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Judgment
Ajit Kumar Sengupta, J.—In this reference u/s 256(1) of the income tax Act, 1961 (''the Act'') at the instance of the revenue, the Tribunal has referred the following question common for all of three assessment years from 1980-81 to 1982-83 for our opinion:
Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the order of the ITO had merged with the order of the Commissioner (Appeals) though the issue involving the subject-matter of Commissioner''s order was not before the Commissioner (Appeals) for consideration and, therefore, the Commissioner had no further jurisdiction to revise the assessment u/s 263 of the income tax Act, 1961?
Shortly stated, the facts giving rise to the question as found by the Tribunal, are as follows:
For the assessment years under consideration 1980-81, 1981-82 and 1982-83 the ITO allowed weighted deduction on account of export market development allowance u/s 35B(1)(b) of the Act at Rs. 1,15,401 being one-third of Rs. 3,46,223, Rs. 9,45,644 being one-third of Rs. 28,36,932 and Rs. 1,76,779 being one-third of Rs. 5,30,337. The said deductions were allowed without any detailed discussion in the assessment orders. The assessee preferred appeals against the said assessment orders before the Commissioner (Appeals). These appeals, however, did not relate to the question of weighted deduction u/s 35B(1)(b). The appeals were disposed of by the Commissioner (Appeals) by his order dated 21-11-1984.
The Commissioner was, however, of the prima facie opinion that the ITO wrongly allowed relief/deduction u/s 35B(1)(b) and initiated proceedings u/s 263 of the Act. The assessee con tended before the Commissioner that the Commissioner had no jurisdiction to pass an order u/s 263 because the ITO''s order was subject of an appeal before the Commissioner (Appeals) who disposed of the appeals by his order dated 21-11-1984. This contention was rejected by the Commissioner who was of the opinion that he was empowered to invoke the provision of section 263. The Commissioner was of the opinion that the ITO erred in completing the assessments which were clearly erroneous and prejudicial to the interests of the revenue. So, he restored the assessments to the file of the ITO for fresh assessments in accordance with the provisions of law. Being aggrieved, the assessee preferred those appeals.
The authorised representative for the assessee reiterated before the Tribunal his original objection that in view of the appellate order of the Commissioner (Appeals) dated 21-11-1984 the Commissioner had no jurisdiction to pass order u/s 263. This contention was strongly opposed by the departmental representative who contended that the Commissioner had jurisdiction to pass the impugned order u/s 263. In dealing with the contentions of the parties, the Tribunal held as follows:
There is no doubt that the decision in the case of R.S. Benwari Lal (supra) and some other decisions from certain other High Courts support the contention of the departmental representative that the Commissioner is empowered to revise that aspect of the assessment order which was not directly in appeal. But, it is settled law that the Tribunal is bound by the decision of the jurisdictional High Court. In our opinion, the decisions in the cases of Jeewanlal [1929] Ltd. (supra) and General Beopar Co. (P.) Ltd. (supra) are fully applicable to the facts involved in the appeals before us. In both these cases, the CIT sought to revise the aspect of the assessment order which was not disputed in appeal. In spite of these facts, in both these cases, the Hon''ble Calcutta High Court definitely laid down that in such circumstances also the Commissioner could have no further jurisdiction to revise the assessment u/s 263 of the Act. These two decisions are directly on the point in dispute before us. On the strength of these two decisions we hold that in the present case also the Commissioner had no jurisdiction to revise the assessment order which were in appeal and disposed of by the order dated 21-11-1984 u/s 263 of the Act.
At the hearing before us, the counsel reiterated what was contended before the Tribunal. The learned counsel for the assessee in the first instance emphasised the scope and ambit of the power of the first appellate authority and brought home the principle that the first appellate authority''s powers are co-extensive with the powers of the Assessing Officers. Therefore, when the assessment as made by the Assessing Officer is brought in appeal before the first appellate authority, the latter is invested with jurisdiction not only to decide the grounds of appeal but also the other matters contained in the assessment order not appealed against. This power arises from the power of the first appellate authority to enhance the assessment. For this proposition numerous decisions have been cited in Commissioner of Income Tax, U.P.,Lucknow Vs. Kanpur Coal Syndicate, and Jute of Corporation of India Ltd. Vs. Commissioner of Income Tax and another, .
