Income Tax Appellate Tribunal - Bangalore
Lamina Suspension Products (P.) Ltd. vs Income-Tax Officer. on 5 May, 1989
Equivalent citations: [1989]30ITD505(BANG)
ORDER
Per Shri A. V. Balasubramanyam, JM - These appeals are directed against the consolidated order passed by the Commissioner of Income-tax, under section 263, Income-tax Act, in respect of assessments passed for 1980-81 and 1981-82.
2. The original assessments, for the two years mentioned above, had been made on 23-2-1983 and 26-2-1983 respectively. The Commissioner viewed that they were erroneous and prejudicial to the interests of the revenue. For the present the details in this regard may not be necessary. On 7-3-1985, the Commissioner issued notice to the assessee calling upon it to lodge objections, if any, for his proposal to revise the assessments in regard to certain items stated in the notice and this was obviously to provide an opportunity of being heard as required in sub-section (1) of section 263. The assessee gave a reply in writing on 19-3-1985 in support of its stand that interference under section 263 was not called for. The Commissioner finally passed a consolidated order on 26-3-1985 whereby he set aside the assessments and gave directions to the Income-tax Officer as to the manner in which assessments are to be completed. The assessee is in appeal challenging the same.
3. Shri R. Krishnamoorthy, the learned counsel for the assessee, raised a preliminary objection which touches upon limitation. It is his case that the Commissioner has not jurisdiction on 26-3-1985 to pass the impugned order inasmuch as it was beyond the period of limitation specified in the section as it obtained on the date the assessments were made. The argument for the revenue has been that the Commissioner was competent in view of the amendment made to section 263(2) which had come into force before the period allowed under the earlier provision had elapsed.
4. Section 263(2), as it stood on the date of assessments, prohibited the Commissioner from revising an order after the expiry of two years from the date of the order sought to be revised, namely, the order of assessment. This provision was amended by Taxation Laws (Amendment) Act, 1984 and with effect from 1-10-1984 there was a change in limitation. As per the amended provision, the Commissioner would have no power to revise after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The period of two years stands but the change is of the starting point of limitation. While according to the provision as it stood on the date of assessment, limitation had to be reckoned from the date of the assessment whereas under the amended provision it starts from the end of the financial year in which the assessments are passed. It is in this sense there is an enlargement of the period within which the Commissioner can exercise powers under section 263(1).
5. As facts stand, the order of the Commissioner would be out of time if the law as it stood prior to 1-10-1984 is to be applied. If, on the other hand, the amended law applies, the Commissioner did have jurisdiction on 26-3-1985 when he passed the order.
6. The argument for the assessee was that the provision as it was on the date of assessments applies and that the assessee has a vested right not to be interfered with inasmuch as the Commissioner had not assumed jurisdiction within two years from the date of assessment and as such the impugned order passed under section 263 on 26-3-1985 is invalid in law. In this connection placed strong reliance upon the decision of the Supreme Court in the case of Commissioner of Sales Tax v. Amarnath Ajitkumar of Bhind [1971] 28 STC 702 and in the case of Garikapati Veeraya v. N. Subbiah Choudhry AIR 1957 SC 540. He also sought to support himself from certain observations of the Bombay High Court in the case of Siemens India Ltd. v. State of Maharashtra [1986] 62 STC 40. For the revenue, reliance was placed upon the decision of the Karnataka High Court in the case of CIT v. M. Nagappa [1978] 114 ITR 707 and two decisions of the Madras Bench of the Tribunal - the cases of Mahalingam v. WTO [1986] 747 and B. Vijayakumar v. IAC [1987] 20 ITD 254.
7. The majority judgment of the Supreme Court in the case of Garikapati Veeraya (supra) held that right of appeal is a substantive right and that the "institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit." It is also held that vested right of appeal can be taken away only by subsequent enactment either expressly or by necessary implication.
8. In the case of Amarnath Ajitkumar of Bhind (supra), the assessee had submitted quarterly returns when Madhya Bharat Sales Tax Act, 2007S was in force. This Act was repealed with effect from 1-4-1959 by Madhya Pradesh General Sales Tax Act, 1959. The Sales Tax Officer passed assessments in November 1961. In October, 1964 the Commissioner initiated revision proceedings under Madhya Pradesh General Sales Tax Act, 1959 and the point was whether the Commissioner was competent to revise the assessment. The Supreme Court, having regard to the provisions in the old Act and the repealing Act, held that the provisions of the earlier Act governed the case. The case of Siemens India Ltd. (supra) dealt with three amendments brought to the Bombay Sales Tax Act and the case depended upon the interpretation of a provision as per the third amendment. We will say more about this at the appropriate stage.
