The correctness of the judgment and order of a Division Bench of the High Court at Calcutta is under challenge in this appeal by the Commercial Tax authorities of the State of West Bengal.
The first respondent was the sole proprietary concern of the late Biswanath Jhunjhunwalla; the second respondent is his heir and legal representative. The first respondent carried on business, principally in gunny bags, and was a registered dealer under the Bengal Finance [Sales Tax] Act, 1941 [now called the ‘Act’]. We are concerned in this appeal with the assessments of the first respondent for the Assessment years Chaitra Sudi 2023 and 2024. These assessments were completed on 17th February, 1969, and 26th March, 1969. Under the law as it then stood, namely, Rule 80, sub-rule [5] of the Bengal Sales Tax Rules, 1941, the assessments could have been re-opened only within a period of 4 years for the relevant part of sub-rule [5] read thus:
"[5] The Commissioner or any other
authority to whom power in this
behalf has ben delegated by the
Commissioner, shall not, of his own
motion, revise any assessment made
or order passed under the Act or
the rules thereunder if-
[ii] the assessment has been made
or the order has been passed more
four years previously."
The Bengal Sales Tax Ordinance, 1973, substituted subsection [1] of Section 26 of the Act. As substituted, subsection [1] of Section 26 read thus:
"26[1] The State Government may
make rules, with prospective or
retrospective effect, for carrying
out the purposes of this Act." The Ordinance was replaced by the Bengal Finance [Sales Tax] [Third Amendment] Act, 1974.
Pursuant to the amendment of Section 26[1] of the Act, a Government Notification was issued on 30th March, 1974, amending, "with effect from the 1st November, 1971", clause [ii] of sub-rule [5] of Rule 80. Subsequent to such amendment, the relevant part of sub-rule [5] read thus:
"The Commissioner or any other
authority to whom power in this
behalf has been delegated by the
Commissioner shall not, of his own
motion, revise any assessment made
or order passed under the Act or
the rules thereunder if-
(ii) the assessment has been made
or the order has been passed more
than six years previously."
On 7th November, 1974, the Commercial Tax authorities issued to the first respondent notices reopening its completed assessments for the Assessment Years Chaitra Sudi 2023 and 2024 under the provisions of the amended sub-rule [5] of Rule 80. The then proprietor of the 1st respondent filed a writ petition in the Calcutta High Court challenging the legality of these notices. The validity of the amendment of Section 26[1] of the Act was called in question, and was upheld. [This contention need not detain us because it is not passed.] It was argued on behalf of the first respondent that the right to re-open the assessments dated 17th February, 1969, and 26th March, 1969, stood barred under the unamended provisions of Rule 80[5] [ii] when said Notification amending these provisions was issued and, therefore, the notices were bad in law. The contention was upheld. The High Court held that, by the amendment of the rule, assessments which had been completed could be revised within 6 years of the date of such completion, but when the right to revise the assessments under the unamended provision of the rule stood barred on the date the amendment was made, such assessments could not be re-opened or revised. The said Notification did not either expressly or by necessary implication confer any power of revision of assessments which stood barred on the date on which it was issued. The High Court relied upon the decisions of this Court in S.S. Gadgil, Income-Tax Officer, Bombay, vs. Lal and Co., 1964 [8] S.C.R. 72, and J.P. Jani, Income-Tax Officer vs. Induprasad Devshanker Bhatt, 72 I.T.R.595. It quashed the notices.
Hence, this appeal by special leave.
Mr. Tapas Ray, learned counsel for the appellants, drew our attention to the judgments aforementioned. He submitted that the said Notification, issued under the provisions of Section 26[1] of the Act, as amended, expressly stated that the amendment of the period of 4 years to 6 years in Rule [ii] was with effect from 1st November, 1971. The said Notification, therefore, in terms provided the date from which the amended period of 6 years would operate. The notices had been issued within such period and were valid. The decisions of this Court in cases of S.S.Gadgil and J.P. Jani [ibid] were distinguishable in that no provision expressly indicating when the retrospectively amended period should start had been made.
