Padhye, J.
1. This petition concerns the tax liability of the petitioner during the assessment years 1951-52 to 1957-58, that is, Diwali ending 1950 to Diwali ending 1956. During the said period, the petitioner was being assessed as a joint Hindu family firm. With respect to the assessment years 1951-52, 1952-53 and 1953-54 the Income-tax Officer made the assessment orders on 30th March, 1956, 9th March, 1957, and 7th March, 1958, respectively. These orders were challenged by the assessee in appeal before the Appellate Assistant Commissioner of Income-tax and were disposed of by him by orders dated October 20, 1958, October 23, 1958, and October 31, 1958, respectively. Further appeals were taken by the petitioner before the Income-tax Appellate Tribunal, which decided all these three appeals by order dated January 22, 1960. All the three appeals were consolidated as they related to the same assessee and involved common contentions. Before the Tribunal, the department had also filed appeals relating to the assessment years 1952-53 and 1953-54 and they were also disposed of by the same order.
2. One Ramnath, son of Ramkrishna Agarwal of Kamptee, was doing business of manufacture and sale of bides. He died on 23rd of February, 1948. On 10th of February, 1948, he had executed a will disposing of the property and the business. In that will he made certain arrangement for his wife and also for his son-in-law and other relations of his. According to this arrangement made in the will, an amount of Rs. 6,971 each was paid to Chandabai and Madan Mohan Jaipuria, Rs. 3,485 to Pushkarraj Dharmashala, Rs. 3,900 to Chhugnibai during the year 1951-52. These sums were disallowed by the Income-tax Officer as being merely an appropriation of income after it had accrued to the family. This was upheld by the Appellate Assistant Commissioner in appeal. The Appellate Assistant Commissioner seems to have taken the view that Ramnath was assessed in his life time in the status of a Hindu undivided family and, therefore, he had no right to execute the will. The Income-tax Officer further applied the proviso to section 13 of the Income-tax Act, 1961. In the view he took, the manner of accounting was such that the income, profits and gains could not properly be deduced therefrom and the Income-tax Officer, accordingly, made an ad hoc addition to the income of the assessee. This decision of the Income-tax Officer was also confirmed. There were other objections taken before the Income-tax Officer, but we are concerned presently with these two points only, as before the Appellate Tribunal these two grounds were put. It was argued before the Appellate Tribunal that the status of Ramnath was not fully appreciated by the department. It was urged that Ramnath was an individual who could bequeath his property by the will. On the other hand, it was contended on behalf of the department that the status of Ramnath must be taken to be that of a Hindu undivided family as he was assessed as such during his lifetime and acquiesced in such assessment. As regards the applicability of the proviso to section 13, the Appellate Tribunal seems to have taken the view that the production register was such as could be reasonably maintained by the producer for the control of his production and that it might be that there were defects in this register, but it was for the Income-tax Officer to find out and establish such defects so that adjustments could be made therefor. The Tribunal took the view that it was a case where the cumulative effect of the facts and the nature of account were not properly appreciated by the Income-tax Officer. In dealing with the nature of the account books and the applicability of the proviso to section 13, the Tribunal stated as under :
'From the above summary of the case it would be seen that the cumulative effect of the facts and the nature of accounts were not properly appreciated by the Income-tax Officer. Where the quantitative details are maintained there is a very good check on the account books which should not be lightly brushed aside. If there is any inherent defect in the maintenance of such day-to-day stock books by virtue of which they are proved to be worthless, only then should they be rejected altogether. If, on the other hand, quantitative tally is possible out of them, then the books should, by and large, be accepted; if there are defects in these quantitative day-to-day stock books or in the cash book, then such defects should be catalogued and an effort made to value (in terms of money) the effect of such defects which can then be added back to the income. In other words, in such a case the proviso to section 13 should not be applied by way of an application of a flat rate over the turnover but reasonable add-backs made in respect of specific defects noticed.'
3. In this view, the Appellate Tribunal set aside the assessments and the Income-tax Officer was directed to make specific additions to the book profits in terms of the defects noticed after giving the assessee a proper opportunity to state and prove his case. Since the assessment orders were set aside by the Appellate Tribunal, the Tribunal also directed the Income-tax Officer to give an opportunity to the assessee to prove his case that Ramnath was an individual who was competent to execute the will which he did and subject to the verification of such claim it was directed that the payment (to the four persons aforementioned) be allowed. The operative part of the order of the Tribunal reads a under :
'16. In the result, we set aside the three assessments for all the years and direct that -
(a) the assessee should be given an opportunity of proving his case that Ramnath was an individual who had a right to dispose of his self-acquired properties in the manner he did; if it is found that he was an individual then the impugned payments will be allowed as a deduction, and
(b) the correct profit should be worked out by making specific add backs for the specific defects noticed.'
4. The appeals with respect to the assessment years 1954-55 and 1955-56 were decided by the Appellate Tribunal by its order dated November 13, 1961. In those appeals also similar questions were raised and in view of the decision already given by the Tribunal in the earlier cases on January 22, 1960, and for the reasons stated therein, the Tribunal set aside both the assessments for proper reassessments after an investigation on the following points :
(1) As there are no defects established in the system of accounting, the proviso to section 13 cannot be applied to either of the two years; only individual defects, if any, in each year require to be evaluated and added on a proper basis.
(2) The extent to which it could be claimed for Ramnath that his correct status for assessment during his lifetime was in fact individual and not Hindu undivided family as described in all the assessment orders on him.
5. The Income-tax Officer passed similar orders for the assessment years 1956-57 and 1957-58. For these two years there were two separate appeals before the Appellate Assistant Commissioner and by two separate orders these appeals were decided by the Appellate Assistant Commissioner on July 31, 1964. Similar questions were raised in these appeals as were raised before the Appellate Tribunal and, following the decision of the Income-tax Appellate Tribunal, the Appellate Assistant Commissioner of Income-tax also set aside the assessment for these two years, giving similar opportunity to the assessee.
6. On 6th of April, 1967, the Income-tax Officer, Central Circle III, Nagpur, issued notices dated 6th April, 1967, for each of these seven years to the assessee under section 23(2) of the Indian Income-tax Act, 1922, or section 143(2) of the Income-tax Act, 1961. All the notices are similar in substance excepting the year of assessment and the dates on which the assessee was required to attend the Income-tax Office. One such notice may be reproduced below. It runs :
'Notice
under Section 23(2) of the Indian Income-tax Act, 1922
-------------------------------------------------------
under Section 143(2) of the Income-tax Act, 1961.
Dated : 6-4-1967.
No. R. 201.
To
Ramkrishna Ramnath (H. U. F.),
Kamptee.
Dear Sir
Dear Madam,
There are certain points in connection with the return of income submitted by you for the assessment year 1951-52 in regard to which I should like to have some further information. You are hereby required to attend my office at Nagpur on April 20, 1967, at 11.00 a.m. either in person or by a representative duly authorized in writing in this behalf, or to produce or cause to be there produced at the said time any documents, accounts, and other evidence on which you may rely in support of the return filed by you.
(Sd.) G. Lakshmi Narasimhan,
Income-tax Officer,
Central Circle III,
Nagpur.'
7. The petitioner has challenged the seven notices issued to the petitioner by the Income-tax Officer and has asked for a writ of certiorari to quash the notices dated 6th April, 1967, issued under section 23(2) of the Indian Income-tax Act, 1922, by the Income-tax Officer and has further asked for a writ of mandamus restraining the said officer from proceeding in pursuance of the said notices.
8. As regards the Appellate Assistant Commissioner's order Dated July 31, 1964, for the assessment years 1956-57 and 1957-58, a further complaint has been made by the petitioner that the only question involved in the appeals before him was regarding the validity of the will of late Seth Ramnath. The Appellate Assistant Commissioner set aside the assessment as a whole not only giving an opportunity to the petitioner to prove the validity of the said will, but also on other questions for making fresh assessment according to law. While we are here, I might refer to the last paragraph of the Appellate Assistant Commissioner's order dated July 31, 1964, in Appeal No. 3-Spl. Inv. -Cir. 'D'/61-62, which relates to the assessment year 1956-57 and is as follows :
'3. Since the assessments are set aside on the above-mentioned contention, it is unnecessary for me to deal with the other contentions in this order. However, Shri Salve in the course of his submissions in respect of the genuineness of the hundi loans invited my attention to the letter of the assessee dated March 28, 1961, inviting the Income-tax Officer's attention to certain facts regarding the manner in which the hundi loans were arranged and in particular to the fact that it was Mangumal Atmasingh, a well-known party of Raipur having office in Bombay, who had arranged the hundi loans in question. The Income-tax Officer will in the course of reassessment proceedings examine the point made out in this letter and give the appellant a reasonable opportunity for producing evidence that he wants to produce in this regard.'
