Kalawati Debi Haralalka v. Commissioner Of Income Tax, West Bengal

The Judgment of the Court was as follows:

1. Section 297 of the Income-tax Act 1961, which repeals the Income-tax Act 1922 with certain savings, poses a problem, which need be worked out in this Rule.

2. It is necessary for me, at the outset, to set out the circumstances in which the problem arises in this Rule. The petitioner is an assessee to income-tax. In the month of January, 1961, the petitioner filed returns of her income for the assessment years 1952-53 to 1960-61. The respondent Income-tax Officer found that the principal sources of income of the petitioner comprised of interest on certain investments and profit from speculations in shares and silver as also from other miscellaneous sources. On the above sources of income, the respondent Income-tax Officer assessed the petitioner on income computed at:

(a) Rs. 12,150/- for the assessment year 1952-53 (b) Rs. 5,045/- for the assessment year 1953-54 (c) Rs. 5,760/- for the assessment year 1954-55 (d) Rs. 5,730/- for the assessment year 1955-56 (e) Rs. 5,350/- for the assessment year 1956-57 (f) Rs. 5,460/- for the assessment year 1957-58 (g) Rs. 6,170/- for the assessment year 1958-59 (h) Rs. 6,930/- for the assessment year 1959-60 (i) Rs. 7,315/- for the assessment year 1960-61

3. And issued notice of demand for payment of tax thereon. The assessment orders all bear date February 7, 1961.

4. On or about, January 25, 1963, the petitioner was served with several notices, in which it was stated that the respondent Commissioner of Income-tax examined the records of the petitioner's assessment cases for the years 1952-53 to 1960-61 and other connected records and that it appeared to him that the orders of assessment made by the respondent Income-tax Officer were erroneous and prejudicial to revenue on the following amongst other reasons:—

“Enquiries made, have revealed that no business as alleged was carried on from the address declared in the returns. The Income-tax Officer was not justified in accepting the initial capital, the acquisition and sale of jewellery, the income from business and ‘gift made by the petitioner etc. without any enquiry or evidence.”

5. In the said notices it was further stated that the respondent Commissioner proposed to pass orders enhancing or modifying the assessments or cancelling the assessments and directing fresh assessments in exercise of the powers vested in him under Sec. 33B of the Income-tax Act, 1922. Sec. 33B of the Income-tax Act, 1922, in so far material for this Rule, is set out below:—

“Power of Commissioner to revise Income-tax Officer's orders.—(1) The Commissioner may call for the examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case, justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

(2) to (4) xxxx

6. Since prior to the issue of the notices, the Income-tax Act, 1922 had been repealed, with effect from April 1, 1962, by the Income-tax Act 1961, the petitioner caused her attorneys, Messrs. Khaitan & Co., to write to the respondent Commissioner disputing the validity of the notices, firstly, on the ground of repeal of the Income-tax Act of 1922, and secondly, on the ground of vagueness in the notices in that there was no indication as to how the previous assessments were erroneous or prejudicial to revenue. Since the respondent Commissioner did not indicate his willingness to recall the notices, the petitioner moved this Court, under Art. 226 of the Constitution, praying for a Writ in the nature of Certiorari for the quashing of the notices and for a Writ in the nature of Mandamus directing the respondent Commissioner to recall, cancel or withdraw the said notices and obtained this Rule. The Rule was issued on three limited grounds, here-inbelow set out:—

“(a) The First Act having been repealed by the Second Act which came into force on the 1st April, 1962, the respondent No. 1 had no power, authority, or jurisdiction to initiate the said proceedings under Sec. 33B of the First Act.

(b) Sec. 6 of the General Clauses Act in no way authorises the initiation of the said proceedings inasmuch as no steps were taken in respect thereof when the First Act was in force and/or prior to its repeal.

(c) The powers under Sec. 298 of the Second Act can only be exercised in respect of the matters dealt with by Sec. 297 of the Second Act, which does not deal with proceedings under Sec. 33B of the First Act at all.”

7. The grounds set out above are interesting and need be carefully considered.

8. The effect of repeal of an enactment is governed by Sec. 6 of General Clauses Act 1897, which is quoted below:—

“Effect of repeal. Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then unless a different intention appears, the repeal shall not—

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability, acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.”

