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TMI Blog1981 (7) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted later. The assessee's case is that the provisions of section 144B, under which the ITO made the reference to the IAC, are not applicable since they were brought into the statute only on 1-1-1976. The department's case is that section 144B being a procedural section would be applicable to all pending proceedings as on 1-1-1976. This is the controversy. 2. Shri Dinesh Vyas, appearing for the assessee as well as for Aditya Mills, another assessee, which is an intervener here, submitted that it is well settled that all laws operate prospectively only. Only laws pertaining to the procedure would be applicable to pending cases. All other laws and especially laws which are in the nature of substantive laws do not apply retrospectively unless the Legislature makes it clear by an appropriate expression that such a retrospective application was intended. He then submitted that section 144B was substantive law. He based this submission on three grounds : 1. This section radically interferes with the jurisdiction of the ITO and curtails it. All provisions which deal with jurisdiction are substantive. 2. Certain vested rights of the assessee are affected as far as further and collater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, he pointed out that interference by any outside authority impinging on the jurisdiction of an officer in quasi-judicial matters would vitiate the proceeding. He also referred to the Madras High Court decision in S. B. Adityan v. First ITO [1964] 52 ITR 453 wherein the Madras High Court has held that extraneous influence in passing quasi-judicial orders vitiates them. Finally, be relied on the recent decision of the Delhi High Court in Sudhir Sareen. v. ITO [1981] 128 ITR 445 and submitted that therein the Delhi High Court was considering the provisions of section 144B and had held that without that express provision the IAC could not have exercised any authority. 5. Developing the second limb of this submission that the provisions of section 144B affected the vested right, he submitted that these could not be interfered with unless the statute makes clear that such restrictive effect was intended. He submitted that before the provisions of section 144B were brought into the statute, it was open for the assessee aggrieved with the ITO's order to file an appeal to the AAC. The right of appeal is a vested right as laid down by the Patna High Court in Raja Bahadur Kamakhya Narayan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the cases of J. K. Commercial Corporation Ltd. v. ITO [1969] 73 ITR 464 (All.) and Bharat Agencies Ltd. v. ITO [1971] 80 ITR 637 (Cal.) for this proposition. Thus, these orders not being considered as assessment orders could not be rectified at all even if a power of rectification could be considered inherent. He then cited the decision of the Supreme Court in L. Hirday Narain v. ITO [1970] 78 ITR 26 and State of Bombay v. Supreme Films Exchange Ltd. AIR 1968 SC 1336 to show that even rectification powers cannot be used in all circumstances. 8. With regard to the third limb of his submission, i. e., in respect of limitation, he first pointed out that the time-limits fixed under section 153 are not really limitations as one would understand in civil proceedings but they are really fetters on the Government. This had been laid down by the Supreme Court in S. S. Gadgil v. Lal & Co. [1964] 53 ITR 231 where it has been held : "The period prescribed by section 34 of the Income-tax Act for assessment or reassessment is not a period of limitation. The section in terms imposes a fetter upon the power of the Income-tax Officer to bring to tax escaped income. It prescribes different per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any provision which gives such unlimited power of enhancement has to be substantive law. 11. Shri Joshi, learned standing counsel for the department, first of all, referred to the famous statement of law regarding retrospective operation or statutes as laid down by Maxwell in Maxwell On The Interpretation of Statutes, 12th Edn., page 215. He submitted that on the basis of this statement of law, nothing in section 144B could be construed as substantive. Referring to the passage at page 220 in the same authority, he pointed out that when procedural law is altered, all pending actions are decided according to the provisions as altered. He then referred to certain decisions of the Tribunal wherein it has been held that section 144B is procedural. These decisions are in J. Dalmia v. ITO, Delhi Bench 'D' [IT Appeal Nos. 2061, 2501 and 2504 of 1979], ITO v. Nath Bros., Delhi Bench 'C' [IT Appeal No. 1281 of 1978-79], Mehta Charitable Trust, Delhi Bench 'B' [IT Appeal No. 3099 of 1978-79], Vishwanath Prasad Bhagwati Prasad v. ITO, Allahabad Bench 'B' [IT Appeal No. 2957 of 1977-78], Radion Talkies v. ITO, Bombay Bench 'B' [IT Appeal No. 588 of 1977-78], Power Cables Ltd., Bombay Bench 'A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. What the court has to do is to construe the law as on 1-1-1976. On that date, there has been no abridgement of any of the assessee's rights. In respect of limitation, he pointed out that no vested right exists for any person