* THE HONOURABLE SMT. JUSTICE T.MEENA KUMARI AND THE HONOURABLE SRI JUSTICE RAMESH RANGANATHAN W.P.No.10274 of 1998. % 13.08.2008 # Between: B.F. Dittia and others ….Appellant A N D The Appropriate Authority, Income-tax and another …..Respondents ! COUNSEL FOR THE PETITIONERS: Sri M.V.S.SURESH KUMAR ! COUNSEL FOR THE RESPONDENTS: SRI S.R.ASHOK, < Gist: > Head Note: ? CITATIONS: (1993)1 SCC 78 2 AIR 1985 SC 870 3 AIR 1988 SC 587 4 1994 Supp (1) SCC 145 5 (1998) 3 SCC 38 6 (2005) 3 SCC 284 7 (1997) 5 SCC 201 8 (1881)17 Ch.D 746 9 (1884)9 AC 448 10 AIR 1953 SC 333 11 (1986) 1 SCC 465 12 (1996)4 SCC 76 13 (2003) 11 SCC 632 14 (1951) 2 ALL ER 587 (HL) 15 AIR 1964 Allahabad 353 (DB) 16 (2006) 11 S.C.C. 42 17 1901 AC 495 18 AIR 1968 S.C. 647 19 (2002) 7 SCC 222 20 (2002) 257 ITR 123 21 (2003) 2 SCC 111 22 (2002) 3 SCC 496 23 (2003)11 SCC 584 24 (2004)3 SCC 75 25 (2004)6 SCC 186 26 (2004)8 SCC 335 27 (2004)8 SCC 579 28 (2006)1 SCC 368 29 2001(4) SCC 534 30 2003(1) SCC 692 31 AIR 1990 SC 1747 32 AIR 1966 SC 1678 33 (1984 (2) SCC 500 34 (2001)8 SCC 61 35 (2003)5 SCC 134 36 (2005)10 SCC 437 37 (2003)2 SCC 455 38 (2004)11 SCC 625 39 (1986) 4 SCC 746 40 AIR 1992 SC 96 41 (2001)4SCC 139 42 (2001)3 SCC 735 43 (2001)10 SCC 280 44 (1974) Vol.96 ITR 390 45 (2002) 4 SCC 234 46 (2004)5 SCC 568 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE THIRTEENTH DAY OF AUGUST TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MRS JUSTICE T.MEENA KUMARI and THE HON'BLE MR JUSTICE RAMESH RANGANATHAN WRIT PETITION NO : 10274 of 1998 Between: 1 B.F.Dittia, S/o. F.N.Ditya. 8-2-698, Road No.12, Banjara Hills, Hyderabad. 2 Mr.Burjor Datliwala, S/o. Late K.Batliwala. 8, SRK Colony, Marredpally, Secunderabad. 3 Mrs. Roshan Minoo Patel, W/o. Minoo S.Patel, Dhun-Village, 64, Sardar Patel Roads, Secunderabad. 4 Mr.Asted Erachah Chonoy, S/o. Late Nawab Errhyar Jung, 206, Tarbund, Secunderabad. 5 Mrs. Sooni Rustam Mehta, W/o. Rustam C.Mehta. Sea-side, 147 Middle Colabe, Bombay. Rep. General Power of Attorney holder- B.F.Dittia. ..... PETITIONER(S) AND 1 The Appropriate Authority, Income tax Department Kendriya Saran, 4th Floor, "A" Wing, Bangalore. 2 The Income-tax Officer (Public relations), O/o. The Chief Commissioner of Income Tax, Hyderabad. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to to quash the order dated 30/03/1998 passed by the 1st Respondent herein under Section 269 UD(1) of the Income Tax Act, 1961 for the pre-exptive purchase by the Central Government of the property bearing No.63, 1-1-152/153, situated at Sardar Patel Road, Secunderabad, as illegal, arbitrary and contrary to the Judgement of this Hon'ble Court dated 3-12-1997 passed in W.P.No.2978/90 by issuing any appropriate writ, order or direction and pass such other order or orders, as may be deemed fit and proper under the circumstances of the case. Counsel for the Petitioner:MR.M.V.S.SURESH KUMAR Counsel for the Respondent No.: MR.S.R.ASHOK The Court made the following : THE HON’BLE SMT. JUSTICE T.MEENA KUMARI AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN W.P.No.10274 OF 1998 ORDER: (per Hon’ble Sri Justice Ramesh Ranganathan) Exercise of the right of pre-emptive purchase by the Central Government, under Section 269 UD(1) of the Income Tax Act, of “Rustom Villa”, a residential building, and the order issued in this regard on 30.3.1998, are the subject matter of challenge in this writ petition. “Rustom Villa” at Sardar Patel Road, Secunderabad, belonged to Mrs.Zenobia Rustom Ranji who passed away on 29.10.1988. She had earlier executed a will on 22.5.1987 appointing the petitioners as executors in respect of her properties including “Rustom Villa”. Under the will, the said residential building was to be sold and the sale proceeds was to be donated to nine charitable institutions. Petitioners claim to have got the property valued by two valuers according to whom it was worth Rs.15.32 lakhs and Rs.15.60 lakhs respectively. The petitioners entered into an agreement of sale with Mrs.Sanbar N.Markar on 14.12.1989 for a total consideration of Rs.15.60 lakhs. They filed the statement in Form 37-I, together with the agreement of sale, before the 1st respondent on 27.12.1989. Another set of Form 37-I was also submitted on 9.2.1990. The 1st respondent, without giving the petitioners an opportunity of being heard, passed orders on 16.2.1990 purchasing the property, on behalf of the Central Government, for Rs.15,31,640/-. Questioning the said order dated 16.2.1990, the petitioners filed W.P.No.2978 of 1990 and this Court by its order