Bhagwati, J.
1. This petition is directed against a notice dated 13th November 1663 issued by the Income-tax Officer, Circle IV, Ward-G, Ahmedabad, under Section 148 of theIncome-tax Act, 1961, (hereinafter referred to as the new Act). The notice is impugned as invalid on three grounds which we shall presently state. But in order to understand and appreciate those grounds, it is necessary to state briefly a few facts. The petitioner was assessed to tax as an individual for the assessment year 1947-48 and his assessment was completed by the Income-tax Officer, Ward E, Circle II, Ahmedabad, by an order of assessment dated 31st January 1952. The Income-tax Officer thereafter received information that a certain profit alleged to have been made by one Natwarlal Manilal Pandit on sale of a plot of land bearing Survey No. 63 at Vastrapur really belonged to the petitioner since Natwarlal Manilal Pandit was merely a benamidar of the petitioner and that the said profit had escaped assessment by reason of the petitioner not having disclosed it at the time of the original assessment. The Income-tax Officer, therefore after obtaining the approval of the Commr. of Income-tax issued a notice dated 27th March 1956 under Section 34(1)(a) of the Income-tax Act, 1922, (hereinafter referred to as the old Act) The notice was attempted to be served by the process server on the petitioner at his residence on or about 31st March 1956. The petitioner was, however, not at his residence, having temporarily gone out of Ahmedabad to Vatwa in order to attend the meeting of the Vatwa Panchayat of which he was the Sarpanch and the notice could not, therefore, be served on him personally at that time. On the process server making a report to that effect, the Income-tax Officer directed the process server to effect service by affixing the notice on a conspicuous part of the petitioner's house and pursuant to this direction, the process server affixed the notice on the door of the petitioner's house at about 9.00 A.M. on 31st March 1956 in the presence of two witnesses, who identified the house as that of the petitioner. The petitioner thereafter received ft letter dated 13th September 1956 from the Income-tax Officer in which it was alleged that in respect of the sale of the plot of land at Vastrapur, Natwarlal Manilal Pandit was a benamidar of the petitioner and that the income earned by him on the sale of that plot of land was really the income of the petitioner and was, therefore, liable to be taxed as income in the hands of the petitioner and the petitioner was accordingly called upon to submit a return of his income for the assessment year 1947-48. In reply to this letter the petitioner pointed out to the Income-tax Officer that no notice under Section 34(1)(a) was served on him and he was, therefore, not liable to furnish a return of his income, but since the Income-tax Officer threatened to make an ex parte assessment, the petitioner filed a return of his income under protest on 16th January 1957. In the return the petitioner showed the same amount of income which was determined in the original assessment. Despite the objection raised by the petitioner that notice under Section 34(1)(a) was not served on him, the Income-tax Officer proceeded to re-assess the income of the petitioner for the assessment year 1947-48 and passed anorder dated 29th March 1987 determining the total income of the petitioner at Rs. 89,000 by including the profit alleged to have been earned by Natwarlal Manilal Pandit on the sale of the plot of land at Vastrapur as income of the petitioner. The petitioner preferred an appeal to the Appellate Assistant Commissioner against the order of assessment and one of the grounds raised by the petitioner in the appeal was that the order of assessment was bad since notice under Section 34(1)(a) was not served on the petitioner as required by the Section. This ground was upheld by the Appellate Assistant Commissioner who took the view that the service of the notice purported to be effected by affixing it on the door of the petitioner's house was not valid inasmuch as the condition on which such service could be effected, namely, that the party to be served could not be found, was not fulfilled in the present case and the order of assessment made by the Income-tax Officer without serving notice under Section 34(1)(a) on the petitioner was, therefore, bad in law and liable to be set aside. The Appellate Assistant Commissioner accordingly cancelled the assessment made by the Income-tax Officer without going into the merits of the assessment. The Revenue accepted the decision of the Appellate Assistant Commissioner and did not carry the matter higher in appeal to the Tribunal. Now this decision was given by the Appellate Assistant Commissioner on 5th January 1963 by which time the old Act had been repealed and the new Act had come into force with effect from 1st April 1962. The time for taking action for assessment or reassessment in case of escaped income exceeding Rs. 50,000 but less than Rs. 1,00,000 was enlarged from eight years to sixteen years under the new Act and the Income-tax Officer, Circle IV, Ward G, Ahmedabad, therefore, issued a notice dated 4th July 1963 calling upon the petitioner to show cause why proceedings should nol be taken under Section 147(a) of the new Act for bringing to tax the escaped profit of the petitioner on the sale of the plot of land at Vastrapur. The petitioner by his letter dated 15th July 1983 disputed the jurisdiction of the Income-tax Officer to initiate proceedings under Section 147(a) but the Income-tax Officer, it appears, was not impressed by the arguments put forward by the petitioner and he accordingly issued the impugned notice dated 13th November 1963 under Section 148 for reassessing the income of the petitioner for the assessment year 1947-48 and served it on the petitioner. This notice was followed by another notice dated 9th January 1964 issued under Section 142(1). The petitioner, therefore, filed the present petition against the Income-tax Officer and the Commissioner of Income-tax as respondents challenging the validity of the two notices dated 13th November 1963 and 9th January 1964 and praying for issuance of an appropriate writ to quash and aet aside those notices. Though the validity of both the notices was challenged, the main attack was against the notice dated 13th November 1963 and the challenge to the notice dated 9th January 1964 was only consequential. Thequestion which, therefore, arises in the petition is whether the notice dated 13th November 1963 was a valid notice.
