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The Chairman, Central Board of Direct Taxes, Ministry of Finance, New Delhi and ors. Vs. V.S. Malhotra - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberLetter Patent Appeal No. 143 of 1972
Judge
Reported in[1981]128ITR543(Delhi)
ActsIncome tax Act, 1961 - Sections 288(4)
AppellantThe Chairman, Central Board of Direct Taxes, Ministry of Finance, New Delhi and ors.
RespondentV.S. Malhotra
Advocates: M.L. Varma,; S. Mukherjee,; Rashmi Saini,;
Cases ReferredPhilips v. Eyre
Excerpt:
.....only to act prospectively - if power used retrospectively it falls within prohibition against ex post facto legislation and thus harsh and unjust - an act attaching new disability in respect of past transactions presumed not to have retrospective operation - appeal dismissed. - - ' (6) in our opinion section 288(4) which empowers the commissioner to disbar a practitioner is clearly prospective in character. an ex post facto legislation is condemned on the ground that it is harsh and unjust. if a retroactive effect is given to section 288(4) it will be perfectly shocking to our sense of justice. the presumption is that all laws operate prospectively only and only when the legislature has clearly indicated its intention that the law operate retroactively will the courts so apply it...........found favor with the commissioner and the board, we will be converting section 288(4) into an ex post facto law. (7) an increase in possible penalty is. sufficient to make a statute ex post facto and invalid. an ex post facto law is one which renders an act punishable in a manner in which it was not punishable when committed. it alters the' situation of a! party to his disadvantage. in this case the punishability of the fault or default in disclosing the full particulars of income has been aggravated by the act of 1961. in addition to the traditional penalty it introduced a new power to debar persons from practice. the act of 1961 aims at a wider grasp in the matter of professional misconduct. (8) if a retrospective effect is given to a disbarment provision such as section 288(4) it.....
Judgment:

Avadh Behari Rohatgi, J.

(1) The single question in this appeal is whether the provisions of section 288(4) of the Income Tax Act, 1961, (Act of 1961) which empower the Commissioner of Income Tax to disqualify a practitioner are retrospective in operation. Has the power of disbarment been validity exercised in the case of respondent to this appeal The material facts on which the decision has turned are as follows.

(2) The respondent is an advocate. He filed his return of income for the assessment year 1958-59 on September 3, 1958. .On assessment it was found that he had concealed his income. A penalty of Rs. 3,000 was imposed on him by order dated March 12, 1965. This was eventually confirmed by the Income Tax Appellate Tribunal.

(3) The Additional Income Tax Commissioner. Bhopal made an order -under section 288(4) of the Act on February 26, 1971, disqualifying the respondent from representing an assesses before the income-tax authorities for a period of two years. The respondent appealed to the Central Board of Direct Taxes. His appeal was dismissed. He brought a' writ petition for setting aside his disbarment from practice. A learned single Judge held that the Commissioner had illegally disqualified the respondent. He thereforee, set aside the order of disbarment. (His decision has since been reported in : [1973]88ITR110(Delhi) : V. S. Malhotra v. Union of India). From his decision the Central Board of Direct Taxes appeals to this court.

(4) It is quite plain that the respondent filed his return of income when the Indian Income Tax Act of 1922 was in force. But his assessment was completed after the Act of 1961 had come into force on April 1, 1962. His case was thereforee governed by section 297(2)(g) of the Act. Accordingly the penalty of Rs, 3,000 was imposed on him under section 271(l)(c). Now section 288(4) says that no person on whom a penalty has been imposed under this Act other than a penalty imposed on him under clauses (i) and (ii) of sub-section I of section 271 shall be qualified to represent an assessed for such time as Commissioner may by order determine. The Commissioner, whose decision was affirmed by the Board, thought that as penalty had been imposed 'under this Act' of 1961, he was fully empowered to debar the respondent from practice before the income-tax authorities' It is the validity of this order of disbarment which is in issue in this appeal.

(5) The act or default of the respondent for which the penalty was imposed on him related to section 28(1)(c) of the Act of 1922. By reason of the repeal of the Act and the enactment of Act of 1961, the said default could be penalised under the corresponding provisions of section 271(1)(c): This was mainly by reason of section 297(2)(g) of the Act which lays down that 'any proceeding for the imposition of a penalty in respect of any assessment for the year .ending on 31st day of March 1962 or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and such penalty may be imposed under this Act.'

