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TMI Blog2023 (4) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... date, i.e., the amended Section 153C shall be applicable. Section 153C has been amended by way of substitution whereby the words belongs or belong to have been substituted by the words pertains or pertain to . As observed and held by this Court in the case of Shamrao V. Parulekar [ 1952 (5) TMI 12 - SUPREME COURT] that amendment by substitution has the effect of wiping the earlier provision from the statute book and replacing it with the amended provision as if the unamended provision never existed. The primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote or advance the object and purpose of the enactment. It is further observed that the ascertainment of the legislative intent is a basic rule of statutory construction and that a rule of construction should be preferred which advances the purpose and object of a legislation and that though the construction, according to the plain language, should ordinarily be adopted, such a construction should not be adopted where it leads to anomalies, injus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 929 OF 2022 (@ SLP (C) NO. 29134 OF 2019) CIVIL APPEAL NO. 930 OF 2022 (@ SLP (C) NO. 29879 OF 2019) CIVIL APPEAL NO. 931 OF 2022 (@ SLP (C) NO. 29880 OF 2019) CIVIL APPEAL NO. 932 OF 2022 (@ SLP (C) NO. 29881 OF 2019) CIVIL APPEAL NO. 933 OF 2022 (@ SLP (C) NO. 29882 OF 2019) CIVIL APPEAL NO. 934 OF 2022 (@ SLP (C) NO. 29883 OF 2019) CIVIL APPEAL NO. 935 OF 2022 (@ SLP (C) NO. 30535 OF 2019) CIVIL APPEAL NO. 936 OF 2022 (@ SLP (C) NO. 30539 OF 2019) CIVIL APPEAL NO. 937 OF 2022 (@ SLP (C) NO. 30542 OF 2019) CIVIL APPEAL NO. 938 OF 2022 (@ SLP (C) NO. 30548 OF 2019) CIVIL APPEAL NO. 939 OF 2022 (@ SLP (C) NO. 30549 OF 2019) CIVIL APPEAL NO. 940 OF 2022 (@ SLP (C) NO. 30550 OF 2019) CIVIL APPEAL NO. 941 OF 2022 (@ SLP (C) NO. 30551 OF 2019) CIVIL APPEAL NO. 942 OF 2022 (@ SLP (C) NO. 486 OF 2020) CIVIL APPEAL NO. 943 OF 2022 (@ SLP (C) NO. 492 OF 2020) CIVIL APPEAL NO. 944 OF 2022 (@ SLP (C) NO. 493 OF 2020) CIVIL APPEAL NO. 945 OF 2022 (@ SLP (C) NO. 496 OF 2020) CIVIL APPEAL NO. 946 OF 2022 (@ SLP (C) NO. 499 OF 2020) CIVIL APPEAL NO. 947 OF 2022 (@ SLP (C) NO. 504 OF 2020) CIVIL APPEAL NO. 948 OF 2022 (@ SLP (C) NO. 505 OF 2020) CIVIL APPEAL NO. 949 OF 2022 (@ SLP (C) NO. 526 O ..... 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X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as the lead matter and the facts in the said writ petition are narrated, which in nutshell are as under:- 3.1 The original writ petitioner, an individual filed his Return of Income for the Assessment Year (A.Y.) 2012-13 on 11.09.2012 declaring total income of Rs. 44,73,820/- as business income from a partnership firm and other income. A search came to be conducted on various premises of H.N. Safal Group on 04.09.2013. A panchnama came to be prepared on 07.09.2013. On the basis of the seized material, the Assessing Officer initiated proceedings against the assessee under Section 153C of the Act, 1961 by issuing a notice dated 08.02.2018. 3.2 The assessee filed his reply dated 01.05.2018 and also submitted his return of income. Vide letter dated 14.5.2018, the Assessing Officer furnished the satisfaction note recorded by him and also attached therewith the satisfaction of the Assessing Officer of the searched person. From the satisfaction recorded, though it was found that no document belonging to the original writ petitioner - assessee was found during the course of search, however, a hard-disk was seized, which contained an excel sheet with the data of the computer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the person searched; Section 153C of the Act as amended w.e.f. 01.06.2015 by Finance Act, 2015 shall not be made applicable with respect to the searches conducted prior to 01.06.2015. The High Court has further observed that by amendment brought in Section 153C of the Act, 1961 by Finance, Act, 2015 w.e.f. 01.06.2015, a new class of assesses are sought to be brought within the sweep of Section 153C of the Act, which affects the substantive rights of the assessees and, therefore, cannot be said to be a mere change in the procedure. The High Court has also observed that since the amendment expands the scope of Section 153C of the Act, 1961 by bringing in an assessee if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, inasmuch as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A, Provided that in case of such other person, the reference to the date of initiation of the search under Section 132 or making of requisition under Section 132-A in the second proviso to sub-section (1) of Section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in subsection (1) has or have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of Section 153-A: Provided that in case of such other person, the reference to the date of initiation of the search under Section 132 or making of requisition under Section 132-A in the second proviso to sub-section (1) of Section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of Section 153-A except in cases where any assessment or reassessment has abated. (2) Where books of account or document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the words pertains or pertain to insofar as books of account and documents are concerned. 