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Rex Cinema Co-owners Vs. Sixth Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Reported in(1983)3ITD633(Mum.)
AppellantRex Cinema Co-owners
RespondentSixth Income-tax Officer
1. the special bench was constituted to consider the following important question which arises from the cross objection of the assessee: whether the provisions of section 144b which are introduced in the i.t. act, 1961 with effect from 1-1-1976 are applicable to all pending assessment proceedings or whether they are applicable only to the proceedings for assessment years 1976-77 and onwards? the assessment year involved is 1974-75. the assessee, a firm, had filed their first return on 5-8-1974. in the course of the assessment proceedings, the ito, after hearing the assessee, made out a draft assessment order and referred the same to the iac under section 144b on 29-3-1977. the assessee filed his objections on 12-4-1977. the iac, after hearing the assessee, gave his directions which were.....
1. The Special Bench was constituted to consider the following important question which arises from the cross objection of the assessee: Whether the provisions of Section 144B which are introduced in the I.T. Act, 1961 with effect from 1-1-1976 are applicable to all pending assessment proceedings or whether they are applicable only to the proceedings for assessment years 1976-77 and onwards? The assessment year involved is 1974-75. The assessee, a firm, had filed their first return on 5-8-1974. In the course of the assessment proceedings, the ITO, after hearing the assessee, made out a draft assessment order and referred the same to the IAC under Section 144B on 29-3-1977. The assessee filed his objections on 12-4-1977. The IAC, after hearing the assessee, gave his directions which were received by the ITO on 23-9-1977. The assessment was completed later. The assessee's case is that the provisions of Section 144B, under which the ITO made the reference to the IAC, are not applicable since they were brought into the statute only on 1-1-1976. The department's case is that Section 144B being a procedural section would be applicable to all pending proceedings as on 1-1-1976. This is the controversy.

2. Shri Dinesh Vyas, appearing for the assessee as well as for Aditya Mills, another assessee, which is an intervener here, submitted that it is well settled that all laws operate prospectively only. Only laws pertaining to the procedure would be applicable to pending cases. All other laws and especially laws which are in the nature of substantive laws do not apply retrospectively unless the Legislature makes it clear by an appropriate expression that such a retrospective application was intended. He then submitted that Section 144B was substantive law. He based this submission on three grounds: 1. This section radically interferes with the jurisdiction of the ITO and curtails it. All provisions which deal with jurisdiction are substantive.

2. Certain vested rights of the assessee are affected as far as further and collateral proceedings are concerned, like appeals, revision and rectification.

3. The period for completion of assessment has been extended by Section 153, read with Section 144B. The statute has provided certain time-limit for completion of assessments. Once that time-limit is over, the assessee acquires a vested right that there would be no further proceedings in respect of that assessment. This vested right is affected by Section 153 which has extended the time-limit by a maximum of 180 days in case where a draft order has been submitted to the IAC under Section 144B.3. Developing the above three points, Shri Vyas submitted that jurisdiction had always been considered part of substantive law. He then took us through the definition of 'jurisdiction' as given in Mulla's Commentary on Civil Procedure Code, Vol. 1, page 155 (13th Edition). He pointed out that before the introduction of Section 144B in the statute, the IAC had no jurisdiction in respect of the assessments. The ITO had full and untrammelled power in determining of issues connected with the assessments. His jurisdiction was unlimited.

Such an unlimited jurisdiction has been taken away from the ITO and a part of it has been vested with the IAC. He submitted that for the first time an IAC gets jurisdiction in respect of assessment which he did not have earlier. Thus, he gets vested for the first time with a right to interfere and give directions to the ITO who till date had unlimited power. An amendment to an Act, which confers inherent jurisdiction to an officer, has to be substantive law. An amendment which curtails an existing unlimited jurisdiction to another officer has also to be substantive.

4. In support of this proposition, Shri Vyas cited the decision of the Bombay High Court in Dinshaw Darabshaw Shroff v. CIT [1943] 11 ITR 172.

That was a case where an IAC was present while assessment proceedings were going on and who put questions directly to the assessee. The Bombay High Court held that it was grossly improper as the senior officer, i.e., IAC had no power. He also referred to the decision of the Supreme Court in J.K. Synthetics Ltd. v. CBDT [1972] 83 ITR 335 wherein it was held that the Board was not competent to give directions regarding the exercise of any judicial power by its subordinate officers. Citing another Supreme Court decision in Sirpur Paper Mills Ltd. v. CWT [1970] 77 ITR 6, he pointed out that interference by any outside authority impinging on the jurisdiction of an officer in quasi-judicial matters would vitiate the proceeding. He also referred to the Madras High Court decision in S.B. Adityan v. First ITO [1964] 52 ITR 453 wherein the Madras High Court has held that extraneous influence in passing quasi-judicial orders vitiates them. Finally, he relied on the recent decision of the Delhi High Court in Sudhir Sareen v. ITO [1981] 128 ITR 445 and submitted that therein the Delhi High Court was considering the provisions of Section 144B and had held that without that express provision the IAC could not have exercised any authority.

