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Judgment
Rajagopalan, J.—The assessee, the wife of A. Sheik Abdul Khadar, a ""non resident"" for the purposes of the Income tax Act, received from
her husband, who was at Bangkok, sums totaling Rs. 9,180 during the year of count ending with March 31, 1942. These amounts were remitted
by the husband to India by bank drafts obtained in the name of his agent Yahiya Maricair, who paid the amounts to the assessee. The assessee did
not submit any return of these items, which constituted ""income"" in her hands u/s 4(2) of the Act, in the assessment year 1942-43. The proceedings
u/s 34 of the Act were initiated with the issue of the prescribed notice on July 25, 1949. The Tribunal recorded that in her appeal against the
assessment, which had been confirmed by the Assistant Commissioner, the assessee contended that (1) ""the initiation of proceedings on July 25,
1949, u/s 34 as amended by Act XLVIII of 1948 is invalid as the Departments right to revise the assessment was governed by the old section 34
where the period of limitation prescribed was only four years in the case of a failure to file a return, and this period having expired on March 31,
1947, that is, four years from the end of the year of default, and the amended Act having come into force only from March 30, 1948, the right year
period provided therein could not be invoked, and (2) that the amount was not remitted directly by the non-resident husband to the wife but
through an intermediary and therefore such income could not be deemed to be an income of the wife under the provision of section 4(2) of the
Act."" Both the contentions were negatived by the Tribunal.
The questions referred to this Court u/s 66(1) of the Act were :
(1) Whether the proceedings u/s 34 of the Indian Income Tax Act initiated on July 25, 1949, to assess the amount of Rs. 9,180 which escaped
assessment during the year 1942-43 by failure to submit voluntary return are valid in law ?
(2) Whether on the facts and circumstances of the case, the sum of Rs. 9,180 received by the assessee from her husband through Mr. Yahiya
Maricair is assessable to Income Tax u/s 4(2) of the Act ?
Section 34 was amended by Act XLVIII of 1948, and the amended section 34 came into force on March 30, 1948. It was common ground,
that the period of limitation would have been eight years for cases of failure to submit any return of income in the relevant assessment year had the
amended section 34 applied. The contention of the assessee was that the period was only four years u/s 34 as it stood before it was amended in
1948, and that that period of limitation expired on March 31, 1947. The further contention was that between March 31, 1947, and March 30,
1948, no action could have been taken against her u/s 34 as it stood during that period, and that the extended period of limitation could not
therefore be applied to her case. The Tribunal accepted the contention of the assessee, that the period of limitation was only four years u/s 34 as it
stood before it was amended in 1948. That finding, in our opinion, was correct. We must reject the plea of the learned counsel for the
Commissioner, that even under the old section 34 the period of limitation was eight years for failure on the part of the assessee to submit a return.
The failure to submit a return was neither concealment of particulars of income nor furnishing deliberately inaccurate particulars thereof within the
meaning of the old unamended section 34, to which two classes alone the eight year rule applied. The assessees case fell into the other class for
which the old section 34 provided, ""any other case,"" to which the four year rule applied.
Even at the outset we must make it clear that we are concerned only with a case of liability to assessment u/s 34 of the Act of an assessee who
had failed to submit the return in the relevant assessment year. The effect of section 1(2) of the Amending Act XLVIII of 1948 was that the
amended section 34 was deemed to have been part of the Act on March 30, 1948. The contention of the learned counsel for the assessee was,
that, since one of the main amendments of section 34 altered the rule of limitation from four years to eight years, the amended rule of limitation
would not apply to a case. Where even before March 30, 1948, the prescribed period of limitation of four years had run out by efflux of time. Mr.
Rama Rao Sahib, the learned counsel for the Department, urged that the language of the amended section 34 was clear enough, and that whatever
might have been the period of limitation under the unamended section 34, it was the new period of limitation under the amended section 34 that
would apply under the express language of the amended section 34. Both the learned counsel relied on the observations of Chakravrtti, C.J., in
Income Tax Officer v. Calcutta Discount Co. Ltd.
