1969 (7) TMI 29 - SC - Income Tax

Whether the State Government could invest the Tahsildar with the powers of a Tax Recovery Officer under the sub-clause (ii) of clause (44) of section 2 of the Act read with sub-rule (2) of rule 7 of the Income-tax (Certificate Proceedings) Rules, 1962 with effect from a date prior to the date of the notification, i. e., retroactively or retrospectively? Held that - It is difficult to hold in the present case that the Taluka Tahsildar could be authorised by the impugned notification to exercise powers of a Tax Recovery Officer with effect from a date prior to the date of the notification. As the legislature can legislate prospectively as well as retrospectively there can be hardly any justification for saying that the President or the Governor should not be able to make rules in the same manner so as to give them prospective as well as retrospective operation. For these reasons the ambit and content of the rule making power under article 309 can furnish no analogy or parallel to the present case. The High Court was consequently right in coming to the conclusion that the action taken by the Tahsildar in attaching the shares was unsustainable. Appeals dismissed.

Summary

Issues:
Validity of a notification empowering revenue officials to act as Tax Recovery Officers under the Income-tax Act, 1961 with retrospective effect.

Analysis:
The judgment in question involved the validity of a notification issued by the Government of Kerala empowering revenue officials, including the Tahsildar, to exercise the powers of a Tax Recovery Officer under the Income-tax Act, 1961, with retrospective effect from 1st April, 1962. The notification was challenged in court by a party who claimed that the actions taken by the revenue officials, including the Tahsildar, were invalid due to the retrospective nature of the notification. The court examined the provisions of the Income-tax Act, specifically the definitions of "Tax Recovery Officer" under Section 2(44) and the subsequent amendment brought by Section 4 of the Finance Act, 1963. The court analyzed the legislative intent behind retrospective laws and the principles governing the delegation of legislative power. It emphasized that retrospective laws should only be applied when expressly stated or implied by the legislature. The court also considered the distinction between legislative and executive acts, highlighting that the impugned notification was more of an executive act. Drawing on precedents, the court concluded that the notification could not confer retrospective powers on the Tahsildar to act as a Tax Recovery Officer.

The court further examined whether the substitution of the definition of "Tax Recovery Officer" by the Finance Act, 1963, could authorize the State Government to invest officers with retrospective powers. It noted that the legal fiction created by the substitution could not extend beyond its intended scope without express provisions. The court referenced a previous decision regarding the extension of time limits by the State Government, emphasizing the need for explicit authorization for retrospective actions. Additionally, the court discussed a Constitution Bench decision on rule-making powers under article 309 of the Constitution, highlighting the distinction between legislative and executive authorities. Ultimately, the court held that the impugned notification did not have the legal basis to confer retrospective powers on the Tahsildar, leading to the dismissal of the appeals with costs.

In conclusion, the judgment delved into the complexities of retrospective laws, delegation of legislative powers, and the interpretation of statutory provisions. It underscored the importance of clear legislative intent and explicit authorization for retrospective actions, ultimately upholding the decision that the actions taken by the Tahsildar based on the retrospective notification were unsustainable.