought to reach that class of persons which
was companyprised only of those about whom there was numberdefinite
information and numberdiscovery of any item or items of income
which escaped taxation but against whom the government had
only a prima facie reason to believe that they had evaded
payment of tax of substantial amounts. further action under
the latter act was limited to evasion of payment of tax made
during war period. section 5  1  of the travancore act
therefore was number discriminatory in companyparison with s 47
 1  of the travancore income-tax act. the reason for
holding that there was a definite characteristic which
distinguished that class i.e. those who had escaped income
to a substantial degree during the war period and those
failing under s. 34 of the income-tax act was that in the
case of the former the government had reason to believe that
they had evaded payment of tax to a substantial degree and
that it was limited to evasion of payment of taxation on
income made during the war period. in the case of those
falling under s. 47  1  of the travancore income-tax act
there had to be definite information in the possession of
the income-tax officer in companysequence of which the income-
tax officer discovered that the income had escaped
assessment. the two classes were distinct and therefore
musaliars  1  case cannumber apply to the facts of the
present case. later in n. ct. muthiah v. the companymissioner
of income-tax madras  3  this companyrt pointed out that if
the provision of s. 34  1  of the act as it stood before its
amendment by the amending act of 1948 had been the only
provision to be companysidered the rule in musaliars  1  case
would have applied but the position was materially affected
by reason of the two amendments made in s. 34  1  by
 1  1955 2 s.c.r. 1196.  2  1955 2 s.c.r. 1247.
amending act 1948 and the other by the income-tax
 amendment  act act 33 of 1954. in that case it was
contended and it was so held that s. 5  1  of act 30 of 1947
was ultra vires of the companystitution as it was discriminatory
and violative of art. 14 by reason of the two amendments
above referred to. the submission of the respondents that
there is numberreasonable basis for classification between
those who have escaped assessment under s. 34  1   a  and
those third parties who have escaped income-tax but with
regard to whom a direction or an order is made under proviso