5. Developing the second limb of this submission that the provisions of Section 144B affected the vested right, he submitted that these could not be interfered with unless the statute makes clear that such restrictive effect was intsnded. He submitted that before the provisions of Section 144B were brought into the statute, it was open for the assessee aggrieved with the ITO's order to file an appeal to the AAC. The right of appeal is a vested right as laid down by the Patna High Court in Raja Bahadur Kamakhya Narayan Singh v. State of Bihar [1962] 46 ITR 516. This right of appeal became vested in the assessee on the date of filing of the returns. Again, by virtue of the provisions of Section 144B, where the variation between the income returned and the income assessed exceeds a particular figure, the matter has to be considered by the IAC and the appeal therefrom is only to the Commissioner (Appeals), Therefore, the right, which the assessee had, of being heard by an AAC was lost. This has an impact on the option of the assessee to approach the Commissioner for a revision under Section 264. An AAC is subordinate to a Commissioner for the purpose of Section 264. But when the first appeal is heard by a Commissioner (Appeals), he not being subordinate to the Commissioner for the purpose of Section 264, the assessee does not have a right for revision under that Section. He pointed out that the right to file a revision petition is a valuable right. The Commissioner, unlike the appellate authorities like the Tribunal, is not fettered in admitting additional grounds or additional reliefs claimed. He has wider discretion under Section 264 than the appellate authority. He could give relief which a Tribunal cannot give under law. Thus, the right to approach the Commissioner under Section 264 is clearly a valuable right and this is lost.

6. In support of his contention that revisionary powers are wider than appellate powers, Shri Vyas relied on the decision of the Supreme Court in Dwarka Nath v. ITO [1965] 57 ITR 349 and Sirpur Paper Mills' case (supra). He then cautioned that courts should be slow in presuming ouster of jurisdiction.

7. Another right lost as a result of the induction of Section 144B was to get certain mistakes rectified. He submitted that it is quite possible to conceive of a mistake creeping in an order passed by the IAC while directing the ITO under Section 144B. The ITO is bound to implement directions. He pointed out that the mistake in the direction under Section 144B cannot be rectified by an IAC because no power for rectification has been vested in him under Section 154. The ITO also cannot rectify because he is bound to carry out the directions of the IAC. Thus, an assessee would be left with no remedy. He pointed out that where orders are passed by authorities which are not considered as assessment orders, powers of rectification could not be exercised. He cited the cases of J.K. Commercial Corporation Ltd. v. ITO [1969] 73 ITR 464 (All.) and Bharat Agencies Ltd. v. ITO [1971] 80 ITR 637 (Cal.) for this proposition. Thus, these orders not being considered as assessment orders could not be rectified at all even if a power of rectification could be considered inherent. He then cited the decision of the Supreme Court in L. Hirday Narain v. ITO [1970] 78 ITR 26 and State of Bombay v. Supreme Films, Exchange Ltd. AIR 1968 SC 1336 to show that even rectification powers cannot be used in all circumstances.

8. With regard to the third limb of his submission, i.e., in respect of limitation, he first pointed out that the time-limits fixed under Section 153 are not really limitations as one would understand in civil proceedings but they are really fetters on the Government. This had been laid down by the Supreme Court in S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 where it has been held: The period prescribed by Section 34 of the Income-tax Act for assessment or reassessment is not a period of limitation. The section in terms imposes a fetter upon the power of the Income-tax Officer to bring to tax escaped income. It prescribes different periods in different classes of cases for enforcement of the right of State to recover the tax. (p. 232) Whenever such fetter is slackened, there should be an express provision by Legislature. Citing the decision of the Supreme Court in Banarsi Debt v. ITO [1964] 53 ITR 100, he cited the following passage at page 105: To the present case the general rule of construction of fiscal Acts would apply and not the exception engrafted on that rule: for Section 4 of the Amending Act cannot be described as a provision laying down the machinery for the calculation of tax. In substance it enables the Income-tax Officer to reassess a person's income which has escaped assessment, though the time within which he could have so assessed had expired under the Act before the amendment of 1959. It resuscitates barred claim. Therefore, the same stringent rules of construction appropriate to a charging section shall also apply to such a provision.

On this basis, he submitted that extension of the time-limit within which an assessment has to be made is clearly part of substantive law.

It is also possible to see that although the provisions of Section 153 may be only a matter of fetter, ultimately it is a question of jurisdiction since the ITO whose jurisdiction got exhausted in respect of the assessment is revived.