Mr. H.N. Salve, learned counsel for the respondents, laid stress on the fact that even at the time when the amendment of Section 26[1] was made, the assessing officer had lost the power to re-open the assessments in question He submitted that the words "with effect from 1st November, 1972" in the said Notification should be read as meaning that the amended provision would be applicable to assessments made after 1st November, 1971. So read, no assessments that had achieved finality would be affected. Re-opening was a matter of power, and of substantive law where assessments had reached finality. An intention should clearly be evinced in the amendments to confer the power to destroy such finality. Such intention was not evinced in the present case. Our attention was drawn to the judgment in The Income Tax Officer, Madras vs. S.K. Habibullah, Madras, 1962 Supp. [2] S.C.R. 716.
In the case of S.S. Gadgil, this Court said, and the passages are self-explanatory:
"Section 18 of the Finance Act,
1956, is it is common ground, not
given retrospective operation
before April 1,1956. The question
then is, whether the Income-tax
Officer may issue notice of
assessment to a person as an agent
of a non-resident party under the
amended provision when the period
prescribed for such a notice had
before the amended Act came into
force expired? Indisputably the
period for serving a notice of re-
assessment under the unamended
section had expired, and there was
in the Act as it then stood, no
provision for extending the period
beyond the end of the year from the
year of assessment. The Income-tax
Officer could therefore commence a
proceeding under s. 34 on March 27,
1957, only if the amended section
applied and not otherwise. The
amending Act came into force after
the period provided for the issue
of a notice under s. 34 before it
was amended had expired. It is
true that there was no determinable
point of time between the expiry of
the prescribed time within which
the notice could have been issued
against the assessee under s. 34
proviso [iii] before it was
amended. But there was no
overlapping period either. Prima
facie, on the expiry of the period
prescribed by s. 34 as it
originally stood, there was no
scope for issuing a notice unless
the Legislature expressly gave
power to the Income-tax Officer to
issue notice under the amended
section notwithstanding the expiry
of the period under the unamended
provision or unless there was
overlapping of the period within
which notice could be issued under
the old and the amended provision." The court quoted with approval the following observations in Ahmedabad Manufacturing and Calico Printing Co. Ltd. vs. S.C. Mehta, Income-tax Officer and another, 1963 Supp. [2] SCR 92:
"Once a final assessment has been
made, it can only be reopened to
rectify a mistake apparent from the
record [s, 35] or to reassess where
there has been an escapement of
assessment of income for one reason
or another [s. 34]. Both these
sections which unable reopening of
back assessments provide their own
periods of time for action but
allow these periods of time,
whether for the first assessment or
for rectification, or for
reassessment, merely create a bar
when that time passed against the
machinery set up by the Income-tax
Act for the assessment and levy of
the tax. They do not create an
exemption in favour of the assessee
or grant an absolution on the
expiry of the period. The
liability is not enforceable but
the tax may again become exigible
if the bar is removed and the
taxpayer is brought within the
jurisdiction of the said machinery
by reason of a new power. This is,
of course, subject to the condition
that the law must say that such is
the jurisdiction, either expressly
or by clear implication. If the
language of the law has that clear
meaning, it must be given that
effect and where the language
expressly so declares or clearly
implies it, the retrospective
operation is not controlled by the
commencement clause." The court said that the Legislature had given to Section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., upto 1st April, 1956. That provision had to be read subject to the rule, that in the absence of an express provision or clear implication, the Legislature did not intend to attribute to the amending provision a greater retrospectivity than was expressed mentioned nor to authorise the Income-tax Officer to commence proceedings which, before the new Act came into force, had, by expiry of the period provided, become time barred.
In the case of J.P. Jani. the decision in the case of S.S. Gadgil was followed. It was contended on behalf of the Revenue that Section 297[2][d][ii] of the Income Tax Act, 1961, was wide in its sweep and it took in all assessment years after the 31st March, 1940, irrespective of the question whether the right to reopen the assessment in respect of any such assessment years was barred or not under the 1922 Act when the 1961 Act came into force. The argument was found unacceptable because such construction was found unacceptable because such construction was tantamount to giving retrospective operation to the provision which was not warranted either by its express language or by necessary implication. The provision did not disclose in express terms or by necessary implication that there was a revival of the right of the Income Tax Officer to reopen an assessment which was already barred under the 1922 Act.
