PETITIONER: COMMISSIONER OF INCOME-TAX, BOMBAY & ANOTHER Vs. RESPONDENT: ISHWARLAL BHAGWANDAS AND OTHERS DATE OF JUDGMENT: 07/05/1965 BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. MUDHOLKAR, J.R. SIKRI, S.M. CITATION: 1965 AIR 1818 1966 SCR (1) 190 CITATOR INFO : R 1966 SC1445 (9) RF 1966 SC1888 (4) F 1968 SC1227 (3) RF 1986 SC1272 (100) ACT: Constitution of India, 1950, Art. 133(1)(c)-"Civil Proceeding", Meaning of. Income-tax Act (11 of 1922), s. 18A(6), proviso-Scope of. HEADNOTE: The respondents filed under s. 18A(2) of the Income-tax Act, 1922, estimates of their income for the assessment year 1948, 1948-49 and made advance payments of tax. On 31st MarCh 1953 the regular assessment was made, but the Income- tax Officer omitted to charge penal interest as required by s. 18A(6) even though the tax paid was less than 80% of the tax determined. The error was discovered during audit and the Income-tax Officer rectified the error after notice in 1956, under s. 35 of the Act. When the notice demanding interest was issued, the respondents challenged the order before the Commissioner on the ground that the omission to charge pepal interest could not be considered a mistake apparent from the record, in view of the proviso to s. 18A(6), which was introduced on 24th May 1953 but was made retrospective from 1st April 1952, giving power to the Income-tax Officer to reduce or waive the interest payable by the assessee. The Commissioner did not accept the contention. The respondents then moved the High Court under Art. 226 of the Constitution and the High Court quashed the notice of demand. In his appeal to this Court, the Commissioner contended that : (i) no retrospective operation was effectively given to the proviso, because the rules, which alone could render that discretion operative, were framed only in December 1953, and (ii) there was nothing to show that the Income-tax Officer had purported to exercise his discretion when he passed the order of assessment but did not impose penal interest under s. 18A(6). Me respondent raised a preliminary objection that the appeal was incompetent because (a) the High Court had no power under Art. 133 to certify the appeal as a proceeding under Art. 226 was not a civil proceeding within the meaning of Art. 133, and (b) even if some proceedings under Art. 226 could be treated as civil proceeding, when relief is sought against the levy of a tax, the proceeding could not be so treated as it comes under " other proceeding" as contrasted with a civil proceeding, referred to in Art. 132(1). HELD : (i) (by Full Court) : 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, nor is there any rational basis for excluding from its purview proceedings instituted and tried in the High Court in exercise of its jurisdiction under Art. 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. [200 B-D] (Per P. B. Gajendragadkar, C. J., K. N. Wanchoo, J. C. Shah and S. M. Sikri, JJ) : The expression "civil proceeding" covers all proceedings in which a party asserts the existence of a civil right conferred by the civil law or by statute, and claims relief for breach thereof. It is one in which a person seeks to enforce by appropriate relief the alleged in- 191 fringement of his civil rights against another person or the State and which, if the claim is proved, would result in the declaration express or implied of the right claimed and -relief such as payment of debt, damages, compensation, delivery of specific property, enforcement of personal rights, determination of status, etc. By a petition for a writ under Art. 226, extraordinary jurisdiction, which is undoubtedly special and exclusive of the High Court is invoked. But on that account the nature of the proceeding in which it is exercised is not altered. The character of a proceeding depends, not upon the nature of the Tribunal which is invested with authority to grant -relief but upon the nature of the right violated and the appropriate relief which may be claimed. [196B, G, H; 197H] There is no warrant for the view that from the category of civil proceedings, it was intended to exclude proceedings relating to or which seek relief against enforcement of taxation laws of the State. If a person is called upon to pay tax which the State is not competent to levy, or which is not imposed in accordance with the law which permits imposition of the tax, or in the levy, assessment and collection of which rights of the tax-payer are