2. In order to appreciate the contentions that have beeu urged before us, it is necessary to refer briefly to the relevant provisions of the old Act and the new Act. Section 34 of the old Act as it stood immediately prior to its amendment by the Finance Act 1956. was in so far as it is material for our present purpose, in the following terms:
'34. (1) If--
(a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under Section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act or excessive loss or depredation allowance has been computed, or
(b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his posses-sion reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been underassessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under Clause (a) at any time within eight years and in cases fall-ing under Clause (b) at any time within four years of the end of that year, serve on the assessee, or if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which maybe included in a notice under Sub-section (2) of 3. 22 and may proceed to assess or re-assess such income, profits or gains or recompute the loss or depreciation allowance, and the provisions of this Act shall, so far as may be apply accordingly as if the notice were a notice Issued under that Sub-section:
Provided that:
(1) the Income-tax Officer shall not issue a notice under this Sub-section, unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit rase for the issue of such notice:
xxxxxxxxxxProvided further that nothing in this section limiting the time within which any action may be taken, or any order, assessment or re-assessment may be made, shall apply to a re-assessment made under Section 27 or to an assessment or re-assessment 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.'
This was the form in which Section 34 stood at the time when the notice dated 27th March 1956 was issued by the Income-tax Officer under Clause (a) or Sub-section (1) of that Section. By the Finance Act, 1956, certain amendments of a far-reaching character were made in Section 34 with effect from 1st April 1956. The time limit of eight years in Sub-section (1) in respect of cases falling within Clause (a) was removed and the following provisos were sub-stituted for the existing proviso in sub-sec-tion (1):
'Provided that the Income-tax Officer shall not issue a notice under Clause (a) of Sub-section (1)--
(i) for any year prior to the year ending on the 31st day of March, 1941;
(ii) for any year, if eight years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income-tax which have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year, or for that year, and any other year or vears after which or after each of which eight years have elapsed, not being a year or years ending before the 31st day of March, 1941;
(iii) for any year, unless he has recorded his reasons for doing so, and, in any case falling under Clause (ii), unless the Central Board of Revenue, and, in any other case, the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice:xxxxx'
On the Section so amended, tho question arosewhether after the deletion of the time limit ofeight years in cases involving escapement ofincome exceeding Rs. 1 lac, a notice couldissue under Clause (a) of Sub-section (1) of Section 34 even though such notice was barred byreason of the expiration of the period of eightyears at the date when the amendment madeby the Finance Act, 1956, came into force.The High Court of Calcutta held in Debi Duttv. T. Bellan : AIR1959Cal567 , that once theright of the Income-tax Officer to proceedunder Clause (a) of Sub-section (1) of Section 34as it stood prior to its amendment by theFinance Act, 1956, was barred by reason ofthe expiration of the period of eight years, itwas not revived by the deletion of the timelimit of eight years from Clause (a) of subsection (1) of Section 34. This decision led to thepassing of an Ordinance and later the IndianIncome-tax (Amendment) Act, 1959. ThisAmending Act added Sub-section (4) to Section 34providing for issue of notice under Clause (a)of Sub-section (1) at any time notwithstandingthe expiration of the period of eight years provided under the Section as it stood prior toits amendment by the Finance Act, 1956, andalso enacted Section 4 for validating notices issuedprior to the commencement of the AmendingAct even though at the time when such noticeswere issued, the time within which such noticesshould have been issued under Clause (a) ofsub-section (1) of Section 34 as in force before itsamendment by the Finance Act, 1930, had expired. These were the relevant provisions of Section 34 as they stood at the time when the new Act came into force from 1st April 1962. By sub section (1) of Section 297 the new Act repealed the old Act and by Sub-section (2) of that Section the new Act enacted certain saving provisions consequent upon repeal of the old Act, of which the material one is that set out in Clause (d). It was in the following terms:
'297 Repeals and savings:
(1) xxxxx
(2) Notwithstanding the repeal of the Indian Income-tax Act, 11 of 1922 (hereinafter referred to as the repealed Act),--
xxxxx (d) where in respect of any assessment year after the year ending on the 31st day of March 1940,--
(i) a notice under Section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed;
(ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under Section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under Section 148 may, subject to the provisions contained in Section 149 or Section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly.'