9. Finally, he submitted that any interpretation given to any section which would result in anomaly should be avoided. This salutary principle had been laid down by the Supreme Court in Banarsi Devi's case (supra). He pointed out that an assessment for the year 1973-74 which is completed before 1-1-1976 and an assessment completed after 1-1-1976 get different types of treatment if the provision is treated as procedural. This would lead to anomaly.

10. Shri Dalip Dwarkadas appearing for another intervener, Modern Bobbin Co. (P.) Ltd., adopted the submissions of Shri Vyas and further submitted that the assessee's rights get vested the moment the lis or proceedings starts. It may be from the date of issue of notice as laid down in D.P. Wadia & Sons v. CIT [1963] 50 ITR 761 (Bom.). He further pointed out that the IAC more or less sits as a judge and the ITO on the other (sic). This is certainly an exercise of quasi-judicial authority and its conferment has to be by a substantive provision of law. He further submitted that an IAC can even enhance the assessment under this section. Any provision which gives such unlimited power of enhancement has to be substantive law, 11. Shri Joshi, learned standing counsel for the department, first of all, referred to the famous statement of law regarding retrospective operation of statutes as laid down by Maxwell in Maxwell On The Interpretation Of Statutes, 12th Edn., page 215. He submitted that on the basis of this statement of law, nothing in Section 144B could be construed as substantive. Referring to the passage at page 220 in the same authority, he pointed out that when procedural law is altered, all pending actions are decided according to the provisions as altered. He then referred to certain decisions of the Tribural wherein it has been held that Section 144B is procedural. These decisions are in J. Dalmia v. ITO, Delhi Bench 'D' [IT Appeal Nos. 2061, 2501 and 2504 of 1979], ITO v. Nath Bros., Delhi Bench 'C' [IT Appeal No. 1281 of 1978-79], Mehta Charitable Trust, Delhi Bench 'B' [IT Appeal No. 3099 of 1978-79], Vishwanath Prasad Bhagwati Prasad v. ITO, Allahabad Bench 'B' [IT Appeal No. 2957 of 1977-78], Radion Talkies v. ITO, Bombay Bench 'B' [IT Appeal No. 588 of 1977-78], Power Cables Ltd., Bombay Bench 'A' [IT Appeal No. 2780 of 1977-78] and Chemida India (P.) Ltd., Bombay Bench 'D' [IT Appeal No. 1182 of 1979].

He also referred to a decision of the Special Bench of the Tribunal in a wealth-tax case in Biju Patnaik v. WTO [1981] 6 Taxman 56 wherein the question was the applicability of certain rules.

12. Shri Joshi then took us through the background facts which led to the insertion of Section 144B by reading out extract recommending introduction of such a provision by the Wanchoo Committee. He then pointed out that the section occurs in Chapter XIV which deals with the procedure for assessment. A mere reading of the section would show that it was just procedural only. Section 153 was also procedural. He submitted that the authorities referred to by Shri Vyas were oases wherein action had already become barred by limitation under the existing law and in such a case enlargement of the provisions would not have affected a matter which has already become barred by limitation.

He then submitted that the point at issue is really not at all res Integra because the Madhya Pradesh High Court has decided this very issue in Banarsidas Bhanot & Sons v. CIT [1981] 129 ITR 488. There could be no further discussion on this point. But he submitted that if authorities were required on the various propositions submitted by the counsel for the cross objector they would be found in the discussion on an analogous matter by the Calcutta High Court in ITO v. Calcutta Discount Co. Ltd. [1953] 23 ITR 471. There the Calcutta High Court has pointed out that in respect of Section 34 of the 1922 Act which authorised the reopening of assessment, there was no question of any vested right. According to the principles laid down in this authority, one has only to read the section to understand its ambit. From 1-1-1976, where there is variation between the income returned and the proposed assessment, the ITO will refer the matter to the IAC. This does not involve any substantive law.

13. Shri Joshi then pointed out that many of the submissions made by Shri Vyas assumed that on 1-1-1976 the right of appeal, etc., had been taken away and vested in the Commissioner (Appeals). He pointed out that this was factually erroneous because the Commissioner (Appeals) was authorised to hear appeals only from 10-7-1978. So, none of the contentions regarding appeal, revision or rectification had relevance.

What the court has to do is to construe the law as on 1-1-1976. On that date, there has been no abridgement of any of the assessee's rights. In respect of limitation, he pointed out that no vested right exists for any person in this matter and this has been laid down by the Calcutta High Court in the case of Calcutta Discount (supra) at pages 490-91. It is no doubt true that the law as on 1st April is applicable to each assessment year but that relates to substantive law or where certain charge is created. It does not relate to procedural law. As early as 1936, the Privy Council has stated that the entire reassessment proceedings are procedural. The Supreme Court has adopted the same in their decision in Govinddas v. ITO [1976] 103 ITR 123. He submitted that sometimes even jurisdiction could be a matter of procedural law.