infringed in a manner not warranted by the statute, a proceeding to obtain relief, whether it is from the tribunal set up by the taxing statute or from the civil court, would be regarded as a civil proceeding. The words "other proceeding" in Art. 132(1) refer only to proceedings which may be neither civil nor criminal, such as, proceedings for contempt of court and for exercise of disciplinary jurisdiction against professionals. it is not because a reference under s. 256 of the Income-tax Act to the High Court is not a civil proceeding that a certificate under Art. 133 may not be granted, necessitating the enactment of s. 261 for granting such a certificate, but, because of the advisory character of the jurisdiction exercised by the High Court, the High Court's opinion is not a judgement, decree or order within the meaning of Art. 133. [196 D-G; 197E] (ii) (By Full Court) : It is true that the proviso operates only in respect of cases and under circumstances as may be prescribed by the rules, but as soon as the rules were framed which effectuate the purpose for which the proviso was enacted, the proviso and the rules became effective retrospectively from 1st April 1952. [202E] T. Cajee v. U. Jormanik Slem, [1961] 1 S.C.R. 750, distinguished. M. K. Venkatachalam I.T.0. v. Bombay Dyeing and Manufacturing Co. Ltd. [1959] S.C.R. 703, applied. (iii) (Per P. B. Gajendragadkar, C.J., K. N. Wanchoo, J. C. Shah and S. M. Sikri, JJ.) : The High Court was right in setting aside the order passed by the Commissioner without considering the proviso (5) to s. 18A(6) which was clearly applicable to the case of the, assesse. [205E] The Income-tax Officer, on the language of s. 18A(6) on the date of making the assessment order, was bound to impose liability for payment of penal interest. But by reason of the retrospective operation given to the proviso added in 1953, the Officer must be deemed to have possessed discretion to reduce or waive interest payable by the assessee, on the date on which he made the assessment order. The order which did not take note of the law deemed to be in force must be regarded as defective; and the fact that the offered 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. [202A, C; 205 B-C] Per Mudholkar, J. (dissenting) : Even though the proviso and the rule must be deemed to have been in force on 1st April 1952, the omi- 192 ssion to charge penal interest at the time of making the regular assessment could not be ascribed to the exercise of discretion by the income-tax Officer. In fact, when he made the assessment, he had no discretion and was bound by law to charge penal interest. His omission to do so must be ascribed to an oversight and not to deliberateness. He was competent to rectify the mistake under s. 35 and when he exercised his power under the section he himself accepted the position that what he did earlier was through mistake. [209 C-E, G] JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1003 and
1004 of 1963.
Appeals from the judgment and orders dated November 13, 1958
of the Bombay High Court in Miscellaneous Petition No. 217
and 218 of 1958.
C. K. Daphtary, Attorney-General, R. Ganapathy Iyer and
B. R. G. K. Achar, for the appellants (in both the
appeals).
A. V. Viswanatha Sastri, C. A. Ramachandran, J. B. Dada-
chanji, 0. C. Mathur and Ravinder Narain, for the respondent
(in both the appeals).
The Judgment of Gajendragadkar, C.J., Wanchoo, Shah, and
Sikri, JJ. was delivered by Shah, J. Mudholkar, J. delivered
a dissenting Opinion.
due notice to the assessee”.
Shah, J. The 1st Income-tax Officer, C-11 Ward, Bombay
served a notice tinder s. 18-A(1) of the Indian Income-tax
Act, 1922 calling upon Bhagwandas Kevaldas-who will
hereinafter be called ‘the assessee’-to pay in four equal
installments Rs. 25,973/5 as advance-tax for the assessment
year 1948-49. On September 17, 1947 the assessee filed an
estimate of his income under s. 18-A(2) and of the tax
payable by him, and on January 10, 1948 he filed a revised
estimate. An order under S. 23-B of the Act provisionally
assessing the income was made by the Income-tax Officer and
pursuant thereto on August 23, 1950 the assessee paid the
tax so assessed. Regular assessment of the income of the
assessee was made on March 31, 1953 by the Income-tax
Officer, and it was found that the tax paid on the basis of
the estimate of the assessee was less than eighty per cent
of the tax determined as a result of the regular assessment.