Stress was laid on the decisions of this Court in Jeewanlal (1929) Ltd. Vs. Additional Commissioner of Income Tax and Others, and General Beopar Co. (Pvt.) Ltd. Vs. Commissioner of Income Tax, . Thus, the assessee has sought to impress on us that when the assessment order was subjected to appeal and an appeal order has been passed in pursuance thereof, the entire assessment order merges with the appeal order and ceases to be an order of the ITO. Now, the Commissioner''s power of revision u/s 263 extends only to the order of the ITO but not the order of the first appellate authority. Therefore, the Commissioner could not lawfully invoke section 263 for revising the assessment order once an appeal order has been passed thereon.
Counsel for the revenue mentioned that section 263 has been amended in the year 1988 whereby an Explanation has been inserted which, inter alia, provides in sub-section (c) as follows:
(c) Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the first day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.
According to the revenue''s contention, this Explanation has been given retrospective effect and in deciding all pending matters the new provision has to govern the decision. Under the new provision, it is now legislatively acknowledged that the merger in the context of the Commissioner''s revisionary power is only partial in regard to matters dealt with by the first appellate authority. The remaining part not so dealt with in appeal survives for being revised by the Commissioner, the other conditions precedent to such revision being satisfied.
It is not in dispute that this Court in Hamilton and Co. Pvt. Ltd. Vs. Commissioner of Income Tax, has held that the effect of merger by virtue of order of appeal having been passed is partial in respect of matters dealt with by the appellate authority. In Hamilton & Co.''s case (supra) earlier decisions of this Court have been noticed and distinguished. This Court has decided in the light of the amended provisions of section 263 that the effect of the appeal order does not result in the total merger of the assessment order in the appellate order, the merger is only to the extent the appeal order deals with the matters contained in the appeal order. The balance part of the assessment order remains open for revision.
The decisions of the Supreme Court in Kanpur Coal Syndicate''s case (supra) and Jute Corporation of India'' s case (supra) are no authority for the proposition that the effect of appeal order shall have complete fusion of the assessment order in the appellate order. The said decisions are concerned with altogether different aspect, namely, the scope of the powers of the first appellate authority. Even, if the doctrine of the total merger can be canvassed as a by-product of the principles laid down by the Supreme Court in the said decisions, that would not alter the conclusion this Court arrived at in Hamilton & Co.''s case (supra), in the light of the amended provisions of section 263.
Even, in the absence of the new Explanation the revenue could advance its case by citing the judgment of the Supreme Court in State of Madras Vs. Madurai Mills Co., Ltd., . Before parting with the matter we must place on record the arguments which the learned counsel for the assessee strenuously urged to persuade us to make a departure from our decision in Hamilton & Co. (P.) Ltd.'' s case (supra).
It is respectfully submitted that the decision of the Supreme Court in Madurai Mills Co. Ltd.''s case (supra) does not decide the controversy involved in the present case under reference and is clearly distinguishable. In this case, their Lordships of the Supreme Court while dealing with the revisionary powers of the Deputy Commissioner u/s 12 of the Madras General Sales Tax Act, 1939 held and observed that the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders - one by an inferior Tribunal and the other by a superior Tribunal passed in an appeal or revision, there is a fusion or merger of the two orders irrespective of the subject-matter of the appellate or the revisionary order and the scope of the appeal or revision contemplated by the particular statute. The Court further observed that the application of the doctrine depends upon the nature of the appellate or the revisionary order in each case and scope of the statutory provision conferring appellate or revisionary jurisdiction. It may be noted that their Lordships of the Supreme Court in this case were concerned with the interpretation of section 12(2) which contains the revisionary powers vested with the Deputy Commissioner. These provisions are extracted hereinbelow for ready reference:
12(2) The Deputy Commissioner may-
(i) suo motu, or
(ii) in respect of any order passed or proceeding recorded by the Commercial Tax Officer under sub-section (1) or any other provision of this Act and against which no appeal has been preferred to the Appellate Tribunal u/s 12A, on application, call for and examine the record or any order passed or proceeding recorded under the provisions of this Act by an Officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit.
In the case before the Supreme Court, the question was whether the Board of Revenue was revising the order dated 21-11-1954 passed by the Deputy Commissioner in revision proceeding taken at the instance of the assessee or that of the Deputy Commercial Tax Officer dated 28-11-1952.
