Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the following questions have been referred to this court:
'(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of the Indian Income-tax Act, 1922, were not saved for the purpose of completing the assessment under Section 23(4) of the Indian Income-tax Act, 1922, after April 1, 1962, in a case where a notice under Section 22(2) has been validly served prior to that date but no return had been filed and in that view cancelling the order under Section 23(4) for the assessment year 1961-62 ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of the Income-tax Act, 1961, were not applicable and the order under Section 23(4) of the Indian Income-tax Act, 1922, could not be sustained as having been passed u/s. 144 of the Income-tax Act, 1961 ?
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the validity of the ex parte order could be decided upon in the appeal against the order under Section 27 of the Indian Income-tax Act, 1922 ?
(iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalties under Section 271(1)(a)/ 273(a) of the Income-tax Act, 1961 ?'
2. In order to appreciate the questions, we have to refer to certain facts. The above questions arose out of the assessment for the assessment year 1961-62. It is important to bear in mind a few dates before we go to the controversy. A notice under Section 22(2) of the Indian I.T. Act, 1922, was served on the assessee on the 10th June, 1961. On the 1st April, 1962, the I.T. Act, 1961, came into operation. It is the case of the ITO, in his assessment order, that pursuant to the notice under Section 22(2), the return was not furnished by the assessee. For filing the return, from time to time, reminders were given to the assessee but without any effect. Anotice under Section 28(3) of the Indian I.T. Act, 1922, was also issued in November, 1961. But this was also not complied with. Ever since July, 1965, it was further stated by the ITO in his order, that efforts were made to find out whether the claim made on behalf of the firm that due to disputes among the partners it was not possible to file the return of income was correct or not. Ultimately after the examination of witnesses and examination of whatever papers and documents available, the ITO could gather otherwise, that the assessment was made under Section 23(4) of the Indian I.T. Act, 1922, on 9th March, 1960 (sic). After considering the various incomes in various sets of books, the ITO computed the total income at Rs. 52,98,996. He also initiated proceedings under Section 271(1)(a), (b) and (c) and also under Section 273(a) of the I.T. Act, 1961. Thereafter, the assessee filed a petition under Section 27 of the Indian I.T. Act, 1922, and considering the points urged, it was held by the ITO in its order, that no sufficient cause had been made out and as a result the application under Section 27 was rejected.
3. The matter was taken up in appeal by the assessee, both with regard to the order under Section 27 as well as the assessment made under Section 23(4) of the Indian I.T. Act, 1922, before the AAC. It was urged in the appeal against the order under Section 27 that the assessment was bad in law as it was completed under Section 23(4) at a time when the old Act stood repealed. It was urged, Section 297(2) of the I.T. Act, 1961, indicated an intention that Section 6(e) of the General Clauses Act would not be applicable. This argument was accepted by the AAC and he held that the ITO was not justified in making the assessment under Section 23(4) of the Indian I.T. Act, 1922. According to the Appellate Tribunal, the AAC had not specifically said whether the provisions of the new Act were applicable to the case and whether the ITO could make an assessment under the new Act. In any event, however, the AAC held that Section 6 of the General Clauses Act would not save the application of the old Act in the facts and circumstances of the instant case. The AAC, accordingly, cancelled the assessment under Section 23(4) of the 1922 Act and directed the ITO to make 'fresh assessment according to law'. This order, he passed in the appeal against the rejection order under Section 27 of the Indian I.T. Act, 1922. In the appeal against the order under Section 23(4), the AAC was of the view that the same had become infructuous and ordered the 'filing of the proceedings'. Consequently, he also cancelled the penalty order passed by the ITO under Section 271(1)(a) and Section 273 of the I.T. Act, 1961. He, however, had not gone specifically into the merits of these orders.