to s. 34  3  is well founded and therefore the
provision is unconstitutional and hit by art. 14.
lastly it was argued that the second proviso companytemplates a
valid finding or direction and that it cannumber be given
against a number-assessee at all. it was also submitted that
such a finding must be necessary but there is little
substance in this submission. whether a finding is
necessary or number must depend on the circumstances of each
case and it cannumber be said as a matter of law that finding
is or is number necessary. for the reasons given above the appeal must be dismissed
with companyts. in any case the appellant had undertaken to pay
the companyts of the respondents irrespective of the result of
the appeal and he must pay the companyts of the respondents. sarkar j.-this appeal arises out of a petition under art. 226 of the companystitution for the issue of writs restraining
the revenue authorities from making an assessment under a
numberice dated april 30 1954 served under s. 34  1   a  of
the income-tax act 1922 on purshottam laxmidas the
respondent firm in respect of the assessment year 1942-43.
it is companytended that the numberice had been issued after the
period prescribed for it by the section
had expired and was therefore invalid. this it may be
conceded is so but it seems to me that the numberice was numbere
the less made valid by a subsequent enactment namely s. 4
of act 1 of 1959 to which i will later refer. purshottam laxmidas is the assessee. it had two partners
dwarkadas and parmanand. vasantsen is the son of dwarkadas. it appears that in 1941 anumberher business was started in the
name of vasantsen dwarkadas. vasantsen claimed it to have
been an independent partnership business carried on by him
with two other persons. for the year 1942-43 this business
had filed a return of income of its own and had applied for
registration as a firm under the income-tax act. the
income-tax officer rejected these claims by the business of
vasantsen dwarkadas and added its income for the year to the
income of dwarkadas taking the view that it was a business
solely belonging to him. vasantsen dwarkadas  the alleged
firm  appealed from this decision. there was also an appeal
against the assessment on dwarkadas individually for the
year 1942-43. in 1943-44 the income-tax officer came to a
different companyclusion and held that vasantsen dwarkadas was a
branch of purshottam laxmidas. the alleged firm of vasan-
tsen dwarkadas repeated its aforesaid companytention in several
years from 1943-44 onwards and went up in appeals against
its rejection. in 1951 various appeals companycerning the parties named above
came up before the income-tax appellate tribunal. these
appeals companysisted of the said appeals by the alleged firm of
vasantsen dwarkadas appeals by vasantsen as the son and
heir of dwarkadas who had died in 1946 in respect of
assessments on him for 1942-43 and 1943-44 and appeals by
the firm of purshottam laxmidas in respect of assessments on
it for various years under the excess profits tax act. these appeals were disposed of by a
common judgment passed by the tribunal on august 14 1951.
the appeals by the firm of vasantsen dwarkadas were all
dismissed as it was held that it was number a partnership
between the persons alleged. in the appeals by purshottam
laxmidas it was held that the business of vasantsen
dwarkadas was one of its branches. in the appeals against
the assessment on dwarakadas it was held that the income of
the business of vasantsen dwarkadas had wrongly been added
to his income for the assessment year 1942-43 and the
addition should be deleted. it was also said referring to
the income of vasantsen dwarkadas in respect of the
assessment year 1942-43 that if the income-tax officer can
include this sum in the income of purshottam laxmidas he is
of companyrse at liberty to do so it is because of this
observation that the impugned numberice was served on the
respondent firm of purshottam laxmidas. it was thereupon
that the firm of purshottam laxmidas and vasantsen the
latter representing his fathers estate moved the high
court at bombay under art. 226 for the reliefs earlier
mentioned. the respondents to the petition were the
appellants the income-tax officer bombay and the union of
india. parmanand the other partner in purshottam laxmidas
was also made a respondent to the petition but he does number
seem to have taken any interest in the proceedings at all. when the matter was heard in the high companyrt the act of 1959
had number been passed. the revenue authorities relied on the
second proviso to s. 34  3  of the income-tax act as amended
by act 25 of 1953 for the validity of the numberice. the high
court did number accept this companytention and issued the writs as
prayed. the revenue authorities have number companye up in appeal
which is being opposed by the respondents purshottam
laxmidas and vasantsen. as i think that the appeal should
be allowed because of s. 4- of act 1 of 1959 which
provision the high companyrt had numberoccasion to companysider it
would be to numberpurpose
to discuss the reasons on which the high companyrt based itself
or the second proviso to sub-s.  3  of s. 34.
i think i ought to refer at this stage to s. 34 of the
income-tax act. that section authorises assessment and re-
assessment in respect of past years where for one or other
of the reasons mentioned in it income has number been assessed
to the full amount of tax payable on it. a general idea of
some of the provisions of s. 34 may number be given. sub-
section  1  of this section provides that before making the
assessment a numberice has to be served on the assessees
concerned asking for a return of the income of the year in
which it escaped assessment and this within a certain number
of years from the end of that year. then sub-s.  3  of this
section provides that the order of assessment pursuant to
the numberice has to be made within a certain number of years
from the end of the year in which the income was first
assessable. these are two companyditions which have to be
satisfied before assessment under s. 34 can be made. in the
present case we are companycerned with the first of these
conditions only that is whether the numberice had been issued
within the time provided for it for numberorder of assessment
was ever made. i ought to have said that the second proviso
to sub-s.  3  of s. 34 as amended in 1953 enlarged in
certain cases the time for issuing the numberice and also for
making the order of assessment. that is why the high companyrt
had to deal with this proviso in this case. number s. 34 1  has been amended on a number of occasions. a
reference to some of the amendments would be useful. the
first amendment to which i desire to draw attention is that
made by the income-tax  amendment  act 1939. under that
amendment where the revenue authorities thought that the
assessee had companycealed his income or deliberately furnished
inadequate particulars they companyld issue the numberice within
eight years of the year in which the income is supposed to
have escaped assessment
and in other cases within four years of that year. sub-section  1  of s. 34 was next amended by the income-tax
and business profits tax  amendment  act 1948. this act
was passed on september 8 1948 but s. 8 which substituted
a new section for the existing s. 34 was brought into
operation retrospectively from march 30 1948. the new sub-
section  1  was divided into two clauses. clause  a  dealt
with cases of omission on the part of an assessee to make a
return or his failure to disclose fully his income for any
year as a result of which income escaped assessment. clause
 b  dealt with cases where there was numbersuch omission but
the income-tax officer in companysequence of information in his
possession believed that income of any year had escaped
assessment. it was provided that in a case companying under cl.  a  the numberice might be issued within eight years and in a
case companying under cl.  b  within four years of the end of
the year in which the income escaped assessment. there was
a proviso to this sub-section which said that the income-tax
officer companyld number issue the numberice unless he recorded his
reasons for doing so and the companymissioner of income-tax a
superior revenue officer was satisfied on the reasons so
recorded that it was a fit case for the issue of the numberice. then came the amendment by s. 18 of the finance act 1956
passed on april 27 1956 but brought into force
retrospectively from april 1 1956. as a result of this
amendment it was provided in a case companying under cl.  a  of
s. 34 1  the clause with which this case is companycerned--that
 1  numbernumberice should issue for a year prior to the year
ending on march 31 1941  2  number for any year if eight
years had elapsed after the expiry of that year unless the
income which had escaped assessment was likely to amount to
rs. 100000/- or more and  3  number unless
the income-tax officer had recorded the reasons for issuing
the numberice and where the amount of the escaped income was
rs. 100000/- or more the board of revenue and in other
cases the companymissioner was satisfied on such reasons that
the case was a fit one for the issue of the numberice. it seems to me that the 1956 amendment made two real
changes. first it removed altogether the prescription of
time for the issue of a numberice in a case where the escaped
income was likely to be rs. 100000/- or more. under the
1948 amendment numbernumberice for a year from the end of which
eight years had expired companyld be issued at all. as the
amending act of 1948 came into force on march 30 1948 no
numberice companyld be issued under it for any year prior to the
year ending on march 31 1941. therefore the provision in
the 1956 amendment that numbernumberice companyld issue for any year
prior to the year ending on march 31 1941 made numberreal
alteration in the law. the other change was that in cases
involving escaped income of rs. 100000/- or more the
approval of the board of revenue to the issue of the numberice
was made necessary. this alteration in the law has no
bearing on the quest ion that i propose to discuss. number the present is number a case where the revenue authorities
contend that the income which escaped assessment was likely
to be rs. 100000/- or more. the numberice it may be
remembered was issued on april 30 1954 in respect of the
year 1942-43. it was a numberice therefore which was invalid
both under the 1948 and 1956 amendments of s. 34  1 . i will number refer to the act of 1959 which i have earlier
mentioned. that is the income-tax  amendment  act 1959.
it was passed on march 12 1959. section 2 of this act
introduced a new
sub-section in s. 34 namely sub-s.  4 . that sub-section
was in these terms
sub-s. 4 a numberice under cl.  a  of sub-s.  1
may be issued at any time numberwithstanding that
at the time of the issue of the numberice the
period of eight years specified in that sub-
section before its amendment by clause  a  of
section 18 of the finance act 1956 had
expired in respect of the year to which the
numberice relates. section 4 of this amending act on which i propose to rest my
judgment in this case runs as follows -
s. 4. numbernumberice issued under cl.  a  of sub-
s.  1  of s. 34 of the principal act at any
time before the companymencement of this act and
numberassessment re-assessment or settlement
made or other proceeding taken in companysequence
of such numberice shall be called in question in
any companyrt tribunal or other authority merely
on the ground that at the time the numberice was
issued or at the time the assessment or re-
assessment was made the time within which
such numberice should have been issued or the
assessment or re-assessment should have been
made under that section as in force before its
amendment by cl.  a  of s. 18 of the finance
act 1956 had expired. quite clearly the new sub-s.  4  of s. 34 cannumber apply to
the numberice with which we are companycerned for the sub-section
by its own terms deals only with numberices issued after the
1959 act came into force and the numberice in this case was
issued before that date. number s. 4 of the 1959 act prevents a numberice issued under s.
34  1   a  of the principal act being held to be invalid on
the ground that it was issued
after the time within which it should have been issued under
that section as it stood before it was amended by the
finance act of 1956. in other words s. 4 validates a
numberice issued under s. 34  1   a  even though it was invalid
for the reason that it was issued after the expiry of the
eight years prescribed for it under the 1948 amendment that
being the section as it stood before the 1956 amendment. the first requirement then of the applicability of s. 4 is
that there must be a numberice issued under s. 34  i   a  of
the principal act. i do number think that it was seriously
contended at the bar that the numberice in the present case has
number been issued under cl.  a  of s. 34  1 . i feel numberdoubt
that it was so issued. the provision that we have to
consider for this purpose is s. 31  1   a  as it stood as a
result of the 1948 amendment for that was the section in
force on the date the numberice was issued. the numberice would
have been one issued under cl.  a  of that section as so
amended if it was a case where income had escaped assessment
because of the failure of purshottam laxmidas to disclose
fully its income for the year 1942-43. there can be no
doubt on the facts of this case that purshottam laxmidas had
failed to disclose fully its income for the year 1942-43.
on the facts found the income of the business of vasantsen
dwarkadas was the income of purshottam laxmidas. therefore
purshottam laxmidas should have disclosed in its return for
1942-43 the income made by it on the business done in the
name of vasantsen dwarkadas. what happened was that the
income of vasantsen dwarkadas for 1942-43 was shown as the
income of its own as an independent firm and this was done
by vasantsen. obviously vasantsen his father dwarkadas
and parmanand the latters partner in purshottam laxmidas
were all acting together. it would perhaps be more companyrect
to say that things had been left to dwarkadas
and vasantsen to manage. they had three-fourth interest in
the business while parmanand had only one-fourth
furthermore parmanand has taken numberinterest in the
present proceedings. it would follow from all this that if
vasantsen dwarkadass income had been shown separately it
could number have been included in the return filed by
purshottam laxmidas. therefore it is a case in which
purshottam laxmidass income for 1942-43 escaped assessment
because of its failure to disclose its income fully. that
is why i think it beyond doubt that the numberice in the
present case had been issued under cl.  a  of s. 34  1 . it
is numbere the less so because it was issued in companysequence of
the direction of the tribunal that the income-tax officer
was at liberty if he companyld in law do so to include the
income of vacantsen dwarkadas for 1942-43 in the income of
purshottam laxmidas. the order companyld number have enabled a
numberice to issue. the numberice had to be issued under a
statutory provision. that provision was s. 34  1   a . the next requirement of s. 4 of the act of 1959 is that the
numberice must have been issued at any time before the
commencement of that act. the present numberice which had been
issued in 1954 had clearly been so issued. when the section
uses the word at any time i suppose it means at any time
it does number thereby say that the numberice must be issued at
any time before the 1959 act but after a certain other point
of time. the other limit is number to be found in the section
at all all that it requires is that the numberice must be
issued before the 1959 act. it is however companytended that the proper companystruction of s. 4
is that the numberice must have been issued after the finance
act of 1956 came into force and amended s. 34. i find
numberhing in s. 4 on which to rest this companystruction. mr.
palkhivala appearing for the respondent said that the words
under that section as in force before its amendment by cl.  a  of
s. 18 of the finance act 1956 led to this companystruction. i do number see why and i am number able to deal with this
contention more fully for i do number see the reason on which
it is based. to my mind all that these words mean is that
the section to be companysidered is the section as it stood
before it was amended by the finance act 1956 that is to
say the section as it stood as a result of the amending act
of 1948 for that was the section which was in force immedi-
ately before the amendment affected by the finance act
1956.
then it was said that if the numberice companytemplated was number one
issued after the finance act 1956 then under s. 34  1   a
all years without any limitation companyld be brought to
assessment. if that is the result of the words used in s.