In Income Tax Officer v. Calcutta Discount Co. Ltd., the assessee was assessed to Income Tax for the assessment years 1942-43, 1943-44
and 1944-45, u/s 23(3) of the Act, on returns furnished by the assessee. The amended section 34 came into force on March 30, 1948. On March
28, 1951, notices were issued to the assessee u/s 34 of the Act on the ground that the Income Tax Officer had reason to believe that the income
for each of the years had been under assessed. One of the contentions of the assessee was that under the language of the amended section 34 no
proceedings at all could be taken for any of the assessment years prior to March 30, 1948. That contention was negatived by Chakravartti, C.J.,
and Sarkar, J. At page 482 the learned Chief Justice observed :
The plain effect of the substitution of the new section 34 with effect from the March 30, 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 coming within clause (a) of sub-section (1) are concerned, all assessment years ending within eight years from the March 30, 1948, and from
subsequent dates, are within its purview and it will apply to them, Provided the notice contemplated is given within such eight years. What is not
within the purview of the section is an assessment year which ended before eight years from the March 30, 1948. All the three assessment years in
question in the present case ended within eight years from the March 30, 1948.......
It should however be noticed that even under the do section 34, the eight years rule of limitation would have applied to the assessee, the
Calcutta Discount Co. Ltd., because it was a case of alleged concealment of income or deliberately furnishing inaccurate particulars of the income.
That aspect of the case was stressed more than once in his judgment by Chakravartti, C.J. At page 490 the learned Chief Justice pointed out :
Under the old section as well, the Income Tax Officer could proceed on his own view of a possibility that income might have escaped assessment
or might have been under-assessed, although it was called discovery; and since the time limits for so proceeding were the same, the new section
affects no rights previously unaffected.
It is against this background that we have to consider the scope of the observations of the learned Chief Justice on which the learned counsel for
the assessee relied. At pages 488-89 the learned Chief Justice observed :
It seems to me, however, that to dispose of the question to section 34 affecting substantive rights merely by saying that the section is concerned
with procedure, is to over simplify the problem. A rule of procedure can affect substantive rights as, for example, a rule of limitation which takes
away a right of suit which was still available under the previous law or enlarges the time for bringing a suit which had become barred : Gopeshwar
Pal v. Jiban Chandra. The subject-matter of section 34 being essentially a rule of limitation, the matter requires a little more careful scrutiny.
The learned Chief Justice continued :
But since section 34 had a predecessor which prescribed the same limits of time for initiation of proceedings, more or less in the same
circumstances, it would prima facie appear that by the new section no pre-existing rights are adversely affected.
As we have pointed out earlier, in the case of that assessee, the Calcutta Discount Co. Ltd., the amended section 34 did not effect any change
in the rule of limitation. That was obviously what the learned Chief Justice stressed again in the passage we have just quoted.
At page 490 the learned Chief Justice observed :
Nor is the enlargement of time for the completion of an assessment a violation of any right, for, if a man is liable to be proceeded against, he cannot
say that he has right to be proceeded against within a certain time or not at all.... Provided that the right or liability is not itself affected, the time for
asserting the right or enforcing the liability may always be enlarged or abridged.
The exception to that rule was what the learned Chief Justice pointed out in the succeeding passage :
It is true that if time is enlarged by a new enactment, but at the date when the enactment comes into force, no proceeding can any longer be
commenced in a particular case under the previous law, the new enactment will not apply to such a case (Khondkar Mohammad Saleh v. Chandra
Kumar Mukherji).
With reference to Calcutta Discount Co. Ltd., the learned Chief Justice pointed out :
But no such situation has been caused here. Time has not been enlarged at all. On the day the new section came into force and on any day
thereafter, proceedings in respect of the same assessment years could be initiated under the old section, if it had remained in operation, as under
the new section.
It was the same principle the learned Chief Justice reiterated when he observed at page 492 :
The enlargement of the period within which the proceedings must be concluded does not also affect any substantive right for the same reasons as
apply to enlargement or abridgment of the period for the initiation of proceedings, so long as the result is not to extinguish an existing right or revive
a dead one.
