High Court Of Calcutta
Duncan Agro Industries Ltd. vs. Income Tax Officer & Ors.
Sections 263(1), Explanation
Asst. Year 1974-75
Ashim Kumar Banerjee, J.
C.R. No. 5983 of 1979
28th March, 2001
Dr. Debi Prasad Pal, J.P. Khaitan, Ajoy Kumar Dey & S. Mukherjee, for the Petitioner : Rupendra Nath Mitra & Md. Nizamuddin, for the Respondent
ASHIM KUMAR BANERJEE, J. :
Notice dt. 22nd June, 1979, issued by the respondent-authority under s. 263 of the IT Act served on the assessee, the petitioner above named, has been impugned before me in this writ petition. The said notice, dt. 22nd June, 1979, has been annexed to the writ petition and is appearing at p. 54 therein. In the said notice the CIT (Central- II), Calcutta, asked the assessee to show cause as to why the order passed by the AO would be not be revised under s. 263(1) of the IT Act, 1961, for the asst. yr. 1974-75.
2. Appearing for the petitioner Dr. Debi Prasad Pal, learned senior counsel, submitted that the assessment order sought to be revised by the CIT has been passed under s. 143(3) r/w s. 144B of the said Act, 1961. Under s. 144B if the return income exceeds Rs. 1,00,000 the matter should be referred by the AO to the IAC. In case, any objection is received on the draft assessment made by the AO, upon hearing the parties the IAC is empowered to pass order under s. 144B(4) of the said Act and such order and/or direction of the IAC is binding upon the ITO by virtue of the provision of s. 144B(5) of the said Act. Hence, CIT ha no power to revise the order passed by the ITO in compliance with the direction of IAC under s. 144B(4) of the said Act. According to Dr. Pal the direction of IAC in the said case is complied with by the ITO by virtue of the provision of s. 144B(5) of the said Act and CIT has no power to revise such order which has been passed in compliance with the direction of IAC.
3. Dr. Pal further submitted that the Revenue authority has issued the said show-cause notice on the basis of the “Explanation” incorporated by the Taxation Laws (Amending Act, 1984, which reads as follows : “Explanation: For the removal of doubts, it is hereby declared that, for the purposes of this subsection,â (a) an order passed on or before or after the 1st June, 1988 by the AO shall include : (i) an order of assessment made by the Asstt. CIT or Dy. CIT or the ITO on the basis of the directions issued by the Jt. CIT under s. 144A; (ii) an order made by the Jt. CIT in exercise of the powers or in the performance of the functions of an AO conferred on, or assigned to him under the orders or directions issued by the Board or by the Chief CIT or Director General or CIT authorized by the Board in this behalf under s. 120; (b) “record” shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the CIT; (c) where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal filed on or before or after the 1st June, 1988, the powers of the CIT under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.
4. According to Dr. Pal since the said amendment has come into force w.e.f. 1st Oct., 1984, the Respondent authority is not entitled to take its benefit retrospectively. Replying on a decision CIT vs. Tajmahal Hotel 1973 CTR (SC) 480 : (1973) 82 ITR 44 (SC) : TC 68R.225, Dr. Pal submitted that expression “shall include” means that such amendment would have prospective effect. Dr. Pal in this regard has also relied upon the case CIT vs. Patel Bros. & Co. Ltd. & Ors. (1995) 126 CTR (SC) 132 : (1995) 215 ITR 165 (SC) : TC 68R.202. Mr. Rupendra Nath Mitra, learned advocate appearing for the Revenue authority submitted that the “Explanation” incorporated under s. 263(1) of the said Act, 1961, is clarificatory and, therefore, the question of application of such “Explanation” prospectively does not arise. The Revenue authority has relying on CIT vs. Shri Arbuda Mills (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC) : TC S57.4432 and CIT vs. Mulchand Bagri (1992) 108 CTR (Cal) 206 : TC 57R.163. Relying on the said decision it was contended on behalf of the Revenue authority that the CIT was well within its power to issue such notice under s. 263(1) of the said Act, 1961, and the writ petition is misconceived and is liable to be dismissed. To decide the issue let me first deal with the cases cited by the parties. (i) 1973 CTR (SC) 480 : (1973) 82 ITR 44 (SC) : TC 68R.225 (supra): I do not find any application of this judgment in the present case. (ii) (1995) 126 CTR (SC) 132 : (1995) 215 ITR 165 (SC) : TC 68R.202 (supra): “Explanation” inserted in s. 37(2A) of the said Act, 1961, was called in question in the said judgment. Sub-s. (2A) being a non obstante clause provides that no allowance shall be made in the nature of entertainment expenditure expended before 30th Sept., 1967. By incorporation of the said “Explanation the entertainment expenditure provided in sub-s. (2A) would include expenditure on provision of hospitality of every kind by the assessee to any outsider but would not include expenditure on food or beverages provided by the assessee to the employees.