But the Income-tax Officer made no charge for interest under
sub-s. (6) of S. 18-A of the Income-tax Act.
The departmental auditor raised an objection in auditing
accounts of C-11 Ward that a mistake was committed by the
Income-tax Officer in failing to charge interest in making
the order of assessment against the assessee. On September
21, 1956 the Income-tax Officer served a notice upon the
assessee requiring him
193
to show cause why the mistake in not levying interest be not
rectified and why he should not be directed to pay “penal
interest’ under s. 18-A(6). On October 4, 1956 the Income-
tax Officer recorded the following order :
“During the internal checking of C-11 Ward,
the Auditor has pointed out a mistake in not
charging penal interest under s. 18-A(6). As
this mistake is apparent from record the same
is rectified under s. 35 after giving due
notice to the assessee”,
and served a notice of demand calling upon the assessee to
pay Rs. 14,929/10 as interest due under s. 18-A(6) for the
period January 1, 1948 to July 22, 1950.
In exercise of his powers under s. 33-A, by order dated Feb-
ruary 1, 1958, the Commissioner of Income-tax confirmed the
order of the Income-tax Officer rectifying the original
order of assessment and imposing liability to pay interest,
subject to the modification that interest be paid only till
June 13, 1950.
The assessee then moved the High Court of Judicature at
Bombay by a petition under Art. 226 of the Constitution for
issue of a writ certiorari summoning the record of the case
and for an order quashing or setting aside the order passed
under s. 33-A(2) by the Commissioner of Income-tax and the
order passed by the Income-tax Officer under s. 35 and the
notice of demand pursuant to that order. The High Court of
Bombay following its earlier judgment in the case of
Shantilal Ravji v. M. C. Nair, IV Income-tax Officer, ‘G’
Ward, Bombay and Another(1) directed that the orders passed
by the Income-tax Officer and by the Commissioner of Income-
tax be quashed. Against the order passed by the High Court
the Commissioner of Income-tax and the Income-tax Officer
have, with certificate granted by the High Court, appealed
to this Court.
At the hearing of this appeal counsel for the assessee
raised an objection in liming that the appeal filed by the
Commissioner and the Income-tax Officer was incompetent.
because the High Court had no power under Art. 133 of the
Constitution to certify a proposed appeal against an order
in a proceeding commenced by a petition for the issue of a
writ under Art. 226 of the Constitution. It was urged that
the proceeding before the High Court was not ” a civil
proceeding” within the meaning of Art. 133. Article 133 of
the Constitution, insofar as it is material, by the first
clause provides
(1) (1958) 34 I.T.R. 439.
194
“An appeal shall lie to the Supreme Court from
any judgment, decree or final order in a civil
proceeding of a High Court in the territory of
India if the High Court certifies-
(a) that the amount or value of the subject-
matter of the dispute in the court of first
instance and still in dispute on appeal was
and is not less than twenty thousand
rupees***; or
(b) that the judgment, decree or final order
involves directly or indirectly some claim or
question respecting property of the like
amount or value; or
(c) that the case is a fit one for appeal to
the Supreme Court;
The power to issue a certificate under Art. 133 may be exer-
cised only in respect of a judgment, decree or final order
of a High Court in a civil proceeding, and the order passed
by the High Court disposing of the petition filed by the
assessee for the issue of a writ under Art. 226 is a
judgment. But Mr. A. V. Vishwanath Sastri for the assessee
contended in the first instance that the expression “civil
proceeding” -in Art. 133 only means a proceeding in the
nature of or triable as a civil suit and a petition for the
issue of a high prerogative writ not being such a
proceeding, against the order passed by the High Court no
appeal lay to this Court with certificate under Art. 133.
