COMMISSIONER OF INCOME TAX v. SHEO KUMARI DEVI
[Citation -1985-LL-1016-2]

Citation 1985-LL-1016-2
Appellant Name COMMISSIONER OF INCOME TAX
Respondent Name SHEO KUMARI DEVI
Court ITAT
Relevant Act Income-tax
Date of Order 16/10/1985
Assessment Year 1961-62
Judgment View Judgment
Keyword Tags reassessment proceedings • income chargeable to tax • best judgment assessment • depreciation allowance • period of limitation • barred by limitation • legislative history • penalty proceeding • issuance of notice • prescribed period • reason to believe • service of notice • binding judgment • land acquisition • prescribed time • registered post • issue of notice • limitation date • wealth-tax act • non-resident • tax evasion • black money • time-limit
Bot Summary: For our present purpose, it suffices to note that the old, exhaustive and interminable section 34 of the 1922 Act was entirely substituted by as many as six corresponding sections 147 to 152 of the 1961 Act. The very meaningful change in the law and the explicit departure from the old one, with which we are concerned, was that of section 149 of the Act which in a way corresponds to clause of subsection of section 34 of the old Act. 1922 Act 1961 Act If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. O. Chinnappa Reddy J., speaking for the court, after an exhaustive analysis of Banarsi Debi's case 1964 53 ITR 100, at pages 43, 45, concluded as under: The decision of the Supreme Court in Banarsi Debi's case 1964 53 ITR 100 was that the expression' issued' had a wide as well as a narrow meaning and that in the context of section 34(1) which provided for service of notice within a period of eight years and in the context of the object of the Amending Act, the expression'issued' could only be given a wider meaning in section 4 of the Amending Act. Section 18 of the Wealth-tax Act and, in particular, sub-section thereof is plainly subsidiary to section 17. One does not see how the brief observations made by their Lordships in the context of section 17 or section 18 of the Wealth-tax Act are in any way applicable to the entirely different provision of section 149 of the Income-tax Act, 1961, and does not see how the brief observations of their Lordships in CWT v. Kundan Lal Behari Lal 1975 99 ITR 581 would, in any way, advance the case of the respondent. As has already been noticed, the core of the respondent-assessee's stand is that after Banarsi Debi's case 1964 53 ITR 100, the word issue in the 1961 Act must, wherever and whenever it is used, be read as serve and in any case it should be so in sections 147 to 153 of the Act which have supplanted section 34 of the old Act.


JUDGMENT JUDGMENT S. S. SANDHAWALIA C. J.-Whether limitation provision of section 149 of Income-tax Act, 1961, envisages issuance of notice only, or its actual service subsequently on assessee as well, is intricate and significant question necessitating this reference to Full Bench. Particularly in issue is correctness of view enunciated by Full Bench on this point in Jai Hanuman Trading Co. Pvt. Ltd. v. CIT [1977] 110 ITR 36 (P & H). assessment year in this reference was way back 1961-62. Revenue being of opinion that substantial income has escaped assessment initiated proceedings under sections 147 and 148 of Income-tax Act, 1961 (hereinafter to be referred to as " Act "). For that purpose, notice for reassessment to assessee which was actually signed on March 30, 1970, was admittedly issued by registered post on March 31, 1970. Though precise date of its service is not on record, it is common ground that said notice was served later in first week of April, 1970. assessee raised objection that notice, though issued within period of limitation but having not been served within eight years from end of assessment year in question, was illegal and without jurisdiction. This was, however, rejected and Income-tax Officer made best judgment assessment under section 144 of Act. assessee went up in appeal but Appellate Assistant Commissioner rejected same. Aggrieved thereby, further appeal was carried to Tribunal. Meanwhile, in course of reassessment proceedings, notice for levy of penalty was also issued to assessee. Holding assessee to be in default, Income-tax Officer imposed penalty restricted to 50 per cent. of tax payable. assessee appealed unsuccessfully to Appellate Assistant Commissioner and thereafter appealed to Tribunal. Both appeals aforesaid were consolidated and disposed of by common order dated February 18, 1975, by Tribunal. Therein, purporting to follow Supreme Court judgment in Banarsi Debi v. ITO [1964] 53 ITR 100, and views of Gujarat and Calcutta High Courts, it was held that notice of reassessment under section 149 of Act issued against assessee before limitation date but served on assessee after such date would be without jurisdiction and thus void and inoperative. Accordingly, reassessment as also penalty proceeding were annulled. Later, on application of Revenue, following two questions were referred to this High Court: " (1) Whether, on facts and in circumstances of this case, Tribunal was correct in law in holding that assessment for assessment year 1961-62 was barred by limitation? (2) Whether, on facts and in circumstances of this case, Tribunal was justified in law in cancelling penalty under section 271(1)(a) for assessment year 1961-62? " This case had originally come up before Division Bench and it rightly noticed that question of legality of levy of penalty was intricately linked with validity of reassessment. Very lucidly it was