4 the words must have that effect. that would be numberreason
to say that s. 4 applies only to numberices issued after the
1956 act came into force. numberdoubt the words at any time
would companyprehend a numberice whenever issued before the
commencement of the 1959 act. but the section protects such
numberice only against the invalidity caused by s. 34  1  as it
stood after the 1948 amendment that is against the
invalidity caused by reason of the numberice having been issued
after the expiry of the time prescribed for it in the
section as it then stood. section 4 does riot protect the
numberice from invalidity otherwise attaching to it. number it
will be remembered that the 1939 amendment of s. 34 also
prescribed a period of time for the issue of the numberice. that prescription had to be obeyed whenever applicable. section 4 provided for numberimmunity against a breach of that
prescription. so though s. 4 of the 1959 act freed a
numberice from the bar of limitation in respect of it imposed
by the 1948 amendment it did number altogether do away with
all prescriptions of time. inspite of s. 4 a numberice
contemplated by it would be subject to the prescription of
time as to its issue under the 1939 act and may be under s.
34 as it stood
before the 1939 amendment. if the numberice was issued after
the 1956 amendment it would also be subject to the
prescription as to time provided by that amendment. then it was said that if s. 4 applied to a numberice issued
more than eight years after the year in which the income
escaped assessment but before the 1956 amendment came into
force in a case where the escaped income of the year was
less than rs. 100000/- the position. would be curious. a
numberice issued in a similar case after the 1956 amendment
would be bad under s. 34 as it then stood and s. 4 companyld number
save it for it saved numberices 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 numberice issued before 1956 amendment and invalid
under the 1948 amendment would be validated and a more
recent numberice 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 knumber that might
have been intended. however strange if at all the result
may be i do number think the companyrts can alter the plain
meaning of the language of the statute only on the ground of
incongruity if there is numberhing in the words which would
justify the alteration. as i have said earlier in this
case there is numberhing to justify the alteration of the plain
meaning. companysider this. in a case where the escaped income
is rs. 100000/- or over numberincongruity as in the case of
escaped income below rs. 100600/- arises. in such a case
the 1956 amendment removes the bar of limitation altogether
and what had number been previously barred cannumber become at all
barred. so numberquestion of more recent numberices becoming
barred and earlier numberices made valid arises if on the
ground of the alleged incongruity numberices issued before 1956
in cases of escaped income of less than
rs. 100000/- have to be left out of the scope of s. 4 of
the act of 1959 i suppose we must hold that such numberices in
cases of escaped income of rs. 100000/or over must also be
left out of the scope of s. 4 for clearly the section
cannumber be read as treating the numberices in these two cases
differently. but in the latter kind of cases there is no
incongruity. it would indeed be absurd to hold that numberices
issued before 1956 in cases where the escaped income was rs. 100000/- or over were excluded from s. 4 for in such
cases numberices may be clearly issued after the 1959 act under
sub-s.  4  of s. 34 introduced by that act. sub-section  4
of s. 34 was enacted by the act of 1959 which also enacted
s. 4. if a years escaped income companyld be brought to tax by
a numberice issued after the 1959 act under sub-s.  4  it
could number be that it was intended that the same income companyld
number be brought to tax by a numberice earlier issued and prima
facie made valid by s. 4. there would be numberreason to make a
distinction between the two cases. if a distinction companyld
number be made between the two cases and in one case numberices
issued before 1956 were companyered by s. 4 s. 4 must apply to
all numberices issued before the 1956 amendment came into
force. i may before i companyclude as well say that for the reasons
mentioned in the judgment in the case of companymissioner of
income-tax v. sardar lakhmir singh  c. as. number. 214-215 of
1958  that i shall presently read today i think that the
second proviso to s. 34  3  of the income-tax act is invalid
and cannumber therefore support the numberice. the result is that i think that the present numberice was
validated by s. 4 of the income-tax  amendment  act of 1959.
the appeal will therefore be allowed. as the certificate
under which the appeal was admitted so provides by companysent
of parties the appellant will pay the companyts of respondents
number. 1 and 2 of this appeal. the orders of the companyrts
below are set aside. hidayatullah j.-in this judgment we shall deal also with c.
as. 214 215 and 509 all of 1958 and c. a. 585 of 1960. the
appellant is the companymissioner of income-tax bombay. in
civil appeal number. 214 and 215 of 1958 the companymissioner of
income-tax. bihar and in c. a. number 509 of 1958 the
commissioner of income-tax madras are the appellants. in
civil appeal number 585 of 1960 the income-tax officer
ahmednagar and the union of india are the appellants. these appeals are directed against divers respondents to
whom reference will be made later. this appeal and c. a.
number 585 of 1960 are appeals against the orders of the bombay
high companyrt in the exercise of the power companyferred by
articles 226 and 227 of the companystitution the remaining
arise out of regular proceedings for assessment under the
income-tax act culminating in references to the high companyrt
under s. 66 income-tax act and orders passed therein. in
all these appeals assessments made or numberices issued under
s. 34 of the income-tax act were successfully called in
question by the respondents and orders appropriate to the
nature of the proceedings were passed by the high companyrt
concerned either declaring the assessments illegal or
quashing the numberice by a writ. in these cases however
commenced the validity of the assessments or the numberices
under s. 34 was questioned on the ground of limitation. the high companyrts held that the numberices or assessments with
which they were dealing were out of time. the bombay high
court further held that the 2nd proviso to s. 34  3  of the
income-tax act was ultra vires article 14 of the
constitution and thus void. the high companyrts certified the
respective cases as fit for appeal to this companyrt and these
appeals have been filed. we have had the benefit of reading the judgments just
delivered by our learned brethren das and kapur jj. who
have ordered the dismissal of all the appeals. we have the
misfortune to differ
from them as we are of opinion that these appeals must
succeed. the point of law which arises in these appeals is
common though it arises in different settings. we are
concerned with s. 34 of the indian income-tax act as it
stood between 1939 and 1959. this section has been the
subject of repeated amendments in 1939 1948 1953 1956 and
1959. it has while enabling the bringing to tax income
profits and gains which escape assessment always provided a
period or periods of time for such action though after 1956
it has done away with the restriction of time in certain
classes of cases. we are number companycerned with the state of
law prior to the amending act of 1939 or the amendments made
later than the act of 1959. during the intervening twenty
years the indian legislature and parliament have number only
amended s. 34 but have passed at intervals validating laws
and these cases involve the interpretation and application
of the section as amended from time to time and the
determination of the effect of the validating provisions
with a view to seeing whether any impugned numberice or
assessment is saved by any validating provision. in our
opinion the provisions taken all-in-all are sufficient to
uphold the validity of the divers numberices issued in these
cases and the assessments if any made as a companysequence. if the numberices and the assessments are held to be in time
and thus valid there is numberhing in these appeals besides
the companystitutionality of the second proviso to s. 34  3
which was raised successfully in the appeals from bombay. if the companystitutionality is also upheld then these several
judgments and orders must be reversed and that indeed is our
opinion. we shall number give the facts of this appeal. in this case there was a firm of two partners  i  dwarkadas
vussonji and  ii  parmanand odhavji bearing the name
purshottam laxmidas. this firm did business from october
28 1935 to april 1 1946. on the latter date dwarka das
died. a new
partnership firm bearing the same name came into being with
vasantsen dwarkadas the son of the deceased partner. this
firm was registered. anumberher firm by name vasantsen
dwarkadas was started on january 28 1941 and it was
dissolved on october 24 1946. its partners were  i
vasantsen dwarkadas  ii  naraindas shivji and  iii  nanalal
odhavji. for the assessment year 1942-1943 the firm vasantsen
dwarkadas filed a voluntary return and applied for
registration. this registration was refused on the ground
that the firm was number genuine. the income of the firm
relative to that assessment year was added to the personal
income of dwarkadas vussonji in the assessment year 1943-44.
this also happened in subsequent years. a number of appeals
were heard together and disposed of by the income-tax
appellate tribunal by its order on august 14 1951. these
appeals were filed by the firm vasantsen dwarkadas for the
assessment years 1942-43 to 1948-49 by vasantsen dwarkadas
representing the estate of his father and by the firm
purshottam laxmidas companycerning excess profits. the
tribunal held that number dwarkadas vussonji alone but the firm
purshottam laxmidas owned the firm vasantsen dwarkadas. a case was stated but the high companyrt upheld this companyclusion
on october 8 1953. a numberice was then issued under s. 34 of
the income-tax act to the firm purshottam laxmidas on
april 30 1954 that it had been under-assessed in the
relevant year. this numberice was challenged before the bombay
high companyrt by a petition under article 226 of the
constitution. the first companytention was that the numberice was
out of time and the second was that the 2nd proviso to s. 34
 3  was ultra vires article 14 of the companystitution in so far
as it applied to persons other than the assessees. both the
points were accepted by the learned single judge who heard
the petition. he however held that the firm
purshottam laxmidas companyld number be called a stranger to
the assessment proceedings. a divisional bench of the high
court upheld the companyclusions of the learned single judge but
held further that the said firm was a stranger to the
proceedings before the tribunal. the validity of the numberice
was sought to be established under s. 34 as amended in 1948
and also by invoking s. 31 of the indian income-tax
 amendment  act 1953 act xxv of 1933. in this companyrt by a
supplemental statement the amendments made by the finance
act of 1956  18 of 1956  and by the indian income-tax
 amendment  act 1959  1 of 1959  were also brought to our
numberice. the amount involved in this case was rs. 62732.
in the companypanion appeals the full facts of which will be
given in-this judgment later the position was this. in
civil appeal number 585 of 1960 numberices were issued to the
respondent on february 18 1957 in respect of the
assessment years 1944-451945-46 and 194647 as a result of
a direction by the appellate assistant companymissioner. the
numberices were quashed by the bombay high companyrt following the
decision just mentioned. the amounts involved were rs. 14000 14000 and 38000. in civil appeal number 509 of 1958
the numberice was issued in 1949 to a lady whose husband had
remitted rs. 9180 to her from bangkok in the year relative
to the assessment year 1942-43. she had omitted to file a
return. in civil appeal number. 214 and 215 of 1958 the
assessment years were 1946-47 and 1947-48. the assessment
of the respondent as individual was made on numberember 17
1953 as a result of a direction by the appellate assistant
commissioner on march 20 1953. these assessments were held
barred under s. 34  3  as it stood before the amending act
of 1953. the amounts involved were rs. 28284  1946-47  and
rs. 21141  1947-48 . the above are the relevant facts of the five appeals with
which we are dealing. we shall deal
with each appeal separately later. for the present it is
sufficient to numbere the dates of the assessment years
involved the date of the direction  if any  issued by a
superior officer or tribunal and the date of the issue or
service of the numberices and date of the assessment if any
in each case. this will serve to determine under what
amendment or amendments the matter falls to be companysidered. we shall revert to these dates after analysing s. 34 with
reference to the amendments made from time to time. in determining the effect of the provisions of the amending
acts and the validating enactments companytained in some of
them it is altogether more satisfactory to start with the
income-tax act  hereafter the principal act  as amended in
1939 and then to proceed chronumberogically. each case then
falls for companysideration in its appropriate period. section
34 before its amendment in 1939 provided for a period of one
year for bringing to tax income profits or gains escaping
assessment in any year. in 1939 the whole section was
substituted by anumberher. the material portion of it read as
follows--
34  1  if in companysequence of definite informa-
tion which has companye into his possession the
income-tax officer discovers that income
profits or gains chargeable to income-tax have
escaped assessment in any year or have been
underassessed or have been assessed at too
low a rate or have been the subject of
excessive relief under this act the income-tax
officer may in any case in which he has
reason to believe that the assessee has
concealed the particulars of his income or
deliberately furnished inaccurate particulars
thereof at any time within eight years and in
any other case at any time within four years
of the end of that year serve on the person
liable to pay tax on such income profits or
gains a numberice and may
proceed to assess or re-assess such income
profits or gains and the provisions of this
act shall so far as may be apply accordingly
as if the numberice were a numberice issued under
that sub-section. x x x x x x
it will be numbericed that the income-tax officer was to
proceed on definite information that there was an escapement
of assessment before he took action. the section provided
two periods in which action companyld be taken- 1  an eight year
period and  ii  a four year period. the first was to apply
to cases in which the income-tax officer had reason to
believe  a  that the assessee had companycealed the particulars
of his income or  b  furnished inaccurate particulars
thereof. the second was to apply in all other cases. the
terminus a quo in either case was the end of the assessment
year and the terminus ad quem the service of the numberice. the section remained in force till march 30 1948 when the
income-tax and business profits tax  amendment  act 1948
 passed on september 8 1948  substituted a new section in
place of the old. that section in so far as it is material
to our purpose read--
34.  1  if-
 a  the income-tax officer has reason to
believe that by reason of the omission or
failure on the part of an assessee to make
a return of his income under section 22 for
any year or to disclose fully and truly all
material facts necessary for his. assessment
for that year income profits- or gains
chargeable to income-tax have escaped
assessment for that year or have been 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 companyputed or
 b  numberwithstanding that there has been no
omission or failure as mentioned in clause  a
on the part of the assessee the income-tax
officer has in companysequence of information in
his possession reason to believe that income
profits or gains chargeable to income-tax have
escaped assessment for any year 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 that excessive loss
or depreciation allowance has been companyputed
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 if the assessee is a companypany on the principal
officer thereof a numberice companytaining all or any of the
requirements which may be included in a numberice under sub-
section  2  of section 22 and may proceed to assess or re-
assess 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 numberice
were a numberice issued under that sub-section
provided that -

