1968 PLP 645 (PTD)

We have already set out our reason for holding that a proceeding taken for recovery of tax is not "other proceeding" under Article 132(1) : such a proceeding is a civil proceeding within the meaning of Article 132(1). The object of referring to "other proceeding" in that clause is merely to emphasize that adjudications made in proceedings which are not included in the description civil or criminal would still attract the provisions of Article 132(1) in case they raise a substantial question of law as to the interpretation of the Constitution. A proceeding in which relief is claimed against action of revenue authorities is included in the civil proceeding and not in "other proceeding" within the meaning of Article 132(1), and an aggrieved party's right to appeal to this Court from orders in those proceedings is exercisable ill the same manner as it would be in the case of a decree, order or judgment in any other civil proceeding: A large number of, cases have arisen before the High Courts in India in which conflicting views about the meaning of the expression "civil proceeding" were expressed. In some cases it was held that the expression "civil proceeding" excludes a proceed ing instituted in the High Court for the issue of a writ whatever may be the nature of the right infringed and the relief claimed in other cases it has been held that a proceeding resulting from an application for a writ under Article 226 of the Constitution may in certain cases be deemed to be a "civil proceeding", if the claim made the right infringed and the relief sought warrant that inference : instill another set of cases it has been held that even if a proceeding commenced by a petition for a writ be generally categorised as a civil proceeding, where the jurisdiction which the High Court exercises relates to revenue, the proceeding is not civil. A perusal of the reasons given in the cases prompt the following observations. There are two preliminary conditions to the exercise of the power to grant certificate: (a) there must be a judgment, decree or final order, and that judgment, decree or final order must be made in a civil proceeding. An advisory opinion in a tax reference may not be appealed from with certificate under Article 133, because the opinion is not a judgment, decree or final order, and (b) a proceeding does not cease to be civil, when relief is claimed for enforcement of civil rights merely because the proceeding is not tried as a civil suit. In a large majority of the cases in which the jurisdiction of the High Court to certify a case under Article 133(1) was negatived it appears to have been assumed that the expression "other proceeding" used in Article 132 of the Constitution is or includes a proceeding of the nature of a Revenue proceeding, and therefore the expression "civil proceeding" in Article 133(1) does not include a revenue proceeding. This assumption for reasons already set out is erroneous. We do not think that any useful purpose will be served by entering upon a detailed analysis of the cases to which our atten tion was invited in which the view has been expressed that in a petition under Article 226 of the Constitution where relief is claimed in respect of action sought to be taken by the revenue authorities, the High Court has no power to issue a certificate under Article 133 of the Constitution. Express prescription of two independent conditions by the Constitution on the existence of which alone the jurisdiction of the High Court may be invoked, has in some cases been obliterated, and the ground that from an order in a reference in a case concerning revenue for opinion, a certificate may not be granted under Article 133, because there is no judgment, decree or final order has been projected into a ground for denying that proceeding the character of a civil proceeding. On a careful review of the provisions of the Constitution, we are of the opinion that there is no ground for restricting the expression "civil proceeding" only to those proceedings which arise out of civil suits or proceedings which are tried as civil suits, not is there any rational basis for excluding from its purview proceedings instituted and tried in the High Court in exercise of its jurisdiction under article 226, where the aggrieved party seeks relief against infringement of civil rights by authorities purporting to act in exercise of the powers conferred upon them by revenue statutes. The preliminary objection raised by counsel for the assessee must therefore fail. We may now turn to the question which is raised on the merits in this appeal. Section 18-A which was added by the Indian Income-tax (Amendment) Act 11 of 1944, for imposing. liability for advance payment of tax enacts by the first subsection, in so far as it is material, that where there is no provision made for deduction of income-tax at the time of payment, the Income-tax. Officer may on or after the commencement of any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government the income-tax and super tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed. Contrary to the two basic concepts of the scheme of the Indian Income-tax Act under which tax is charged upon the income of the previous year and not the income of the assessment year and liability does not arise until the annual Finance Act is passed charging income to tax, section 18-A introduces within, the scheme of the Act the principle of advance payment of tax and authorises collection advance tax before the assessment year commences and before even the Finance Act which imposes liability is enacted. But this tax is advance tax which is to be adjusted against tax payable on the income of the financial year, in the light of the total income which may be computed and also in the light