TMI Blog1965 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... . - C.A. 1003 OF 1963 - - - Dated:- 7-5-1965 - Judge(s) : P. B. GAJENDRAGADKAR., K. N. WANCHOO., J. C. SHAH., J. R. MUDHOLKAR., S. M. SIKRI JUDGMENT [The judgment of Gajendragadkar C. J., Wanchoo, Shah and Sikri JJ. was delivered by Shah J. Mudholkar J. delivered a separate judgment. ] SHAH J.--- (Civil Appeal No. 1003 of 1963) --- The 1st Income-tax Officer, C-II Ward, Bombay, served a notice under section 18A(1) of the Indian Income-tax Act, 1922, calling upon Bhagwandas Kevaldas--- who will hereinafter be called " the assessee "--- to pay in four equal instalments Rs. 25,973-5-0 as advance tax for the assessment year 1948-49. On September 17, 1947, the assessee filed an estimate of his income under section 18A(2) and of the tax payable by him, and on January 10, 1948, he filed a revised estimate. An order under section 23B of the Act provisionally assessing the income was made by the Income-tax Officer and pursuant thereto on August 23, 1950, the assessee paid the tax so assessed. Regular assessment of the income of the assessee was made on March 31, 1953, by the Income-tax Officer, and it was found that the tax paid on the basis of the estimate of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed an objection in limine that the appeal filed by the Commissioner and the Income-tax Officer was incompetent, because the High Court had no power under article 133 of the Constitution to certify a proposed appeal against an order in a proceeding commenced by a petition for the issue of a writ under article 226 of the Constitution. It was urged that the proceeding before the High Court was not a " civil proceeding " within the meaning of article 133. Article 133 of the Constitution, in so far as it is material, by the first clause provides : " An appeal shall lie to the Supreme Court from any judgment, decree or final order in a civil proceeding of a High Court in the territory of India if the High Court certifies--- (a) that the amount or value of the subject-matter of the dispute in the court of first instance and still in dispute on appeal was and is not less than twenty thousand rupees... ; or (b) that the judgment, decree or final order involves directly or indirectly some claim or question respecting property of the like amount or value ; or (c) that the case is a fit one for appeal to the Supreme Court..... " The power to issue a certificate under article 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the exception already noticed), whatever be the character of the proceeding, appeals lie with leave to this court. An appeal lies against the adjudication of a High Court as a matter of right, whatever the nature of the proceeding, with certificate that it involves a substantial question of law as to the interpretation of the Constitution, and in civil proceeding with certificate of the nature set out in clause (a), (b) or (c) of article 133 and in criminal proceedings in conditions mentioned in clauses (a) and (b) and with certificate under clause (c) of article 134. Counsel for the assessee said that proceedings instituted in the High Court in exercise of its jurisdiction---original or appellate---may be broadly classified as (i) proceedings civil, (ii) proceedings criminal, and (iii) proceedings revenue, and where the case does not involve a substantial question as to the interpretation of the Constitution, from an order passed in a proceeding civil, an appeal lies to this court with certificate granted under article 133 of the Constitution, and from a judgment, final order or sentence in a criminal proceeding an appeal lies with certificate granted under article 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The primary object of a taxation statute is to collect revenue for the governance of the State or for providing specific services and such laws directly affect the civil rights of the taxpayer. If a person is called upon to pay tax which the State is not competent to levy, or which is not imposed in accordance with the law which permits imposition of the tax, or in the levy, assessment and collection of which rights of the taxpayer are infringed in a manner not warranted by the statute, a proceeding to obtain relief whether it is from the tribunal set up by the taxing statute, or from the civil court would be regarded as a civil proceeding. The character of the proceeding, in our judgment, depends not upon the nature of the tribunal which is invested with authority to grant relief, but upon the nature of the right violated and the appropriate relief which may be claimed. A civil proceeding is therefore one in which a person seeks to enforce by appropriate relief the alleged infringement of his civil rights against another person or the State, and which if the claim is proved would result in the declaration express or implied of the right claimed and relief such as payment of debt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority---statutory or otherwise---by public officers or authorities is invoked. This jurisdiction is undoubtedly special and exclusive, but on that account the nature of the proceeding in which it is exercised is not altered. Where a revenue authority seeks to levy tax or threatens action in purported exercise of powers conferred by