C.I.T CENTRAL, CALCUTTA v. NATIONAL TAJ TRADERS (2)

Citation: [1980] 2 S.C.R. 268

Court: Supreme Court of India

Bench: V.D. TULZAPURKAR, E.S. VENKATARAMIAH

Case summary

Feeling aggrieved by the Tribunal's aforesaid order dated July 5, 1965 the appellant sought to refer a set of six questions of law said to • arise out of the said order to the Calcutta High Court but the Tribunal 8 referred the following two questions only for the opinion of...

Judgment text

A C. I. T. CEN1RAL, CALCUITA v. NATIONAL TAJ 1RADERS t November 27, 1979 • LV. D. TuLZAPURKAR AND E. S. VENKATARAMIAH, JJ. ] Income Tax Act, 1922, Section 33B-Constructi'on of section 33B wit# parti-· • cular bearing on the scope of the appellate powers of the Tribunal under subsection 4 thereof and the effect ·of sub-section 2(b) on sub section (4)-... Whether sub section 2(b) of section 33B has the effect of attenuation or turtait~ ,.. ing. the appellate por. ;ers of the Tribunal under sub section 4. "fc in respect of the accounting years ending March 31, 1957 and March 195! ~ respectively on the voluntary returns submitted by the respondent, the Income Tax Officer 'E' Ward District TI (1) Calcutta completed the assessment for these years (1957-58 and 1958-59) on total incomes of Rs. 7000/- and Rs. 7500/respectively, the same having been made in the status of unregistered firm consisting of three partners, namely Asha Devi Vaid, Santosh Devi Vaid and Sugni .

D Devi Vaid with equal shares. On August 2, 1962, the Commissioner of Income Tax issued notice to show cause why the said assessments should not be can~ celled under section 33B of the Act as he felt that the completed .. ,. _ments were erroneous as being prejudicial to the interests of the Revenue and the- In4 come Tax Officer 'E' Ward District TI(l) Calcutta had no territorial juriodictioo over the case of the A literal construction placed on sub-s. (2) (b) would lead to such manifestly absurd and anomalous results, which, were not intended by the Legislature. Therefore, the words of sub-section 2(b) should be construed as being applicable to suo motu orders of the Commissioner in revision end not to order~ made by him pursuant to a direction or order passed by the Appellate Tribunal under sub-s. (4) or by any other higher authority.

Such construction will be iD consonance with the principle that all perts of the section should be construed -together and every clause·thereof should be construed with reference to the c0ntext and other clauses thereof so that the construction put on that partic•. :!. &r provision makes a consistent enactment of the whole statute. [279 D-H, 280 A-G] Commissioner of Income Tax v. Kishoruingh Kalyan Singh Solaflki, 39, I. T. R. 522 (Bombay); approved. It i. a well settled that the principle that the fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions and by no stretch could s. 33B be regarded as charging • provision. [281 C-D] 6. A casus omissus bas not to be readily inferred and it could not be inferred from the mere fact that both ss. 338 and 34(3) together with the se.

cond proviso were inserted simultaneously in the Act by the same Amending Act of n 1948 and that in the case of former a relaxing provision was not made as ~ made in the case of the latter provision, firstly because the two provisiont operated ill ootinct fields and secondly it would be improper to do so without compar- 272 SUPREMI: COURT RBPORTS [1980] 2 i. C. R. ing the various stages of amendments through which each set of these Provisions had undergone since inception. The further aspect that the Legislature has in the 1961 Act made the requisite provision removing or relaxing the bar of limitation, in section 263(3), is, not of much importance. Irrespective of the question whether the second proviso to section 34 (3) was enacted ex majore cautella or not (over which conflicting views obtain) it is clear that s. 263(3) of the 1961 Act must be regarded ·as an ex ma;ore Cautella provision. Admittedly, at the time when the said provision was enacted in the 1961 Act, ~ the Bomb3.

y view held the field and there was no ·decision to the contrary of any other High Court. Obviously, therefore, the enactment of o. 263 (3) must be regarded as declaratory of the law which was already prevailing and thio position has been clarified in the Notes on Clauses of the Income Tax Bill 1961 where it has been stated that sub-cl. (3) of s. 263 was new and had been added_,. to get over the difficulty experienced in (wrongly stated 'caused by') the Bombay High Court's decision in Solanki's case. The enactment of an ex majort cautella provision in the 1961 Act would, therefore, be a legislative recognition of the legal position that olitaincd as a result of judicial pronounce1Il . contentien t· strong reliance was placed by birn upon the Bombay High Cl)jjl"('s decision in Solanki's case (supra). On the other band, counsel fo. r the assessee canvassed the High • Court's view for our acceptance by pointing out that both i. s. 33B and ..

