TMI Blog1979 (8) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... 96,648 for which bills were not produced by it. He also categorised 26 separate cash credits, the peak of which on February 8,1965, came to Rs.60,882. The assessee, when asked to explain the source of the credits, did not furnish any explanation, but said that the amount of Rs. 60,882 be included in the assessment subject to an adjustment of Rs. 31,000 which had been taxed in the earlier year. The ITO allowed the deduction of Rs.31,000 as claimed and assessed tax at Rs. 29,882 as income from undisclosed sources. The assessee also agreed to pay tax on business income of Rs. 30,118 as against the income of Rs. 10,365 as declared by it earlier. Thus, the assessment was completed on February 26, 1970, at a total sum of Rs. 60,000. The assessee did not file any appeal against the assessment order. The ITO initiated penalty proceedings under s.271(1)(c) of the Act before completing the assessment and, as the minimum penalty imposable exceeded Rs. 1,000, the matter was referred to the IAC. He, vide order dated March 29, 1972, passed under s. 274(2) read with s. 271(1)(c) of the Act, levied a penalty of Rs. 4,239. The assessee went up in appeal against the order of the IAC to the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee, has vehemently argued that the jurisdiction of the Tribunal is a matter relating to procedure. He further submits that it is well settled that the procedural laws have retrospective effect and, therefore, the Amendment Act would have a restrospective effect. According to him, the IAC, after enforcement of the Amendment Act, was deprived of the jurisdiction to decide the question of penalty against the assessee. He submits that, therefore, the penalty imposed by the IAC was illegal. We have heard the learned counsel for the parties at a considerable length and find force in the contention of Mr. Awasthy. Before dealing with the matter, it is necessary to notice the relevant sections. Section 271 deals with the powers of the ITO and the AAC to impose penalties and s. 274 with the procedure. The aforesaid sections, before the Amendment Act, read as follows : " 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person--... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income,-- he may direct that such person shall pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 274 is prospective or retrospective. It is a well-settled principle of law that no statute shall have retrospective effect unless its language requires such construction. If a statute has retrospective effect, it is not to be construed so as to have a greater retrospective operation. A statute which affects vested rights must be presumed to be prospective. The legislature may, however, make its operation retrospective so as to take away vested rights. There is an exception to the above principle and it is regarding a statute dealing with the procedure. Such statute has a retrospective effect but if its provisions affect the vested rights, it is prospective and riot retrospective. In this regard, it will be advantageous to refer to the following observations of Lord Blackburn in Gardner v. Lucas [1877] 3 App Cas 582, 603 : " Now the general rule, not merely of England and Scotland, but, I believe, of every civilised nation, is expressed in the maxim, ' Nova constitutio futuris formam imponere debet non Praeteritis ' --prima facie, any new law that is made affects future transactions, not past ones. Nevertheless, it quite clear that the subject-matter of an Act might be such tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect is manifested. " (Emphasis supplied). The above observations are fully applicable to the present case. This matter also came up before the Federal Court in two cases, namely, United Provinces v. Mt. Atiqa Begum, AIR 1941 FC 16 ; 192 IC 138 and Venugopala Reddiar v. Krishnaswami Reddiar alias Raja Chidambara Reddiar, AIR 1943 FC 24. The relevant observations of Sulaiman J., speaking for the Bench in Mt. Atiqa Begum's case, are as follows (192 IC 138, 159) : " It is a well recognized rule that statutes should, as far as possible be so interpreted, as not to affect vested rights adversely, particularly when they are being litigated. When a statute deprives a Person of his right to sue or affects the power or jurisdiction of a court in enforcing the law as it stands, its retrospective character must be clearly expressed. " (Emphasis supplied). Varadachariar J., while speaking for the court in Venugopala Reddiar's case, AIR 1943 FC 24, held that a right to continue a duly instituted suit is in the nature of a vested right and it cannot be taken away except by a Clear indication of intention to that effect. A similar matter came up before the Bombay High Court in C. P. Bann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reddiar, AIR 1943 FC 24 and the passage at page 27, col. 1, thereof : It will be noticed that in that case the Judiciary Act was passed during the pendency of the action in the court of first instance and their Lordships' decision recognised that, from the date of the initiation of the action, the suitor had a right of appeal to a superior tribunal according to the state of the law as it stood at the time of the commencement of the proceeding. This necessarily involves the recognition of an equally valuable right that proceedings should in due course be tried and disposed of by the tribunal before which it had been commenced. This principle that a statute should not be so interpreted as to take away an action which has been well commenced has been affirmed in various cases in differing circumstances. In Marsh v. Higgins [1850] 9 CP 551; 19 LJCP 297 it was observed by Wilde C.J. that it must have been well known to both branches of the legislature that strong and distinct words would be necessary to defeat a vested right to continue an action which has been well commenced'. (Emphasis supplied). A Division Bench of the Madras High Court in Ganapathy Raja Valia Raja of Edapally v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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