pointed out that core question was whether issuance alone of notice should be within period of limitation prescribed under section 148 of Act or whether service of notice actually must also be within aforesaid period of limitation. On behalf of Revenue, while relying on Full Bench judgment in Jai Hanuman Trading Co. Pvt. Ltd. v. CIT [1977] 110 ITR 36 (P & H), basic contention was that Gujarat, Andhra Pradesh and Calcutta High Courts had misconstrued ratio of Supreme Court judgment in Banarsi Debi's case [1964] 53 ITR 100. Noticing significance of question and absence of firm direct precedent on point within this court, matter was referred to larger Bench. Herein, more than any other case, it becomes indeed imperative to notice in some detail legislative history of provisions because it is not possible to truly appreciate and construe them without doing so. It needs no great erudition to opine (as it is matter of recent history) that over passage of nearly four decades and as many as 62 amendments made therein, state of law under Indian Income-tax Act of 1922 had reached peak of unsatisfactoriness and complexity. Way back in 1940, Privy Council in CIT v. Mahaliram Ramjidas [1940] 8 ITR 442, with particular reference to section 34 had observed as follows (p. 447): " Section 34 is unhappily and even ungrammatically phrased. It is expressed impersonally, and it fails to state by whom and by what procedure it is to be established that income, profits or gains have escaped assessment or have been assessed at too low rate. " There, thus, arose persistent and vociferous demand for drastic changes and simplification of income-tax law-both substantive and procedural. Consequently, matter was referred by Central Government to Law Commission then presided over by Mr. Setalvad, and it rendered its exhaustive Twelfth Report thereon suggesting radical changes in statute. With regard to state of law under earlier Act, Commission commented as follows: " There is hardly any Act on Indian statute book which is so complicated, so illogical in its arrangement, and in some respects so obscure as Indian Income-tax Act, 1922. Courts and commentators have commented on illogical arrangement of provisions of Act. " It was on basis of aforesaid Twelfth Report that meaningful and somewhat radical changes were wrought in law and present incometax Act of 1961 found its way on statute book whilst totally repealing earlier 1922 Act. It is neither possible nor, perhaps, desirable to range over larger conspectus of such complex legislation as Income-tax Act of 1961. For our present purpose, it suffices to note that old, exhaustive and interminable section 34 of 1922 Act was entirely substituted by as many as six corresponding sections 147 to 152 of 1961 Act. However, very meaningful change in law and explicit departure from old one, with which we are concerned, was that of section 149 of Act which in way corresponds to clause (b) of subsection (1) of section 34 of old Act. For clarity's sake, old and new provisions may be juxtaposed old Act. For clarity's sake, old and new provisions may be juxtaposed against each other: 1922 Act 1961 Act " 34. Income escaping assessment:-... (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on part of assessee, Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to 1922 Act 1961 Act income-tax have escaped assessment for any year, or have been underassessed, or assessed at too low rate, or have been made subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under " 149. Time limit for notice.clause (a) at any time and in cases falling under clause (b) at any time (1) No notice under section 148 within four years of end of that shall be issued,year, serve on assessee, or, if assessee is company, on princi- (a) in cases falling under pal officer thereof, notice containing clause (a) of section 147all or any of requirements which may be included in notice under (i) for relevant assesssub-section (2) of section 22 and may ment year, if eight years have proceed to assess or reassess such elapsed from end of that year, income, profits or gains or recompute unless case falls under subthe loss or depreciation allowance; clause (ii); and provisions of this Act shall, so far as may be, apply accordingly (ii) for relevant assessas if notice were notice issued ment year, where eight years, but under that sub-section: " not more than sixteen years, have elapsed from end of that year, unless income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year; (b) in cases falling under clause (b) of section 147, at any time after expiry of four years from end of relevant assessment year. (2) provisions of sub-section (1) as to issue of notice shall be subject to provisions of section 151. 