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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 972 of 1967. Appeal from the judgment and order. dated December 14, 15, 1964 of the Gujarat High Court in Special Civil Application No.. 54 of 1964.

D. Narsaraju, S.K. Aiyar, S.P. Nayar and, B.D. Sharma, for the appellants.

S.T. Desai, M.C. Bhandare and K. Rajendra Chaudhuri, for the respondent.

The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought by certificate against the judgment of the Gujarat High Court dated 14th/15th December 1964 in Special Civil Application No. 54 of 1964 whereby a writ of mandamus was issued to. quash the notices issued under sections 147, 148 and 142(1) of the Income Tax Act, 1961 against the respondent. The respondent was assessed by the, Income Tax Officer, Ward E, Circle 11, Ahmedabad for the assessment year 1947-48 by an assessment order dated 31-1-1952. The Income Tax Officer thereafter received 'information that a certain profit made by the assessee in the name of Natwarlal Mardial Pandit who was a benamidar of the respondent had escaped assessment by reason of the respondent not having disclosed it at the time of the original assessment. The Income Tax Officer, therefore, after obtaining the approval of the Commissioner of Income Tax issued a notice dated 27th March, 1956 under s. 34(1)(a) of the Income Tax Act, 1922 (hereinafter referred to as the old Act). The notice could not be served personally, and, therefore, was served by affixing on a conspicuous part of the respondents. The respondent objected to the service of the notice and did not file a return stating that there had been no valid service. When the Income Tax Officer threatened to proceed ex parte, a return was filed under protest on 16-1-19'57 and in that return the respondent showed the same amount of income which was determined in the original assessment. Despite the objection. of the respondent that there was no proper service of notice under s. 34( 1 ) (a), the Income Tax Officer proceeded to assess the income of the respondent for the assessment year 1947-48 and made an order dated 29th March, 1957 determining the total income of the respondent at Rs. 89,000 by including the profit alleged to have been earned by Natwarlal Manilal Pandit. The respondent preferred an appeal to the Appellate Assistant Commissioner who allowed the appeal and set aside the order of assessment on the ground that there was no valid service of the notice. The' decision of the Appellate Assistant Commissioner was given on 5-1-1963 by which time the Income Tax Act, 1922 had been repealed and the Income Tax Act, 1961 (hereinafter called the New Act) had come into force with effect from 1st April, 1962. The time for taking action for assessment or reassessment in case of escaped income exceeding Rs. 50,000 but less than Rs. ,1,00,000/- was enlarged from 8 years to 16 years under the new Act. On 4-1-1963 the Income Tax Officer, Circle IV, Ward G, Ahmedabad issued a notice calling upon the respondent to show cause why proceedings should not be taken under s. 147(a) of the new Act for bringing to tax the escaped profit of the respondent. The respondent protested against the new notice on the ground that action under the old Act had become time barred and the new Act had no application to his case. Subsequently, a notice under s. 148 of the new Act was issued on 13-11-1963 and this notice was followed by another notice dated 9-1-1964 issued under s. 142(1). The respondent, therefore, preferred Special Civil Application No. 54 of 1964 in the Gujarat High Court praying for a writ of certiorari to quash the notices dated 13-11- 1963 and 9-1-1964 by the first appellant. The High Court took the view that on a true construction of s. 297(2)(d)(ii) of the new Act the Income Tax Officer could not issue a notice under s. 148 in order to reopen the assessment in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. The High Court observed that the right of the Income Tax Officer to reopen the assessment of the resportdent in the present case was admittedly barred under s. 34(1 )(a) of the old Act at the commencement of the new Act and it was, therefore, not competent to the Income Tax Officer to issue a notice under s. 148 of the new Act in order to reopen the assessment of the' respondent and to reassess the income of the respondent relying on the provisions enacted under s. 297 (2)(d)(ii) of the new Act. The High Court accordingly allowed the Special Civil Application preferred by the respondent and set aside the notices dated 13-11-1963 and 9-1-1964.