an Act relating to revenue, the primary impact of such an act or threat is on the civil rights of the party aggrieved and when relief is claimed in that behalf it is a civil proceeding, even if relief is claimed not in a suit but by resort to the extraordinary jurisdiction of the High Court to issue writs. It is not easy to attribute to the expression " revenue proceeding " any precise connotation, and in interpreting articles 132(1) and 133 it would be difficult to project the somewhat anomalous provision contained in section 226 of the Government of India Act, 1935, under which, for historical reasons, it was enacted that unless otherwise provided by the appropriate legislature, no High Court shall have any original jurisdiction in any matter concerning the revenue, or concerning any act ordered or done in the collection thereof according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from an application for a writ under article 226 of the Constitution may in certain cases be deemed to be a " civil proceeding ", if the claim made, the right infringed and the relief sought warrant that inference : in still another set of cases it has been held that even if a proceeding commenced by a petition for a writ be generally categorised as a civil proceeding, where the jurisdiction which the High Court exercises relates to revenue, the proceeding is not civil. A perusal of the reasons given in the cases prompt the following observations. There are two preliminary conditions to the exercise of the power to grant certificate : (a) there must be a judgment, decree or final order, and that judgment, decree or final order must be made in a civil proceeding. An advisory opinion in a tax reference may not be appealed from with certificate under article 133, because the opinion is not a judgment, decree or final order, and (b) a proceeding does not cease to be civil, when relief is claimed for enforcement of civil rights merely because the proceeding is not tried as a civil suit. In a large majority of the cases in which the jurisdiction of the High Court to certify a case und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government the income-tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed. Contrary to the two basic concepts of the scheme of the Indian Income-tax Act under which tax is charged upon the income of the previous year and not the income of the assessment year and liability does not arise until the annual Finance Act is passed charging income to tax, section 18A introduces within the scheme of the Act the principle of advance payment of tax and authorises collection of advance tax before the assessment year commences and before even the Finance Act which imposes liability is enacted. But this tax is advance tax which is to be adjusted against tax payable on the income of the financial year in the light of the total income which may be computed and also in the light of the Finance Act which may be passed. Assessment and demand for advance payment of tax are therefore provisional. If ultimately the advance tax paid is in excess of the tax finally assessed, refund will be granted to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred upon the Income-tax Officer became, by fiction of law, exercisable as from April 1, 1952, even though the Act came into force from May 24, 1953, and the cases in which and circumstances under which the discretion was to be exercised were prescribed by the Central Government by rule 48 in December, 1953. The Income-tax Officer in the present case, on the language used in the statute as it stood on the date of making the order of assessment, was bound to impose liability for payment of interest under sub-section (6). But for some reason which cannot be ascertained from the record he did not impose that liability. It was only when in the course of audit this lacuna was pointed out, that the Income-tax Officer commenced proceeding under section 35 of the Income-tax Act for rectification of the order of assessment. There was at the date of the original assessment an absolute obligation imposed upon the assessee to pay interest under section 18A(6), but by reason of the retrospective operation given to the fifth proviso added to sub-section (6) by Act 25 of 1953, the Income-tax Officer was invested with the discretion to reduce or waive interest payable by the assessee, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. The Sixth Schedule vested in the District Council a general administrative power which was capable of being restricted by law, but until so restricted the power was absolute. In the case before us, however, the discretion to reduce or waive interest can only be exercised in cases and under circumstances to be prescribed. There was no absolute power with which the Income-tax Officer was invested to reduce or waive interest ; his power could be exercised only in prescribed cases within the limits of the authority conferred upon him. He could not reduce or waive interest except in cases and in circumstances prescribed. But once the rules are framed, they by reason of the retrospective operation of Act 25 of 1953, become operative as from the date on which the Act has become operative. This court in M. K. Venkatachalam v. Bombay Dyeing and Manufacturing Co. Ltd. held in dealing with a case