In other words, the question was whether the order of the Deputy Commercial Tax Officer merged in its entirety with that of the Deputy Commissioner passed in revision proceedings taken at the instance of the assessee. Section 12(2) contains 2 clauses:
Clause (i) contemplates suo motu revision;
Clause (ii) provides for revision at the instance of the assessee.
The powers under clause (i) are exercised when the order of the Deputy CTO is found to be erroneous and prejudicial to the interests of the revenue. The powers under clause (ii) are exercised with a view to giving relief to the assessee, if possible. In that case, the Deputy Commissioner had exercised powers of revision under clause (ii) of section 12(2). It was in that context that the Supreme Court made the aforesaid observations regarding merger. There is nothing in the decision of the Supreme Court to show that it expressed a view in Madurai Mills Co. Ltd.''s case (supra) different from the one taken in CIT v. Amritlal Bhogilal & Co. [1958] 34 ITR 130 (SC). This very aspect has been stressed by their Lordships of the Bombay High Court in Commissioner of Income Tax Vs. P. Muncherji and Company, . Their Lordships held and observed that the decision of the Supreme Court in Madurai Mills Co. Ltd.''s case (supra) does not decide the issue in controversy.
If the decision of the Supreme Court in Madurai Mills Co. Ltd.''s case (supra) does not decide the issue as regards merger, then we can say that the matter is an open issue not finally settled judicially. It is submitted that the ratio in Amritlal Bhogilal & Co.''s case (supra) cannot also be said to have resolved the issue because in that case the Supreme Court found that if a particular matter is not appealable before the first appellate authority under the statute, that matter does not merge with the appeal order. Therefore, in Amritlal Bhogilal & Co.''s case (supra), it was never the question whether a specific matter arising from the assessment order which has not been appealed against nor dealt with by the appellate authority could nonetheless be said to have merged in the appellate order merely because some matters in the order have been decided in appeal. The ratio decidendi in that case is that, if any incidental matter to assessment is not appealable, it does not merge with the appeal order.
We have closely studied the decision of the Supreme Court in Madurai Mills Co. Ltd''s case (supra). As a matter of fact, this decision of the Supreme Court is an authority for the proposition that the effect of merger is only partial to the extent the superior authority has dealt with any part of the order of the lower authority and the rest part does not merge with the order of the superior authority. In Madurai Mills Co. Ltd.''s case (supra) pursuant to completion of the assessment of the turnover by the Deputy CTO, the assessee went in revision before the Deputy Commissioner with the grievance that the turnover could not have been computed by adding to it the sales tax collection. There was no other objection to the assessment of the Deputy Commissioner. The Deputy Commissioner by his order dismissed the said revision petition. Eventually, the Board of Revenue proposed revision of the assessment on the ground that the turnover was wrongly computed by excluding therefrom the value of purchases from outside the State. But, the revisionary power of the Board is subject to a limitation of time which is four years from the date the order sought to be revised was communicated to the dealer. Here the assessment order was passed by the Deputy CTO on 28-11-1952 while the revision order was passed by the Deputy Commissioner on 21-8-1954. The Board issued the notice on 4-8-1958. The Board took the view that the revision proceeding initiated by it is in relation to the order passed by the Deputy Commissioner by virtue of merger and that the assessment order having merged with the order of the Deputy Commissioner, the limitation should run from 21-8-1954 and the notice issued by the Board on 4-8-1958 was not barred by limitation of time and was valid. But, the dealer contended that the subject-matter of revision not being the subject-matter of consideration by the Deputy Commissioner, the revision is of the assessment order of the Deputy CTO, dated 28-11-1952 and the limitation of four years should run from 28-11-1952. It is the contention of the dealer that the revision by the Deputy Commissioner not dealing with the question of exemption of purchases from outside the State, the assessment order allowing such exemption does not merge with the revision order of the Deputy Commissioner. The Supreme Court held against the action of the Board of Revenue on the basis of the finding recorded in the following words:-
It is manifest that the subject-matter of the revision proceedings before the Board of Revenue was the revised assessment order of the Deputy Commercial Tax Officer, Madurai dated 28-11-1952. It follows that the order of the Board of Revenue was made beyond the limit of four years prescribed by section 12(4)b) of the Act, and it is, therefore, invalid.