4. The Revenue, being aggrieved, went up in appeal before the Appellate Tribunal against all these orders. There, various contentions were urged. It was contended that, even if it was necessary, the order might be treated as an order under Section 144 of the I.T. Act, 1961, and whether the ITO hadthe jurisdiction or not, the reference to a wrong section would not make the exercise of the power invalid. Reliance was also placed for this proposition on certain authorities of the Supreme Court. It is not necessary for us to go into the details of the arguments advanced before the Tribunal as well as to the findings of the Income-tax Appellate Tribunal. The Tribunal was, however, of the view that the old Act was repealed and in the contingency that had happened, Section 297(2) could not save the old provisions and there was contrary intention expressed in Section 297 which indicated that Section 6 of the General Clauses Act would not be applicable to save the pending proceedings in the instant case. The Appellate Tribunal, therefore, held that the AAC was right in holding that the assessments were wrongly made under Section 23(4) of the Indian I.T. Act, 1922. As to the contention that the AAC was incompetent to go into the validity of the order in an appeal against the order under Section 27, the Tribunal was unable to accept this contention urged on behalf of the Revenue. In the premises, according to the Tribunal, the action of the AAC was justified. The Tribunal, therefore, dismissed the departmental appeal.
5. As a result of this order, four questions, indicated above, have been referred to this court.
6. The basic question, in our opinion, is whether the assessment could have been made under Section 23(4) of the Indian I.T. Act, 1922, in the facts and circumstances of the case, after 1st April, 1962. This involves the examination of the effect of Section 6 of the General Clauses Act read in conjunction with the intention of the Legislature as evidenced in Section 297 of the I.T. Act, 1961. This question has been examined in several decisions of the Supreme Court as well as in different High Courts. The first decision to which we must refer is the decision in the case of Kalawati Devi Harlalka v. CIT : [1967]66ITR680(SC) . It is not necessary, in view of the fact that this case was analysed in other decisions, to recapitulate in detail the facts of that case. What had happened in that case was that assessments were made on 7th February, 1961, on the assessee for the assessment years 1952-53 to 1960-61 under the Indian I.T. Act, 1922, and on 24th January, 1963, after the repeal of the said Act by the I.T. Act, 1961, the Commissioner had issued a notice under Section 33B of the Act of 1922, to revise these assessments. It was held that the Commissioner had jurisdiction to issue the notices under Section 33B of the 1922 Act in view of Section 297(2) of the Act of 1961, and paragraph 4 of the I.T. (Removal of difficulties) Order, 1962. The expression 'assessment' was to be construed in as wide a language as was possible. There, at pp. 690-691 of the report, the Supreme Court enunciated the principles which would be applicable in the present controversy, which are as follows :
'It is quite clear from the authorities cited above that the word 'assessment' can bear a very comprehensive meaning; it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer. Is there then anything in the context of Section 297 which compels us to give to the expression 'procedure for the assessment' the narrower meaning suggested by the learned counsel for the appellant In our view, the answer to this question must be in the negative. It seems to us that Section 297 is meant to provide, as far as possible, for all contingencies which may arise out of the repeal of the 1922 Act. It deals with pending appeals, revisions, etc. It deals with non-completed assessments pending at the commencement of the 1961 Act, and assessments to be made after the commencement of the 1961 Act, as a result of returns of income filed after the commencement of the 1961 Act. Then in Clause (d) it deals with assessments in respect of escaped income; in Clauses (f) and (g) it deals with levy of penalties; Clause (h) continues the effect of elections or declarations made under the 1922 Act; Clause (i) deals with refunds; Clause (j) deals with recovery ; Clause (k) deals generally with all agreements, notifications, orders issued under the 1922 Act; Clause (1) continues the notifications issued under Section 60(1) of the 1922 Act, and Clause (m) guards against the application of a longer period of limitation prescribed under the 1961 Act to certain applications, appeals, etc. It is hardly believable in this context that Parliament did not think of appeals and revisions in respect of assessment orders already made or which it had authorised to be made under Clause (a) of Section 297(2).
