KM
Sharma Vs. Income Tax Officer, New Delhi
[2002] Insc 193 (11
April 2002)
Cji,
N. Santosh Hegde & D.M. Dharmadhikari Dharmadhikari, J
In
this appeal, which is filed after obtaining special leave, the Order dated 24th May, 1996 of the High Court of Delhi has been
assailed. The main question involved is on the application and interpretation
of the provisions of Section 150 of the Income Tax Act, 1961 (hereinafter
referred to as the Act).
The
relevant facts necessary for deciding the legal question raised are as under: -
1. The
appellant's lands were acquired under Section 6 of the Land Acquisition Act and
an award was passed on 2.12.1967 by the Chief Commissioner of Delhi granting compensation in favour of
the appellant. The Additional District Judge by Judgment dated 20.5.1980 held
the appellant entitled to 1/32 share of the compensation awarded under various
awards and the appellant was granted total compensation in the sum of
Rs.1,18,810/- approximately in the year 1981.
2. On
a reference under Section 18 of the Land Acquisition Act, the learned
Additional District Judge, Delhi vide his Judgment dated 31.7.1991 awarded a
sum of Rs.1,10,20,624/-. The amount was paid to the appellant between
15.10.1992 and 26.5.1993. The amounts paid represented principal sum of
compensation of Rs.41,96,496/- and interest in the sum of Rs.76,84,829/- upto
18.5.1992. Before making the above payments, tax was deducted at source
amounting to Rs.8,60,701/-
3.
Since the lands acquired were agricultural lands and were acquired prior to
1.4.1970, capital gains tax was not leviable but tax was leviable on interest
earned on the amount awarded on year to year basis.
4. The
appellant through counsel sent a letter dated 17.9.1993 informing the ITO that
he had received interest amount of Rs.76,84,829/- and interest accrued from
year to year was assessable in each year. Year-wise break up of the interest
was also given in the letter. According to the appellant, no tax was leviable
on interest accruing up to 31.3.1982 as assessment for it had become barred by
time. The appellant, therefore, requested that necessary action be taken under
Section 147 of the Act to enable the appellant as assessee to file his Income
Tax Return and pay tax accordingly.
5. On
31.3.1994, the appellant was served with impugned notices under Section 148 of
the Act for 16 assessments years i.e., 1968-69 to 1971-72 and assessments years
1981-82 to 1992-93.
6. The
appellant, in the High Court, assailed the notices issued under Section 148 of
the Act for reassessment for the assessment years 1968-69 to 1971-72 and for
the year 1982-83 on the ground that the proposed reassessment for those
assessment years had already become barred by time under Section 149 of the
Act, for which in the relevant periods maximum period of four years or seven
years limitation was prescribed depending upon the quantum of liability towards
tax.
7. The
High Court by the impugned Judgment accepted the contention of the Department
that the provisions of Section 150(1) of the Act, as amended with effect from
1.4.1989, could be resorted to for reassessment to levy tax on the increased
amount of interest earned by the appellant in the relevant assessment years. It
was held that bar of limitation prescribed under Section 149 of the Act was not
attracted by virtue of the provisions of Section 150 (1) because notices for
such reassessments are based on the awards passed in the land acquisition
proceedings by the Court of the Additional District Judge on a reference under
Section 18 of the Land Acquisition Act. Upholding the validity of the
assessment proceedings initiated by the Department under Section 148 of the
Act, the High Court rejected the contention of the assessee that sub-section
(2) of Section 150 of the Act is an explanation to sub-section (1) and
proceedings for reassessment, which had already become barred by time under
Section 149 of the Act before 1.4.1989, could not have been commenced on the
amended provisions of sub- section (1) of Section 150.
8. To
appreciate the contentions advanced by learned counsel for the parties and the
decision of the High Court, it is necessary to reproduce for critical
examination the provisions of Section 150 (1) and (2) of the Act. The
provisions read as under:
"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 [or by a
Court in any proceeding under any other law] [The portion bracketed and
underlined above is inserted aby the Direct Tax Laws (Amendment) Act, 1987 with
effect from 1.4.1989.] (2) The provisions of sub-section (1) shall not apply in
any case where any such assessment, reassessment or recomputation as is
referred to in that sub-section relates to an assessment year in respect of
which an assessment, reassessment or recomputation could not have been made at
the time the order which was the subject-matter of the appeal, reference or
revision, as the case may be, was made by reason of any other provision
limiting the time within which any action for assessment, reassessment or recomputation
may be taken."
9.
