Frederick William Gentle, C.J.
1. This is a case stated, at the instance of the assessees, by the Income-tax Appellate Tribunal pursuant to Section 21 of the Indian Excess Profits Tax Act, 1940, (hereinafter called ' the Act') which incorporated in the Act the provisions of Section 61 of the Indian Income-tax Act, 1922. Two questions, of law are referred to the Court, namely.
(1) Whether in the circumstances of the case the Bench was right in holding that the appeal from an order by the Excess Profits Tax Officer lay to the Tribunal only?
(2) Whether the tribunal was right in the circumstances of this case in holding that the appeal filed by the Appellants against the order of the Appellate Assistant Commissioner was misconceived and whether the consequent dismissal of the appeal by the Tribunal was right in law?
2. The case requires elucidation of the meaning and effect of some provisions of the Act, the relevant portions of which it is convenient to set out. They are the following:
Section 10-A (1).--Where the Excess Profits Tax Officer is of opinion that the main purpose for which any transaction or transactions was or were effected...was the avoidance or reduction of liability to excess profits tax, he may...make such adjustments as respects liability to excess profits tax as he considers appropriate so as to counteract the avoidance or reduction of liability to excess profits tax which would otherwise be effected by the transaction or transactions.
(2) Without prejudice to the generality of the powers conferred by Sub-section (1), the powers. Conferred thereby extend
(a) to the charging with excess profits tax of persons who, but for the adjustments, would not be chargeable with any tax or would not be chargeable to the same extent;
(b) to the charging of a greater amount of tax than would be chargeable but for the adjustments.
(3) Any person aggrieved by a decision of the Excess Profits Tax Officer under this section/may appeal in the prescribed time and manner to the Appellate Tribunal.
Section 14(1).--The Excess Profits Tax Officer shall, by an order in writing...assess to the best of his judgment the profits liable to excess profits tax, and the amount of excess profits, tax payable on the basis of such assessments....
Section 17(1).--Any person aggrieved by a decision made in pursuance of Section 8 or objecting to the amount of excess profits tax for which he is liable as assessed by the Excess Profits Tax Officer...may appeal to the Appellate Assistant Commissioner:
Provided that no appeal shall lie against a determination of the amount of the profits of any standard period where those profits have been determined in accordance with the second proviso to Rule 1 of the First Schedule except in respect of adjustments made under the provisions of that schedule.
Provided further that no appeal shall lie under this section against any apportionment made by. the Excess Profits Tax Officer under the proviso to Sub-section (5) of Section 8, against any refusal to make modifications or against any modifications made by the Excess Profits Tax Officer under Sub-section (8) of Section 8, against any decision of the Excess Profits Tax Officer under Rule 11 of the First Schedule or against any decision of the Board of Referees or the Central Board of Revenue.
Section 19(2).--Any Excess Profits Tax Officer or any person in respect of whose business an order under Section 14 has been passed who objects to an order passed by an Appellate Assistant Commissioner under... Section 17 may... appeal against such order to the Appellate-Tribunal constituted under the Indian Income-tax Act, 1922.
3. Section 8 is of some length, it is unnecessary to set out all the terms and it suffices to state that it deals with dealing of, and decision upon, matters preparatory to an assessment to be made: Sub-sections (5) and (8) relate to apportionments and modifications being made by the Excess Profits Tax Officer and each provides for an appeal to the Board of Referees against such apportionments or against the refusal to make or the making of modifications respectively. No special appeal is conferred' in any other parts of Section 8 and appeals from decisions uponmatters arising in those parts is conferred by Section 17(1). When the Excess Profits Tax Officer makes a decision, pursuant to the section, he passes an order recording it and postpones making an assessment until either the period has expired during which an appeal against his decision can be preferred or, if there is such appeal, the appealhas received disposal by the Appellate authority.
4. Section 10-A was inserted in the Act by the Excess Profits Tax (Second Amendment) Act, 1941. The incident of subsequent addition can have no special significance when construing its meaning and effect; it must be construed as one of the provisions contained in the Act and as if it had always formed part of it.