The learned counsel for the appellant submits that Parliament had Section 6 of the General Clauses Act in view, and, therefore, no express provision was made dealing with appeals and revisions, etc. In our view, Section 6 of the General Clauses Act would not apply because Section 297(2) evidences an intention to the contrary. In Union of India v. Madan Gopal Kabra : [1954]25ITR58(SC) , while interpreting Section 13 of the Finance Act, 1950, already extracted above, this court observed at page 68 :
'Nor can Section 6 of the General Clauses Act, 1897, serve to keep alive the liability to pay tax on the income of the year 1949-50 assuming it to have accrued under the repealed State law, 'for a different intention' clearly appears in Sections 2 and 13 of the Finance Act read together as indicated above.' It is true that whether a different intention appears or not, must depend on the language and content of Section 297(2). It seems to us, however, that by providing for so many matters mentioned above, some in accord with what would have been the result under Section 6 of the General Clauses Act and some contrary to what would have been theresult under Section 6, Parliament has clearly evidenced an intention to the contrary,'
7. Therefore, the principles that emerge are that, normally, pending proceedings are generally saved by the operation of Section 6 of the General Clauses Act. When, however, a different intention appears from the repealed provision, then the proceedings cannot be said to be saved. Whether a different intention appears or not in the facts and circumstances of controversy must depend on the language and contents of Section 297(2). The Supreme Court, in that case, held that by providing for so many matters, some in accord with what would have been the result under Section 6 of the General Clauses Act and some contrary to what would have been the result under Section 6, Parliament had expressed the intention of reopening an assessment made under the old Act, and thereby had clearly evidenced an intention to the contrary. The aforesaid principle enunciated by the Supreme Court was again reviewed by the Supreme Court in the case of T.S. Baliah v. T.S. Rangachari, ITO : [1969]72ITR787(SC) . There, the court was concerned with Section 52 of the Indian I.T. Act, 1922. The provisions of Section 52 of the Indian I.T. Act, 1922, did not alter the nature or quality of the offence indicated, according to the Supreme Court, in Section 177 of the Indian Penal Code but they merely provided a new course of procedure for what was already an offence. There was no repugnancy or inconsistency. The two enactments could stand together and must be treated as cumulative in effect. The Supreme Court was of the view that in enacting Section 297(2) of the I.T. Act, 1961, it was not the intention of Parliament to take away the right of instituting the proceedings in respect of which proceedings were pending on the commencement of the Act. Parliament had not made, according to the Supreme Court, any detailed provision for the institution of proceedings or prosecution in respect of any offence under the 1922 Act. Section 6(e) of the General Clauses Act applied for the condonation of such proceedings after the repeal of the Indian I.T. Act, 1922, and a legal proceeding in respect of an offence committed under the 1922 Act might be instituted after the repeal of the Act by the 1961 Act and punishment might be imposed as if the repealing Act had not been passed. The Supreme Court had observed at p. 793 of the report that the principle of Section 6 of the General Clauses Act was that unless a different intention appeared in the repealing Act, any legal proceedings could be instituted and continued in respect of any matter pending under the repealed Act, as if that Act was in force at the time of the repeal. When the repeal is followed by a fresh legislation on the same subject, the court would undoubtedly have to look to the provisions of the new Act but only for the purpose of determining whether the provision indicated a different intention. The question is, according to theSupreme Court, not whether the new Act expressly kept alive old rights and liabilities but whether it manifests an intention to destroy them. Section 6 of the General Clauses Act, therefore, would be applicable unless the new legislation manifests an intention, incompatible with or contrary to the provision of this section. Such an incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new statute and the mere absence of a saving clause would by itself not be material. The Supreme Court noted that it was true that there was no express sub-clause in Section 297(2) of the Act of 1961, which provided for a condonation of such proceedings, that is, the proceedings under Section 52 of the Indian I.T. Act, 1922, but Parliament did not intend that Section 297(2) of the 1961 Act would be completely exhaustive and with regard to such matters as were not expressly saved by Section 297(2), the provisions of Section 6(e) of the General Clauses Act would be applicable. In the case Tiwari Kanhaiyalal v. CIT : [1975]100ITR5(SC) , the Supreme Court had to consider Section 28(4) of the Indian I.T. Act, 1922, which provided that 'no prosecution for an offence against this Act shall be instituted in respect of the same facts on which a penalty has been imposed under this section' did not, according to the Supreme Court, bar the institution of a prosecution for an offence against the 1922 Act or the 1961 Act, when penalty had been imposed not under Section 28(1) of the 1922 Act, but under Section 271(1) of the 1961 Act. Section 28(4) did not obliterate the factum of commission of an offence under Section 52 of the 1922 Act and did not transmute the offence into an innocent act because of the imposition of the penalty under Section 28 of the 1922 Act. Such an imposition merely barred the prosecution for trial and conviction for the commission of an offence. Where penalty was imposed under Section 271(1) of the 1961 Act, launching of the prosecution became permissible and was not hit by Article 20(1) of the Constitution of India. The accused would be entitled to rely upon Article 20(1) only to the extent of the awarding of a lesser punishment under Section 52 of the 1922 Act. Where a false statement was made in a declaration or in a return submitted under the 1922 Act prior to the coming into operation of the 1961 Act, it was not correct to take recourse to Section 297(2)(h) of the 1961 Act to make the offence come under Section 277 of the 1961 Act. There, the Supreme Court referred to the observations of Ramaswamy J., in the case of T.S. Baliah v. T.S. Rangachari, ITO : [1969]72ITR787(SC) and reiterated the same principle.
