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PETITIONER: THE COMMERCIAL TAX OFFICER & ORS.

       Vs.

RESPONDENT: M/S. BISWANATH JHUNJHUNWALLA & ANR.

DATE OF JUDGMENT:       28/08/1996

BENCH: BHARUCHA S.P. (J) BENCH: BHARUCHA S.P. (J) PARIPOORNAN, K.S.(J)

CITATION:  JT 1996 (7)   600        1996 SCALE  (6)211

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T BHARUCHA, J.      The correctness of the judgment and order of a Division Bench of  the High  Court at  Calcutta is under challenge in this appeal  by the  Commercial Tax authorities of the State of West Bengal.      The first  respondent was  the sole proprietary concern of the  late Biswanath  Jhunjhunwalla; the second respondent is his  heir and legal representative.  The first respondent carried on  business, principally  in gunny  bags, and was a registered dealer  under the Bengal Finance [Sales Tax] Act, 1941 [now  called the  ‘Act’].   We are  concerned  in  this appeal with  the assessments of the first respondent for the Assessment  years   Chaitra  Sudi  2023  and  2024.    These assessments were  completed on 17th February, 1969, and 26th March, 1969.  Under the  law as  it then stood, namely, Rule 80, sub-rule  [5] of  the Bengal  Sales Tax Rules, 1941, the assessments could  have been  re-opened only within a period of 4 years for the relevant part of sub-rule [5] read thus:      "[5]  The Commissioner or any other      authority to  whom  power  in  this      behalf has  ben  delegated  by  the      Commissioner, shall not, of his own      motion, revise  any assessment made      or order  passed under  the Act  or      the rules thereunder if-      XXX             XXX             XXX      [ii]   the assessment has been made      or the  order has  been passed more      four years previously."      The Bengal  Sales Tax Ordinance, 1973, substituted sub- section [1]  of Section 26 of the Act.  As substituted, sub- section [1] of Section 26 read thus:      "26[1]   The State  Government  may      make  rules,  with  prospective  or      retrospective effect,  for carrying

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    out the purposes of this Act." The Ordinance was replaced by the Bengal Finance [Sales Tax] [Third Amendment] Act, 1974.      Pursuant to  the amendment of Section 26[1] of the Act, a Government  Notification was  issued on  30th March, 1974, amending, "with  effect from the 1st November, 1971", clause [ii] of  sub-rule [5]  of  Rule  80.    Subsequent  to  such amendment, the relevant part of sub-rule [5] read thus:      "The  Commissioner   or  any  other      authority to  whom  power  in  this      behalf has  been delegated  by  the      Commissioner shall  not, of his own      motion, revise  any assessment made      or order  passed under  the Act  or      the rules thereunder if-      XXX             XXX             XXX      (ii) the  assessment has  been made      or the  order has  been passed more      than six years previously."      On 7th  November, 1974,  the Commercial Tax authorities issued  to   the  first  respondent  notices  reopening  its completed assessments  for the Assessment Years Chaitra Sudi 2023 and  2024 under  the provisions of the amended sub-rule [5] of  Rule 80.   The then proprietor of the 1st respondent filed a writ petition in the Calcutta High Court challenging the  legality  of  these  notices.    The  validity  of  the amendment  of  Section  26[1]  of  the  Act  was  called  in question, and  was upheld.  [This contention need not detain us because  it is  not passed.]   It was argued on behalf of the  first   respondent  that   the  right  to  re-open  the assessments dated 17th February, 1969, and 26th March, 1969, stood barred  under the  unamended provisions  of Rule 80[5] [ii] when  said Notification  amending these  provisions was issued and,  therefore, the  notices were  bad in  law.  The contention was  upheld.   The High  Court held  that, by the amendment of  the rule, assessments which had been completed could be  revised  within  6  years  of  the  date  of  such completion, but  when the  right to  revise the  assessments under the  unamended provision  of the  rule stood barred on the date  the amendment was made, such assessments could not be re-opened  or revised.   The  said Notification  did  not either expressly  or by  necessary  implication  confer  any power of  revision of  assessments which stood barred on the date on which it was issued.  The High Court relied upon the decisions of  this Court in S.S. Gadgil, Income-Tax Officer, Bombay, vs.  Lal and Co., 1964 [8] S.C.R. 72, and J.P. Jani, Income-Tax  Officer  vs.  Induprasad  Devshanker  Bhatt,  72 I.T.R.595.  It quashed the notices.      Hence, this appeal by special leave.      Mr. Tapas Ray, learned counsel for the appellants, drew our attention to the judgments aforementioned.  He submitted that the  said Notification,  issued under the provisions of Section 26[1]  of the Act, as amended, expressly stated that the amendment  of the  period of  4 years to 6 years in Rule [ii] was  with effect  from 1st  November, 1971.   The  said Notification, therefore,  in terms  provided the  date  from which the  amended period  of 6  years would  operate.   The notices had  been issued  within such period and were valid. The decisions  of this Court in cases of S.S.Gadgil and J.P. Jani  [ibid]  were  distinguishable  in  that  no  provision expressly indicating when the retrospectively amended period should start had been made.      Mr. H.N.  Salve, learned  counsel for  the respondents, laid stress  on the  fact that  even at  the time  when  the amendment of  Section 26[1]  was made, the assessing officer