Sections 147 to 150 referred to in Section 297(2) (d)(ii) and Ss. 151 to 153 were the provisions of the new Act corresponding to Section 34 of the old Act. In the new Act Section 34 of the old Act was split up into Ss. 147 to 163. Section 147 empowered the Income-tax Officer to assess or re-assess escaped income in the same kind of rases in which he could do so under Section 34 but that right could be exercised only subject to the provisions of Sections 148 to 153. Sub-section (1) of Section 148 provided inter alia that before making any assessment or reassessment under Section 147. the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Section 139(2) and Sub-section (2) of that Section imposed an obligation on the Income-tax Officer, before issuing such notice, to record his reasons for doing so. Section 149 laid down different time limits for issuing notice and in cases falling within Clause (a) of Section 147 corresponding to Clause (a) of Sub-section (1) of Section 34 time limits were prescribed in the following words:
'149. Time limit for notice: (1) No notice under Section 148 shall be issued,
(a) in cases falling under Clause (a) of Section 147--
(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (ii);
(ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely toamount to rupees fifty thousand or more for that year;xxxxx'
Section 150, Sub-section (1) made an exception in cases where assessment or reassessment is sought to be made in consequence of or togive effect to any finding or direction containedin an order passed by any authority in anyproceeding under the Act by way of appeal,reference or revision and provided that in suchcases there shall be no time limit and noticeunder Section 148 may be issued at any time unlessof course the case fell within Sub-section (2)of Section 150. Section 151 made it a condition precedent to the issue of notice under Section 148that the Income-tax Officer should obtain theprevious sanction of the Central Board ofRevenue or the Commissioner of Income-taxaccording as the notice is proposed to be issued after the expiry of eight years from the endof the relevant assessment year or after theexpiry of four years from the end of the relevant assessment year. Sections 152 and 153made other provisions in regard to assessmentand reassessment but they are not material andwe need not, therefore, refer to them. Theseare the relevant provisions which have a bearing on the determination of the question beforeus and it is in the light of these provisions thatwe must examine the validity of the noticedated 13th November 1963.
3. Now the notice dated 13th November 1963 was admittedly issued under Section 148 and it is, therefore, clear that the Income-tax Officer by issuing the notice proposed to reassess the income of the petitioner under Section 147. Section 147, however, by its express language applies only to assessment years subsequent to the coming into force of the new Act for Clause (a) makes it a condition of its applicability that the escapement from assessment should have taken place by reason of omission or failure on the part of the assessee to make a return under Section 139 for the relevant assessment year and no return for the relevant assessment year could be filed under Section 139 unless the relevant assessment year fell to be governed by the new Act. On its own terms, therefore, Section 147 could not be invoked by the Revenue for reassessing the income of the petitioner for the assessment year 1947-48. But reliance was placed on behalf of the Revenue on Section 297(2)(d)(ii) and it was contended that by virtue of that provision the Income-lax Officer was entitled to issue notice under Section 148 for reopening the assessment of the petitioner for the assessment year 1947-48 and the impugned notice was, therefore, within jurisdiction. It was not disputed that if the right to reopen the assessment could not be found in Section 297(2)(d)(ii) there was no other provision in the new Act which empowered the Income-tax Officer to reopen the assessment by issuing notice under Section 148 and in that event the impugned notice would be bad. The validity of the impugned notice thus depended on the true interpretation of the scope and effect of Section 297(2)(d)(ii). If the impugned notice was covered by Section 297(2)(d)(ii), it would be valid but not so, if it was not covered by that Section.
4. Mr. B. G. Thakore, learned advocate appearing on behalf of the petitioner, there-fore, attacked the applicability of Section 297(2)(d)(ii) at three points. In the first place he contended that proceedings initiated by the Income tax Officer by issue of the notice dated 27th March 1956 under Section 34(1)(a) were pending at the commencement of the new Act and the conditions requisite for the applicability of Section 297(2)(d)(ii) were, therefore, not satisfied so as to authorize the Income-tax Officer to issue the impugned notice under Section 148. When his attention was drawn to the order of the Appellate Assistant Commissioner, he agreed that it was undoubtedly true that by that order the re-assessment of the income of the petitioner under Section 34(1)(a) was cancelled but he pointed out that the reason for which the reassessment was cancelled WHS not that the notice was bad but that the notice was not duly served on the petitioner. He urged that the only, effect of the order of the Appellate Assistant Commissioner was to declare the service of the notice bad and not to quash or set aside the notice and the notice, therefore, remained pending and along with it remained pending the proceedings under Section 34(1)(a) initiated by the issue of the notice. It may be, he argued, that the proceedings could not be continued further under Section 34(1)(a) because the time-limit for the service of the notice having expired on 3lst March 1950, the notice could nol be served on the petitioner but that did not mean that the proceedings initiated by the issue of the notice ceased to exist. This contention was based on the premise that the stage of issue of notice was anterior in point of time to the stage of service of notice and proceedings under Section 34 commenced on the issue of the notice and the commencement of the proceedings had nothing to do with the service of the notice. This premise was sought to be supported by reference to the provisions of Section 34 where the Legislature has used at some places the word 'served' and at other places the word 'issued' and the argument was that the fact that the legislature has used two different words in the same Section showed that the Legislature wanted to convey different meanings by those words and that the stages denoted by those words were, therefore, distinct and different stages, the stage of issue of notice being the first stage and the stage of service of notice being the next stage following upon the first stage of issue of notice. In this connection reliance was also placed on a decision of a Division Bench of this Court in Madanlal Muthurdas v. Chunilal, Income-tax Officer, Ward 'C' : [1962]44ITR325(Guj) , where Desai C. J., as he then was and Miabhoy J., look the view while interpreting the first proviso to Section 34 as amended by the Finance Act, 1956, that the word 'issue' in that proviso could not be equated with the word 'serve' and that the issue of the notice was a different and an anterior stage and the service of the notice followed upon the issue of the notice. It was contended on the basis of this decision that since the issue of the notice was the first stage in the initia-tion of proceedings under Section 84, the proceedings under Section 34 must be held to commence on the issue of the nolice irrespective of the question as to whether and when the notice was served.