8. The question with which we are now faced, that is to say, whether the assessment under Section 23(4) or in respect of which a notice had been issued under Section 22(2) prior to the coming into operation of the new Act, came up for consideration before the Division Bench of the Delhi High Court after coming into operation of the new Act in the case of AmolakSingh Jain v. CIT [1971] 31 Tax 120 . There, Chief Justice Khanna, speaking for the Division Bench of the Delhi High Court, observed that Section 6 of the General Clauses Act naturally enabled the institution and continuation of the legal proceedings in respect of any matter pending under the repealed Act as if that Act was in force subsequent to the repeal unless a different intention appeared in the repealing Act. Where the repeal was followed by a fresh legislation on the same subject, the Delhi High Court was of the view that the court would undoubtedly have to look to the provisions of the new Act but only for the purpose of determining whether this indicated a different intention. The question is not whether the new Act expressly kept alive the old rights and liabilities but whether it manifested an intention to destroy these. Section 6 of the General Clauses Act, therefore, would be applicable unless the new legislation manifested any intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all relevant provisions of the new statute and the mere absence of a saving clause would, by itself, not be material. In other words, the provisions of Section 6 of the General Clauses Act would apply to the case of a repeal even if there was a simultaneous re-enactment unless a contrary intention can be gathered from the new statute. Where, under Section 22(2) of the Indian I.T. Act, 1922, as well as under Section 22(4) of the said Act, a notice had been issued by the ITO to the assessee before the coming into operation of the new Act, it was held that the ITO could continue and complete the proceedings of assessment under the 1922 Act. As we have said before, the ratio of the said decision would be applicable to the facts and circumstances of the instant case. But while we are on this aspect, it would be appropriate to refer to a single Bench decision of mine in the case of Amarnath Mehra v. ITO : [1977]110ITR376(Cal) , where I held that where the assessee did not file his return of income within 30th September under Section 139(2) of the I.T. Act, 1961, even though the assessee had the privilege of filing its return before the completion of the assessment up to 31st March, 1961, the notice issued to the assessee under Section 147 of the Act before March, 1961, would be a valid notice. Failure to file the return, it was observed by me, within the time mentioned under Section 139(2) would attract the provisions of Section 147(a) of the Act.
9. Learned advocate for the assessee sought to urge that the principle enunciated in the aforesaid decision of mine would be contrary to the view taken by Khanna C.J., in the decision referred to hereinbefore. According to learned advocate for the assessee, the facts of the instant case before us would come within the purview of Sub-clause (ii) of Section 297(2)(d) of the I.T. Act, 1961. In this case also the learned advocate for the assessee contended that the income chargeable to tax had escaped assessmentwithin the meaning of that expression in Section 147 which stipulated that if the ITO had reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year, he could take action under Section 148, and no proceedings under Section 34 of the repealed Act in respect of any such income were pending at the commencement of this Act, a notice under Section 148 could be issued with respect to that assessment year. Therefore, according to learned advocate for the assessee, the moment there was a failure to file the return on the expiry of the time required for filing the return, there was an escapement in the assessment of income and, therefore, Section 147 would be applicable and in this case as no notice under Section 34 of the old Act had been issued, action could not have been taken under Section 297(2)(d)(ii). Therefore, there was a contrary intention, according to learned advocate for the assessee, expressed in the aforesaid Sub-clause (vi) of s, 297(2)(d) of the Act, which ousted the operation of the provisions of the General Clauses Act. We are, however, unable to accept this contention. The expressions 'income not assessed' and 'income escaping assessment' are not synonymous expressions.
