PETITIONER:
M/S. HIND WIRE INDUSTRIES LTD.
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME TAX, WEST BENGAL-V
DATE OF JUDGMENT20/01/1995
BENCH:
SAWANT, P.B.
RAY, G.N. (J)
CITATION:
1995 AIR 1133 1995 SCC (3) 136
JT 1995 (2) 317 1995 SCALE (1)475
ACT
HEADNOTE
JUDGMENT
ORDER 1. Special leave granted. Heard counsel on both sides. 2. What is challenged in these appeals is the decision of the Calcutta High Court interpreting the provisions of Section 154 [7] of the Income Tax Act [hereinafter referred to as the ’Act’] as it stood at the time of the assessment order dated 21st September, 1979. 3. Shortly stated, facts are that the appellant-assessee was assessed for income tax originally under the assessment order dated 21st September, 1979. The assessee filed a petition for rectification of the said order under Section 154 of the Act as it stood then on the ground that the Income Tax Officer had not taken into consideration the shift allowance available to the 319 assessee. Consequent upon this application, the assessment order was rectified on 12th July, 1982. Thereafter the assessee again applied for rectification of the fresh order of 12th July, 1982 on 4th July, 1986 contending that while he was entitled to depreciation allowance on factory building at the rate of 10% he was allowed the depreciation only at only at the rate 5%. The Income tax Officer dismissed the assessee’s claim on the ground that teh application was beyond time. This order was confirmed by the Applicable Assistant Commissioner. In the appeal the Tribunal however allowed the application holding that the application made on 4th July 1986 was within 4 years of the fresh order of assessment made on 12 th July, 1982 and hence wihtin limitation. On reference the High Court reversed the order of the Tribunal holding that the period of 4 years is to be calculated from the initial orders of assessment, viz from 21st September 1979 and not from the fresh order of assessment passed on 12th July 1982. 4. There is no dispute that the assessee would be entitled to 105 depreciation allowance on the factory building and it has to be granted to him if it is held that this rectification application was within time. 5. Section 154 of the Act, as it stood at the relevant time, read as follows:
"154. Rectification of mistake-
[1] With a view to rectifying any mistake
apparent from the record-
[a] the Income-tax Officer may amend any order
of assessment or of refund or any other order
passed by him.
x x x x x x
[1A] Where any matter has been considered and
decided in any proceeding by way of appeal or
revision relating to an order referred to in
sub-section [1] the authority passing such
order may, notwithstanding anything contained
in any law for the time being in force amend
the order under that sub-section in relation
to any matter been so considered and decided.
x x x x x x
[7] Save as otherwise in Section 155 or sub-
section [4] of section 186 no amendment under
this section shall be made after the expiry of
four years from the date of the order sought
to be amended. 6. What falls for consideration in the present case in the interpretation of the expression"from the date of the order sought to be amended " insub-section [7] of Section 154 as it stood then. It is obvious that the word ’order’ has not been qualified in any way and it does not necessarily mean the original order. It can be any order including the amended or rectified order. A similar expression in Rule 38 of the Mysore Sales Tax Act fell for consideration in International Cotton Corporation v. C.T.O. [ (1975 2 SCR 345]. Dealing with the point raised this court held as under;
"The other attack that the rectification order
is beyond the point of time provided in Rule
38 of the Mysore Sales Tax Rules is also
without substance. What was sought to be
rectified was the assessment order rectified
as a consequence of this court’s decision in
Yaddalam’s case. After such rectification the
original assessment order was no longer in
force and that was not the order sought to be
rectified. It is admitted that all the
rectification orders would be within time
calculated from the original rectification
order. Rule
320
38 itself speaks of "any order’ and there is
no doubt that the rectified order is also "any
order" which can be rectified under Rule 38". 7. This decision was endorsed in Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu [(1977) 39 STC 180] when this court observed there as follows::
"The reason for that is that once an as-
sessment is reopened, the initial order for
assessment ceases to be operative. The effect
of reopening the assessment is to vacate or
set aside the initial order for assessment and
to substitute in its place the order made on
re-assessment. The initial order for re-
assessment cannot be said to servive even
partially,although the justification for re-
assessment arises because of turnover escaping
assessment in a limited field or only with
respect to a part of the matter covered by the
intial assessment order. The result of
reopening the assessment is that a fresh
order for reassessment would have to be made
induding for those matters in respect of which
there Ls no allegation of the turnover
escaping assessment. As it Ls, we find that
in the present case the assessment orders made
under section 12A were comprehensive orders
and were not confined namely to matters which
had escaped assessment earlier. In the
circumstances the only orders which couldbe
subject-matter of revision by the appellant
were the orders made under section 12A
of the Act and not the initialassessment
orders. In the case of J. Jaganmohan Rao v. Commissioner
of Income-taxand Excess Profits Tax
Andhhra Pradesh [(1970) 75 ITR 373 (SC)],
tins Court dealt with section 34 of the Indian
Income-tax Act 1922, which relates to
reassessment in the case of income escaping
assessment. It was held by this Court that
once assessment is reopened, the previous un-
der-assessment is set aside and the whole
proceedings start afresh. Ramaswamy, J.,
speaking for the Court observed:
"Section 34 in terms states that once the
Income-tax Officer decides to reopen the
assessment he could do so within the period
prescribed by serving on the personliable to
pay tax a notice containing all or any of the
requirements which may be included in a notice
under section 22 [2] and may proceed to asses s
or reassess such income, profits or gains. It
is, therefore, manifest that once assessment
is reopened by issuing a notice under sub-sec-
tion [2] of section 22 the previous under-
assessment Ls set aside and the whole
assessment proceedings start afresh. When
once valid proceedings are started under
section 34 [11 (b), the Income-tax Officer had
not only the jurisdiction but it was his duty
to levy tax on the entiere income that had
escaped assessment during Om year."