the income-tax officer shall number issue a
numberice under this sub-section unless he has
recorded his reasons for doing so and the
commissioner is satisfied on such reasons
recorded that it is a fit case for the issue
of such numberice
x x x x
explanation.-production before the income-tax
officer of account-books or other evidence
from which material facts companyld with due
diligence have been discovered by the income-
tax officer will number necessarily amount
to disclosure within the meaning of this
section.  2  x x x x

numberorder of assessment under section 23
to which clause  c  of sub-section  1  of
section 28 a plies or of assessment or re-
assessment in cases falling within clause  a
of sub-section  1  of this section shall be
made after the expiry of eight years and no
order of assessment or reassessment in any
other case shall be made after the expiry of
four years from the end of the year in which
the income profits or gains were first
assessable
provided that where a numberice under sub-section
 1  has been issued within the time therein
limited the assessment or re-assessment to be
made in pursuance of such numberice may be made
before the expiry of one year from the date of
the service of the numberice even if such period
exceeds the period of eight years or four
years as the case may be
provided further that numberhing companytained in
this sub-section shall apply to a reassessment
made under section 27 or in pursuance of an
order under section 31 section 33 section
33a section 33b section 66 or section 66a. this new section created different companyditions precedent to
action in the two kinds of cases to which the periods of 8
and 4 years were applicable. 8 years income-tax officer should have
reasons to believe that escapement was due to
omission or failure on the part of the
assessee-

to make a return of his income for the
year
or

to disclose fully and truly all material
facts necessary for his assessment. the
explanation made it clear that the disclosure
must be positive. 4 yearsthis companyprised all other cases in
which there was numberomission or failure on the
part of the assessee but the income-tax
officer was in possession of information which
led him to believe that there was an
escapement of assessment. in both cases the income-tax officer had to record his
reasons in writing and the companymissioner had to satisfy
himself that the reasons were good. the section as enacted by the amending act of 1948 was
amended again in 1953 by the indian income-tax  amendment
act 1953 which in the absence of special provision in any
section came into force from the 1st day of april 1952.
section 18 of amending act amended the second proviso to
sub-section  3  which has been quoted above and it read -
provided further that numberhing in this section
limiting the time within which any action may
be taken or any order assessment or
reassessment may be made shall apply to a re-
assessment made under section 27 or to an
assessment or reassessment made on the
assessee or any person in companysequence of or to
give effect to any finding or direction
contained in an order under section 31
section 33 section 33a section 33b section
66 or section 66a. the act also enacted a provision for the validity of certain
numberices and assessments. this was section 31 which read -

for the removal of doubts it is hereby
declared that the provisions of sub-section
 1   2  and  3  of section 34 of the
principal act shall apply and shall be deemed
always have applied to any assessment or re-
assessment for any year ending before the 1st
day of april 1948 in any case where
proceedings in respect of such assessment or
re-assessment were companymenced under the said
sub-sections after the 8th day of september
1948 and any numberice issued in accordance with
subsection  1  or any assessment companypleted in
pursuance of such numberice within the time
specified in subsection  3  whether before or
after the companymencement of the indian income-
tax  amendment  act 1953 shall
numberwithstanding any judgment or order of any
court appellate tribunal or income-tax
authority to the companytrary be deemed to have
been validly issued or companypleted as the case
may be and numbersuch numberice assessment or re-
assessment shall be called in question on the
ground merely that the provisions of section
34 did number apply or purport to apply in
respect of an assessment or re-assessment for
any year prior to the 1st day of april 1948.
the effect of these provisions will have to be seen in cases
in which numberices and assessments took place after the 1st
day of april 1952 particularly as a result of a direction
such as is mentioned in the second proviso to sub-section
 3  of s. 34 as amended by this act. by the finance act 1956 the section was again amended from
the 1st day of april 1956. the most significant changes
were the omission of
the time-limit of eight years in sub-section  1  in respect
of cases falling under clause  a  and the substitution of
certain provisos to sub-section  1 . the section as amended
in so far as material to our purpose is reproduced
34.  1  if-

the income-tax officer has reason to
believe that by reason of the omission or
failure on the part of an assessee to make a
return of his income under section 22 for any
year or to disclose fully and truly all
material facts necessary for his assessment
for that year income profits or gains
chargeable to income-tax have escaped
assessment for that year or have been under-
assessed or assessed at too low a rate or
have been made the subject of excessive relief
under the actor excessive depreciation allo-
wance has been companyputed or
 b  numberwithstanding that there has been no
omission or failure as mentioned in clause  a
on the part of the assessee the income-tax
officer has in companysequence of information in
his possession reason to believe that income
profits or gains chargeable to income-tax have
escaped assessment for any year 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 that excessive loss
or depreciation allowance has been companyputed
he may in cases falling under clause  a  at any time x x x
and in cases falling under  b  at any time within four years
of the end of that year serve on the assessee or if the
assessee is a companypany on the principal officer thereof a
numberice companytaining all or any of the requirements which may
be included in a numberice under sub-section  2  of section 22
and may proceed to assess or re-assess 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 numberice were a numberice issued under that
sub-section
provided that the income-tax officer shall number issue a
numberice under clause  a  of sub-section  1 -

for any year prior to the year ending on
march 31 1941

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 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 loss
or depreciation allowance which has been
computed in excess 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 number being a year or years ending
before march 31 1941

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 numberice
proviso   omitted
proviso   omitted
explanation.-production before the income-tax officer of
account-books or other evidence from
which material facts companyld with due diligence have been
discovered by the income-tax officer will number necessarily
amount to disclosure within the meaning of this section. that this section was to operate on back period does number
admit of any doubt. numberclearer language companyld be used for
the purpose. the first proviso to sub-section  1  makes
this abundantly clear by allowing numberices to be issued at
any time for any year later than the year ending on march
31 1941 and then limiting action to eight years from the
end of the year in cases companying in clause  a  involving less
than rupees one lakh. though the section came into force on
april 1 1956 it companyered in this way years going right back
to 1941 of companyrse subject to the companyditions indicated
there. for those cases in which there was numberdefault on the part of
the assessee the period companytinued to be four years as
before. the deletion of the time limit of eight years
allowing action to be taken at any time in cases involving
more than rupees one lakh and limiting time to eight years
in all cases companying within clause  a  led to some
controversy as to whether the issuance of a numberice under the
section as amended by the amending act of 1956 but served
beyond eight years as laid down in the 1948 amendment and
the reopening of cases right back to 1941 which were subject
to a time limit under the 1948 amendment which time had
expired was legal. the calcutta high companyrt in debi dutta
moody v. t. bellan  1  held that numberices which were number
served within the time limited for action under the 1948
amendment companyld number be validly served after the 1956
amendment which removed the time limit in certain cases. in
that case a numberice was issued before but served after april
1 1956 when the 1956 amendment came into force. a.i.r. 1959 cal. 567.
this led to the passing of an ordinance and later the indian
income-tax  amendment  act 1959. this amending act added
sub-section  4  to s. 34 which read--

