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Goombira Tea Co. P. Ltd. Vs. Income-tax Officer, A-ward and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberAppeal from Original Order Nos. 447, 449 and 838 of 1977
Judge
Reported in[1980]125ITR260(Cal)
ActsIncome Tax Act, 1961 - Sections 143, 144, 147 and 153(3); ;Constitution of India - Article 226
AppellantGoombira Tea Co. P. Ltd.
Respondentincome-tax Officer, A-ward and ors.
Appellant AdvocateDebi Prasad Pal and ;Samarjit Gupta, Advs.
Respondent AdvocateBalai Lal Pal, ;A.K. Sengupta and ;Rupen Mitra, Advs.
Cases ReferredNew Delhi v. Pooran Mall
Excerpt:
- .....no. 2, the ito, central circle xxxiii, calcutta, to forbear from exercising his jurisdiction to make assessment and also for calling upon the other respondents and each of them to forbear from permitting respondent no. 2 to make assessment or to proceed with the assessment and/or to proceed with any pending proceedings under the i.t. act. the learned judge has taken the view that by the said prayer the appellants having also challenged the assessment, if any, that might be made by respondent no. 2 after the transfer of the files to him, the assessment proceedings before respondent no. 2 are the subject-matter of the rules nisi. he has also referred to the interim order that was initially granted by p. k. banerjee j. staying all further proceedings and the modification or variation of.....
Judgment:

M.M. Dutt, J.

1. In these appeals, the appellants, who are tea companies, have challenged the propriety of a direction given by the learned single judge while making the rules nisi obtained by the appellants on their applications under Article 226 of the Constitution absolute.

2. The appellants are all assessees under the I.T. Act, 1961. They were being assessed by the ITO, A-Ward, Karimgunj, Assam. The Central Board of Direct Taxes, in exercise of its power under Section 127 of the I.T. Act, 1961, by its order dated June 30, 1973, transferred the cases of the appellants from the ITO, A-Ward, Karimgunj, to the ITO, Central Circle XXXIII, Calcutta. The appellants being aggrieved by the said order of transfer moved this court under Article 226 of the Constitution and obtained the rules nisi out of which these appeals arise. They also obtained an interim order under which all further proceedings were stayed. On December 19, 1973, the interim order was varied by P.K. Banerjee J. at the instance of the revenue as follows :

' The interim order is varied to the extent that the proceedings may continue and the final order be passed but it will not be given effect to or communicated pending the disposal of the Rules. The final order or any assessment order will be subject to the result of the Rules. '

3. At the final hearing of the Rules, it was conceded by the learned advocate appearing on behalf of the revenue that in view of the observations of the Supreme Court in Ajantha Industries v. CBDT : [1976]102ITR281(SC) , the impugned order of transfer under Section 127 of the I.T. Act, 1961, could not be sustained as the same did not state any reasons for the transfer of the cases of the appellants from the ITO, A-Ward, Karimgunj, to the ITO, Central Circle XXXIII, Calcutta. It was, however, prayed on behalf of the revenue that the court should give a direction for assessment in consequence of and in order to give effect to the finding that the order of transfer was invalid. The said prayer was opposed on behalf of the appellants.

4. The learned judge, however, overruled the objection made on behalf of the appellants. The rules were made absolute and a writ in the nature of certiorari was issued quashing the impugned order of transfer. Further, a writ in the nature of mandamus was issued directing the respondents to forbear from giving effect or further effect to the impugned order of transfer and also the assessment orders made by the ITO, Central Circle XXXIII, Calcutta. Thereafter, the following direction was given :

' The Income-tax Officer, A-Ward, Karimgunj, Assam, is directed to make fresh assessments for the aforesaid period within four months from this day in accordance with law. Thereafter, both parties will be entitled to proceed further in accordance with law. '

5. The effect of the said direction was that the bar of limitation as provided in Sub-sections (1) and (2) of Section 153 of the I.T. Act was lifted in view of Clause (ii) of Sub-section (3) of that section and the ITO, A-Ward, Karimgunj, became entitled to make fresh assessments for the relevant years which were otherwise barred. The appellants feel aggrieved by the said direction which had the effect of lifting the bar of limitation and have, accordingly, challenged the same in these appeals.