The forum in which a matter could be litigated is not a part of jurisdiction. He further pointed out that there is no anomaly if the Tribunal decides that Section 144B is procedural. In fact, pending assessments after that date are vested with an additional right, in the sense that a superior officer is also associated with the assessment proceedings.

14. In this reply, Shri Vyas submitted that the findings of Wanchoo Committee or Chokshi Committee, not being Parliamentary Committee, are not at all relevant. He further submitted that some of the provisions might be held to be beneficial to the taxpayer but that is not a material consideration in deciding the issue whether the section is procedural or substantive. Both procedural and substantive provisions could be beneficial for the taxpayer. Referring to the submission that Section 144B appears in a Chapter heading 'Procedure for assessment', he submitted that marginal notes cannot control the section. The issue has not, as claimed, ceased to be res integra because of the Madhya Pradesh High Court decision in Bhanot's case (supra). The question referred to for the High Court's decision was not whether Section 144B was substantive or procedural. The Court had proceeded on the assumption by both sides that it is procedural. Regarding the reliance placed on Calcutta Discount Co.'s case (supra) he submitted that the case did not lay down any proposition which is contrary to the position he canvassed. With regard to the fact that the Commissioner (Appeals) came into the statute only as an authority from 10-7-1978, he submitted that it made no difference because, firstly, the date from which a provision comes into effect is not decided by the Parliament but by the Government in an arbitrary manner. To understand the content of any section, its impaet on other sections cannot be ignored. Section 246 which gives a right of appeal has to be read in the context of Section 144B.15. Section 144B was introduced with effect from 1-1-1976 which reads as follows : (1) Notwithstanding anything contained in this Act, where, in an assessment to be made under Sub-section (3) of Section 143, the Income-tax Officer proposes to make any variation in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board under Sub-section (6), the Income-tax Officer shall, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the assessee.

(2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order or within such further period not exceeding fifteen days as the Income-tax Officer may allow on an application made to him in this behalf.

(3) If no objections are received within the period or the extended period aforesaid, or the assessee intimates to the Income-tax Officer the acceptance of the variation, the Income-tax Officer shall complete the assessment on the basis of the draft order.

(4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue, in respect of the matters covered by the objections, such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment: Provided that no directions which are prejudicial to the assessee shall be issued under this Sub-section before an opportunity is given to the assessee to be heard.

(5) Every direction issued by the Inspecting Assistant Commissioner under Sub-section (4) shall be binding on the Income-tax Officer.

(6) For the purposes of Sub-section (1), the Board may, having regard to the proper and efficient management of the work of assessment, by order, fix, from time to time, such amount as it deems fit: Provided further that amount fixed under this Sub-section shall, in no case, be less than twenty-five thousand rupees.

(7) Nothing in this section shall apply to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in pursuance of an order made under Section 125 or Section 125A.The issue is whether this section is a procedural or substantive law.

There could be no dispute on the basic proposition that procedural laws apply to all pending matters. The word 'retrospective' has been used rather frequently in this connection, but, as Chakravartti, CJ., pointed out in Calcutta Discount Co.'s case (supra), the expression would be misleading. When a procedural law applies to a pending matter it does not act retrospectively. What it does is to affect procedurally a pending matter which at the time of the initiation of proceedings-was governed by a different set of procedural law.

16. The treatise in Salmond on Jurisprudence (12th Edn.) brings out the distinction between procedural law and substantive law at pages 461-62: ...The law of procedure may be defined as that branch of the law which governs the process of litigation. It is the law of actions-jus quod ad actiones pertinet-using the term action in a wide sense to include all legal proceedings, civil and criminal. All the residue is substantive law and relates not to the process of litigation but to its purposes and subject-matter. Substantive law is concerned with the ends which the administration of justice seeks; procedural law deals with the means and instruments by which those ends are to be attained....

A glance at the actual contents of the law of procedure will enable us to judge the accuracy of this explanation. Whether I have a right to recover certain property is a question of substantive law, for the determination and the protection of such rights are among the ends of the administration of justice; but in what courts and within what time I must institute proceedings are questions of procedural law, for they relate merely to the modes in which the courts fulfil their functions....

So, according to Salmond, in what could the proceedings are to be instituted is procedural law. Or, to put in differently, which Court would conduct and hear the proceedings is procedural law. Or again, to put it in the context of the tax law, which officer would conduct and hear the proceedings is procedural law.

17. Thus, the first point made out by Shri Vyas is not supported by Salmond. It is also not supported by Indian authorities. The Bombay High Court in Shiv Bhagwan Motiram v. Onkarmal AIR 1952 Bom. 365 observed: The question that arises for determination is whether, notwithstanding the fact that the Court had no jurisdiction with regard to this property at the inception of the suit, this Court can try the suit with regard to this property by reason of the fact that jurisdiction was subsequently conferred on it. Now, I think, it may be stated as a general principle that no party has a vested right to a particular proceeding or to a particular form and it is also well-settled that all procedural laws are retrospective unless the Legislature expressly states to the contrary....This Court is bound to administer the law as it was when the suit came on for hearing.

