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Cachar Plywood Ltd. v. Income-Tax Officer, 'A' Ward, Karimganj Dist. Cachar
Structured Summary of the Opinion (Salil Kumar Datta, J.)
Factual and Procedural Background
This is an appeal against the judgment and order of Sabyasachi Mukharji, J. dated 27 November 1975, by which a connected rule was discharged.
The petitioner-appellant is an assessee under the Income-tax Act, 1961 who was assessed by the Income-tax Officer (I.T.O.) A Ward, Karimganj up to assessment year 1969–1970. On 23 December 1972 the Central Board of Direct Taxes issued an order transferring the appellant's case from I.T.O. A Ward, Karimganj to I.T.O., Central Circle XXXIII, Calcutta (effective from 8 January 1973).
Pursuant to that transfer the I.T.O., Central Circle XXXIII, Calcutta issued a notice dated 20 February 1973 calling on the appellant to produce documents in connection with assessment year 1970–1971 under section 143(2). The appellant challenged the Board's transfer order by an application under Article 226 on grounds that included the absence of recorded reasons for the transfer. A rule was issued, the respondents contested it, and the rule was discharged by the order under appeal (the November 27, 1975 order).
After the discharge of the rule on 27 November 1975, the I.T.O., Central Circle XXXIII, Calcutta completed the assessments for the relevant years, although those assessment orders had not been communicated to the appellant at the time of this opinion.
Legal Issues Presented
- Whether the transfer order of 23 December 1972 (transferring the appellant's case from I.T.O. A Ward, Karimganj to I.T.O., Central Circle XXXIII, Calcutta) was valid in law where it did not record reasons for the transfer.
- Whether, upon quashing the transfer order, the court has jurisdiction under section 153(3) of the Income-tax Act, 1961 and related authorities to direct that the original Income-tax Officer (I.T.O. A Ward, Karimganj) make assessments for specified assessment years which otherwise would be time-barred under the limitation provisions of section 153(1) and (2).
Arguments of the Parties
Advocate-General (Respondents' position / submissions before the Court)
- Conceded that the Supreme Court decision in Ajantha Industries v. Central Board of Direct Taxes (AIR 1976 SC 437 = 102 I.T.R. 281) holds that reasons for transfer must be recorded and communicated, and therefore the respondents could not defend the impugned transfer order that lacked recorded reasons.
- Submitted that this Court should, while quashing the transfer order, pass appropriate directions under section 153(3) of the Income-tax Act so that the original I.T.O., A Ward Karimganj, may complete assessments for assessment years 1970–1971, 1972–1973, 1973–1974 and 1974–1975; otherwise those assessments would become barred by limitation under sub-section (1) of section 153.
- Argued that unless such directions are given the assessee would obtain an unfair advantage by reason of pendency of the proceedings — an outcome neither party sought in the writ petition.
- Relied on Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons (AIR 1975 SC 67 = 96 I.T.R. 390) for the proposition that the court exercising powers under Article 226 can mould the remedy and direct another authority to deal with the matter so as to avoid giving an unintended advantage to any party.
Appellant's Arguments (Dr. Debi Prasad Pal)
- Contended that the court cannot, in law, revive claims already barred by limitation by directing assessments to be made at this stage; once the period of limitation under section 153(1) has expired the authority has lost jurisdiction.
- Argued that sub-section (3) of section 153 is a proviso to sub-sections (1) and (2) and therefore cannot be used to enlarge or curtail the substantive limitation periods in sub-sections (1) and (2).
- Pointed out that there was no injunction in force at the material time restraining the I.T.O., Karimganj from making the assessments and that the inaction of that officer (if any) does not justify the court exercising its discretion to the prejudice of the appellant.
