A. Raghuvir, C.J.
1. The Income-tax Appellate Tribunal at Gauhati, at the instance of the assessee (S. P. Malik), referred the following question for the opinion of this court :
'Whether, on the facts and in the circumstances of the case and in consideration of the provisions of Sections 143(3), 148, 153(1)(a)(iii), 153(2)(a) and 153(1)(b), the Tribunal was right in holding that the assessment was not barred by limitation and, therefore, holding it to be valid ?'
2. The assessee seeks an answer to the question separately for the assessment year 1970-71 and the assessment year 1971-72 on the facts of the respective years.
3. The assessee submitted a return on September 30, 1970, and the same return again on December 19, 1972, for the assessment year 1970-71. On both the occasions, the income shown was Rs. 11,973. On May 19, 1972, he filed a return for the assessment year 1971-72 showing income of Rs. 23,809.
4. The Income-tax Officer informed the assessee that the income of Rs. 3,84,115 as respects the year 1970-71 and Rs. 3,359 relevant to the assessment year 1971-72 received by him from the Deputy Controller of Defence was not disclosed in the returns submitted by him. The assessee explained that the two amounts were received by his two employees, Janak Raj Suri and Mohendra Singh Vasin, who supplied fruits and vegetables to the Defence Department. He did not receive the amounts. In proof of his explanation, he produced a document subscribed by the two employees. Thereupon, the Income-tax Officer held an inquiry in that the account of the assessee in Punjab and National Bank was scrutinised and the two employees of the assessee were examined, The signatures found in the document were not denied by them. Their version was that they signed a blank paper at the instance of the assessee and were completely unaware of what was written in the document. The two persons specifically stated that they have not received any monies from the Deputy Controller of Defence and repudiated the allegation that they had received the amounts.
5. The Income-tax Officer accepted the evidence of the-two persons and held that the assessee was guilty of concealment of income. He added 11% of the amounts as income of the assessee. On appeal by the assessee, the Appellate Assistant Commissioner observed that normally 12% should have been added as income but did not vary the order of the Income-tax Officer. The finding that the assessee concealed the amount was confirmed. The Income-tax Appellate Tribunal, on further appeal by the assessee, confirmed the findings and reduced the income as, in the business in perishable commodities, the margin of profits was five per cent.
6. Before the Tribunal for the first time, the assessee contended that the proceedings for 1970-71 assessment should have been completed on or before March 31, 1973, and 1971-72 assessment order should have been passed on or before March 31, 1974. The two orders, the assessee assailed, were barred by limitation. The Revenue, in this regard, pointed out that the notices were issued on March 27, 1973, and, on the basis of inquiry held later, the Income-tax Officer was satisfied that the assessee had concealed her income, therefore, the larger period of eight years was invoked under Section 153(1)(b) and, therefore, the Section. 271(1)(c) proceedings were not barred.
7. The issue thus turns on the answer to the question whether the Income-tax Officer was satisfied, on March 27, 1973, that the assessee had concealed her income to hold that from that day, the cases felt out of the normal period of limitation and the facts of the case attracted the larger period of eight years of limitation. We will revert to this aspect later after we determine the date on which the Income-tax Officer was satisfied under the above two sections.
8. Ever since the case of Liversidge v. Anderson [1942] AC 206 the word 'satisfaction' in legal literature and cases has caused numerous ripples. When a citizen of the United Kingdom of German origin was detained during World War II, the above case came to be decided by the House of Lords. In that case, Lord Atkin fought a lone battle and paid a high price socially in later years for some observations made by him which affected his colleagues. His viewpoint was in the minority in the case. Today, his dissent in the case is accepted as the correct position in law. In the battle he waged, the utterances ,of a character in fiction or fantasy by a girl called Alice and her discussion with her animal companions were profusely used in the minority opinion. The discussions of Alice with the Cheshire cat, Queen of Hearts, Humpty Dumpty, Tweedledum and Tweedledee, the Mock Tuttle all have by this day passed into English literature and also into legal literature.
9. It is accepted now that when a statutory authority holds individuals as discreditable persons or of unworthy or unreasonable conduct, the law requires such individuals to be dealt with fairly by the statutory authorities. This conclusion is restated in Secretary of State for Education and Science v. Tameside Metropolitan Borough Council [1977] AC 1014. The case related to the admission of students in schools. One set of students were to be admitted to grammar schools for their ability and aptitude. The rest were to be admitted without reference to ability or aptitude. The question in the case arose under the Education Act, 1944, wherein a provision contained the two words 'satisfaction' and 'unreasonable'. The case has a wealth of information as to the interpretation of the word 'unreasonable'. But the' discussion in the case also turned on the implication of satisfaction by the statutory authorities. Lord Denning M. R., at p. 1025 in the Appeal Court, held that elementary rules of fair play are to be observed before individual persons are discredited. This view-point is confirmed by the law Lords. The grammar school case is followed in the decisions of the Indian Supreme Court and State High Courts on numerous occasions.