in this matter and this has been laid down by the Calcutta High Court in the case of Calcutta Discount at pages 490-91. It is no doubt true that the law as on 1st April is applicable to each assessment year but that relates to substantive law or where certain charge is created. It does not relate to procedural law. As early as 1936, the Privy Council has stated that the entire reassessment proceedings are procedural. The Supreme Court has adopted the same in their decision in Govinddas v. ITO [1976] 103 ITR 123. He submitted that sometimes even jurisdiction could be a matter of procedural law. The forum in which a matter could be litigated is not a part of jurisdiction. He further pointed out that there is no anomaly if the Tribunal decides that section 144B is procedural. In fact, pending assessments after that date are vested with an additional right, in the sense that a superior officer is also associated with the assessment proceedings. 14. In this rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding fifteen days as the Income-tax Officer may allow on an application made to him in this behalf. (3) If no objections are received within the period or the extended period aforesaid, or the assessee intimates to the Income-tax Officer the acceptance of the variation, the Income-tax Officer shall complete the assessment on the basis of the draft order. (4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue, in respect of the matters covered by the objections, such directions as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment : Provided that no directions which are prejudicial to the assessee shall be issued under this sub-section before an opportunity is given to the assessee to be heard. (5) Every direction issued by the Inspecting Assistant Commissioner under sub-section (4) shall be binding on the Income-tax Officer. (6) For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir functions . . . . ." [Emphasis supplied by us] So, according to Salmond, in what could the proceedings are to be instituted is procedural law. Or, to put in differently, which Court would conduct and hear the proceedings is procedural law. Or again, to put it in the context of the tax law, which officer would conduct and hear the proceedings is procedural law. 17. Thus, the first point made out by Shri Vyas is not supported by Salmond. It is also not supported by Indian authorities. The Bombay High Court in Shiv Bhagwan Motiram v. Onkarmal AIR 1952 Bom. 365 observed : "The question that arises for determination is whether, notwithstanding the fact that the Court had no jurisdiction with regard to this property at the inception of the suit, this Court can try the suit with regard to this property by reason of the fact that jurisdiction was subsequently conferred on it. Now, I think, it may be stated as a general principle that no party has a vested right to a particular proceeding or to a particular form, and it is also well-settled that all procedural laws are retrospective unless the Legislature expressly states to the contrary . . . This Court is bound to administer the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in the proceedings ; it is an entirely different thing to say that the powers vesting with an officer to associate himself in the assessment proceedings is substantive law. In fact, in that case, the Bombay High Court did not say that the proceedings were entirely invalid because of the association of the IAC. They only set aside the assessment. Similarly, the case law relied on in the cases of J. K. Synthetics and Sirpur Paper Mills were cases where an authority, who had no power at all under the Act, was asked to decide the issue which was pending before certain other quasi-judicial authority. The decision of the Court was that the authority like the CBDT, as in J. K. Synthetics' case was not the person to decide the issue which had to be looked into by the ITO as in Sirpur Paper Mills Ltd. The Supreme Court pointed out that revision petitions before the Commissioner are quasi-judicial proceedings and the CBDT had no say in the matter. Neither of these two decisions says anywhere that jurisdictions are substantive law. They were decisions given on the facts of the case and have no application to the point at issue before us. 21. Similarly, the arguments of Shri Dalip Dwarka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, that vested right was taken away not by section 144B but by section 246. Therefore, this point is irrelevant in deciding whether the provisions of section 144B are substantive or not. The provisions of section 144B as such did not contain within itself the rights of appeal. Those rights are conferred on the assessee by different sections. 24. It was submitted by Shri Vyas that it is possible that an assessment pending on 1-1-1976 might be completed only in 1978 with the result that the appeals could be heard only by the Commissioner (Appeals). So, he submitted that the amendment to section 246 affects pending proceedings to which section 144B is applicable. According to him, therefore, this is not an extraneous matter. We are unable to accept this submission. If the rights are affected, then the provision which affects those rights is only section 246. It has nothing to do with section 144B. This section acting by itself had not taken away any of the rights of the assessee with regard to appeals. It is one thing to say that section 144B has affected certain rights. It is quite another thing that the Legislature, keeping in view the provisions of section 144B, made amendments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a very different thing from regulating procedure." 