KUDILAL GOVINDRAM SEKSARIA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN the assessment of the assessee for the assessment year 1949 -50 for which the account year was Maru Year 2004 -2005, notices were issued by the Income -tax Officer under section 22(4) on the 12th October, 1953, and on the 21st December, 1953. By the said notices the Income -tax Officer had called upon the assessee to furnish accounts, documents and information in respect of the items specified by him in a letter accompanying each of the notices. The assessee failed to comply fully with the said notices and the Income -tax Officer made a best judgment assessment under section 23(4) on the 28th January, 1954. On the 1st March, 1954, the assessee filled an application under section 27 for setting aside the best judgment assessment under section 23(4). It was alleged in the said application by the assessee that he had complied with the requisition of the notices issued by the Income -tax Officer and the best judgment assessment, therefore, was not justified. The application was rejected by the Income -tax Officer. In the arguments before the Appellate Assistant Commissioner in the appeal, which the assessee referred again the order of the Income -tax Officer, an additional ground was taken, viz., that the notice sunder section 22(4) were invalid and, consequently, the Income -tax Officer had no right to make a best judgment assessment for non -compliance with the said notices. The argument advanced was that prior to the amendment of section 22(4) by the Amending Act of 1953, the Income -tax Officer could under the said section ask only for the production of accounts and documents and not for any other information or particulars. The amendment made by the Amending Act of 1953 gave power to the Income -tax Officer to require the assessee to supply particulars and information in addition to the accounts and documents, but this amendment became operative only from the 1st April, 1952, and, therefore, could not apply to assessments of a period prior to the said date. Since the assessment in the present case was for the assessment year 1949 -50, the Income -tax Officer had no power to require the assessee to furnish particulars or information on a notice under section 22(4). The argument was negatived by the Appellate Assistant Commissioner who took the view that the amendment of section 22(4) effected by the Amendment Act was clearly a procedural amendment and was, therefore, applicable to all assessments, which were then pending. Since the notices issued under section 22(4) were subsequent to the date since when the amendment had become effective, the notices issued were perfectly good and valid and the Income -tax Officer was, therefore, justified in proceeding to a best judgment assessment for non -compliance with the said notices by the assessee. In the appeal before the Income -tax Appellate Tribunal, the same contention was again raised by the assessee and it was further sought to be reinforced by an argument that if the amendment effected in section 22(4) was made applicable to assessments of a date prior to its introduction, such an interpretation of the said provision would make it discriminatory and, therefore, violative of the fundamental rights under article 14 of the Constitution. The Tribunal did not accept the contentions raised by the assessee before it, and confirmed the orders passed by the income -tax authorities. Thereafter, at the instance of the assessee, it drew up a statement of the case and referred to this court the following question under section 66(1) of the Indian Income -tax Act : 'Whether oh the facts and circumstances of the case the notices dated 12th October, 1953, and 21st December, 1953, issued under section 22(4) are valid ?'

(2.) MR . Kolah, the, learned counsel appearing for the assessee, has argued that the provision of section 22(4) of the Indian Income -tax Act is not merely a procedural provision and, therefore, the rule that a procedural provision is ordinarily retrospective cannot apply to the said provision. Secondly he has argued that the legislature at the time of enacting the said provision, having made the Act retrospective only from a specified date, viz, 1st April, 1952, no greater retrospective effect could be given to the said provision. Mr. Kolah argues that the even though in the absence of the legislature having expressed its intention it may have been possible to say that the rule that a procedural amendment is retrospective could have applied to the present provision. In view of the specific intention declared by the legislature, no greater retrospective effect than making it operative only from 1st April, 1952, can be given to the said provision. Mr. Kolah's further argument is that even if it is assumed that the amendment is only in the procedural law, the procedural law is also subject to constitutional limitations and, consequently, even the procedural law, which is discriminatory will be affected by article 14 of the Constitution and thus rendered ineffective. Mr. Kolah's argument in this connection is that by giving retrospective effect to the provision of section 22(4) assessee similarly situated will have affected differently. According to him, all assessee, who are liable to pay income -tax for a given assessment year, are persons similarly situated. Thus all assessee who are liable to pay income -tax for the assessment year 1949 -50 form a class of persons similarly situated. Now, in the case of some persons o this class of their assessments might have been completed before the amendment of section 22(4) was brought in by the Amending Act of 1953. In the assessments proceedings of these persons, the Income -tax Officer could have no authority it require them by a notice under section 22(4) to furnish particulars and information. In the case of persons, however, whose assessments for the year 1949 -50 were not completed until the amendment came on the stature book, the Income -tax Officer would have the right to give a notice under section 22(4) requiring them not only to produce accounts and documents but also to produce particulars and information, and if they failed to comply with the notice requiring particulars and information to be supplied, he could make a best judgment assessment under section 23(4) against them although for the same failure on the part of the others, whose assessments were completed, he could not have done so, Mr. Kolah, therefore, argues that the mere fortuitous circumstance that the assessments of one assessee was completed before a particular date while that of another similarly situated assessee was not completed, the Income -tax Officer would be in a position to treat the other man in a manner different from that in which he treated the first one. Since such a result is likely to follow by interpreting the provisions of section 22(4) as being retrospective, Mr. Kolah's argument is that no such interpretation could be given to it. Mr. Kolah has referred us to State of West Bengal v. Anwar Ali Sarkar and Dhirendra Kumar Mandal v. Superintendent and Remembrancer of Legal Affairs to the Government of West Bengal for his submission that a procedural law comes as much within the purview of article 14 of the Constitution as any other law. For his argument that the provision of section 22(4) is not purely procedural but affairs the liability of the assessee and, therefore, would be violative of article 14 of the Constitution, if retrospective effect is given to it, he has referred us to certain observations in Shree Meenakshi Mills Ltd. v. A. V. Visvanatha Sastri and M. C. Muthiah v. Commissioner of Income -tax.

(3.) IT is in the procedure prescribed for the determination of the amount of tax liability of the assessee that section 22(4) provides that the Income -tax Officer may require the assessee to furnish him with certain accounts or document or certain other particulars and information. Before the amendment in 1953, the provision of this section had only provided for accounts and documents to be called for. It has now by the amendment also provided that further particulars and information may also be called. But these, it must be remembered, are matters which are relevant and which would help the Income -tax Officer in correctly determining the tax liability of the assessee which, it is the duly and obligation of the assessee, to discharge. The provision of section 22(4) by itself is, no doubt, purely procedural and simply because there has been a change in this procedural provision, which perhaps is little inconvenient to the assessee, that would not make the usual the inapplicable to this provision, viz., that a procedural provision will have application to all pending proceedings subsequent to its introduction. Mr. Kolah's argument, however, is that, although the provision of section 22(4) appears to be procedural in its nature, it affects the liability of the assessee in view of the provision of section 23(4) and, consequently, the provision cannot be regarded as purely procedural. Mr. Kolah says that a failure to comply with the requisition under section 22(4) subjects the assessee to a best judgment assessment at the hands of the Income -tax Officer, and, therefore, affects his liability. Since the consequence of a best judgment follows on a non -compliance with the notice under section 22(4), the content of section 22(4) is directly linked with the liability of the assessee and, therefore, it would not be correct to look upon the provision as being a mere procedural provision.