On behalf of the appellants Mr. Narasaraju stressed the argument that the High Court was in error in holding that the provisions of the new Act of 1961 were not applicable in cases where the time limit fixed in the old Act had expired before the coming into force of the new Act. It was contended that section 297(2) (d)(ii) of the new Act was wide in its sweep and it took in all assessment years after the year ending on 31st March, 1940 irrespective of the question whether the right to reopen the assessment in respect of any such assessment years, was barred or not under the old Act at the date when the new Act came into force. According to Mr. Narasaraju the legislative intention was that once the new Act came into force, the question whether the assessment in respect of any assessment year after the year ending on 31st March, 1940 was liable to be reopened or not should be decided with reference to the provisions of the new Act. It was argued that the new Act authorised such assessment to be reopened whatever might be the position in regard to the right to reopen such assessment under the old Act. In our opinion, the argument put forward by Mr. Narasaraju is not warranted. It is admired in this case that the right of the Income Tax Officer to reopen the assessment for the year 1947-48 was barred under the old Act before the new Act came into force. In our opinion, it not permissible to construe section 297(2)(d)(ii) of the new Act as reviving the right of the Income Tax Officer to reopen the assessment which was already barred under the old Act. The reason is that such a construction of section 297(2)(d)(ii) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well-known rule of interpretation that unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time. On behalf of the appellants reference was made to the opening phrase "where in respect of any assessment year after the year ending on the 31st day of March 1940" occurring in section 297(2)(d)(ii) of the new Act, but these general words cannot take in their sweep assessment years subsequent to the year ending on 31st March, 1940 without regard to the question whether the right to reopen the assessment in respect of any assessment year was or was not barred under the repealed Act. We consider that the language of the new section must be read as applicable only to those cases where the right of the Income Tax Officer to reopen the assessment was not barred under the repealed section. In our view, the new statute does not disclose in express terms or by necessary implication that there was a revival of the right of the Income Tax Officer to reopen an assessment which was already barred under the old Act. This view is borne out by the decision of this Court in S.S. Gadgil v. Lal & Company(1). In that case, a notice was issued against the assessee as an agent of a non-resident on 27th March, 1957 and that notice related to the assessment year 1954-55. Under clause (iii) of the proviso to section 34( 1 ) as it stood prior to its amendment by the Finance Act, 1956, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident after the expiry of one year from the end of the year of assessment. The right to commence a proceeding for assessment against the assessee as agent of a non-resident for the assessment year 1954-55 therefore ended on 31st March, 1956 under the new Act before its amendment in 1956. This provision was, however, amended by the Finance Act, 1956 and under the amended provision the period of limitation was extended to two years from the end of the assessment year. The amendment was made on 8th September, 1958 but was given effect from 1st April, 1956. Since the time within which notice could be issued against a person deemed to be an agent of a non-resident was extended to two years from the end of the assessment year, it was contended on behalf of the Income Tax Officer that the notice issued by him was within the terms of the amended provision and was; therefore, a valid notice. Now the notice issued on 27th March, 1957 was clearly within a period of two years from the end of the assessment year 1954-55 and if the amended provision, applied, the! notice would be a valid notice. It was, however, held by this Court that notice was (1) (1964) 53 I.T.R. 231.

not a valid notice inasmuch as the right of the Income Tax Officer to reopen the assessment of the assessee under the unmended provision became barred on 31st March, 1956 and the amended provision did not operate against him so as to authorise the Income Tax Officer to commence proceedings for reopening the assessment of the assessee in a case where before the amended provision came into force, the proceedings had become barred under the unamended provision. At page 240 of the Report, Shah, J. speaking for the Court observed as follows :-

In our opinion, the principle of this decision applies in the present Case and it must be held that on a proper construction of section 297(2)(d)(ii) of the new Act, the Income Tax Officer cannot issue a notice under section 148 in order to reopen the assessment of an assessee ,in a ease where the right to reopen the assessment was barred under the old Act at the. date when the new Act came into force. It follows therefore that the notices dated 13-11-1963 and 9-1-1964 issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court by the grant of a writ.