1922 Act 1961 Act (3) If person on whom notice under section 148 is to be served is person treated as agent of non-resident under section 163 and assessment, reassessment or recomputation to be made in pursuance of notice is to be made on him as agent of such non-resident, notice shall not be issued after expiry of period of two years from end of relevant assessment year. " Apart from above, sub-section (1A) of section 34 of old Act had again expressly employed terminology of " served on assessee, or, if assessee is company, on principal officer thereof, notice containing all ". Again, proviso to sub-section (3) of old section 34 was in following terms: " Provided that where notice under clause (b) of sub-section (1) has been issued within time therein limited, assessment or reassessment to be made in pursuance of such notice may be made before expiry of one year from date of service of notice even if at time of assessment or reassessment four years aforesaid have already elapsed. " It would be manifest from above that Parliament was well aware of phraseology employed in section 34 of 1922 Act, which expressly mentions service on assessee. However, in substituted section 149(1), use of any such phraseology and word " served " were scrupulously excluded. Instead, language employed in terms mentioned issue of notice alone and time-limit therefor. Again in subsection (2) of section 149, it is only issue of notice which is made subject to section 151. Similarly, reference to sub-section (3) of section 149 would show that Legislature drew clear distinction betwixt words " served " and " issued " and employed them with different meanings therein. Now, it is sound canon of construction that Legislature does not waste its words. By 1961, old Act of 1922 had held field for wellnigh 40 years. designed change in its language by substituting section 149 could not but be intended to bring change in law. Parliament did not abandon phrase " served on assessee " used in old Act and substituted it by " no notice under section 148 shall be issued " if it had intended to mean identical thing. clear departure from language in this context involved equally clear change in law. That such departure from old law was intended has been authoritatively so held by their Lordships of Supreme Court itself in following words in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, at page 444: " provisions of sections 147 to 153 of Act correspond to those of section 34 of Indian Income-tax Act, 1922. There have been some points of departure from old law, but it is not necessary for purpose of present case to refer to them. " It is, therefore, wrong to assume that structural and meaningful changes made in law by substitution of section 149 and deliberate omission of old phraseology " served on assessee " from new Act was either otiose or meaningless. Indeed, in construing two Acts, celebrated rule in Heydon's case [1584] 3 Co Rep 7a; 76 ER 637; 42 Digest 614, is at once attracted. We must see what was state of existing law before Act of 1961, what was mischief or defect for which law had not provided earlier and what remedies Parliament has provided thereafter. Applying said rule, it is plain that change from old law was actually intended. This seems to have been fairly and squarely directed to hit at mischief of dilatory tactics of avoiding service by manipulating assessees in order to creep out of limitation provision. To my mind, evil sought to be remedied was clearly long-delayed and studied avoidance of service of notice by assessees, whose income had escaped assessment, which would render limitation provisions of old law virtually nugatory and may well have proved to be paradise for tax-evaders. It would thus follow that remedy provided by Parliament in this context was to take service of notice out of ambit of limitation and draw clear and sharp line betwixt date of issuance of notice on one hand and uncertain and fluctuating date of service on assessee on other. Mr. Rajgarhia, learned counsel for Revenue, had rightly highlighted that it is impossible to estimate time within which legal and valid service can be effected on recalcitrant assessee whose escaped income is sought to be brought within net again. To bring something so nebulous within clear confines of limitation provision is in itself anomalous and, therefore, Parliament intended clear change in law by fixing limitation from firm date of issuance of notice as against actual service on assessee under old law. It inevitably follows that to read clear and categoric change of language in section 149 of Act as meaning same thing as earlier in old Act in distinctly different phraseology would be patently violative of sound canon of construction. As would appear hereinafter, whole controversy and, with greatest respect, fallacy herein has stemmed from misapprehension of import of observations of their Lordships in Banarsi Debi v. ITO [1964] 53 ITR 100 (SC). It is, therefore, apt to consider this judgment at very outset. Therein, what fell for construction was section 4 of Indian Income-tax (Amendment) Act, 1959. They did not even remotely consider section 149 of 1961 Act at all. Their Lordships came to conclusion in peculiar circumstances of case that unless word " issued " in section 4 aforesaid was given wider meaning to include its service as well, whole of validating and amending provision would fall to ground and be rendered nugatory. In terms, it was observed as follows (p. 107): " As notice mentioned in section 4 of Amending Act is linked with time prescribed under Act, section becomes unworkable if narrow meaning is given to expression'issued'. On other hand, if we give wider meaning to word, section would be consistent with provisions of section 34(1) of Act. Moreover, narrow meaning would introduce anomalies in section: while notice, assessment or reassessment were saved, intermediate stage of service would be avoided. " It was in light of aforesaid compulsions that their Lordships, by interpretation, gave strained and wider meaning to word " issued " in order to save Indian Income-tax (Amendment) Act, 1959, from being rendered nugatory. It is sound canon of construction that any interpretation which would frustrate one or all of provisions of statute, has to be avoided. Conforming to said salutary rule, their Lordships have concluded that since