6. It has been urged by Dr. Debi Prasad Pal, learned advocate appearing on behalf of the appellants, that the learned judge was not at all justified in giving that direction for fresh assessments, for, such a direction was not necessary for the disposal of the rules nisi. It is contended by him that Section 153(3)(ii) does not enlarge the jurisdiction of the court for the purpose of lifting the bar of limitation. If any finding is required to be made or direction to be given for the disposal of the proceeding, in that case, the bar of limitation would be lifted in consequence of or to give effect to such finding or direction. It is submitted on behalf of the appellants that thedirection for fresh assessments that was given by the learned judge was not necessary for the disposal of the rules and, accordingly, it was illegal. On the other hand, it is contended by Mr. Balai Lal Pal, learned advocate appearing on behalf of the revenue, that such a direction was necessary to be given for the disposal of the rules and, as such, the provision of Section 153(3)(ii) was applicable.

7. Sub-sections (1) and (2) of Section 153 lay down the time-limit for the completion of assessments and reassessments. Under Clause (a)(iii) of Sub-section (1) of Section 153, no order of assessment shall be made under Section 143 or Section 144 at any time after two years from the end of the assessment year in which the income was assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969. Clause (ii) of Sub-section (3) of Section 153 provides as follows :

'(3) The provisions of Sub-sections (1) and (2) shall not apply to the following classes of assessments, reassessments and the recomputations which may, subject to the provisions of Sub-section (2A), be compl'ted at any time--...

(ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order, under Section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act. '

8. While, therefore, Sub-sections (1) and (2) of Section 153 provide for the time-limit for completion of assessment and reassessment, Sub-section (3) makes such provision inapplicable under certain circumstances, one of which is that such assessment or reassessment can be made in consequence of or to give effect to any finding or direction contained in an order under certain provisions of the Act or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Act. In a recent decision of the Supreme Court in Rajinder Nath v. CIT [1919] 120 ITR 14, it has been observed as follows (p. 18);

' The expressions ' finding ' and ' direction ' are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A's income. A finding respecting B is intima-tely involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can ba directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression 'direction' in Section 153(3)(ii) of the Act, it is now well settled that it must be an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. The expressions ' finding ' and ' direction ' in Section 153(3)(ii) of the Act must be accordingly confined. Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. It is a provision which merely raises the bar of limitation for making an assessment order under Section 143 or Section 144 or Section 147 : ITO v. Murlidhar Bhagwan Das : [1964]52ITR335(SC) and N. K. T. Sivalingam Chettiar v. CIT : [1967]66ITR586(SC) . '

9. In the above observation of the Supreme Court, it has been laid down, inter alia, that the finding and direction must be necessary for the disposal of the particular case, and that Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. An authority or court, therefore, cannot simply for the purpose of lifting the bar of limitation give a finding or direction. Unless such a finding or direction is necessary for the disposal of the proceeding before such authority or court the provision of Section 153(3)(ii) will not be attracted. When making any finding or direction the authority or court will not take into consideration the provision of Section 153(3). It makes the finding or gives the direction, if required under the facts and circumstances of the case, for the proper disposal of the case. It may be that the assessment or reassessment has become barred by limitation during the pendency of a case before the authority or court, but that will be no consideration for making a finding or a direction, unless it is necessary for the disposal of the case.

10. Now, it has to be considered whether the direction that has been given by the learned judge was necessary to be given in order to effectively dispose of the rules out of which these appeals arise. The complaint of the appellants in the writ applications was against the impugned order of transfer made by the CBDT. The court was, therefore, directly concerned with the legality or otherwise of the impugned order of transfer. The order of transfer was conceded to be illegal and invalid as it did not give any reason for the transfer of the cases of the appellants from the ITO, A-Ward, Karimgunj, to the ITO, Central Circle XXXIII, Calcutta. The impugnedorder was, accordingly, quashed by the learned judge. The quashing of the order reinvested the ITO, A-Ward, Karimgunj, with the jurisdiction to make the assessments for the relevant period, if it was not already barred.