Therefore, the ratio of the Supreme Court in Madurai Mills, clearly indicates that unless a matter has become the subject-matter of the appeal proceedings, that does not merge in the appeal order.
This is also the principle in Amritlal Bhogilal & Co. (supra). The Supreme Court for all practical purposes laid down the identical principle. There the Supreme Court held that the question of registration of a firm not being an appealable matter cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the composite order of assessment. As a logical consequence or extension of this principle laid down by the Supreme Court we can also say that where matter is not the subject-matter of the appeal order, the same does not cease to be amenable to revision proceedings simply because the order has been dealt with in an appeal in respect of some other matters. Therefore, the doctrine of partial merger has judicial recognition for quite long. The Explanation is no innovation of Parliament.
The other aspect agitated on behalf of the assessee is that the amendment in section 263 by the Finance Acts, 1988 and 1989 cannot be of such effect as results in the total merger. In the instant case to appreciate the submissions of the learned counsel for the assessee, it is at the outset necessary to set out the Explanation as a whole. This Explanation reads as under:
Explanation : For the removal of doubts, it is hereby declared that for the purpose of this sub-section,-
(a) an order passed on or before or after 1st day of June, 1988 by the Assessing Officer shall include,-
(i) an order of assessment made by the Assistant Commissioner of the income tax Officer on the basis of the directions issued by the Deputy Commissioner u/s 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 u/s 120;
(b) ''record'' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the 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 [filed on or before or after 1st day of June, 1988] the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.
In the present case, we are only concerned with clause (c) of the said Explanation. This clause (c) was brought on the statute book for the first time by the Finance Act, 1988 with effect from 1-6-1988. Originally, this clause (c) read as under:-
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.
The expressions in sq. brackets ''filed on or before or after 1-6-1988'' and ''shall be deemed always to have extended'' were inserted in clause (c) by the Finance Act, 1989 with effect from 1-6-1988. In other words, the entire clause (c) of the Explanation to section 263(1) has been inserted by the Finance Acts of 1988 and 1989 read together but only with effect from 1-6-1988. It may be contended by the revenue that this Explanation is clarificatory in nature and must be deemed to have retrospective effect. The contentions on behalf of the assessee in this respect are as under:
(a) It is a cardinal principle of the Tax Law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication - Reliance Jute and Industries Ltd. Vs. Commissioner of Income Tax, West Bengal, . It is also by now well-settled that the degree of retrospectivity of a statute can be discovered and/or inferred from the language of the provision itself- Union of India (UOI) and Another Vs. Raghubir Singh (Dead) by Lrs. Etc., . In this case, the Supreme Court was dealing with the amendment made in section 23(2) of the Land Acquisition Act, 1894 by section 32(2) of the Land Acquisition (Amendment) Act, 1984. Before the enactment of the Amendment Act solatium was provided u/s 23(2) of the present Act at 15 per cent of the market value of the land. The Amendment Bill of 1982 was introduced in the House of People on 30-4-1982 and upon enactment, the Amendment Act came into force with effect from 24-9-1984. By the Amendment Act, the solatium was increased from 15 per cent to 30 per cent. The intention of the statute was made clear by section 32(2). The question before the Supreme Court was whether the increased solatium at the rate of 30 per cent was payable in all cases where proceedings were pending by way of appeal in the High Court or in the Supreme Court on the date on which the amendment was brought into force. The Court held on a reading of section 32(2) that the benefit of enhanced solatium was intended in respect of the following matters only:-
(i) In respect of the Award made by the Court between 30-4-1982 and 24-9-1984.
(ii) Award made by the Court between those two dates.
(iii) Appeals against an award of the Collector of the Court made between those two dates.
The Supreme Court, however, held and observed that it cannot be contended that the enhanced solatium was payable in respect of appeals disposed between 30-4-1982 and 24-9-1984 even though arising out of the awards of the Collector of the Court made before 30-4-1982. The Court observed at page 570 of the Reports that the Amendment Act has not been made generally retrospective. The retrospectivity is restricted to certain areas as spelt out from the Amendment Act itself.
