Case: Grindlays Bank Limited Vs. Income Tax Officer, 'H' Ward Companies, District-IV, Calcutta

The appellant is a banking company incorporated in the United Kingdom with its registered office at London. It carries on banking business in India, and is assessed under the Income-tax Act,appellant filed a return of its income for the assessment year 1972-73. During the assessment proceeding, the Income-tax Officer issued a notice under s. 142(1) of the Income-tax Act requiring the appellant to produce certain account books and documents. The appellant applied against the notice to the High Court at Calcutta under Articles 226 of the Constitution. A learned Single Judge of the High Court did not accept the wide construction which the appellant sought to put upon the impugned notice, and construing it in specific limited terms he directed the appellant to comply with it. The appellant preferred an appeal in the High Court. Meanwhile, pursuant to the direction by the learned Single Judge, the Income-tax Officer made an assessment order on March 31, 1977. Thereafter, the appeal was allowed by a Division Bench of the High Court by its judgment dated May 8 and 12, 1978, and the impugned notice under s. 142(1) and the consequent assessment order were quashed. But while doing so, the Division Bench also directed the Income-tax Officer to make a fresh assessment. Aggrieved by that direction, the appellant applied for, and obtained, special leave to appeal, to this Court.

Reasoning: The assessment year under consideration is the year 1972-73. By virtue of s. 153(1) (a) (iii) of the Income-tax Act, no assessment order in respect of that assessment year could be made after two years from the end of that assessment year. The end of the assessment year is March 31, 1975. However, the appellant filed the writ petition on March 17, 1975, fourteen days before the end of the period for making the assessment order. On the same date, March 17, 1975, the learned Single Judge granted an interim injunction restraining the Income-tax Officer from proceeding with the assessment, and on March 25 , 1975 the injunction was made operative for the pendency of the writ petition. The writ petition was disposed of by the learned single judge by his judgment dated August 31, 1976. It is apparent that the assessment proceedings remained stayed throughout the period from March 17, 1975 to August 31, 1976 by virtue of the orders of the court. As has been mentioned, the learned Single Judge disposed of the writ petition on August 31, 1976. In his judgment, besides directing the appellant to comply with the notice under s. 142(1) as construed by him, he also included a direction to the Income-tax Officer to complete the assessment by March 31, 1977. On September 22, 1976, he amended his judgment inasmuch as it now required that "the assessment for the relevant year must be completed on the 31st of March, 1977 but must not be completed before 31st March 1977." In other words, while the Income-tax Officer could continue with the assessment proceedings he was restrained b y the Court from making the assessment order before, and in fact could make it only on, March 31, 1977. Now it is important to note that when the amendment was made by the learned Single Judge in his judgment, it was an amendment made by him to a judgment disposing of the writ petition and having regard especially to the nature and the terms of the amendment, it must be deemed to have taken effect as from August 31, 1976, the date of the original judgment. In the appeal filed thereafter by the appellant, no interim order was made suspending the operation of the direction that the assessment order be made on March 31, 1977 only. A stay order was made against the enforcement of the notice of demand alone. Adhering to the directions of the learned Single Judge, the Income-tax Officer made an assessment order on March 31, 1977. In the result, the assessment proceeding remained pending during the entire period from March 17, 1975 to March 31, 1977 by successive orders of the Court. If regard be had to clause (ii) of Explanation 1 to s. 153, which provides that in computing the period of limitation for the purposes of s. 153, the period during which the assessment is stayed by an order or injunction of any court shall be excluded, it is abundantly clear that the assessment order dated March 31, 1977 is not barred by limitation. In computing the period for making the assessment, the Income-tax Officer would be entitled to exclude the entire period from March 17, 1975, on which date there were fourteen days still left within the normal operation of the rule of limitation. The assessment order was made on the very first day after the period of stay expired; it could not be faulted on the ground of limitation. There is, therefore, no force in the submission of the appellant that the limitation for making the assessment had expired and a valuable right not to be assessed had thereby accrued to it, and that consequently the High Court was not competent to make the order directing a fresh assessment.Theprincipal relief sought in the writ petition was the quashing of the notice under s. 142(1) of the Income-tax Act, and inasmuch as the assessment order dated March 31, 1977 was made during the pendency of the proceeding consequent upon a purported non -compliance with that notice, it became necessary to obtain the quashing of the assessment order also. The character of an assessment proceeding, of which the impugned notice and the assessment order formed part, being quasi-judicial, the "certiorari " jurisdiction of the High court under Article 226 was attracted. Ordinarily, where the High court exercises such jurisdiction it merely quashes the offending order and the consequential legal effect is that but for the offending order the remaining part of the proceeding stands automatically revived before the inferior court or tribunal with the need for fresh consideration and disposal by a fresh order. Ordinarily, the High Court does not substitute its own order for the order quashed by it. It is, of course, a different case where the adjudication by the High Court establishes a complete want of jurisdiction in the inferior court or tribunal to entertain or to take the proceeding at all. In that event on the quashing of t he proceeding by the High Court there is no revival at all. But although in the former kind of case the High court, after quashing the offending order, does not substitute its own order it has power nonetheless to pass such further orders as th e justice of the case requires. When passing such orders the High court draws on its inherent power to make all such orders as are necessary for doing complete justice between the parties. The interests of justice require that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court, by the mere circumstance that it has initiated a proceeding in the court, must be neutralised. The simple fact of the institution of litigation by itself should not be permitted to confer an advantage on the party responsible for it. The present case goes further. The appellant would not have enjoyed the advantage of the bar of limitation if, notwithstanding his immediate grievance against the notice under s. 142(1) of the Income-tax Act, he had permitted the assessment proceeding to go on after registering his protest before the Income-tax Officer, and allowed an assessment order to be made in the normal course. In an application under s. 146 against the assessment order, it would have been open to him to urge that the notice was unreasonable and invalid and he was prevented by sufficient cause from complying with it and therefore the assessment order should be cancelled . In that event, the fresh assessment made under s. 146 would not be fettered by the bar of limitation. Section 153(3)(i) removes the bar. But the appellant preferred the constitutional jurisdiction of the High Court under Article 226. If no order was made by the High Court directing a fresh assessment, he could contend as is the contention now before us, that a fresh assessment proceeding is barred by limitation. That is an advantage which the appellant seeks to derive by the mere circumstance of his filing a writ petition. It will be noted that the defect complained of by the appellant in the notice was a procedural lapse at best and one that could be readily corrected by serving an appropriate notice. It was not a defect effecting the fundamental jurisdiction of the Income- tax Officer to make the assessment. In our opinion, the High Court was plainly right in making the direction which itare of the opinion that the cases are distinguishable. In Pickles (supra), Cave L.C. declined to remand the case to the Special Commissioners because the time for making the requisite assessment had expired. In Anisminic Ltd. (supra) the decision of the Commissioner considered by the House of Lords was a nullity. The present case is one of a mere procedural lapse, an imperfect notice which is replaceable by a proper notice. The third case, Bath and We st Countries Property Trust Ltd. (supra) was again a case where it was too late for the Inspector to make a fresh assessment. In the case before us a direction by the High court is sufficient to raise the bar of limitation, a power absent in the aforesaid cases.