Calcutta H.C : This writ petition is directed against order dt. 31st Dec., 1993, and order dt. 11th Aug., 1978, 31st Oct., 1979, 19th Dec., 1989, and the proceedings for charging interest under s. 220

JUDGMENT

KALYAN JYOTI SENGUPTA, J.:

This writ petition is directed against order dt. 31st Dec., 1993, and order dt. 11th Aug., 1978, 31st Oct., 1979, 19th Dec., 1989, and the proceedings for charging interest under s. 220 of the IT Act, 1961 and the order rejecting the applications for waiver and the Certificate Case No. 82 T.R-24 of 1978-79 and 35 T.R-24 of 1979-80 for the asst. yrs. 1973-74, 1974-75 and to direct the respondents and also to refund amount paid by the petitioner with interest.

2. The facts of the case are briefly stated hereunder : One Steel Rolling Mills of Hindustan Private Limited and Apeejay Structural Private Limited were amalgamated into one company, namely, the writ petitioner herein. The subject-matter of the writ petition relates to the asst. yrs. 1973-74 and 1974-75. Interest is sought to be realised under s. 220 of the IT Act, 1961 (in short “the Act” hereinafter). So the writ petitioner herein filed an application for waiver of interest under s. 220, sub-s. (2A) of the Act. In the application it was stated that the predecessor-in- interest of the writ petitioner filed returns showing net loss of Rs. 18,40,580 on 14th Aug., 1973. Thereafter, a revised return was filed on 25th Nov., 1975, showing net loss of Rs. 1,62,949. The ITO completed the assessment on a total income of Rs. 19,20,560 on 2nd March, 1977, by making huge intangible additions and disallowances. On appeal before the CIT (A) and before the Tribunal to total income was reduced. The Tribunal sent back the matter on certain points to the CIT(A) on 26th June, 1979, and the CIT(A) in his turn sent back the matter to the ITO on 14th April, 1986. Thus, the total income was reduced to Rs. 7,51,705 while giving effect to the appellate order under s. 251. The Asstt. CIT, without considering the merits of the case, imposed the demand payable of Rs. 2,93,943 and also charged interest under s. 215 of Rs. 2,04,142 and interest under s. 220, sub-s. (2A) of Rs. 6,84,158 thereby making total demand payable of Rs. 9,78,300, after adjustment of the payment of Rs. 2,03,943 on 30th March, 1988, without any justified reasons. Most of the additions could not be foreseen as aforesaid at the time of filing of the return or payment of advance tax and there was reasonable cause for non-payment of the tax. The petitioner has co-operated with the Department in all sorts of enquiry relating to the assessments or any proceedings for recovery of any dues from him and as such cl. (iii) of the section as aforesaid has been satisfied in the present case. The addition as made in the assessment proceedings by the appellate authority could not be foreseen at the time of filing of the return or even before completion of the assessment proceedings and as such the petitioner was under the bona fide belief that the petitioner had not to pay any tax in pursuance of the fact that the petitioner had not to pay any tax in pursuance of the fact that the petitioner filed a loss return as well as the revised loss return. Therefore, the petitioner acted in good faith in making any payment of tax before and after the assessment.

On the writ petition filed by the writ petitioner the High Court at Calcutta dt. 31st Jan., 1978, issued rule and passed an order of injunction against the demand as imposed for the said year. So the demand as imposed for the year was stayed till the writ petition was dismissed on 8th Jan., 1986, when the Court vacated all interim orders. After vacation of the said order the petitioner, in spite of acute financial crisis paid a sum of Rs. 1,00,000 on 31st March, 1987, and further paid Rs. 2,03,943 on 31st March, 1988. Therefore, the default in making payment was due to circumstances beyond the control of the petitioner and the petitioner at least tried to pay even at the time of acute financial crisis.

The petitioner was at a loss as to what will be the correct demand before the completion of all the appellate proceedings and giving effect to the order in pursuance thereof. As such the petitioner had no clear picture over the tax payable before the finally determined figure in 1990. The petitioner will suffer irreparable loss and injury if the interest of Rs. 6,84,158 is to be paid by it. The entire activities of the petitioner will be seriously jeopardised and it will have to close down its business. Thus, all the conditions required under the statute as aforesaid have been satisfied. Moreover, the additions and disallowances made therein were not in the proper perspective. The petitioner could not anticipate the said additions and the demand was stayed by the High Court at Calcutta.