9. The position in law thus is that repeal of an enactment, unless contrary intention appears, does not affect the previous operation of the repealed enactment or anything done or suffered under it or affect any right, privilege, obligation, or liability acquired, accrued or incurred thereunder and any investigation, legal proceeding or remedy may be instituted, continued or enforced in respect of such rights, privileges, liabilities or obligations under the repealed Act, as if the repealing Act had not been passed. Moreover, the Income-tax Act 1961, repealed the Income-tax Act, 1922 with certain savings. The savings are to be found in Sec. 297(2) of the Income Tax Act, 1961 a material portion from which is quoted hereinbelow:—

“(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (hereinafter referred to as the repealed Act).

(a) Where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed;

(b) Where a return of income is filed after the commencement of this Act otherwise than in pursuance of a notice under Sec. 34 of the repealed Act by any person for the assessment year ending on the 31st day of March, 1962, or any earlier year, the assessment of that person for that year shall be made in accordance with the procedure specified in this Act;

(c) any proceeding pending on the commencement of this Act before any income-tax authority, the appellate tribunal or any court, by way of appeal, reference or revision, shall be continued and disposed of as if this Act had not been passed;

(d) where in respect of any assessment year after the year-ending on the 31st day of March, 1940,—

(i) a notice under Sec. 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 Sec. 147 and no proceedings under Sec. 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under Sec. 148 may, subject to the provisions contained in Sec. 149 or Sec. 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly;

(c) Sec. 23A of the repealed Act shall continue to have effect in relation to the assessment of any company or its shareholders for the assessment year ending on the 31st day of March, 1962, or any earlier year, and the provisions of the repealed Act shall apply to all matters arising out of such assessment as fully and effectually as if this Act had been passed:

(f) to (m) xxx

10. The Legislature seems to have been conscious of the fact that the repeal of the old enactment and substitution of a new Act in its place may cause difficulties and power must be taken by the Central Government to remove such difficulties. For that purpose Sec. 298 was incorporated in the Income Tax Act 1961, which reads as follows:—

“(1) If any difficulty arises in giving effect to the provisions of this Act the Central Government may, by general or special order, do anything not inconsistent with such provisions which appears to it to be necessary or expedient for the purpose of removing the difficulty.

(2) In particular, and without prejudice to the generality of the foregoing power, any such order may provide for the adaptations or modifications subject to which the repealed Act shall apply in relation to the assessments for the assessment year ending on the 31st day of March, 1962, or any earlier year.”

11. In exercise of the powers under Sec. 298 the Central Government made an order known as Income Tax (Removal of Difficulties) Order, 1962, which was published in the Gazette of India on August 9, 1962. Clauses (2), (3) and (4) of the aforementioned order reads as hereinbelow set out:—

2. Registration and refund proceedings to be regarded as part of assessment proceedings.—For the purposes of clauses (a) and (b) of sub-section (2) of Sec. 297 of the Income-tax Act, 1961 (XLIII of 1961) (hereinafter referred to as the repealing Act), proceeding relating to registration of a firm or a claim for refund of tax shall be regarded as a part of the proceedings for the assessment of the person concerned for the relevant assessment year.

3. Completion of assessments in cases covered by Sec. 297 (2) (b) of the repealing Act.—In cases covered by cl. (b) of sub-sec. (2) of Sec. 297 of the repealing Act, the assessments shall be made, inter alia, in accordance with the procedure specified in the following sections of the repealing Act, in so far as they may be relevant for this purpose:—

Secs. 131 to 136, 140 to 146, 153 [Except sub-section (2) and cl. (iii) of sub-sec. (3)], 156 to 158, 185, 187 to 189, 282 to 284 and 288.

4. Appeal, reference, or revision proceedings in respect of orders passed under the repealed Act—(1) Proceedings by way of the first or subsequent appeals, reference or revision in respect of any order made under the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the re pealed Act) shall be instituted and disposed of as if the repealing Act had not been passed.

(2) Any such proceeding instituted under the repealing Act after the 31st day of March, 1962 and before the date of this Order shall be deemed to have been instituted under the repealed Act and shall be disposed of as if the repealing Act had not been passed:

Provided that if any such proceeding has been disposed of before the date of this Order under any provision of the repealing Act, it shall be deemed to have been disposed of under the corresponding provision of the repealed Act and any appeal, reference or revision in respect of the proceeding so disposed of shall be instituted and disposed of as if the repealing Act had not been passed.”