dated 03.12.1997, while setting aside the impugned order dated 16.02.1990, observed that a fresh order shall be made keeping in view the ratio and the directions given in the judgment of the Supreme Court in C.B.Gautam v. Union of India. Petitioners were, therefore, issued notice dated 25.3.1998 enclosing thereto a copy of the proceedings of 6.2.1990, (which proceedings were the subject matter of challenge in W.P.No.2978/90), calling upon them to show cause why pre- emptive purchase, under Section 269 UD(1), should not be made. The petitioners were further informed that their case stood posted to 30.3.1998. The petitioners sent a telegram seeking further time. Despite such a request, final orders were passed on 30.3.1998 as, according to the 1st respondent, the last date for passing the final order was 31.3.1998. Since the entire controversy revolves around Section 269-UD(1) of the Income-tax Act and the two provisos thereunder, the Judgment of the Supreme Court in C.B.Gautam1 and the clarificatory order passed on 27.11.1992, it is necessary to make a brief reference thereto before the rival contentions are examined. SECTION 269-UD(1) Order by appropriate authority for purchase by Central Government of immovable property: 269UD (1): Subject to the provisions of sub-sections (1A) and (1B), the appropriate authority, after the receipt of the statement under sub-section (3) of Section 269 UC in respect of any immovable property, may, notwithstanding anything contained in any other law or any instrument or any agreement for the time being in force, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration: Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months from the end of the month in which the statement referred to in Section 269 UC in respect of such property is received by the appropriate authority: Provided further that where the statement referred to in Section 269 UC in respect of any immovable property is received by the appropriate authority on or after the 1st day of June, 1993, the provisions of the first proviso shall have effect as if for the words “two months”, the words “three months” has been substituted” The second proviso was inserted by Finance Act, 1993 with effect from 1.6.1993. In C.B.Gautam1, the Supreme Court held that the requirement of providing an opportunity to show cause must be read into Section 269 UD(1) as it is a minimal requirement of the rules of natural justice. On the question of relief the Supreme Court observed: “........This brings us to the question of relief. We find that the order for compulsory purchase under Section 269-UD(1) of the Income Tax Act which was served on the petitioner in the night of December 15, 1986, has been made without any show-cause notice being served on the petitioner and without the petitioner or other affected parties having been given any opportunity to show cause against an order for compulsory purchase nor were the reasons for the said order set out in the order or communicated to the petitioner or other concerned parties with the order. In view of what we have stated earlier the order is clearly bad in law and it is set aside. The next question is as to the consequence to follow. In view of the fact that the object of the provisions of Chapter XX-C is a laudable object, namely, to counter evasion of tax in transactions of a sale of immovable property, we consider it necessary to limit the retrospective operation of our judgment in such a manner as not to defeat the acquisitions altogether. We find that if the original time-frame prescribed in Chapter XX-C is rigidly applied it would not be possible for the appropriate authority concerned to pass an order under Section 269UD(1) at all in respect of the property in question. In order to avoid that situation and, yet to ensure that no injustice is caused to the petitioner, we order, in the facts and circumstances of the case, that the statement in Form 37-I submitted by the petitioner as set out earlier shall be treated as if it were submitted on the date of the signing of this judgment. Thereafter if the appropriate authority considers it fit, it may issue a show-cause notice calling upon the petitioner and other concerned parties to show cause why an order for compulsory purchase of the property in question should not be made under the provisions of sub-section (1) of Section 269-UD and give a reasonable opportunity to the petitioner and such other concerned parties to show cause against such an order being made. In view of the limited time-frame this