5. Prior to September 30, 1941, the assessees carried on business as dealers in-yarn and piece goods; on the above date the yarn part of their business, with its stock, goodwill and customers was transferred to one, Dhirajlal Vithalji, a son of one of the partners in the assessee firm. Dhirajlal carried on the yarn business; in the same premises as theretofore. Since the assessable amount of the profit made by Dhirajlal, during the year of account, following the transaction of transfer, was less than rupees 36,000 he was not chargeable to excess profits tax upon that profit; but if the yarn business had not been transferred and had remained part of the undertaking of the assessees, they would have been chargeable to excess profits tax upon the amount of profit made in yarns. The Excess Profits Tax Officer, being of opinion that the transfer to Dhirailal was a transaction of which the main purpose was the reduction of the assessees' liability to excess profits tax, invoked Sections 10-A (1) and (2) and made an adjustment by which he added DhirajlaPs profit to the assessees' profit and made an assessment upon the aggregate. By virtue of the adjustment the amount of the assessees' liability to excess profits tax was increased by about Rs. 16,000.
6. The Excess Profits Tax Officer's assessment order upon the assessees, dated 7th December, 1943, was made under Section 14(1) of the Act : the period of account is from October 1, 1941, (the day after the transfer of the assessees' yarn business to Dhirajlal on September 30, 1941 to September 30, 1942). In the assessment, the assessees' profit for the year, on their piece-goods business, is set out; also a small gross profit of' Rs. 905 in yarns; the amount of DhirajlaFs profit is then stated; various additions to and deductions from those profits are made (to which reference is unnecessary) and the amount of the assessable profit is stated at Rs. 1,46,882 (including Rs. 23,282, the assessable profit made by Dhirajlal); upon the aggregate of Rs. 1,46,882 the amount of Rs. 60,106-11-0 (which includes about Rs. 16,000 in respect of the amount of Dhirajlal's assessable profit of Rs. 23,282) is assessed as the excess profits tax charged upon the assessees. At the foot of the Excess Profits'Tax Officer's assessment order, there is a note by the officer which is headed ' Application of Section 10-A of the Act,' it concludes that
It is clear that the object of the assessees in giving up their yarn business in favour of Dhirajlal Vithalji and the main purpose in so doing was only to reduce their excess profits tax liability. I therefore hold... that the profits earned by Dhirajlal Vithalji in yarn should be included in the profits of the assessees for determining their excess profits tax liability.
7. On 24th January, 1944, the assessees preferred an appeal under Section 17(1) of the Act to the Appellate Assistant Commissioner against the order of assessment, inter alia, challenging the correctness of the Excess Profits Tax Officer's conclusion that the transfer of their yarn business to Dhirajlal was to avoid payment of excess profits tax upon the profits derived from it, and requesting that the addition of Dhirajlal's profit of Rs. 23,282 should be deleted and their tax reduced accordingly. The correctness of that amount, as accurately representing the assessable profit, was not challenged. On 28th February, 1944, the appeal came before the Appellate Assistant Commissioner; he observed that he had no jurisdiction to entertain the appeal, but the appeal was kept pending. On 2nd March, 1944, the assessees preferred an appeal under Section 10-A (3) to the Appellate Tribunal in regard to the same subject matter as in the other appeal; on 12th August, 1944, the assessees, through their advocate, petitioned for withdrawal of the appeal, stating that the matters concerned had been properly raised in the appeal under Section 17(1) and should be decided therein; on 16th August, the appeal under Section 10-A (3) was allowed to be withdrawn and it was dismissed by the Tribunal. Incidentally that appeal had been preferred after the expiration of the period during which such an appeal could be made and, consequently, it could not have been effective. On 15th February, 1945, the appeal under Section 17(1) again came before the Appellate Assistant Commissioner; holding that he was not competent to hear an appeal relating to a matter under Section 10-A and that an appeal against an action under that section lies only to the Appellate Tribunal, he rejected the appeal by the assessees. The assessees preferred an appeal under Section 19(2) to the Appellate Tribunal against the decision of the Appellate Assistant Commissioner. The Tribunal dismissed the appeal and in their order made on 12 th November, 1945, it was observed that a right of appeal had expressly been given by Sub-section (3) of Section 10-A to the Appellate Tribunal regarding matters arising under that section also, that since the Appellate Tribunal already had dismissed the assessees' appeal under Section 10-A (3) with regard to the same subject-matter, it could not be reagitated before the Tribunal and that by means of the appeal under Section 19(2) the assessees were attempting to circumvent their order (of dismissal), allowing the appeal to be withdrawn.
