BANARASI DEVI vs. INCOME-TAX OFFICER, CALCUTTA

CIVIL APPEAL No. 142/1963Supreme Court[1964] 7 S.C.R. 53931 March 1964Bench: 2 JudgesAuthor: K. SUBBA RAO, J.C. SHAH S.C.R. SUPREME COURT REPORTS10 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that Section 4 of the Income-tax (Amendment) Act, 1959, saves notices that were served beyond the prescribed time, even if they were issued within the time limit. The Court reasoned that Section 4 is a provision that enables the Income-tax Officer to re-assess income that has escaped assessment, effectively reviving barred claims, and thus should be construed strictly like a charging section. However, to give effect to the legislative intention of saving the validity of notices and assessments, the word "issued" in Section 4 must be given a wider meaning. This wider meaning encompasses the entire process of sending and serving the notice. The Court noted that the word "issued" in Section 34(1) itself had been interpreted by courts to mean "served". Giving a narrow meaning to "issued" would lead to anomalies, where a notice could be questioned if served out of time, but an assessment completed based on such a notice could not be questioned. Therefore, the Court accepted the wider interpretation of "issued" as including "served". Consequently, the notices, though served beyond the prescribed time, were held to be valid under Section 4 of the Amending Act. No other points were raised.

What were the facts?

For the assessment year 1947-48, the appellants filed returns. Assessments were completed in 1948, with no tax payable in one case and tax deposited in the other. On April 2, 1956, both appellants were served with notices dated March 19, 1956, under Section 34(1) of the Income-tax Act, 1922, for escaped assessment. The notices were issued within 8 years of the assessment year's end but served beyond 8 years from that date, making them out of time under the existing provisions. The appellants filed writ petitions to quash these notices, which were initially allowed by a single judge. The revenue appealed, and during the pendency of these appeals, Section 34 of the Act was amended by Section 2 of the Income-tax (Amendment) Act, 1959. The Division Bench, relying on the amendment, held the notices valid.

What were the issues?

1. Whether Section 4 of the Income-tax (Amendment) Act, 1959, saves notices that were issued within the prescribed time but served beyond the prescribed time under Section 34(1) of the Income-tax Act, 1922? (Question of law) Assessee's contention: Section 4 of the Amending Act only saves notices that were "issued" after the prescribed time, not those where the notice was "issued" within time but "served" out of time. They argued that "issued" should be interpreted narrowly as "sent". Revenue's contention: The expression "issued" in Section 4 of the Amending Act should be interpreted broadly to include the entire process of giving and serving the notice. They contended that "issued" means "served" in this context, or at least encompasses it, to give effect to the legislative intent.

Which sections of the Income-tax Act were involved?

Section 34(1),Section 4

AI-generated summary — verify with the full judgment below

7 S.C.R. SUPREME COURT REPORTS 539 BANARASI DEVI v. INCOME-TAX OFFICER, CALCUTTA [K. SUBBA RAO, J. C. SHAH AND S. M. Snau, JJ.J Income-tax Act, (11 of 1922), as amended by Income-tax (Amendment) Act (1 of 1959) s. 4-Fiscal enactments-Inter- pretation of-"lssued" in s. 4 of the Amending Act-Meaning of.

For the assessment year 1947-48 the appellant in the fust case field a return of her income and the assessment was com- pleted sometime in 1948 as a result whereof it was found that no tax was payable by her. On April 2,1956, the appellant was ,;erved with a notice dated March 19, 1956, under s. 34(1) of the Income-tax Act, 1922, on the ground of escaped assessment.

The date of the notice fell within' 8 years from the end of the relevant assessment year i.e. March 31, 1948, but it was served beyond 8 years from the date and therefore was clearly out of time under the provisions of the said section. In the second case, the appellant was assessed for the assessment year 1947-48 and the tax thereon was deposited on his behalf. On April 2, 1956, the appellant was also served with a similar notice as aforesaid. The appellants filed two petitions under Art. 22~ for .q

The order continues below.

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