will have to be done with a sense of urgency. If, after such an opportunity is given, the appropriate authority so considers it fit, it may hold an inquiry, even though summary in nature, and may pass an order for compulsory purchase by the Central Government of the property in question under Section 269- UD(1). The appropriate authority will have to decide whether an inquiry is called for in the facts and circumstances of the case after the show-cause notice is issued..........” (emphasis supplied) After the judgment in C.B.Gautam1 was pronounced on 17.11.1992, the Union of India moved an application seeking certain clarifications with a view to obviate certain difficulties envisaged in applying the principles laid down therein. Since the clarification issued by the Supreme Court on 27.11.1992 has a bearing on the questions which fall for consideration, it is but appropriate that it be reproduced hereunder:- “....... Our attention was drawn to two aspects: one in relation to the large number of similar petitions pending before this Court and the various High Courts where, in view of the subsisting orders of stay operating therein, it would not be possible immediately to take steps and implement the directions contained in the judgment within the time frame stipulated therein. The second aspect relates to pending matters before the authorities, which, though not pending before courts, do not also admit of application of the principles consistent with the statutory limit. After hearing the learned Solicitor General, we are satisfied that the problems and difficulties envisaged, in practical terms, are real and require to be provided for. 47. The first aspect arises out of the limited retrospectivity imported by the judgment. The judgment provides that: “In order to avoid that situation and, yet to ensure that no injustice is caused to the petitioner, we order, in the facts and circumstances of the case, that the statement in Form 37-I submitted by the petitioner as set out earlier shall be treated as if it were submitted on the date of signing of this judgment.” 48. Learned Solicitor General points out that in the cases where petitions are yet pending in this Court as well as in the various High Courts, the above direction becomes unworkable inasmuch as the interim orders subsisting in those petitions disable the authorities to carry out the directions contained in the judgment within the stipulated time-frame and that, therefore, the directions as given in the judgment become impossible of implementation. Learned Solicitor General suggests that, in order that the principles laid down in the judgment become workable in all other pending cases before the courts, a clarification be made to the effect that in respect of all such cases pending before this Court and the various High Courts, the time frame for affording of opportunity of being heard shall be reckoned from the date of the actual disposal of those matters by this Court or the High Court, as the case may be. 49. We think that this clarification in the form of a further direction is necessary for a proper implementation of the principles laid down in the judgment. 50. We, accordingly, clarify by this supplemental direction to be read as part of the judgment that in respect of cases other than that of petitioner — C.B. Gautam, the period of two months referred to in Section 269-UD(1) shall be reckoned with reference to the date of disposal of each of such pending matters either before this Court or before the High Courts as the case may be. Where, however, the stay orders inhibiting the authorities from taking further proceedings are vacated, the period referred to in the said Section 269-UD(1) shall be reckoned with reference to the date of such vacating of the stay orders. This clarification and further direction shall be supplemental to and be treated as parts of the main judgment……….” (emphasis supplied). Sri M.V.S.Suresh Kumar, Learned Counsel for the petitioners, would contend that the period of two months prescribed in C.B.Gautam1, to pass a fresh order, expired on 28.2.1998 and, since the show cause notice was issued thereafter on 25.3.1998 and the final orders passed on 30.3.1998, both these orders were barred by limitation and are liable to be quashed. Learned Counsel would submit that the second proviso to Section 269 UD(1), whereby the period for filing the statement in Form 37-I was extended from two months to three months, came into force with effect from 1.6.1993 and, as the petitioners had submitted their