Section 149 of the Act prescribes maximum period of four or seven years
depending upon the quantum of tax as mentioned in the said Section for
initiating reassessment proceedings. Section 150 (1) states that the period of
limitation prescribed in Section 149 is not applicable, if the reassessment is
proposed on the basis of any Order passed by any 'authority in any proceedings
under the Act by way of appeal, reference or revision' or 'by Court in
proceedings under any other law'. Sub-section (2) of Section 150, however,
makes it clear that reassessment permissible under sub-section (1) of Section
150 would not be available to the Department where the period of limitation for
such assessment or reassessment has expired at the time it is proposed to be
reopened. In sub-section (1) of Section 150, by Direct Tax Laws (Amendment)
Act, 1987 with effect from 1.4.1989, the words 'or by a Court in any proceeding
under any other law' were inserted which are shown in bracket with underline in
the Section reproduced above.
10.
The main question that has been raised on behalf of the learned counsel
appearing for the parties is whether the provisions of sub-section (1) of
Section 150 as amended can be availed for reopening assessments, which have
attained finality and could not be reopened due to bar of limitation, that was
attracted at the relevant time to the proposed reassessment proceedings under
the provisions of Section 149 of the Act.
11.
The submission made on behalf of the appellant is that neither the provisions
of sub-section (1) nor sub-section (2) can be read as giving more than intended
operation to the said provision. The provisions, it is argued, do not permit
the authorities to reopen assessments, which have become final and reassessment
of which had become barred by time before 1.4.1989 when Section 150(1) was
amended. Reliance is placed on the decision of this Court in S.S.Gadgil v. Lal
and Co. reported in [1964] 53 ITR 231.
12.
The learned counsel appearing on behalf of the Department has made an effort to
persuade this Court to accept his construction of the provisions of Section
150(1) and (2) of the Act. It is argued that it is for the specific purpose of
assessing income, which might accrue on the basis of any decision of any Court
in any proceeding in any other law that the provision has been amended to lift
bar of limitation for reassessment.
13.
Fiscal statute more particularly on a provision such as the present one
regulating period of limitation must receive strict construction. Law of
limitation is intended to give certainty and finality to legal proceedings and
to avoid exposure to risk of litigation to litigant for indefinite period on
future unforeseen events. Proceedings, which have attained finality under
existing law due to bar of limitation cannot be held to be open for revival
unless the amended provision is clearly given retrospective operation so as to
allow upsetting of proceedings, which had already been concluded and attained
finality. The amendment to sub-section (1) of Section 150 is not expressed to
be retrospective and, therefore, has to be held as only prospective. The
amendment made to sub-section (1) of Section 150 which intends to lift embargo
of period of limitation under Section 149 to enable Authorities to reopen
assessments not only on the basis of Orders passed in proceedings under the IT
Act but also on Order of a Court in any proceedings under any law has to be
applied prospectively on or after 1.4.1989 when the said amendment was
introduced to sub-section (1). The provision in sub-section (1) therefore can
have only prospective operation to assessments, which have not become final due
to expiry of period of limitation prescribed for assessment under section 149
of the Act.
14. To
hold that the amendment to sub-section (1) would enable the Authorities to
reopen assessments, which had already attained finality due to bar of
limitation prescribed under Section 149 of the Act as applicable prior to
1.4.1989, would amount to giving sub-section (1) a retrospective operation
which is neither expressly nor impliedly intended by the amended sub-section.
15. On
behalf of the assessee before the High Court and in this Court reliance has
been placed on the provisions contained in sub-section (2) of Section 150. It
is submitted that the provision contained in sub-section (2) of Section 150 is
in the nature of clarification or explanation to sub-section (1). Sub-section
(2) makes it clear that the embargo of period of limitation lifted under
sub-section (1) for proposed reassessments based on Order in proceedings
appeal, reference or revision, as the case may be, would not apply to
assessments which have attained finality due to bar of limitation applicable at
the relevant time.
16.
The High Court rejected the above contention of the assessee on the ground that
on the amendment introduced with effect from 1.4.1989 in sub-section (1), which
enables reopening of assessment based on any Order of 'Court in any proceedings
in any law', there is no corresponding amendment made in sub-section (2) of
Section 150 to bar reassessment based on Order of Court passed in any
proceedings in any law in cases where prescribed period of litigation for
reassessment had already expired.
17. We
do not find the above reasoning of the High Court is sound. The plain language
of sub-section (2) of Section 150 clearly restricts application of sub-section
(1) to enable the Authority to reopen assessments which have not already become
final on the expiry of prescribed period of limitation under Section 149. As is
sought to be done by the High Court, sub-section (2) of Section 150 cannot be
held applicable only to reassessments based on Orders 'in proceedings under the
Act' and not to Orders of Court 'in proceedings under any other law'. Such an
interpretation would make the whole provision under Section 150 discriminatory
in its application to assessments sought to be reopened on the basis of Orders
under the IT Act and other assessments proposed to be reopened on the basis of
Orders under any other law. Interpretation, which creates such unjust and
discriminatory situation, has to be avoided. We do not find that sub-section
(2) of section 150 has that result. Sub-section (2) intends to insulate all
proceedings of assessments, which have attained finality due to the then
existing bar of limitation. To achieve the desired result it was not necessary
to make any amendment in sub-section (2) corresponding to sub-section (1), as
is the reasoning adopted by the High Court.