In the alternative, counsel contended that even if a
proceeding for the issue of a writ under Art. 226 of the
Constitution may in certain cases be treated as a civil
proceeding, it cannot be so treated when the party aggrieved
seeks relief against the levy of tax or revenue claimed to
be due to the State.
This Court is invested by the Constitution with appellate
jurisdiction of great amplitude exercisable over all courts
and tribunals in India. The jurisdiction may be exercised
in respect of any judgment, decree, determination, sentence
or order in any cause or matter passed by any court or
tribunal other than a judgment, determination, sentence or
order made or passed by any court or tribunal under any law
relating to the Armed Forces: Art. 136. Exercise of this
power depends solely upon the discretion of the Court.
Appeals lie to this Court also from orders passed in certain
classes of cases when certified by the High Courts. An
appeal lies from the judgment, decree or final order of a
High Court in a civil, criminal or other proceeding, if the
195
High Court certifies that the case involves a substantial
question of law as to the interpretation of the Constitution
: Art. 132(1). Am appeal also lies from any judgment,
decree or final order in a civil proceeding of a High Court
if the High Court certifies that the case satisfies the
conditions in cls. (a), (b) or (c) of Art. 133(1), or from
any judgment or final order or sentence in a criminal
proceeding of a High Court, if the case falls within the
description of cls. (a) & (b) of Art. 134, or if the High
Court certifies that the case is a fit one for appeal. It
is clear that under Art. 136 against the adjudications of
all courts and tribunals (subject to the exception already
noticed) whatever be the character of the proceeding,
appeals lie with leave to this Court. An appeal lies
against the adjudication of a High Court as a matter of
right, whatever the nature of the proceeding, with
certificate that it involves a substantial question of law
as to the interpretation of the Constitution, and in civil
proceeding with certificate of the nature set out in cls.
(a), (b) or (c) of Art.. 133, and in criminal proceedings in
conditions mentioned in cls. (a) and (b) and with
certificate under cl. (c) of Art. 134.
Counsel for the assessee said that proceedings instituted in
the High Court in exercise of its jurisdiction–original or
appellate may be broadly classified as (i) proceedings
civil, (ii) proceedings criminal, and (iii) proceedings
revenue, and where the case does not involve a substantial
question as to the interpretation of the Constitution, from
an order passed in a proceeding civil, an appeal lies to
this Court with certificate granted under Art. 133 of the
Constitution, and from a judgment, final order or sentence
in a criminal proceeding an appeal lies with certificate
(,ranted under Art. 134 of the Constitution, but from an
order passed in a proceeding relating to revenue the right
of appeal may be exercised only with leave of this Court.
Counsel seeks support for this argument primarily from the
phraseology used in Art. 132 of the Constitution. That
Article, by its first clause, provide-,
“An appeal shall lie to the Supreme Court from
any judgment, decree or final order of a High
Court in the territory of India, whether in a
civil, criminal or other proceeding, if the
High Court certifies that the case involves a
substantial question of law as to the
interpretation of this Constitution.”