In the case of Commissioner of Sales Tax,
Madhya Pradesh v. - H.M Esufaii H-M. Abdulaii
[(1973) 32 STC 77 (SC):90 ITR 271 (SC)], this
Court dealt with reassessment made under
section 19 of the Madhya pradesh General
Sales Tax Act, 1958. It was held that when
reassessment is made, the former assessment is
completely reopened and in its place
assessment is made. Hegde, J., speaking for
the Court, observed:
"What is true of the assessment must also be
true of reassessment because reassessment is
nothing but a fresh assessment. When
reassessment is made under Section 19, the
former assessment is completely reopened and
in its place fresh
321
assessment is made. While reassessing a
dealer, the assessing authority does not
merely assess him on the escaped turnover, but
it assesses him on his total estimated
turnover. While making reassessment under
section 19, if the assessing authority has no
power to make best judgment assessment, all
that the assessee need do to escape
reassessment is to refuse to file a return or
refuse to produce his account books. If the
contention taken on behalf of the assessee is
correct, the assessee can escape his liability
to be reassessed by adopting an obstructive
attitude. It is difficult to conceive that
such could be the position in law. 8. What fell for consideration in this decision were Sections 12A, 21 and 21 [2] and 21 [3] of the Mysore Sales Tax Act. The relevant provisions of Section 12A are as under:
"[1] Where for any reason the whole or any
part of the turnover of a dealer has escaped
assessment to tax or licence fee or has been
assessed at a lower rate than the rate at whic h
it is assessable, the assessing authority may.
subject to the pro visions of sub-section [2]
at any time within a period of five years from
the expiry of the year to winch the tax or
licence fee relates, assess to the best of
its judgment, the tax or licence fee payable
on the turnover referred to after issuing a
notice to the dealer and after making such
enquiry as it considers necessary" 9. Section 21 of the said Act deals, inter alia, with revisional powers of the Deputy commissioner. Sub-sections [2] and [3] of that section read as under:
"[2] The Deputy Commissioner may of his own
motion call for and examine the record of any
order passed or proceeding recorded under the
provisions of the Act by a Commercial Tax
Officer subordinate to him and against which
no appeal has been preferred to him under
section 20, for the purpose of satisfying
himself as to the legality or propriety of
such order or as to the regularity of such
proceeding and pass such order with respect
thereto as he thinks fit.
[3] In relation to an order of assessment
passed under this Act, the power under sub-
section [1] and [2] shall be exercisable only
within a period of four year from the date on
which the order was passed." 10.While holding that the expression "the date on which the order was passed" in sub-section [3] of Section 21, did not qualify the word ’order’ and hence the period of four years has to be calculated from the date of the rectified order, this Court referred to its earlier decision in International Cotton case [supra] and also followed the decision of this Court in H.M. Esufali H.M. Abdulali case [( 1 973) 90 ITR 271 at 280] as under:
"What is true of the assessment must also be
true of re-assessment because re-assessment
is nothing but a fresh assessment. When
reassessment is made under section 19, the
former assessment is completely reopened and
in its place fresh assessment is made. While
reassessing a dealer, the assessing authority
does not merely assess him on the escaped
turnover but it asses= him on his total esti-
mated turnover. While making reassessment
under section 19, if the assessing authority
has no power to make best judgment assessment
all that the assessee need do to escape
reassessement is to refuse to file a return
or refuse to produce taken on
322
behalf of the assessee is correct, the
assessee can escape his liability to be re-
assessed by adopting an obstructive attitude.