10. In the background of this position in law, that the assessees, before they are held guilty of having concealed income, should be dealt with fairly is not doubted nor is it disputed. The precise issue in the instant case is from what date the Revenue can reckon to avail of the larger period of limitation under Section 153 read with Section 271 of the Act. That such a date (of satisfaction of the Income-tax Officer) should fall or the Income-tax Officer should be, satisfied within the normal period of limitation is beyond doubt.
11. In the instant case, a number of cases are cited on behalf of the asses-see. Among the cases, two are from the Supreme Court. One is Banarsi Debi v. ITO : [1964]53ITR100(SC) . The other is S. S. Gadgil v. Lal and Co. : [1964]53ITR231(SC) . The Supreme Court, in the first case, considered the Indian Income-tax Act, 1922, as amended by the Income-tax (Amendment) Act, 1959. In that case, it was held that when the assessee was served with notice, the proceedings were barred but were saved under Section 4 of the Indian Income-tax (Amendment) Act, 1959. In the second case, S. S. Gadgil v. Lal and Co. : [1964]53ITR231(SC) again the amendment made to the 1922 Act before 1956 and after 1956 were considered in the light of the provisions of the Finance Act, 1956. The Income-tax Officer commenced the proceedings on March 27, 1957, when the period expired on March 31, 1956. Because of amendments, the proceedings were held not barred.
12. Four cases of the Allahabad High Court were cited next on behalf of the assessee. In the first case, Mir Suba Hari Bhakta v. ITO : [1960]39ITR617(All) the question arose under Section 34(1)(c) read with Section 28(1)(c). The issue was whether two sums of Rs. 1 lakh and Rs. 12 were concealed by the assessee. The Allahabad High Court held that a statutory appeal was pending and, for that reason, facts were not decided as the court was considering the issue in a writ petition. The second Allahabad case, Ram Bilas Kedar Nath v. ITO : [1964]54ITR11(All) again arose in a writ petition. In that case, it was held that it was obligatory for the Income-tax Officer to make assessments within a period of four years. The assessment proceedings cannot be kept pending beyond the period of four years to attract Section 28(1)(c) till the end of time on the ground that some concealment or the furnishing of inaccurate particulars might come to light at some distant future date. In the third case from Allahabad, CIT v. Surdjpal Singh : [1977]108ITR746(All) the period for completing the assessment was shown as four years with two exceptions under Section 23 or Section 27. There is discussion in the case as to whether the 1922 Act applies or the 1961 Act. It was held that the case is governed by the former Act. The fourth case from Allahabad is Ram Bilas Kedar Nath v. ITO : [1964]54ITR11(All) which referred to the second Allahabad case and held that if the Income-tax Officer does anything after the expiry of four years, he is required to disclose the material on the basis of which he proposes to take the case out of the normal period of limitation. On facts, if was held that Section 28(1)(c) was not attracted.
13. A Madras High Court case in S. Santosha Nadar v. First Addl. ITO : [1961]42ITR715(Mad) was cited on behalf of the assessee. In this case, the assessee was held to be liable to pay tax of Rs. 1,01,081 in four assessment orders. The High Court considered the case under Article 226 and held that the assessee was to pay only Rs. 64,994. The assessment orders were scrutinised to see whether they were barred under the 1922 Act. As respects the assessment order of 1945-46, it was observed : where an assessee filed the return before the period of limitation, proceedings cannot be commenced under Section 34 as, in that case, the return was filed after the expiry of four years and, therefore, the court held that no assessment could have been validly made on the return filed on March 20, 1954. As respects the assessment order for 1946-47, it was held that, on the facts, the assessee's case did not come within Section 34(3) or Section 28(1)(c). As the assessee did not file the return under Section 34(1)(a), the four-year period of limitation, it was held, was attracted. The assessment for the year 1946-47 was held not barred. There is a Delhi High Court case in H. G. Gupta and Sons v. CIT. That court held that Section 28(1)(c) nowhere required the Income-tax Officer to record the reasons as the statute recited whether the Income-tax Officer had good reasons to hold that the assessee has concealed the income. The above cases were decided on the facts of each case. No rationale can be culled from the cases to answer the instant question.