Therefore, if the Court had jurisdiction to try the suit when it came on for disposal, it could not refuse to assume jurisdiction by reason of the fact that it had no jurisdiction to entertain it at the date when it was instituted.

18. The matter can be considered concluded by the Supreme Court in Union of India v. Sukumar Pyne AIR 1966 SC 1206. Therein, the respondent Pyne was proceeded before the Director of Enforcement for violation of the Foreign Exchange Regulations Act. Now, at the time of the alleged violation, the law provided only for prosecutions in a criminal court. A later amendment made it possible for the Director of Enforcement to deal with it. The respondent contended that since the Act, as it stood at the time of alleged commission of offence, provided only for criminal prosecution in a criminal court, action of Enforcement Directorate is without jurisdiction. The Supreme Court rejected the contention.

19. On the basis of the authorities given above, it should be abundantly clear that the forum for any proceeding is part of procedural law. There could be an amendment of the Act when proceedings in respect of assessees are pending and by that amendment jurisdiction vested in one officer could be taken away and given to another officer or two or more officers may be jointly vested with jurisdiction or one officer may be assigned to decide certain part of the proceedings and another officer certain other part of the proceedings. All these are matters of procedure. Thus, when the proceedings were pending in respect of the assessee's assessment for the year 1974-75 the law was changed with effect from 1-1-1976. The IAC became associated with the assessment proceedings which were pending under certain circumstances.

The change in law from 1-1-1976 being a change in the procedural law will, therefore, apply to all proceedings which were pending on that date.

20. The authorities relied on by Shri Vyas do not in any way contradict the well-settled proposition set out above. He relied on the Bombay High Court decision in Dinshaw Darabshaw Shroff's case (supra). That was in a case where the IAC, who had no jurisdiction at all interfered with the proceedings before the ITO. It is one thing to say that an officer, who was not competent to look into certain matters, should not have interfered in the proceedings; it is an entirely different thing to say that the powers vesting with an officer to associate himself in the assessment proceedings is substantive law. In fact, in that case, the Bombay High Court did not say that the proceedings were entirely invalid because of the association of the IAC. They only set aside the assessment. Similarly, the case law relied on in the cases of J.K.Synthetics (supra) and Sirpur Paper Mills (supra) were cases where an authority, who had no power at all under the Act, was asked to decide the issue which was pending before certain other quasi-judicial authority. The decision of the Court was that the authority like the CBDT, as in J.K. Synthetics' case (supra) was not the person to decide the issue which had to be looked into by the ITO as in Sirpur Paper Mills Ltd. (supra). The Supreme Court pointed out that revision petitions before the Commissioner are quasi-judicial proceedings and the CBDT had no say in the matter. Neither of these two decisions says anywhere that jurisdictions are substantive law. They were decisions given on the facts of the case and have no application to the point at issue before us.

21. Similarly, the arguments of Shri Dalip Dwarkadas, learned counsel for the intervener, Modern Bobbin Co. (P.) Ltd., do not contain anything contrary either. He had. submitted that lis starts from the date of the issue of notice and, therefore, only the officer having jurisdiction at that time can complete the assessment proceedings. The submission has now been squarely covered by the authorities quoted above. In procedural enactments there is no question as to when the lis started in conducting the proceedings before the officers having jurisdiction. If the jurisdiction is transferred by an amendment when the lis was pending,. the amended provisions would apply irrespective of when the lis was started.

22. Once it is found that law affecting the forum is procedural law, it is at once clear that no one has a vested right therein. The Supreme Court has laid down in the case of Anand Gopal v. State of Bombay that no person has a vested right in any course of procedure and he has only the right of prosecution or defence in the manner prescribed for the time being by or for the court in which the case is pending and if, by an Act of Parliament, the mode of procedure is altered, he has no other right than to proceed according to the altered mode.

23. We will now take up the second limb of the submission made by Shri Vyas. In order to prove that Section 144B is substantive law, he had tried to show that certain vested rights were affected. The first right affected is in respect of appeals. Before the amendment he had a right of appeal to the AAC but that right was taken away. Now, in his submission, Shri Vyas is not strictly correct. The amendment to Section 144B was with effect from 1-1-1976. Assessments, which were completed on 1-1-1976 and thereafter could be appealed against before the AAC. It was only with effect from 10-7-1978 that the appeals were transferred to the Commissioner (Appeals) by an amendment to Section 246. So the assessments completed between 1-1-1976 to 10-7-1978 were not affected from the point of right of appeals to the AAC. It would, therefore, not be correct to say that from 1-1-1976 itself the assessee's rights were affected in respect of appeals. They were affected only from 10-7-1978, if at all. It would be seen that the rights were affected not by the provisions of Section 144B but by the amendment brought into the provisions of Section 246. If the right of appeal is a vested right, that vested right was taken away not by Section 144B but by Section 246. Therefore, this point is irrelevant in deciding whether the provisions of Section 144B are substantive or not. The provisions of Section 144B as such did not contain within itself the rights of appeal. Those rights are conferred on the assessee by different sections.