In the case of S.K. Habibullah, the Income-tax Officer had sought to rely upon Section 35[5] which had been incorporated by Section 19 of the Indian Income-tax [Amendment] Act, 1953, with effect from 1st April, 1952. Clause [5] was one of a group of clauses added by the Amending Act which dealt with the rectification of assessments. It dealt with the inclusion of income or correction of the income of a partner in a firm consequent upon assessment or re-assessment of the firm of which he was a partner. The Legislature by a fiction had regarded the inclusion and correction as the rectification of a mistake apparent from the record and prescribed a special terminal reckoning for the period of four years within which the rectification had to be made. Under clause [5] the inclusion of the shares in the assessment of the partners or the correction thereof was deemed to be a mistake apparent from the record within the meaning of the section and subsection [1] applied thereto accordingly, the period of four years being computed from the date of the final order passed in the case of the firm. The discrepancy disclosed as a result of the assessment or re-assessment of a firm between the share of a partner included in the individual assessment of that partner and his share disclosed in the assessment of the firm was not an error apparent from the record within the meaning of Section 35(1) and the Legislature enacted a fiction making the inclusion of the share in the assessment or correction thereof such a mistake. If the inclusion of the share of correction of the assessment were an error apparent from the record and failing under clause (1) of Section 35, the enactment of clause (5) was unnecessary. The Legislature having deliberately enacted a fiction of the nature set out in clause (5), the court rejected the contention raised by counsel for the Revenue that the enactment of the fiction was ex-abundanti cautela. Rectification of the nature contemplated by clause (5) could not have been effected under clause (1) . The legislature declared that what was not a mistake should for the purpose of rectification of assessment be regarded as a mistake apparent from the record and provided a terminus for the computation of period of four years. The question which fell to be considered was whether, relying upon clause (5) pf Section 35, an Income tax Officer could rectify the assessment of a person a who was a partner in a firm when the assessment of the firm was completed before 1st April, 1952. The legislature had given to clause (5) a partial retrospective operation. The provision enacted by clause (5) was not procedural in character : it affected the vested rights of the assessee. Therefore, in the absence of compelling reasons the court would not be justified in giving a greater retrospectivity to the provision than was warranted by the plain words used by the legislature. If by the law prevailing at the time when the assessment was made, no such result as was contemplated by the new clause (5) arose, to give a larger retrospective operation than was directed was to ascribe to the Legislature an intention different from the one expressed and to make a larger inroad upon the finality of the assessment than was permitted by the Legislature.
What, therefore, we have to seek is the clear meaning of the said Notification. If there be no doubt about the meaning, the amendment brought about by the said Notification must be given full effect. If the language expressly so states or clearly implies, retrospectivity must be with effect from 1st November, 1971, so as to encompass all assessments made within the period of six years theretofore, whether they have become final by reason of the expiry of the period of four years or not.
By reason of the said Notification, with effect from 1st November, 1971, Rule 18(5)(ii) has to be read as barring the commissioner (or other authority to whom power in this behalf has been delegated by the commissioner) from revising of his own motion any assessment made or order passed under the Act. or the rules if the assessment has been made or the order has been passed more than six years previous to 1st November, 1971, Put conversely, with effect from 1st November, 1971, Rule 18(5)(ii) permits the Commissioner (or other authority) to revise of his own motion any assessment made or order passed under the Act or the rules provided the assessment has not been made or the order passed more than six years previously. This being the plain meaning, the said Notification must be given full effect. Full effect can be given only if the said Notification is read as being applicable not only to assessments which were incomplete but also to assessments which reached finality by reason of the earlier prescribed period of four years having elapsed. Where language as unambiguous as this is employed, it must be assumed that the legislature intended the amended provision to apply even to assessments that had so become final: if the intention was otherwise, the Legislature would have so stated.
In the result, the appeal is allowed. the judgment and order under appeal is set aside. The respondents shall be entitled to proceed upon the notices dated 7th November, 1974, issued to the 1st respondent reopening its assessments for the Assessment years Chaitri Sudi 2023 and 2024.
There shall be no order as to costs.