8. Mr. Rama Rao Sahib for the Commissioner of Income-tax the respondent in this reference did not seek to support the correctness of the opinion expressed by the Tribunal that, by reason of its withdrawal and their dismissal of the assessees' appeal under Section 10-A (3) the appeal under Section 17(1)(assuming such appeal lay) was incompetent. Previously, Mr. Subbaraya Aiyar, for the assessees, had contended that, since the appeal under Section 10-A (3) had been withdrawn and, consequently dismissed and there had been no adjudication upon the merits of the appeal, the assessees were in the position of never having preferred an appeal and their right of appeal, if any, under Section 17(1) was unaffected by the withdrawal and dismissal of the other appeal. In support of his argument reference was made to Abdul Mqjid v. Jawaharlal (1914) 27 M.L.J. 17 : I.L.R. 36 All. 350 (P.C.) Deoki v. Jwala Prasad I.L.R.(1928) All. 608 and Gundry v. Dunham (1915) 7 T.C. 12. As the correctness of Mr. Subbaraya Aiyar's contention was not challenged, further consideration in that connection is unnecessary.
9. The sole matter for determination is whether, in respect of a decision by the Excess Profits Tax Officer under Section 10-A which ultimately may affect the amount of excess profits tax, any person aggrieved has solely a right of appeal direct to the Appellate Tribunal under Sub-section (3) of that section, or, in addition, he has a right of appeal to the Appellate Assistant Commissioner under Section 17(1) and from his decision a further right of appeal to the Appellate Tribunal under Section 19(2). Shortly, whether the Act has conferred concurrent rights of appeal in the instance abovementioned. It is conceded that if there is a right of appeal under Section 17(1), it will follow that there is the further right of appeal under Section 19(2).
10. If an enactment is capableof two constructions, one ofwhich leads to an absurdity and the other does not, the latter construction should prevail; a construction which leads to an absurdity should, if possible, be avoided. There is a general rule that where a special provision and a general provision are contained in the same Statute a case falling within the words of the provision must be governed by it and not by the terms of the general provision (per Quain, J.,) at page 232 in Dryden v. Overseers of Putney L.R. (1876) 1 Exch. 323. Section 10-A (3) conferring a right of appeal to the Tribunal, is a specialprovision in the Act; the right of appeal conferred by Section 17(1) is contained in a general provision. Prima facie, therefore, the special provision should prevail over the other and general provision so as to exclude' the right of appeal conferred by Section 17(1) from cases covered by Section 10-A (3).
11. It was contended for the assessees that, since the second proviso to Sub-section (1) of Section 17 excludes from the application of that sub-section matters in respect of which a special right of appeal is conferred elsewhere in the Act, namely, by Sub-sections (5) and (8) of Section 8, and since there is no such exclusion regarding matters for which a special rightof appeal is given by Sub-section (3) of Section 10-A, the Legislature had not the same intention respecting the latter matters as it had, and has expressed, regarding the former and that a right of appeal under Section 17(1) against the amount of liability assessed in respect of matters falling under Section 10-A, is not excluded by Sub-section (3) of that section.
12. Section 17(1) confers a right of appeal upon any person aggrieved by a decision made in pursuance of Section 8 but by means of the second proviso, that right is excepted in respect of decisions under Sub-sections (5) and (8) of that section. The effect, therefore, is that Section 17(1) confers a right of appeal regarding only some decisions, and not all under Section 8 and the second proviso clarifies the extent of the right. It has previously been pointed out that Section 8 deals solely with matters anterior to the assessment. That proviso does not purport to deal with a right of appeal by which objection is taken to the amount of the liability for excess profits tax, which objection arises only after an assessment has been made. Elsewhere, the second proviso forbids a right of appeal against decisions of the Board of Referees (the appellate authority under Sub-sections (5) and (8) of Section 8) and of the Central Board of Revenue, both of which bodies deal with matters anterior to an assessment. The first proviso to Sub-section (1) of Section 17 denies a right of appeal against a determination of the amount of the profits of any standard period when they have been determined in accordance with Rule 1 of the First Schedule. These matters, again, are anterior to an assessment.