9. It will thus appear that with regard to these transactions of hundi loans it was the petitioner himself through his counsel who has asked for an opportunity to produce the evidence in that regard.
10. The petitioner raised three contentions before us for challenging the impugned notices. In the first place, it was contended that the assessment had to be made within a period of four years from the end of the assessment year and if for any reason that period of four years elapsed, then there could be no assessment under sub-section (3) of section 34. It was next contended that by the second proviso to sub-section (3) of section 34, the bar of four years provided in sub-section (3) of section 34 is sought to be removed and a fresh assessment could be made only under that proviso beyond the period of 4 years prescribed in sub-section (3), but the said second proviso to sub-section (3) of section 34 is ultra vires article 14 of the Constitution, and, hence, could not be availed of by the department and if the said proviso is not available, then no assessment could be made against the petitioner in pursuance of the notices dated April 6, 1967, which are much beyond the period of 4 years from the end of all the assessment years in question. The third ground of attack was that even if the second proviso is available to the department, then the directions or findings which have been given by the Income-tax Appellate Tribunal or the Appellate Assistant Commissioner are not such which enable or attract the application of the second proviso to sub-section (3) of section 34 as no such directions or findings are existing in this case. This last ground was subsequently given up at the hearing.
11. Mr. Natu, the learned counsel for the department, raised some preliminary objections to the petition. He urged that the orders of the Appellate Tribunal and the Appellate Assistant Commissioner were not challenged by the petitioner in this petition, but only the notices issued have been challenged and since the orders of the Tribunal and the Appellate Assistant Commissioner have become final, the petitioner is not entitled to any relief of quashing of the notices, inasmuch as the Income-tax Officer to whom the cases are remanded by the Appellate Tribunal and the Appellate assistant Commissioner is bound to obey the orders of his superiors. It is also urged that the orders of the Appellate Assistant Commissioner and the Tribunal should have been further challenged by the petitioner by way of appeal and reference and under articles 226 and 227 of the Constitution within reasonable time and the petitioner not having done so, he is new not entitled to challenge the notices which have been issued in pursuance of the orders of the Tribunal and the Appellate Assistant Commissioner. In reply, it is urged on behalf of the petitioner that it was only the notices issued by the Income-tax Officer which gave him a cause to challenge the same and if the notices were quashed, the assessment also could not be made as directed by the Tribunal or the Appellate Assistant Commissioner and they would become ineffective automatically as soon as the notices are quashed, and, hence, the relief of quashing the orders of the Appellate Tribunal and the Appellate Assistant Commissioner being only incidental to quashing of the notices issued, it was not necessary to challenge the orders of the Tribunal or the Appellate Assistant Commissioner. It is further urged that the petitioner is challenging the vires or the constitutionality of the second proviso to sub-section (3) of section 34, which goes to the root of the case and if the said proviso is held to be ultra vires, then the authority of the Income-tax Officer to issue a notice after the lapse of the period vanishes and the notices and further proceedings in pursuance thereof would be illegal and without jurisdiction. There is much substance in the contentions raised by Mr. Bobde for the petitioner on the preliminary objections taken and we have, therefore, heard the case fully on all the questions that have been raised before us.
12. In order to appreciate the contentions raised on behalf of either party, it would be necessary to refer to some of the relevant provisions of the Income-tax Act, 1922, as amended from time to time. Section 22(1) requires the Income-tax Officer to give a public notice on or before the 1st day of May in each year, requiring every person whose total income during the previous year exceeded the maximum amount, which is not chargeable to income-tax, to furnish return within the prescribed period. If a person does not file any return, then under sub-section (2) the Income-tax Officer can issue a notice to a person who, in his opinion, is liable to income-tax, to furnish the return of his income within the time specified in the notice. Section 23(1) gives power to the Income-tax Officer to make the assessment, if he is satisfied, without requiring the presence of the assessee or the production by him of any evidence, that the return made by the assessee under section 22 is correct and complete. Under sub-section (2) if the Income-tax Officer is not satisfied about the correctness or completeness of the return, then he can call upon the assessee to attend his office or to produce or cause to be produced any evidence in support of his return. Under sub-section (3), the Income-tax Officer on hearing such evidence, as may be produced before him, has to assess the total income of the assessee and determine the sum payable by him on the basis of such assessment. If the assessee fails to make a return in spite of the notice given to him, then the Income-tax Officer is authorized to make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. Section 23 as such does not prescribe a period within which an assessment could be made by the Income-tax Officer, but it appears that it is controlled by sub-section (3) of section 34 which provides that :
'No order of assessment or reassessment, other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1A) of this section 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.'
13. Section 30 provides for appeals against the assessment made by the Income-tax Officer to the Appellate Assistant Commissioner. Amongst others an assessee can object to the amount of the income assessed under section 23 or the amount of tax determined under section 23 or to make a fresh assessment under section 23. Under section 31(3)(b), the appellate Assistant commissioner is empowered to set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further enquiry as the Income-tax Officer thinks fit or he might direct and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment. Section 33 Provides for appeals against the order of the Appellate Assistant Commissioner to the Appellate Tribunal. Under this section the department also is entitled to prefer an appeal against the order of the appellate Assistant Commissioner. Under sub-section (4) of section 33, the Appellate Tribunal is authorized to pass such orders on the appeal as it thinks fit. Section 33A is the power of the Commissioner to revise the orders of the authorities subordinate to him, which are the Income-tax Officer and the Appellate Assistant Commissioner and after making such enquiry, he is empowered, subject to the provisions of this Act, to pass such order thereon, not being an order prejudicial to the assessee as he thinks fit. There are, however, certain restrictions on his powers to revise the order given in the proviso to that section. Section 33B empowers the Commissioner to call for and examine the record of any proceeding if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue and after giving the assessee an opportunity of being heard to pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment and directing a fresh assessment. There is, however, a limit to his power which is specified in clause (b) to sub-section (2), namely, he cannot pass any order after the export of two years from the date of the order sought to be revised. The provisions of sub-section (3) to section 34 have already been reproduced by us above and the provisos to the said sub-section are reproduced below :
'Provided that where a notice under clause (b) of sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if at the time of the assessment or reassessment the four years aforesaid have already elapsed : Provided further that nothing contained 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 reassessment made under section 27 or to an assessment or reassessment 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 31, section 33, section 33A, section 33B, section 66 or section 66A.'
14. It is well established that where a return under section 22 of the Income-tax Act is made there is no escaped assessment during the period prescribed for making the assessment by section 34(3) of the Income-tax Act. This is because, though no period for making the assessment is prescribed by section 23, it is controlled by section 34(3) which puts a limit of four years from the end of the year in which the income was assessable. However, once the period of four years elapses without making any assessment even though the return may be filed, the assessee could be reached only be issuing a notice under section 34(1) of the Act. In such a case, the case has to be brought within the four corners of section 34(1) of the Act. It has been contended on the strength of this provision under section 34(3) read with section 23 that the Appellate Assistant Commissioner in appeal as well as the Income-tax Appellate Tribunal in second appeal must complete the assessment or must pass the final orders of assessment within a period of four years from the end of that assessment year. The further submission is that since the order of the Tribunal has been passed more than 8 years from the end of the assessment years in question, no notice could be issued to the petitioner under either of the clauses of the clauses of section 34(1) as the period mentioned in those clauses has already expired.