Counsel relies upon the classification of proceeding made in
Art. 132(1) and seeks to contrast it with the phraseology
used in Arts. 133(1) & 134(1). He says that “other
proceeding” in Art. 132(1)
196
falls within the residuary class of proceedings other
than civil or criminal, and such a proceeding includes a
revenue proceeding. The expression “civil proceeding” is
not defined in the Constitution, nor in the General Clauses
Act. The expression in our judgment covers all proceedings
in which a party asserts the existence of a civil right
conferred by the civil law or by statute, and claims relief
for breach thereof. A criminal proceeding on the other hand
is ordinarily one in which if carried to its conclusion it
may result in the imposition of sentences such as death,
imprisonment, fine or forfeiture of property. It also
includes proceedings in which in the larger interest of the
State, orders to prevent apprehended breach of the peace,
orders to bind down persons who are a danger to the
maintenance of peace and order, or orders aimed at
preventing vagrancy are contemplated to be passed. But the
whole area of proceedings, which reach the High Courts is
not exhausted by classifying the proceedings as civil and
criminal. There are certain proceedings which may be
regarded as neither civil nor criminal. For instance,
proceeding for contempt of Court and for exercise of
disciplinary jurisdiction against lawyer or other
professionals, such as chartered accountants may not fall
within the classification of proceedings, civil or
criminal. But there is no warrant for the view that from the
category of civil proceedings, it was intended to exclude
proceedings relating to or which seek relief against
enforcement of taxation laws of the State. The primary
object of a taxation statute is to collect revenue for the
governance of the State or for providing specific services
and such laws directly affect the civil rights of the tax-
payer. If a person is called upon to pay tax which the
State is not competent to levy, or which is not imposed in
accordance with the law which permits imposition of the tax,
or in the levy, assessment and collection of which rights of
the tax-payer are infringed in a manner not warranted by the
statute, a proceeding to obtain relief whether it is from
the tribunal set up by the taxing statute, or from the civil
court would be regarded as a civil proceeding. The
character of the proceeding, in our judgment, depends not
upon the nature of the tribunal which is invested with
authority to grant relief but upon the nature of the right
violated and the appropriate relief which may be claimed. A
civil proceeding is therefore one in which a person seeks to
enforce by appropriate relief the alleged infringement of
his civil rights against another person or the State, and
which if the claim is proved would result in the declaration
express or implied of the right claimed and relief such as
payment of debt, damages, com-
197
pensation, delivery of specific property, enforcement of
personal rights, determination of status etc.
There is therefore under the Constitution a right of appeal
to, this Court with special leave from the adjudications of
all courts and tribunals (except tribunals constituted by or
under laws relating to Armed Forces). An appeal also lies
to this Court against all adjudications by a High Court from
judgments, decrees and orders in cases in which a
substantial question as to the interpretation of the
Constitution is involved, whatever the nature of the
proceeding. Appeals from criminal proceedings lie as a
matter of right in cases falling within cls. (a) and (b) of
Art. 134, and in cases certified as fit for appeal under cl.
(c) of Art. 134, and from civil proceedings of the nature
certified by the High Court under Art. 133(1) cls. (a), (b)
or (c).
For reasons already stated, a proceeding for relief against
infringement of civil right of a person is a civil
proceeding even if the infringement be in purported
enforcement of a taxing statute. Section 261 of the Income-
tax Act 1961 under which an appeal lies to this Court from
any judgment delivered on a reference made under s. 256 in
any case which the High Court certifies to be a fit one for
appeal to this Court is not an exception to that rule. It
is not because the reference is not a civil proceeding that
a certificate under Art. 133 may not be granted: it is
because of the advisory character of the jurisdiction
exercised by the High Court under s. 256 that the opinion
delivered by the High Court in a reference under s. 256 is
not a judgment, order or decree within the meaning of Art.
133. Similarly the enactment of s. 54 of the Land
Acquisition Act which expressly provides for an appeal to
this Court, subject to the provisions contained in s. 110 of
the Code of Civil Procedure, from an award, or from any part
of the award made by the Court is easily appreciated, if
regard be had to the character of the adjudication, which is
in the nature of an award in an arbitration: see Rangoon
Botatoung Company Ltd. v. The Collector, Rangoon(1).
By a petition for a writ under Art. 226 of the Constitution,
extraordinary jurisdiction of the High Court to issue high
prerogative writs granting relief in special cases to
persons aggrieved by the exercise of authority-statutory or
otherwise-by public officers or authorities is invoked.
This jurisdiction is undoubtedly special and exclusive, but
on that account the nature of the proceeding in which it is
exercised is not altered. Where a revenue
(1) L.R. 39 I.A. 197.
198
authority seeks to levy tax or threatens action in purported
exercise of powers conferred by an Act relating to revenue,
the primary impact of such an act or threat is on the civil
rights of the party aggrieved and when relief is claimed in
that behalf it is a civil proceeding, even if relief is
claimed not in a suit but by resort to the extraordinary
jurisdiction of the High Court to issue writs.