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had lost  the power  to re-open  the assessments in question He submitted  that the words "with effect from 1st November, 1972" in  the said  Notification should  be read  as meaning that  the   amended  provision   would  be   applicable   to assessments made  after 1st  November, 1971.   So  read,  no assessments that  had achieved  finality would  be affected. Re-opening was  a matter  of power,  and of  substantive law where assessments had reached finality.  An intention should clearly be  evinced in the amendments to confer the power to destroy such  finality.   Such intention  was not evinced in the present  case.   Our attention was drawn to the judgment in The  Income Tax  Officer,  Madras  vs.  S.K.  Habibullah, Madras, 1962 Supp. [2] S.C.R. 716.      In the  case of  S.S. Gadgil,  this Court said, and the passages are self-explanatory:      "Section 18  of  the  Finance  Act,      1956, is  it is  common ground, not      given    retrospective    operation      before April  1,1956.  The question      then  is,  whether  the  Income-tax      Officer   may   issue   notice   of      assessment to  a person as an agent      of a  non-resident party  under the      amended provision  when the  period      prescribed for  such a  notice  had      before the  amended Act  came  into      force expired?    Indisputably  the      period for  serving a notice of re-      assessment  under   the   unamended      section had  expired, and there was      in the  Act as  it then  stood,  no      provision for  extending the period      beyond the end of the year from the      year of assessment.  The Income-tax      Officer could  therefore commence a      proceeding under s. 34 on March 27,      1957, only  if the  amended section      applied and  not  otherwise.    The      amending Act  came into force after      the period  provided for  the issue      of a  notice under  s. 34 before it      was amended  had expired.    It  is      true that there was no determinable      point of time between the expiry of      the prescribed  time  within  which      the notice  could have  been issued      against the  assessee under  s.  34      proviso   [iii]   before   it   was      amended.     But   there   was   no      overlapping period  either.   Prima      facie, on  the expiry of the period      prescribed   by   s.   34   as   it      originally  stood,   there  was  no      scope for  issuing a  notice unless      the  Legislature   expressly   gave      power to  the Income-tax Officer to      issue  notice   under  the  amended      section notwithstanding  the expiry      of the  period under  the unamended      provision  or   unless  there   was      overlapping of  the  period  within      which notice  could be issued under      the old and the amended provision." The court quoted with approval the following observations in Ahmedabad Manufacturing  and Calico  Printing Co.  Ltd.  vs.

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S.C. Mehta,  Income-tax Officer  and another, 1963 Supp. [2] SCR 92:      "Once a  final assessment  has been      made, it  can only  be reopened  to      rectify a mistake apparent from the      record [s, 35] or to reassess where      there has  been  an  escapement  of      assessment of income for one reason      or another  [s. 34].    Both  these      sections which  unable reopening of      back assessments  provide their own      periods  of  time  for  action  but      allow  these   periods   of   time,      whether for the first assessment or      for    rectification,     or    for      reassessment, merely  create a  bar      when that  time passed  against the      machinery set  up by the Income-tax      Act for  the assessment and levy of      the tax.   They  do not  create  an      exemption in favour of the assessee      or  grant   an  absolution  on  the      expiry  of   the  period.       The      liability is  not  enforceable  but      the tax  may again  become exigible      if  the  bar  is  removed  and  the      taxpayer  is   brought  within  the      jurisdiction of  the said machinery      by reason of a new power.  This is,      of course, subject to the condition      that the  law must say that such is      the jurisdiction,  either expressly      or by  clear implication.   If  the      language of  the law has that clear      meaning,  it  must  be  given  that      effect  and   where  the   language      expressly so  declares  or  clearly      implies   it,   the   retrospective      operation is  not controlled by the      commencement clause." The court  said that the Legislature had given to Section 18 of the  Finance Act,  1956,  only  a  limited  retrospective operation, i.e.,  upto 1st  April, 1956.  That provision had to be  read subject  to the  rule, that in the absence of an express provision  or clear implication, the Legislature did not intend  to attribute to the amending provision a greater retrospectivity  than   was  expressed   mentioned  nor   to authorise the  Income-tax Officer  to  commence  proceedings which, before the new Act came into force, had, by expiry of the period provided, become time barred.      In the  case of  J.P. Jani. the decision in the case of S.S. Gadgil was followed.  It was contended on behalf of the Revenue that  Section 297[2][d][ii]  of the  Income Tax Act, 1961, was  wide in  its sweep  and it took in all assessment years after  the  31st  March,  1940,  irrespective  of  the question whether  the right  to  reopen  the  assessment  in respect of any such assessment years was barred or not under the 1922  Act when  the 1961  Act  came  into  force.    The argument was  found unacceptable  because such  construction was  found   unacceptable  because   such  construction  was tantamount  to   giving  retrospective   operation  to   the provision which  was not  warranted either  by  its  express language or  by necessary implication. The provision did not disclose in  express terms  or by necessary implication that there was  a revival  of the right of the Income Tax Officer