15. The first part of the contention that the final assessment order by the appellate assistant commissioner or the Appellate Tribunal must also he passed within a period of four years from the end of the assessment year cannot be accepted. When the Income-tax Officer makes an assessment, he makes it under section 23 of the Act and the limit on his powers to make the assessment within a particular period has been put by section 34(3). This limit is for making of the assessment by the Income-tax Officer under section 23 and from this bar of limitation is excluded an order of assessment under section 23 to which clause (c) of sub-section (1) of 28 applies. This would show that the bar under section 34(3) applies to the assessment to be made by the Income-tax Officer under section 23 as it is the Income-tax Officer who makes the assessment. When the assessment made by the Income-tax Officer is challenged by the assessee, the Appellate Assistant Commissioner does not make an assessment, but only finds out as to whether the assessment made by the Income-tax Officer is correct and lead and if he finds that it is either not correct or legal in respect of the whole or any part of it, then he either sets aside the assessment or modifies it giving relief to the assessee. Similarly, when an appeal is taken to the Appellate Tribunal by the assessee he only finds out as to whether that part of the order of the Appellate Assistant Commissioner which is against the assessee is a correct order and passes suitable orders in respect thereof either maintaining the order of the Appellate Assistant Commissioner or gives the further relief to the assessee. Such orders by the Appellate Assistant Commissioner or the Tribunal could not, therefore, be said to be orders of assessment or reassessment so as to fall within the meaning of section 34(3) of the Act. It the contention that is put forward on behalf of the assessee were to be accepted, then the provisions of appeal to the Appellate Assistant Commissioner or the Tribunal and further preparing of records and the decision by High Court on reference would become nugatory or illusory. Section 30 give a right of appeal to an assessee objecting to the amount of income assessed under section 23 and the other provisions of the Act which prescribe a period of limitation of 30 days for preferring an appeal. After the appeal is presented, there is bound to be some time to elapse before the appeal can be decided by the Appellate Assistant Commissioner. Similar is the case where a further appeal is taken to the Tribunal. Cases can be contemplated where the orders of assessments are made by the Income-tax Officer almost towards the end of the period of 4 years prescribed by section 34(3) or even on the last day of limitation. In the last case, which is the extreme case, the presentation of the appeal itself could not be within a period of 4 years from the end of the assessment year and that appeal will be in fructus and only an empty formality if no relief could be given by the Appellate Assistant Commissioner to the assessee on such appeal. There may be cases where the Income-tax Officer passes the assessment order well within a period of 4 years and the appeal is also presented within the period of 4 years, from the end of the assessment year, but for some reason or the other the appeal cannot be decided by the Appellate Assistant Commissioner within the period of 4 years from the end of the assessment year. Again in such a case the appeal would become infructuous and the assessment made by the Income-tax Officer would remain intact rendering the appeal infructuous. There tax Officer would remain intact rendering the appeal infructuous. There may again be cases where the order of the Appellate Assistant Commissioner is passed within a period of 4 years from the end of the assessment year, and, thereafter, a further appeal is filed before the Tribunal. If the tribunal did not decide the appeal within the period of four years from the end of the assessment year, then again the appeals before the tribunal will be rendered infructuous. Before the department both the assessee as well as the department could prefer appeals and if by the time the order is passed by the Income-tax Officer or the Appellate Assistant Commissioner, the period of 4 years has already elapsed, the right which has been given to the assessee or the department to challenge the orders of the Appellate Assistant Commissioner before the Tribunal would be an illusory right. This could not have been the intention of the Act. It could well be that the reasonable time limit had to be provided within which an assessment must be made by the Income-tax Officer so as not to keep the sword hanging on the assessee and avoid harassment to him. A limit of 4 years, therefore, has been prescribed for the Income-tax Officer to make the assessment which is the outer limit so far as the Income-tax Officer to make the assessment which is the outer limit so far as the Income-tax Officer is concerned. If the whole process including the appeal to the Tribunal had to be concluded within a period of 4 year, then different limits would have been placed for the orders to be made by the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal so as to make the total period of 4 years. It cannot be expected that the appeals before the Appellate Assistant Commissioner and the Tribunal must be decided soon after the appeals are presented. They have to deal with the several appeals and naturally that is bound to take some time for decision. It is not possible, therefore, to accept the contention raised on behalf of the petitioner-assessee that not only the assessment by the Income-tax Officer, but the appeals by the Appellate Assistant Commissioner and the Appellate Tribunal must also be decided within a period of 4 years from the end of the assessment year in question. However, where the Appellate Assistant Commissioner or the tribunal were to enhance the assessment made on the assessee by the Income-tax Officer, different considerations may arise in such cases.
16. It was contended by the learned counsel for the petitioner that if the Income-tax Officer himself could not make an order of assessment after the expiry of 4 years of the end of the assessment year, then the Appellate Assistant Commissioner and the Tribunal could also not make any order after a period of 4 years. He placed reliance on the decision of the Supreme Court in State of Orissa v. Debaki Debi. This was a case under the Orissa Sales Tax Act and the Collector of Sales Tax purported to revise an order passed by the Assistant collector of Sales Tax in appeal acting under his powers under section 23(3) of that Act. The Collector revised the orders of the Assistant Collector by raising the taxable turnover allowed by him to be deducted. It was held on the provisions of the said Act that the Collector had no power to make such an order beyond the period of 36 months after the expiry of the quarter in respect of which the assessment had originally been made. This was not a case of an appeal against the order of assessment made by the original court. In the Orissa case the Collector made an assessment which the Sales Tax Officer and the Assistant Collector had not made. This was, therefore, a case of an assessment made by the Collector for the first time with respect to the items of amounts for which deductions were given by the lower authorities. In that context, it was held that the assessment made by the Collector was beyond the period of limitation and he was not competent to make the same. This would not apply to the facts of the present case where the assessment had already been made by the Income-tax Officer and the Appellate Assistant Commissioner or the Tribunal did not make a fresh or additional assessment, but were only considering the validity or the correctness of the order made by the Income-tax Officer and to such an appeal, there could not be any limitation. In my view, the decision of the Supreme Court in State of Orissa v. Debaki Debi, referred to above, has no application to the facts of the present case.
17. The question then arises is what kind of assessment is made by the Income-tax Officer when proceedings are remanded either by the Appellate Income-tax Commissioner or the Tribunal to the Income-tax Officer. Are they proceedings under section 23, or section 34, or any other kind of proceedings The Income-tax Officer having already made an assessment, it could not be said that he is making the assessment again on remand by the appellate authority. It may not, therefore, fall under section 23 of the Act and such a further proceeding on remand by the Income-tax Officer could be under section 34 or some other kind of assessment. It could be a reassessment as contemplated by section 34, but whether it is a reassessment under section 34 or whether it is some other kind of assessment, that would not make any difference in view of lifting of the bar of limitation prescribed by section 34(3) by the second proviso added to the same. If it is not an assessment or reassessment under sections 23 and 34 and is a different kind of assessment altogether, then the question of limitation does not in fact arise and there is no question of lifting the bar of limitation. Such a situation was considered by the Allahabad High Court in Jawahar Lal Mani Ram v. Commissioner of Income-tax. The matter was considered from both points of view and it was held that in case it were a different kind of assessment, then no question of limitation arises and if it was a reassessment under section 34, then the bar of 4 years imposed by section 34(3) is removed by the second proviso to sub-section (3) of section 34. The reasoning was based on the decision of the Supreme Court in Bhopal Sugar Industries Ltd. v. Income-tax Officer, Bhopal, wherein it has been laid down that, under the system of hierarchy of courts in this country including the proceedings under the Income-tax Act a subordinate authority like the Income-tax Officer is bound to carry out the directions of a superior authority and if the assessment made in consequence of an appellate order is altogether a different kind of assessment, than one made under section 23 or section 34, no question of limitation can all arise and there would be no question of making any provision for the removal of non-existent bar of limitation. In this view, the second proviso to section 34(3) would be superfluous and this court in Commissioner of Income-tax v. Kishoresingh Kalyansingh Solanki has taken the view that the second proviso to section 34(3) was in fact not necessary in a case where the Income-tax Officer makes a fresh assessment on remand by the appellate authority, but the second proviso has been added only ex abundanti cautela, that is, by way of abundant caution.