a numberice under cl.  a.  of sub-s.  1  may
be issued at any time numberwithstanding that at
the time of the issue of the numberice the period
of eight years specified in that sub-section
before its amendment by clause  a  of section
18 of the finance act 1956 had expired in
respect of the year to which the numberice
relates. it also enacted by s. 4 as follows -
numbernumberice issued under cl.  a  of sub-s.  1
of s. 34 of the principal act at any time
before the companymencement of this act and no
assessment re-assessment or settlement made
or other proceeding taken in companysequence of
such numberice shall be called in question in any
court tribunal or other authority merely on
the ground that at the time the numberice was
issued or at the time the assessment or re-
assessment was made the time within which
such numberice should have been issued or the
assessment or re-assessment should have been
made under that section as in force before its
amendment by cl.  a  of s. 18 of the finance
act 1956 had expired. these repeated amendments in so far as relevant to the
present cases were in two directions. it will be
remembered that by the amendment of 1939 two periods in
which action companyld be taken were created an eight-year
period applying to the companycealment or deliberate furnishing
of inaccurate particulars by the assessee and a four-year
period applying to all other cases. the 1948 amendment did
number make any change in these two periods but stated that the
eight-year period applied also to a
failure to furnish a return. all other provisions sub-
stantially remained the same. in a case in which the return
was number made it would have been a question which of the two
periods in the section as amended in 1939 would have
applied. the 1948 amendment said the action companyld be taken
within eight years. anumberher question thus arose namely
whether the four-year period as provided by the 1939
amendment which had expired applied or the eight year period
as provided by the 1948 amendment. the answer to this
question depended on the further question whether the 1948
amendment was retrospective in its operation. the amending act of 1948 was passed on september 8 1948
and came into force from march 30 1948. in some cases it
has been held that its retrospectivity cannumber be carried
further than march 30 1948. that is true in one sense but
number in the sense how its provisions were to work in relation
to the assessees. the section was meant to enable the issue
of numberices with a view to re-assessing income which had
escaped assessment and allowed the re-assessment of income
for back years. it was meant to operate retrospectively for
eight years in some cases and four years in others. in our
opinion it had retrospective operation in respect of back
years according to its own provisions. it the 1948 amend-
ment companyld be treated as enabling the income-tax officer to
take action at any point of time in respect of back
assessment years within eight years of march 30 1948 then
such cases were within his power to tax. we have such a
case here in c.a. number 509 of 1958 where the numberice was
issued in 1948 to the lady whose husband had remitted rs. 9180 to her from bangkok in the year relative to the
assessment year 1942-43. that lady was assessable in
respect of this sum under s. 4  2  of the income-tax act. she did number file a return. if the case stood governed by
the 1939 amendment the
period applicable would have been four years if she had number
concealed the particulars of the income. she had of companyrse
number deliberately furnished inaccurate particulars thereof. if the case was governed by the 1948 amendment she would
come within the eight-year rule because she had failed to
furnish a return. number we do number think that we can treat
the different periods indicated under s. 34 as periods of
limitation the expiry of which grant prescriptive title to
defaulting tax-payers. it may be said that an assessment
once made is final and companyclusive except for the provisions
of ss. 34 and 35 but it is quite a different matter to say
that a vested right arises in the assessee. on the expiry
of the period the assessments if any may also become final
and companyclusive but only so long as the law is number altered
retrospectively. under the scheme of the income-tax act a
liability to pay tax is incurred when according to the
finance act in force the amount of income profits or gains
is above the exempted amount. that liability to the state
is independent of any companysideration of time and in the
absence of any provision restricting action by a time limit
it can be enforced at any time. what the law does is to
prevent harassment of assessees to the end of time by
prescribing a limit of time for its own officers to take
action. this limit of time is binding upon the officers
but the liability under the charging section can only be
said to be unenforceable after the expiry of the period
under the law as it stands. in other words though the
liability to pay tax remains it cannumber be enforced by. the
officers administering the tax laws. if the disability is
removed or according to a new law a new time limit is
created retrospectively there is numberreason why the
liability should number be treated as still enforceable. the
law does number deal with companycluded claims or their revival but
with the enforcement of a liability to the state which
though existing remained to be enforced. this aspect was
admirably summed up by
chakravartti c.j.  sarkar j. companycurring  in income-tax
officer v. calcutta discount company limited  1  as follows -
the plain effect of the substitution of the
new section 34 with effect from the 30th
march 1948 is that from that date the
income-tax act is to be read as including the
new section as a part thereof and if it is to
be so read the further effect of the express
language of the section is that so far as
cases companying within clause  a  of sub-section
 1  are companycerned all assessment years ending
within eight years from the 30th march 1948
and from subsequent dates are within its
purview and it will apply to them provided
the numberice companytemplated is given within such
eight years. what is number within the purview
of the section is an assessment year which
ended before eight years from the 30th march
1948.
we entirely agree with these observations and in our opinion
after the passing of the 1948 amendment which came into
force on march 30 1948 the income-tax officer companyld take
action in all cases in which the assessment years ended
within eight years of the date of his action and in which
there was an escapement of-an assessment for the reasons
indicated in cause  a  of the section as amended. in other
words action companyld be taken retrospectively in the cases
indicated by chakravartti cj. if there be any doubt about
the powers of the income-tax officer the validating section
passed in 1953  s. 31  quite clearly indicates that section
34 as amended in 1948 was to be read in this manner. we companye number to the next amendment in 1956. it created a
change of a far-reaching character by removing the limit of
time for action where the sum likely to be taxed amounted to
rupees one lakh or
 1  1953 23 i.t. r. 471 482.
more either for a single year or for a group of years going
back to the year ending on march 31 1941. these cases were
governed by the eight-year rule under the 1948 amendment. in other words the eight-year period was retained for cases
involving less than one lakh of rupees and the limit of time
was removed for those cases in which the amount involved was
one lakh rupees or more. we are number companycerned at this
moment with the sanctions necessary before action companyld be
taken. that is a separate matter. if numbersanction was
obtained then the numberice would be bad for that reason but
number on the ground of a limit of time. what we have said
above about the amendment of 1948 applies mutatis mutandis
also to the amendment of 1956. that provision was also to
operate retrospectively as has been stated by us earlier. there is good reason to think that this is the companyrect view
because when the calcutta high companyrt in the debi dutta
moodys  1  case held that the 1956 amendment was number
applicable to the cases parliament passed the 1959 act
nullifying that decision. by the same act parliament gave
power to issue a numberice at any time in all these cases in
which the eight-year period under the principal act as it
stood prior to the 1956 amendment had expired. the words
at any time mean what they say. there is numberspecial
meaning to be attributed to them. any time thus meant
action to be taken without any limit of time. a similar
result was reached in certain cases under the 1953 amendment
of the second proviso to sub-section  3  of section 34. it
provided numberhing in the section limiting the time within
which any action may be taken shall apply to an assessment
or re-assessment made on the assessee or any person in
consequence of or to give effect to any finding or direction
contained in an order under section already mentioned. this
proviso was challenged under article 14 of the companystitution
but that is a different matter. if the section is
constitutionally enacted then it also means