word " issued " had both wider and limited meaning, they were compelled to choose wider connotation to include service of notice as well in section 4 aforesaid. Their Lordships did not and, perhaps, could not possibly have said that word " issued ", whenever and wherever used, means " served ". They did not hold that two distinct words " issued " and " served " are either synonymous or are identical. It is true that they observed that in certain Indian statutes these words had been employed in interchangeable terms. That solitary observation, in my view, cannot possibly be picked upon to do patent violence to language by holding that " issued " always means " served " as well. As was rightly pointed out by Lord Halsbury L. C. in Quinn v. Leathem [1901] AC 495, decision is only authority for what it actually decides, and quintessence thereof is its ratio and not every observation found therein nor what logically follows from various observations made in it. In approving that view, their Lordships in State of Orissa v. Sudhansu Sekhar Misra, AIR 1968 SC 647, further warned that it was not profitable task to extract sentence here and there from judgment and to build upon it. Consequently, Banarsi Debi's case [1964] 53 ITR 100 (SC) is no warrant for abstruse proposition that word " issued " de hors its context must always mean " issued and " served " in every statute or in section 149 of Act. This very question was considered in depth by Full Bench in jai Hanuman Trading Co. P. Ltd. v. CIT [1977] 110 ITR 36 (P & H). O. Chinnappa Reddy J., speaking for court, after exhaustive analysis of Banarsi Debi's case [1964] 53 ITR 100 (SC), at pages 43, 45, concluded as under: " decision of Supreme Court in Banarsi Debi's case [1964] 53 ITR 100, therefore, was that expression' issued' had wide as well as narrow meaning and that in context of section 34(1) which provided for service of notice within period of eight years and in context of object of Amending Act, expression'issued' could only be given wider meaning in section 4 of Amending Act. Supreme Court did not lay down that expression' issued', whenever and wherever it occurred in Income-tax Act, carried wider meaning ............ We are clearly of opinion that in context of provisions of Income-tax Act, 1961, expression' issued' occurring in section 149 cannot be given meaning' served'. We dissent from views expressed by Gujarat and Andhra Pradesh High Courts and we overrule decision of Punjab and Haryana High Court in Tikka Khushwant Singh's case [1975] 101 ITR 106. " We are in respectful and unhesitating agreement with aforesaid view. Equally it deserves notice that said judgment has been subsequently followed by Delhi High Court in New Bank of India Ltd. v. ITO [1982] 136 ITR 679, in preference to contrary view. In fairness to Mr. Jain, learned counsel for respondent-assessee, one must advert to his primal reliance on judgments of Gujarat High Court which have been followed in Andhra Pradesh and passing observation of Calcutta High Court. It would appear that in Gujarat High Court earlier in Madanlal Mathurdas v. Chunilal, ITO [1962] 44 ITR 325, Chief justice Desai, speaking for Bench, on in-depth consideration of matter, held that in first proviso to section 34 itself (substituted by Finance Act of 1956), word " issue could not mean " serve " with following pointed observation (p. 330); " Mr. Shah had, therefore, to fall back on sheer argument that expression' issue' in initial words of proviso should be equated with expression' serve' notwithstanding amendments in section and insertion of proviso to sub-section (1). decision so strenuously relied on in support of petitioner's case cannot advance argument canvassed before us as expressions' issue' and' serve' there had to be read in wholly different context. In context and collocation before us, we must read words as used correctly and exactly and not loosely and inexactly and in present context there is nothing to show that we should Prefer loose and inexact meaning of these words by impermissible equation. As they now stand after amendments of 1956, relevant parts of section relating to time-limit seem to us to be plain and certain and we do not read in them any uncertainty or obscurity. We have to read this expression'issue' in initial part of proviso in context and setting in which it finds place. " reasoning aforesaid, to my mind, remains undimmed with time. However, authority of aforesaid judgment was whittled down later in Induprasad Devshankar Bhatt v. Jani [1965] 58 ITR 559 (Guj), not on any independent reasoning but, with greatest respect, on misinterpretation of true ratio, in Banarsi Debi's case [1964] 53 ITR 100 (SC). It was observed that Madanlal's case [1962] 44 ITR 325 (Guj) was no longer good law solely on assumption, which is not warranted, that final court had declared distinct words " issued " and " served " to be synonymous. That view was then inevitably followed by Division Bench of Gujarat High Court in Shanabhai P. Patel v. Upadhyaya, ITO [1974] 96 ITR 141. Andhra Pradesh High Court in CIT v. Smt. Kailasa Devi and Smt. Rukmini Bai [1976] 105 ITR 479 again slipped into same error in merely following aforesaid view purporting same to be based on binding precedent of Banarsi Debi's case [1964] 53 ITR 100 (SC). It seems also to be assumed that in new Act, sections 147 to 153 merely bifurcated earlier section 34 without any change in law. This assumption is obviously erroneous when reference is made to 12th Report of Law Commission in which extensive changes and departure