1996 (8) TMI 511 - SC - VAT and Sales Tax

Whether, relying upon clause (5) pf Section 35, an Income tax Officer could rectify the assessment of a person a who was a partner in a firm when the assessment of the firm was completed before 1st April, 1952? Held that - By reason of the said Notification issued on 30th March, 1974, with effect from 1st November, 1971, Rule 18(5)(ii) has to be read as barring the commissioner (or other authority to whom power in this behalf has been delegated by the commissioner) from revising of his own motion any assessment made or order passed under the Act or the rules if the assessment has been made or the order has been passed more than six years previous to 1st November, 1971, Put conversely, with effect from 1st November, 1971, Rule 18(5)(ii) permits the Commissioner (or other authority) to revise of his own motion any assessment made or order passed under the Act or the rules provided the assessment has not been made or the order passed more than six years previously. This being the plain meaning, the said Notification must be given full effect. Full effect can be given only if the said Notification is read as being applicable not only to assessments which were incomplete but also to assessments which reached finality by reason of the earlier prescribed period of four years having elapsed. Where language as unambiguous as this is employed, it must be assumed that the legislature intended the amended provision to apply even to assessments that had so become final if the intention was otherwise, the Legislature would have so stated. In the result, the appeal is allowed. The judgment and order under appeal is set aside. The respondents shall be entitled to proceed upon the notices dated 7th November, 1974, issued to the 1st respondent reopening its assessments for Assessment years Chaitra Sudi 2023 and 2024.

Summary

Issues Involved:
1. Validity of reopening assessments under amended Rule 80(5) of the Bengal Sales Tax Rules, 1941.
2. Retrospective application of amendments to Section 26(1) of the Bengal Finance (Sales Tax) Act, 1941.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessments under Amended Rule 80(5) of the Bengal Sales Tax Rules, 1941:

The primary issue was whether the Commercial Tax authorities could validly reopen assessments for the Assessment Years Chaitra Sudi 2023 and 2024, which were completed on 17th February 1969 and 26th March 1969, respectively. Under the original Rule 80(5) of the Bengal Sales Tax Rules, 1941, assessments could be reopened only within four years. However, the Bengal Sales Tax Ordinance, 1973, and the subsequent Bengal Finance (Sales Tax) (Third Amendment) Act, 1974, amended Section 26(1) of the Act to allow the State Government to make rules with retrospective effect. Following this amendment, a Government Notification issued on 30th March 1974, amended Rule 80(5) to extend the period for reopening assessments from four to six years, effective from 1st November 1971.

The High Court had quashed the notices for reopening the assessments, holding that the right to reopen the assessments had already been barred under the unamended Rule 80(5) when the notification was issued. The High Court relied on the Supreme Court decisions in S.S. Gadgil vs. Lal and Co. and J.P. Jani vs. Induprasad Devshanker Bhatt, which held that amendments could not revive the power to reopen assessments that had already become time-barred.

2. Retrospective Application of Amendments to Section 26(1) of the Bengal Finance (Sales Tax) Act, 1941:

The Supreme Court had to determine whether the retrospective amendment to Section 26(1) and the corresponding notification extending the period for reopening assessments from four to six years could apply to assessments that had already become final. The appellants argued that the notification explicitly stated that the amendment was effective from 1st November 1971, thereby allowing the reopening of assessments within six years from that date. The respondents contended that the amendment should only apply to assessments made after 1st November 1971, and not to those that had already achieved finality.

The Supreme Court examined precedents, including S.S. Gadgil, J.P. Jani, and S.K. Habibullah, which emphasized that retrospective amendments could not revive the power to reopen assessments unless explicitly stated by the legislature. The Court concluded that the language of the notification was clear and unambiguous, indicating that the amended Rule 80(5) should apply retrospectively from 1st November 1971, encompassing all assessments made within the preceding six years, whether they had become final or not.

Conclusion:

The Supreme Court allowed the appeal, setting aside the judgment and order of the High Court. The Court held that the notification must be given full effect, permitting the reopening of assessments even if they had become final under the earlier four-year limitation period. Consequently, the respondents were entitled to proceed with the notices dated 7th November 1974, reopening the assessments for the Assessment Years Chaitra Sudi 2023 and 2024. There was no order as to costs.