9. Section 263(2), Income-tax Act, does not lay down a period of limitation within which the Commissioner may pass an order under section 263. It prohibits the Commissioner from passing an order thereunder after a specified period which takes away his power to revise. It is when such prescribed period is over that the assessee gets a vested right because the assessment becomes final and conclusive as against both the revenue and the assessee. As to when the assessment becomes final, it depends upon the provision that applies. While the old law or the amended law applies is altogether different question, there is no denying both the revenue and the assessee when the power to revise vanishes after the prescribed time limit.
10. In the case of Amarnath Ajitkumar of Bhind (supra), according to section 12(1) of the Madhya Bharat Act, the Commissioner was precluded from revising an order which had been made more than two year previously. When this Act was repealed with effect from 1-4-1959 by Madhya Pradesh General Sales Tax Act, 1959, the new Act [vide section 39(2)] prevented the Commissioner from initiating any revisional proceeding after the expiry of three years from the date of order sought to be revised. But the repealing Act of 1959 contained a provision [section 52 (1)] whereby certain rights acquired by parties under the repealed Act were saved. Interpreting that saving clause, the Supreme Court held that section 12 of the repealed Act conferred a right to the assessee that the assessment made against him was not altered to his prejudice by the repealing Act. Such is not the case in the appeals before us.
11. In Siemens India Ltd.s case (supra) section 57 of the Bombay Sales Tax Act, which provided for revision by Commissioner, was amended thrice. As per the first amendment, a Commissioner could revise within two years from the date of the order and his right to revise would come to an end after that period of two years. Under the second amendment, the substance of the provision was not altered but the period of two years was enlarged to five years. But the third amendment brought about a substantive change. This amendment prescribed two conditions. One is that it required a notice to be served upon the assessee within three years from the date of communication of the order sought to be revised. The other is to bar the powers of the Commissioner after the expiry of five years from the date of communication of the order sought to be revised. So, the Commissioner has to not only initiate the proceeding by issuing within a point of time but, also, he would lose his power after a specified time limit to validly pass an order. As the facts in that case did not satisfy both these conditions the revised order was held to be time barred.
12. Section 263, Income-tax Act, does not impose any condition within which a notice is to be issued to the assessee. Sub-section (2) only bars the Commissioner from revising an order after a time limit. A right of appeal (which is a vested right) may be likened to the right of the Commissioner to initiate suo motu revisional proceeding in respect of an assessment. But the law prescribing time limit validly passing an order in revision is a procedural law and in this behalf the authorities are clear. Ordinarily, limitation bars a remedy and the right of the party as such is not lost. That is why Angel describes law of limitation as statute of repose. But there may be a statute law under which right may cease to exist after a period. For instance, under sec. 27 of the Limitation Act, 1963 the right to property is extinguished after the period of limitation and, in consequence, a new right is lightened up in the person against whom an action for possession could have been maintained. In such a case, law confers a substantial right in the other party. So, it all depends upon the nature of right. It is pointed out in the case of Siemens India Ltd. (supra) that though right of revision may be substantive, the law prescribing period of limitation for exercising a right of revision is procedural.
13. An identical case is Commissioner of Sales Tax v. Associated Dichem Corpn. [1986] 62 STC 54 (Bom.). The sales tax assessment had been when the first amendment to section 27 of the Bombay Sales Tax Act which prescribed a time under sec. 57 was in operation and the revisional proceeding was taken and completed when the second amendment was in operation which prescribed a time limit of five year. Their Lordships held that the amended law applied. The principle laid down in Associated Dichem Corpn.s case (supra) is squarely applicable to the appeals on hand.