18. If the assessment cannot be said to be a different kind of assessment in the sense that it is neither an assessment under section 23 nor reassessment under section 34, in a situation like this where the Income-tax Officer has to make a fresh assessment in view of the order of remand, it can be still a proceeding for reassessment under section 34. If a finding or a direction has been given by the appellate authority, which directs the Income-tax Officer to make the fresh assessment as per that finding or direction, that would constitute an information under section 34(1)(b) of the Act. The decision of the Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax shows that the information section 34(1)(b) includes information as to facts as well as information as to the state of the law and finding or direction given by an appellate authority either on the question of fact or of law would be an information to the Income-tax Officer under the provisions of section 34(1)(b). Section 34(1)(b), however, puts a bar of limitation and for proceedings under that provision a notice has to be issued within a period of 4 years of the end of that year and the assessment has to be made before the expiry of one year from the date of the service of the notice. Apparently, if the order of the appellate authority remanding the matter to the Income-tax officer is itself passed after a period of 4 years of the end of that year, no notice could ever be issued to the assessee under section 34(1)(b) of the Act and no effect could be given to the findings or direction given by the appellate authority. In order to remove this anomalous position, it appears that the second proviso below section 34(3) had been added which lifts the bar of limitation for making an assessment or reassessment in pursuance of the findings or directions given by the appellate or revisional authority under the different section mentioned in the said proviso. This second proviso is a proviso to the whole of section 34 though put below sub-section (3) of section 34 and applies to all cases whether falling under section 34(1)(a) or 1(b) or (1A) to (1D) of section 34, provided that the assessment or reassessment is made on the assessee or reassessment is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under sections 31, 33, 33A, 33B, 66 and 66A. In the present case, it is not necessary to consider whether the bar is lifted with respect to any person other than the assessee in respect of whom a finding or direction has been given by the appellate authority because, here, we are dealing with the case of the assessee himself relating to whom the finding or direction has been given by the appellate authority. It may, however, be stated that in a case which went to the Supreme Court, the opinion was divided, some learned judges holding that the second proviso so far as it relates to 'any person' is ultra vires article 14 of the Constitution and other learned judges holding that it was intra vires. Subsequently, this view seems to have been modified by the later decision of the Supreme Court and it was held that 'any person' would take in only persons intimately connected with the assessment. These cases are discussed later.
19. So far as the assessee is concerned, the second proviso makes it quite clear that if the assessment has to be made in consequence of or to give effect to any finding or direction contained in the appellate order then the bar of limitation provided in section 34(1)(b) or (3) stands removed and the fresh assessment would not be illegal if it is made after a period of 4 years from the end of that year. It was, however, contended that even notices under section 34 have not been issued in the present case and the notices that are issued are under section 23(2) of the Income-tax Act, 1922, or under section 143(2) of the Income-tax Act, 1961. Even if the notices that are issued are described as under section 23(2), they could be taken to be as notices under section 34 as they were issued in consequence of the order passed by the appellate authority and if the notices are so understood, then the second proviso to section 34 would apply with all force and the bar of limitation under section 34(3) or section 34(1)(b) could not be pleaded. Such a situation arose in the Allahabad High Court in a case, Lakshman Prakash v. Commissioner of Income-tax. Assessment was made for the assessment years 1940-41 to 1943-44 against a Hindu undivided family of which A was a member. For the assessment year 1944-45. A submitted a return in the status of an individual. The Income-tax Officer assessed the income as that of a Hindu undivided family. The Hindu undivided family appealed and contended that the assessment was invalid as the income did not belong to it but belonged to it but belonged to A as an individual. The Appellate Assistant Commissioner directed an enquiry to be made as to whether the income belonged to the family or to A as an individual. The Income-tax Officer made an enquiry and found that the income did not belong to the family and by order dated 24th January, 1952, assessed the income as that of A as individual. A again appealed contending that the power to direct a fresh enquiry and fresh assessment conferred by clause (b) of section 31(3) of the Act was only in respect of the person who had appealed and did not extend to others. The second assessment made on A was said to be made beyond limitation. It was held that the direction with respect to individual A was not with respect to a different person as A was also the member of the joint Hindu family and, secondly, it was held that the second proviso to section 34 lifted the bar of limitation and the assessment though made 4 years after the end of the year was not beyond limitation in view of the fact that it was made in consequence of a finding or direction given by the appellate authority.
20. It was then contended that the second proviso below section 34(3) is itself invalid as being ultra vires of article 14 of the Constitution. It is said that there is no difference between an assessee who has not filed a return for a period of 4 years and thus has escaped assessment or an assessee who has filed a return under section 22, but has not been assessed during the period of 4 years and has escaped assessment and between an assessee who has been assessed within a period of 4 years by the Income-tax Officer, but by an order passed by the Appellate Assistant Commissioner or the Tribunal after a period of 4 years and remanding the case to the Income-tax Officer with a finding or a direction in pursuance of which the Income-tax Officer has to make a fresh assessment. The latter also would be the case of an escaped assessment since 4 years have by that time elapsed after the end of the assessment. It is urged that whereas the assessee in the first two categories referred to above can be reached only under section 34(1) (a) or (b) within the time limit prescribed therein, an assessee in respect of whom a finding or a direction has been given by the Tribunal even beyond the period prescribed under the proviso to sub-section (1) of section 34 could be reached much beyond that period for which there is no rational basis and there is no rational relation between the said provision and the object which is to be achieved. It is contended that both are cases of an escaped assessment and there is no reason why they should be differently treated. In fact, it is contended that the assessee in respect of whom a finding or direction has been given has submitted himself to the procedure under the Income-tax Act, and has gone through the whole procedure, whereas in respect of the other assessee they have escaped assessment on account of their negligence or inadvertence or omission on the part of the Income-tax Officer and are in a more favourable position.
21. The question regarding the vires of the second proviso below section 34(3) of the Income-tax Act was raised before the supreme court in two decisions, viz., S. C. Prashar v. Vasantsen Dwarkadas and Commissioner of Income-tax v. Sardar Lakhmir Singh. Both these cases were decided by the same Bench of five judges on the same day. In the first case the majority judgments were delivered by Mr. Justice S. K. Das, Mr. Justice J. L. Kapur and Mr. Justice A. K. Sarkar and the minority judgment was delivered by Mr. Justice Hidayatullah, as he then was, on behalf of himself and Mr. Justice Raghubar Dayal. Mr. Justice S. K. Das and Mr. Justice Kapur took the view that the second proviso to section 34(3) is unconstitutional whereas Mr. Justice Hidayatullah (now Chief Justice) and Mr. Justice Raghubar Dayal took the contrary view. Mr. Justice Sarkar did not deal with the question of vires in this judgment as he had dealt with it in the other judgment delivered on the same day, namely, commissioner of Income-tax v. Sardar Lakhmir Singh. However, while holding that the said proviso is invalid on the reasons given by him, he observed at the end as follows :
'I think therefore, that the second proviso to sub-section (3) of section 34, as amended by the amending Act, 1953, in so far as it affects persons other than assessee is void as violating article 14 of the Constitution. It cannot validate the assessment orders in this case. As I have said before, it is not necessary in this case to say that the proviso is bad as making a hostile discrimination against the assessee mentioned in it and I do not do so. The respondent, Lakhmir Singh, was not the assessee in the section 31 proceedings in consequence of which the assessment order against him was made. The assessee was his father as the karta of non-existent family. The proviso is invalid against the respondent, Lakhmir Singh.'
22. Thus, so far as the second proviso related to 'any person', that is, a stranger who had nothing to do with the assessment proceedings in which the finding or direction was given, it was declared ultra vires. It appears that in these cases the question of the vires of the second proviso to section 34(3) was being considered in relation to 'any person' and not with respect to an 'assessee.'
23. In Mahendra Bhawanji Thakar v. S. P. Pande this court had an occasion to deal with the constitutionality of the second proviso to section 34(3) and this court interpreted the aforesaid decisions of the Supreme Court to mean that the whole of the second proviso to section 34(3) was ultra vires article 14 of the Constitution. The question of the vires of the second proviso again came up for consideration before a Bench of five judges of the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das. The majority judgment, delivered by Mr. Justice Subba Rao, as he then was, took the view that the words 'any person' in the second proviso in the setting in which they appear must be confined to a person intimately connected with the assessments of the year under appeal. This was on the view that the modification or setting aside of assessment made on a firm, joint Hindu family or association of persons, for a particular year, may affect the assessment for the said year on a partner or partners of the firm, member or members of the Hindu undivided family or the individual, as the case may be, and in such cases, though the latter are not to nomine parties to the appeal, their assessments depend upon the assessments on the former. Thus, it would appear that the unconstitutionality of the second proviso to section 34(3) was confined only to the persons who are not intimately connected with the assessments and not with respect to the assessee or person intimately connected with the assessment under appeal. The minority judgment was given by Mr. Justice Mudholkar in which he considered the earlier Supreme Court decisions cited above, as well as the decision in Suraj Mall Mohta & Co. v. A. V. Visvanatha Sastri. The learned judge, while dealing with the question, made the following observations, which are relevant :
'No doubt, persons whose income have escaped assessment, and the fact that they have escaped assessment has not been discovered till after the lapse of eight years from the year in which they could have been assessed to tax on such income can be placed in one class. But surely it does not follow that even in that class there can be no further classification. The legislature in enacting the particular provision has made a further or a sub classification by putting under one head those whose assessments have come up for scrutiny before an appellate authority and with respect to whose escaped assessment a judicial finding or direction is made by the appellate authority and under another head other assessee whose escaped income was not detected by the appellate authority and with respect to which no judicial finding or direction was, therefore, made by such authority. There is a real difference between the two categories of assessee. Prima facie, there is reasonable basis for the sub-classification and the grounds on which it is made, that is, discovery by a higher income-tax authority and a judicial finding or direction made with respect to the fact by it. These grounds have a rational relationship with the object which was intended to be achieved by the law, that is, to detect and bring to assessment the escaped income.'