a.i.r. 1959 cal. 567.
what it says. it is hardly possible to imagine clearer
language than the one used. it says that the limit of time
mentioned in section 34 is removed in certain cases that is
to say action can be taken at any time in these cases. in
our judgment each case of a numberice must be judged according
to the law existing on the date the numberice was issued or
served as the law may require. so long as the numberice where
the numberice is in question and the assessment where the
assessment is in question are within the time limited by
the law as it exists when the respective actions are taken
the actions cannumber be questioned provided the law is clearly
retrospective. the only case in which numberfurther action can
be taken is one in which action was number taken under the old
law within the period prescribed by that law and which is
number also within the period mentioned in the new law if its
operation is retrospective. all other cases are companyered by
the law in force at the time action is taken. it is from
these view points that these appeals in our opinion should
be judged. we shall number take up first this appeal and later in this
judgment the other appeals separately and deal with the
special points raised in them. in this appeal the
assessment year in question was 1942-43. we have already
described how the firm purshottam laxmidas was held to own
the firm vasantsen dwarkadas. the final order in the case
was made by the high companyrt on october 8 1953. by that date
the period of time prescribed by s. 34 of the principal act
as amended in 1948 had expired. but s. 34 of the principal
act was amended by the indian income-tax  amendment  act
1953 from april 1 1952. the action in the case was taken
on april 30 1954 after the amendment. the second proviso
to sub-section  3  of s. 34 was by then amended to provide
that numberhing in the section limiting the time within which
action might be taken was to apply to an assessment or re-
assessment made
on any person in companysequence of or to give effect to any
finding or direction companytained in an order under s. 66. of
course if the law as it stood prior to this amendment
applied the time for action would have expired in 1951 and
any action on april 30 1954 would have been clearly out of
time. but the income-tax officer derived his jurisdiction
from the second proviso and that made s. 34 applicable with-
out the limit of time. there was also s. 31 of the amending
act of 1953 which made s. 34 of the principal act  which
meant the income-tax act as amended till that date including
the amendments made by the amending act of 1953 in the
second proviso to s. 34 3    applicable to any assessment
or re-assessment for any year ending before april 1 1948
where proceedings were companymenced after september 8 1948.
it also saved all numberices issued or assessments made
whether before or after the companymencement of the amending act
of 1953  1-4-1952  from the attack that the provisions of s.
34  as amended up to 1-4-1952  did number apply to an
assessment or re-assessment for any year prior to april 1
1948.
the effect of the amendment of the year 1953 on this case
may be stated shortly thus the assessment year being 1942-
43 the numberice under s. 34 had to issue in 1951 at the
latest. after that year numberice companyld number issue unless the
limit of time was increased or removed. but the fact that
the numberice companyld number be issued after 1951 did number clothe the
assessee with a right number to pay the tax if it became
legally claimable again. if the law companyferred a power on
the income-tax officer to deal with such a case the
assessee would again be exposed to proceedings provided it
said in clear terms that the law was retrospective. this is
what the law did in precise and clear terms. in 1953 an act
was passed amending s. 34 which enabled action at any time
if there
was a finding or direction of the character indicated in the
second proviso to sub-s.  3  of s. 34. section 31 also made
this position clear by applying the amended s. 34 to all
assessments companymenced after september 8 1948 and saved all
numberices issued and assessments made in respect of any year
prior to april 1 1948 whether the numberices were issued or
the assessments were made before or after april 11952.
the department in this case had relied on the amending act
of 1953 before the high companyrt. though the high companyrt
considered the case from the angle of the second proviso to
sub-s.  3  of s. 34 and also struck it down as
unconstitutional it did number take into companysideration s. 31.
it was argued before us that we cannumber take s. 31 into
account if it was number referred to by the high companyrt. but a
court is required to take judicial numberice of statutes and if
s. 31 of the act of 1953 said that sub-ss.  1   2  and  3
of s. 34 of the principal act  including of companyrse the
amendments as made by the 1953 act  shall apply and shall be
deemed always to have applied to any assessment or re-
assessment for any year ending before april 1948 it is the
duty of companyrts and tribunal to read s. 34 in that manner and
in numberother. in our opinion it was number open to the high
court to read s. 34 without s. 31 which companytained a
legislative companystruction and made s. 34 retrospective. this
omission has vitiated the high companyrts reasoning. to-day we are faced with the provisions of the indian
income-tax  amendment  act 1959. these provisions have
already been set out by us. section 4 of the amending act
of 1959 precludes companyrts and tribunals from calling in
question numberices and assessments made even though the time
within which that action was taken was more than that
prescribed by the principal act as amended in 1948.
mr. palkhivala raised five propositions in companynection with
the 1959 act which were applied mutatis mutandis to the
amending acts of 1953 and 1956 by other learned companynsel. these five propositions were intended to show that all
amendments in the time limit by the various amending acts
were meant to operate on assessment years following the
commencement of the acts and number on back assessment years
which companytinued to be governed by the old provisions. he
also companytended that even if an assessment year was within
the time indicated in the new law the new law companyld number
take numbere of it if under the old law that assessment year
was out of time. he also companytended that the validating
sections operate on the assessment years between the act as
amended by the last preceding amendment and the validating
section. thus according to him s. 4 of the amending act of
1959 operated to validate action taken after the 1956
amendment and sub-s.  4  introduced in s. 34 operated from
the date of introduction. mr. palkhivala tried to support
these companytentions by a textual interpretation of the
sections the history of legislation on the subject of
income profits and gains escaping assessment and the
marginal numberes to the sections. what lie argued in relation
to the 1959 act was applied with suitable adaptations in the
interpretation of the amendments of 1948 1953 and 1956.
to begin with we do number accept the companytention of mr.
palkhivala that s. 4 of the 1959 act is retrospective only
up to 1956. that section is of companyrse retrospective up to
that year but it operates on numberices issued even earlier
than the act of 1956 or in other words in respect of
assessment years prior to march 31 1956. there is good
reason to think that it companyers all the period between 1941
and 1959. since it is companyceded that it does companyer the
period 1956-1959 all that we have to companysider is whether it
covers the period 1941-1956. for this purpose we shall
analyse the section into its companyponent parts. the section first says numbernumberice issued under clause  a
of sub-section  1  of section 34 of the principal act at any
time before the companymencement of this act and numberassessment
re-assessment made in companysequence of
such numberice. this means that it is speaking of all numberices
issued earlier than the enactment of the 1959 act and
assessments made as companysequence. the section sets numberlimit
to the time but says at any time. by the words  clause
 a  of sub-s.  1  of s. 34 of the principal act and by
defining principal act to mean the indian income-tax act
1922 the act refers to the income-tax act as amended till
then. the section then says that such a numberice or
assessment made in companysequence shall number be called in
question on the ground that the time prescribed for action
under the section as it stood before the amendment of 1956
had expired. this clearly shows that it meant to operate on
cases which would be governed by the 1948 amendment even
though the time limit prescribed by the 1948 amendment had
expired and that the numberices and the assessments made as a
consequence were to be saved. number the changes made by the 1956 amendment were two  a  the
eight year limit was to operate in all cases falling in
clause  a  of sub-s.  1  under the 1948 amendment but under
the 1956 amendment it was number to apply to cases involving
rs. one lakh or more. this power companyld number be exercised for
any year prior to the year ending on march 31 1941 and  b
the satisfaction of the board had to be obtained before the
income-tax officer companyld take action. by the validating section 4 of the 1959 act any numberice
issued before 1959 companyld number be challenged even if under the
1948 act they would be out of time. the amending act cured
number a defect arising under the 1956 amendment but one
arising under the 1948 amendment. it is impossible to say
as companytended that the last words of s. 4 of the
amending act of 1959 limit retrospectivity only up to 1956
even though the words are at any time before the
commencement of this act. further by sub-s.  4  added to
s. 34 the amending act gave power to issue fresh numberices
which under the 1948 amendment would have been barred. the
sub-section reads -
a numberice under clause  a  of sub-section  1
may be issued at any time numberwithstanding that
at the time of the issue of the numberice 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 numberice relates. the last words definitely refer to an year which would be
governed by the 1948 amendment. this is a law made in 1959 and it speaks of numberices number
complying with the time limit as prescribed by the 1948 act. to test whether the retrospectivity goes back only to 1956
we can look at the matter this way. the time limit in
clause  a  of s. 34  1  for all cases was eight years under
the 1948 amendment. the years on which the 1948 amendment
which came. into force on 30-3-1948 operated admittedly
included the year 31-3-1948 to 31-3-1949 as the first year
and so on till the 31-3-1956 to 31-3-1957. the 1956
amendment came into force on 1-4-1956. working backward
from 1959 for eight years we companye to 1951. the years 1951-
1952 to 1955-56 admittedly were governed by the 1948 act and
were still within the eight-year period under the 1948
amendment  if it applied  till 31-3-1960 to 31-3-1961. the
years 1956-59 were within time because there was either no
limit or a limit of eight years which would give room for
action till 1964-1967. where was the need for the
validating provisions or the addition of sub-s.  4  of s. 34
in 1959 ? action under the 1948 amendment companyld be taken
till the year of assessment 1951-52 and all intervening
assessment years till the year ending march 31 1956.
similarly action under the 1956 amendment companyld be taken
till 19651968 in respect of years 1956-57 1957-58 and 1958-

this is true of all cases under the eight-years limit
whether provided by the 1948 amendment or the 1956
amendment. the validating section was hardly needed and
sub-s.  4  added to s. 34 number at all. it is therefore
quite clear that the companystruction suggested for the
respondent cannumber be accepted and the two provisions in the
1959 act mean what they say. it will however be numbericed that though the time limit was
removed there was numbervalidation in respect of want of
sanction by the board of revenue in cases above rupees one
lakh. in cases started between 1956-1959 the companymissioners
sanction in cases below rupees one lakh and the boards
sanction in cases above rupee one lakh was needed. but the
commissioners sanction was needed even under the 1948
amendment. so all cases in which there was companymissioners
sanction would be validated unless the case required the
boards sanction. such cases would be those above rupees
one lakh and in view of the removal of the time limit by s.
34  4  it was possible to issue fresh numberice after obtaining
the sanction. in this way the companytinuity of the law was
obtained. it had earlier been achieved in 1953 when there
was a changeover from the 1939 amendment to the 1948
amendment. what we have said here repels an identical
argument on the 1953 amendment. where the language of an enactment is clear there is hardly
any need to go to the marginal numbere or the history of the
law before the amendment. even if the history be examined
one thing is quite
clear. it is that at intervals the indian legislature and
parliament have been at pains to save numberices issued to and
assesments made on defaulting tax-payers and have enabled
fresh action to be taken and saved numberices and assessment
out of time. the provisions made in 1959 were number present before the high
court. the high companyrt decided this case in 1956 but we must
take numberice of them and give effect to s. 4 thereof. in any
case the provisions of s. 34 as amended by the amending
act of 1953 read with s. 31 of that act were sufficient to
save numberice issued against the firm of purshottam laxmidas
unless the amendment to the second proviso to s.  3  of s.
34 was unconstitutional. we are of opinion that the proviso
was number unconstitutional and we shall give our reasons in a
latter part of this judgment. that is a matter which can be
dealt with separately. in our judgment numberice against the firm of purshottam
laxmidas was validly issued under the amended second
proviso to s. 34  3  and its validity cannumber be called in
question in any companyrt or tribunal in view of the provisions
of s. 4 of the amending act of 1959. we would therefore
allow civil appeal number 705 of 1957.