14. As to the effect of amendment of statutory provision laying down limitation, the High Courts are unanimous in opinion. In the case of M. Nagappa (supra) while concluding the assessments the Income-tax Officer had initiated action for levying penalty under sec. 271(1) (c). As on the date the assessments were made, section 275 provided that no order imposing penalty shall be passed after the expiry of two years from the date of completion of the proceeding in the course of which the action for imposition of penalty has been commended. This provision was amended whereby it stipulated that the period of two years shall be from the end of the financial year in which the proceedings in the course of which action for imposition of penalty initiated are completed. This is exactly the same as the amendment made to sec. 263 (2). Their Lordships held that the amended provision applied inasmuch as the new law came about the time allowed under the earlier law had elapsed. Similar view is taken by the Full Bench of the Andhra Pradesh High Court in the case of Addl. CIT v. Watan Mechanical & Turning Works [1977] 107 ITR 743; the Gujarat High Court in the case of CIT v. Royal Motor Car Co. [1977] 107 ITR 753; the Allahabad High Court in the case of Hargu Charan Srivastava v. CIT [1979] 119 ITR 622; the Madhya Pradesh High Court in the case of CIT v. Fakirchand Dayaram [1983] 143 ITR 184 and the Orissa High Court in the case of CIT v. Soubhgya Manjari Devi [1976] 105 ITR 82.
15. To repeat, section 263 does not prescribe any time limit within which the Commissioner has to issue a notice. Sub-section (1) merely stipulates issuance of a notice, but no time limit is prescribed and in this manner it is distinguishable from the third amendment made to section 57 of the Bombay Sales Tax Act which was applied in the case of Siemens India Ltd. (supra). Sub-section (2) of section 263 merely provides a period of limitation within which the Commissioner can validly pass an order and such a provision is essentially a procedural law. It the procedural law is changed by an amendment before the assessee acquired any vested right under the earlier law, then the amended provision would have to be applied.
16. In the present case, the Commissioner had time till 23-2-1985. Much earlier to that (on 1-10-1984) the law was changed which gave an enlarged period of limitation. Therefore, the amended law will have to be applied. The fact that section 263 notice was issued after 23-2-1985 is of no consequence because section 263 does not stipulate the time within which such notice is to be given. We are clear in our view that section 263(1) as amended with effect from 1-10-1984 has to be applied in this case. It follows that the Commissioner had power when he passed the impugned order on 26-3-1985.
17. The Madras Bench of the Tribunal had occasion to deal with similar question arising out of amendment to the corresponding provisions of the Wealth-tax Act in the cases of N. Mahalingam (supra) and B. Vijayakumar (supra). By Taxation Laws (Amendment) Act, 1984, section 25(3) of the Wealth-tax Act was amended in a similar manner so as to extend time with effect from 1-4-1988. It was held that the amended provision applied if limitation had not run out as on 1-10-1984.
18. The ground raised by the assessee touching on limitation has no real validity.
19. Of merits, there were certain points common to both assessments. There were others which pertained only to the individual assessments. On all these issues, except in regard to sales tax penalty, the Commissioner did not record any finding on merits, but directed the Income-tax Officer to reconsider the same bearing in mind the observations in his order. In the notice the Commissioner referred to allowance of staff welfare expenditure (Rs. 5,05,001) without examining whether the Trust was recognised or not. While this was the notice, the Commissioner, in paragraph 10 of the order, directed the Income-tax Officer to look into the retrospective amendment of section 40A (9). Shri Krishnamoorthy contended that he had not been heard on the point of amendment. It is true that the assessee had no opportunity of giving its say but the Commissioner has merely asked the Income-tax Officer to consider the retrospective effect of the amendment and if the assessee has anything to submit, the same may be stated before the assessing officer when he takes up the matter for consideration. Thereupon, no prejudice can be said to have been caused to the assessee. The Commissioner pointed out why the issues required a fresh consideration. We have read the order of the Commissioner and his direction to the Income-tax Officer that the issues required a relook at his hands cannot be said to be improper. Justifiably he exercised revisional powers in regard to them.
20. So far as sales tax penalty in respect of which a deduction was claimed, the issue was common to both the years. The Commissioner has dealt with this point in paragraph 7 of the order. He recorded a finding that the Income-tax Officers order was wrong and he was directed to disallow the same. This issue would have been considered by us on merits but for the submission of Shri Krishnamoorthy that it is not pressed. In the circumstances, we uphold the order of the Commissioner in paragraph 7.
21. In result, the appeals fail. They are dismissed.