of the Finance Act which may be passed. Assessment and demand for advance payment of tax are therefore provisional. If ultimately the: advance tax paid is in excess of the tax finally assessed, refund will be granted to the assessee ; if the advance tax paid , is less than what is payable, the balance becomes payable on the final assessment. With the object of enforcing compliance with the provision for payment of advance tax effectively, and at the same time to protect the assessee from avoidable harassment, the Legislature made a provision under subsection (2) of section 18-A enabling the assessee before the last instalment is due to intimate his own estimate of the income of the previous year to the Income-tax Officer and the tax payable by him calculated in the manner laid down in subsection (1) and to pay such amount as accords with his estimate. Provision is also made for submitting revised estimate of income. The Legislature by subsection (6) also on the other hand penalises an assessee who seeks to evade liability to pay advance tax by under-estimating his income by providing that if in any year an assessee paid tax under subsection (2) or (3) on the basis of his own estimate and the tax so paid is less than eighty percent. of the tax determined on the basis of the regular assessment, so far as such tax relates to income to which the provisions of section 18 do not apply and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made, simple interest at the rate of six percent. per annum from the 1st day of January in the financial year in which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the -amount by which the tax so paid falls short of the said eighty percent. Subsection (6) as originally enacted left no discretion to the Income-tax-Officer : if the estimate fell below the prescribed limit, the Income-tax Office was obliged to direct payment of interest. But by Act 25 of 1953 which was enacted with retrospective operation from April 1, 1952, the following proviso was added as the fifth proviso to section 18-A(6): "Provided further that in such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee." The amendment authorised the Income-tax Officer to reduce or waive the interest payable by assessee in such cases and under such circumstances as may be prescribed. It was given retrospective operation from April 1, 1952, and the discretion conferred upon the Income-tax Officer became, by fiction of law, exercisable as from April 1, 1952, even though the Act came into force from May 24, 1953, and the cases in which and circumstances under which the discretion was to be exercised were prescribed by the Central Government by rule 48 in December 1953. The Income-tax Officer in the present case, on the language used in the statute as it stood on the date of making the order of assessment, was bound to impose liability for payment of interest under subsection (6). But for some reason which cannot be ascertained from the record he did not impose that liability. It was only when in the course of audit this lacuna was pointed but, that the Income-tax officer commenced proceeding under section 35 of the Income-tax Act for rectification of the order of assessment. There was at the date of the original assessment an absolute obligation imposed upon the assessee to pay interest under section 18-A(6), but by reason of the retrospective operation given to the fifth proviso added to subsection (6) by Act 25 of 1953, the Income-tax' Officer was invested with the discretion to reduce or waive interest payable by the assessee, this power the Income-tax Officer must, in view of the retrospective amendment, be deemed in law to have possessed on the date on which the order of assessment was made in this case. The Attorney-General appearing on behalf of the Commis sioner contended that to the fifth proviso to section 18-A(6) no retrospective operation could effectively be given, because the rules, which alone could render the discretion operative, were framed for the first time in December 1953. We are unable to agree with that view. The legislature has expressly given operation to the fifth proviso to section 18-A(6), from April 1, 1952. It is true that the proviso operates only in respect of cases and under circumstances as may be prescribed, but as soon as the rules were framed, which effectuate the purposes for which the proviso was enacted, the proviso and the rules became effective retrospectively from April 1, 1952. Mr. Sastri appearing on behalf of the assessee contended that this Court has laid down in T. Cajee v. U. Jormanik Siem ((1961) 1 S C R 750) that where power is conferred upon an authority and it is made exercisable in the manner provided by subsidiary legislation, failure to enact such subsidiary legislation will not defeat the power: the power will be exercisable without the restrictions which may be, 'but are not imposed, and therefore once the power of the Income-tax Officer came into being that power became exercisable immediately without restrictions or limitations until the Central Government chose to frame rules defining those restrictions. We do not think that the case cited by counsel for the assessee has any application. That was a case in which a District Council was constituted for the Jaintia Hill District under the Sixth Schedule to the Constitution. Under the Sixth Schedule, the District Council was empowered to make laws, inter alia, for administration of the District, and appointment or succession of chiefs or headmen, but the District Council made no rules regulating the appointment and succession of chiefs and headmen. . It was held by this Court that the District Council being an administrative and legislative body, it could, so long as no law was made, exercise its administrative powers