' 34(3) together with the second proviso were introduced in the Act by the same Amending Act 1948 but ins. 33B no provision for removing or relaxing the bar of limitation contained in sub-s. (2) (b) was made and hence it was not for the Court to supply a casus omissus. He • also relied on the fact that in the 1961 Act the necessary provision has been enacted in s. 263(3) which also showed that in the absence of such p;rovision ins. 33B of the 1922 Act the bar of sub-s. (2) (b) was C. I. T. v. NATIONAL TAJ TRADERS (Tulzapurkar, J. ) 277 appllcable to every order of the Commissioner irrespective of whether > ' it was made suo motu or in pursuance of a direction issued by the appellate authority. According to him since the bar of limitation all( contained in sub-s. (2) (b) of s. 33B always operated for the benefit oi • the assessee as the same accorded finality tOl the assessment orders, the appellate powers of the Tribunal under sub-s.

(4) must be regarded as having been curtailed to thei extent that the Tribunal cannot remand • the case to the Commissioner for making fresh assessment if by then the limitation has expired. _ ~ Two principles of construction--one relating to casus omissu. J and "'>). , th~· other in regard to reading the statute as a wholei--appear to be well 81lttled. In regard to the former the following statement of law appears in Maxwell on Interpretation of Statutes (12th Edn. ) at page 33 ; Omissions not to be inferred-"It is a corollary to the general rule of literal construction that nothing is to be added I> to or taken from a statute unless there are adequate groundi to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said : 'It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do. ' 'We are not entitled ,' said Lords Loreburn L. C.

, 'to read words into an Act of Parliament unless clear ;reason for it is to be found within the four comer~ of the Act itself. ' A case not provided for in a statute is net to be dealt with merely because there seems no good reason why it should have been omitted, and th~ omission in consequence to have been unintentional. " In regard to the latter principle the following statement of law appears in Maxwell at page 47 : • A statute is to be read ~ a whole-"It was resolved in the case of Lincoln College [(1595) 3 Co. Rep. 58b, at p. 59b] that the good expositor of an Act of Parliament ' ... should 'make construction on all the parts together, and not of one part only by itself. ' Every clause of a statnte . is to 'be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enact- Ht ment of tfie whole statute. ' (Per Lord Davey in Canada Sugar Refining Co.. Ltd. v. R : 1898 AC 735)". ----.. ,... -- (1980] 2 $. C. R.

In other words, under the first principle a casus omissus cannot be supj plied by the Court except in the case of clear necessity and when reason --·- .. for it found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for thc,t purpose • all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on. • a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature. "An intention to produce a~ _ 1 . C unreasonable result'', said Danckwerts L. J. in Artemiou v. Procopioli( ) • 'f "is not to be imputed to a statute if there is some other construction available.

" Where to apply words literally would "defeat the obvious intention of the legislation and produce a wholly umeasonable result" we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction, (Per Lord Reid in Luke v. /. R. C. -1968 AC 557 where at p. 577 he also observed : "this is not a new problem, though our standard of drafting is such that it rnrely emerges. In the light of these principles we will have to construe sub-s. (2) (b) with reference to the context and other clauses of s. 33B. Section 33B was introduced in the Indian Income-Tax Act. 1922 by the Income Tax and Business Profit Tax (Amendment) Act 1948 with effect from March 30, 1948 and the object of introducing the same was obviously to confer revisional powers upon the Commis,ioner to correct the erroneous orders of an Income Tax Officer in so far as they were prejudicial to the interests of the revenue. The language of the subsec.