The decision of the Supreme Court in connection with the retrospective effect of amendment of section 23(2) is not applicable here because there the Court was concerned with substantive law enhancing the rate of solatium. But here, we are dealing with an explanation which is declaratory in nature.
(b) The Finance Acts, 1988 and 1989 which inserted clause (c) in Explanation to section 263(1) clearly provide the degree of retrospectivity in the clause itself. The law is made retrospective with effect from 1-6-1988. In view of the insertion of clause (c) with effect from 1-6-1988, the Commissioner shall have jurisdiction to exercise the powers of revision u/s 263(1) in respect of all matters, decided by an Assessing Officer, which has not been considered and decided in appeal by the appellate authority, whether such appeal is filed on or before or after 1-6-1988. In other words, although clause (c) was brought on the statute book with effect from 1-6-1988, the Commissioner may exercise the revisionary jurisdiction u/s 263(1) on or after 1-6-1988 even in those cases where the appeals have been filed and/or disposed of prior to 1-6-1988. The degree of retrospectivity is, accordingly, limited by the Amendment Act itself. It is submitted that the only restriction on the exercise of powers by the Commissioner u/s 263(1) is that he can take recourse to clause (c) on or after 1-6-1988. In other words, clause (c) cannot help the Commissioner in those cases where jurisdiction had already been exercised prior to 1-6-1988. The amendment to clause (c) of the Explanation made by Finance Act, 1989 made it very clear that even when appeals are filed before 1-6-1988, the Commissioner can exercise his revisionary jurisdiction in respect of those matters which had not been considered and decided in such appeal. But, there is no intention on the part of the statute to say that even in those cases where the Commissioner had already passed orders u/s 263 prior to 1-6-1988, clause (c) must be deemed to have been in operation all along. The expression ''shall be deemed always to have extended'' inserted in clause (c) by the Finance Act, 1989 was intended to cover a case where the Commissioner exercises his jurisdiction u/s 263(1) after 1-6-1988, but not where the appeal had already been disposed of prior to the said date. There is nothing in clause (c) of the Explanation to show that the intention of the statute was to cover even those cases which had already been disposed of by the Commissioner prior to 1-6-1988.
(c) Nothing prevented the statute from providing that clause (c) must be deemed to have been in existence right from 1-4-1962 when the new Act of 1961 became operative. It may be appreciated that the expression ''for the removal of doubts'', it is hereby declared...'' occurs at no less than 18 different places in the Act. In the following 7 instances, retrospectivity has been specifically mentioned in the Explanation inserted using the expression in question:
Sl. No.
Provision
Remarks
1.
Explanation to section 9(1)( ii)
Inserted by the Finance Act, 1983 with retrospective effect from 1-4-1979.
2.
Explanation to section 10(13A)
Inserted by Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1-4-1976.
3.
Explanation 1 to section 16(1)
Inserted by Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1-4-1975.
4.
Explanation to section 34(3)
Inserted by Finance Act, 1966 with retrospective effect from 1-4-1962.
5.
Explanation 2 to section 35B
Ordinarily inserted by the Finance Act, 1973 with retrospective effect from 1-4-1968.
Sl. No.
Provision
Remarks
6.
Explanation 2 to section 37(2A)
Inserted by the Finance Act, 1983 with retrospective effect from 1-4-1976.
7.
Explanation 8 to section 43
Inserted by the Finance Act, 1986 with retrospective effect from 1-4-1974.
As against these 7 instances there are 11 other instances including the one u/s 263 where, though the same expression is used, there is no mention of retrospective effect having been given to it. Those instances are the following:-
Sl. No.
Provision
Remarks
1.
Explanation 2 to section 5
Originally inserted with I.T. Act, 1961 w.e.f. 1-4-1962.
2.
Explanation to section 15.
Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1-4-1989.
3.
Explanation 2 to section 23
Taxation Laws (Amendment) Act, 1984 w.e.f. 1-4-1985.
4.
Explanation to section 32A(9)
Finance Act, 1976 w.e.f. 1-4-1976.
5.
Explanation 2 to section 36(1)( ii )( a )
Finance (No. 2) Act, 1980 w.e.f. 1-4-1981.
6.
Explanation 2 to section 40A(7)
Finance Act, 1975 w.e.f. 1-4-1973.
7.