Learned counsel for the respondents has taken a point of law, though it was not raised nor was it discussed before the CIT. Both the parties proceeded on the basis that s. 220(2A) has application in this case. Yet it is contended by the learned lawyer for the respondents that, admittedly, the aforesaid section has been inserted by the amendment of the Taxation Laws (Amendment) Act, 1984, on and from 1st Oct., 1984, and the question of waiver of interest involved in the writ petition relates to the asst. yrs. 1973-74 and 1974-75. In support of his contention, the learned lawyer for the Department has placed reliance on the decision of this Court in Sri Sri Iswar Benodeswar Mahadev vs. CWT (2000) 163 CTR (Cal) 322 : (1999) 238 ITR 572 (Cal). He contends that the aforesaid case was decided while dealing with s. 31(2A) of the WT Act, which, according to him, is analogous to the provisions of s. 220(2A) of the IT Act. In that case, it was decided that the aforesaid amending Act of the WT Act has no retrospective operation. He contends that the point of law can be agitated at any stage of the proceedings, particularly when it touches the question of authority. In this connection, he relied on two decisions Sir Kikabhai Premchand vs. CIT (1953) 24 ITR 506 (SC) : TC 13R.271 and National Rayon Corporation Ltd. vs. CIT (1997) 142 CTR (SC) 202 : (1997) 227 ITR 764 (SC).

Dr. Pal, on the question of applicability of the aforesaid amended section, contends that the wording and language used in the said s. 220(2A) of the Act clearly indicates that the same has retrospective operation, at least in this case payability of interest arising after the amending Act came into force.

The law prevailing on the date of demand for payment of interest will govern the case, not in relation to the assessment year or when such demand could have been made. The words used, in the aforesaid section, “paid or payable” sufficiently indicate the aforesaid proposition. In this case, the demand for payment of interest was made in 1989 long after the aforesaid amendment Act came into force. He contends that the payability of tax and interest by the petitioner crystallised finally after the delivery of the judgment of this Court in the previous writ petition. Besides, the aforesaid amendment is a procedural law and it always has retrospective operation even though by the section itself it is not expressly made clear.

Dr. Pal on the merits contends that though the power of waiver and reducing of interest under s. 220, sub-s. (2A), is discretionary, this cannot be exercised arbitrarily or illegally. He contends further that the moment the conditions mentioned in s. 220, sub-s. (2A), are satisfied the concerned CIT has no option but to waive or reduce interest.

The learned lawyer for the respondents on the merits contends that it is the discretionary power under the aforesaid s. 220, sub-s. (2A). The impugned order rejecting such application has been passed with reasons. When respondent No. 1 in exercise of his discretionary power has rejected the application it is not open for this Court in exercise of jurisdiction under Art. 226 to interfere with this order substituting its own reasons, since the petitioner has not fulfilled all the conditions mentioned in s. 220(2A) of the Act. He referred to cases, viz., Ramapati Singhania vs. CIT (1997) 139 CTR (All) 210 : (1998) 234 ITR 655 (All) : TC S43.3757, Eminent Enterprises vs. CIT (1999) 154 CTR (Ker) 513 : (1999) 236 ITR 883 (Ker), Auro Food Ltd. vs. CIT (1999) 239 ITR 548 (Mad), S.A. Wahab vs. ITO (1998) 145 CTR (Ker) 453 : (1998) 232 ITR 624 (Ker) : TC S57.4460, New Shorrock Spg. & Mfg. Co. Ltd. vs. CIT (1994) 208 ITR 765 (Bom) : TC 41R.370, G.T.N. Textiles Ltd. vs. Dy. CIT (1992) 10 CTR (Ker) 174 : (1993) 199 ITR 347 (Ker) : TC 43R.729 and Shri Ambica Mills Ltd. vs. ITO (1993) 110 CTR (Guj) 243 : (1993) 203 ITR 84 (Guj) : TC 43R.696. Having heard learned counsel for the parties and considered the material placed before me, I feel as a point of law, though for the first time here, has been raised by the respondent and argued by both the parties without reservation, my first task would be to examine whether the petitioner can get any benefit of the Taxation Laws (Amendment) Act, 1984, r/w 1987 whereby and whereunder sub-s. (2A) in s. 220 has been inserted inasmuch as waiver of interest relate to asst. yrs. 1973-74 and 1974-75. It is trite position of law that the provisions of a substantive law cannot have any retrospective operation unless it is intended to be made so by the legislature expressly. From the aforesaid amending Act, I do not find expressly it has retrospective operation. However, having regard to the language employed in the section meaningful interpretation is to be given. I am unable to accept the contention of Dr. Pal that the aforesaid provision for power of waiver is procedural law. In my view, the provision of s. 220(2A) is nothing short of substantive law. In order to find out the clear idea and meaning of procedural law, the meaning of both the substantive law and the procedural law is to be considered. In Black’s Law Dictionary (sixth edition), the meaning and definition of “procedural law” have been given as follows : “which prescribes method of enforcing rights or obtaining redress for their invasion; those which merely prescribe the manner in which such rights and responsibilities may be exercised and enforced in a Court are procedural laws.”