(1) clearly suggests that the said power was contemplated to be. exercised suo motu by the Commissioner inasmuch as the opening words show that it was upto the Commissioner to call for and. examine the record of any proceedings under the Act and on examination of the record if he were satisfied that any· order passed by an Income Tax Officer was erroneous as being prejuclicial to th<>. interests of the revenue he could revise the same after giving an opportunity to the' assessee of being heard. It is true that sub-s. (2) (b) thereof prescribed a period of limitation on his power by providing that no order shall be madei under sub-s. (1) after the expiry of two years from the date of the . ' order sought to be revised bv the Commissioner and a literat construction of sub-s. (2) (b) also sugoests that the bar of limitation imposed thereby was absolute in the sense that it applied to every lind of o. rdcr to be made under sub-s. (1) and no di$tinction was made between a (I) [1966] l Q. B.

878. C. I. T. v. NATIONAL TAJ TRADERS (Tulzapurkar, J. ) 279 suD mDtu order and an order that might be made by him pursuant to ·a direction given ·by any appellate or other higher authority but the question is whether such a literal construction should be accorded to that provision? As stated earlier sub-s. (3) conferred on au assessee a right to prefer an appeal to the Appellate Tribunal against the Commissioner's order made under sub-s. (1) and under sub-s. (4) the Tribunal had authority to deal with the impugned order of the Commissioner in such manner as it deemed fit in exercise of its appellate pbwers; for instance, it. could confirm the impugned order, it could annul that order, it could after vacating it remand the case back to the Commissioner for making ~fresh assessment in the light of the observations made by it in its ;,( I judgment or it could, after calling for a remand report, rectify the · erroneous order of the Income Tax Officer.

Further there was no period prescribed "~thin wl1ich an appeal against the impugned order of the Commissioner had to be disposed of by the Tribunal and in the normal course on rare occasions such appeals would have been heard and disposed of before the expiry of two years from the date of the Income Tax Officer's order which was regarded as erronOOIJS by the Commissioner. More often than not such appeals would come up for hearing after the expiry of the said period of two years---a fuct fully· known and within the contemplation of the Legislature when it intro- . duced the section in the Act in J948. In these circumstances did the Legislature intend to attenuate or curtail the appellate powers which it conferred on the Appellate Tribunal in very wide terms under sub-s. (4) by enacting sub-s. (2) (b) prescribing a time limit on the Commissioner's power (o revise an erroneous order of the Income Tax Officer \ when the Commissioner was seeking to exercise the same not SUD motu _,.

J'lllt but in pursuance of or obedience to a direction from the Appellate authority ? According to the construction contended for by the assessee and which found favour with the High Court the answer was in the affirmative because sub-s. (2) (b), on its literal construction, was absolute. In our view such literal construction would lead to a manifestly absurd result, because in a given case, like the present one, where the appellate authority (Tribunal) has found (a) the Income Tax Officer's order to be clearly erroneous as being prejudicial to the interests of the revenue and (b) the Commissioner's order unsustainable as being in violation of principles of natural justice how should the appellate authority exercise its appellate powers ?

Obviously it could · not withhold its hands and refuse to interfere with Commissioner's order altogether for, that would amount to perpetuating the Commissioner's erroneous order, nor could it merely cancel or set aside the Commis- • sioner's wrong order without doing anything about the Income Tax Officer's order, for, that would result in perpetuating the Incomr, Ta,; Officer's order which had been found to be manifestly erroneous as being prejudicial to the revenue. But such result would flow from the ~iew taken by the High Court which has held that the Tribunal acted properly in vacating the Commissioner's order but did not act properly in directing him to dispose of the proceedings afresh after gi~ing oppor- • tunity to the assessee. Such manifestly absurd result could never have been intended by the Legislature.