26. We may now refer to Maxwell again. The last line quoted from Maxwell On The Interpretation Of Statutes was with reference to this case. So Maxwell makes a distinction between a statute which actually takes away the right of appeal and a statute which is procedural, i. e., which substitutes one forum of appeal with another. The Patna High Court decision in Raja Bahadur Kamakhya Narayan Singh relied on was also a case of denial of right if certain conditions were not satisfied. The latter type of cases, i. e., where it is treated as procedural, would be found in Craies at page 403. 27. We may also make a reference to the decision of the Gujarat High Court in CIT v. Ochhavlal Laljibhai Dharia [1980] 125 ITR 301. That was a case of acquisition of property under Chapter XXA of the Income-tax Act. The question in those proceedings would be the fair market value of the relevant property. The presumption with reference to the fair market value could be rebutted under section 269F by an agreement for sale provided that the agreement is a registered document. Although the question before the Court was mainly on the law of evidence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 144B brought out into the statute with effect from 1-1-1976. We should also point out that the number of forums available for the assessee to canvass for relief has not been reduced. Earlier, the assessee could file appeal to the AAC and thereafter a revision petition to the Commissioner under section 264. Now, the assessee has the right to be heard by the IAC under section 144B and by an officer of the Commissioner's rank as appellate authority. So, both before and after the amendment, an officer of the rank of the Commissioner deals with his grievances. Further, all our reasonings stated earlier in respect of appeals would apply to this branch of Shri Vyas's arguments also. 30. The last point on this line of argument was that the assessee may be caught in a situation where none of the officers concerned could rectify an order. It is possible, as Shri Vyas points out, certain circumstances may arise in which it may not be easy to decide whether any officer has power to rectify. However, the character of a provision in the statute cannot be decided on such vague hypothesis. Parliament might enact a procedural law or a substantive law and yet fail to provide for a machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the new enactment will not apply to such a case . . . ." The same point has been reiterated by all the High Courts while dealing with the extension of time-limit brought about by the 1970 Amendment Act for completing penalty proceedings. We are merely giving the names of the following cases in order to avoid repetition : CIT v. Soubhagya Manjari Devi [1976] 105 ITR 82 (Ori.), CIT v. N. Nagappa [1978] 114 ITR 707 (Kar.), Kerala Oil Mills v. CIT [1980] 121 ITR 254 (Ker.), Hargu Charan Srivastava v. CIT [1979] 119 ITR 622 (All.) and Addl. CIT v. Watan Mechanical & Turning Works [1977] 107 ITR 743 (AP). If anything is considered as settled law, that is this that all laws of limitation are pertaining to procedure only. 32. The decisions relied on by Shri Vyas are not relevant on this point. He had referred to a decision of the Supreme Court in Banarsi Devi's case. We have extracted the passage relied on by him in para 8 of this order. Therein, the Supreme Court was of the view that the stringent rules of construction should be applied. This sentence has to be understood in the context in which it is found. This was a case where an assessment, which has become barred by limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute. For example, section 52(2) in computing the income under the head 'Capital gains', Explanation 5 to section 43(1) for determining the actual cost of an asset for the purpose of depreciation. In these provisions there is no requirement that the IAC should hear the assessee. The Legislature thought perhaps that unlike these provisions, it would be better if the IAC hears the assessee before approving a draft assessment order. It would be worthwhile to note that if the AAC does not approve of the alterations suggested in the draft order, he can direct the ITO not to make the proposed additions even without hearing the assessee. It also answers another submission of Shri Dwarkadas that the IAC acts like a judge. He does not. 36. We may also point out that powers of enhancement are given to the IAC in a separate section (section 144A) and subject to the conditions therein. 37. Shri Joshi referred to a number of decisions of the Benches of the Tribunal. None of them had taken a different view from what we have expressed here. Detailed discussion of many of the aspects touched upon by the learned counsel before us, had been urged before the Appellate Tribunal, Delhi Bench 'D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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