- Relied on the passage in Pooran Mall to the effect that there is "no equity about limitation" and that a superior tribunal cannot extend the period of limitation merely by directing an inferior tribunal to make an assessment after limitation has expired.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ajantha Industries v. Central Board of Direct Taxes, AIR 1976 SC 437 = 102 I.T.R. 281 | Held that recording of reasons in an order of transfer and its communication to the assessee are mandatory. | The Advocate-General conceded that Ajantha Industries precluded defending the impugned transfer order that did not record reasons; the court therefore held the transfer order to be invalid and quashed it. |
| Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons, AIR 1975 SC 67 = 96 I.T.R. 390 | Explains that a court exercising powers under Article 226 can mould the remedy to suit the facts: it may quash an order but direct the appropriate authority to deal with the matter afresh so that the aggrieved party does not obtain an unfair advantage; also contains a passage that limitation cannot be extended by such directions. | Relied upon by the Advocate-General to support the proposition that the court can direct the original I.T.O. to make assessments. The appellant relied on portions of the same decision to argue that limitation cannot be circumvented. The Court used the authority to support its power to mould relief but reconciled Pooran Mall's statement on limitation with the specific statutory provision of section 153(3). |
| Iswarlal v. Moti Bhai, AIR 1966 SC 459 | Noted for the principle that even a proviso may in appropriate cases be treated as a provision dealing independently with matters specified therein rather than merely qualifying the main provision. | Cited to support the view that section 153(3) is not a mere proviso to sub-sections (1) and (2) but a substantive provision capable of operating independently where applicable. |
Court's Reasoning and Analysis
The court proceeded in the following logical steps, based on the material and authorities placed before it:
- Validity of Transfer Order: The Advocate-General conceded that Ajantha Industries establishes that a transfer order that fails to record reasons (and to communicate them) is invalid. On that basis the court found the impugned transfer order of 23 December 1972 to be unsustainable and liable to be quashed.
- Scope of Section 153: The court examined section 153 of the Income-tax Act which prescribes time limits for completion of assessments and reassessments (sub-sections (1) and (2)), and identified sub-section (3) as specifying classes of assessments, reassessments and recomputations to which those time limits do not apply — specifically where assessment is made "in consequence of or to give effect to any finding or direction contained in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act."
- Characterisation of the Writ Proceeding: The court treated the writ proceeding (the Article 226 challenge to the transfer under section 127) as a proceeding "otherwise than by way of appeal or reference under the Act", thereby bringing it within the scope of sub-section (3) if any finding or direction of the court results in an assessment.
- Jurisdiction to Give Directions: Relying on Pooran Mall, the court accepted that a court exercising Article 226 can mould relief and, in appropriate cases, quash an order while directing an appropriate authority to dispose of the matter afresh — so as to avoid conferring an unintended advantage on any party. The court concluded that prima facie it had jurisdiction to pass directions under section 153(3) when the circumstances justify it.
- Addressing the Limitation Objection: The appellant argued that once limitation under section 153(1) had expired the authority had no jurisdiction and the court could not revive a time-barred claim. The court analysed sub-section (3) as a substantive statutory provision that excludes the application of sub-sections (1) and (2) for specified classes of matters (including assessments to give effect to court orders in proceedings other than by way of appeal or reference). Therefore, when such a proceeding is pending the limitation periods of sub-sections (1) and (2) do not apply to assessments made in consequence of the court's order or direction.
- On the question of inaction by the original I.T.O.: The court observed that while there was no injunction on the Karimganj I.T.O. to make assessments, so long as the transfer order remained in existence the Karimganj I.T.O. lacked jurisdiction to proceed. Thus the officer's consequent inaction could not justify refusing to exercise the court's remedial jurisdiction in cases where doing so was required in the public interest to prevent taxes from becoming irrecoverable.
- Nature of Sub-section (3): The court rejected the submission that sub-section (3) is a mere proviso to sub-sections (1) and (2). It held that sub-section (3) confers plenary power that, by its terms, excludes the operation of sub-sections (1) and (2) in specified cases; it can therefore operate independently to permit assessments at any time where the statutory conditions are satisfied.
- Application to the Present Case: Given that the appellant did not dispute liability to income-tax for the relevant years, and that the transfer order (which prevented the original I.T.O. from proceeding) has been held invalid, the court found this a fit case in national interest to exercise the statutory power and direct the original I.T.O. (A Ward, Karimganj) to make assessments for specified years so that revenue is not defeated by procedural events.
Holding and Implications
Holding:
APPEAL ALLOWED. The impugned transfer order of the Central Board of Direct Taxes dated 23 December 1972 is set aside.
The court directed that the Income-tax Officer, A Ward, Karimganj, is authorized to make assessments on the appellant for the assessment years 1970–1971, 1972–1973, 1973–1974 and 1974–1975.
There will be no order as to costs.
Implications (Direct effect)
The direct consequence of the decision is that the transfer order is quashed and the original assessing officer (I.T.O., A Ward, Karimganj) is to complete assessments for the four specified assessment years. The court exercised its statutory power under section 153(3) to prevent the assessments becoming irrecoverable by reason of the procedural transfer and the pendency of the writ petition.