11. The question is whether the direction was necessary to be given for the disposal of the rules nisi. It is a direction to the ITO, A-Ward, Karimgunj, to make the assessments for the relevant period as prayed for on behalf of the revenue. The learned judge has referred to the prayers made by the appellants in their writ petitions which include the prayer for the issue of a writ in the nature of prohibition forbidding the respondents from giving effect to the purported order of transfer and for calling upon respondent No. 2, the ITO, Central Circle XXXIII, Calcutta, to forbear from exercising his jurisdiction to make assessment and also for calling upon the other respondents and each of them to forbear from permitting respondent No. 2 to make assessment or to proceed with the assessment and/or to proceed with any pending proceedings under the I.T. Act. The learned judge has taken the view that by the said prayer the appellants having also challenged the assessment, if any, that might be made by respondent No. 2 after the transfer of the files to him, the assessment proceedings before respondent No. 2 are the subject-matter of the rules nisi. He has also referred to the interim order that was initially granted by P. K. Banerjee J. staying all further proceedings and the modification or variation of that order granting liberty to the respondents to make the assessments subject to the result of the rules. The learned judge has, therefore, placed reliance on the interim order as modified in support of his view that the assessment proceedings are also the subject-matter of the rules.

12. We have carefully examined the prayer made by the appellants in the writ petitions. The sum and substance of the prayers is that the impugned order of transfer should be quashed and that respondent No. 2, the ITO, Central Circle XXXIII, Calcutta, should be prohibited from making the assessments pursuant to the impugned order. The appellants had not made any prayer to the effect that respondent No. 1, the ITO, A-Ward, Karimgunj, should be directed to make the assessments. Even if that prayer was made, that would have been redundant, for, as soon as the impugned order of transfer was quashed, the ITO, A-Ward, Karimgunj, would again have jurisdiction to make the assessments. We do not also think that after the quashing of the impugned order, it was necessary to restrain respondent No. 2 from making the assessments. Respondent No. 2 derived his authority to assess the appellants from the impugned order, and after the same was struck down as illegal and invalid, the assessments, if made by respondent No. 2, would consequently fall to the ground ashaving been made without jurisdiction. The only question that was involved in the writ petitions was whether the impugned order should be quashed or not. Therefore, the only finding that was germane to the question and necessary for the disposal of the writ petitions was on the question of legality or otherwise of the impugned order. After the court found that it was illegal, the only order that was required to be made was to quash the same. At the most, the court could grant liberty to the CBDT to make a fresh order of transfer in accordance with law, but that was not necessary as the Board had the authority to make a fresh order of transfer in accordance with law.

13. We may now consider the effect of the interim order as modified. Initially, by the interim order all further proceedings were stayed pending the disposal of the rules. It was, however, at the instance of the revenue that the interin order was modified to the extent that the proceedings for assessments were allowed to be continued and final orders to be passed, but such final orders would not be given effect to or communicated and, further, such final orders or any assessment order would be subject to the result of the rules. Obviously, by virtue of the modified interim order, the impugned order of transfer became operative to the limited extent and respondent No. 2, the ITO, Central Circle XXXIII, Calcutta, could proceed with the assessments of the appellants, and pass final orders. He was, however, restrained from giving any effect to such final orders or any order of assessment which again were subject to the result of the rules. In other words, if the rules succeeded, which meant the quashing of the impugned order of transfer, the final orders of assessments or any order of assessment that might be made by respondent No. 2 would be of no effect whatsoever. The modified interim order was complete and did not reserve or contemplate the making of any further order or giving of any direction along with the disposal of the rule.

14. In the circumstances, we are unable to agree with the learned judge that in view of the prayers in the writ petitions and the terms of the modified interim order, ' assessment ' was the subject-matter of the writ petitions. In our opinion, the only subject-matter was the question as to the validity or otherwise of the impugned order of transfer. There was, therefore, no necessity for giving the impugned direction to respondent No. 2 in disposing of the writ petitions.