24. It was submitted by Shri Vyas that it is possible that an assessment pending on 1-1-1976 might be completed only in 1978 with the result that the appeals could be heard only by the Commissioner (Appeals). So, he submitted that the amendment to Section 246 affects pending proceedings to which Section 144B is applicable. According to him, therefore, this is not an extraneous matter. We are unable to accept this submission. If the rights are affected, then the provision which affects those rights is only Section 246. It has nothing to do with Section 144B. This section acting by itself had not taken away any of the rights of the assessee with regard to appeals. It is one thing to say that Section 144B has affected certain rights. It is quite another thing that the Legislature, keeping in view the provisions of Section 144B, made amendments in some other sections which might or might not affect certain rights.

25. It is not true to say that right of appeal is always a vested right. The question whether the abridgement of the right of the appeal is procedural or not has been referred to in Maxwell On The Interpretation Of Statutes, 12th Edn., page 221. The following passage is relevant: The effect of a change in the law between a decision at first instance and the hearing of an appeal from that decision was discussed by the House of Lords in Att.-Gen. Vernazza [1960] AC 965.

Lord Denning said (at p. 978) that it was 'clear that in the ordinary way the Court of Appeal cannot take into account a statute which has been passed in the interval since the case was decided at first instance, because the rights of litigants are generally to be determined according to the law in force at the date of the earlier proceedings. But it is different when the statute is retrospective either because it contains clear words to that effect or because it deals with matters of procedure only, for then Parliament has shown an intention that the Act should operate on pending proceedings and the Court of Appeal are entitled to give effect to this retrospective intent as well as a court of first instance.' For this purpose, however, a statute which actually takes away the right of appeal is not to be regarded as affecting mere matters of procedure.

In order to understand the last line in the quotation, we may have to make a reference to the decision of the Privy Council in Colonial Sugar Refining Co. v. Irving [1905] AC 369. A summary of this case would be found in Craies on Statute Law, 7th Edn., page 402. That was a case from Australia. The action in which the appeal was brought was commenced on 25-10-1902. The Judiciary Act came into force on 25-8-1903. By Section 39 of this Act, right of appeal to the Privy Council had been abrogated. In this case, however, leave to appeal was given on 4-9-1903, i.e., a few days after the Judiciary Act came into force. An application was made to the Privy Council to dismiss the appeal. The Privy Council rejected this application on the ground that the Act touched a right in existence at the passing of the Judiciary Act. Therefore, it could not be retrospective. It was observed: To deprive a suitor in a pending action or an appeal to a superior Tribunal which belonged to him as of right is a very different thing from regulating procedure.

26. We may now refer to Maxwell again. The last line quoted from.

Maxwell On The Interpretation Of Statutes (supra) was with reference to this case. So Maxwell makes a distinction between a statute which actually takes away the right of appeal and a statute which is procedural, i.e., which substitutes one forum of appeal with another.

The Patna High Court decision in Raja Bahadur Kamakhya Narayan Singh (supra) relied on was also a case of denial of right if certain conditions were not satisfied. The latter type of cases, i.e., where it is treated as procedural, would be found in Craies at page 403.

27. We may also make a reference to the decision of the Gujarat High Court in CIT v. Ochhavlal Laljibhai Dharia [1980] 125 ITR 301. That was a case of acquisition of property under Chapter XXA of the Income-tax Act. The question in those proceedings would be the fair market value of the relevant property. The presumption with reference to the fair market value could be rebutted under Section 269F by an agreement for sale provided that the agreement is a registered document. Although the question before the Court was mainly on the law of evidence, the Court had necessarily to make a reference to procedural and substantive laws.

It was pointed out that there was a difference between an existing right and a vested right. A procedural enactment can affect an existing right. So, unless a right has become vested, a later amendment of an Act can take away or abridge that right. The Court then quoted Halsbury's Laws of England, 2nd Edn., Vol. 31 at page 314 as under : Although an existing right of action is not prima facie taken away by a new statute, there is no insuperable objection to construing the language of a statute so as to make it apply to pending proceedings, if such a construction is rendered necessary by the proper interpretation of the language used by the Legislature.

Express words are unnecessary to take away vested rights of action for which legal proceedings have been commenced. Clear language is sufficient. There is no rule that when a person has commenced an action he has a vested right in the then state of the law.