Moreover, it was fairly conceded by the counsel foc the assessee befure us that in exercise of its appellate powen it was open to the Tribunal itself to call for a remand report frcm either the Commissioner or the Income Tax Officer and rectify th~ Income Tax Officer's erroneous ocder· after giving oppo«timity ~ the assessee and in doing so no question of limitation would arise. It ( was also not disputed by him that it was equally open to the Tribunal to set aside the Commissioner's order and remand the case directly to the Income Tax Officer giving the requisite direction to rectify his erroneous order and thereupon the Income Tax Officer could carry out the Tribunal's direction, for, admittedly, the bar of limitation under £ub-m. (2)(b) was only on the Commissioner's power to makti m aasessment afresh and not on the Income Tax Officer. If this be the correct position then it is gravely anomalous that the Tribunal L!

hould not be in a position to set aside the Commissioner's order and remand the case back to the Commissioner for making a fresh llSSCl! ament bcc:mse in the meantime two years' period of limitation has expired, for, it would mean that the Tribunal was prevented from achieving the desired effect directly through the Commissioner but it could do. so indirectly through the Income Tax Officer. A literal constn1ction placed on 1ub-s. (2) (b) would lead to such manifestly absurd and anomalous ~ reaults, which, we do not think, were intended by the Legislature. The. ore considerations compel us to construe the words of sub-s. (2)(b) as . being applicable to suo motu orders of the Commissioner in reviilion and ... / not to orders made by him pursuant to a direction or order passed by the Appellate Tribunal under sub-s. (4) or by any other higher authority.

Such construction will be in consonance with the principle that all parts of the section should be construed together and every clause thereof should be coostrued with reference to the context and other clauses thereof so that the construction put on that particular provision makes a consistent enactment of the whole statute. Having regard to the above discussion we are clearly of opinion · that the view taken by the Bombay High Court in SolankrN case (supra) on the construction of sub-s. (2) (b) of s. 33B is correct and we approve of it. In Sabitri Devi Agrawalla's case (supra) the Assam High Court took ai contrary view and held that unde~ s. 33B(4) of the C. I. T. v. NATIONAL TAJ TRADERS (Tulzapurkar, !. ) 281 Act the Tribunal would not be justified in remanding the case to the, " Comntlssioner after the two years had expired from the date of the order sought to be revised.

The decision seems to rest on three aspects : (a) it b~ fiscal statute the same must be strictly construed, (b) the • bar of limitation contained in sub-s. (2) (b) was absolute and un- • qualified and covered all types of orders and (c) that unlike tlle second proviso to s. 34(3) tllere was no provision for removing or relaxing 8 ' the bar of limitation on tlle power of tlle Commissioner under s. 33B (2) (b) and that since s. 33B as well as s. 34(3) with second proviso had been introduced in tlle Act by tlle same Amending Act of 1948 ~re was a deliberate omission to make a provisiQ! l remo\ing o. r relax- 1 >{ · ing th~ bar of lim~tation in s. 33B ~d for such an omission the remedy · lay with the Legislature and not with the Court. The Assam High Court also alluded to the fact that under the 1961 Act the Legislature had made a provision removing or relaxing the bar of limitation in s. 263 (3). As regards aspect (b) we have already dealt with\ it above.

As regards aspect (a) it is well settled that the principle that the fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provi,sion or a provision imposing penalty and not to those parts of the statute which contain machinery provisions and by no stretch could s. 33B be regarded as a charging provision. As regards aspect (c) we have already pointed out above that a cast~ omissus has not to be readily inferred and it could not be inferred from the mere fact that both SS. 33B and 34(3)' togetller with the second proviso were inserted simultaneously in the Act by the same Amending Act of 1948 and that in the case of former a relaxing provision was \ not made. as was made in the case of the latter provision, firstly because ~ tho two provisions operated in distinct fields and secondly it would be improper to do so without comparing the various stages of amendments through which each set of tllese provisions had undergone since inception.

The further aspect tllat the Legislature has in the 1961 Act made the requisite provision removing or relaxing the bar of limitation in ~ , --. s. 263(3), is, in our view, not of much consequence. Irrespective of the r ) question whether the second proviso to s. 34(3) was enacted ex majore cautel/a oc not (over which conflicting views obtain), it is clear to us that s. 263(3) of the 1961 Act must be regarded as an ex majare \cautella provision. Admittedly, at the time when the said provision ~ was enacted in the 1961 Act, thel Bombay view held the field and, there was no decision to the contrary of any othe. r High Court. Obviously, therefore, the enactment of s. 263(3) must be regarded as declaratory I • of the law which was already prevailing and this position has been clarified ·in the Notes on Clauses of the Income Tax Bill 1961 where ,_. , it bas been stated that sub-cl. (3) of s. 263 was new and had been 19-868SCI/79 .