12. Mr. Subimal Roy, learned Advocate for the petitioner, argued that the savings in Sec. 297 were not wide enough to keep alive the power of the respondent Commissioner to start proceeding under Sec. 33B of the repealed Income-tax Act, 1922. He further contended that there was also nothing contained in Sec. 6 of the General Clauses Act under which such a power would survive in the respondent Commissioner. He also contended that the Income-tax (Removal of Difficulties) Order either went beyond the savings contained in Sec. 297 of the Act of 1961 or was insufficient to save the powers of the respondent Commissioner under Sec. 33B of the repealed Act. He lastly, contended that Sec. 263 of the Act of 1961, which re-enacted the powers of the Commissioner of Income-tax under Sec. 33B of the repealed Act, merely authorised the Commissioner to call for and examine the records of any proceeding under the Act of 1961, and did not authorise him to call for the records of any proceeding under the repealed Act and notices for revision of assessment under the repealed Act could not be followed up by the Commissioner in exercise of his powers under Sec. 263 of the repealing Act.

13. I take up for consideration the arguments of Mr. Roy in the order they were made.

14. The first point for my consideration is the meaning of the expression “proceedings for assessment”, as used in Sec. 297(2) (a) of the Income-tax Act, 1961. If that expression includes proceedings for revision, under Sec. 33B of the repealed Income-tax Act, then the power of the Commissioner of Income-tax, under Sec. 33B, must be taken to have been expressly saved under Sec. 297.

15. The word “assessment” is defined in sub-sec. (8) of Sec. 2 of the Act 1961 in the following language:—

“Assessment includes reassessment.”

16. Like all “inclusive of definitions, the definition leaves much more unsaid than what it expressly states.

17. In the case of Commissioner of Income-tax v. Khemchand Ramdas (1) (1938) 6 I.T.R 414, P.C Lord Romer tried to explain the comprehensiveness of the word “assessment” under the now repealed Act of 1922 in the following language:—

“One of the peculiarities of most Income-tax Acts is that the word ‘assessment’ is used as meaning sometimes the computation of income, sometimes the determination of the tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax-payer. The Indian Income-tax Act is no exception in this respect.”

18. If the words “proceedings for assessment” have a comprehensive meaning, including therein assessment proceeding for revision either under Sec. 33A or 33B of the repealed Income-tax Act, then the first point urged by Mr. Roy loses all substance.

19. Mr. Roy, however, argued that such an interpretation of the words “proceedings for assessment” would not be a proper interpretation in the context of Sec. 297 of the Income tax Act of 1961. He invited my attention to clauses (c), (d) and (e) of Sec. 297 (2) and contended that if the words “proceedings for assessment” in cl. (a) of Sec. 297 (2) had the comprehensive meaning, inclusive of assessments made by an appellate authority or a revisional authority or assessment of escaped income, it would not have been necessary to specify separately (1) that any proceeding pending on the commencement of the Act before any income-tax authority, the appellate tribunal or any Court by way of appeal, reference or revision shall be continued and disposed of if the new Act had not been passed [Cl. (c)], (ii) that where in respect of any assessment year after the year ending on the 31st day of March, 1960, a notice under Sec. 34 of the repealed Act had been issued before the commencement of the new Act, the proceedings in pursuance of such notice may be continued and disposed of as if the new Act had not been passed [cl. d(i)], and (iii) that Sec. 23A of the repealed Act shall continue to have effect in relation to the assessment of any company or its shareholders for the assessment year ending on the 31st day of March, 1962 or earlier year and the provisions of the repealed Act shall apply to all matters arising out of such assessment as fully and effectually as if the new Act had not been passed [cl. (e)]. Mr. Roy laid particular emphasis on the provisions of Sec. 297.(2) (c) and contended that Secs. 33A and 33B of the repealed Act, in so far saved, were therein indicated and larger saving, namely, power to start new proceeding under Sec. 33B after the repeal of the Income-tax Act 1922 should not be imagined. Mr. Roy further contended that Sec. 6 of the General Clauses Act would not help in preserving the power of the Commissioner under Sec. 33B of the repealed Income-tax Act of 1922, firstly, because a different intention appeared in Sec. 297 of the repealing Act of 1961and secondly, because there was no obligation or liability under the repealed enactment which necessitated saving after repeal of the Income-tax Act of 1922.

20. Mr. Meyer, learned Advocate for respondents, tried to repel the contentions of Mr. Roy with the argument that cl. (a) of Sec. 297(2) was wide enough to include a revision proceeding under Sec. 33B of the repealed Act and that clauses (c) and (d) of Sec. 297(2) were enacted by way of abundant caution and did not curtail the generality of the powers saved under Sec. 297 (2) (a). He, however, conceded that if Sec. 297 (2) (a) was not wide enough to save the power of the Commissioner to start revision proceedings under Sec. 33B, after the repeal of the Act of 1922, cl. 297(2) (c) will not save such power. He emphasised on cl(4) of the Income-tax (Removal of Difficulties) Order 1962, hereinbefore set out, and contended that cl. (4) (i), inter alia, expressly provided for revision of orders, passed under the repealed Act, under the provisions of the repealed Act itself, even after the date of its repeal. This, he contended, was meant to remove all difficulties, if any, in making the provisions of 297 (2) (a) comprehensive enough to include such proceedings. He also contended that the petitioner was liable to taxation under the Income-tax Act 1922 and for correct assessment of that liability, proceedings under Sec. 33B could be instituted against the petitioner even after the repeal of the Income-tax Act 1922, by virtue of the provisions in Sec. 6 of the General Clauses Act.