The definition of “substantive law” has been given in the aforesaid dictionary is as follows : “that part of law which creates, defines and regulates rights and duties of parties, as opposed to adjective, procedural or remedial law.”

11. As a general rule, laws which fix duties, establish rights and responsibilities among and for persons, natural or otherwise are, “substantive laws” in character. In my close examination the provision of sub-s. (2A) of s. 220 of the Act appears to be power vested upon the CIT vis-a-vis the right of the assessee of having interest waived. So this provision gives the assessee the right to apply for waiver and further to get the interest waived if the conditions mentioned therein are fulfilled. I am of the view that all the trappings of the substantive law are to be found therein. Therefore, I do not hesitate to hold that the aforesaid provision is a substantive law. The decisions cited by Dr. Pal on the subject as being procedural law are not applicable in this case. So I do not apply the same.

12. But, in this case, the aforesaid amending provision will be applicable by reason of the fact that interest became payable in or about October, 1989, when after disposal of the writ petition the respective authorities, viz., the Tribunal, the appellate authority and the assessing authority finally determined the amount of the income-tax payable.

13. In the case of Brij Mohan vs. CIT (1979) 12 CTR (SC) 198 : (1979) 120 ITR 1 (SC) : TC 9R.244, cited by Dr. Pal the apex Court, while deciding the question of applicability of cl. (iii) substituted in s. 271(1) by the Finance Act, 1968, held that it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for the concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. So, I reject the contention of the learned lawyer for the respondent that assessment year will be relevant and sub-s. (2A) will not be applicable. In my view, the aforesaid sub-section will also be applicable in a case where the interest has already been paid though the assessee has reasons to apply for waiver. Therefore, the said sub-section will have partial retrospective effect in limited cases because of the language employed therein. The petitioner is entitled to apply for waiver or reduction of interest and for that matter the CIT has rightly entertained this application.

14. To decide this case on the merits I have gone through the impugned order of respondent No. 1. Upon a plain reading of the order it appears to me that respondent No. 1 has not applied the aforesaid provision of sub-s. (2A) of s. 220 of the IT Act, 1961, on the factual matrix of this case. It appears further to me that he has discussed and considered some other materials which were not really brought before him. I accept the argument of Dr. Pal that in a case like this respondent No. 1 is obliged to examine the case under the provision of s. 220(2A) from the material placed before him as to whether the plaintiff has fulfilled the following conditions, viz., (i) payment of such amount has caused or would cause genuine hardship; (ii) default in payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee; and (iii) the assessee has co-operated in any enquiry relating to the assessment or any proceedings for recovery of any amount due from him.

15. In the case of the Kishan Lal vs. Union of India (1998) 145 CTR (SC) 450 : (1998) 230 ITR 85 (SC) : TC S52.4123, the Supreme Court laid down that when an application is filed under sub-s. (2A) of s. 220 the authority concerned is called upon to take a quasi-judicial decision. If it is satisfied that the reasons contained in the application would bring the case under cls. (i), (ii) and (iii) of s. 220(2A) then it has the power either to reduce or waive the amount of interest.

