Case: Commissioner of Income Tax, Central, Calcutta Vs. National Taj Traders

The facts giving rise to the aforesaid question may briefly be stated. The assessment years involved are8 and9 corresponding to the accounting years ending March 31, 1957, and March 31, 1958, respectively. On or about August 5, 1960, thee submitted voluntary returns, inter alia, for the said two assessment years along with a declaration dated August 8, 1960. The assessments for these years were completed on August 12, 1960, by the ITO,  E  Ward, District II(1), Calcutta, on total income of Rs. 7, 000 and Rs. 7, 500, respectively, the same having been made in the status of unregistered firm consisting of three partners, namely, Asha Devi Vaid, Santosh Devi Vaid and Sugni Devi Vaid with equal sharesOn August 2, 1962, the CIT issued a notice to show cause why the said assessments should not be cancelled under s. 33B of the Act as he felt that the completed assessments were erroneous as being prejudicial to the interests of the revenue and that the ITO,  E  Ward, District II(1), Calcutta, had no territorial jurisdiction over the case of the assessee. The notice was served on the assessee on August 3, 1962, and the hearing was fixed by the Commissioner for August 6, 1962. On the ground that none appeared and that there was no application for adjournment, the Commissioner passed his order under s. 33B ex parte on that date. By his said order the Commissioner cancelled the assessments made by the ITO on August 12, 1960, on three grounds : (a) that some of the partners were minors and were not competent to enter into any partnership agreement with the result that the status of unregistered firm assigned to the assessee by the ITO was clearly wrong and as such the assessments deserved to be cancelled, (b) that the books of account were unreliable and they were not properly examined by the ITO with the result that the assessments made were prejudicial to the interests of the revenue, and (c) that the ITO concerned had no territorial jurisdiction over the case which fell within the jurisdiction of the ITO, District III(II), Calcutta, and directed the ITO having proper jurisdiction to make fresh assessments after examining the record of the assessee in accordance with lawIn the appeals preferred to the Appellate Tribunal under s. 33B(3) thee challenged the said order of the Commissioner on various grounds. The Tribunal, negativing all other contentions of the, came to the conclusion that on merits the facts justified the assumption of jurisdiction under s. 33B by the Commissioner but held that the Commissioner had not conformed to the requirements of natural justice by putting to thee what case it had to meet and by giving due opportunity for explaining the same. The Tribunal noted that the Commissioner had disposed of the matter at0 a.m. when none appeared on behalf of thee while the notice served upon the latter permitted filing of objections at any time during the course of August 6, 1962, and objections had been filed by theFeeling aggrieved by the Tribunals aforesaid order dated July 5, 1965, the respondent sought to refer a set of six questions of law said to arise out of the said order to the Calcutta High Court but the Tribunal referred the following two questions only for the opinion of the High Court:" 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assumption of jurisdiction by the Commissioner under s. 33B of the Indianx Act, 1922, was valid in law ?2. Whether, on the facts and in the circumstances of the case, the Tribunal acted properly by vacating the order of the Commissioner under s. 33B of the said Act and in directing him to dispose of the proceedings under the said section afresh after giving due opportunity to the assessee ?"The High Court disposed of the reference (I.T. Reference No.117 of 1967) by its judgment dated March 9, 1972, whereby it answered the first question in the affirmative, against the assessee, that is to say, on merits it held that the assessments made by the ITO required revision at the hands of the Commissioner. As regards the second question, the High Court was of the view that it comprised two aspects, one relating to the vacating of the Commissioners order and the other relating to the giving of a direction to him to dispose of the case under s. 33B afresh after giving due opportunity to the assessee and the High Court held that in exercise of its appellate powers the Tribunal acted properly in vacating or cancelling the Commissioners order but did not act properly in directing him to dispose of the case afresh under s. 33B(1) because the period of limitation of two years prescribed under s. 33B(2)(b) for him to act under s. 33B(1) had expired and answered the question accordingly (i.e., in the affirmative on the first aspect and in the negative on the second aspect). In doing so the High Court held that the provision ofsubs.(2)(b) was absolute and covered even a revisional order of the Commissioner passed in pursuance of a direction given by any appellate authority and relied in that behalf on the aspect that, unlike the 2nd proviso to s. 34(3), there was no provision removing or relaxing the bar of limitation on the power of the Commissioner under s. 33B(2)(b). The High Court preferred the view of the Assam High Court in CIT v. Sabitri Devi Agarwalla [1970] 77 ITR 934   to the view of the Bombay High Court in CIT v. Kishoresinh Kalyansinh Solanki [1960] 39 ITR 522.   The revenue has come up in appeal to this court challenging the aforesaid view of the High Court