to determine the appointment of chiefs or headmen. After the law was made, the administra tive powers could be exercised subject to the law. The case has no application to the present case. The Sixth Schedule vested in the District Council a general administrative power which was, capable of being restricted by law, but until so restricted the power was absolute. In the case before us, however, the discre tion to reduce or waive interest can only be exercised in cases and under circumstances to be prescribed. There was no absolute power with which the Income-tax Officer was invested to reduce or waive interest; his power could, be exercised only in prescribed cases within the limits of the authority conferred upon him. He could not reduce or waive interest except in cases and in circumstances prescribed. But once the rules are framed, they by reason of the retrospective operation of Act 25 of 1953, become operative as from the date on which the Act has become operative. This Court in M. K. Venkatachalam v. Bombay Dyeing and Manufacturing Co. Ltd. (1959 S C R 703) held in dealing with a case arising under the second proviso to section 18-A(5) (which was also inserted by Act 25 of 1953 with retrospective operation from April 1, 1952) that the Income-tax Officer has power under sec tion 35 of the Act to rectify a mistake in the assessment, even though the mistake was the result of a legal fiction arising from the retrospective operation given to the amending Act. In Venkatachalam's case on October 9, 1952, the income-tax Officer assessed the tax-payer for the assessment year 1952-53 and gave him credit for certain amount as representing interest on tax paid in advance under section 18-A(5). Thereafter, on May 24, 1953, the Indian Income-tax (Amendment) Act (25 of 1953) came into force which added a proviso to section 18-A(5) that the assessee was entitled to interest not on the whole of the advance tax paid by him, but only on the difference between the payment made and the amount assessed. This amendment being retrospective as from April 1, 1952, the Income-tax Officer acting under sec tion 35 of the Act rectified the assessment order and directed that the assessee be given credit for a smaller amount by way of interest on tax paid in advance, and issued a notice of demand against the assessee for the balance remaining due by him. The assessee filed a petition in the High Court of Bombay praying for a writ prohibiting the Commissioner of Income-tax and the Income-tax Officer from enforcing the rectified order and notice of demand. The High Court issued the writ prayed for, holding that section 35 was not applicable to the case as the mistake could not be said to be apparent from the record and the question must be judged in the light of the law as it stood on the day when the order was passed. This Court reversed the order of the High Court and held that in view of the retrospec tive operation given to the newly inserted provision in sec tion 18-A(5) of tee principal Act as from April 1, 1952, the order passed by the Income-tax Officer before the date on which the amending Act came into operation was incompatible with the provisions of that proviso and disclosed a mis take apparent from the record. The Court in that case relied upon the observations made by Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. Finsbury Borough Council ((1952) A C 109, 132), "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 consequences and incidents which if the putative state of affairs had in fact existed must inevitably have flowed from or accompanied it." In Venkatachalam's case by virtue of the retrospective operation of the amendment, the assessee was entitl ed to interest which was less than what had already been allowed to him in the course of assessment. On the date on which the order of assessment was made, the assessee was entitled to that amount, but by virtue of the amendment which was retrospective; his right was substantially restricted. It was held by this Court that in exercise of the powers under section 35 of the Indian Income-tax Act on the application of the retrospective amend ment, it must be held that there was a mistake apparent on the face of the order. In the present case the position is reversed, but on that account the principle is not any the less applicable. By virtue of the retrospective amendment in section 18-A(6) the order which was made by the Income-tax Officer on the date of assessment and which was plainly inconsistent with the terms of the section as it then stood became one which he was competent to pass in exercise of his power. The Attorney-General contended that in any event there was nothing to show that the Income-tax Officer had purported to exercise his discretion when he passed the order of assessment and did not impose any liability for payment of interest under section 18-A(6). That may be so. But the case of the assesse did fall within the terms of rule 48(1) and the Income-tax Office must in law be bound to consider whether he was entitled to reduction or waiver of interest under the fifth proviso. The amendment and the rules which came into operation later must in view of the retrospective operation be deemed to be then extant, and the fact that the Income-tax Officer could not in making the assessment have adjusted his approach to the problem before him in the light of those provisions is irrelevant in considering the legality of his order. The order of the Income-tax Officer which did not take note of the law deemed to be in force must be regarded as defective. The matter was brought before the Com missioner of Income-tax and it is unfortunate that the Commis sioner in considering the matter under section 33-A assumed that the amending Act 25 of 1953 had no retrospective