10. In the case of Rajendranath Mukerjee v. CIT [1934] 2 ITR 71 the Judicial Committee had observed that if an assessment was not made on income within the tax year then that income could not be said to have escaped assessment. The Judicial Committee noted that a reading of the expression 'has escaped assessment' as equivalent to 'has not been assessed' could not be assented to. According to the Judicial Committee, it gave too narrow a meaning to the word 'assessment' and too wide a meaning to the word 'escaped'. Now, Section 147 of the 1961 Act requires the formation of an opinion by the ITO that income had escaped assessment and that opinion may be formed by reason of an omission or failure to file a return or otherwise as mentioned in Clause (a) or Clause (b) of Section 147 of the Act. But in a case where the time to file the return had expired and notice had been issued to the assessee to file the return and proceedings for assessment pursuant to that notice were pending, unless the proceedings had been terminated either by an assessment or the completion of the proceedings, it could not be said, merely on the failure of the assessee to file the return, that income had escaped assessment by reason of the failure or omission to file the return within time.
11. This view, which, in our (sic) is the correct view, was first expressed in the observations of the unreported decision of this court in Income-tax Reference No. 128 of 1961, Haji Mohamed Mian v. CIT, judgment delivered on 23rd February, 1965, the observations in respect of which were approved by the Supreme Court in the case of CIT v. Bidhu Bhusan Sarkar : [1967]63ITR278(SC) . There the Supreme Court again reiterated the principle that where the proceedings for an assessment werepending and action under Section 34 of the Indian I.T. Act, 1922, had to be taken for not filing the return by the assessee, such action could be taken by the ITO, and, in this connection, reliance was placed on the aforesaid observations of the Division Bench of the Calcutta High Court, which we have just referred to hereinbefore.
12. So far as the decision in the case of Amarnath Mehra v. ITO : [1977]110ITR376(Cal) , the controversy was not whether when proceedings were pending it can be said that income had escaped assessment and such proceedings for reopening under Section 147 could be taken or not. The controversy was, where the time to file the return was at the option of the assessee, i.e., up to four years, when the assessment was not completed even though the time to file the return under Section 139(2) had expired, whether action could be taken by the ITO under Section 147. There, I had held that Section 139(2) imposed an obligation on the assessee to file the return within the time mentioned. Failure to file the return within the time mentioned in Section 139(2) would attract the jurisdiction of Clause (a) of Section 147 of the Act of 1961. I further observed that this was an additional privilege given to the assessee under Sub-section (4) of Section 139 and that would not defeat the right of the ITO to issue the notice on the failure of the assessee to file the return within the time mentioned under Sub-section (2) of Section 139 of the Act.
13. Now, in the scheme of Section 139 of the I.T. Act, 1961, under Sub-section (1) the assessee was obliged to file the return within the time prescribed for the different contingencies. Sub-section (2) of Section 139 gives the right to the ITO to issue a notice to file the return. Sub-section (4) of Section 139 gives the assessee an option before an assessment is made to furnish a return for any previous year at the end of the period specified in Clause (b) and the provisions of Sub-section (8) shall apply in every such case. What was argued before me in the Single Bench decision, referred to hereinbefore, was whether a notice under Section 147 could be issued even in a case where the time to file the return had expired under Section 139(2) of the Act. It is not quite clear whether the court really dealt with Section 147 or Section 139(2) of the I.T. Act, because there is no reference as to whether, in fact, any notice under Section 139(2) had been issued or not or whether any proceedings were pending, It was not canvassed before the court that where a notice under Section 139(2) had been issued and a proceeding had been initiated, unless the said proceedings had been terminated by assessment or otherwise, whether notice under Section 147 could be issued at all or not. That was not the controversy there. The controversy was solely whether before the expiry of the time a fresh notice could be issued, subject to the fulfilment of other conditions for the issue of a notice under Section 147 of the Act. In that view of the matter, we are of the opinion that it cannot be said that the view takenin the said decision in the case of Amarnath Mehra v. ITO : [1977]110ITR376(Cal) , is in any way in conflict with the views expressed by the Division Bench of the Delhi High Court in the decision referred to hereinbefore.