It is not easy to attribute to the expression “revenue
proceeding” any precise connotation, and in interpreting
Arts. 132 (1) and 133 it would be difficult to project the
somewhat anomalous provision contained in s. 226 of the
Government of India Act, 1935 under which, for historical
reasons, it was enacted that unless otherwise provided by
the appropriate legislature, no High Court shall have any
original jurisdiction in any matter concerning the revenue,
or concerning any act ordered or done in the collection
thereof according to the usage and practice of the country
or the law for the time being in force. This section barred
the High Court from exercising original jurisdiction in
matters concerning revenue. There was no such bar against
subordinate courts, nor against the exercise of appellate
jurisdiction by the High Courts in matters concerning
revenue instituted in subordinate courts. No provision has
been made in the Constitution similar to S. 226 of the
Government of India Act, and there is no reason to think
that it was intended to deprive the High Court of its power
to certify cases concerning revenue, by enacting that the
High Court may certify a case in a civil proceeding. No
ground is suggested for acceptance that while removing the
ban against the High Court’s original jurisdiction in
matters concerning revenue, the Constitution imposed another
ban against the exercise of power to certify cases decided
by the High Court in the appellate as well as original
jurisdiction when the cases concerned revenue.
We have already set out our reasons for holding that a Pro-
ceeding taken for recovery of a tax is not “other
proceeding’ under Art. 132 (1) : such a proceeding is a
civil proceeding within the meaning of Art. 133(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 Art. 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 Art. 132(1), and an
aggrieved party’s right to appeal to this Court from orders
in those proceedings is exercisable in
199
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 proceeding 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 Linder
Art. 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 : in
still 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
Art. 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 Art.
133(1) was negatived it appears to have been assumed that
the expression “other proceeding” used in Art. 132 of the
Constitution is or includes a proceeding of the nature of a
revenue proceeding, and therefore the expression “civil
proceeding” in Art. 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
attention was invited in which the view has been expressed
that in a petition under Art. 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 Art. 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
200
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 Art. 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, nor is there any rational
basis for excluding from its purview proceedings instituted
and tried in the High Court in exercise of its jurisdiction
under Art. 226, where the aggrieved party seeks relief
against infringement of civil rights by authorities purport-
ing 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
sub-section, insofar 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, s. 18-A
introduces within the scheme of the Act the principle of
advance payment of tax and authorises collection of 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
201
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 sub-s. (2) of s. 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 sub-s. (1) and to pay such amount as
accords with his estimate. Provision is also made for
submitting revised estimate of income. The Legislature by
sub-s. (6) also on the other hand penalises an assessee who
seeks to evade liability to pay advance tax by
underestimating his income by providing that if in any year
an assessee paid tax under sub-s. (2) or (3) on the basis of
his own estimate and the tax so paid is less than eighty per
cent of the tax determined on the basis of the regular
assessment, so far as such tax relates to income to which
the provisions of s. 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 per cent 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 per
cent. Subsection (6) as originally enacted left no
discretion to the Income-tax Officer: if the estimate fell
below the prescribed limit, the Income-tax Officer 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 s. 18-A(6):
“Provided further that in such a case 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 the 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 r. 48 in December 1953.
202
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 sub-s. (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 out, that the Income-tax
Officer commenced proceeding under S. 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
s. 18-A(6), but by reason of the retrospective operation
given to the fifth proviso added to sub-s. (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 Commissioner
contended that to the fifth proviso to s. 18-A (6) no retro-
spective 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 s. 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 and Anr(1) 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 res-
trictions. We do not think that the case cited by counsel
for the assesee 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,
(1) [1961] 1 S.C.R. 750.
203
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 administrative
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 discretion to reduce or waive
interest can only be exercised in cases and under
circumstances to be prescribed. There was no absolute power
in 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 I.T.O. and Another v.
Bombay Dyeing and Manufacturing Company Ltd(1) held in
dealing with a case arising under the second proviso to s.
