HUSSAIN BHAI AND OTHERS versus COMMISSIONER OF INCOME TAX, MADRAS.

Citation: [1971] SUPP. 1 S.C.R. 390 · Decided: 16-04-1971 · Supreme Court of India · Bench: S.M. SIKRI · Disposal: Appeal(s) allowed

Judgment (excerpt)

1190 
HUSSAIN BHAI AND OTHERS 
v. 
COMMISSIONER OF INCOME TAX, MADRAS. 
April 16, 1971 
s 
rs. M. s1i;:R1, c. 1 .• G. K .. MrITER, K. s. HEGDE, A. N. GRovEil: 
c 
D 
E 
F 
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AND P. 1AGANMOHAN REDDY, 11.J 
Income tax Act, (II of 1922), s. 34(1)(a) and lncome-ta'1: (Amendment) 
Act, 1959, s. 4--Effer:t on bar of limitation. 
Notioe under s. 34(1) (a) of the Income-tax Act, 1922 was served in 
February 1957 on the appellant with respect to escaped income of Rs. 
40,000 for the assessment year 1948-49. On appeal the Appellate Assistant 
Commissioner held that the proceedings were illegal. On July 9. 1958,. 
the Income-tax Officer issued another notice and assessed the assess.:e's in-
come including therein the Rs. 40,000, to tax. 
. When the matter came up before the High Court on reference, the 
High Court held that the notice dated July 9, 1958 was a fresh notice· 
but that it was saved from the bar· of limitation by s. 4 of the Income tax 
(Amendment) Act, 1959. 
In appeal to this Court, 
HELD: Section 4 of the 1959-Act refers to all notices issued under 
s. 34(1) la) of the 1922 Act at any time before the commencement of the· 
1959-Act. The notice dated July 9, 1958, in the present case, fell within 
that description. But s. 4 of the 1959-Acl. does not save such notices from 
attack on all grounds whatsoever; the only ground of attack which cannot 
be taken is that at the time the notice 'Nas issued. the period prescribed 
by s. 34(1) (a) of the 1922-Act, as in force before its amendment by the 
Finance Act, 1956, had expired. But in the present case, what the assessee 
was saying wa.s, that a notice under s. 34(1) (a) as amended by the Finance 
Act of 1956, could have been issued under that Act in respect of the assess-
ment year 1948-49 till April l, 1957; but when the Finance Act "f 1956, 
came into force, he came to be governed by the 8 year period prescribed by 
the Act as amended by the 1956 Act and not the 8 year period prescribed 
by the Act as it stood before the amendment in 1956. Accordingly the 
escaped income being less than a lakh, the assessee's ground of attack 
was that the 8 years prescribed by s. 34 as amended after 1956 had already 
expired before July 9, 1958. The assessee"s stand was correct, and the· 
notice was barred. (3958-F]. 
Observations of Sarkar, J. in S.C. Prashar v. Vasantani Dwan1kadas, 
[1964] I S.C.R. 29. 90, applied. 
CIVIL APPELLATE JURISO!Cf!ON : Civil Appeal No. 1097 o( 
1967. 
Appeal from the judgment and order dated December I, 1965 
of the Madras High Court in Tax Case No. 17S of 1963 (Reference; 
No. 49 of 1963). 
HUSSAIN BHAI v. C.I.T. (Sikri, C.J.) 
T. A. Ramachandran, for the appellants. 
Jagadish Swarup, Solicitor-General, S. Mitra, P. L. Juneja and 
R. N. Sachthey, for the respondent. 
The Judgment of the Court was delivered by 
391 
Sikri, C. 1~ 
This appeal by certificate granted by the Madras 
B 
High Court under Section 66A (2) of the Indian Income-tax Act. 
1922, hereinafter referred to as the Act, is from the judgment of 
the Madras High Court in a reference made to it under Section 66 
(I) of the Act by the Income-tax Appellate Tribunal, Madras 
Bench. 
The Tribunal referred the following question . 
"Whether the present proceedings initiated under 
Section 34(1) (a) of the Act against the assessees are valid 
in law?" 
The relevant facts may now be stated. 
For the assessment 
year 1948-49 (accounting year ending November 12, 1947) an 
assessment was made on Abdullabhai Fazalali in the status of an 
individual on September 30, 1948, on a total income of Rs. 9,102. 
The sour~es of income consideted in the assessment were share 
income from the firm of S. A. Bhagat and Co., and property in-
come. 
Subsequently, it came to light that Abdullabhai Fazalali 
had deposited Rs. 40,000 in cash on July 28, 1947 in the branch 
of the Bank of India Ltd. at Palanpur, now in North Gujarat. 
Abdullabhai Fazalali died on August I, 1954. 
Notice under See-
tion 34 (1) (a) of the Act was served on February 9. 1957 on 
Hussainbhai Abdullabhai as legal heir and representative of the 
estate of the late Abdullabhai Fazalali. On March 9, 1957 a return 
was filed showing the income as Rs. 8,237. but in Column 'D' the 
sum of Rs. 40,000 aforesaid was mentioned. 
While the proceedings were pending under Section 23(2) of 
the Act a petition was filed in the High Court challenging the 
validity of the proceedings under Section 34(1)(a). 
On March 
15, 1957 assessment was made. 
An ap

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