from old law were advocated generally and with particular regard to section 34 of old Act, which were later adopted and enacted. Equally this assumption is now in headlong conflict with binding observations of final court in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, that distinct departure from old law was intended by substitution of sections 147 to 153 of new Act in place of section 34 of old Act. Lastly, there is again passing observation in Lilooah Steel & Wire Co. Ltd. v. ITO [1972] 86 ITR 611 (Cal) without any detailed discussion or rationale, which also tends to take same view as Gujarat and Andhra Pradesh High Courts. For detailed reasons recorded earlier and those that follow hereinafter, I feel compelled to record very respectful dissent from these authorities. Mr. Jain had then placed reliance on short order passed in limine whilst declining to grant special leave to appeal by their Lordships of Supreme Court in CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581. Assuming entirely for argument's sake in first instance, that said order is judgment, it may be pointedly noticed that this was rendered basically under section 17 of Wealth-tax Act, 1957. Now, there is no manner of doubt that from its very enforcement, clause (b) of sub-section (1) of section 17, in express terms, required service of notice within prescribed period on assessee. Clearly enough, in said section, both issue of notice and its service, by express mandate, have to be within prescribed time of four years or eight years, as case may be. Section 18 of Wealth-tax Act and, in particular, sub-section (2A) thereof (which stands omitted with effect from April 1, 1976) is plainly subsidiary to section 17. Equally it deserves notice that sub-section (2) of section 14 of Wealth-tax Act, which has been referred to in clause (b) of section 17(1), required service of notice upon person and not mere issuance of such notice. One, therefore, does not see how brief observations made by their Lordships in context of section 17 or section 18 of Wealth-tax Act are in any way applicable to entirely different provision of section 149 of Income-tax Act, 1961, and, therefore, does not see how brief observations of their Lordships in CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581 (SC) would, in any way, advance case of respondent. said case is, therefore, plainly distinguishable and it is well to recall that Delhi High Court in New Bank of India's case [1982] 136 ITR 679, referred to same and explained its inapplicability in context of section 149 of Act. Now, apart from above, Mr. Jain's stand that even short order dismissing special leave petition in limine, without notice to other side, would be binding judgment within article 141 does not seem to be tenable. It is settled beyond cavil that judgment of court of law derives its legal sanctity from direct canvassing of opposite views in open court and adjudication made thereon. It has been rightly judicial mandate that court should not pronounce on matters which have not been directly raised and debated before it. great constitutional authority has forcefully opined that no amount of individual research and opinion is substitute for full-dress argument in court and, indeed, such attempt should be avoided. It is significant to recall that their Lordships in declining leave on special leave petition are not at all obliged to give reasons and in their discretion can do so for wide variety of considerations. As is evident from order in case of CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581 (SC), their Lordships did not consider that point arising out of judgment required any further examination and were disinclined to grant leave, but on being pressed and invited to give reasons, they briefly did so orally. It appears from report that no notice was given to other side nor full-dress debate on point was raised. In my humble view, such ex parte short order declining to grant discretionary leave to appeal under article 136 is not strictu sensu judgment which is either binding or within ambit of article 141. To seek to cull out from such order any considered principle of law on point, on which there is deep countrywide controversy, would, in my view, be uncalled for and, with greatest respect, would amount to some distortion of hallowed rule of binding precedents. Though reference to commentaries is uncalled for, Mr. Jain attempted to adopt cryptic reasoning in Kanga and Palkhivala's Law and Practice of Income-tax in supplement to seventh edition at page 180 of Volume I. Therein, in form of footnote, it is very simplistically said that jai Hanuman Trading Co. Ltd. v. CIT [1977] 110 ITR 36 (P & H) [FB] is incorrectly decided on this point and has overruled Tikka Khushwant Singh v. CIT [1975] 101 ITR 106 (P & H) because court's attention was not drawn to CIT v. Kundan Lal Behari Lal [1975] 99 ITR 581 (SC). I have already in detail above distinguished said case and have also respectfully opined that same cannot be binding authority on point. Consequently, mere comment even though from standard work is of little significance. Once maze of precedents is out of way, one might as well examine issue refreshingly on principle. To my mind, fallacy that seems to have crept in this context is to suggest that (barring some very peculiar or compulsive textual compulsion) in plain ordinary English, word " issue " and word " serve " are synonyms or identical in terms. With great respect, it is not so. Their plain dictionary meaning runs directly contrary