24. With reference to the earlier decisions of the Supreme court in S. C. Prashar v. Vasantsen Dwarkadas and Commissioner of Income-tax v. Lakhmir Singh it was observed :
'As regards the other decision relied upon, it is sufficient to point out that the majority of the learned judges have only struck down that part of the proviso which enables a notice to issue 'to any person' on the ground that it is violative of article 14. The precise question which we have before us does not appear to have been the subject of decision in the case.'
25. This decision though of minority will be the decision of the court as the full aspects of the matter have been considered by these two judges on the question of the vires of the second proviso in all its aspects and have declared the law that it is ultra vires only in so far as it relates to 'any person'. The majority judgment has not struck any different note and they must be taken to have concurred in the view expressed by Mr. Justice Mudholkar since they did not strike a contrary note. On the contrary, the majority judgment has explained the word 'any person' and confined it to 'a person' who is intimately connected with the assessment under appeal.
26. The Madhya Pradesh High Court in Shyam Sunder Govindram v. Income-tax Officer, while dealing with the question of the constitutionality of the second proviso to section 34(3), has observed as under :
'The learned counsel for the petitioner relies upon S. C. Prashar v. Vasantsen Dwarkadas to support his contention that the proviso the section 34(3) is unconstitutional as it is hit by article 14 of the Constitution. A perusal of that decision seems to us to indicate that the proviso has been held to be unconstitutional only so far as third parties are concerned but has been held valid with respect to persons who are parties to the proceedings before the income-tax authorities.'
27. The Madras High Court in M. Ct. Muthuraman v. Second Income-tax Officer, Madras has explained the Supreme Court decisions in S. C. Prashar v. Vasantsen Dwarkadas and Commissioner of Income-tax v. Sardar Lakhmir Singh, referred to above, in these words :
'... the majority of the learned judges of the Supreme Court were considering the question whether the proviso should be struck down as unconstitutional as it is not supported by the well-known theory of reasonable classification. It is, however, to be remembered that in S. C. Prashar v. Vasantsen Dwarkadas the majority were mainly concerned in applying the principle and text of the proviso to any person, meaning thereby an utter stranger to the earlier appeal or revisional proceedings. In that context, it was held that the provisions of the second proviso to section 34(3) in so far as they authorized the assessment or reassessment of any person other than the assessee beyond the period of limitation specified in section 34 in consequence of or to give effect to a finding or direction given in an appeal, revision or reference arising out of proceedings in relation to the assessee violated the provisions of article 14 of the Constitution of India and were invalid to that extent.'
28. This High Court while deciding the case of Mahendra Bhawanji Thakar cited supra, appears to have understood the decision of the Supreme Court in Prashar v. Vasantsen to mean that the whole of the second proviso to section 34(3) was unconstitutional This decision, however, was given before the second decision of the Supreme Court in Income-tax Officer v. Murlidhar Bhagwan Das cited above, and in view of the latest law declared by the Supreme Court, the decision in Mahendra's case could not be read to mean that the whole of the second proviso is ultra vires, but must be confined only so far as it relates to an utter stranger. That is how the Madhya Pradesh and the Madras High Courts' decisions referred to above have limited the scope of the decision of this court in Mahendra's case. However this court itself on a later occasion took a revised view of the matter in view of the Supreme Court decision in the case of Income-tax Officer v. Murlidhar Bhagwan Das. In Onkarmal Meghraj v. Commissioner of Income-tax, this court has now laid down :
'We may, however, point out that when this court took the view that the case of Vasantsen Dwarkadas declared that the said proviso was wholly ultra vires, it had not the advantage of the Supreme Court decision in the case of Commissioner of Income-tax v. Sardar Lakhmir Singh and the view expressed by Sarkar J. in the said decision. In Vasantsen Dwarkadas case Sarkar J. when he expressed his view that he thought that the second proviso to section 34(3) of the Income-tax Act is invalid, had preceded it by saying that he was taking that view for the reasons mentioned in the judgment in the case of Commissioner of Income-tax v. Sardar Lakhmir Singh. In the absence of that decision being before the court, it took the view that Sarkar J.'s opinion was that the second proviso to section 34(3) was wholly invalid and it is on that basis that it was held that the case of Vasantsen Dwarkadas had declared that the second proviso was wholly ultra vires. Subsequent decision of the Supreme Court in Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwandas, however, makes it clear that the law declared by the case of Vasantsen Dwarkadas is that the second proviso was ultra vires in so far as it affected persons other than those who were parties to the proceedings in which the order or finding was made. It appears to us, therefore, that the view expressed in Mahendra Bhawanji Thakar v. S. P. Pande may be incorrect and may not be capable of being allowed to prevail in view of the subsequent decision of the Supreme Court in Income-tax Officer, Sitapur v. Murlidhar Bhagwan Das, which makes it clear that the extent of the ultra vires nature of the second proviso to section 34(3) is only so far as it affects persons other than parties to the proceedings.'
29. The question, therefore, of the constitutionality of the second proviso to section 34(3) has now been settled by the Supreme Court and the said proviso could not be held to be ultra vires as contended by the learned counsel for the petitioner except to the extent to which it has already been held to be ultra vires by the decision of the Supreme Court.
30. Since the second proviso to section 34(3) in so far as the assessee is concerned with whom we are now concerned in the present case, is valid and intra vires, must take effect and in view of the finding or direction that has been given by the Appellate Tribunal in pursuance of which fresh assessment has to be made, the bar of limitation put by sub-section (3) of section 34 will be removed and the proceedings could be taken by the Income-tax Officer even though the original period of 4 years or a period of 8 years provided in section 34(1)(a) has elapsed. The notices which have been issued in the present case are in fact an intimation to the assessee that the further proceedings for assessment in pursuance of the finding or direction given by the tribunal will be taken against the assessee and in any case they must be taken to be notices under section 34 of the Income-tax Act. The proceedings as proposed by the Income-tax Officer could, therefore, be taken and a further assessment could be made against the petitioner-assessee and therefore, notices could be issued to the assessee for proceeding with the assessment in pursuance of the finding or direction given by the Appellate Tribunal. I do not, therefore, think that the notices issued to the petitioner are in any way invalid.
31. In the result, the petition fails and is dismissed with costs.
Vimadalal, J.
32. The facts of the case have been sect out in the judgment delivered by my brother Padhye and need not therefore be set out by me in this judgment. I agree with the conclusion at which my brother Padhye has arrived, but would like to state my own reasons for the same. Mr. Bobde on behalf of the petitioners formulated, at the outset of his argument, the following three propositions as constituting the case of the petitioners for whom he appeared :
1. The second proviso to section 34(3) of the Indian Income-tax Act, 1922 (hereinafter referred to as 'the second proviso'), is ultra vires article 14 of the Constitution, because, if the appellate authority could not itself have made the assessment after the expiry of the period of four years from the end of the year in question as provided in the substantive portion of section 34(3) itself, there is no intelligible differential for allowing the assessment to be done after the expiry of that statutory period by means of an order of remand, except by resorting to the provisions of section 34(1) in a proper case;
2. The orders of remand in the present case are not accompanied by 'finding or direction' within the terms of the second proviso so as to attract the applicability of that proviso; and
3. Once the statutory period of four years elapses in the course of proceedings by way of appeal, etc., it is not possible to reach the assessee under the second proviso, except through the machinery of section 34(1).