Reasoning: Having regard to the above discussion we are clearly of opinion that the view taken by the Bombay High Court in Solankis case [1960] 39 ITR 522  , on the construction ofsubs.(2)(b) of s. 33B is correct and we approve of it. In Sabitri Devi Agarwallas case [1970] 77 ITR 934, the Assam High Court took a contrary view and held that under s. 33B(4) of the Act the Tribunal would not be justified in remanding the case to the Commissioner after the two years had expired from the date of the order sought to be revised. The decision seems to rest on three aspects : (a) it being a fiscal statute the same must be strictly construed, (b) the bar of limitation contained insubs.(2)(b) was absolute and unqualified and covered all types of orders, and (c) that unlike the second proviso to s. 34(3), there was no provision for removing or relaxing the bar of limitation on the power of the Commissioner under s. 33B(2)(b) and that since s. 33B as well as s. 34(3) with the second proviso had been introduced in the Act by the same Amending Act of 1948, there was a deliberate omission to make a provision removing or relaxing the bar of limitation in s. 33B and for such an omission the remedy lay with the legislature and not with the court. The Assam High Court also alluded to the fact that under the 1961 Act the legislature had made a provision removing or relaxing the bar of limitation in s. 263(3). As regards aspect (b) we have already dealt with it above. As regards aspect (a), it is well settled that the principle that the fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions and by no stretch could s. 33B be regarded as a charging provision. As regards aspect (c) we have already pointed out above that a casus omissus has not to be readily inferred and it could not be inferred from the mere fact that both ss. 33B and 34(3) together with the second proviso were inserted simultaneously in the Act by the same Amending Act of 1948, and that in the case of the former a relaxing provision was not made as was made in the case of the latter provision, firstly because the two provisions operated in distinct fields and, secondly, it would be improper to do so without comparing the various stages of amendments through which each set of these provisions had undergone since inception. The further aspect that the legislature has in the 1961 Act made the requisite provision removing or relaxing the bar of limitation in s. 263(3) is, in our view, not of much consequence. Irrespective of the question whether the second proviso to s. 34(3) was enacted ex majore cautela or not (over which conflicting views obtain), it is clear to us that s. 263(3) of the 1961 Act must be regarded as an ex majore cautela provision. Admittedly, at the time when the said provision was enacted in the 1961 Act, the Bombay view held the field and there was no decision to the contrary of any other High Court. Obviously, therefore, the enactment of s. 263(3) must be regarded as declaratory of the law which was already prevailing and this position has been clarified in the Notes on Clauses of thex Bill, 1961, where it has been stated that. (3) of s. 263 was new and had been added to get over the difficulty experienced in (wrongly stated  caused by ) the Bombay High Courts decision in Solankis case [1960] 39 ITR 522.   The enactment of an ex majore cautela provision in the 1961 Act would, therefore, be a legislative recognition of the legal position that obtained as a result of judicial pronouncement qua the 1922 Act. In our view, therefore, the Assam case was wrongly decidedIt may be pointed out that in s. 132 there is no provision removing or relaxing the bar of limitation contained in s. 132(5) enabling the ITO to pass an order afresh pursuant to any direction issued to him by a higher authority under s. 132(12) and even then this court took the view that the limitation prescribed under s. 132(5) will be applicable only to the initial order to be made by the ITO and not to an order that would be made by him pursuant to a direction from the Board or notified authority. The concerned provisions were read together and such construction was put onsubs.(5) of s. 132 as made a consistent enactment of the whole statute