to any such assumption. No dictionary says that issuance of order is necessarily service of such order on person as well or, in reverse, that service of order on person is mathematical equivalent to its issuance. In Chamber's Twentieth Century Dictionary, relevant meanings given to word " issue " are act of sending out; to put forth; to put into circulation; to publish; to give out for use. On other hand, word " serve " in same dictionary has been given meaning, as term of law, to deliver or present formally, or give effect to. Similarly, in New Illustrated Dictionary, relevant meaning attributed to word " issue " is come out; be published; send forth; publish; put into circulation whilst relevant meanings attributed to word " serve " are to supply person with; make legal delivery of (writ, etc.); deliver writ, etc., to person. Thus, it would appear that words " issue " and " serve " are distinct and separate and indeed gap between two may be wide both in point of time and place. order or notice may be issued today but may be served two years later. order or notice may be issued at one place and may be served at point 1,000 or more miles away. order issued may not require any service at all. example may be taken of order issued in shape of notification in Official Gazette which does not require any service on person affected by it. statute may require that issuance of general order be conveyed by publication in locality without individual service. Reference in this connection may be made to section 4 of Land Acquisition Act which, apart from notification, requires publication only of order in vicinity of area sought to be acquired. Therefore, issuing of order is not necessary concomitant of its actual service upon any one in particular. Merely because statute may provide that order issued should also be properly served subsequently on person directly affected would not, in my view, in any way render words " issue " and " serve " as either synonymous or identical. very peculiar situation in statute and compulsion of sound canon of construction may sometimes require enlargement or extension of word to save legislation from being rendered nugatory. That, indeed, was situation in Banarsi Debi's case [1964] 53 ITR 100. However, this cannot possibly be any warrant or authority for saying that distinct and separate words of English language, namely, " issue " and " serve " are in any way synonymous. Again we are called upon to construe word " issue " not in isolation but in context of section 149 of Act. Plainly enough, it is express limitation provision creating precise bar with regard to reopening of assessments. As its heading in term says, it provides timelimit for notice. Now, barring exceptions, hallmark of limitation provision is that same must have clear cut and fixed termini at both ends. It has been rightly said that limitation provision would lose its effect unless it has terminus quo and terminus ad quem. Now, admittedly, section 149 fixes terminus quo from end of relevant assessment year, i.e., on 31st March of said year. On other hand, terminus ad quem under clauses (a) and (b) is fixed at four years, eight years and sixteen years, from fixed date of 31st of March, of relevant assessment year. It is within these precise parameters that notice under section 148 is mandated to be issued. If notice is issued beyond these inflexible polestars, same would transgress limitation provision of section 149. However, if argument canvassed on behalf of respondent-assessee is to be accepted, it leads to grave fallacy by making terminus ad quem wholly nebulous and utterly uncertain. It is manifest that time when reluctant and manipulating tax evading assessee, whose income has escaped assessment, can be served for reopening of his assessment would always remain problematic and is becoming progressively so. Therefore, to suggest that terminus ad quem of section 149 would not be date of issuance of notice but its valid service on recalcitrant assessee, would, in way, be violating sounder norms of construction for precise limitation statute. Clearly enough, if terminus quo is fixed as relevant assessment year, namely, 31st March of said year, other terminus must equally be fixed with regard to fixed date of issuance of notice, which is precise and predictable. Indeed, construction canvassed by respondent may well frustrate very object of this limitation provision as would be indicated in some detail hereinafter. As has already been noticed, core of respondent-assessee's stand is that after Banarsi Debi's case [1964] 53 ITR 100 (SC), word " issue " in 1961 Act must, wherever and whenever it is used, be read as " serve " and in any case it should be so in sections 147 to 153 of Act which have supplanted section 34 of old Act. Now, gravely anomalous and, if one may say so, absurd results which would ensue if such construction were to be accepted, deserve to be highlighted. Reference in this connection may first be made to sub-section (2) of section 148 which reads as follows: " 148. Issue of notice where income has escaped assessment.