JUDGMENT C.S.P. Singh, J.
1. Raja Mustafa Ali Khan was assessed in the status of an individual for the assessment year 1950-51, on a total income of Rs. 1,77,749. The original assessment was completed on January 17, 1955. Later on, it came to the notice of the department that the assessee had sold sal trees and timbers during the relevant accounting year, and accordingly proceedings under Section 34(1)(a) of the Act were initiated with the prior sanction of the Commissioner of Income-tax, U.P. This notice was served on the assessee on 30th November, 1955. In response to this notice the assessee filed a return disclosing a total income, which was equivalent to that which was originally assessed. Notices under Sections 22(4) and 23(2) of the Act calling for books of accounts were issued but the assessee did not comply on the ground that no accounts were in his possession. The Income-tax Officer, however, added an amount of Rs. 1 lakh to the total income of the assessee by order dated 15th March, 1961. An appeal was then filed by the assessee. It was contended that proceedings were barred by time, as under Section 34(1)(a) the assessment could have been reopened only within a period of four years, as the provisions of Section 28(1)(c) did not apply in the case. As regards the plea of limitation, the Appellate Assistant Commissioner of Income-tax held that proposals for initiating proceedings under Section 34(1)(a) were sent by the Income-tax Officer in October, 1955, and sanction was received from the Commissioner in November, 1955. Notice under Section 34(1)(a) was issued on 30th 'November, 1955, and It was served on the assessee on December 7, 1955. At the relevant time proceedings under Section 34(1)(a) could have been taken by the Income-tax Officer within eight years from the end of the assessment year in question, and were thus within limitation. On second appeal, the Tribunal held that under Section 34(1)(a) the assessment could have been completed within 8 years from the end of the year in which the income was first assessed. As the assessment could be made only by 31st March, 1957, inasmuch as the assessment was made on 15th March, 1961, the assessment was clearly beyond the prescribed period of limitation. Subsequently, at the instance of the Commissioner of Income-tax, the Tribunal has referred the following question of law for our opinion :
"Whether, upon the facts and in the circumstances of the case, the finding of the Income-tax Appellate Tribunal is right in law that the assessment made pursuant to Section 34(1)(a) of the Indian Income-tax Act, 1922, was barred by limitation ? "
2. The controversy raised in the present reference is short but interesting. Section 34 of the Income-tax Act, before it was amended by Section 18 of the Finance Act, 1956, permitted issue of notices under Section 34(1)(a) only within a period of 8 years from the end of the assessment year. By Act 18 of 1956, the limitation regarding issue of notice within 8 years was deleted. Section 34(3) which prescribed the limitation for making an order of assessment or reassessment was also amended, and as a result of the amendment no period of limitation was fixed for reassessment in cases falling under Section 34(1)(a) of the said section. In the present case notice for reassessment was issued on the 30th November, 1955, and served on 7th December, 1955, i.e., it was served well within the period of limitation as allowed under Section 34 of the Act as it then stood. Thus, there was no invalidity in the initiation of proceedings under Section 34(1)(a) of the Act. While these proceedings were pending, Section 34 was amended and after the amendment, Section 34(3) reads as under :
"34. (3) No order of assessment or reassessment, other than an order of assessment under Section 23 to which Clause (c) of Sub-section (1) of Section 28 applies or an order of assessment or reassessment in cases falling within Clause (a) of Sub-section (1) or Sub-section (1A) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable. "
3. It has already been seen that assessment was made on 15th March, 1961. If limitation has to be reckoned in accordance with Section 34(3), as amended, the assessment was well within time. Counsel for the assessee, however, contended that limitation for the reassessment in this case was to be governed by Section 34(3) as it originally stood before the amendment. Counsel for the department has, however, urged that inasmuch as proceedings in the present case were validly initiated in 1955, when limitation was still subsisting, the period for making the assessment would be governed by Section 34(3), as amended by Section 18 of the Finance Act of 1956, and not by the unamended provisions of Section 34(3). In support of this contention he has drawn our attention to the decision of the Supreme Court in the case of S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR (SC) 1 and in particular to the observations of Hidayatullah J. at page 53, where, considering the provisions of the Finance Act, 1956, which amended Section 34, it was observed:
" That this section was to operate on back period does not admit of any doubt. No clearer language could be used for the purpose. The first proviso to Sub-section (1) makes this abundantly clear by allowing notices to be issued ' at any time ' for any year later than the year ending on March 31, 1941, and then limiting action to eight years from the end of the year in cases coming in Clause (a) involving less than rupees one lakh. Though the section came into force on April 1, 1956, it covered in this way years going right back to 1941, of course, subject to the conditions indicated there. "
4. These observations undoubtedly support the contention made on behalf of the revenue. We have, however, to be circumspect in applying these observations, for Hidayatullah J. was in the minority. It is no doubt true as has been contended by the counsel for the revenue that the majority view does not touch this question. But, nevertheless, the result reached by Hidayatullah J., as regards the interpretation of the 1959 Finance Act, was not accepted by the majority. In Prashar's case [1963] 49 ITR (SC) 1, the question that came up for consideration was as to whether Section 4 of the Indian Income-tax (Amendment) Act, 1959, validated all notices and assessments which may have become time-barred even before the amendment. The majority took the view that the amending Act did not bring about this result. Hidayatullah J., speaking for himself and Raghubar Dayal J., took a contrary view. This being so, although the observations of Hidayatullah J. have great weight, it would not be safe to apply the rule of interpretation laid down by him as regards the amending Act of 1956.
5. Moreover, the question that arises in the present case is different. Here, admittedly, when the amendment in 1956 was engrafted, the limitation for making the assessment still subsisted. Thus when the legislature extended the period of limitation, no vested right had accrued to the assessee, in the sense that the Income-tax Officer had on account of the efflux of time lost jurisdiction to make the assessment. When the amending Act was introduced limitation for making the assessment still subsisted. All that happened was that the 1956 Act extended the limitation. The question really is whether this extended period of limitation can be applied in respect of cases which were pending and the Income-tax Officer had still time left to make the assessments. It is settled beyond doubt, by a catena of decisions that the law of limitation is a procedural one and it is open to a legislature to extend the period of limitation. It is only in those cases where a right accrues to a party, when the remedy against him is barred by the existing law, the question arises as to whether the law of limitation as amended is to be interpreted prospectively or retrospectively. Such is not the position here. The remedy of the Income-tax Officer to make the assessment against the assessee was not barred when the amending Act came into force. This being so, inasmuch as the 1956 Act extended the period of limitation, it is the extended period of limitation that would apply. Reliance placed by the Tribunal on the case of Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) appears to be out of context. In that case the question was as to whether the Kerala Surcharge and Taxes Act, 1957, which came into force on September 1, 1957, would apply to a period when it was not in force. It was held that amendments to the Income-tax Act, which were not in force on the 1st day of April of the financial year, do not apply to the assessment for that year. That principle cannot be applied in the present case, for, in that case, their Lordships were dealing with a substantive provision, i.e., a charging provision. The law of limitation, as has been seen, is a procedural one and, as such, it would not be appropriate to hold in favour of the assessee on this account.
6. We accordingly answer the question in the negative, in favour of the department and against the assessee. The department will be entitled to its costs, which we assess at Rs. 200. Counsel's fee is assessed at the same figure.