14. On the question that unless the proceedings taken for assessment had been terminated by assessment or otherwise, fresh proceedings under Section 147 could not be taken, reference may be made to the observations of the Supreme Court in the case of CIT v. Bidhu Bhusan Sarkar : [1967]63ITR278(SC) , which we have already referred to and the observation of the Supreme Court in the case of Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax : [1964]51ITR557(SC) . There, the Supreme Court was dealing with the C.P. & Berar Sales Tax Act, 1947. There the Supreme Court observed that the rules laid down in the judgments relating to the income-tax that the words 'escaping assessment' applied equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee and, therefore, there was no assessment of his income, was applicable to assessments of turnover tax under the C.P. & Berar Sales Tax Act, 1947. The Supreme Court further observed that if assessment proceedings had been initiated, income could not be said to have escaped assessment until a final order of assessment was passed on the pending proceedings. In this connection, the Supreme Court referred to the observations of the Judicial Committee in the case of Rajendranath Mukerjee v. CIT [1934] 2 ITR 71 , referred to hereinbefore. In this connection reference may also be made to the observations of the Supreme Court in the case of CIT v. Raman Chettiar : [1965]55ITR630(SC) .
15. In the case of State of Assam v. D.C. Choudhuri : [1970]76ITR706(SC) , the Supreme Court was concerned with the Assam Agrl. I.T. Act, 1939, and was of the view that if the assessee did not file a return of his agricultural income pursuant to a general notice under Section 19(1) of the Assam Agrl. I.T. Act, 1939, the assessment could be made only after due notice under Section 19(2) or by initiating proceedings under Section 30 for assessing income escaping assessment. The Agrl. ITO could not proceed directly to assess to the best of his judgment under Section 20(4) without serving notice under Section 19(2) within the financial year or by having resort to the provisions of Section 30.
16. The basic principle underlined by these decisions is this : Normally pending proceedings would be saved unless a contrary provision is expressed by the repealing Act. It is necessary to refer to the specific provision of the repealing Act to see if there is a contrary provision expressed. If, on the other hand, there is a contrary intention expressed by dealing with a particular contingency contemplated in the repealing Act itself, then by a normal user of the power given by the appropriate provision of therepealing Act it could be said that there was no provision made in the repealing Act indicating a contrary intention to repeal the provisions of the old Act, so far as those Acts were contemplated. In this case, it was argued that Section 297 dealt with all the possible contingencies, in the case of an assessment. These are Clauses (a), (b), (c) and (d) of Sub-section (2) of Section 297.
17. In this connection, on behalf of the Revenue reliance was placed on a Division Bench decision of this court in the case of CIT v. B.P. (India) Ltd. : [1979]116ITR440(Cal) , where, agreeing with all the decisions of the Supreme Court we found that the purpose and effect of Section 25(3) of the 1922 Act was clearly to give relief to a taxpayer, who, but for it, would, in the aggregate, be charged with tax once in respect of every year's income and twice in respect of one year's income, because, under the 1918 Act, the tax was levied on the income of the year in which the assessment was made, whereas under the 1922 Act, the tax was on the income of the previous year, and we felt that in the 1961 Act, there was no provision in Section 297 which dealt with this contingency and as it appeared to us from the report of the Commission that there was no contrary intention sought to be expressed by the absence of the similar provisions in Section 297 of the Act. We held that the Tribunal was right in holding that the relief claimed by the assessee under Section 25(3) of the Indian I.T. Act, 1922, even though the relief was granted after the coming into operation of the 1961 Act, was justified.
18. More or less, the same view was expressed by us in the decision in the case of Imperial Chemical Industries Ltd. v. CIT : [1979]116ITR516(Cal) . There we had also noted that in certain cases the Legislature had chosen to use the expression 'may' in contradistinction to 'shall' in the different clauses of Section 297(2) of the Act and where it was so done the expression 'may' should be construed in the light that it was only a permissive power.