No doubt the observations of the learned Chief Justice on which the learned counsel for the assessee relied. ""It is true that if time is enlarged by
a new enactment, but at the date when the enactment comes into force, no proceeding can any longer be commenced in a particular case under the
previous law, the new enactment will not apply to such a case"" constituted obiter. But it was a well settled principle of construction of statutory
amendments altering periods of limitation that the learned Chief Justice referred to; and it is that well settled principle of law we are called upon to
apply to the case of the assessee in these proceedings. It was that same principle that was reiterated by a Division Bench of this Court in
Ramanathan Chettiar v. Kandappa Goundan :
It is well settled that the law of limitation being procedural law, its provisions operate retrospectively in the sense that they apply to causes of action
which arose before their enactment. But it is equally well established that if a right to sue has become barred by the provisions of the Act then in
force on the date of coming into force of a later enactment, then such a barred right is not revived by the application of the new enactment.
It is on this basis that we have to decide the question, whether the amended section 34, either by express terms or by necessary intendment,
provided that even in cases where the period of limitation in force provided that, even in cases where the period of limitation in force before March
30, 1948, had expired, the effect of the amended section 34 is to confer jurisdiction on the assessing authority to reassess the income of a year
which could not have been reassessed at any point of time anterior to March 30, 1948. It should be remembered that the amended section 34 did
not prescribe a period of limitation for the first time. It amended the existing law prescribing a period of limitation. Under such circumstances, what
is the effect of the amendment is the question, and that question has to be decided on the basis of the well settled principle of law, that if the
exercise of a right had become barred by the provisions of the Act then in force, such a right is not revived by the application of a new enactment.
In the present case, the right to reopen the assessment in the case of the assessee under the old section 34 expired on March 31, 1947. Between
March 31, 1947, and March 30, 1947, when the amended section 34 came into force, the Department could not have taken any valid
proceedings to assess or reassess the assessee on the income she was deemed to have received during the year of account ending with March 31,
1942, with the corresponding assessment year ending March 31, 1943.
We are unable to accept the contention of Mr. Rama Rao Sahib, that the learned Chief Justice held in the Calcutta Discount Co. Ltd., case
that the amended section 34 should be construed and applied, completely ignor in any amendment in the rule of limitation that would apply to a
given case. Once again we should point out this factor the learned Chief Justice himself was fully alive to that in the case of Calcutta Discount Co.
Ltd., there was no change in the rule of limitation; it was eight years under the old section and continued to be eight years under the amended
section.
In our opinion, the contention of the learned counsel for the assessee is well founded, that the new rule of limitation of eight years prescribed by
the amended section 34 would not apply to the case of the assessee before us, whose was an instance of a failure to submit a return, when the
period of limitation of four years had run out long before March 30, 1947, when the amended section 34 came into force as part of the Income
Tax Act with effect from that date, March 30, 1948.
The learned counsel for the Department next referred to section 31 of Act XXV of 1953 in support of his contention that the notice issued on
July 25, 1949, was valid. The learned counsel himself had to realise that section 31 of Act XXV of 1953 did not enlarge the scope of the amended
section 34 nor did it purport to amend it. The validity of the notice dated July 25, 1949, will still have to be decided with reference to the
provisions of the amended section 34. Section 31 of Act XXV of 1954 does not therefore affect the question at issue, whether the extended
period of limitation applicable to the assessee had expired before the amended section 34 came into force on March 30, 1948.
Our answer to question No. 1 is in the negative and in favour of the assessee.
In view of our answer to question No. 1, it may not be necessary to record an answer to the second of the question referred to this Court.
Should, however, an answer be necessary, we would confirm the view taken by the Tribunal, that though the bank drafts had been taken in the
name of an agent, since the monies were admittedly received by the assessee from her husband through the agent, Yahiya Maricair, they
constituted ""remittances"" from the husband within the meaning of section 4(2) of the Income Tax Act.
Since the assessee has succeeded on the first question she will be entitled to the costs of this reference. Counsels fee Rs. 250.
Reference answered accordingly.