J A added to get over the difficulty experienced in (wrongly s~1te<l 'caused by') the Bombay High Court's decision in Solanki's case (supra). The enactment of an ex majore cautella provision in the 1961 Act would, therefore, be a legislative recognition of th(1 legal position that obtained as a. result of judicial pronouncement qua the 1922 Act. In our view, therefore. the Assam case was wrongly decided. B Reference may now be made to a decision of this CoU'rt in Pooran Mall's case,(! ) where in a similar situat,ion arising under s. 132 of the Income Tax Act, 1961, a restricted construction was accQrded by this . Court to sub-s. (5) thereof which prescribed certain period of limitation. In that case pursμant to an authorisation issued under s. 132(1~ C of the 1961 Act searcbe~ were carried out on October 15 and 16,.

1971 at the residence and business premises of P, an individual, and at certain office premises of the firms in which he was a partner, and jewellery, cash and accoont books were seized. The. re was also a search ad' two banks and a restraint order was made under s. 132(3) in respect of 114 silver bars pledged with those banks on the ground that they were the property of P. On January 12, 1972. the Income Tax Officer passed a summary order under s. 132(5) on the basis that all thel assets seized and 114 silve. r bars belonged to. P. Thereupon, P & Sons, one of the firms in which P was a partner, and P' filed a writ petition in the High Court challenging the order dated January 12, 1972 and 0\11 April 6, 1977, on the basis of the consent of the parties, the High Court quashed the order and permitted the department to make a fresh enquiry after giving an opportunity to the petitioner and pass a fresh order within two months.

After a fresh enquiry the Income Tax Officer passed an order on June 5, 1972, holding tha~ the silver bars belonged to P, the individual, and not the firm. P and Sons. Thereupon, the firm and P again filed a writ petition challenging the second order. The Hit,h Court held that the Income Tax Officer had no jurisdiction to pass that o. rder beyond the period prescribed in s. 132(5) and set aside the order and directed the return of the 114 bars of silver. This Court held, inter a1ia, that the order made in pursuance of a direction given under s. 132(12) orl by a, Court in writ proceedings, was not subject to the limitation prescribed under s. 132(5). At page 394 this Court has \observed thus : "Even if the period of time fixed under section 132(5) is held to be mandatory that was satisfied when the first order was made. Thereafter, if any direction is given under section 132(2) or by a Court in writ procw! ings, as in this case, we do not think an order l! lade in pursuance of such a (!

) 96 J. T. R. 390. c,1. T. v. NATIONAL TAJ TRADERS (Tulzapurkar, !. ) 283 ilirection would be subject to the limitations prescribed under section 132(5). Once the order has been made within ninety . days the aggrieved person has got the right to approach the notified authority under section 132 (11) within thirty days ~nd that authority can d. i~ect the Income Tax Officer to pass :a fresh order. We cannot accept the contention on behalf of the respondents that even such a fresh order should be passed ·within ninety days. It would make the sub-sections (11) and (12) of section 132 ridiculous and useless. " ""'--_1t ~y be pointed ou~ 1? at_in s. 132. ther~ is no provision removing or ' - <felaxmg the bar of hm1tat1011 contamed m s. 132(5) enabling the Income Tax Officer to pass an order afresh pursuant to any 'direction issued to him by a higher authority w1der s. 132(12) and even then this Court took the view that the limitation presc. ribed under s.

132(5) will be applicable only to the initial order to be made by tl). e Income Tax Officer and not to an order that would be made by him pursuant to a direction from the Board or notified authority. The concerned provi- ·sions were read together and such construction was put on sub-s. (5) ·Of s. 132 as made a consistent enactment of the whole statute. 1n the result, we are of opinion that the answer given by the High 'Court to the second aspect of the second question ~eferred to it was dearly wrong and, in our view, the Tribunal's order vacating the Commissioner's order and directing the Commissioner to make assessment afresh after giving due opportunity to the respondent-assessee was proper. The appeal is accordingly allowed but in the circumstances, there will be no order as to costs. V. D. K. . , Appeal allowed.