5. Now it is undoubtedly true that according to the decision of Desai C. J., as he then was and Miabhoy J., in : [1962]44ITR325(Guj) the words 'issue' and 'serve' as used in Section 34 cannot he equated with each other and that the stage of issue of notice is a distinct and different stage from the stage of service of notice and ordinarily this decision being a decision of a Division Bench of this Court would be binding upon us, but having regard to the subsequent decision of the Supreme Court in Banarasi Debi v. Income tax Officer : [1964]53ITR100(SC) , this decision can no longer be regarded as good law and its authority must he held to have been impliedly overruled, though we may point out that even if the view taken by the Gujarat High Court in this decision were correct, we should still have found considerable difficulty in accepting the contention that the proceedings under Section 34 commence on the issue of the notice. The Supreme Court in the decision to which we have just referred pointed out that the words 'issued' and 'served' are used as interchangeable terms in the context of notices issued under Section 34 and that where the legislature has used the word 'issued' in the context of such notices, that word is used in the same sense as the word 'served'. This decision of the Supreme Court made it clear that so far as notices under Section 34 are concerned, there are no two distinct and separate stages such as the stage of issue of notice and the stage of service of notice: the notice is issued to the assessee when it is served upon him. If that be the position, the entire foundation on which the superstructure of the argument urged on behalf of the petitioner is based must disappear. There being only one stage, whether it be described as issue of notice or as service of notice, the proceedings under Section 34 would commence when the step envisaged in that stage is taken and that would he when the notice is served on the assessee. As a matter of fact when we turn to Section 34(1) we find that the first step which the Income-tax Officer is required to take where he decides to initiate proceedings for assessment or reassessment of the income of the assessee is to serve notice on the assessee. The service of the notice on the assessee being the first step contemplated by Section 34(1), it must follow that the proceedings under Section 34(1) commence only when the notice is served on the assessee. This apart, it is difficult to see how any proceedings under Section 34(1) can he regarded as having commenced when the nolice is merely prepared and signed by the Income-tax Officer and not served on the assessee. The notice may remain in the drawer of the Income-tax Officer for any length of time without being served on the assessee and even if it is handed over by the Income-tax Officer to the process-server for service, it may be lost by the process-server or it may remain un-served with the process-server and the assesseemay not come to know about it for a considerable period of time in such a case, in the absence of service of the notice on the assessee, it would not be possible to say that the proceedings have commenced against the assesses. The proceedings must commence by some overt act on the part of the Income-tax Officer and that overt act can only be service of the notice on the assessee. It is, therefore, clear that the proceedings under Section 34(1) commence only on the service of the notice on the assessee and until the notice is served on the assessee, it is not possible to say that there are any proceedings under Section 34(1) pending against the assessee Now what the order of the Appellate Assistant Commissioner did was to declare the service of the notice had with the result that the notice remained as it was drawn up and prepared by the Income-tax Officer but not served on the petitioner. Unless the notice was served on the petitioner, no proceedings under Section 34(1)(a) could be said to have started against the petitioner and there were, therefore, no proceedings under Section 34(1)(a) pending against the petitioner at the commencement of the new Act. This attack against the applicability of Section 297(2)(d)(ii) must, therefore, fail.