34. Though Mr. Bobde formulated the three propositions stated above, it must be stated that, with his characteristic fairness, he did not press the second proposition in view of the decision of the Supreme Court in the case of Income-tax Officer, Sitapur v. Murlidhar Bhagwan Das which makes it clear that an order of remand would itself fall within the term 'direction' within the terms of the second proviso. As far as the third proposition formulated by Mr. Bobde is concerned, Mr. Bobde has conceded that if the second proviso is intra vires article 14, no question of the applicability of the statutory period of four years would arise, and the third proposition would not survive at all. The third proposition is, therefore, dependent upon the decision of the court on the first point and must stand or fall according to the view which is taken on the first proposition. The result is that the entire case of the petitioners boils down to only one point and that is the one which was formulated as the first proposition by Mr. Bobde which embodies the question of the vires of the second proviso. Even as far as the first proposition of Mr. Bobde is concerned, it may, at this stage, be clarified that though at the outset of his argument Mr. Bobde did contend that the second proviso has, in its entirety, been already held to be invalid by the majority of the Supreme Court in the leading case of S. C. Prashar v. Vasantsen Dwarkadas as construed by a Division Bench of this court in the case of M. Bhawanji Thakar v. S. P. Pande, he gave up that stand in view of the subsequent decision of the Supreme Court in the case of Income-tax Officer v. Murlidhar Bhagwan Das already referred to above in another context, and in view of the construction placed upon Prashar's case,by a Division Bench of this court in the later case of Onkarmal Meghraj v. Commissioner of Income-tax in which it has been held in the clearest possible terms that in Prashar's case the second proviso was held to be ultra vires only in so far as it affected persons other than those who were parties to the proceedings in which the order of finding was made. Once that position was made amply clear by Mr. Bobde in the course of his arguments before us, it was not necessary for Mr. Natu to address us on that point or to cite decisions in order to show that the second proviso has been held to be ultra vires by the Supreme Court in Prashar's case only in regard to third persons, as he did. I do not think it necessary to refer to the same as, in view of Mr. Bobde's clarification, the only point that arises for our decision is the one which has been formulated above as being the first proposition of Mr. Bobde.
35. The premise underlying that proposition of Mr. Bobde is that the appellate authority could not itself have made the assessment after the expiry of the period of four years laid down by the substantive portion of sub-section (3) of section 34, because the term 'assessment' takes in orders made in appeal or revision or on reference. This premise is seriously disputed by Mr. Natu on behalf of the revenue. Mr. Natu has submitted that the statutory period of four years laid down in section 34(3) is applicable only to the first order of assessment made by the Income-tax Officer under section 23, and to a reassessment under section 34(1) in respect of escapement of income, but does not apply to any subsequent stage of the proceedings. According to Mr. Natu, as the substantive portion of subsection (3) of section 34 does not apply to proceedings by way of appeal, revision or reference, no question of lifting the bander the second proviso arises at all in respect of a fresh assessment made in consequence of a finding or direction given in appeal or revision or on a reference. The learned advocates on both sides have stated that the point is one which is not directly covered by authority.
36. In support of that contention, Mr. Natu has taken us in detail through the various section of the Indian Income-tax Act, 1922, and the different expressions used therein, viz., 'assessment', 'provisional assessment', 'regular assessment', 'fresh assessment', 'new assessment', and 'original assessment'. He has pointed out that the word 'assessment', simpliciter, has been used in section 23, that the expression 'provisional assessment' has been used in section 23B, that the expression 'regular assessment' has been used in sub-section (5) of the said section 23B in a sense which equates it with the first assessment under section 23, that the expression 'fresh assessment' has been used in section 27, 30(1), 31(3)(b) and 33B(1), that the expression 'new assessment' is used in section 31(4), and that the expression 'original assessment' is used in section 34(2). Mr. Natu has also relied strongly on the fact that section 30(2) which lays down the period of limitation for the filing of an appeal by an assessee from the order of the Income-tax Officer to the Appellate Assistant Commissioner lays down various starting points of limitation, but none of those starting points have any relation to the time which the Income-tax Officer may have taken in completing the assessment. According to Mr. Natu, it is possible to conceive of a case in which the Income-tax Officer may have made the assessment from which the assessee desires to appeal, on the last day of the four years' period of limitation provided of by section 34(3), in which case it would be impossible for the assessee to exercise the statutory right of appeal conferred upon him by section 30 of the Act within that period, and it is for that reason that section 30(2) provides for starting points of limitation which are quite independent of the time taken up by the Income-tax Officer for completing the assessment. Similarly, Mr. Natu has relied on the fact that sub-section (1) and (2) of section 33, which confer rights of appeal from the order passed by the Appellate Assistant Commissioner, upon the assessee and the Commissioner, respectively, also lay down the date of communication of the order under appeal as being the starting point of the periods of limitation laid down therein, and do not take into account the time taken up by the Income-tax Officer for completing the assessment, or by the Appellate Assistant Commissioner for disposing of the appeal before him. Mr. Natu has contrasted these provisions with the provision of section 33A(1) which contain the words 'subject to the provisions of this Act' which would make the revisional powers of the Commissioner under that section subject to the statutory period of four years laid down in section 34(3). Mr. Natu has pointed out that those words are not to be found in section 33B where the Commissioner seeks to exercise revisional powers to protect the interests of the revenue.
37. In my opinion, the contention of Mr. Natu that the period of limitation laid down in the substantive portion of section 34(3) applied only (a) to the first order of assessment by the Income-tax Officer under section 23, and (b) to a reassessment by the Income-tax Officer on account of escaped income under section 34, is not correct. The scheme of the Act on which Mr. Natu has relied only shows that section 34(3) does not apply to proceedings by way of appeal, revision or reference. It does not show that the terms of section 34(3) would not cover an assessment or reassessment by the Income-tax Officer in consequence of a finding or direction given in appeal or revision or on reference. In my opinion, the substantive portion of sub-section (3) of section 34 would have applied to an assessment or reassessment in consequence of a finding or direction given in appeal, or revision, or on reference, but for the second proviso thereto. That is precisely why the legislature has enacted the second proviso. Whilst, therefore, I agree with the conclusion of Mr. Natu that section 34(3) does not apply to an assessment or reassessment made in consequence of a finding or direction given in appeal or revision or on reference, in my opinion, that is not because of the terms of the substantive portion of sub-section (3) of section 34, but because the second proviso lifts the bar of limitation in such cases. Though, as already stated above, no direct authority on the point has been cited before us in the course of the hearing of this petition, several authorities were cited by the learned advocates on either side which, it was contended, supported their respective cases, and I must now proceed to discuss them.
38. Strong reliance was placed by Mr. Bobde on behalf of the petitioners on the decision of the Supreme Court in the case of State of Orissa v. Debaki Debi. At the outset it must be stated that the said case related not to the Income-tax Act, but to the provisions of the Orissa Sales Tax Act, 1947, and the question which arose in that case was whether the said Act imposed a time limit for making an order under section 23(3) thereof revising an order of assessment. The respondents before the Supreme Court having moved the High Court of Orissa under article 226 of the Constitution to quash the orders of the Collector in revision, the High Court granted that relief, holding that the impugned orders were illegal as they were really reassessments of turnover which had escaped assessment, and such assessment could not be made in respect of any quarter after thirty-six months from the date of its expiry as provided in section 12(7) of that Act. The scheme of the Orissa Sales Tax Act was discussed in the judgment of the majority of the judges who decided the said case and the view taken (paragraph 24) was that when an appellate or revisional authority is effecting a fresh assessment by enhancing it, it is exercising the power which is conferred by section 12 which lays down the different modes in which the assessment of tax may be made, and so to speak, doing the duty which the assessing authority would or ought to have performed. It was, therefore, held that any order of assessment made by the appellate authority or, as in that case, by the revising authority, must, therefore, be held to be the orders passed under section 12, as well as under section 23, which lays down the powers of such authority, and that, consequently, the period of limitation prescribed in the second proviso to section 12(6) would in terms become applicable. In accordance with the view of the majority of the judges, the decision of the High Court quashing the orders of assessment passed in the revision was, therefore, confirmed and the appeals before the Supreme Court dismissed. I am unable to read the decision in Debaki Debi's case as being of any assistance for the purpose of construing the provisions of the Income-tax Act. The Supreme Court decided the question before it in that case expressly on a review of the provisions of the Orissa Sales Tax Act. It would, in my opinion, be dangerous to apply that decision in regard to the construction of the provisions of the Income-tax Act, 1961, as urged by Mr. Bobde. Mr. Bobde also relied upon another decision of the Supreme Court, and that was the decision in the case of A. N. Lakshman Shenoy v. Income-tax Officer, Ernakulam, in regard to what have been referred to in the report of the said case as the Travancore-Cochin appeals. The facts of that case were that, by virtue of article 277 of the Constitution, the taxes leviable under the Cochin Act or the Travancore Act continued to be so levied until provision was made by the Finance Act, 1950, section 13(1) of which provided, inter alia, that, if immediately before the 1st day of April, 1950, there was in force in any Part B State (The State of Travancore-Cochin being a Part B State) any law relating to income-tax or super-tax or tax on profits of business, that law was to cease to have effect except of the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922, for the year ending on the 31st day of March, 1951, or for any subsequent year. One of the questions canvassed in the said case was whether section 13 of the Finance Act, 1950, which kept alive the provisions of the Cochin Act and the Travancore Act, did so only 'for the purpose of the levy, assessment and collection of income-tax and super-tax' in respect of the period mentioned in the section, and did not have the effect of saving the provisions of those Acts for the purpose of 'reassessment of income-tax and super-tax'. The question that arose therefore was, in what sense had the word 'assessment' been used in section 13(1) of the Finance Act, 1950. It was stated in the judgment (at pages 289-291) that the words 'assessment' and 'reassessment' occurred in several section of Chapter IV of the Indian Income-tax Act, 1922, and that section 22 thereof laid down the whole procedure of assessment, which applied not only to the first assessment, but which is also prescribed by section 34 in respect of income which has escaped assessment. Various sections of the Act in which the word 'assessment' or 'reassessment' or any cognate expression has been used were then discussed, including section 34 of that Act, and it was observed (at page 291) that discussion clearly established that the word 'assessment' had to be under stood in each section with reference to the context in which it had been used, and that in some section it had a comprehensive meaning, and in some a somewhat restricted meaning, to be distinguished from a 'reassessment' or even a 'fresh assessment'. In my opinion, though the word 'assessment' has to be understood in each section with reference to the context in which it has been used as laid down by the Supreme Court in Shenoy's case, it must carry the same meaning in the same section. It cannot mean one thing in section 34(1) and another in section 34(3), or in the second proviso thereto. The ratio of the judgment of the Supreme Court in Shenoy's case is that as the words 'assessment' and 'reassessment' occurred in juxtaposition in section 34, a somewhat restricted meaning had to be given to the otherwise comprehensive expression 'assessment' which would distinguish it from 'reassessment', or a 'fresh assessment'. It would, in my opinion, follow that the terms 'assessment' and 'reassessment' between them cover every kind of taxing order. That is the only conclusion to which the observation of the Supreme Court in Shenoy's case can lead us.
