BHAGWANDAS KEVALDAS Vs. MEHROTRA N D

JUDGEMENT

(1.) THIS is a petition for a writ of certiorari or any other appropriate writ under article 226 of the Constitution and it arises out of an order for penalty interest made by the Income -tax Officer, the second respondent before us, in respect of the assessment of the petitioner for the assessment year 1948 -49. The first respondent is the Commissioner of Income -tax, Bombay. The second respondent served a notice upon the petitioner under section 18A(1) for the assessment year 1948 -49, requiring the petitioner to pay a sum of Rs. 25,973 -5 -0 in equal installments as an advance payment of tax. The petitioner filed an estimate of the income and tax payable thereon. That was under section 18A(2) and that was done on the 17th of September, 1947. Thereafter a revised estimate was filed by the petitioner. But that fact is not material. After the petitioner filed his return of income, the second respondent made a provisional assessment under section 23B and the petitioner paid the amount of that provisional assessment. Subsequently when the assessment was finalised on 31st March, 1953, the second respondent did not charge any penalty interest under section 18A(6). However, on 21st September, 1956, he informed the petitioner that he had made a mistake is not charging penalty interest and as he wanted to rectify the mistake he called upon the petitioner to show cause why he should not do so. Ultimately, he issued a notice of demand for Rs. 14,929 -10 -0. In that order it was stated that penal interest was being charged under section 18A(6). The original assessment order was made on 31st March, 1953, and the order of rectification made by the Income -tax Officer under section 35 was made on 4th October, 1956. In the meantime, proviso 5 was added to section 18A(6) and retrospective operation was given by the Legislature to the proviso and it came into operation respectively from 1st April, 1952. On 5th December, 1956, the petitioner went in revision to the Commissioner of Income -tax and on 1st February, 1958, the Commissioner of Income -tax substantially dismissed the revision application, but he modified the order and directed that penal interest should be charged for a shorter period. The present petition was field on 1st May, 1958.

(2.) AN objection was taken by Mr. G. N. Joshi, learned counsel for the Revenue, that the only relief sought by the petitioner was that in the petition the petitioner challenged the legality of the orders made by the Income -tax Officer and that he had not properly done so as far as the order passed by the Commissioner of Income -tax was concerned. On such objection being taken, Mr. Palkhivala, learned counsel for the assessee, applied for an amendment of the petition and by the amendment it was only sought to add the following words before the grounds :

(3.) THE contentions have been pressed before us by learned counsel for the assessee and strong reliance has been placed on a decision of this court in Shantilal Rawji v. M. C. Nair, IV Income -tax Officer, E -Ward, Bombay, to which decision I was a party. That was a case of penal interest and in that case, the Income -tax Officer had passed an order rectifying an earlier order made by him under which order he had not charged any penal interest. When a notice of demand was issued by the Income -tax Officer under section 18A(6) the petitioner applied to this court challenging the validity of the order of rectification and it was held by my Lord the Chief Justice and myself that if it were clear that under section 18A(6) it was incumbent upon the Income -tax Officer to charge interest then his failure to do so would be an error apparent on the face of the record and capable of being rectified by him under section 35. We also held that the position was different. The view we took of the matter was that the fifth proviso to section 18A(6) which was inserted in the Act in May 1953, that is, after the original order of assessment had been made, and the proviso having been given retrospective effect from 1st April, 1952, must be deemed to have been part of the Act on the date of the assessment order. That being the position, the conclusion we reached was that the Income -tax Officer had vested in him a discretion to reduce or waive the interest payable by the assessee and that notwithstanding the fact that the proviso was not there on the statute book when the assessment order was made. In our judgment in the case we referred to the decision of the Supreme Court in State of Bombay v. Pandurang Vinayak, where their Lordships of the Supreme Court pointed out the effect of a deeming provision being inserted in any statute and being given respective operation. We also referred to a passage from the judgment of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council 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 the deeming provision, which was retrospective in its 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 and not having said anything in his order as to why he had not done so, the only inference possible was that he had decided to waive the amount of interest and in those circumstances he had no jurisdiction subsequently to rectify that order on the ground that there was an error apparent on the face of the record.