The opinion does not explicitly assert that it establishes a new binding precedent beyond applying existing statutory provisions and the authorities cited.
End of summary. G.N. Ray, J. concurred: "Appeal allowed; directions given."
Salil Kumar Datta, J.:— This appeal is against the judgment and order of Sabyasachi Mukharji, J. dated November 27, 1975 whereby the connected rule was discharged.
2. The petitioner appellant is an assessee under the Income-tax Act, 1961 and was being duly assessed till the assessment year 1969-1970 by the Income-tax Officer ‘A’ Ward Karimganj. The Central Board of Direct Taxes passed the following order in respect of the assessee on December 23, 1972.
F. No. 185/141/72-1T (AI)
Central Board of Direct Taxes.
New Delhi, the 23.12.72
No. 572-J. In exercise of the powers conferred by sub-section (1) of Section 127 of the I.T Act, 1961 (43 of 1961) and of all other powers enabling it in this behalf, the Central Board of Direct Taxes hereby transfers the case, the particulars of which are mentioned in column 3 of the Schedule hereto annexed from the Income-tax Officer mentioned in column 4 to the Income-tax Officer mentioned in column 5 thereof.
Sl. No. G.I.R No. Name of the assessee. From Income tax Officer. To Income-tax Officer. 1 2 3 4 5 1 C-3 Cachar Plywood Ltd., Oliviacherra Cachar. I.T.O A-Wd. Karimganj. I.T.O CC XXXIII, Cal This order shall take effect from 8.1.73 Sd. B. Madhavan Under Secretary, Central Board of Direct Taxes.”
3. Thereafter in pursuance thereof the Income-tax Officer, Central Circle XXXIII-Cal. issued a notice on the appellant on February 20, 1973 calling upon it to produce certain documents in connection with the assessment year 1970-1971 under S. 143(2) of the Act. The appellant challenged the aforesaid order of the Central Board of Direct Taxes by an application under Article 226 of the Constitution on grounds inter alia that the order did not contain any reasons for transfer as required in law, and the connected Rule was issued on this application on the concerned Income-tax Officer, the Commissioner of Income-tax, Central Circle, the Secretary, Central Board of Direct Taxes and the Union of India. The Rule was contested by the respondents and on hearing the parties the rule was discharged by the impugned order under appeal.
4. As the appeal came up for hearing learned Advocate General conceded that in view of the decision of the Supreme Court in Ajantha Industries v. Central Board of Direct Taxes, New Delhi AIR 1976 SC 437 = 102 I.T.R 281, wherein it was held that recording of reasons in the order of transfer and its communication to the assessee are mandatory, it is no longer possible for him to urge the validity of the impugned order which did not record any reasons. The appeal accordingly has to be allowed and the order of transfer of the case to the Income-tax Officer, Central Circle XXXIII-Cal dated December 23, 1972 in consequence has also to be quashed. It may be mentioned here that after the discharge of the Rule on November 27, 1975, the Income-tax Officer Circle XXXIII-Cal had completed the assessment in respect of the aforesaid years though under order of the Appeal Court, the orders have not been communicated to the appellant.
5. The learned Advocate-General submits that while passing the afore said order, the court should also pass appropriate directions under S. 153(3) of the Act, otherwise it would no longer be possible for the original Income-tax Officer to make assessments of the income of the appellant for the assessment years 1970-1971, 1972-1973, 1973-1974 and 1974-1975 which under sub-s. (1) of S. 153 would be barred by limitation. He further submitted that unless such directions, which the statute authorises, are given, by reason of the mere pendency of the proceeding, the assessee would reap an unfair and improper advantage which even was never their claim in the writ petition.
6. The relevant provisions are as follows:—
“Time limit for completion of assessments and re-assessments.
153. (1) No order of assessment shall be made under section 143 or section 144 at any time after—
(a) the expiry of—
(i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967;
(ii) three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968;
(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or
(b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of sub-section (1) of section 271; or
(c) the expiry of one year from the date of the filing of a return or a revised return under sub-section (4) of sub-section (5) of section 139.
whichever is latest.
(2) No order of assessment, re-assessment or recomputation shall be made under section 147—
(a) where the assessment, re-assessment or recomputation is to be made under clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice under section 148 was served;
(b) where the assessment, re-assessment or recomputation is to be made under clause (b) of that section, after—
(i) the expiry of four years from the end of the assessment year in which the income was first assessable, or
(ii) the expiry of one year from the date of service of the notice under section 148.
whichever is later.