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to reopen  an assessment  which was already barred under the 1922 Act.      In the  case of S.K. Habibullah, the Income-tax Officer had sought  to  rely  upon  Section  35[5]  which  had  been incorporated  by   Section  19   of  the  Indian  Income-tax [Amendment] Act,  1953, with  effect from  1st April,  1952. Clause [5]  was one  of a  group of  clauses  added  by  the Amending  Act   which  dealt  with  the  rectification    of assessments.   It dealt  with the  inclusion  of  income  or correction of  the income  of a partner in a firm consequent upon assessment or re-assessment of the firm of which he was a partner.   The  Legislature by  a fiction had regarded the inclusion and  correction as  the rectification of a mistake apparent from  the record and prescribed a special  terminal reckoning for  the period  of four  years within  which  the rectification  had  to  be  made.    Under  clause  [5]  the inclusion of the shares in the assessment of the partners or the correction  thereof was  deemed to be a mistake apparent from the  record within  the meaning of the section and sub- section [1]  applied thereto accordingly, the period of four years being computed from the date of the final order passed in the  case of  the firm.   The  discrepancy disclosed as a result of  the assessment or re-assessment of a firm between the share of a partner included in the individual assessment of that partner and his share disclosed in the assessment of the firm  was not  an error  apparent from the record within the meaning  of Section  35(1) and the Legislature enacted a fiction making  the inclusion of the share in the assessment or correction  thereof such  a mistake.  If the inclusion of the share  of correction  of the  assessment were  an  error apparent from  the record  and failing  under clause  (1) of Section 35, the enactment of clause (5) was unnecessary. The Legislature having  deliberately enacted  a fiction  of  the nature set  out  in  clause  (5),  the  court  rejected  the contention raised  by  counsel  for  the  Revenue  that  the enactment  of   the  fiction   was   ex-abundanti   cautela. Rectification of the nature contemplated by clause (5) could not have  been effected  under clause  (1) . The legislature declared that  what was not a mistake should for the purpose of rectification  of assessment  be regarded  as  a  mistake apparent from  the record  and provided  a terminus  for the computation of period of four years. The question which fell to be  considered was  whether, relying  upon clause  (5) pf Section  35,   an  Income  tax  Officer  could  rectify  the assessment of  a person  a who  was a partner in a firm when the assessment  of the  firm was completed before 1st April, 1952. The  legislature had  given to  clause (5)  a  partial retrospective operation. The provision enacted by clause (5) was not  procedural in  character :  it affected  the vested rights  of  the  assessee.  Therefore,  in  the  absence  of compelling reasons  the court  would  not  be  justified  in giving a  greater retrospectivity  to the provision than was warranted by  the plain words used by the legislature. If by the law prevailing at the time when the assessment was made, no such  result as  was contemplated  by the  new clause (5) arose, to  give a  larger retrospective  operation than  was directed was  to ascribe  to the  Legislature  an  intention different from the one expressed and to make a larger inroad upon the  finality of  the assessment  than was permitted by the Legislature.      What, therefore,  we have  to seek is the clear meaning of the  said Notification.  If there  be no  doubt about the meaning,  the   amendment  brought   about   by   the   said Notification must  be given  full effect.  If  the  language expressly so states or clearly implies, retrospectivity must

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be with  effect from  1st November, 1971, so as to encompass all  assessments   made  within  the  period  of  six  years theretofore, whether they have become final by reason of the expiry of the period of four years or not.      By reason  of the  said Notification,  with effect from 1st November, 1971, Rule 18(5)(ii) has to be read as barring the commissioner  (or other  authority to whom power in this behalf has been delegated by the commissioner) from revising of his  own motion any assessment made or order passed under the Act. or the rules if the assessment has been made or the order has  been passed  more than  six years previous to 1st November,  1971,   Put  conversely,  with  effect  from  1st November, 1971,  Rule 18(5)(ii) permits the Commissioner (or other authority)  to revise of his own motion any assessment made or order passed under the Act or the rules provided the assessment has  not been  made or the order passed more than six years previously. This being the plain meaning, the said Notification must  be given  full effect. Full effect can be given only  if  the  said  Notification  is  read  as  being applicable not only to assessments which were incomplete but also to  assessments which reached finality by reason of the earlier prescribed  period of  four  years  having  elapsed. Where language  as unambiguous  as this is employed, it must be  assumed   that  the  legislature  intended  the  amended provision to  apply even  to assessments  that had so become final: if the intention was otherwise, the Legislature would have so stated.      In the  result, the appeal is allowed. the judgment and order under  appeal is  set aside.  The respondents shall be entitled to  proceed upon  the notices  dated 7th  November, 1974, issued to the 1st respondent reopening its assessments for the Assessment years Chaitri Sudi 2023 and 2024.      There shall be no order as to costs.