6. Mr. B. G. Thakore then contended--and this was an alternative contention under the same head as the previous contention--that, in any event, at the date of the commencement of the new Act, the appeal preferred by the petitioner against the order of assessment made by the Income-tax Officer under Section 34(1)(a) was pending and the appeal being merely a continuation of the original proceedings, the proceedings under Section 34(1)(a) must be said to be pending at the commencement of the new Act. Now this contention ignores the true effect of the order of the Appellate Assistant Commissioner. As we have pointed out above the Appellate Assistant Commissioner held that the notice was not served on the petitioner and, therefore, the proceedings which resulted in the order of assessment were null and void. Since the notice was not served on the petitioner, no proceedings actually commenced against the petitioner and it was for that reason that the order of assessment passed by the Income-tax Officer was cancelled by the Appellate Assistant Commissioner. There were, therefore, no proceedings under Section 34 pending at the commencement of the new Act of course an appeal was pending but the appeal was not a proceeding under Section 34. When Section 297(2)(d)(ii) says that no proceedings under Section 34 should be pending at the commencement of the Act. the reference ts to valid proceedings and not to proceedings which are null and void and are, therefore, no proceed ings at all. If we turn to Section 297(2)(d) we find that sub-clauses (i) and (ii) of Section 297(2)(d) deal with two different kinds of cases which are in a sense complementary and supplementary to each other Where at the commencement, of the new Act proceedings under Section 34 arc pending, they must be continued and disposed of under the old Art and this proposition postulates that the proceedings must be such as can be continued and disposed of under the old Acl, that is, they must be valid proceedings. But where no valid pro-cecdings are pending under Section 34 at the commencement of the new Act which can terminate in an order of assessment under an old Act, the right to reopen the assessment which can no longer be exercised under Section 34 since the old Act is repealed, can now he exercised by resort to the machinery provided in Section 147 subject to the conditions set out in Ss. 148 to 150. It is, therefore, clear that the proceedings which are contemplated by these Sub-clauses of Section 297(2)(d) are valid proceedings under Section 34 and since in the present case there were no valid proceedings under Section 34 pending at the commencement of the new Act as held by the Appellate Assistant Commissioner in an order which has been accepted by both sides, the applicability of Section 297(2)(d)(ii) cannot be repelled by the petitioner on such ground.
7. The second point at which the applicability of Section 297(2)(d)(ii) was attacked on behalf of the petitioner was that there was no escapement of income from assessment within the meaning of that expression as used in Section 147 so as to attract the applicability of Section 297(2)(d)(ii). The argument was that so long as any proceedings are pending for assessment or reassessment of the income of an assessee, such income cannot be said to have escaped assessment, for it may be brought to tax as a result of an order of assessment which might be made in those proceedings. The argument was that proceedings for bringing to tax escaped income of the petitioner were pending since the notice dated 27th March 1950 was not quashed or set aside and until those proceedings terminated in an order of assessment, it could not he said that the income of the petitioner had escaped assessment. Now this contention suffers from a double fallacy. In the first place as we have already pointed out above, no proceedings under Section 34 were pending either at the commencement of the new Act or at the date when the impugned notice was issued by the Income-tax Officer and the foundation for the argument urged on behalf of the petitioner is, therefore, lacking. Moreover, even if the view be taken that proceedings wore initiated by the issue of the notice and that the notice not having been quashed or set aside, the proceedings were pending, they admittedly could not be continued under Section 34 inasmuch as the time within which the notice was required to be served under Clause (a) of Sub-section (1) of Section 34 expired on 31st March 1956 and the notice could not be served thereafter and if the proceedings could not be continued so as to result in an order of assessment, if is difficult to sec how if can be said that the Income of the petitioner had not escaped assessment. The income of the petitioner was not brought to tax at the time of the original assessment and it, therefore, escaped assessment at that time and it also could not be brought to tax by the issue of the notice under Section 34(1)(a) since the notice could not be served within time and if, therefore, remained income which had escaped assessment. This contention urged on behalf of the petitioner must, therefore, be rejected.
8. The third head of attack against the applicability of Section 207(2)(d)(ii) was that the right of the Income-tax Officer to reopen the assessment of the petitioner for the assessment year 1947-48 was barred under the old Act before the new Act came into force and Section 297(2)(d)(ii) did not revive the right of the Income-fax Officer to reopen the assessment which was already barred under the old Act. It was contended on behalf of the petitioner that to construe Section 297(2)(d)(ii) as reviving the right of the Income-tax Officer to reopen an assessment which was already barred under the old Act would be to give retrospective operation to the Section which the Court should be disinclined to give unless such retrospective operation is required to be given either by express words used in the Section or by necessary intendment. The argument was that there were no express words nor was there any necessary intendment of the Legislature which can be gleaned from the language used in the lection which showed that the Legislature intended to revive the right of the Income-tax Officer which was already barred under the old Act and the Section must, therefore, be read as applicable only to those cases where the right of the Income-lax Officer to reopen the assessment was not barred and in such cases that right which was alive at the date of the commencement of the new Act could he exercised under Section 297(2)(d)(ii) by resort to the machinery provided in Ss. 147 to 190. The validity of this contention was disputed by the learned Advocate General appearing on behalf of the Revenue and his argument was that Section 297(2)(d)(ii) was wide in its sweep and it took in all assessment years after the year ending on 31st March 1940 irrespective of the fact whether the right to reopen the assessment in respect of any such assessment years was barred or not under the old Act at the dale when the new Act came into force. According to him the legislative intent was that once the new Act came into force, the question whether the assessment in respect of any assessment year after the year ending on 31st March 1940 should be liable to be reopened or not should be decided by reference to the provisions of the new Act and if the provisions of the new Act authorized the reopening of such assessment, such reassessment should be reopened whatever might have been the position in regard to the right to reopen such assessment under the old Act. These rival contentions raised an interesting question in regard to the retrospective operation of Section 297(2)(d)(ii).