14. Reverting to the facts of the instant case, the Income-tax Appellate Tribunal held that the proceedings are not barred as the Income-tax Officer was satisfied 'in a bona fide manner' that the assessee concealed the income and the finding is 'not a colourable one'. It is difficult to understand the conclusion reached by the Tribunal. How a conclusion which is not colourable and is reached in a bona fide manner can dislodge the application of the statutory period of limitation is not explained in the order of the Tribunal.
15. Learned counsel for the Revenue, in the instant case, argued pointing out particularly to the fact that on March 27, 1973, the Income-tax Officer was satisfied and, therefore, from that day, the Revenue is entitled to reckon the larger period of eight years under Section 153 read with Section 271 of the Act. It is accepted that, in advancing this plea, the assessee was not made aware on that day that the Revenue is seeking to take the case out of the normal period of limitation. That notices were issued on March 27, is of no consequence as the notices were served on April 9 on the assessee. Now, so far as the first assessment for 1970-71 is concerned, if the satisfaction of the Income-tax Officer is shifted to April 9, the day when notice was served, the proceedings are barred. Therefore, the assessee very stoutly resisted the contention founded on March 27 as, on that day, notices were issued by the Income-tax Officer and were not served on that day. We have in the earlier part of the discussion pointed out that, if the result of the satisfaction of the statutory authorities is evil or civil consequences, the affected persons must be informed as a principle of natural justice or as part and parcel of the rule of audi alteram partem. Therefore, it is not possible to hold that, without information to the assessee, the Revenue can take out the assessment proceedings from the normal period of limitation. The plea that on March 27 the Income-tax Officer was satisfied, therefore, cannot be countenanced.
16. The next question at issue is whether, after a final conclusion reached by the Income-tax Officer, it can be said that the Income-tax Officer was satisfied about concealment by the assessee. This was propounded by learned counsel for the assessee as one of the alternative submissions. Here, we may point out that there is a choice of two dates : the date on which, after an inquiry, when it was finally concluded that the assessee had concealed her income, or the date on which notice was served (April 9). Can it be said that the Revenue is entitled to reckon the larger period of limitation from the latter date. In our view, it would not be inappropriate from the standards of fairness required in such matters if we hold that the Revenue is entitled to reckon the larger period of eight years from the date when the assessee is served with notice informing the assessee that he has concealed the income. It is fair because, on service of notice, the assessee is informed that the proceedings are taken out of the normal period of limitation. Therefore, applying the above test, the assessment order for 1971-72 is not barred but as far as assessment order 1970-71 is concerned, the last date for completion of the assessment was March 31, 1973. The assessee was served with the notice on April 9, 1973, and, therefore, we hold the proceedings are barred.
17. To sum up, assessment orders are to be completed within the normal period prescribed under the Act. Whenever assessees are informed of concealment of income, from that date the assessment, proceedings 'fall' in the larger period of eight years. Such information to the assessee or service of notice also must fall within the normal period of limitation prescribed under the 1961 Act.
18. Before we part with this opinion, we may advert to one argument that was advanced in this regard by learned counsel for the Revenue. Counsel referred to the facts in the instant case showing that there are no extenuating circumstances to stretch the provisions of the enactment to benefit the assessee in this regard. Like pleas are often advanced whenever questions of limitation have the effect of saving the individuals who, by their conduct, do not deserve any compassionate consideration. In courts where British jurisprudence prevails, statutes of limitation are jurisprudential necessities. See the American case, Bell v. Mormon [1828] 1 Pet 351. Limitation is said to be 'a statute of repose'. Corpus Juris Secundum, Vol. 53, at page 901 : 'Statutes of limitation are statutes of repose, the object of which is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when all the proper vouchers and evidences are lost or the facts have become obscure from the lapse of time or the defective memory or death, or removal of witnesses ..... that the statute (of limitation) is for the benefit and repose of individuals and not to secure general objects of policy and morals.' In the U.K., the most ancient case is that of A' Court v. Cross [1825] 3 Bing 329 in that limitation was described as 'an act of peace'. In an opinion expressed in Ampthill Peerage's case [1976] 2 All ER 411 the House of Lords observed : 'Truth may be shut out (by operation of limitation) but society considers truth may be bought. . . the fundamental principle ... (is) that there should be some end to litigation . . .'. We find solace in what is stated to be the eternal verity of life and law that statutes of limitation achieve peace and good administration but do not advance morals and pood conduct.
19. We answer that the assessment order for 1970-71 and the assessment proceedings are barred. The answer is recorded against the Revenue. As respects 1971-72, the assessment order is not barred, and we answer the question against the assessee and in favour of the Revenue. No costs.
B.P. Saraf , J.
20. I agree.