15. The learned advocate for the revenue as well as the learned judge have placed reliance on certain observations of the Supreme Court in the case of the Director of Inspection of Income-tax (Investigation), New Delhi v. Pooran Mall & Sons [1974] 26 ITR 390 (SC). In that case, the question was whether the time limit fixed by Section 132(5) of the I.T. Act, 1961, was also applicable to any direction under Section 132(12) or by a court in writ proceed-ings. While holding that the period of time fixed under Section 132(5) applied when the first order under that section was made and not to any direction given under Section 132(12) or by a court in writ proceedings, the Supreme Court made the following observations (p. 394) :

' Even if the period of time fixed under Section 132(5) is held to be mandatory that was satisfied when the first order was made. Thereafter if any direction is given under Section 132(12) or by a court in writ proceedings, as in this case, we do not think an order made in pursuance of such a direction would be subject to the limitations prescribed under Section 132(5). Once the order has been made within ninety days the aggrieved person has got the right to approach the notified authority under Section 132(11) within thirty days and that authority can direct the Income-tax Officer to pass a fresh order. We cannot accept the contention on behalf of the respondents that even such a fresh order should be passed within ninety days. It would make the Sub-sections (11) and (12) of Section 132 ridiculous and useless. It cannot be said that what the notified authority could direct under Section 132 could not be done by a court which exercises its power under Article 226 of the Constitution. To hold otherwise would make the powers of courts under Article 226 wholly ineffective. The court in exercising its powers under Article 226 has to mould the remedy to suit the facts of a case. If in a particular case a court takes the view that the Income-tax Officer, while passing an order under Section 132(5) did not give an adequate opportunity to the party concerned it should not be left with the only option of quashing it and putting the party at an advantage even though it may be satisfied that on the material before him the conclusion arrived at by the Income-tax Officer was correct or dismissing the petition because otherwise the party would get unfair advantage. The power to quash an order under Article 226 can be exercised not merely when the order sought to be quashed is one made without jurisdiction in which case there can be no room for the same authority to be directed to deal with it. But in the circumstances of a case the court might take the view that another authority has the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which has the jurisdiction is vitiated by circumstances like failure to observe the principles of natural justice the court may quash the order and direct the authority to dispose of the matter afresh after giving the aggrieved party a reasonable opportunity of putting forward its case. Otherwise, it would mean that where a court quashes an order because the principles of natural justice have not been complied with it should not while passing that order permit the Tribunal or the authority to deal with it again irrespective of the merits of the case.'

16. In Pooran Mall's case : [1974]96ITR390(SC) . there was no question before the Supreme Court as to the interpretation of Section 153(3) of the I.T. Act. The observation relating to the powers of the court under Article 226 of the Constitution, inter alia, lays down that when the court quashes an order on the ground that such order has been made by the authority concerned without complying with the principles of natural justice, it will not be proper for the court to only quash the order to the advantage of the party. The court should in such a case not only quash the order, but also direct the authority to dispose of the matter afresh after giving the aggrieved party a reasonable opportunity to put forward its case. When, however, the authority concerned has no jurisdiction, such authority cannot obviously be asked to deal with the matter, and if the court takes the view that another authority has the jurisdiction to deal with the matter, such authority may be directed to deal with it.