19. In the case of Chhogmal Agarwalla v. ITO : [1975]100ITR29(Cal) , we had held that Section 35(5) of the Indian I.T. Act, 1922, enabled the reopening and rectifying of the completed assessment of a partner on the assessment of the firm. It dealt primarily with the rectification proceeding for the assessment of a partner but that power was dependent upon the assessment or reassessment of the firm. The power was given to rectify the assessment of a partner 'on the assessment or reassessment of a firm' only on a proper assessment or reassessment of the firm in accordance with law and that the assessment, if, in a particular case, had to be under the Act of 1922, then it had to be under the Act of 1922. If, however, the assessment of a firm had to be made under the 1961 Act, because of Section 297(2)(a) of the 1961 Act, then the power of rectification could be utilised on the proper assessment or reassessment of the firm in accordance with the provisions of the Act of 1961. Therefore, where an assessment on a firm for the year 1961-62 had been made under the 1961 Act, as the return had been filed after 1st April, 1962, in view of the provisions of Section 297(2)(b) of the 1961 Act, the power to rectify the assessment of a partner of the firm could be exercised under Section 35(5) of the Act of 1922, and even where a notice of reassessment was purported to have been issued under the Act of 1961, it could be treated as a notice in exercise of the powers under the Act of 1922.
20. The two Division Benches of different High Courts, viz., the High Court of Punjab and Haryana and the High Court of Rajasthan, have accepted the Revenue's contention on this aspect in a different light.
21. In the case of Indra & Co. v. Union of India , the Rajasthan High Court referred to Section 297(2)(k) to save the provisions of this nature. In view of the expression used in Clause (a), Sub-section (2) of Section 297, in the facts and circumstances of our case, and in the view we have taken on the other aspect of the matter, it is not necessary for us to rest our decision on the construction of Clause (a) of Section 297(2) of the Act. Reliance was also placed on the decision of the Punjab and Haryana High Court in the case of CIT v. Bipan Lal Kuthiala [1972] 83 ITR 182. There also the Punjab and Haryana High Court had relied on the provisions of Section 297(2)(k) in saving pending proceedings. Reliance was placed on the decision of the Rajasthan High Court, which we have referred to hereinbefore. For the reasons we have mentioned before, it is also not necessary for us to place any reliance for the purpose of our present controversy on Clause (a) of Section 297(2) of the Act. Our attention was drawn to a Bench decision of this court in the case of CIT v. Bidhu Bhusan Sarcar : [1966]59ITR590(Cal) , where the Division Bench of this court held that the judgment of the Calcutta High Court on a reference under Section 66 of the Indian I.T. Act, 1922, would be governed in matters of appeal from that decision or order to the Supreme Court by the provisions of the repealed Act. In respect of such matter, the provisions of Section 261 of the Act were not attracted. The Division Bench observed at p. 596 of the report that the effect of the repeal of an enactment was as if it had never existed except as to matters and transactions past and closed, in the absence of any saving clause which manifested or implied a different intention. If particular matters were kept alive by the saving clause, the repealed enactment was treated for all purposes as alive in respect of such matters. The saving clauses contained in Sub-section (2) of Section 297 did indicate a different intention as contemplated by Section 6 of the General Clauses Act and ousted the operation of the general provisions contained in Section 6 with the result that Section 66A(2) of the Act which was completely obliterated by reason of the provision for repeal contained in Sub-section (1) of Section 297 of the new Act could not be availed of by thepetitioner for the purpose of initiating the proceeding for a certificate for appeal to the Supreme Court as contemplated in Section 66A(2) of the Act. Now, so far as the general principles on the construction and effect of the repealing provisions under Section 6 of the General Clauses Act are concerned, there cannot be any exception to the view expressed by the Division Bench of this court in the aforesaid decision. But we may incidentally point out to another Division Bench decision of this court in the case of CIT v. Allahabad Bank Ltd. : [1966]62ITR476(Cal) , where a contrary view was taken on the construction of Section 66A(2) of the Indian I.T. Act, 1922, read with Section 297(2) of the I.T. Act, 1961 on this aspect. We are, however, not concerned with the controversy in the present case and we need not express any opinion as to which of the decisions on this aspect is correct.