21. This first and second branches of the argument of Mr. Meyer need be considered along with the first and second branches of the argument advanced by Mr. Roy.

22. Income-tax (Removal of Difficulties) Order, Mr. Roy contended, may only provide for removal of difficulties in giving effect to the Act of 1961; it cannot add to the repealing Act or make any provision inconsistent with the provisions of the repealing Act. He strongly relied on the language of Sec. 297 (hereinbefore quoted) in support of the argument.

23. If cl. (4) of the Income Tax (Removal of Difficulties) Order goes beyond the provisions of Sec. 297 (2) or is inconsistent therewith, then the clause itself becomes void and nothing therein contained will save the impugned order in this Rule. In my opinion, however, the words “proceedings for assessment” are wide enoughto inter alia, include assessment under Sec. 23 of the repealed Act of 1922 and also revised assessment either under Sec. 33A or under 33B of the repealed Act. The repealed Income-tax Act was a very frequently amended Act and had makeshift patches by different hands and verbal consistency in such legislation was the last virtue. The word ‘assessment’, was used in the Act of 1922, as I have already indicated, in several different senses, beginning from the computation of income to the imposition of tax liability. In the repealing Act of 1961, assessment, according to its definition, includes re-assessment. Therefore, the, word ‘assessment’ has to be read in a comprehensive sense and in that sense must be deemed to include revised assessment. If the word assessment in Sec. 297(2) (a) be given a wide connotation and be deemed to include re-assessment or revised assessment, as I hold it does, then clauses (c) and (d) of Sec. 297 (2) must be deemed to have been enacted by way of abundant caution. Even without the enactment of those clauses, cl. (a) of Sec. 297(2) would have sufficed for their purposes. That being the position in law, cl. (4) of Income-tax (Removal of Difficulties) Order does not go beyond the savings contained in Sec. 297 (2). That clause had been included in the Removal of Difficulties Order so as to silence all criticisms of the wide connotation of the word assessment. In the view taken, I hold that the first two branches of the argument of Mr. Roy must fail.

24. By reason of saving of the provisions of 33B of repealed Act of 1922 under the repealing Act of 1961, I need not consider whether such power is, in any event, also saved by Sec. 6 of the General Clauses Act. If it had been necessary so to do, I would have no hesitation in holding that such power would be saved under Sec. 6, cls. (c) and (e) of the General Clauses Act, there being no indication to the contrary in the repealing Act of 1961.

25. The last contention of Mr. Roy is, however, a contention of substance. There is nothing in Sec. 263 of the repealing Act of 1961, which would, apart from the provisions in Sec. 297 (2) (a) of the repealing Act, entitle the Commissioner of Income-tax to start proceedings under Sec. 33B of the repealed Act of 1922 after its repeal. The section deals with revision of orders made under the repealing Act of 1961, which are prejudicial to revenue and not with orders passed under the repealed Act of 1922. This argument, however, is inconsequential because no steps under Sec. 263 of the repealing Act was taken against the petitioner.

26. To err is human. Income-tax officers also may err either to the prejudice of assessee or of revenue. Secs. 33A and 33B of the repealed Income-tax Act were enacted so as to enable the Commissioner to cure such errors.

27. It must not be too readily assumed that the repealing Act of 1961 left a gap through which such errors under the repealed Act could escape rectification. Sub-sec. (2) of Sec. 297 was enacted with the object, inter alia, of saving certain procedures for proper computation, determination and imposition of tax liability on assesses, including those by way of appeal or revision and the Income-tax (Removal of Difficulties) Order was promulgated in order to put an end to all sophistry against the scope and effect of Sec. 297. I hold that Sec. 297(2) (a) is wide enough to preserve the power of the Commissioner to institute proceedings under 33B of the repealed Income-tax Act 1922, even after the repeal of the Act and the action taken by the respondent Commissioner against the petitioner should not be interfered with.

28. In the view expressed by me, this Rule must be discharged with costs, hearing fee assessed at five Gold Mohurs.

S.N.G