Statement in Form No.37-I nearly 3 years prior thereto, the said amendment had no application to their case. Sri S.R.Ashok, Learned Senior Counsel appearing on behalf of respondents, would submit that when it pronounced its judgment, in C.B.Gautam1, on 17.11.1992 the Supreme Court was conscious of the statutory prescription, for submission of the statement in Form 37-I, under the proviso to Section 296- UD(1) and had, therefore, prescribed the time limit of two months. Learned Senior Counsel would submit that as this period of two months was later enlarged to three months, by insertion of the second proviso with effect from 1.6.1993, the period of two months in C.B.Gautam1 must be held to have been enlarged to three months with respect to all matters which were pending before Courts/Tribunals/other authorities on the date from which the amendment came into force. Learned Senior Counsel would submit that, since this Court had pronounced judgment, in W.P.No.2978 of 1990 on 3.12.1997, much after the amendment came into force with effect from 01.06.1993, the period for completion of proceedings, as stipulated in C.B.Gautam1, must necessarily be read as three months. According to the Learned Senior Counsel, the clarificatory order in C.B.Gautam1 cannot be read as creating two different classes of cases and that the latter class of cases mentioned in Para 50 must be held to have the same consequences as the former class of cases mentioned in para 47 of the order. Learned Senior Counsel would submit that, if both the paragraphs of the clarificatory order were read together, it was evident that the Supreme Court had directed that the time limit prescribed under Section 269 UD (1) should be reckoned from the date of the judgment of High Courts for the purposes of completion of proceedings and passing of final orders. According to the Learned Senior Counsel the judgment in C.B.Gautam1 is a piece of judicial legislation and the Supreme Court had resorted to legal fiction requiring the Statement in Form 37-I submitted earlier to be treated as if it had been submitted on the date of the judgment thereby giving the department time to pass final orders. According to the Learned Senior Counsel, the words “as if”, in paragraph 47 of the judgment in C.B.Gautam1, is a deeming provision and must be understood to include all consequences which would logically follow therefrom. He would submit that since the legislature, by an amendment which came into force with effect from 1.6.1993, had enlarged the period in Section 269 UD(1) from two months to three months, and as this Court had passed judgment thereafter on 3.12.1997, it is the period prescribed pursuant to the amendment which would apply, and the department had three and odd months to pass final orders. Learned Senior counsel would submit that a purposive construction must be placed on the amendment and the word “received”, in the second proviso thereto, must be so read as to include the words “deemed to be received”. He would rely on State of Andhra Pradesh v. Vallabhapuram Ravi and S.Appukuttan v. Thundiyil Janaki Amma. As is evident from the judgment in C.B.Gautam1, as extracted hereinabove, it is with a view to avoid a situation, where if the original time frame prescribed in Chapter XX-C of the Income-tax Act, was rigidly applied it would not have been possible for the appropriate authority concerned to pass an order under Section 269UD(1) in respect of the property in question, and also to ensure that no injustice was caused to the petitioner, that the Supreme Court ordered that “the statement in Form 37-I submitted earlier by the petitioner should be treated as if it were submitted on the date of signing of the judgment.” These directions were issued by the Supreme Court in exercise of its powers under Article 142 of the Constitution of India. This power has been conferred only on the Supreme Court and its exercise is not dependent or conditioned by any statutory provision. (Mohd. Anis v. Union of India; Chandrakant Patil v. State). The plenary powers under Article 142 of the Constitution inheres in the Supreme Court and exist independent of the statutes with a view to do complete justice between the parties. (Kalyan Chandra Sarkar v. Rajesh Ranjan). The phrase “complete justice” in Article 142 is a word of width couched with elasticity to meet myriad situations created by human ingenuity or cause or result of operation of statute law or law declared under Articles 32, 136 and 141 of the Constitution. (Ashok Kumar Gupta v. State of U.P,). The