Explanation to section 43B
Finance Act, 1989 w.e.f. 1-4-1989.
8.
Explanation to section 80CCA
Finance Act, 1988 w.e.f. 1-4-1988.
9.
Explanation 2 to section 80G(5A)
Finance Act, 1970 w.e.f. 1-4-1971.
10.
Explanation 5 to section 50G(5A)
Finance Act, 1976 w.e.f. 1-4-1976.
11.
Explanation to section 263(1)
Finance Acts, 1988 and 1989 w.e.f. 1-6-1988.
The aforesaid table would clearly show that the statute never intended to give retrospective effect to the amendments made in section 263(1).
(d) One cannot give greater retrospectivity to the provisions of a statute than what is clearly stated and/or intended by the statute itself.
(e) The scope of the amendment carried out in Explanation to section 263(1) has also been considered by the Bombay High Court in Ritz Ltd. and another Vs. Union of India and others, . This decision clearly supports the case of the assessee. Here also the Bombay High Court held that amended clause (c) does not have retrospective effect and cannot be applied in those cases where Commissioner of income tax exercised jurisdiction prior to 1-6-1988.
(f) The very fact that the Legislature in its wisdom thought it fit to bring clause (c) of the Explanation to section 263(1) with effect from 1-6-1988 clearly goes to suggest that the law prior to 1-6-1988, when CIT had already exercised jurisdiction, was otherwise and is not intended to be disturbed even by the statute.
(g) The aforesaid aspects as discussed in detail hereinabove were not brought to the notice of this Court either in the case of Hindustan Aluminium Corporation Ltd. Vs. Commissioner of Income Tax (Central) and Others, and/or in the case of Hamilton & Co. (P.) Ltd. ''s case (supra).
This part of the argument has also been considered by us. Mr. Poddar in enumerating the instances where the Legislature inserted Explanations to the main provisions giving retrospective effect to the same not from the commencement of the Act but from an intermediate date, has omitted to mention Explanation that was inserted below section 26 relating to treatment of property owned by co-owners. The Explanation clarified that where more than one person owned a particular property each using it as his or her residence, the concessional tax treatment provided for in section 23(2) in respect of self-occupied dwelling house is to be allowed in computing the property income of each such co-owner as if each co-owner is individually entitled to the relief. This Explanation was inserted by the Taxation Laws (Amendment) Act, 1975, having effect from 1-4-1976. There also the question arose whether the Explanation is applicable only in respect of computation of property income from assessment year 1976-77 and onwards. This Court in Commissioner of Income Tax Vs. Bejoy Kumar Almal, held that the Explanation is clarificatory in nature and seeks to set at rest the ambiguity in the provisions contained in sections 23(2) and 26. Therefore, the Explanation should be given retrospective effect and should be taken as explaining the law as it always has been. Similar view was also taken by the Delhi High Court in Commissioner of Income Tax Vs. Shyam Sunder, . It is not that the Court did not have occasion to decide on the issue arising from the effect of retrospectivity on account of insertion of Explanation with effect from a date later than the date of commencement of the Act. Even after taking notice of limited retrospectivity, this Court held that the Explanation should be deemed to be in force from the very inception of the law, its effect ordinarily being clarificatory. All the arguments now being urged by Mr. Poddar before us must have had a place in judicial consideration that weighed with this Court in holding the view that it did in Bejoy Kumar Almal''s case (supra). The reference to the decision of the Bombay High Court in Ritz Limited''s case (supra) does not advance the case of Mr. Poddar in view of the unambiguous pronouncement of this Court in Bejoy Kumar Almal''s case (supra), as to the effect of Explanation.
It is true that the Explanation begins with the words:
For the removal of doubts, it is hereby declared that for the purpose of this sub-section.
Then the relevant clauses (a), (b) and (c) of the Explanation follow.
It is, therefore, correct apprehension of the learned counsel that these words can be construed as the declaration by the Legislature of its intention hitherto latent in the words now spelt out more clearly. Therefore, this amendment is not a legislation de novo; it is merely a restatement of what the law was legislated to be in the beginning, of which some further articulation is necessary. When the Legislature refers to prevailing law and then explains the true import of the words used in the provision, the amendment is on the face of it declaratory or annotative and is no new legislation.
