K.M SHARMA v. INCOME TAX OFFICER, WARD 13 (7) NEW DELHI

Citation: [2002] 2 S.C.R. 1047

Court: Supreme Court of India

Bench: S.P. BHARUCHA, N. SANTOSH HEGDE, D.M. DHARMADHIKARI

Judgment text

K. M. SHARMA --- . .. v. INCOME TAX OFFICER, WARD 13 (7) NEW DELHI APRIL 11, 2002 [S. P. BHARUCHA, CJ. , N. SANTOSH HEGDE AND D. M. DHARMADHIKA13J, JJ. ] j Income Tax Act, 1961 : Sections 147, 148 and 149. Section 150(1) [As amended with effect from 1. 4. 1989} and Section 150(2). Income Tax-Assessee---Receipt of interest on compensation for· land acquisition-Assessment-Limitation-Reassessment to levy tax-Permissibility o~Held amendment to Section 150(1) does not empower authorities to reopen assessment which have become final due to bar of liniitation prior to ' amendment~Section 150(2) is also applicable to court orders apart from income-tax proceedings. ' Fiscal statute-Interpretation of-Provision imposing liability-Heldsuch a law is not retrospective in the absence ofcontrary intendment. Section 150(1) of the Income Tax Act, 1961, as amended by Direct Tax Laws (Amendment) Act, 1987 w. e. f. 1. 4.

1989 provides 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 any proceedings under any other law. ' The question involved in this appeal is whether Section 150(1) can be availed for re-opening assessments, which have attained finality and could not be re-opened due to bar of limitation, that was attracted at the relevant time to the proposed reassessment proceedings under the provisions of Section 149. For acquisition of his land the appellant was paid between 15. 10. 1992 and 26. 5. 1993 compensation and interest thereon. Revenue issued notices to the appellant for reassessment to ' _J levy tax on the increased amount of interest for the assessment years 1968 to 1969 to 1971-72 and 1981-1982.

The appellant-assessee challenged the validity of these notices contending that the provision contained in sub-section (2) of Section 150 is in the nature of clarification or explanation to sub-section (I). Sub-section (2) makes it clear that i~he 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. The High Court upheld the validity of the assessment proceedings 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) ofSection 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. l In appeal to this Court it was contended on behalf of the appellantassessee that the provisions contained in Section 150(1) and (2) 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. Allowing the appeal and setting aside the impugned judgment, the Court HELD: 1. Sub-section (1) of Section 150 of the Income Tax Act, 1961 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. [1056-D) 2. On a combined reading ofsub-section (1) as amended with effect from 1. 4. 1989 and sub-section (2) of section 150, it is clear that the authority under the Act has been emppwered 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. 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. (1055-C] 3.

Sub-se~tion (2) of Section 150 cannot be held applicable only to J reassessment based on Orders 'in proceedings under the Act' and not to Orders of Court 'in proceedings under aay other law'. Such an interpretation r I r- ~ K. M. SHARMA v. I. T. O. 1049 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. [1054-E, F] 4. 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 assessment or to open up liabilities, which have become barred by lapse of time. [1056-C-D] 5. 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 retrosp. ective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. [1053-D] 6.

The amendment to sub-section (1) ofSection 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The provision in sub-section (1) therefore can have only prospective operation to assessments, which have not become final due to expiry of the period of limitation prescribed for assessment under Section 149 of the Act. [1053-E, F) 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. - . J Consequently, the notices issued by the Income Tax Department against the appellant are quashed. (1053-G-H; 1056-F] S. S. Gadgil v. Lal and Co. (1964) 53 ITR 231, relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No.

7742 of From the Judgment and Order dated 24. 5. 96 of the Delhi High Court in C~W. P. No. 1152 of 1996. B. B. Ahuja, R. R. Dwivedi, Durgainder Singh and Randhir Singh Jain for the Appellant. . , R. P. Bhatt, Ms. Lakshmi Iyengar and B. V. B. Das for Ms. Sushma Suri ' for the Respondent. The Judgment of the Court was delivered by 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: - I. 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 ufitler various awards and the appellant was granted total compensation in the sum of Rs. l,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 ofcompensation of Rs. 41,96,496 arid 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. K. M. SHARMA v. I. TO. [DHARMADHIKARI, J. ] 1051 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 tile 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 assessment years i. e. , 1968-69 to 1971-72 and J assessment 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 ..

) (I) because notices for such reassessments are based on the awards passed in the land acquisition proceedings by the Court ofthe 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 ofthe Act is an explanation to sub-section (I) 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 (I) 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 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1. 4. 1989. ] ...

t (2) The provisions of sub-section (1) shall not apply in by case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of \Vhich ( an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter ofthe 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 l 50 (1) states that the period of limitation prescribed in Section 149 is not applicable, if the reassessment r 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 cle which have become barred by lapse of time. Our conclusion, therefore, is that sub-section (I) of Section 150, as amended with effect from l. 4. 1989, does not enable the Authorities to reopen assessments, which ~ave 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 riotices 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. T. N. A. Appeal allowed.