arising under the second proviso to section 18A(5) (which was also inserted by Act 25 of 1953 with retrospective operation from April 1, 1952) that the Income-tax Officer has power under section 35 of the Act to rectify a mistake in the assessment, even though the mistake was the result of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was less than what had already been allowed to him in the course of assessment. On the date on which the order of assessment was made, the assessee was entitled to that amount, but by virtue of the amendment which was retrospective, his right was substantially restricted. It was held by this court that in exercise of the powers under section 35 of the Indian Income-tax Act on the application of the retrospective amendment, it must be held that there was a mistake apparent on the face of the order. In the present case the position is reversed, but on that account the principle is not any the less applicable. By virtue of the retrospective amendment in section 18A(6) the order which was made by the Income-tax Officer on the date of assessment and which was plainly inconsistent with the terms of the section as it then stood became one which he was competent to pass in exercise of his power. The Attorney-General contended that in any event there was nothing to show that the Income-tax Officer had purported to exercise his discretion when he passed the order of assessment and did not impose any liability for payment of interest under section 18A(6). That may be so. But the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts of the assessee. MUDHOLKAR J.--- I agree with my learned brother Shah J.that the expression " civil proceedings " in article 133(1) of the Constitution cannot be restricted to proceedings which arise out of civil suits or proceedings. A proceeding before the High Court under article 226 or article 227 in which relief is sought in respect of liability to pay tax or penalty levied by a revenue authority would, accordingly, be a civil proceeding. The High Court was, therefore, competent to grant a certificate in this case under article 133(1). On the merits my learned brother has held that the High Court was right in quashing the order of the Income-tax Commissioner, Bombay, by which he confirmed the order of the First Income-tax Officer, C-II Ward, Bombay, dated October 4, 1958, rectifying under section 35 of the Income-tax Act, 1922, the regular assessment made by him on March 31, 1953. The sequence of the relevant events which have occurred is as follows : On September 17, 1947, the respondents filed under section 18A(2) an estimate of their income and on September 27, 1947, they made an advance payment of tax on its basis. On January 10, 1948, they filed a revised estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Revised notice of demand to be issued. " Thereafter, a notice demanding Rs. 14,929-10-0 was issued to the respondents. The respondents challenged this order before the Commissioner of Income-tax, Bombay. The main contention raised before him was that the omission to charge penal interest at the time of regular assessment cannot be considered to be a mistake apparent from the record in view of proviso to section 18A(6) and the rules made thereunder and therefore the Income-tax Officer could not rectify the regular assessment by resort to section 35 of the Act. His contention was not accepted by the Income-tax Commissioner. He, however, directed that in the circumstances of the case the respondents would be liable to pay penal interest only for the period between January 1, 1948, and June 13, 1950. Being dissatisfied with this decision the respondents moved the High Court for a writ under article 226 of the Constitution and succeeded in having the notice of demand quashed. The ground upon which the High Court granted relief to the respondents was that the Amending Act of 1953 which enacted the last proviso to section 18A(6) was made retrospective from April 1, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 framed by the Central Board of Revenue which prescribes these matters does not make it retrospective and, therefore, it should be deemed to be only prospective in its application. I find it difficult to accept this argument. The proviso was itself made retrospective as from April 1, 1952. Rule 48 as soon as it was framed was to be read along with the proviso and as the proviso is retrospective the rule must also be deemed retrospective. It is a well accepted principle of construction of statutes that even if a provision of law may not have been expressly made retrospective it could be deemed to be so if the circumstances justify the inference that the legislature intended that it should be retrospective. Such an intention is evident in this case. Even though the proviso and the rule must be deemed to have been in force on April 1, 1952, I find it difficult to agree with the High Court that omission to charge penal interest at the time of making the regular assessment must be ascribed to the exercise of discretion by the Income-tax Officer. Let it not be fotgotten that when he made that assessment, in point of fact, he possessed no discretion and, therefore, be was bound by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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