-... (2) Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. " Plainly enough, this requires that officer must first record his reasons before he formally issues notice under this section. If word " issuing " in this section is to be read as " serving ", it would lead to patent absurdity. This would imply that officer may record his reasons after issuing notice but before serving it on assessee. It is not easy to imagine that Legislature intended any such strange result. Reference may then be made to sub-section (3) of section 149 itself. There, in first line itself, word employed is " served " whilst in penultimate line word employed is " issued ". Thus, in same short subsection, Legislature itself is using these words as distinct and separate. If, as is sought to be canvassed on behalf of respondent, these words are synonymous or identical, Legislature would not land itself in anomaly of using different words if it was intended to mean same thing. Yet, again, word " issued " has been employed in both sub-sections (1) and (2) of section 151, which read as under: " 151. Sanction for issue of notice.-(1) No notice shall be issued under section 148 after expiry of eight years from end of relevant assessment year, unless Board is satisfied on reasons recorded by Income-tax Officer that it is fit case for issue of such notice. (2) No notice shall be issued under section 148 after expiry of four years from end of relevant assessment year, unless Commissioner is satisfied on reasons recorded by Income-tax Officer that it is fit case for issue of such notice. " plain scheme of section is that, as case may be, satisfaction and sanction of Commissioner or Board on reasons recorded by Income-tax Officer is necessary before notice under section 148 is sent out. If word " issued " used in both these sub-sections is read as " served ", it will lead to strange phenomenon that even after Income-tax Officer has recorded his reason and issued notice, sanction therefor may be recorded before its service on assessee. It is thus manifest that in this very statute and, in particular, in sections 147 to 153, Legislature did not intend, and indeed could not have intended, that word " issued " therein should always be read as " served ". Once that is so, then plainly enough, ordinary meaning of " issued " must be given to that word in section 149 and for reasons already recorded whilst discussing this limitation provision, it is indeed essential to read it only as " issued " and not as " served ". Lastly, in this context, one must candidly highlight that true construction of provision like section 149 undoubtedly is coloured and governed by line of approach to taxation laws. That approach has been recently corrected and highlighted by Constitution Bench in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC). In particular, incisive and refreshing observations of Chinnappa Reddy J. with regard to somewhat continuing archaic approach to taxing statutes deserve notice in extenso (p. 160): " We think that time has come for us to depart from Westminster principle as emphatically as British Courts have done and to dissociate ourselves from observations of Shah J. and similar observations made elsewhere. evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in welfare State like ours. Next, there is serious disturbance caused to economy of country by piling up of mountains of black money directly causing inflation. Then there is' large hidden loss' to community (as pointed out by Master Sheatcroft in 18 Modern law Review 209) by some of best brains in country being involved in perpetual war waged between tax-avoider and his expert team of advisers, lawyers and accountants on one side and tax-gatherer and his perhaps not so skilful advisers on other side. Then again, there is the' sense of injustice and inequality which tax avoidance arouses in breasts of those who are unwilling or unable to profit by it'. Last, but not least is ethics (to be precise, lack of it) of transferring burden of tax liability to shoulders of guideless, good citizens from those of the' artful dodgers'. It may, indeed, be difficult for lesser mortals to attain state of mind of Mr. Justice Holmes, who said,' Taxes are what we pay for civilised society. I like to pay taxes. With them I buy civilization'. But, surely, it is high time for judiciary in India too to part its ways from principle of Westminster and alluring logic of tax avoidance. We now live in welfare State whose financial needs, if backed by law, have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is pretence to say that avoidance of taxation is not unethical and that it stands on no less moral plane than honest payment of taxation. In our view, proper way to construe taxing statute, while considering device to avoid tax, is not to ask whether provisions should be construed literally or liberally, nor whether transaction is not unreal and not prohibited by statute, but whether transaction is device to avoid tax, and whether transaction is such that judicial process may accord its approval to it. hint of this approach is to be found in judgment of Desai J. in Wood-Polymer Ltd., In re and Bengal Hotels Limited, In re [1977] 47 Comp Cas 597 (Guj), where learned judge refused to accord sanction to amalgamation of companies as it would lead to avoidance of tax. " If this could be said of what was known as lawful tax avoidance, it is more pertinently and more stringently applicable to tax evasion. It is thus now held authoritatively that in commercial world of modern times and, in particular, in India where tax evasion is rampant, early Victorian approach that taxing statutes must invariably be tilted in favour of assessee has to be given go- by. Once this approach is accepted, as it must be, within this jurisdiction because of binding precedent, it seems plain that provisions of section 149 are directed, inter alia, against assessees who directly avoid their duty to pay tax or in any case against income which has escaped assessment