22. As the basic principles are well settled the question is, therefore, to find out whether Section 297(2) expresses any contrary intention to the effect that the provisions of Section 6 of the General Clauses Act would not be applicable. If the repealing Act has made detailed provisions for a specific contingency concerned then, and then only, could it be said that by the repealing Act the Legislature has expressed a contrary intention. In this case the situation with which we are faced is that a proceeding under the old Act had been initiated by issuing a notice under Section 22(2) of the Act on 10th of June, 1961, prior to the coming into operation of the new Act. The said proceeding was continuing, as the ITO was trying by issuing reminders, etc., to complete the said proceeding. The said proceeding when the new Act came into operation had not been completed either by assessment or by closing the proceeding. In such a case could it be said that either Clauses (a) (b), (c) or (d) of Section 297(2) of the Act covers the situation On behalf of the assessee it was contended that Clause (d) of Section 297(2) would be applicable. It was urged that inasmuch as there was a failure to file the return within the time stipulated either under Section 22(1) or Section 22(2) the provisions of Section 147 were attracted when the new Act had come into effect because notice under Section 34 of the old Act had not been issued. Therefore, the Legislature had contemplated such a situation by not using the power under Sub-clause (d) of Clause (2) of Section 297. The Revenue cannot resort to the provisions of the General Clauses Act when an express contrary intention has been expressed by the Legislature in this case by making a specific provision. This argument, in our opinion, cannot be accepted for reasons more than one, firstly, as we have mentioned before, under the law, the proceeding has been initiated, that is to say, a notice has been issued under Section 22(2) of the 1922 Act without terminating the proceeding, that is to say, either by closing the proceeding or dropping the proceeding or making the assessment on a best judgment under Section 23(4) of the said Act. Therefore, under Section 34 of the old Act or Section 147 of the new Act it could not have been taken.
23. Therefore, a situation of this nature had been contemplated (sic). Furthermore, merely because in a certain case an additional power of reopening is given, in our opinion, it does not exhaust the power of the ITO to complete the pending proceedings which he would otherwise have under Section 6 of the General Clauses Act. There is no contrary intention by the grant of this express power in Clause (d) of Section 297(2) of the Act. We have further to remember that even under the old Act while there was the power under Section 22(2) to issue a notice on failure of the assessee to make the return within time under Section 23(4) simultaneously, there was the power of Section 34 of the old Act to reopen the assessment. The existence of both these powers was not destructive of each other. Similarly, the existence of the power under Section 23(4) to complete the pending proceeding by issuing a notice under Section 22(2) of the Act is not destructive of the power if the condition or otherwise is fulfilled and if the contingency arises to be utilised under Clause (d) of Section 297(2).
24. In that view of the matter, in our opinion, the AAC as well as the Tribunal were in error in holding that the proceedings could not be completed under the old Act in the facts and circumstances of this case. If that is the position then question No. (i) must be answered in the negative and in favour of the Revenue. We also answer the second question by saying that the Tribunal was not justified in holding that the order under Section 23(4) could not be made. The other aspect of the question does not, in the view we have already expressed, arise. This question is also answered in favour of the Revenue.
25. So far as question No. (iii) is concerned, it appears to us that the view taken by the AAC that the assessment order was bad, having been under Section 27(2) of the old Act after the coming into operation of the new Act, was incorrect for the reasons mentioned hereinbefore. In any event, in an appeal under Section 27 of the 1922 Act, the AAC was not competent to go into the validity of the assessment. He, however, directed that the assessment would be made afresh in accordance with law. The order of the AAC was incorrect in law. The Tribunal in disposing of the appeal may direct the ITO to consider the appeal under Section 27 on its merits, that is to say, whether sufficient cause has been made out, and dispose of the appeal under Section 27 of the Indian I.T. Act, 1922, in accordance with law. The question is answered in the manner as aforesaid in favour of the Revenue with the aforesaid direction. If the appeal under Section 27 before the AAC is rejected, this will not preclude the Tribunal from directing the AAC for considering the merits of the quantum appeal, but we make it clear that the validity of the power to make the assessment under the old Act could not as such be questioned. So far as question No. (iv) is concerned, the Tribunal was not justified in cancelling the penalties underSection 271(1)(a) and Section 273(a) of the I.T. Act, 1961, on the grounds it has shown. But neither the AAC nor the Tribunal have considered the merits of the said appeal. In disposing of the appeal the Tribunal would be at liberty to consider the merits of the order imposing the penalties. This question is answered in the manner as aforesaid and by saying that so far as question No. (iv) is concerned, we say, penalty was exigible in law, but as to whether the penalty should be imposed, and the quantum thereof, the Tribunal or the AAC will have to consider them on merits.
26. In the facts and circumstances of this case, each party will pay and bear its own costs.
Sudhindra Mohan Guha, J.
27. I agree.