ORDER
Per Shri S. P. Kapur, Judicial Member – The assessment years involved in these appeals, which have been filed by the assessee, are 1984-85 and 1983-84 respectively. The assessee is a resident public limited company and respective accounting periods ended on 31-7-83 and 31-7-82. The orders impugned in these appeals have been made by the learned Commissioner of Income-tax, Bombay City VI, Bombay. These are dated 26-2-1988 and 11-3-1988 respectively. The learned Commissioner held the assessments made in respect of the two assessment years involved to be erroneous and prejudicial to the interest of the revenue. He accordingly directed the learned Inspecting Assistant Commissioner to withdraw the deduction amounting to Rs. 11,73,984 and Rs. 13,62,162 respectively, which, at the assessment stage, stood allowed to the assessee as deduction under section 80-I of the Income-tax Act, 1961.
2. Although very many grounds have been taken by the assessee before us in relation to both the assessment years under appeals, the main ground relates to the legal issue that the learned Commissioner could not revise the assessment orders made by the learned Inspecting Assistant Commissioner of Income-tax, since those assessment orders have been subject matter of appeals by the assessee and those appeals stood decided by the learned first appellate authority, viz. the learned Commissioner of Income-tax (Appeals) on 19-2-88 and 23-10-86 respectively. Here we will like to emphasise that about the dates of the orders of the learned Commissioner made under section 263 of the Act as also that of the learned Commissioner of Income-tax (Appeals) made as first appellate authority on the appeals of the assessee are not in dispute.
The case of the assessee is that the impugned orders of learned Commissioner made for both the assessment years under section 263 of the Act are directly contrary to the law laid down by the Honble jurisdiction High Court -Bombay High Court -in the case of CIT v. P. Muncherji & Co. [1987] 167 ITR 671/32 Taxman 551, the Honble jurisdictional High Court having laid down the following ratio in the above referred decision :-
“The principle underlying section 263 of the Income-tax Act, 1961, corresponding to section 33B of the Indian Income-tax Act, 1922, is that it is only the order of the Income-tax Officer which can be revised by the Commissioner. Once the order of assessment is confirmed by the Appellate Assistant Commissioner or any order with regard to the assessment has been made by him, that becomes a final order of assessment and the only right the Department has is the right of appeal to the Appellate Tribunal. Once an appeal is preferred by the assessee, it is open to the Commissioner to raise before the Appellate Assistant Commissioner any matter dealing with the assessment of the assessee. It is not as if the power of the Appellate Assistant Commissioner was confined to only those questions which had been raised before him by the assessee. He has widest jurisdiction. The Commissioner has no right of appeal from an order of assessment passed by the Income-tax Officer. The right of appeal is confined to the assessee only. The Commissioner completely goes out of the picture once the Appellate Assistant Commissioner passes orders in appeal from the decision of the Income-tax Officer.”
3. Section 263 of the Act, as it stands on the statute book, reads as under :-
“263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the (Assessing) Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
(Explanation : For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-
(a) an order passed by the Assessing Officer shall include –
(i) an order of assessment made by the Assistant Commissioner or the Income-tax Officer on the basis of the directions issued by the Deputy Commissioner under section 144A;
(ii) an order made by the Deputy Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under section 120;
(b) “record” includes all records relating to any proceeding under this Act available at the time of examination by the Commissioner;
(c) Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal, the powers of the Commissioner under this sub-section shall extend to such matters as had not been considered and decided in such appeal.)
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.
Explanation : In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.”
4. Now the issue for our decision is whether the Explanation appended to sub-section (1) of section 263 of the Act, which was substituted by the Finance Act, 1988 with effect from 1-6-88 will apply and, if so, to what effect. The assessee claims that this Explanation being effective from 1-6-1988, the learned Commissioner could not have exercised jurisdiction under section 263(1) of the Act either on 11-3-1988 or on 26-2-1988 vis-a-vis, such matters as had not been considered and decided in such appeal. Such appeal here means the appeals of the assessee, which stood decided by the learned Commissioner of Income-tax (Appeals) on 29-2-88 and on 23-10-86. The revenue claims this Explanation to be explanatory and declaratory in nature, hence retrospective in operation. The revenue as such justifies the action of the learned Commissioner for invoking revisionary powers under section 263 of the Act. The assessee agitates the same holding this to be prospective one because it affects vested rights. The controversy as such boils down to this narrow compass.
5. The learned author Shri N. S. Bindra in his treatise on Interpretation of Statutes – Fifth Edition (1970) – has discussed the principles to be applied for interpreting statutory provisions and, according to the learned author, the following four principles are well settled :-
“The principles that have to be applied for interpretation of statutory provisions are well settled. The first of these is that statutory provisions creating substantive rights or taking away substantive rights are ordinarily prospective, they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective; and the retrospective operation will be limited only to the extent to which it has been so made by express words, or necessary implication.
The second rule is that the intention of the Legislature has always to be gathered from the words used by it, giving to the words their plain, normal, grammatical meaning.
The third rule is that if in any legislation, the general object of which is to benefit a particular class of persons, any provision is ambiguous so that it is capable of two meanings, one which would preserve the benefit and another which would take it away, the meaning which preserve it should be adopted.