It is difficult to conceive that such could be
the position in law". 11.The Court while dealing with the provisions of the M.P. General Sales Tax Act, 1958 quoted Section 19 and Rule 33 [1] and [2] which read as under:
"19. Assessment of turnover escaping
Assessment. -- [1] Whereas an assessment has
been made under the Act repealed by Section 52
and if for any reasons any sale or purchase of
goods chargeable to tax under this Act or any
Act repealed by Section 52 during any period
has been under-assessed or has escaped
assessment or assessed at a lower rate or any
deduction has been wrongly made therefrom, the
Commissioner may, at any time within five
calendar years from the date of order of
assessment, after giving the dealer a
reasonable opportunity of being heard and
after making such enquiry as he considers
necessary, proceed in such manner as may be
prescribed to reassess within a period of two
calendar years from the commencement of such
proceedings, the tax payable by such dealer
and the commissioner may, where the omission
leading to such reassessment is attributable
to the dealer, direct that the dealer shall
pay. by way of penalty in addition to the
amount of tax so assessed, a sum not exceeding
that amount
Provided that in the case of an assessment
made under any Act repealed by section 52, the
period for re-assessment escapement or wrong
deduction shall be provided in such Act
notwithstanding the repeal thereof :
Provided further that any reassessment
proceedings pending on the date of
commencement of the Madhya Pradesh
General Sales Tax [Amendment] Act, 1978 [No.25
of 1978] be completed in accordance with the
provisions in force before the date of such
commencement and within a period of two
calendar years from the date of such
commencement.
x x x x x
"33. Manner of Assessment and re-assessment
and imposition of penalty. -[1] Where -
[a] a registered dealer has rendered himself
liable to tax and penalty under subsection [1]
of Section 14-A, or
[a-i] a dealer has failed to comply with a
notice issued under sub-section (1) of Section
17, or
[b] a registered dealer has failed without
sufficient cause to furnish prescribed returns
for any period by the prescribed date as
required by sub-section (1) of Section 17, or
[c] a registered dealer has rendered himself
liable to best judgment assessment under
clauses (a) and (b) of sub-section (4) of
Section 18, or
[d] a dealer has rendered himself liable to
best judgment assessement under sub-section
(6) or sub-section (7) of Section 18, or
(e) a dealer being liable to pay tax, has
willfully failed to apply for or
(f) the sale or purchase of goods by a
dealer during any period has been under
assessed or has escaped or has
been assessed at a lower rate or any deduction
has been wrongly made therefrom within the
meaning of sub-section (1) of Section 19,
or
323
(g) a dealer has deliberately concealed his
turnover of sale or purchase in respect of any
goods or has furnished a false return then in
every such case, the assessing authority shall
serve on the dealer a notice which shall as
far as may be, be in Form XVI specifying the
default, escapement or concealment, as the
case may be, and calling upon him to show
cause by such date, ordinarily not less than
30 days from the date of service of the notice
as may be fixed in that behalf, why he should
not be assessed or reassessed to tax and/or
penalty should not be imposed upon him and
directing him to produce on the sale date his
books or account and other documents which the
assessing authority may require and any
evidence which he may wish to produce in
support of his objection:
Provided that no such notice shall be nec-
essary where the dealer, having appeared
before the assessing authority, waives such
notice.
[2] On the date fixed in the notice issued
under sub-rule 11 or in case the notice is
waived on such date which may be fixed in this
behalf the assessing authority shall after
considering the objections raised by the
dealer and examining such evidence as may be
produced by him and after taking such other
evidence as may be available, assess or re-
assess the dealer to tax and/or impose a
penalty or pass any other suitable order". 12.In view of these authorities taking the view that the word ’any’ in the expression "order sought to be amended" would mean even the rectified order, we are satisfied that the High Court was wrong in setting aside the decision of the Tribunal. Shri G. Vishwanatha Iyer, learned senior counsel cited before us the decisions of the Calcutta, Gujarat, Madras and Orissa High Courts in Bharat Textile Works & Ors. v. Income-tax Officer, Circle-IV, 3-A, (Company] [(1978) 114 ITR, 281, Ahmedabad Sarangpur Mills Co. Ltd. v. A.S. Manohar, Income-Tax Officer, Circle IV, Ward-A, [Companies, Ahmedabad [(1976) 102 ITR 7121, Kothari (Madras) Ltd. v. Agricultural Income Tax Officer. [(1989) 177 ITR 538] and commissioner of Income Tax. v. Kalinga Tubes [(1991) 187 ITR 595] respectively in support of his contention that the word ’order’ used in the expression "order sought to be amended" would mean the original order of the assessment. As against this, Dr. Shankar Ghose, learned senior counsel referred us to the decisions of the Patna and Karnataka High Courts in Bihar State Road Transport Corporation v. Commissioner of Income Tax [(1986) ITR 162 114 at 130] and Commissioner of Income-tax, Karnataka-II, Bangalore v. Mysore Iron & Steel Ltd. [(1986) 157 ITR at 531] respectively which decisions have taken the contrary view. However, in view of the decisions of this Court referred to above, we are of the opinion that the view taken by the Tribunal in the present case is the correct one. We, therefore, set aside the impugned order of the High Court and restore that of the Tribunal. The appeals are allowed accordingly with no order as to costs. 326