39. The next decision relied upon by Mr. Bobde was the decision of the Supreme Court in the case of Thomas v. Vasant Hiralal Shah, but all that the said decision lays down (at page 334), is that the second proviso governs the whole of section 34(1) and would, consequently, include even an escaped assessment with respect to which limitation is provided in clause (ii) of the first proviso to section 34(1), by virtue of the amendment effected in the Act in the year 1953, whereby the word 'section' was substituted for the word 'sub-section'. I do not think that decision is of any use as far as the present case is concerned. In support of his contention that the term 'assessment' takes in all the appellate, revisional and reference stages of the proceedings also, Mr. Bobde has further relied upon the decision of the Privy Council in the case of the Commissioner of Income-tax v. Khemchand Ramdas, the decision of a division Bench of this court in Commissioner of Income-tax v. Mangaldas Motilal & Co., and the decision of the Patna High Court in the case of Province of Bihar v. Khetra Mohan Kumar, in all of which the main question which arose was as to when the assessment could be said to have become final. What was held by the Privy Council in Khemchand Ramdas's case was that if the commissioner desired to enhance the assessment he had to proceed within the time limited by the Act. That was how the decision of the Privy Council in that case was construed by a Division Bench of this court in Mangaldas Motilal's case (at page 154, col. 2), in which the same view was expressed by the court. The same view was expressed in Khetra Mohan's case, by the Patna High Court in which it was observed that it is the assessment made on appeal that is the final assessment irrespective of the power of revision conferred by the Act (paras. 22-23). I am, however, not concerned in the present case with finding out when 'assessment' becomes final, but I am concerned only with determining what is the content of words 'assessment' and 'reassessment'. Moreover, it may be pointed out that in all the three cases just discussed, the situation with which the court was concerned arose prior to the enactment of the second proviso in its present form by Act No. 48 of 1948, in which the word 'assessment' appeared for the first time, and which proviso had an enlarged scope as pointed out by the Supreme Court in the case of Income-tax Officer, Sitapur v. Murlidhar Bhagwan Das, which has been strongly relied upon by Mr. Natu and which I must now proceed to discuss in some detail.
40. The facts of Murlidhar Bhagwan Das's case were that a certain item of interest amounting to Rs. 88,737 was brought to tax for the assessment year 1949-50. The assessee appealed and the Appellate Assistant Commissioner held that the income was received in the previous accounting year and directed that the amount should be deleted from the assessment for the year 1949-50 and included in the assessment for the year 1948-49. Pursuant to that direction, the Income-tax Officer initiated reassessment proceedings under section 34(1) in respect of the year 1948-49 and served a notice on the assessee on 5th December, 1957. It was common ground that the said notice was beyond the time prescribed by section 34(1), and the question which arose was whether the second proviso to section 34(3) applied and saved the notice from being time-barred. The judgment of the majority was delivered by Subba Rao J. and it was held that the second proviso would not save the time limit prescribed under sub-section (1) of section 34 of the Act in respect of escaped assessment of a year other than that which was a subject matter of the appeal or the revision, as the case might be, and the notice in that case was clearly barred by limitation and had to be quashed, as held by the High Court, and the appeal was, therefore, dismissed. Tracing the history of section 34 in some detail (at pages 339-341), Subba Rao J. pointed out that while the scope of the proviso as it existed prior to the amending Act 48 of 1948 was confined only to the completion of reassessment proceedings, the scope of the amended proviso was much wider in that it exempted the subject-matter of that proviso from the operation of the period of limitation prescribed by the section or, in other words, it gave full scope to the operation of the substantive part of the section unhampered by the periods of limitation prescribed by sub-section (1), (2) and (3) of section 34 of the Act. It was stated in that judgment that it followed that if a matter fell within the terms of the proviso in question, there would be no period of limitation for initiating an action or making an assessment or reassessment in respect of that matter, as the said proviso was a proviso to the entire section 34. In the historical background of section 34, it was observed (at page 341), that under that section as it existed in 1956, the assessment proceedings once commenced were to be completed within the period of limitation prescribed under section 34(3) and that to a case to which the second proviso applied, there was no period of limitation either for initiating proceedings under section 34 or for completing the assessment commenced either under section 23 or under section 34(1). It was, however, held (at page 343) by the Supreme Court that the said proviso did not confer any fresh power upon the Income-tax Officer to make assessments in respect of escaped incomes without any time limit, but only lifted the bar of limitation in respect of certain assessments made under certain provisions of the Act, and the lifting of the bar could not be so construed as to increase the jurisdiction of the tribunals under the relevant section. The Supreme court then proceeded to discuss (at pages 343-346) the significance of the expressions 'section', 'finding or direction', 'in consequence of or to give effect to', and 'any person', which occur in the second proviso and held that none of these expressions could enlarge the scope of that proviso which must be confined to a finding or direction necessary for giving relief in respect of the assessment of the year in question. Incidentally, it may be observed that the Supreme court construed the expression 'direction' in the second proviso as referring only to the direction which the Appellate Assistant Commissioner or other tribunals could issue under the powers conferred on him or them under the respective section. The ratio of the decision of the supreme Court in Murlidhar Bhagwan Das's case, therefore, is that the second proviso lifts the bar of limitation only in respect of the assessment year in question in the appeal or revision. The said decision is, therefore, not directly applicable to the present case. The Supreme Court has, however, discussed the historical background of section 34 and has analyzed the provisions thereof in a manner which is of assistance in the task of construing the second proviso in the present case. Mr. Natu has relied on the observation of the Supreme court in the said case mentioned above that, to a case to which the second proviso applies, there is no period of limitation either for initiating proceedings under section 34 or for completing the assessment commenced either under section 23 or under section 34(1), as showing that the said proviso would lift the bar of limitation in the present case, and that it is not true to say that the appellate authority could not have made the assessment after the period of four years prescribed by section 34(3) was over. In my opinion, however, the said case does not support the contention of Mr. Natu that the word 'assessment' in section 34(3) means only the first order of assessment made by the Income-tax Officer under section 23 and there is nothing in the judgment of the Supreme Court in Murlidhar Bhagwan Das's case was followed by the Supreme Court it self in the case of N. K. T. Sivalingam Chettiar v. Commissioner of Income-tax, but it is not necessary to deal with the same. In the case of Commissioner of Income-tax v. Kishoresingh cited by Mr. Natu, the question which arose was whether the special period of limitation provided for in section 33B(2)(b) is applicable to an order passed in revision by the Commissioner under section 33B, whether so motu or after the matter is remanded back to him in pursuance of an order of a higher authority. A division Bench of this court held that, though the words of section 33B(2)(b) are wide in the abstract if a literal meaning only was to be given to them, the cardinal rule of literal construction must not be pushed so far as to result in irrational or absurd conclusions, and that the phraseology of sub-section (2) (b) of section 33B permitted of a construction which prevented a result which would be manifestly absurd. S. T. Desai J., delivering the judgment of the court, stated (at page 533) that though a causes omissions is not to be readily inferred, 'the preferable meaning of the clause under consideration seems to us to be to restrict it to the fitness of the matter'. Though Mr. Natu has strongly contended to the contrary, in my opinion, it is clear that what the court then proceeded to do was to supply the causes omissions (which means, literally, 'a case omitted'), and held that the rule of limitation prescribed in section 33B(2) must be read as used with reference to an order made by the Commissioner in revision suo motu, and that the period of limitation prescribed by that provision did not apply to an order passed by the Commissioner in pursuance of an order or direction of a higher authority. In