The fourth rule is that if the strict grammatical interpretation gives rise to an absurdity or inconsistency, such interpretation should be discarded and an interpretation which will give effect to the purpose the Legislature may reasonably be considered to have had will be put on the words, if necessary, even by modification of the language used.”
It is a well-known rule of statute drafting that a statute is to be regarded as always speaking. If we have to take that to be so, which, in this case, is then Explanation appended to sub-section (1) of section 263 of the Act, which was substituted (as mentioned above by Finance Act, 1988), is to be effective from 1-6-88. The cut off date if clearly mentioned and accordingly it has to be held that the statute speaks for itself and it has to be held to be affecting the subject matter with effect from 1-6-88 and no action earlier to that date. The case of the revenue that it is retrospective in operation, which it is not, since the question whether a statute operates prospectively or retrospectively is one of legislative intent. When the terms of a statute are clear, plain and unambiguous, then it has to be held that it is manifest that the Legislature intended the same to be operative from the cut off date, i.e. prospectively and not retrospectively. Even assuming there was no cut off date, then still the statute has to be presumed to operate prospectively because it affects the vested rights and giving it a retrospective operation will be in derogation of vested rights, i.e. in other words in interfering with the vested rights, which was not the intent of the Legislature.
In interpreting fiscal statutes, no amendment or a statute can be said to have retrospective effect until and unless there is a clear provision and the statute speaks to that effect, since the intention to impose a tax has to be shown by clear and unambiguous language.
The same learned author has the following to say about the meaning of word, retrospective :-
1. Meaning of “retrospective” – The word retrospective is somewhat ambiguous. Retrospective means looking backwards; having reference to a state of things existing before the Act in question. A retrospective statute contemplates the past and gives to a previous transaction some different legal effect from that which it had under the law when it occurred or transpired. Every statute which takes away or impairs a vested right acquired under existing law or creates a new obligation, imposes a new duty or attaches a new disability in respect of transactions or considerations already past, must be deemed to be prospective. A retrospective law is one which reaches back to and gives to a prior transaction some different legal effect from that which it had under the law when it took place. If an Act provides that as at a past date the law shall be taken to been that which it was not, that Act is deemed to be retrospective. Corpus Juris defines it thus :
“Literally defined, a retrospective law is a law that looks backward or on things that are past; and a retroactive law is one that acts on thins that are past. In common use, as applied to statutes, the two words are synonymous, and in this connection may be broadly defined as having reference to state of things existing before the Act in question. A retroactive or retrospective law, in the legal sense, is one that takes away or impairs vested rights acquired under existing laws or creates a new obligation, imposes a new duty or attaches a new disability in respect to transactions or considerations already past.”
The question whether a statute operates prospectively or retrospectively is on of legislative intent. If the terms of a statute are clear and unambiguous and it is manifest that the Legislature intended the Act to operate retrospectively it must unquestionably be so construed. It, however, the terms of a statute do not of themselves make the intention certain or clear, the statute will be presumed to operate prospectively where it is in derogation of a common law right, or where the effect of giving it a retrospective operation would be to interfere with an existing contract, destroy a vested right or create a new liability in connection with a past transaction or invalidate a defence which was good when the statute was passed.
6. The Explanation referred to above cannot be said to look backward since it speaks for itself and its effect is so very clear inasmuch as it speaks of, with effect from 1-6-1988.
7. In the memo explaining provision in Finance Act, 1988, vide para 48, dealing with the topic, amendment of provisions relating to revision of orders prejudicial to revenue, it is stated in very clear terms and that speaks volume of the intention of the Legislature that, these amendments will take effect from 1st June 1988. In this para reference is made to clauses 44, 57 and 68 of the Finance Bill, 1988. No more clarification is either required or desired and accordingly, on the facts and in the circumstances of the cases, with which we are seized of, we do hold that for the reasoning as in the decision of the Honble jurisdictional High Court rendered in the case of P. Muncherji & Co. (supra), the learned Commissioner did not have the jurisdiction to revise the orders, which were subject matter of appeals before the learned Commissioner of Income-tax (Appeals) as he completely goes out of the picture. Explanation substituted by Finance Act, 1988 with effect from 1-6-88 to sub-section (1) of section 263 of the Act is held to be prospective in operation and not retrospective. The impugned orders of learned Commissioner made under section 263 of the Act for both the assessment years under appeal stand cancelled.
8. Before parting, we like to derive fortification from the cases as Auto Pins (India) v. ITO [1987] 20 ITD 1 (Delhi) to which the present J. M. was party, and in the case of Aeroplane Shoes Factory v. ITO [1989] 28 ITD 478 (Delhi) both the Benches having taken the same view on the same issue on identical grounds.
9. Since we have cancelled the orders of learned Commissioner on the main and vital reasoning of the learned Commissioner having no jurisdiction to exercise revisionary powers under section 263 of the Act for both the assessment years, grounds of the assessee taken on merits need not be decided and we are accordingly not discussing those contentions and the resultant decision.
10. Both the appeals succeed and stand allowed.