28. From the above discussion, it would be clear that only when a right of appeal is totally destroyed as in the case of Colonial Sugar Co.'s case (supra), the courts will hold that a vested right would be affected. Where there are merely changes in the form, procedure or forum, it would amount to affecting existing rights and not vested right. To take away or abridge or alter such right, it is not necessary that there should be express words. Clear language is sufficient. That clarity of language is certainly found in the provisions relating to appeals in this case.

29. We may now refer to the arguments based on the laws of right by way of revision. We agree with Shri Vyas that the Commissioner under Section 264 has much wider powers than an appellate authority which has to decide the issues on the basis of evidence and the provisions of law. The powers of the Commissioner to condone delay or admit new grounds are certainly much wider. But Section 144B is in no way responsible for cutting down the rights of any assessee to approach the Commissioner for this purpose. It may be that in respect of an assessment pending on 1-1-1976, the appeals might be heard two years later by the Commissioner (Appeals) thus effectively barring the remedy by way of revision. But that is the consequence of the amendment to Section 246 brought out in 1978. It is not a consequence of the provisions of Section 144B brought out into the statute with effect from 1-1-1976. We should also point out that the number of forums available for the assessee to canvass for relief has not been reduced.

Earlier, the assessee could file appeal to the AAC and thereafter a revision petition to the Commissioner under Section 264. Now, the assessee has the right to be heard by the IAC under Section 144B and by an officer of the Commissioner's rank as appellate authority. So, both before and after the amendment, an officer of the rank of the Commissioner deals with his grievances. Further, all our reasonings stated earlier in respect of appeals would apply to this branch of Shri Vyas's arguments also.

30. The last point on this line of argument was that the assessee may be caught in a situation where none of the officers concerned could rectify an order. It is possible, as Shri Vyas points out, certain circumstances may arise in which it may not be easy to decide whether any officer has power to rectify. However, the character of a provision in the statute cannot be decided on such vague hypothesis. Parliament might enact a procedural law or a substantive law and yet fail to provide for a machinery to rectify any mistake arising in carrying out of the provisions of the Act. This is completely an irrelevant consideration in resolving the issue whether Section 144B is procedural or not. It is also quite possible to hold that since the mistake is found in the assessment order signed by the ITO, he could rectify the same, Section 144B notwithstanding.

31. The last branch of argument is with regard to limitations. The real grievance of assessees in invoking of Section 144B is this that in proceedings under Section 144B the department gets an extended time-limit of six months. We accept Shri Vyas's submission that the time-limits fixed under Section 153 are not really limitations but fetters placed on the department in completing the assessments. Whether they are looked at as fetters placed or as laws of limitation, it is well settled position in law that limitation pertains to procedural law. As early as 1953, in Calcutta Discount Co.'s case (supra), it has been held that the limitations contained in Section 34 of the 1922 Act (corresponding to Section 153 of the 1961 Act) are all aspects of procedural law. That is what the Court observed: ...Assuming that the restrictions on the Income-tax Officer's power to proceed under the section have been slackened by the new section, even then it cannot be said that any right of the assessee has been affected, because to be proceeded against under certain preliminary conditions rather than others, when the matter for which one is proceeded against is the same, is not a right. Nor is the enlargement of time for the completion of an assessment a violation of any right, for, if a man is liable to be proceeded against, he cannot say that be has right to be proceeded against within a certain time or not at all. Just as a man may have right to take a proceeding, but has no right to be allowed to take it up to a certain time, so has no man, liable to be proceeded against, a right to the initiation or completion of any proceeding against him being limited to any particular period. Provided that the right or liability is not itself affected, the time for asserting the right or enforcing the liability may always be enlarged or abridged. It is true that if time is enlarged by a new enactment, but at the date when the enactment comes into force, no proceeding can any longer be commenced in a particular case under the previous law, the new enactment will not apply to such a case.... (p. 490) The same point has been reiterated by all the High Courts while dealing with the extension of time-limit brought about by the 1970 Amendment Act for completing penalty proceedings. We are merely giving the names of the following cases in order to avoid repetition: CIT v. Soubhagya Manjari Devi [1976] 105 ITR 82(Ori.), CIT v. N. Nagappa [1978] 114 ITR 707 (Kar.), Kerala Oil Mills v. CIT [1980] 121 ITR 254 (Ker.), Hargu Charan Srivastava v. CIT [1979] 119 ITR 622 (All.) and Addl. CIT v.Watan Mechanical & Turning Works [1977] 107 ITR 743 (AP).

If anything is considered as settled law, that is this that all laws of limitation are pertaining to procedure only.

32. The decisions relied on by Shri Vyas are not relevant on this point. He had referred to a decision of the Supreme Court in Banarsi Devi's case (supra). We have extracted the passage relied on by him in para 8 of this order. Therein, the Supreme Court was of the view that the stringent rules of construction should be applied. This sentence has to be understood in the context in which it is found. This was a case where an assessment, which has become barred by limitation and where the rights of the department had already expired, was sought to be resuscitated. It dealt with claims already barred. That was why the Supreme Court stated that although the matters were generally procedural, because of this special circumstance, a strict construction should be applied.