earlier. Mr. Rajgarhia for Revenue was not far wrong in contending that section 149 and its allied provisions are attracted not in case of honest assessees but are directed against dishonest assessees who have amassed wealth and are ultimately caught up by discovery of evasion and escapement of their income. Is such provision to be construed in manner by which its very purpose may be eroded be rendered nugatory on technical ground of limitation by avoiding service of notice issued under section 148? It was forcefully pointed out that with all care and competence service of notice on recalcitrant assessee wishing to avoid same is not entirely in hands of Department. It is usually easy for manipulating and tax-evading assessee to delay or avoid service when it is on brink of limitation which, if crossed, would absolve him from further proceeding. Therefore, to fix terminus ad quem under section 149 on valid service on assessee whose case is to be reopened for escaped assessment may well be placing premium on tax evasion. It was rightly and forcefully argued on behalf of Revenue that recording of reason and issuance of notice within time prescribed is in hands of Department. Legislature mandates that Income-tax Officer must apply his mind and direct issue of notice within time fixed from last date of relevant assessment year and Revenue must comply therewith. However, service on evasive assessee is not and cannot inevitably be in hands of Department. It was with this object in view that Legislature designedly abandoned word " served " employed in old section 34 and pointedly used word " issued " alone in section 149 of Act. Even now, to read section 149 as requiring service would, therefore, be running against intent and mandate of Parliament and equally tending to construction which may defeat and frustrate its attempt to curb tax evasion. In CIT v. Smt. Kailasa Devi and Smt. Rukmini Bai [1976] 105 ITR 479, Andhra Pradesh High Court expressed view that unless " issued " was read as " served " in section 149, it may give option to Department to withhold service of order for inordinately and interminably long period and extend same for reopening assessment. With greatest respect, it is always rule that statute is not to be construed on presumption that its provisions will be abused or misused. It has rightly been said that there is no provisions will be abused or misused. It has rightly been said that there is no provision of law which is not capable of being misused. Courts, therefore, cannot proceed on assumption that public authorities vested with such power would necessarily abuse their authority. It was rightly and forcefully argued by Mr. Rajgarhia on behalf of Revenue that Department would not have least motivation to withhold or delay service after officer first duly recorded reasoned order for issuance of notice for reopening assessment under section 148. If at all, they would be motivated in expeditious execution of their decision in this context. boot, indeed, would be entirely on other leg because assessee sought to be proceeded against under sections 147 and 148 may wish to evade service and, if possible, cross barrier of limitation. Equally in eye of law, there is presumption under s. 114 of Evidence Act that all official acts are regularly performed. Even though there may be some fall in official standard, one cannot go to length of reversing that presumption by acting on assumption that statutory power will be abused or misused by public authority. With greatest respect, apprehension of Andhra Pradesh High Court on this score would, perhaps, be hardly acceptable. If such view tilted their decision as it obviously has, one must respectfully record dissent therefrom. Before parting with this judgment, reference must be made to Division Bench judgment of this court in CIT v. Mohammad Quddus & Sons [1985] 157 ITR 11 (Pat). In said case, notice under section 148 was sent out through registered post on March 29, 1976, but was served on assessee on April 3, 1976. Tribunal held that since service of notice was beyond time prescribed in Act, proceedings were barred by limitation provision of section 149. In assailing finding, firm reliance was placed on behalf of Revenue on Jai Hanuman Trading Co. Ltd. v. CIT [1977] 110 ITR 36 and New Bank of India Ltd. v. ITO [1982] 136 ITR 679. Without adverting in depth to said judgments, stand of Revenue was rejected and Tribunal's view was affirmed. With greatest respect, judgment has not laid down law correctly in view of detailed reasons recorded above and has, therefore, to be overruled. To finally conclude, answer to question posed at very outset is rendered in terms that limitation provisions of section 149 of Income-tax Act, 1961, envisage only issuance of notice to assessee and not its actual service subsequently on him as well. In light of above, answer to question No. (1) referred to High Court is rendered in negative and it is held that Tribunal was not correct in law in holding that assessment for assessment year 1961-62 was barred by limitation, that is, in favour of Revenue and against assessee. Equally, answer to question No. (2) is rendered in negative and it is held that Tribunal was not justified in cancelling penalty under section 271(1)(a) for assessment year 1961-62, i.e., in favour of Revenue and against assessee. Revenue will be entitled to costs of this reference. UDAY SINHA J.-I agree. NAZIR AHMAD J.-I agree. *** COMMISSIONER OF INCOME TAX v. SHEO KUMARI DEVI
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