*******
(3) The provisions of sub-sections (1) and (2) shall not apply to the following clauses of assessment, re-assessments and recomputation which may, (subject to the provisions of sub-section (2A) be completed at any time—
(i) where a fresh assessment is made under section 146;
(ii) where the assessment, re-assessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order, under sections 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this act;
(iii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147.
EXPLANATION 1: In computing the period of limitation for the purpose of this section (1) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be reheard under the proviso to section 129 or (II) the period during which the assessment proceeding is stayed by an order or injunction of any court …. shall be excluded.
[Provisions of sub-s. (2A) as also other explanations have not been quoted as they are not relevant for this appeal.]
7. Sub-sections (1) and (2) provide, as marginal note indicates, for time limits for completion of assessments and reassessments. Sub-section (3) in clauses (I), (II) and (III) provides for cases where no time limit for completion of assessment or re-assessment or recomputations as provided in sub-ss. (1) and (2) applies and such assessment, reassessment or recomputation may be completed at any time. Such assessment or re-assessment or recomputation however can only be made when it is in consequence of or to give effect to any finding or direction contained in an order in appeal or revision or in an order by the Court on a reference or in an order of any court in any other proceeding, otherwise than by way of appeal or reference under the Act. A writ proceeding as here in respect of any order under the Act under S. 127 of the Act will be such proceeding being one otherwise than by way of appeal or reference under the Act. Prima facie therefore the court has the jurisdiction in the instant case to pass appropriate direction for assessments in respect of the years which otherwise would be barred by limitation if such action is called for in interest justice and in the attending circumstances.
8. Learned Advocate General referred the decision in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons 96 I.T.R 390 = AIR 1975 SC 67 in support of his proposition that the instant case is a fit case where the court, in disposing of the appeal, should pass such appropriate direction in connection with the said assessments for years indicated above by the Income-tax Officer having the jurisdiction to assess particularly in view of the authority and power conferred on court in such “other” proceeding. The Supreme Court observed while considering S. 132(5) of the Income-tax Act 1961 as follows:
“The Court in exercising its powers under Article 226 has to mould the remedy to suit the facts of a case. If in a particular case a court takes the view that the Income-tax Officer, while passing an order under section 132(5) did not give an adequate opportunity to the party concerned it should not be left with the only option of quashing it and putting the party at an advantage even though it may be satisfied that on the material before him the conclusion arrived at by the Income-tax Officer was correct or dismissing the petition because otherwise the party would get an unfair advantage. The power to quash an order under Article 226 can be exercised not merely when the order sought to be quashed is one made without jurisdiction in which case there can be no room for the same authority to be directed to deal with it. But in the circumstances of a case, the court might take the view that another authority has the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which has the jurisdiction is vitiated by circumstances like failure to observe the principles of natural justice, the court may quash the order and direct the authority to dispose of the matter afresh after giving the aggrieved party a reasonable opportunity of putting forward its case. Otherwise, it would mean that where the court quashes an order because, the principles of natural justice have not been complied with, it should not while passing that order permit the tribunal or the authority to deal with it again irrespective of the merits of the case.”
9. On the above authority it was submitted that the court has ample jurisdiction to issue directions so that the Income-tax Officer ‘A’ Ward, Karimganj, may complete the assessment for the aforesaid years and there can be little dispute that the instant case is a fit one where such discretion should be exercised.
10. Dr. Debi Prasad Pal learned counsel for the appellant relied on the same decision in support of his contention that such direction can not in law be issued at this stage when the assessment for the relevant years undisputedly had already become barred by limitation. The court in exercise of its jurisdiction, it is submitted, can not revive a barred claim where under the operation of the provisions of sub-s. (1) S. 153 of the Act, the authority has lost its jurisdiction to pass any order of assessment in respect of the relevant years. Further sub-s. (3) of S. 153 is a proviso to sub-s. (1) and (2) of the same section and its provisions cannot enlarge or curtail the substantive provisions for limitation of time for assessment. It was also submitted that there was no injunction at the material time on the Income-tax Officer Karimganj from making assessment within the period of limitation and for such inaction on the part of such officer, the court should not exercise its discretion to the serious prejudice of the appellant assessee.