9. Now it is settled law that if the right of the Income-tax Officer to reopen an assessment is barred under the law for the time being in force, no subsequent enlargement of the time can revive such right in the absence of express words or necessary intendment. This principle is really based on the well known rule of interpretation that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to affect, alter or destroy any right already acquired or so as to revive any remedy already lost by efflux oftime. It is always presumed in such case that the Legislature does not intend to deprive a person from pleading that the right or remedy sought to he enforced against him as Income barred before the new provision of law come into operation. This principle was applied by the Calcutta High Court in : AIR1959Cal567 . In that case the question was whether the deletion of the time limit of eight years in Clause (a) of Sub-section (1) of Section 34 by the Finance Act, 1956, entitled the Income-tax Officer to reopen an assessment where the right to do so had become harred under the Section as it stood prior to its amendment by the Finance Act, 1956. Strong reliance was placed on behalf of the Revenue on the general words used in the amended Section 34(1)(a) because those words applied to any assessment year after the year ending on 31st March 1940 and it was contended that those general words look within their sweep all assessment years subsequent to the year ending on 31st March 1940 without any reference to the question whether the right to reopen the assessment in respect of any such assessment years was or was not barred under the unamended Section. This contention of the Revenue was, however, rejected by the Calcutta High Court which look the view that as soon as the time within which notice could be served under the unamended Section expired, the right of the Income-tax Officer to reopen the assessment came to an end and the assessee was entitled fo tell the Revenue that the Revenue was not eutitled to reopen the assessment any more and unless the language of the amended Section provided in express terms or by necessary implication that the right of the Income-tax Officer to reopen the assessment was revived and correspondingly the right of the assessee not to have the finality of his assessment disturbed by any reopening of the assessment was taken away, the general words used in the amended Section could not be read as achieving any such effect. The general words of the amended Section must be read as applicable only to those cases where the right of the Income-tax Officer to reopen the assessment was not barred under the unamended Section and in such cases the right of the Income-tax Officer to reopen the assessment not having been lost, there would be no question of giving retrospective operation to the amended Section and the rigid of the Income-tax Officer to reopen the assessment could be exercised under the amended Section. The same principle was also applied by the Bombay High Court in S.C. Prashar v. Vasantsen Dwarkadas : [1956]29ITR857(Bom) where the Bombay High Court took the view that once the right of the Income-tax Officer to reopen the assessment under S 34 as it stood prior to its amendment by the Income-tax (Amendment) Act, 1956 was barred by lapse of time it could not be revived by reason of the newly amended proviso to Section 34(3) which did away with time-limit in certain cases. This decision was of course taken in appeal and was reversed by the Supreme Court, but on this point, out of five Judges, two Judges expressed one view, two Judgesexpressed another view and the fifth Judge did not express any view at all with the result that the decision of the Bombay High Court stood unreversed so far as this point is concerned. This principle was also applied by us in a decision given last year in Mathuradas Govinddas v. G. N. Gadgil, (1964) 5 GLR 746.
10. But apart from the authority of the decision of the Bombay High Court in : [1956]29ITR857(Bom) , and the authority of the decision of this High Court in 1964 5 GLR 746 (supra), we have now the authority of the decision of the Supreme Court in S.S. Gadgil v. Lal & Co. : [1964]53ITR231(SC) . That was a case where a notice of re-assessment was issued against the assessee as agent of a non-resident on 27th March 1957 and that notice related to the assessment year 1054-55. Under Clause (iii) of the proviso to Section 34(1) as it stood prior to its amendment by the Finance Act, 1958, a notice, of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident after the expiry of one year from the end of the vcar of assessment. The right to commence a proceeding for assessment against the assessee as agent of a non-resident for the assessment year 1954-55 therefore ended on 31st March 1956 under the Act before it was amended in 1956. This provision was, however, amended by the finance Act, 1956, and under the amended provision the period of limitation was extended to two years from the end of the assessment year. The amendment was made on 8th September 1958 but was given retrospective effect from 1st April 1956. Since the time within which notice could be issued against a person deemed to he an agent of a non-resident was extended to two years from the end of the assessment year, the Revenue, contended that the notice issued by the Income-tax Officer was within the terms of the amended provision and was, therefore, a valid notice. Now the notice having been issued on 27th March 1957, was clearly within a period of two years from the end of the assessment year 1954-55 and if the amended provision applied, the notice would be a valid notice The Supreme Court, however, look the view that the notice was not a valid notice inasmuch as the right of the Income-tax Officer to reopen the assessment of the assessee under the unamended provision became barred on 31st March 1956 and the amended provision did not operate retrospectively so as to authorize the Income-tax Officer to commence proceedings for reopening the assessment of the assessee in cases where before the amended provision came into force, the proceedings had by the expiry of the period provided in the un amended provision become barred. Shah J., delivering the judgment of the Supreme Court observed :