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 s. 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(1) 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 s. 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 s. 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 s. 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
(1) [1959] S.C.R. 703.
sup./65-14
204
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 S. 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 retrospective operation given to the newly inserted
provision in S. 18-A(5) of the 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 mistake 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(1) “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 accom-
panied it.” In Venkatachalam’s case (2 ) by virtue of the
retrospective operation of the amendment, the assessee was
entitled 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 s. 35 of the Indian Income-tax Act on the
application of the retrospective amendment, 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 anytheless applicable. By
virtue of the retrospective amendment in s. 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
nothing to show that the income-tax officer had purported to
exercise his discretion when he passed the order of
assessment and
(1) [1952] AC. 109,132.
(2) (1959) S.C.R. 703.
20 5
did not impose any liability for payment of interest under
s. 18-A (6). That may be so. But the case of the assessee
did fall within the terms of r. 48(1) and the Income-tax
Officer must in law be bound to consider whether he was
entitled to reduction or waiver of interest tinder 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
Commissioner of Income-tax and it is unfortunate that the
Commissioner in considering the matter under s. 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 (late 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 s. 1 A (6) which was clearly
applicable to the case of the assessee and in the light of
r. 48 which was enacted in pursuance of that proviso.
The Attorney-General contended that the petition filed by
the assesse did not expressly seek to plead the case which
was ultimately made out by the High Court. It is .rue 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 paragraph-6 cl. (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 1961 and 1004
of 1963.
Mudholkar J. I agree with my learned brother Shah J., that
the expression “civil proceeding” in Art. 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 Art. 226 or Art. 227 in which relief is
sought in respect of liability to
206
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 Art. 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, 1956 rectifying under s. 35 of the Income-tax Act, 1922
the regular assessment 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
s. 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 s. 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 s. 1 8-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 assessment
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 s. 18-A(6)
“Provided further that in such a case and
under such circumstances 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 42 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
case and under the circumstances mentioned
below, namely :
(1) Where the relevant assessment is
completed more than one year after the
submission of the return, the delay in
assessment 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.
207
(3) Where the assessee has income from an
unregistered firm to which the provisions
of clause (b) of subsection (5) of section
23 ire 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 s. 35 of the Act :
“During the interest checking of C-II Ward,
the Auditor has pointed out a mistake in not
charging penal interest tinder section 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
contention 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 s. 18-A(6) and the Rules made thereunder and
therefore the Income-tax Officer could not rectify the
regular assessment by resort to s. 35 of the Act. This
contention was not accepted by the Income-tax Commissioner.
He, however, directed 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 Art. 226 of the Constitution
and succeeded in having the notice of demand quashed.
The ground upon which the High Court -ranted relief to the
respondents was that the Amending Act of 1953 which enacted
the last proviso to s. 18-A(6) was made, retrospective from
April 1, 1952; that, therefore, that proviso must be
regarded as being on the statute book on the date on which
the regular assessment was
208
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 payable 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 Rayji v. M. C. Nair,
IV Income-tax Officer, E. Ward, Bombay and anr.(1) the
learned Judges observed
“In our judgment in that case we referred to
the decision of the Supreme Court in the State
of Bombay v. Pandurang Vinayak(2) 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(1) 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 tile
deeming provision which was retrospective in
it,,, 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 circumstances
he bad no jurisdiction subsequently to rectify
that order on the ground that there was an
error 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
pointed out that r. 48 framed by the Central Board of
Revenue which prescribes these matters does not make it
retrospective and, therefore, it should be
(1) (1958) 34 I.T.R. 439.
(2) (1953) S.C.R. 773.
(3) (1952) A.C. 109.
209
deemed to be only prospective in its application. 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 alone 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 statutes 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, 1 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, be 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. By an omission to do
what he was bound by law to do the Income-tax Officer
committed an error and that error appears on the face of the
record. He was, therefore, competent to rectify under s.
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 s. 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 home out by the fact that on October 14,
1956 when he made good the omission by resorting to the
power conferred by s. 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 s. 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.
Appeals dismissed.
210