question which must be examined first is whether legal fiction, as applicable to Statutes, can also be extended to judgments of the Supreme Court and the High Courts. Among the synonyms for the words “treated as if” would also include “deemed as if”. The word ‘deemed’ is used a great deal in modern legislation. When a statute enacts that something shall be deemed to have been done, which in fact and in truth was not done, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to. After ascertaining the purpose, full effect must be given to the statutory fiction and it should be carried to its logical conclusion and to that end it would be proper and even necessary to assume all those facts on which alone the fiction can operate, (Levy, Re, ex p Walton. Hill v. East and West India Dock Co.; State of Travancore Cochin v. Shanmugha Vilas Cashewnut Factory; American Home Products Corpn. v. Mac Laboratories (P) Ltd.; Vallabhapuram Ravi2; S.Appukuttan3, Parayankandiyal Eravath Kanapravan Kalliani Amma v. K. Devi and Ali M.K. v. State of Kerala, for if you are bidden to treat an imaginary state of affairs as real you must surely, unless prohibited from doing so, also imagine as real the consequence and incidents which, if the putative state of affairs had, in fact, existed must inevitably have flowed from or accompanied it and having done so, you must not cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. (East End Dwellings Co. Ltd. v. Finsbury Borough Council). The legal fiction, treating something not done as done, requires legislative authority and can neither be indulged in by Courts without it, (Sheikh Ghulam Maula v. State of U.P, nor can it be created by an administrative order. (V.C., Banaras Hindu University V. Shrikant). While legal fiction is widely used in plenary and subordinate legislation, the said principles cannot be extended to judgments of Courts for it is well settled that a decision of a Court is only an authority for what it decides and not what can logically be deduced therefrom. It cannot be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical Code whereas, it must be acknowledged that, the law is not always logical. It is not a profitable task to extract a sentence here and there from a judgment and to build upon it. (Quinn v. Leathem; State of Orissa v. Sudhansu Sekhar Misra; Delhi Administration (NCT of Delhi) v. Manoharlal; Dr. Nalini Mahajan etc. v. Director of Income Tax (Investigation); and Bhavnagar University v. Palitana Sugar Mill (P) Ltd.). In Haryana Financial Corpn. v. Jagdamba Oil Mills, the Supreme Court observed: “……Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are not to be read as Euclid’s theorems nor as provisions of the statute. These observations must be read in the context in which they appear. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark upon lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes, their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton: (1951) 2 ALL ER 1 (HL):- “The matter cannot, of course, be settled merely by treating the ipsissima verba of Willes, J., as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished Judge.” In Home Office v. Dorset Yacht Co.: (1970)2 ALL ER 294 Lord Reid said (at All ER p. 297g-h), “Lord Atkin’s speech … is not to be treated as if it were a statutory definition. It will require qualification in new circumstances”. Megarry, J. in (1971) 1 WLR 1062 observed: “One must not, of course, construe even a reserved judgment of even Russell, L.J. as if it were an Act of Parliament.” And, in Herrington v. British Railways Board: (1972)2 WLR 537 Lord Morris said: “There is always peril in treating the words of a speech or a judgment as though they were words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case……...” (emphasis supplied) These observations have been reiterated by the Supreme Court in Ashwani Kumar Singh v. U.P. Public Service Commission; Union of India v. Amrit Lal Manchanda; Collector of Central Excise, Calcutta v. Alnoori Tobacco Products; Escorts Ltd. v. Commissioner of Central Excise, Delhi II; Bharat Petroleum Corpn Ltd v. N.R.Vairamani; Union of India v. Major Bahadur Singh). Judgments of Courts are not to be construed as statutes. Judges interprets statutes and not judgments. The words, used in their opinions, are not be interpreted as statutes. The principles governing statutory fiction, and the consequences arising therefrom, cannot be extended to judgments of Courts. It is not for this Court to decide by an interpretative process whether