13. As assessee is charged with excess profits tax by means of the assessment made upon him. Sub-section (1) of Section 10-A empowers an Excess Profits Tax Officer to make such adjustments, as he considers appropriate, respecting liability to excess profits tax for the purpose of counter-acting avoidance or reduction of liability to tax; Sub-section (2)(a) declares that the officer's powers, under Sub-section (1), include power to charge any person affected by the section with excess profits tax. That charging must be by means of an assessment and the act of charging involves a decision in that behalf made by the Excess Profits Tax Officer by whom it is effected. Sub-section (3) provides for a special right of appeal against a decision by such officer under Section 10-A.
14. The several exceptions, contained in the two provisos to Sub-section (1) of Section 17 do not deal with any matters directly relating to charging with tax or the making of an assessment, but, as pointed out, with matters anterior thereto. The incident of the inclusion of those exceptions connected with matters, different to the matters in Section 10-A, does not, in my view, manifest either an intention that the right of appeal conferred by Section 10-A (3) is concurrent with the right conferred by Section 17(1) or an intention of departure from the ordinary principle of construction that the special enactment in the former section should not prevail against the general enactment in the latter.
15. There are two constructions of the relevant provisions of the Act. Firstly, that there is only one right of appeal, in regard to matters in Section 10-A, namely, an appeal direct to the Appellate Tribunal. Secondly, that there are concurrent rights, (a) the appeal direct to the Tribunal and (b) also an appeal to the Appellate Assistant Commissioner from whom an appeal lies to the Tribunal. The second construction inevitably leads to the absurdity that, in respect of an identical matter there is one appeal direct to the Tribunal and another, through the Appellate Assistant Commissioner to the same Tribunal. That could never have been the intention of the Legislature. The construction which avoids an absurdity should prevail.
16. Lastly, the learned Counsel for the assessees, argued that Section 17(1) confers a right of appeal against the ' amount ' of tax liability and the appeal in this case is against that amount. As pointed out, there is no challenge to the amount, as such, but the grounds of the assessees' appeal to the Appellate Assistant Commissioner make it perfectly clear that the appeal is against the action by the Excess Profits Tax Officer in making the adjustments, by reason of his opinion and decision that the transaction of transfer to Dhirajlal was to avoid or reduce the assessees' tax and, it is alleged that that conclusion and decision were wrong. The appeal is not one objecting to the amount but is against the Officer's decision in relation to the purpose of the transfer. It can well be said that every appeal in connection with tax involves the amount of tax since every matter relating to tax is ultimately connected with its amount. But in the present instance the appeal is not against the amount, as such, but against the decision of the Excess Profits Tax Officer upon matters other than the amount of tax.
17. For the reasons given in my opinion the answers to both questions raised should be in the affirmative. The Commissioner of Income-tax is entitled to his costs, Rs. 250.
18. I desire to make it clear that the opinion which I have expressed relates to the facts and circumstances arising in the present reference.
Patanjali Sastri, J.
18. I agree that the questions referred to us should be answered in the affirmative. I wish however, to guard myself against being understood as holding that in no circumstances can an assessee have a concurrent right of appeal under Section 10-A (3) and Section 17(1) of the Excess Profits Tax Act, 1940. Whether he is entitled to appeal under the one or the other or both of those provisions depends, in my opinion, on the grounds on which he seeks to attack the order of the Excess Profits Tax Officer.
19. An assessment to excess profits tax involves a preliminary determination of various specific matters which affect the amount of tax payable by the assessees and the Act has provided for appeals against the decisions of the Excess Profits Tax Officer in respect of these matters to different appellate authorities which, in the opinion of the Legislature, are specially qualified to deal with such-matters, while a general right of appeal against the assessments made by that officer is conferred under Section 17(1). Thus, in matters arising under Section 8 Sub-sections (5) and (8) and Rule 11 of the First Schedule a right of appeal to the Board of Referees is given, and in respect of matters dealt with under Section 10-A and Rule 12 of the First Schedule an appeal lies to the Appellate Tribunal. That the appeals under Section 8, Sub-sections (5)and (8) relate to the specific matters therein mentioned is clear from the language of those sub-sections and of the second proviso to Section 17(1). Though in matters arising under Section 10-A and Rule 12 the appeal is to be againstthe 'decision' of the Excess Profits Tax Officer, it isclearfrom those provisions that the matters mentioned therein are specific preliminary matters and the appeals accordingly must relate only to those matters. Appeals under Rules 11 and 12 for instance, can only relate to apportionment of allowable deductions and disallowance of excessive expenses respectively. So, too, an appeal under Section 10-A must, I think, be confined in scope to the 'adjusments, as respects liability to excess profits tax ', which the Excess Profits Tax Officer has made in the case of transactions designed to avoid or reduce such liability. In other words, though as a result of an 'adjustment' made under Section 10-A the assessment made under Section 14 will no doubt be affected in that the amount of excess profits tax payable will be increased, the ground of attack in an appeal under Section 10-A(3) must, as it seems to me, be confined to the Excess Profits Tax Officer's conclusion that 'the main purpose' of the transaction or transactions was the 'avoidance or reduction of liability to excess profits tax.' Any other ground of objection to the amount 'as assessed by the Excess Profits Tax Officer' can be taken only in an appeal preferred under Section 17(1) against his order of assessment.