operation and rejected the claim of the assessee on the ground that at the date when the order of assessment was made, Act 25 of 1953 had not come into operation, and that the Act became effective as from December 1953, when the rules were framed. In so holding, the Commissioner committed an error of law apparent on the face of the record. The High Court was therefore right in setting aside the order which was passed by the Commissioner without considering the proviso to section 18-A(6) which was clearly applicable to the case of the assessee and in the light of rule 48 which was enacted in pursuance of that proviso. The Attorney-General contended that the petition filed by the assessee did not expressly seek to plead the case which was ultimately made out by the High Court. It is true that the petition is somewhat vague in setting out the material particulars which have a bearing on the plea which appealed to the High Court. But it cannot be said, having regard specially to para graph 6, clause (iii), of the petition that in granting relief to the assessee a new case was made out by the High Court. The appeal fails and is dismissed with costs. There will be one hearing fee in Civil Appeals Nos. 1003 of 1963 and 1004 of 1963. Civil Appeal No. 1004 of 1963.-The facts in this case are substantially the same as in the companion Civil Appeal No. 1003 of 1963, and for reasons set out in the judgment in that case this appeal also fails and is dismissed: The appellants will pay the costs of the assessee. MUDHOLKAR, J.-I agree with my learned brother Shah, J. that the expression "civil proceedings" in Article 133(1) of the Constitution cannot be restricted to proceedings which arise out of civil suits or proceedings. A proceeding before the High Court under Article 226 or Article 227 in which relief is sought in respect of liability to pay tax or penalty levied by a revenue authority would, accordingly, be a civil proceeding. The High Court was, therefore, competent to grant a certificate in this case under Article 133(1). On the merits my learned brother has held that the High Court was right in quashing the order of the Income-tax Commissioner, Bombay, by which he confirmed the order of the First Income-tax Officer, C-II Ward, Bombay, dated October 4, 1958, rectifying under section 35 of the Income-tax Act, 1922, the regular assess ment made by him on March 31, 1953. The sequence of the relevant events which have occurred is as follows: On September 17, 1947, the respondents filed under section 18-A(2) an estimate of their income and on September 27, 1947, they made an advance payment of tax on its basis. On January 10, 1948, they filed a revised estimate in pursuance of which they made a further advance payment towards the tax on January 17, 1948. On August 23, 1950, they paid the tax in pursuance of the provisional assessment made on July 22, 1950, under Section 23-B. All this was with respect to the assessment year 1948-49. While making the regular assessment on March 31, 1953, the Income-tax Officer omitted to charge penal interest as required by section 18-A(6) of the Income-tax Act. It is not disputed that according' to the law as it stood on the date on which the regular assess ment was made the Income-tax Officer was bound to charge penal interest. By Act 25 of 1953, which came into force on May 24, 1953, the following proviso was added to section 18-A(6): "Provided further that in such cases and under such circum stances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee." In order to give effect to the proviso the Central Board of Revenue framed rule 48 and notified it on December 14, 1953. The rule read as follows: "The Income-tax Officer may reduce or waive the interest payable under section 18-A in the cases and under the circum stances mentioned below, namely :- (1) Where the relevant assessment is completed more than one year after the submission of the return, the delay in assess ment not being attributable to the assessee. (2) Where a person is under section 43 deemed to be an agent .of another person and is assessed upon the latter's income. (3) Where the assessee has income from an unregistered firm to which the provisions of clause (b) of subsection (5) of section 23 are applied. (4) Where the `previous year' is the financial year or any year ending near about the close of the financial year and large profits are made after the 15th of March, in circumstances which could not be foreseen. (5) Any case in which the Inspecting Assistant Commissioner considers that the circumstances are such that a reduction or waiver of the interest payable under section 18-A(6) is justified." On October 4, 1956, the Income-tax Officer made the following order under section 35 of the Act: "During the interest checking of C-II Ward, the auditor has pointed out a mistake in not charging penal interest under sec tion 18-A(6). As this mistake is apparent from record the same is rectified under section 35 after giving due notice to the assessee. Revised notice of demand to be issued." Thereafter, a notice demanding Rs. 14,929-10-0 was issued to the respondents. The respondents challenged this order before the Commissioner of Income-tax, Bombay. The main conten tion raised before him was that the omission to charge penal interest at the time of regular assessment cannot be considered to be a mistake apparent from the record in view of proviso to section 18-A(6) and the rules made there under and therefore the income-tax Officer could not rectify the regular assessment by resort to section 35 of the Act. His contention was not accepted by the Income-tax Commissioner. He, however, direct ed that in the circumstances of the case the respondents would be liable to pay penal interest only for the period between January 1, 