17. The impugned order of transfer has been found to be vitiated as no reason has been given in justification of the same. It is indisputable that the CBDT has the jurisdction to make an order of transfer under Section 127 of the I.T. Act. If the effect of the quashing of the impugned order is that the CBDT is precluded from passing a fresh order of transfer after recording its reasons in the order, there can be no doubt that the court would grant liberty to the Board to make a fresh order of transfer in accordance with law. But no such liberty is necessary as the Board can make a fresh order of transfer. If a matter is to be remitted, it has to be remitted to the authority which disposed of the matter. If the authority is found to have no jurisdiction, the matter may be directed to be disposed of by another authority who may have jurisdiction to deal with it. In the instance case, the question of remittance or remand does not arise for the reasons stated already. In the circumstances, we are of the view that the above observations of the Supreme Court in Pooran Mall's case : [1974]96ITR390(SC) do not lend any support to the giving of the direction for assessments to the ITO, A-Ward, Karimgunj. The impugned direction, in our opinion, was not necessary for the disposal of the writ petitions of the appellants. Moreover, as the Supreme Court has pointed out in Rajinder Nath's case : [1979]120ITR14(SC) , Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. Had it been so, the court could in a suitable case make any finding or give any direction so as to remove the bar of limitation, even though such a finding or direction was not necessary for the disposal of the case. In the absence of any specific provision permitting the authority or court to remove the bar of limitation when it thinks fit and proper the authority or court cannot, in our opinion, override the provisions prescribing time limits. In this connection, it may be noticed that in Pooran Mall's case : [1974]96ITR390(SC) , it has also beenIobserved by the Supreme Court that there is no equity about limitation, and after the period of limitation has expired no proceedings can be taken to assess, nor could any period of limitation laid down by the Act be extended merely by a superior Tribunal directing an inferior Tribunal to make an assessment or to take proceedings which result in an assessment after the period of limitation is over.

18. Much reliance has, however, been placed on behalf of the revenue on a Bench decision of this court in Cachar Plywood Ltd. v. ITO : [1978]114ITR379(Cal) . The facts of that case are similar to those of the present case before us. In that case also the order of transfer under Section 127 of the I.T. Act, 1961, was conceded on behalf of the revenue to be unsustainable as it did not contain any reason. The order was quashed and the court directed the ITO, A-Ward, Karimgunj, to make the assessment. In upholding the said direction the Division Bench took the view that when the court was in seisin of the proceeding, the time-limit of assessment as provided in Sub-sections (1) and (2) of Section 153 would have no application to the assessment which might be made at any time in consequence of or to give effect to any finding or direction contained in an order of court in the said proceeding. Further, it was observed that such directions should be made in national interest. The observations in Pooran Mall's case : [1974]96ITR390(SC) , quoted above, were also relied on. It was, however, not considered whether the direction was necessary to be given for the disposal of the proceeding. It seems to have proceeded on the view that Section 153(3)(ii) is a substantive provision empowering the authority or court to lift the bar of limitation. The above Bench decision is, accordingly, contrary to the decision of the Supreme Court in Rajinder Nath's' case : [1979]120ITR14(SC) , which was, however, not in existence on the date of the Bench decision. In our opinion, the question of national interest does not come in for the interpretation of a provision of a statute. We would have referred the matter to a larger Bench, but as the above Bench decision is contrary to the Supreme Court decision in Rajinder Nath's case : [1979]120ITR14(SC) it has lost its binding force.

19. For the reasons aforesaid, we are of the view that the learned judge was not justified in giving the direction on the ITO, A-Ward, Karimgunj, to make fresh assessments. The said direction, which is the subject-matter of these appeals, is set aside. The rest of the judgment of the learned judge will, however, stand affirmed.

20. These appeals are allowed, but in the facts and circumstances of the case, there will be no order as to costs.

21. Mr. Sengupta, learned advocate appearing on behalf of the respondents, prays for a certificate for appeal before the Supreme Court under Article 134A read with Article 133(1) of the Constitution. It is submitted by him that thequestion whether the direction that has been given by the learned judge in making the rule nisi absolute was necessary for the disposal of the rule so as to attract the provision of Section 153(2)(ii) of the I.T. Act, 1961, is a substantial question of general importance and needs to be decided by the Supreme Court. We do not, however, think that the question is a substantial question of law of general importance. In deciding the matter, we have followed the recent decision of the Supreme Court in Rajinder Nath's case, referred to above.

22. In the circumstances, the oral prayer for leave is refused.

23. As prayed for, there will be stay of all further proceedings till three weeks after the Christmas vacation.

Sharma, J.

24. I agree.


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