JUDGMENT Satish Chandra, J.
1. Sri Mahadeo Prasad, the petitioner, challenges the validity of notices issued under Section 148 of the I.T. Act, 1961, for the assessment years 1953-54 to 1963-64.
2. Mahadeo Prasad, the petitioner, was being assessed in the status of HUF consisting of himself, his mother, wife and three sons. For the assessment year 1949-50, the petitioner filed a return in his individual capacity on the footing that there had been a total partition under Section 25A of the Indian I.T. Act, 1922. In the alternative, he claimed partial partition of some of the joint family properties. Both these claims were initially negatived and the entire income was assessed in the hands of the HUF. The return filed by the petitioner in his individual capacity was finalised by holding that there was no income assessable in his individual capacity.
3. The HUF went up in appeal, and, ultimately, the Tribunal accepted that there had been a partial partition of some of the properties with effect from the different dates. In respect of the other sources of income, the matter was taken up in reference and this court in a decision reported in Mahadeo Prasad Rais v. ITO [1972] 84 ITR 48, held that the other sources of income of the HUF were also partitioned. Consequent on these decisions of the Tribunal and the High Court, income from a variety of sources were excluded from the assessment of the HUF.
4. On 19th March, 1977, the petitioner was served with notices under Section 148 of the Act of 1961, in respect of the assessment years 1953-54 to 1963-64. The petitioner has come to this court for quashing these notices. His case in the writ petition was that he had not concealed any income. He furnished all relevant and material particulars of the income, and hence, there was no case for reopening the assessments. It was also claimed that the notices were barred by time and that the sanction granted by the CBDT was mechanical and without the application of mind to the facts.
5. In the counter-affidavit it has been clarified that in accordance with the final decision of the Tribunal as well as the High Court, various categories of income were excluded from the assessment of the HUF on the footing that there having been a partition in the family, those categories of income were assessable in the hands of the individual members of the family. The impugned notices were hence issued in order to bring those categories of income to tax in the hands of the petitioner in his individual capacity. It was averred that, in view of Section 150 of the I.T. Act, 1961, the notices were not barred by limitation.
6. At the hearing, Mr. Raja Ram Agarwal, appearing for the petitioner, perused the record of the case in which the Board had accorded its sanction, and after perusal he gave up the point that the Board had accorded the sanction mechanically or without the application of mind. He also stated that he was not questioning the department's case that the notices have been issued in order to bring the income to assessment because of findings recorded in the appellate orders in respect of the HUF. He stated that this question would be agitated before the departmental authority when the proceedings for reassessment are taken. This point is, therefore, left open.
7. The only question pressed at the hearing before us was that the notices were barred by limitation.
8. It is apparent that for the assessment years 1953-54 to 1961-62, the proceedings were conducted under the Indian I.T. Act of 1922. The appeals were decided under Section 30 thereof. But for the assessment years 1962-63 and 1963-64, the assessment proceedings were held under the Act of 1961. Section 297 of the Act of 1961 repeals the Indian I.T. Act of 1922. Sub-section (2) thereof makes transitory provisions. Clause (d) is material. It reads:
" 297. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred to as the repealed Act),--......
(d) where in respect of any assessment year after the year ending on the 31st day of March 1940,--
(i) a notice under Section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed;
(ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under Section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under Section 148 may, subject to the provisions contained in Section 149 or Section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly."
9. In the present case, no proceedings under Section 34 of the repealed Act were initiated and, therefore, the case was governed by Sub-clause (ii) of Clause (d). Under this clause, a notice can be issued under Section 148 but subject to the provisions of Section 149 or Section 150. Further, to such notice "all the provisions of this Act shall apply accordingly ".
10. Section 149 lays down the period of limitation for notices under Section 148. Section 150 makes provisions for cases where the assessment is in pursuance of an order on appeal, reference or revision. This is the provision relied on by the revenue. It says ;
"150. (1) Notwithstanding anything contained in Section 149, the notice under Section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of, or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision.."
11. For the revenue, it was stressed that the impugned notices under Section 148 have been issued for making reassessment in consequence of, and to give effect to, the findings of the Tribunal and the High Court made in appeals and references and, therefore, the notices could be issued without any limit of time, notwithstanding anything contained in Section 149.
12. Mr. Raja Ram Agarwal countered this submission on the ground that Section 150(1) was not applicable to the assessment years 1953-54 to 1961-62, because, for these years, the proceedings by way of appeal or reference were under the repealed Act of 1922, and not " under this Act ". He stressed that, in view of Sub-clause (ii) of Clause (d) of Section 297(2), the notice under Section 148 was " subject to the provisions contained in Section 149 or Section 150 ". Therefore, the provisions of Sections 149 and 150 were applicable in their terms, and if a given case did not fulfil the actual provisions of Section 150 the same will not apply. Section 150(1) applies where a finding was given in any proceeding under the Act of 1961. Hence, Section 150(1) could be utilised only in respect of the assessment years 1962-63 and 1963-64, and not in relation to the previous eight years. In support he relied on a decision of the Supreme Court in R. B. Seth Gujar Mat Modi v. CIT [1972] 84 ITR 261. In that case, the Supreme Court repelled the contention that Section 150(1) enabled the ITO to issue the impugned notices for years prior to the commencement of the I.T. Act, 1961, on April 1, 1962. The court held that this contention was unsustainable because the AAC's order was not passed under the 1961 Act, the department cannot hence take any support from Section 150(1) of the Act of 1961.