'The power to issue a notice under the un-amended Act came to an end on March 31, 1956. Under that Act no notice could thereafter be issued It is true that by the amendment made by Section 18 of the Finance Act, 1956, a notice could be issued within two years from the end of the year of assessment. But theapplication of the amended Act is subject to the principle that, unless otherwise provided, if the right to act under the earlier statute has come to an end. It could not be revived by the subsequent amendment which extended the period of limitation. The right to issue a notice under the earlier Act came to an end before the new Act came into force....' Again towards the end, the learned Judge observed: '.. The legislature has given to Section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., upto April 1, 1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred.' The Supreme Court thus approved of the principle that where the right of the Income-tax Officer to recover tax by reopening the assessment of an assessee has come to an end under the law for the time being in force, such right would not be revived by the provision of an extended time limit in a new Act unless there is express provision or clear implication to that effect. The Supreme Court of course held that the period prescribed by Section 31 is not a period of limitation but it pointed out that the Section in terms imposes a letter on the power of the Income-tax Officer to bring to tax escaped income. To quote the words of Shah J., Section 34 prescribes different periods in different classes of cases for enforcement of the right of the State to recover tax'. Once this right of the State to bring to tax escaped income comes to an end by reason of lapse of the time limit provided for taking of action under the law for the time being in force, then unless there is express provision or necessary implication, a subsequent Act which enlarges the time for enforcement of the right to bring to lax escaped income, does not revive the right to bring to tax escaped income which has already come to an end before the subsequent Act came into force. The learned Advocate General appearing on behalf of the Revenue, however, contended that the ratio of this decision can have no application to the present case since in the present case there was no amendment of Section 34 as was the case before the Supreme Court, but the whole of the old Art was repealed and a new Act had taken its place and the principle laid down by the Supreme Court in this decision should nol, therefore, be applied in the interpretation of Section 297(2)(d)(ii) of the new Act. We cannot accept this contention. So far as the application of the principle laid down by the Supreme Court in this decision is concerned, we do not see any difference between a position where a Section in a statute is amended and a position where a statute is repealed and another statute takes its place. The rule of interpretation on which this principle is based is, as we have already pointed out above, that no statute should be construed as retrospective in operation if it has the effect of altering, modifying or affecting existing rights unless the statute says so in express words or by necessary implication. This rule of interpretation is equally applicable whether the occasion which calls for its application is an amendment of an existing statute or the repeal of an existing statute by enactment of a new statute. We are, there fore, of the opinion that the principle of this decision of the Supreme Court must apply in the present case and we must ask ourselves the question whether there are any express words or there is any necessary intendment which would show that the Legislature intend ed to attribute to Section 297(2)(d)(ii) a retrospective operation so as to revive the right of the Income-tax Officer to reopen an assessment which was already barred under the old Act. That is a pure question of construction of Section 297(2)(d)(ii) to which we will now address ourselves.
11. Now one thing is clear from the authorities to which we have referred above, that mere general words in a Section arc not enough to warrant any retrospective operation being given to the section as a matter of construction. As we have pointed out above, the words in Section 34(1)(a) as amended by the Finance Act, 1956, which came up for consideration in AIR 1950 Cal 567 (supra) were general in scope. So also were the words in the amended proviso to Section 34(3) which came up for consideration in : [1956]29ITR857(Bom) , general in character. And yet it was held in both these cases that they were not sufficient to indicate that the Legislature intended to give a retrospective operation to the provisions in question. There must be some definite indication in the language of the provision showing that the Legislature intended that the provision should have a retrospective operation. We do not find any such indication in Section 297(2)(d)(ii) either in its express words or by way of necessary intendment. On the contrary there is, in our opinion, the clearest legislative intent that Section 297(2)(d)(ii) should not have a retrospective opera lion. Of course we must make it clear that when we say that Section 297(2)(d)(ii) has no retrospective operation, we do not wish to suggest that it does not operate in respect of past assessment years. On its own terms and by its express language, it operates in respect of pasl assessment years. Where income chargeable to tax has escaped assessment in respect of any past assessment year after the year ending 31st March 1940 and no proceedings under Section 34 in respect of such income are pending at the commencement of the new Act, a notice under Section 148 may he issued with respect to such assessment year. But where the right to reopen the assessment in respect of any such assessment year was barred under the old Act, the Revenue cannot take shelter behind Section 297(2)(d)(ii) for the purpose of proceeding in respect of such assessment year it is only in such a case that the question of giving retrospective operation arises in a case where the right to reopen the assessment was not barred under theold Act, there would be no existing right of the assessee which would be liable to be affect-ed nor would then be any question of reviving a right