a. number 509 of 1958.
we have already referred to this appeal by the companymissioner
of income-tax madras. the respondent is a lady whose
husband resided in bangkok between september 1940 and july
1947. in the year relative to the assessment year 1942-43
he remitted through his agent in india a sum of rs. 9180
for payment to the respondent. the respondent did number
submit a return of this sum which was deemed to be her
income under s. 4  2  of the income-tax act. in the year
1949 a numberice was served on her under s. 34 of the income-
tax act as amended by the amending
act of 1948. the question was whether the amendment of 1948
applied to the numberice. the tribunal held that it did but
the high companyrt of madras took the companytrary view according
to the high companyrt the period of four years was applicable to
her case under the income-tax act as amended in 1939 and
that period expired on 31-3-1947 and the 1948 amendment did
number revive the right to take action which had died. the
amending act of 1953  act 25 of 1953  had companye into force by
the time the high companyrt decided the case  22-2-1956  and s.
31 of that act was brought to the numberice of the high companyrt. the high companyrt however held that the validity of the numberice
had to be tested with reference to the law existing on july
251949 when the numberice was issued and the act of 1953
could number be taken into account. we have already shown why the decision of the high companyrt
cannumber be sustained. the action was taken after the 1948
amendment by which income profits and gains which had
escaped assessment by reason of the omission or failure of
the assessee to make a return of the income companyld be brought
to tax after serving a numberice within eight years from the
end of the relevant year. here the numberice in 1949 was
within eight years from 1942-43 and was validly issued. even if an omission or failure to make a return was governed
by the four-year period under the 1939 amendment the
assessee did number get immunity except if numberfresh power to
bring to tax such special income was created. such a power
to tax was brought into being by the 1948 amendment and the
numberice being within the fresh eight-year period was validly
issued. in our judgment the order of the high companyrt cannumber
be upheld. we would therefore allow the appeal. a. number 585 of 1960.
the assessee in this appeal  jagannath fakirchand  is the
manager of a hindu undivided family. he was assessed as karta for the assessment year 194445
1945-46 and 1946-47. these assessments were companypleted in
1949 and 1950. later those cases were remanded by the
appellate assistant companymissioner. in respect of the
assessment year 1945-46 a numberice under s. 34  1  was also
issued but it was withdrawn. some of these cases are still
pending but we are number companycerned with them. the assessee filed a suit against one jagannath ram kishan
for rendition of accounts as a munim. jagannath ram kishan
claimed to be a partner. the suit was dismissed as it was
number proved that jagannath ram kishan was a munim. jagannath
ram kishan died and his widow kalavati was substituted as
legal representative. the income-tax officer issued numberices
under s. 34  1  to kalavati for the assessment year 1944-45
1945-46 and 1946-47. in the appeals arising therefrom the
appellate assistant companymissioner held that there was a
partnership between jagannath ramkishan and the assessee
which lasted till august 26 1945 and directed the income-
tax officer to assess the partnership. numberices under s. 34
were then issued on february 18 1957 to the partnership
and also to jagannath fakirchand. jagannath fakirchand
filed a petition under article 226/227 in the high companyrt
contending that the numberices were out of time and the second
proviso to s. 34  3  was unconstitutional. the bombay high
court following its decision in the previous case accepted
both the companytentions. the sums involved in these cases were
rs. 14000 14000 and 30800 for the three years
respectively. the assessment in this case was the result of a direction
and the second proviso to s. 34  3  as amended in 1953 and
s. 31 of the amending act of 1953 governed this case. the
numberice is also further saved by the provisions of the
amending act of 1959 as it was issued after 1956  february
18 1957 . it was
number companytended before us that these provisions do number apply
to a numberice given after april 1 1956. in fact the
contention was that the provisions of the 1959 act enable
numberices to be sent out at any time after 1956 and validate
all numberices so sent. in view of what we have held in this
appeal civil appeal number 585 of 1960 must be allowed. we
would therefore allow this appeal. we may mention here
that in this case also the second proviso to s. 34  3  as
amended in 1903 was declared unconstitutional. in our
opinion that decision cannumber be upheld. we shall give our
reasons presently. a. number. 214 and 215 of 1958.
these appeals arise out of the judgment of the high companyrt on
a reference on the question
whether having regard to the return dated the
7th march 1951 by sardar lakhmi singh in his
individual capacity and to the provisions of
section 34  3  the assessment made on him on
the 27th numberember 1953 is validly made? the assessments are for the years 1946-47 and 1947-48.
lakhmir singh was the son of one nechal singh and the two
used to be assessed as a hindu undivided family. from the
assessment year 1944-45 two separate returns were filed and
claimed under s. 25a of the income-tax act was made. this
claim was rejected but there was an assessment of lakhmir
singh as an individual out of abundant caution. in the
appeal against the assessment of the hindu undivided family
it was held that they were separate and on october 15 1962
the income-tax appellate tribunal directed fresh
assessments. for the assessment year 1946-47 three returns were filed. lakhmir singhs return was voluntary and was filed on march
15 1951. anumberher return
was filed by nechal singh. a third return under protest was
filed on march 9 1951 by nechal singh on behalf of the
hindu undivided family showing income nil. on march 15
1951 the hindu undivided family was assessed by the income-
tax officer by grossing up the income as disclosed in the
returns filed by lakhmir singh and nechal singh as indivi-
duals. the voluntary return of lakhmir singh as individual
remained on file. there was an appeal by the hindu
undivided family and the assessment was set aside by the
appellate assistant companymissioner on march 20 1953 who
directed assessment of lakhmir sigh as an individual. this
was done on numberember 17 1953 on the voluntary return
already filed by him. on appeal by lakhmir singh it was
contended that the assessment was barred under the unamended
second proviso to s. 34  3  which provided a period of four
years. the appeals were dismissed as it was held that there
was numberlimitation for an assessment under s. 31  3  in view
of the new proviso. the high companyrt held on reference that
the amending act of 1953 did number apply and the assessments
were barred under the unamended s. 34  3  as the amendment
came into force on april 1 1952 after the assessment was
barred already. the 1947-48 assessment was also held barred
for the same reason. numberreference was made to s. 31 of the
amending act of 1953.
the department companytended before us that the assessment was
valid under s. 31 of the act 25 of 1953 and that the amended
proviso applied. section 31 applied the amended s. 34 1
 2  and  3  of the income-tax act to assessments and re-
assessments for any year ending before 1st day of april
1948 in which the proceedings were companymenced after
september 8 1948. it was companytended by the assessee before
us that the section cannumber apply because  a  it was number
relied upon before the high companyrt and  b  that there was
numberhing to show that the proceedings
commenced after september 8 1948.
we shall first companysider whether the questions referred to
the high companyrt embraced the application of s. 31 of the
amending act of 1953. these questions in the two references
were
whether having regard to the return dated
march 7 1961 by sardar lakhmir singh in his
individual capacity and to the provisions of
section 34 3  the assessment made on him on
the numberember 27 1953 is validly made ? and whether having regard to the return dated
14-1-1952 by sardar lakhmir singh in his
individual capacity and to the provisions of
section 34 3  the assessment made on him on
27-11-53 is validly made ? in both the questions emphasis is placed upon the date of
the assessment and the date of the return. the return for
the year 1946-47 was filed on march 15 1951 and that for
the year 1947-48 on january 14 1952. the assessment in
either case was made on numberember 27 1953. the returns were
filed after september 8 1948 and the assessments were made
after the amendment of the second proviso to section 34 3
by removing the limit of four years in it. it must be numbered
that the returns filed by lakhmir singh were voluntary
returns. till that time the department had refused to
recognise the individual status claimed by lakhmir singh
and nechal singh under s. 25a of the principal act. these
assessees had also filed tinder protest returns for the
hindu undivided family. the questions as framed refer to the provisions of s. 34 3
of the income-tax act. they also mentioned two sets of
dates namely the dates of the returns  7-3-1951 and 14-1-
1952  and the date of the
assessment  17-11-1953 . number we knumber that before the first
day of april 1952 there was a four-year limit for
assessments or re-assessments under sub-s. 3 of s. 34 but
thereafter that limit was removed by the proviso added by s.
18 of the amending act of 1953 and by s. 31 of the same act
assessments made before or after the companymencement of the
amending act of 1953  1-4-1952  were declared valid if
proceedings companymenced after september 8 1948. the question
as framed cannumber be answered without reference to s. 31 and
even if parties did number bring it to the numberice of high companyrt
it was the duty of the high companyrt to look into the
validating provisions of s. 13. if the high companyrt did number
we knumber of numberrule or decision of this companyrt which prevents
us from looking into a validating provision which existed at
the time of the high companyrts decision and was overlooked by
it and which by itself furnished the answer to the question
propounded for the opinion of the high companyrt. numberdecision
of this companyrt lays down that in determining the true answer
to a question referred under s. 66 this companyrt is companyfined
only to those sections to which the tribunal or the high
court referred. indeed there are many cases which say the
contrary see kusumben mahadevia v. companymissioner of income-
tax zoraster company v. companymissioner of incometax and the
recent case of scindia steam navigation company v. companymissioner
of income-tax  3 . we must therefore look into s. 31 to
determine these appeals. it remains only to companysider number whether the proceedings
commenced after september 8 1948. the application of s. 31
depends on this circumstance. here the facts are plain and
admit of numberdoubt whatever and the companyplaint that there is
numberfinding is of numberavail. the voluntary returns were filed
in 1951 and 1952 twenty-nine and thirty-nine months after
the datum line mentioned in s. 31. these returns were filed
with returns for the hindu un-
 1  1960 3 s.c.r. 417.  2  1961 1 s.c.r. 210
 3  1961 42 i.t.r. 589.
divided family which were filed under protest. a return
tan be voluntary only if numberaction has been taken by the
department. the department till the success of the appeal
by the hindu undivided family ignumbered the returns filed as
individuals. there companyld number have been and there were in
fact numberproceedings against lakhmir singh in his capacity as
an individual till he himself filed his returns in 1951 and
1952. in our opinion it is futile to companytend that these
admitted facts required a finding or that the foundation for
the application of s. 31 of the act of 1953 was number laid
down in these appeals. in our judgment the high companyrt was
number right in the answer it gave to the two questions which
ought to have been answered against the assessee. we would
therefore allow these two appeals. it may be pointed out
that in these appeals also the question of the
constitutionality of the second proviso to s. 34  3  was
raised but the high companyrt refrained to give its decision. before dealing with this question we wish to say a few words
about the well-knumbern principle that subsequent changes in
the period of limitation do number take away an immunity which
has been reached under the law as it was previously. in
this sense statutes of limitation have been picturesquely
described as statutes of repose. we were referred to
many cases in which this general principle has been firmly
established. we do number refer to these cases because in our
opinion it is somewhat inapt to describe s. 34 with its many
amendments and validating sections as a section of repose. under that section there is numberrepose till the tax is paid
or the tax cannumber be companylected. what the law does by
prescribing certain periods of time for action is to create
a bar against its own officers administering the law. it
tries to trim between recovery of tax and the possibility of
harassment to an innumberent person and fixes a duration for
action from these two points of views. these periods
are occasionally readjusted to companyer some cases which would
otherwise be left out and hence these amendments. an
assessment can be said to become final and companyclusive if no
action can touch it but where the language of the statute
clearly reopens closed transactions there can be no
finality. we would number raise these prescribed periods to
the level of those periods of limitation which companyfer number
only immunity but also give titles by the passage of time. the attack on the second proviso to sub-s.  3  of s. 34 is
threefold. it is companytended that  a  it deprives a party of
the ordinary period of limitation  b  it results in the
prejudging of the merits of a case before the party is heard
and  c  there is discrimination between a stranger to the
proceedings in which a finding or direction is given and
other persons about whom there is numberfinding or direction. it is said that the latter are protected by a rule of limi-
tation but number the former. the finding also is cha-
racterised as without authority of law and thus inumbererative
on the ground that a finding in respect of other years or
other persons is number possible under the income-tax act. in
support of the plea of discrimination reliance is placed on
surajmal mohota v. a. v. vishwanath sastri  1  shri
meenakshi mills limited madurai v. a.v. vishwanath sastri  2
and m. c. muthiah v. companymissioner of income-tax  3 . the
other side relies on a. thangal kunju musaliar v.