The learned counsel has, however, contended that this view would be simplistic when examined from the total context of such amendment. Even while saying that the amendment has the purpose of removing doubts the Legislature has pegged its operation to a past date which means its intention is not to give it unrestricted retrospective operation. Multiple instances of similar legislative amendments have been given where, despite avowal of the single-minded purpose of removing doubts, retrospective effect has been given to such declaratory amendments from a particular point of time. Such drawing of the line of retrospectivity at different points of time cannot be said to have been done capriciously. Even though declaratory, the provisions cannot be stretched beyond the line drawn.
There are no doubt reasons why the Legislature has in some instances given divergent retrospectivity to different amendments. The date-lines depend on the circumstances and the requirement of rationalization and pragmatism. Such date-lines are fixed so that the matters buried in long past may not be revived creating undesirable multiplication and complexities. There may be many other cogent considerations for the Legislature to fix the point of retrospectivity somewhere in the past. We are not concerned with that. In the present case, we cannot persuade ourselves to share the view of the counsel for the assessee that the Commissioner while passing an order on any date prior to 1 -6-1988 cannot draw support from the principle declared by this Explanation.
The Commissioner proceeded to revise the assessment and passed the revision order u/s 263 obviously taking the view, even in the absence of the Explanation, that the merger extends only to the matters which are appealed against and dealt with in the appeal order. The insertion of the Explanation by the Legislature vindicates his view as correct. There would be no difficulty for us at all to uphold the initiation of the proceeding even if there was no Explanation as now inserted. The Explanation merely restates what was the law latent in the unamended provision as we have earlier said. The insertion of the Explanation (c), after its amendment by the Finance Act, 1989, in its text does not create complication. It simply says that, no matter, when the order sought to be revised had been the subject-matter of any appeal, whether on or before or after 1-6-1988, revisionary powers shall be deemed always to have extended to such matters as had not been considered and decided in appeal. Much has been made by the learned counsel of the fact that despite the retrospectivity given in clause (c) of the Explanation in the widest possible terms retrospective effect of the amendment has, however, been given a definite date, viz., 1-6-1988. The counsel''s contention is that this dateline means that the principle embodied by the Explanation cannot be invoked by the Commissioner on a date prior to 1 -6-1988. But, our reading is different. This dateline, if given effect to in the manner the learned counsel proposes, then clause (c) renders the amendment otiose in that the words ''shall be deemed always to have extended'' lose significance. Even without these words clause (c) would have the same effect as it earlier had. But redundancy cannot be attributed to any legislation. Rather one test of unsoundness of any interpretation is whether the interpretation reduces the legislation to redundancy. If it does, the interpretation is wrong.
In our view the dateline operates as a bar where the Commissioner proceeds to revive a proceeding by way of rectification of any order which he might have passed before 1-6-1988 taking a view opposed to what is now declared in the amendment. Many High Courts have held that the effect of the appeal order is total merger even if the subject- matter of appeal is in respect of part or parts of the assessment order and not the whole of it. Thus, possibility of revision proceeding having been dropped after initiation by reason of such pronouncements by the jurisdictional High Courts cannot be ruled out. The date-line only signifies that on the basis of the retrospectivity of the amendment no rectificatory measure should be taken in respect of any decision taken for giving up the proceeding prior to 1-6-1988.
This is the only way one can read the mind of Parliament. Parliament merely declared what it intended to enact at the very inception of the provision, but also took care that the amendment, though declaratory, may not lead to the reopening of the past cases given up. It was for that purpose that it thought fit to set a date to its retrospectivity. This should not, however, preclude application of the principle in the cases pending adjudication. Any question on this point subsisting for decision on or after 1-6-1988 should be governed by the present declaration.
It is quite clear now that the revision order passed on the view taken of the legal effect of merger on the same way now as clause (c) of the Explanation declares, shall be free from any debate and the law as clarified should apply. That is why it has been said that the Explanation shall apply after 1-6-1988 as though it had been on the statute from the very inception. The words ''shall be deemed always to have extended'' leave no doubt that clause (c) of the Explanation has retrospective effect and any order of revision coming in for judicial scrutiny shall have to be adjudged in the light thrown by the Explanation.
In the result, we answer the question in the negative and in favour of the revenue and against the assessee. There will be no order as to costs.
Banerjee, J.
I agree.