alreadv tost and hence there would be no question of giving retrospective operation to Section 297(2)(d)(ii). It is only where the right to reopen the assessment was barred under the old Act and the assessee had acquired the right to tell the Revenue that the assessment was final and could not be reopened, that the question would arise whether this right was intended to be taken away by the Legislature by enacting Section 297(2)(d)(ii). Now it is significant to note that Section 297(2)(d)(ii) occurs as a saving provision. Sub-section (1) of Section 297 repeals the old Act and Sub-section (2) of that Section enacts various saving provisions consequent on the repeal of the old Act. Now there may be two classes of cases at the commencement of the new Act. One class of cases may be where a notice to reopen the assessment under Section 34 may have already been issued and the proceedings in pursuance of such notice may he pending at the commencement of the new Act. In such a case Section 297(2)(d)(i) provides that such proceedings shall be continued and disposed of under the old Act. This provision had to be made because otherwise the old Act being repealed, the proceedings commenced under the old Act would also fall along with the old Act and, therefore, a saving provision was enacted that notwithstanding the repeal of the old Act, the proceedings shall be continued and disposed of under the old Act. The other class of cases may be where the Income-tax Officer had the right to reopen the assessment, but that right was not exercised by issue and service of notice under Section 34. In such a case, on the repeal of the old Act. the right of the Income-tax Officer to reopen the assessment would also go along with the old Act and the Income-tax Officer would not, thereafter, be entitled to reopen the assessment The right of the Income-tax Officer to reopen the assessment would he destroyed by reason of the repeal of the old Act. The Legislature, with a view to saving this right, enacted Section 297(2)(d)(ii) and provided that in such a case where no proceedings under Section 34 were pending, the Income-tax Officer may exercise the right to reopen the assessment by resorting to the machinery provided in the new Act. The Legislature thus saved the right of the Income-tax Officer to reopen the assessment and made it exercisable by him by issuing notice under Section 148 subject to the provisions contained in Ss. 149 and 150. But where the right of the Income tax Officer to reopen the assessment was already lost by reason of lapse of lime under the old Act, there was nothing to be saved and Section 297(2)(d)(ii) which enacted a saving provision could not have been intended to revive such right of the Income lax Officer. It must be remembered that in effect and substance Section 297(2)(d)(ii) is a saving provision and it would not be right to say that the Legislature in the guise of a saving provision enacted a provision conferring a new right oh the Income-tax Officer to reopen an assessment in cases where his right to reopenthe assessment was lost before the new Act came into force and be had no such right at the date of the commencement of the new Act. If the Legislature wanted to confer such right the Legislature would have enacted an appropriate provision using appropriate language and would not have left its intention to be gathered by doubtful implication from the language of a provision relegated to the Section dealing with repeals and savings.
12. The learned Advocate General on behalf of the Revenue laid strong emphasis on the words 'where in respect of any assessment year after the year ending on the 31st day of March, 1940' occurring at the commencement of Section 297(2)(d)(ii) hut these general words cannot, as we have pointed out above, avail the Revenue. There is no doubt a reference made in the Section to past assessment years right upto the assessment year immediately after the year ending on 31st March 1940, but that reference had to he made because under Section 34 as it stood immediately prior to the coming into force of the new Act, the reopening of the assessment could not extend to assessment years prior to the assessment year ending 31st March 1941 and since the intention of the Legislature in enacting Section 297(2)(d)(ii) was to save only the existing right of the Income-tax Officer to reopen an assessment and not to extend it further backwards, the Legislature introduced the same limitation also in Section 297(2)(d)(ii). In a case falling under Section 150 their would be no limitation of time and the Income-tax Officer could, therefore, go as far hack as be liked, but the Legislature obviously wanted to stick to the policy which it had evolved under the old Act and it, therefore, provided that the Income-tax Officer should not he entitled to go further backwards than the assessment year ending 31st March 1941. The reference to the past assessment years upto the assessment year ending 31st March 1941 does not therefore throw any light on the question whether the Legislature intended to revive the right of the Income-tax Officer to reopen an assessment which was already barred under the old Act.
13. We arc, therefore, of the view that on a true construction of Section 297(2)(d)(ii), the Income-tax Officer cannot issue a notice under Section 148 in order to reopen the assessment of an assessce in cases where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. The righl of the Income-tax Officer to reopen the assessment of the petitioner in the present ease was admittedly barred under Section 34(1)(a) at the commencement of the new Act and it was, therefore, not competent to the Income-tax Officer to issue a notice under Section 148 in order to reopen the assessment of the petitioner and to reassess the income of the peti-tioner by relying on the provision enacted in Section 297(2)(d)(ii). The notice dated 13th November 1963 was, therefore, beyond jurisdiction and must be set aside. Along with that notice, the subsequent notice dated 16th January 1964 must also fall.
14. In the result we allow the petition find issue a writ of mandamus quashing andsetting aside the notices dated 13th November1963 and 16th January 1964 issued against thepetitioner. The respondent will pay the costsof the petition to the petitioner.