1948, and June 13, 1950. Being dissatisfied with this decision the respondents moved the High Court for a writ under Article 226 of the Constitution and succeeded in having the notice of demand quashed. The ground upon which the High Court granted relief of the: respondents was that the Amending Act of 1953 which enacted the last proviso to section 18-A(6) was made retrospective from April: 1, 1952 ; that, therefore, the proviso must be regarded as being on the statute book on the date on which the regular assessment was made, that, according to the High Court, being the position the conclusion to be reached was that the income-tax Officer had vested in him a discretion to reduce or waive the interest pay able by the- assessee notwithstanding the fact that the proviso was, not there on the statute book when the assessment order was, made. After referring to the earlier decision of the High Court in Shantilal Rawji v. M. C. Nair, IV Income-tax Officer, E- Ward, Bombay ((1958) 34 I T R 439) the learned judges observed ((1959) 36 I T R 538): "In our judgment in the case we referred to the decision of the Supreme Court in State of Bombay v. Pandurang Vinayak (1953) S C R 773, where Their Lordships of the Supreme Court pointed out the effect of a deeming provision being inserted in any statute and being given retrospective operation. We also referred to a passage from the judgment of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council (1952) A C 109, in which the learned law Lord very forcibly brought out the full effect of the legal fiction. The view which we ultimately took of the matter was that the Income-tax Officer had no jurisdiction to pass the order of rectification. By operation of the deeming provision, which was retrospective in its operation, it was to be assumed and taken that on the date on which he made the assessment order he had jurisdiction and power to reduce or waive the amount of interest payable by the assessee. The Income-tax Officer not having done so, . . . the only inference possible was that he had decided to waive the amount of interest and in those circums tances he had no jurisdiction subsequently to rectify that order on the ground that there was an error apparent on the face of the record." There is no doubt that by making the proviso in question retrospective as from April 1, 1952, the legislature has created a fiction and because of that fiction we must proceed on the footing that the proviso was in existence when the regular assessment was made. The learned Attorney-General, however, contended before us that though that was the position the proviso could not be given effect to till the Central Board of Revenue prescribed the class of cases and circumstances in which an Income-tax authority could exercise the discretion conferred by the proviso. He point ed out that rule 48 framed by the Central Board of Revenue which prescribes these matters does not make it retrospective and, there fore, it should be deemed to be only prospective in its applica tion. I find it difficult to accept this argument. The proviso was itself made retrospective as from April 1, 1952. Rule 48 as soon as it was framed was to be read along with the proviso and as the proviso is retrospective the rule must also be deemed retrospective. It is a well accepted principle of construction of statute that even if a provision of law may not have been expressly made retrospective it could be deemed to be so if the circumstances justify the inference that the legislature intended that it should be retrospective. Such an intention is evident in this case. Even though the proviso and the rule must be deemed to have been in force on April 1, 1952, I find it difficult to agree with the High Court that omission to charge penal interest at the time of making the regular assessment must be ascribed to the exercise of discretion by the Income-tax Officer. Let it not be forgotten that when he made that assessment, in point of fact, he passed no discretion and, therefore, he was bound by law to charge penal interest. His omission to do so must, therefore, be ascribed to an oversight and not to deliberateness. An omis sion to do what he was bound by law to do (sic) the Income-tax Officer committed an error and that error appears on the face of the record. He was, therefore, competent to rectify under section

35. Indeed, if instead of on March 31, 1953, the Income-tax Officer had made the regular assessment on March 31, 1952, could there have been any scope for the surmise that his omission to charge penal interest was attributable to the exercise of any discretion? At any rate without further material we cannot even assume that while making the regular assessment on March 31, 1953, the Income-tax Officer, upon an erroneous view of law; came to the conclusion that he had discretion under section 18-A(6) to reduce or waive any interest and that, therefore, he purported to exercise that discretion. At least, prima facie, the Income-tax Officer, in omitting to charge penal interest made a mistake. This would appear to be borne out by the fact that on October 14, 1956, when he made good the omission by resorting to the power conferred by section 35 he accepted the position that what he did earlier was through mistake. In the circumstances, therefore, agreeing with the Income-tax Commissioner but disagreeing with the High Court, I hold that the Income-tax Officer was competent to rectify the mistake under section

35. I would, therefore, allow the appeals and quash the order, of the High Court but in the circumstances of the case would make no order as to costs. ORDER.-Civil Appeals Nos. 1003 and 1004 of 1963.-In accordance with the opinion of the majority, these appeals are dismissed with costs. One hearing fee. Appeals dismissed.