20. This view receives further support from the statutory rules framed under Section 27 of the Act and the forms prescribed in the schedule annexed thereto. Rule 15-A, Clause (h) provides that an appeal against an order of the Excess Profits Tax Officer, 'in so far as it concerns an adjustment made by him under Section 10-Apf the Act' shall be in Form E.P. 14 (T) which has a column under the heading 'substance of the order made under Section 10-A ' and makes no reference to the amount of tax assessed by the Officer; whereas Rule 12 prescribes that an appeal under Section 17 of the Act shall be in Form E.P. 10 'if against the amount of an assessment made...under Sub-section (1) of Section 14 of the Act ', and that form refers to the amount of profits liable to excess profits tax as determined by the officer and requires the petitioner to state the amount of profits liable to tax according to his claim. These provisions throw light on the respective scope of the appeals under Section 10-A and Section 17 making it clear that an appeal under Section 10-A is concerned solely with the adjustment made by the Excess Profits Tax Officer on the basis that the ' main purpose ' of a transaction or transactions effected by the assessee was the ' avoidance or reduction of liability to excess profits tax ', while objections to the amount as assessed by that officer fall within the purview of an? appeal under Section 17. Thus appeals under Sections 10-A (3) and 17(1) are mutually exclusive in scope, though they may be concurrent in the sense that both may be open to an assessee in a given case.
21. It is true and this is the sheet anchor of the argument on behalf of the assessee that while certain of the specific matters in respect of which special rights of appeal are provided for elsewhere in the Act are excepted under the second proviso to Section 17(1) from the purview of that sub-section the matter arising under Section 10-A (3) is not so excepted and this omission, it is claimed, shows that, in addition to the right of appeal conferred under Section 10-A (3), it is open to an assessee in an appeal under Section 17(1) 'objecting to the amount of excess profits tax for which he is liable as assessed by the Excess Profits tax Officer ' to attack the latter's ' decision ' under Section 10-A (3), as such decision affects the ' amount of excess profits tax ' and therefore comes within the purview of these words. The argument is plausible but cannot be accepted as sound. The omission to exclude the matter referred to in Section 10-A or Rule 12 of the First Schedule is perhaps attributable to the fact that these provisions were inserted in the Act, by the Exceess Profits Tax (Second Amendment) Act, 1941, and the need for a consequential amendment of the second proviso to Section 17(1) was overlooked. Or it may be that, an appeal to the highest Income-tax appellate authority viz-, the Appellate Tribunal, having been provided for in the newly introduced provisions, it was considered unnecessary to exclude expressly the matters therein mentioned from the purview of an appeal to a subordinate authority provided for in Section 17(1). However that may be, having regard to the general scheme of appeals provided for under the Act which in no other case has sanctioned the incongruity of allowing an appeal in respect of the same matter, to a superior and a subordinate authority concurrently, to be followed in the latter case, by further appeal under Section 19(2) to the same superior authority, I am convinced that the special appeal provided for under Section 10-A in respect of the specific matter referred to therein was intended to be the sole and exclusive remedy of an assessee aggrieved by a decision under that section.
22. As, in the present case, the assessees' sole ground of attack against the assessment order related to the decision of the Excess Profits Tax Officer under Section 10-A (1), his appeal on that ground to the Appellate Assistant Commissioner under Section 17(1) was incompetent and misconceived.