1965 (5) TMI 4 - SC - Income Tax

Whether there was nothing to show that the Income-tax Officer had purported to exercise his discretion when he passed the order of assessment and did not impose any liability for payment of interest under section 18A(6)? Held that - It is unfortunate that the Commissioner in considering the matter under section 33A assumed that the amending Act 25 of 1953 had no retrospective operation and rejected the claim of the assessee on the ground that at the date when the order of assessment was made, Act 25 of 1953 had not come into operation, and that the Act became effective as from December 1953, when the rules were framed. In so holding, the Commissioner committed an error of law apparent on the face of the record. The High Court was therefore right in setting aside the order which was passed by the Commissioner without considering the proviso to section 18A(6) which was clearly applicable to the case of the assessee and in the light of rule 48 which was enacted in pursuance of that proviso. Appeal dismissed.

Issues Involved:
1. Whether the appeal filed by the Commissioner and the Income-tax Officer was competent.
2. Whether the High Court had the power to issue a certificate under Article 133 of the Constitution.
3. Whether the omission to charge penal interest by the Income-tax Officer was a mistake apparent from the record.
4. Whether the retrospective operation of the proviso to Section 18A(6) of the Indian Income-tax Act, 1922, and the rules framed thereunder, applied to the case.

Issue-wise Detailed Analysis:

1. Competency of the Appeal:
The first issue raised was whether the appeal filed by the Commissioner and the Income-tax Officer was competent. The counsel for the assessee argued that the High Court had no power under Article 133 of the Constitution to certify a proposed appeal against an order in a proceeding commenced by a petition for the issue of a writ under Article 226 of the Constitution. The Supreme Court held that the expression "civil proceeding" in Article 133 covers all proceedings in which a party asserts the existence of a civil right conferred by civil law or statute and claims relief for breach thereof. The Court concluded that a proceeding for relief against the infringement of civil rights, even if it is in purported enforcement of a taxing statute, is a civil proceeding. Therefore, the appeal was competent.

2. Power of the High Court to Issue a Certificate under Article 133:
The second issue was whether the High Court had the power to issue a certificate under Article 133 of the Constitution. The Supreme Court held that the High Court had the power to certify cases concerning revenue as civil proceedings. The Court noted that the Constitution did not intend to deprive the High Court of its power to certify cases concerning revenue by enacting that the High Court may certify a case in a civil proceeding. Therefore, the High Court was competent to grant a certificate under Article 133(1).

3. Omission to Charge Penal Interest:
The third issue was whether the omission to charge penal interest by the Income-tax Officer was a mistake apparent from the record. The Supreme Court held that the Income-tax Officer was bound to impose liability for payment of interest under Section 18A(6) as it stood on the date of making the order of assessment. However, the officer did not impose that liability, which was later pointed out during an audit. The Court held that this omission was a mistake apparent from the record and could be rectified under Section 35 of the Income-tax Act.

4. Retrospective Operation of the Proviso to Section 18A(6):
The fourth issue was whether the retrospective operation of the proviso to Section 18A(6) of the Indian Income-tax Act, 1922, and the rules framed thereunder, applied to the case. The Supreme Court held that the proviso and the rules framed under it were given retrospective operation from April 1, 1952. The Court noted that the Income-tax Officer was invested with the discretion to reduce or waive interest payable by the assessee, and this power must be deemed in law to have been possessed on the date on which the order of assessment was made. Therefore, the High Court was right in setting aside the order passed by the Commissioner without considering the proviso to Section 18A(6) and the rules framed thereunder.

Separate Judgment by Mudholkar J.:
Mudholkar J. agreed with the majority that the expression "civil proceedings" in Article 133(1) of the Constitution cannot be restricted to proceedings arising out of civil suits. He held that a proceeding before the High Court under Article 226 or Article 227 in which relief is sought in respect of liability to pay tax or penalty levied by a revenue authority would be a civil proceeding. On the merits, he disagreed with the majority, holding that the omission to charge penal interest was a mistake apparent from the record and could be rectified under Section 35. He would have allowed the appeals and quashed the order of the High Court.

Conclusion:
The Supreme Court dismissed the appeals, holding that the High Court had the power to issue a certificate under Article 133 of the Constitution and that the omission to charge penal interest was a mistake apparent from the record. The retrospective operation of the proviso to Section 18A(6) and the rules framed thereunder applied to the case. The appeals were dismissed with costs.

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