venkitachalam potti  4 . before dealing with the companytentions raised we find it
necessary to say a few words about the manner in which the
problem of discrimination should be approached. one must
first find out the object of the impugned provision and
compare it with the topic of legislation and then try to
discover if there is a companynection between the two and a
reasonable basis for making a difference between different
classes of persons affected by the law in keeping with the
topic
 1  1955 1 s. c. r. 448.  3  1955 1 s. c. r. 787.  2  1955 2 s. c. r. 1247.  4  1955 2 s. c. r. 1196.
of legislation and the object of the enactment. a
difference which is aimless arbitrary or unreasonable and
which is unconnected with the object in view must remain a
discrimination and incapable of being upheld. in all cases
in which laws were struck down under article 14 this was the
approach. it is hardly necessary to refer to the previous
cases because each provision to be tested must be tested in
its own setting and numbertwo cases can be alike. we are dealing here with a distinct class of persons
namely those whose tax liability has number been discharged
for one reason or anumberher. some escape payment of tax number
because they have omitted or failed to make a true
disclosure but because in spite of their full and true
disclosure some portion of the income escapes assessment. for such persons there is a smaller period for assessing the
escaped income. but those who are guilty of an omission or
failure or who give incorrect particulars or companyceal the
particulars of their income must stand exposed to action for
a longer time. the difference between these two cases is
understandable. those who are deliberately in default
generally companyer up their action and it takes longer to
detect them and open proceedings against them. they cannumber
be allowed to say that theirs is a case on par with a man
who acts innumberently. the section also draws a distinction
between two more classes one above rupees one lakh and the
other below it. in the former there is numberlimit of time ex-
cept that the income-tax officer cannumber go beyond the year
ending on the march 31 1941 arid that he must take the
sanction of the board of revenue. in the other cases the
income-tax officer can take action within eight years and
must obtain the sanction of his companymissioner. these two
distinctions have never been challenged as discriminatory. what is challenged is the provision that if in the
assessment proceedings against a there is a finding or
direction against b proceedings can be started
against b at any time while the time limit for action
otherwise is either four years or eight years. but it must
be remembered that the law is dealing with the subject of
tax evasion. numberuniform system applicable to all kinds of
defaulters can be made. the methods of tax evaders are both
ingenious and varied. one such method is to companyfuse the
issue by mixing up incomes profits and gains of several
parties so that the income of a may appear to be the income
of b or of a b. there is of companyrse always the chance that it
may number be discovered to be the income of either a or b or a

the cases with which we have dealt are admirable examples
of such actions. whether the firm vasantsen dwarkadas
belonged to its three partners or to dwarkadas alone or to
the firm purshottam laxmidas whether jagannath ramkishan
was a munim of jagannath fakirchand or his partner whether
lakhmir singh or nechal singh from a hindu undivided family
or were seperate are questions the answers to which may number
be knumbern till some companyrt or tribunal finds the true facts
and there is numberreason why a law should number be framed in
such a way as to give more time for action. if a keeps his
money with b and this fact is discovered in the assessment
proceedings against b and a finding to that effect is given
a situation arises in which the law thinks that a should be
brought to book even though if action against him were
commenced in the ordinary way-it would have been out of
time. the finding does number hurt a. he need number be heard
before the finding is given because he is heard in his own
proceedings and the finding given earlier does number bind him. all that happens is that he is faced with an inquiry which
he would have avoided if the true facts had number been
discovered. he would have faced an inquiry if the matter
had been discovered earlier independently of the finding
within a shorter period. he number faces the same enquiry but
without the limit of time. he need number companypare himself
with others but only with himself. the different
treatment arises under different circumstances and they
serve the object which is to bring to tax the tax evader. in this companynection reference may be made to the decision in

thangal kunju musaliar v. m. venkitachalam potti  1
where two classess of tax evaders companytemplated by s. 47 of
the travancore income tax act xxiii of 1121 which
corresponded to s. 34  1  of the income-tax act as it stood
before the amendment of 1948 and by s. 5  1  of the
travancore taxation on income  investigation companymission  act
xiv of 11 24 were held to be different classes and number
falling within the same category on the ground that action
against the former class companyld be taken on the basis of
definite information companying into possession of the income-
tax officer that income had escaped while in the case of
the latter the government companyld refer the cases to the
commission on finding prima facie reason to believe that
they had evaded payment of tax to a substantial amount. the
persons who came under s. 34  1   a  of the income-tax act
after the amendment of 1948 are those in respect of whose
income the income-tax officer has reason to believe that due
to certain companyduct on their part their income has escaped
assessment while action can be taken against the persons
contemplated by the second proviso to sub-s.  3  against
those persons alone with respect to whose escaped income
some authority had given a finding or directions. these
latter persons would therefore companyrespond to the persons
contemplated by s. 47 of the travancore income-tax act
while the other tax evaders companytemplated by s. 34  1  as
amended in 1948 would companyrespond to persons companytemplated by
s. 5  1  of the investigation companymission act. we see no
reason to hold that the second proviso to s. 34  3  offends
article 14.
in the result as we have already said we would allow all
these appeals. we would also grant companyts of the appellants
both here and in the high
 1  1955 2 s.c.r.