The apex Court while interpreting the said “Explanation” was of the view that sub-s. (2A) was inserted w.e.f. 1st Oct., 1967, and “Explanation 2” inserted retrospectively w.e.f. 1st April, 1976, while sub-s. (2B) was inserted w.e.f. 1st April, 1970. According to apex Court the meaning of “Explanation 2” is quite clear and it has enlarged the meaning to widen the tax net.
The apex Court further held that the insertion of “Explanation 2” made retrospectively, but restricted in its application only w.e.f. 1st April, 1976, is itself an indication that its application prior to 1st April, 1976, is excluded. If “Explanation 2” was merely clarificatory of the ordinary meaning it was necessary to restrict its retrospective application in this manner only from 1st April, 1976. (iii) (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC) : TC S57.4432 (supra): In the instant case the “Explanation” to s. 263(1) has been called in question. Here the Supreme Court held as follows : “The consequence of the said amendment made with retrospective effect is that the powers under s. 263 of the CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the CIT under s. 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred. The question referred is, therefore, answered in the negative, in favour of the Revenue and against the assessee.” (iv) (1992) 108 CTR (Cal) 206 (supra) : The Division Bench of this Court held that CIT is empowered to revise the order passed by the ITO in accordance with the direction of IAC and CIT is entitled to revise such an order under s. 263 of the said Act of 1961. The Division Bench of this Court relied on the decision of Madhya Pradesh High Court CIT vs. Vithal Textiles (1988) 73 CTR (MP) 49 : TC 57R.166 wherein the subject “Explanation” has been held to be retrospective. Relying on the said Madhya Pradesh High Court decision the Division Bench of our Court rejected the contention of the assessee that by the said “Explanation” the legislature intended to confer a new revisional jurisdiction upon the CIT.
7. By applying the provisions of law as laid down by the apex Court and Division Bench of our Court in the above decisions I feel that the purpose for which the “Explanation” inserted in s. 37(2) and the “Explanation” inserted in s. 263(1) are not similar and/or identical although both the said “Explanations” started by the word “for the removal of doubts”. In the first case the intention of the legislature, as has been held by the apex Court, was to make it retrospectively w.e.f. 1st April, 1976. According to apex Court by incorporating the words “with effect from 1st April, 1976” it has excluded the period prior to 1st April, 1976. In case of the Explanation incorporated in s. 263(1) there is no such restriction imposed in the said “Explanation”. Hence, the apex Court in the case of CIT vs. Shri Arbuda Mills Ltd. (supra) held such “Explanation” to have retrospective effect. However, the ambiguity, if any, was totally removed by 1988 amendment where it has included any order passed “on or before or after 1st June, 1988”. Hence, relying on the proposition of law laid down in the case of Shri Arbuda Mills Ltd. and Mulchand Bagri (supra) I hold that the “Explanation” incorporated in s. 263(1) of the IT Act, 1961, has its retrospective effect and the impugned notice dt. 22nd June 1979, issued by the CIT is valid and binding upon the parties. In the result the writ petition fails and is hereby dismissed. The rule nisi issued on 2nd July, 1979, is discharged. Interim orders passed earlier are vacated.
8. In the circumstances aforesaid, there would be no order as to costs.
[Citation : 249 ITR 253]