(6) In our opinion section 288(4) which empowers the Commissioner to disbar a practitioner is clearly prospective in character. For his act or default a penalty could be imposed on the respondent under section 28(l)(c) of the Act of 1922. After the coming into force of the Act of 1961 that penalty was imposable under section 271(1)(c) of the Act of 1961 because the Act of 1922 had since been repealed. thereforee, no more than a penalty in the sense of pecuniary punition could be imposed on the respondent. In a civil sense, a statutory penalty is a pecuniary punition imposed for doing some act which is prohibited or for omitting to do some act which is required to be done. Under the Act of 1922 when the return was filed for the year 1958-59 on September 3, 1958, penalty imposable on the respondent for concealment of income could not be greater than a pecuniary penalty. There was no law for the disbarment of a person at the time the income was concealed. thereforee, with the coming of the Act of 1961 into force the respondent could not be subjected to a greater penalty than what he had already incurred under the Act of 1922 when the default was committed. And if we take the view which found favor with the Commissioner and the board, we will be converting section 288(4) into an ex post facto law.

(7) An increase in possible penalty is. sufficient to make a statute ex post facto and invalid. An ex post facto law is one which renders an act punishable in a manner in which it was not punishable when committed. It alters the' situation of a! party to his disadvantage. In this case the punishability of the fault or default in disclosing the full particulars of income has been aggravated by the Act of 1961. In addition to the traditional penalty it introduced a new power to debar persons from practice. The Act of 1961 aims at a wider grasp in the matter of professional misconduct.

(8) If a retrospective effect is given to a disbarment provision such as section 288(4) it will fall within the prohibition against ex post facto legislation. An ex post facto legislation is condemned on the ground that it is harsh and unjust. If a retroactive effect is given to section 288(4) it will be perfectly shocking to our sense of justice. The respondent for his act or default could be visited with a penalty only. Under the Act of 1922 he could not be disbarred. That was not the law at that time. A greater punishment cannot be inflicted than what the law annexed to the act when it was committed. Disbarment is an ex post facto punishment. It will be against all canone of justice to hold that for an act done in 1958, which at that- time could be the subject of a penalty only in the sense of a pecuniary punition could also be visited with the greater punishment of disbarment in 1971.

(9) Retroactive legislation is looked upon with disfavor, as a general rule, and properly so because of its tendency to be unjust and oppressive. This disfavor is so great that article 20(i) of our Constitution contains provisions which expressly prohibit the enactment of retrospective legislation. Nevertheless, even in the absence of constitutional provisions of this character, statutes, with but few exceptions should, if possible, be construed so that they will have only prospective operation.

(10) Indeed, there is a presumption that. the legislature intended its enactments, to have this effect to be effective only in future. Legislation consists of formulating rules for the future, not the past. The legislative function is principally concerned with the establishment of future rules of conduct. The presumption is that all laws operate prospectively only and only when the legislature has clearly indicated its intention that the law operate retroactively will the courts so apply it. This is true because of the basic presumption that the legislature does not intend to enact legislation which operates oppressively and unreasonably; and retrospective laws will generally have such operation. Consequently, in the absence of any indication in the statute that the legislature intended for it to operate retroactively, it must not be given retrospective effect. If perchance any reasonable doubt exists, it should be resolved in favor of prospective operation.

(11) An Act which attaches a new disability or disqualification in respect of past transactions must be presumed to be intended not to have a retrospective-operation. The rule is founded on the proposition that since every citizen is presumed to know the law and to order his affairs in accordance with its provisions, it would be- unjust, even where the legislature has the power to enact a law with retroactive effect, unless it is clear that such is the legislature's purpose, to allow the enactment of legislation to operate in retrospection. Take this case. The respondent did not know in 1958 that his errors and lapses will take him on the road to ruin and disbarment.

(12) The kinship between ex post facto laws and civil retroactive laws is recognised in law, and since the ex post facto provision is limited to criminal statutes, protection from improper retroactivity has been included within the constitutional limitations on. the legislative power in the Constitution. For a distinction between retrospective and ex post facto legislation the classic judgment of Willes J. in Philips v. Eyre, (1870) Lr 6 Qb 1 may usefully be referred to. Whether we view the matter from the stand point of ex post facto legislation or retroactive interpretation the result is that the order of the Commissioner offends our sense of justice and the mind naturally inclines to adopt an interpretation which is less severe and productive of less hardship in the new field of legislation.

(13) We agree with the learned, judge that the power to debar a practitioner can be exercised only in those cases where the person commits an act or default complained of after the Act of 1961 has come into force and not before. We are clearly of opinion that the respondent's disbarment is an ex post facto punishment and wholly unsustainable , in law.

(14) For these reasons we affirm the decision of the learned judge and dismiss the appeal. The parties are however left to bear their own costs.


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