33. Before we leave this aspect, we would make a reference generally to the attempt of Shri Vyas to bring in provisions of other sections like Section 246, 264, 154, etc., in his thesis to show that the law is substantive. We may, in this connection, refer to the Supreme Court decision in CIT v. K. Srinivasan & K. Gopaian [1953] 23 ITR 87. There, the Supreme Court was construing Section 25 of the 1922 Act. The Supreme Court pointed out that Section 25 contained both procedural as well as substantive provisions. At page 97, they pointed out that the mere circumstances of their being grouped together cannot lead to the conclusion that the provisions contained therein are of the same nature and character. They pointed out that each provision has got to be considered separately for this purpose.

34. What remains is to consider the submission of Shri Dalip Dwarkadas that Section 144B contains a power of enhancement and so it is substantive law. We see no merit in this submission. The section allows the IAC to satisfy himself whether the additions proposed by the ITO are reasonable. Under Section 144B, he has to pursue the records and then issue his directions on the draft order. The direction he issues would be prejudicial to the assessee if the IAC agrees with the ITO.So, the proviso has been inserted that he would hear the assessee before issuing the directions. The proviso is part and parcel of Section 144B(4). It does not, as a proviso ordinarily would do, carve out of the main provision an area to which it would apply. Here, it is as much part of Section 144B(4) as the power of the IAC to go through the records.

35. It might then be asked: Why did not Legislature include the requirement that the IAC should have heard the assessee in the Sub-section itself The answer is simple. Under Section 144B(4), the IAC does not pass an order which affects the rights of the assessees.

He considers only the alterations to the returned income already proposed by the ITO. His job is only to approve or not propose additions. There are similar provisions in other parts of the statute.

For example, Section 52(2) in computing the income under the head 'Capital gains', Explanation 5 to Section 43(7) for determining the actual cost of an asset for the purpose of depreciation. In these provisions there is no requirement that the IAC should hear the assessee. The Legislature thought perhaps that unlike these provisions, it would be better if the IAC hears the assessee before approving a draft assessment order. It would be worthwhile to note that if the AAC does not approve of the alterations suggested in the draft order, he can direct the ITO not to make the proposed additions even without hearing the assessee. It also answers another submission of Shri Dwarkadas that the IAC acts like a judge. He does not.

36. We may also point out that powers of enhancement are given to the IAC in a separate Section (Section 144A) and subject to the conditions therein.

37. Shri Joshi referred to a number of decisions of the Benches of the Tribunal. None of them had taken a different view from what we have expressed here. Detailed discussion of many of the aspects touched upon by the learned counsel before us had been urged before the Appellate Tribunal, Delhi Bench 'D' (J. Dalmia v. ITO). We quote this only because of the identity of the arugments advanced therein. We agree with-the finding of the Bench with regard to the invocation and application of Section 144B. A decision of the Bombay Bench had been cited by Shri Vyas for the assessee. This Bench had held that where the ITO under Section 144B (sic) but failed to do so, the order is invalid.

Now, this point is answered squarely by the decision of the Madhya Pradesh High Court in Banarsi Das Bhanot & Sons (supra), where it was held that a defect in the procedure is not fatal and is curable. We agree with Shri Vyas that the question before the High Court was not whether Section 144B was substantive or procedural. But, surely, this is implied in the actual question referred : whether the Tribunal was right in holding that the assessment was not a nullity Although there is no actual discussion on this point in answering the question that the default of the ITO in Section 144B proceedings did not make the assessment a nullity, the High Court in effect has approved a finding that Section 144B is procedural. This cannot be altogether inapplicable.

38. In the result, we hold that Section 144B is only a procedural section and it applied to the assessee's regular assessment under Section 143(3) for the assessment year 1974-75 pending before the ITO on 1-1-1976.

39. We may now consider the other grounds. Ground No. 2 states that the AAC ought to have held that the assessment is barred by limitation.

Facts necessary to dispose of this point are these. The assessee filed a return on 5-8-1974 showing an income of Rs. 1,80,350. A revised return was filed on 4-8-1976, showing an income of Rs. 1,73,750. A second revised return was filed on 22-3-1977 showing a loss of Rs. 8,50,800. A draft assessment order was made by the ITO on 29-3-1977 and final order on 23-9-1977. Now, it would be seen that the assessment was completed within one year of the date of filing the second revised return. This much time is allowed to the ITO under Section 153(1)(c).

So, the assessment order is not barred by limitation.

40. The third ground is against the directions issued under Section 144A by the IAC. There was a departmental appeal which touched upon the addition directed to be made under Section 144A and which was deleted by the AAC. The Tribunal has upheld the AAC's order in this matter. In view of the relief allowed to the assessee in the departmental appeal, this question would not survive and was not pressed before us.

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