18.
Sub-section (2) aims at putting embargo on reopening assessments, which have
attained finality on expiry of prescribed period of limitation. Sub-section (2)
in putting such embargo refers to whole of sub-section (1) meaning thereby to
insulate all assessments, which have become final and may have been found
liable to reassessments or re-computation either on the basis of Orders in
proceedings under the Act or Orders of Courts passed under any other law. The
High Court, therefore, was in error in not reading whole of amended sub-section
(1) into sub-section (2) and coming to the conclusion that reassessment
proposed on the basis of order of Court in proceedings under Land Acquisition
Act could be commenced even though the original assessments for the relevant
years in question have attained finality on expiry of period of limitation
under Section 149 of the Act. On a combined reading of sub-section (1) as
amended with effect from 1.4.1989 and sub-section (2) of Section 150 as it
stands, in our view, a fair and just interpretation would be that the Authority
under the Act has been empowered only to reopen assessments, which have not
already been closed and attained finality due to the operation of the bar of
limitation under Section 149.
19.
This Court took similar view in the case of S.S.Gadgil (supra) in somewhat
comparable situation arising from the retrospective operation given to Section
34(I) of Income Tax Act, 1922 as amended with retrospective effect from
1.4.1956 by the Finance Act of 1956. In the case of S.S.Gadgil (supra)
admittedly under clause (iii) of the proviso to Section 34(I) of the Indian
Income Tax Act, 1922, as it then stood, a notice of assessment or reassessment
could not be issued against a person deemed to be an agent of a non-resident
under Section 43, after the expiry of one year from the end of the year of
assessment. The Section was amended by Section 18 of the Finance Act, 1956,
extending this period of limitation to two years from the end of the assessment
year. The amended was given retrospective effect from April 1, 1956. On March 12, 1957, the Income Tax
Officer issued a notice calling upon the assessee to show cause why, in respect
of the assessment year 1954-55, the assessee should not be treated as an agent
under Section 43 in respect of certain non-residents. The case of the assessee,
inter alia, was that the proposed action was barred by limitation as right to
commence proceedings of assessment against the assessee as an agent of
non-resident for the assessment year 1954-55 ended on 31.3.1956, under the Act
before it was amended in 1956. This Court in the case of S.S. Gadgil (supra)
accepted the contention of the assessee and held as under:
".
The legislature has given to section 18 of the Finance Act, 1956, only a
limited retrospective operation, i.e., up to April 1, 1956, only. That
provision must be read subject to the rule that in the absence of an express
provision or clear implication, the legislature does not intend to attribute to
the amending provision a greater retrospectivity than is expressly mentioned,
nor to authorise the Income-tax Officer to commence proceedings which before
the new Act came into force had by the expiry of the period provided become
barred."
20. On
a proper construction of the provisions of Section 150 (1) and the effect of
its operation from 1.4.1989, we are clearly of the opinion that the provisions
cannot be given retrospective effect prior to 1.4.1989 for assessments which
have already become final due to bar of limitation prior to 1.4.1989. Taxing
provision imposing a liability is governed by normal presumption that it is not
retrospective and settled principle of law is that the law to be applied is
that which is in force in the assessment year unless otherwise provided
expressly or by necessary implication. Even a procedural provision cannot in
the absence of clear contrary intendment expressed therein be given greater retrospectivity
than is expressly mentioned so as to enable the Authorities to affect finality
of tax assessments or to open up liabilities, which have become barred by lapse
of time. Our conclusion, therefore, is that sub-section (1) of Section 150, as
amended with effect from 1.4.1989, does not enable the Authorities to reopen
assessments, which have become final due to bar of limitation prior to 1.4.1989
and this position is applicable equally to reassessments proposed on the basis
of Orders passed under the Act or under any other law.
21. As
a result of the discussion aforesaid, the appeal is allowed. The Judgment of
the High Court of Delhi dated 24.5.1996 is hereby set aside. As prayed in the
petition, the impugned notices issued by the respondent of the Income Tax
Department under Sections 148 and 142 of the Act against the appellant for the
assessment years 1968-69 to 1971-72 and 1981-82 are hereby quashed. The appeal
stands allowed with costs.
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