13. This case is distinguishable. There, a notice under Section 34 of the Act of 1922 was issued on November 7, 1958, and the proceedings thereon were pending when the 1961 Act came into force. The court expressly held that that being so it was not open to the ITO to issue notices under Section 148 of the 1961 Act. This is clearly so in view of Sub-clause (i) of Clause (d) of Section 297(2) under which if a notice under Section 34 had been issued the proceedings had to be completed under the repealed Act as if the 1961 Act had not been passed. Section 148 of the Act of 1961 was hence not available. The subsidiary argument for the department was rejected because on its terms Section 150(1) was not independently available. This case is at best an authority for the proposition that Section 150(1) of the 1961 Act would be applicable on its terms where it is sought to be applied independently and without reference to any other provision, like Sub-clause (ii) of Section 297(2)(d).
14. Sub-clause (ii) of Clause (d) to Section 297(2) makes the provisions of Section 150 expressly applicable to notices issued under Section 148 even though they may relate to assessment years prior to the coming into force of the 1961 Act. The relevant part of Clause (ii) is " a notice under Section 148 may, subject to the provisions contained in Section 149 or Section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly ".
15. The phrase "all the provisions of this Act shall apply accordingly " has been interpreted by the Supreme Court in Govinddas v. ITO [1976] 103 ITR 123. At page 134, it was held that the words " all the provisions of this Act shall apply accordingly " merely referred to the machinery provided in the new Act for the assessment of the escaped income. They did not import any substantive provisions of the new Act which create rights or liabilities. The word "accordingly" in the context means nothing more than " for the purpose of assessment " and it clearly suggests that the provisions of the new Act which are made applicable are those relating to the machinery of assessment. The substantive law to be applied for determining the liability to tax must necessarily by the law under the old Act, for that is the law which applied during the relevant assessment year and it is that law which must govern the liability of the parties.
16. The Supreme Court thus emphasised that the last part of Clause (ii) imported only the machinery provisions of the 1961 Act. The substantive provisions of the old Act would continue to be applied.
17. We, however, find that Sections 149 and 150 have expressly been made applicable. Section 150(1) corresponds to the second proviso to Sub-section (3) of Section 34 of the 1922 Act.
18. If it be held that on its terms Section 150 is inapplicable, then in view of the aforesaid pronouncement of the Supreme Court, the second proviso to Section 34(3) would apply. Under it a notice could be issued, without any limitation of time, to give effect to any finding or direction contained in an order passed in appeal or reference.
19. But we are satisfied that Section 150 was applicable to the cases of assessment years prior to the commencement of the 1961 Act. The Legislature knew that on its terms Section 150 applied to findings recorded in proceedings by way of appeal or reference under the 1961 Act. None the less it was expressly made applicable to assessment years for which appeals or references could only be filed under the repealed Act. Section 150 was made applicable to reassessment proceedings for those assessment years by reference. In other words, Sections 149 and 150 were to apply mutatis mutandis, that is to say, in so far as they were applicable with suitable modifications. The term "under this Act" occurring in Section 150 was under the circumstances to be read as if it included proceedings under the repealed Act as well. This interpretation has been accepted by a Division Bench of this court in Addl. CIT v. Kamlapat Moti Lal [1977] 110 ITR 769. The Bench drew support for its conclusions from the Supreme Court decision in Third ITO v. M. Damodar Bhat [1969] 71 ITR 806. In that case, Clause (j) of Section 297(2) came up for interpretation which provided :
" (j) any sum payable by way of income-tax, super-tax, interest, penalty or otherwise under the repealed Act may be recovered under this Act..."
20. The Supreme Court held that it is not required that all the sections of the new Act relating to recovery and collection should be literally applied but only such of the sections will apply as are appropriate in the particular case and subject, if necessary, to suitable modifications. In other words, the procedure of the new Act will apply to cases contemplated by Section 297(2)(j) of the new Act mutatis mutandis.
21. We may refer to two other decisions of the Supreme Court in relation to Clause (g) of Section 297(2). Clause (g) provided :
" any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act."
22. The phrase " under this Act " was interpreted to mean that the provisions of Section 271 of the Act of 1961 will apply mutatis mutandis. Section 271 in its terms referred to the provisions of the 1961 Act. The Supreme Court in Jain Brothers v. Union of India [1970] 77 ITR 107 held that the provisions of the old Act like Section 28 were also included within its purview. In other words, Section 271 was to be read as if it also referred to the relevant provisions of the repealed Act.
23. This decision was followed by the Supreme Court in CIT v. Singh Engineering Works P. Ltd, [1970] 78 ITR 90.
24. On a parity of the reasoning there is no difficulty in reading into the term "under this Act" occurring in Section 150(1) to include within it proceedings under the repealed Act as well.
25. Since Section 150(1) was applicable, the ITO was competent to issue notices under Section 148 without any limitation of time, for the assessment years 1953-54 to 1961-62.
26. In the result, the petition fails and is accordingly dismissed with costs.