the course of the judgment in the said case, the court rejected the argument that the legislature having in express terms provided for a period of limitation for making an assessment order under section 23 and also provided a period of limitation for making an order of assessment or reassessment in cases of escaped income under section 34, felt the necessity of engrafting an exception on the operation of that rule of limitation, because it must have been felt that but for the exception enacted under the proviso, the period of limitation of four years would have operated in every case, even when the order was made under section 23 or under section 34 after there had been an order or direction from a higher authority. The view taken was (at page 531) that the position properly analyzed was that in a case of assessment under section 23 or an order of assessment or reassessment under section 34, a situation might arise when the Income-tax Officer might have to pass orders once again under those very section and, by the time he sat down to do so, the period of limitation of four years laid down in section 34(3) might well have already elapsed. It was pointed out in the said judgment that it being not the intention of the legislature in any such case to allow the possibility of such a contention being raised, the legislature engrafted the second proviso to sub-section (3) of section 34 only ex abundanti cautela. That, in my opinion, is not a correct view of the matter, as what the Income-tax Officer does in consequence of a finding or direction given by way of appeal, revision or reference is 'assessment' or 'reassessment' and the second proviso was necessary for the purpose of lifting the bar of limitation in regard to the same. The second proviso refers to 'assessment' or 'reassessment' made 'in consequence of or to give effect to any finding or direction' in proceedings by way of appeal, revision or reference. As already stated above, the word 'direction' in the second proviso refers to any order which the appellate authority or other tribunal can make under the powers conferred upon it by the relevant section or section of the Act Commissioner of Income-tax v. Murlidhar Bhagwan Das.
41. Mr. Natu has also relied upon a decision of the Supreme Court in the Case of K. S. Rashid and Son v. Income-tax Officer but the actual decision in the said case is of no assistance as far as the present case is concerned. What was sought to be impugned in that case was the validity of clause (1A) of section 34, and the same was held by the Supreme Court in that case to be valid on the ground that the classification made thereby was a rational one, in so far as it deal with escaped assessment during the war years when business and industry made huge profits, and also in so far as it made a distinction in regard to escaped income of a high magnitude. It may, however, be mentioned that it was observed in the judgment in the said case (at page 361) that the assessment or reassessment which has to follow the issue of the notice thereunder, must be assessment or reassessment in accordance with the relevant provisions of the Act, and that was made very clear by the clause that followed which showed that it was when the process of assessment or reassessment commenced that clause came into operation and that clause required that the provisions of the Act, so far as might be, applied 'accordingly'.
42. The authorities do not lay down the precise connotation of the terms 'assessment' and 'reassessment' used in section 34. A distinction was sought to be made between them in the course of the arguments in Shenoy's case cited above (at page 290), but the Supreme Court did not pronounce upon it, beyond stating (at page 291) that the former term had to be given 'a somewhat restricted meaning, to be distinguished from a reassessment'. It is, however, not necessary for us for the purpose of this case to determine that is the distinction between the terms 'assessment' and 'reassessment' inter se, as used in section 34, in so far as it follows from the observation of the Supreme Court in Shenoy's case that those two terms, between them, cover all taxing orders. The question that falls for decision in the present case is, do the terms 'assessment' and 'reassessment' apply only to taxing orders passed by the original taxing authority, viz., the Income-tax Officer, or do they also include the whole process of taxation by the higher appellate, revisional and reference authorities als The authorities discussed above do not throw any light on that specific question with the result that we are relegated to a construction of section 34 in the context of the other relevant sections of the Act. Having considered the scheme of the Act and the various sections which were pointed out to us in the course of the arguments in the present case, I have come to the conclusion that it is only the Income-tax Officer who makes the 'assessment' or 'reassessment', and that what the higher authorities do is only to correct errors in that 'assessment' or 'reassessment'; and the 'assessment' or 'reassessment' made by the Income-tax Officer does not become final till the stage of the order made in the ultimate appeal, if any. In that view of the matter, I hold that the terms 'assessment' and 'reassessment', between them, cover all taxing orders made by the Original taxing authority, viz., the Income-tax Officer, under section 23 or under section 34, as the case may be, and the period of limitation of four years prescribed in the material part of the substantive portion of sub-section (3) of section 34 does not apply to proceedings in appeal or revision, or on reference, before the higher authorities mentioned in the Act. It is precisely for that reason that there is no reference whatsoever to that period of limitation either in section 30(2) or in section 33(1) or (2) which lay down their own independent periods of limitation for the proceedings to which they relate. In my opinion that is the only way of coherent construction which can be placed upon section 30(2), 33(1) and (2) and 34 of the Act, and that is also the only construction that would obviate the absurd result of rendering the statutory provisions in regard to appeal, revision and reference infructuous, since it may not be possible to go through all those stages within a period of 4 years in cases of any magnitude, complexity, or importance.
43. I would sum up my conclusions as follows :
(1) The substantive portion of section 34(3) will apply to, (a) the original assessment by the Income-tax Officer, and (b) the reassessment, if any, by the Income-tax Officer under section 34;
(2) the substantive portion of section 34(3) will not apply to proceedings by way of appeal, revision or reference to the higher authorities mentioned in the Act; and
(3) the second proviso to section 34(3) applies to, (a) proceedings on remand to the Income-tax Officer in consequence of a finding or direction given in appeal or revision, or on a reference, and (b) proceedings relating to escaped assessment initiated under section 34 in order to give effect to a finding or direction given in appeal or revision, or on a reference.
44. In that view of the matter, Mr. Bobde's basic contention that the appellate, revisional or reference authorities could not themselves have made the assessment after the expiry of the period of four year provided for in the substantive portion of sub-section (3) of section 34 must be rejected. Mr. Bobde's further contention that as the appellate, revisional or reference authorities could not themselves have made the assessment after the expiry of four years, as contended for by him, there is no intelligible differential for allowing the assessment to be done after the expiry of that period be means of an order of remand, except by resorting to the provisions of section 34(1) in a proper case, and that the second proviso to section 34(3) is, therefore, ultra vires article 14 of the Constitution, must also be rejected.
45. Towards the end of his argument, Mr. Bobde formulated, what may be termed, a subsidiary contention that if the term 'assessment' takes in all stages of appeal, revision and reference as he has contended, the order of remand made in the present case as a result of which the notices dated April 6, 1967, which are sought to be impugned by the petitioners have been issued by the Income-tax Officer are bad irrespective of the question of the vires of the second proviso to section 34(3). But for the question of vires raised before us, we would not have decided this subsidiary contention of Mr. Bobde. The Supreme Court has laid down that the question whether assessment proceedings are barred under section 34(3) can and ought to be raised before the Income-tax Officer and is not a point which can be legitimately agitated in writ proceedings : Lalji Haridas v. Income-tax Officer. However, in the view which I have taken that the terms 'assessment' and 'reassessment' do not take in all stages of appeal, revision and reference as contended by Mr. Bobde, this subsidiary contention of Mr. Bobde must necessarily fail.
46. As already stated above, the last of the three propositions formulated by Mr. Bobde is also dependent upon the decision in regard to the question of the vires of the second proviso. Since we have held the second proviso to section 14(3) to be intra vires article 34, the third proposition of Mr. Bobde must also be rejected.
47. In the result, the petition fails, and I agree with my brother Padhye that the same should be dismissed with costs.
48. Petition dismissed.