16. I do not find from the impugned order respondent No. 1 has considered the implication and impact of the order of injunction granted by this Court that continued from 1978 till 1986, rationally as a reasonable prudent man could do while examining the condition that default was due to circumstances beyond the control of the assessee. He has not considered that during this long period, the Department did not take any step for getting the interim order vacated. No one can have two opinions about the impact and implication of the restraint order of the Court that parties thereto cannot be held responsible for any lapses during this period as the well-known maxim actus curiae neminem gravabit, i.e., to say, an act of Court shall prejudice no one. Thereafter, in terms of the order of this Court dt. 8th Jan., 1986, the actual demand was crystallised on 19th Dec., 1989, when the assessing authority gave effect to the order of the appellate authority dt. 30th Oct., 1989. So the order dt. 19th Dec., 1989, is deemed to be service of demand notice under s. 156 of the Act. Needless to reiterate that interest under s. 220 of the Act becomes payable after expiry of 30 days from the date of service of notice under s. 156 of the Act. So interest calculated and charged up to 20th Jan., 1980, becomes payable thereafter. The respondent No. 1 should have viewed that this is the circumstance which was beyond the control of any of the parties. Respondent No. 1 has not considered at all as to whether the applicant/petitioner was really facing hardship of the payment of interest. He has recorded his reasons that the petitioner did not cooperate with the enquiry which is just contrary to the record. It appears that respondent No. 1 has recorded the petitioner initiated vexatious litigation in this Court because of dismissal of the writ petition. Nothing is available from the judgment of this Court dismissing the writ petition with any findings of the writ petition being vexatious. Respondent No. 1 cannot decide a subject contrary to what by necessary implication has already been decided by this Court. I am not forgetful of the settled legal position that the reasons recorded by respondent No. 1 cannot be scrutinised by the writ Court but when the Court finds that the reasons patently appears to be contrary to the record and further without any foundation that has resulted in a wrongful exercise of the statutory power, certainly it can, in exercise of power of judicial review set things right by quashing the same. I would have remanded this matter for fresh consideration. Since it is an old one and considerable time has elapsed I decide to consider and adjudicate this matter on the merits.

In the case of Comptroller & Auditor-General of India, Gian Prakash vs. K.S. Jagannathan AIR 1987 SC 537, the apex Court, explaining the power of this Court under Art. 226 of the Constitution of India, has held that the High Courts exercising their power jurisdiction under Art. 226 have the power to issue a writ of mandamus or a writ in the nature of mandamus or to pass orders and give necessary directions where the Government or a public authority has failed to exercise or has wrongly exercised the discretion conferred upon it by a statute or a rule or a policy decision of the Government or has exercised such discretion mala fide or on irrelevant considerations or by ignoring relevant considerations and materials or in such a manner as to frustrate the object of conferring such discretion or the policy for implementing which such discretion has been conferred. In all such cases and in any other fit and proper case a High Court can, in the exercise of its jurisdiction under Art. 226, issue a writ of mandamus or a writ in the nature of mandamus or pass orders and give directions to compel the performance in a proper and lawful manner of the discretion conferred upon the Government or a public authority, and in a proper case, in order to prevent injustice resulting to the concerned parties, the Court may itself pass an order or give directions which the Government or the public authority should have passed or given had it properly and lawfully exercised its discretion.

Accordingly, I following the above principle hold that the petitioner is entitled to waiver of interest from 1978 till 1986 as during these eight long years there was an order of injunction. Thereafter, in 1989, the aforesaid demand became crystallised to be payable so also the interest. I do not find from the records or materials that the petitioner ever non-co-operated with the enquiry relating to assessment or any proceedings for recovery of the amount due from it. Moreover, I find even before final computation of the demand that the petitioner after dismissal of the write petition paid a substantial amount. In view of this discussion and findings I am unable to apply the decisions cited by the learned lawyer for the respondent.

Accordingly, I set aside the impugned order. I direct the respondent to waive the amount of interest not only for the period during which the interim order of injunction was continuing, i.e., to say, from the period 31st Jan., 1978, and till 8th Jan., 1986, but also for the period thereafter till 20th Jan., 1990, when tax became payable after fresh adjudication.

Thus, the writ petition is allowed to the extent as above without any order as to costs. Prayer for stay of operation of the judgment as prayed for is considered and is granted for a period of three weeks from date. But no penal measure shall be taken in this period.

[Citation : 250 ITR 414]