Full Judgment Text
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PETITIONER:
GRINDLAYS BANK LIMITED
Vs.
RESPONDENT:
THE INCOME TAX OFFICER, ’H’ WARD COMPANIES, DISTRICT-IV,CALC
DATE OF JUDGMENT15/01/1980
BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
UNTWALIA, N.L.
CITATION:
1980 AIR 656 1980 SCR (2) 765
1980 SCC (2) 191
CITATOR INFO :
R 1992 SC1888 (15)
ACT:
Bar of limitation under section 153 (1)(a)(iii) of the
Income Tax Act, 1961- When the assessment proceeding
remained during the entire period by successive orders of
the Court, the fresh assessment order cannot be faulted on
grounds of limitation.
Powers of High Court to make the order a fresh
assessment under certiorari jurisdiction under Art. 226 of
the Constitution.
HEADNOTE:
The appellant, a banking company incorporated in the
United Kingdom, carries on banking business in India and is
assessed under the Income Tax Act, 1961. The appellant filed
a return of its income for the assessment year 1972-73.
During the assessment proceedings the Income Tax Officer
issued a notice under section 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 of Calcutta under Article 226 of the
Constitution. The High Court construing the notice in
specifically limited terms 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 section
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.
Dismissing the appeal, the Court
^
HELD: 1. The High Court was competent to make the order
directing a fresh assessment since the limitation for making
the assessment had not expired and no valuable right to be
assessed had thereby accrued to the appellant. [769 D-E]
The facts of the case make it clear that the assessment
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proceedings remained pending during the entire period from
March 17, 1975 to March 31, 1977 by virtue of successive
stay orders of the Court. If regard be had to clause (ii) of
Explanation 1 to section 153 which provides that in
computing the period of limitation for the purposes of
section 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
766
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. [769 B-D]
2. 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 reviewed 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 the 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 the justice of the case requires.
[769 F-H, 770 A]
3. 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. [770
A-C]
In the present case, 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
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directing a fresh assessment, he could contend 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 affecting the fundamental jurisdiction of the Income
Tax Officer to make the assessment. The High Court was
plainly right in making the direction which it did. [770 C-
G]
Director of Inspection of Income Tax (Investigation)
New Delhi and Anr. v. Pooran Mall and Sons and Anr. (1974)
96 ITR 390 @ 395; followed.
767
Cachar Plywood Ltd. v. Income Tax Officer, ’A’ Ward,
Karimganj Dist. Cachar and Anr., (1978) 114 ITR (Cal.);
approved.
Rajinder Nath etc. v. The Commissioner of Income Tax,
Delhi, [1980] 1 SCR 272; distinguished.
Pickles v. Falsham, 9 Tax Cases, 261, 288; Anisminic
Ltd. v. The Foreign Compensation Commission & Anr. [1969] 1
All E.L.R. 208; Bath and West Countries Property Trust Ltd.
v. Thomas (Inspector of Taxes) [1978] All. E.R. 305;
distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2009 of
1978.
Appeal by Special Leave from the Judgment and Order
dated 8/12th May, 1978 of the Calcutta High Court in Appeal
from Original Order No. 884/76.
Devi Pal. P. K. Pal, J. B. Dadachanji and K. J. John
for the Appellant.
S. T. Desai, B. B. Ahuja and Miss A. Subhashini for the
Respondents 1-2
The Judgment of the Court was delivered by
PATHAK, J: This appeal by special leave is directed
against the judgment of the High Court at Calcutta dated May
8 and 12, 1978 in so far as it directs the Income-tax
Officer to make a fresh assessment in respect of the
appellant.
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, 1961.
The 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
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768
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.
The sole question before us is whether the High Court
erred in directing a fresh assessment. The appellant
contends that the High Court was in error in making the
direction because the assessment had already become barred
by limitation and thereby a valuable right not to be
assessed had accrued to the appellant, and the High Court
was not competent to deprive the appellant of that accrued
right.
It is necessary first to examine whether the bar of
limitation had come into play at any time before the High
Court passed the impugned order.
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 by 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 amend-
769
ment, 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
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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.
The next point is whether the High court possessed any
power to make the order directing a fresh assessment. The
principal 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 jurisdic-
770
tion in the inferior court or tribunal to entertain or to
take the proceeding at all. In that event on the quashing of
the 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 the 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
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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 it
did. The observations of this court in Director of
Inspection of Income-tax (Investigation), New Delhi and
Another v. Pooran Mall & Sons and another(1) are relevant.
It said:
"The court in exercising its powers under article
226 has to mould the remedy to suit the facts of a
case. If in a particular case a court takes the view
that the Income-tax
771
Officer, while passing an order under section 132(5),
did not give an adequate opportunity to the party
concerned it should not be left with the only option of
quashing it and putting the party at an advantage even
though it may be satisfied that on the material before
him the conclusion arrived at by the Income-tax Officer
was correct or dismissing the petition because
otherwise the party would get an unfair advantage. The
power to quash an order under Article 226 can be
exercised not merely when the order sought to be
quashed is one made without jurisdiction in which case
there can be no room for the same authority to be
directed to deal with it. But, in the circumstances of
a case, the court might take the view that another
authority has the jurisdiction to deal with the matter
and may direct that authority to deal with it or where
the order of the authority which has the jurisdiction
is vitiated by circumstances like failure to observe
the principles of natural justice, the court may quash
the order and direct the authority to dispose of the
matter afresh after giving the aggrieved party a
reasonable opportunity of putting forward its case.
Otherwise, it would mean that where a court quashes an
order because the principles of natural justice have
not been complied with, it should not while passing
that order permit the tribunal or the authority to deal
with it again irrespective of the merits of the case."
The point was considered by the Calcutta High court in
Cachar plywood Ltd. v. Income-Tax Officer, "A" Ward,
Karimganj, Dist., Cachar & Another(1) and the High court,
after considering the provisions of s. 153 of the Income-Tax
Act, considered it appropriate, while disposing of the writ
petition, to issue a direction to the Income-tax Officer to
complete the assessment which, but for the direction of the
High court, would have been barred by limitation.
Our attention has been drawn to a recent decision of
this Court in Rajinder Nath etc. v. The Commissioner of
Income-tax, Delhi(2) (by a Bench of this Court of which one
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of us was a member). In that case, the Court considered the
provisions of s. 153(3) (ii) of the Income-tax Act and laid
down that the word "direction" in that subsection refers to
a direction necessary for the disposal of the case and which
the court has power to make while deciding the case. In the
view taken by us that the order made by the High Court
directing a fresh assessment is necessary for properly and
completely disposing of
772
the writ petition, the appellant can obtain no assistance
from Rajinder Nath (supra).
Mr. A. P. Mohanti, who appeared for the intervener,
supported the contention that the High Court was not
entitled to make an order directing a fresh assessment, and
has referred us to three cases, Pickles v. Falsham,(1),
Anisminic Ltd. v. The Foreign Compensation Commission and
Another(2), and Bath and West Countries Property Trust Ltd.
v. Thomas (Inspector of Taxes)(3). We are 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 West 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.
In our Judgment, the order made by the High Court
directing the Income-tax Officer to make a fresh assessment
was necessary in order to do complete justice between the
parties. The High Court had jurisdiction to make the order,
and it acted in the sound exercise of its judicial
discretion in making it.
The appeal is dismissed with costs.
V.D.K. Appeal dismissed.
773