11. Dealing with the question of injunction, it is true there was no fetter on the Income-tax Officer ‘A’ Ward Karimganj to proceed with the assessments for the relevant years. But so long as the impugned order of the Central Board of Direct Taxes dated December 23, 1972 transferring the case of the appellant from the file of the said officer to the Income-tax Officer Central Circle XXXIII-Calcutta is in existence, as it does exist even today till it is quashed, the Income-tax Officer of Karimganj has no jurisdiction to proceed with the assessment. His inaction, which is inevitable, cannot accordingly be a ground for refusal to exercise a jurisdiction by this Court if it is otherwise called for in the circumstances of the case and the court has been conferred such jurisdiction which it should exercise in national interest as otherwise taxes payable for those years would be irrecoverable for no fault of the Revenue.
12. The contention that sub-s. (3) of S. 153 is a proviso to sub-s. (1) and (2) is also hard to accept. As the arrangement of the section stands, it cannot be said that sub-s. (3) of S. 153 is a mere proviso to its earlier sub-sections. This sub-section confers plenary powers on the appropriate authority to pass appropriate directions in regard to assessment, re-assessment or recomputation which can be made and completed at any time in consequence of any finding of court or to give effect to its direction as may be made. In such cases the provisions of sub-ss. (1) and (2) are not applicable at all so that sub-s. (3) which by its own force exclude operation of the earlier sub-sections can not be said to be a mere proviso to them and thus not competent to curtail or affect the provisions of the earlier sub-sections. Even a proviso may in appropriate cases be considered as a provision dealing independently with matters specified therein and not as qualifying the main or preceding provision as noted in Iswarlal v. Moti Bhai AIR 1966 SC 459.
13. Dr. Pal's foamidable contention is that the intended assessment by lapse of time have already become barred by limitation creating vested rights in the assessee and the court has no jurisdiction to revive such claims when such jurisdiction is already lost. He referred to the following observations in Pooran Mall's case:
“……there is no doubt that there is no equity about limitation……Naturally, after the period of limitation has expired no proceeding can be taken to assess nor could any period of limitation laid down by the Act be extended merely by a superior tribunal directing an inferior tribunal to make assessment or to take proceedings which result in assessment after the period of limitation is over.”
14. The above propositions are basic concepts of law and the Court on its own has no jurisdiction to extend the period of limitation in absence of requisite provision in that regard. We have already seen that sub-s. (3) of S. 153 of the Income-tax Act, 1961 is a substantive provision of law. It provides inter alia in respect of proceeding before any court otherwise than by way of appeal or reference under the Act that provisions of sub-ss. (1) and (2) shall not apply to certain classes of assessments, re-assessments and recomputations which may be completed at any time. One of such classes of assessment is where it is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order of any court in such proceeding. When the court is in seisin of such proceeding, the time limit of assessment as provided in sub-ss. (1) and (2) of S. 153 shall have no application to the assessment which may be made at any time in consequence of or to give effect to any finding or direction obtained in an order of court in the said proceeding. Accordingly it can be said that when such proceeding is pending before a court there can be no limitation, on the Revenue to make assessment in consequence of any finding or to give effect to any direction if any in the order of court in such proceeding. In respect of such matters there can be no question of limitation as expressly provided in sub-s. (3) and accordingly there is no question of extending the period of limitation or revival of time barred assessments when such assessments may be made at any time. Those provisions in our opinion are also salutary and in national interest when mere initiation and pendency of proceedings by an assessee may defeat the purpose of the Act and the court has been made the repository for exercise of such power obviously in appropriate cases.
15. The appellant, while challenging the order of transfer of his case, did not dispute his accessibility to income tax for the relevant years. By force of events such assessments would be time barred for no fault of the revenue unless appropriate directions are given by the court. We have not the least doubt in our mind that the present case is a fit one in national interest and in the circumstances to issue appropriate directions, the power in respect of which has been expressly conferred on the court, authorising the Income-tax Officer ‘A’ Ward Karimganj to make assessment in respect of the relevant years referred to above.
16. The appeal in the premises is allowed and the impugned order of transfer of the case of the appellant dated December 23, 1972 is set aside with the direction on the Income-tax Officer ‘A’ Ward Karimganj to make assessment on the appellant in respect of assessment years 1970-1971, 1972-1973, 1973-1974 and 1974-1975.
17. There will be no order for costs in the appeal in the circumstances.
G.N Ray, J.:— I agree.
Appeal allowed; directions given.
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