4.2 It is further submitted that there is a difference between the words or phrases belongs or belong to and pertains or pertain to . It is submitted that the words pertains or pertain to are of much wider import than belongs or belong to . That, therefore, the legislature has expanded the scope of operation of Section 153C to include the situation where during search proceedings under Section 132 of the Act, 1961, if incriminating documents / materials pertaining to a third party are found, the Revenue can proceed against such third party. 4.3 It is next submitted by Shri Nataraj, learned ASG appearing on behalf of the Revenue that while interpreting the amendment to Section 153C by Finance Act, 2015, the following principles / tests need to be kept in mind:- (i) effect of amendment by substitution; (ii) legislative intent; (iii) Section 153C of the Act, 1961 is a machinery provision; (iv) interpretation which makes the statute or a part of it a dead letter to be avoided; (v) power to legislate includes power to legislate retrospectively. 4.4 Elaboratin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SG has relied upon the decisions of this Court in the cases of Zile Singh (supra) (paras 14, 15, 18 and 20) and Girdhari Lal Sons Vs. Balbir Nath Mathur, (1986) 2 SCC 237. 4.6 Relying upon above two decisions, it is contended that the object and purpose of the amendment to remove the mischief and defect for which the amendment was necessitated is required to be considered and borne in mind. That as observed and held that once the Parliament s intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the Court to give the statute a purposeful or a functional interpretation. 4.7 It is further contended by Shri Nataraj, learned ASG that Section 153C of the Act, 1961 is a machinery provision. He submitted that the High Court in the impugned judgment and order has also observed that Section 153C is a machinery provisions. While interpreting a machinery provision of a taxing statute, it is the duty of the Court to give effect to its manifest purpose. The interpretation that defeats the purpose of the statute should be avoided. That despite the observation by the High Court that Section 153C of the Act, 1961 is a machinery prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment of CIVIL APPEAL NO. 911 OF 2022 Page 31 of 67 Andhra Pradesh Vs. Hindustan Machine Tools Ltd., (1975) 2 SCC 274 (para 10) and Lily Thomas Vs. Union of India (2013) 7 SCC 653 (para 21). 4.10 It is further submitted by Shri Nataraj, learned ASG that the High Court has erred in holding that the respondents have a vested right and the amendment to Section 153C of the Act, 1961 affects such vested substantive right of the respondents. That no such substantive rights are vested in the respondents. Once the conditions enumerated in Section 153C are satisfied, no liability is fastened ipso facto. It is submitted that the authorities issued a show cause notice and thereafter proceedings were initiated in accordance with law. Therefore, the High Court has erred in quashing the proceedings at the initial stage of show cause notice by holding that substantive rights of the respondents are affected. 4.11 Making above submissions, it is vehemently submitted that the High Court has committed a grave error in holding that Section 153C as amended by the Finance Act, 2015 w.e.f. 01.06.2015, though a machinery provision, will only apply to search proceedings initiated after the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions are machinery provisions, the amendment brings into its fold persons not otherwise covered and hence affects the substantive rights and, therefore, cannot be made applicable retrospectively. In support of their submission that the amendment to Section 153C by Finance Act, 2015 shall not be made applicable retrospectively and with respect to the search carried out prior to 01.06.2015, reliance is placed on the decision of this Court in the case of Controller of Estate Duty Vs. M.A. Merchant, 1989 Supp (1) SCC 499. It is submitted that in the said decision, this Court had refused to interfere with the vested rights by allowing reopening of an assessment completed prior to the date w.e.f. which the new section in the Estate Duty Act came into force. 5.4 It is contended that in the present case, the amendment to Section 153C by Finance Act, 2015 brings into the fold of Section 153C of the Act, 1961, assessees, who were not so far covered by it, i.e., persons to whom books of account/documents pertain or relate to, and not just persons to whom it belong. That this widening, thus, affects substantive rights, as new assessees may now be proceeded against and hence the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Assessing Officer could not have invoked Section 153C of the Act, 1961 at all. 5.8 It is further submitted that the amended Section 153C of the Act, 1961 deals with both procedural and substantive rights, therefore, the prospective rule of construction shall be applicable. That as observed and held by this Court in the case of Zile Singh (supra), it is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. The rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. It is submitted that unless there are words in the statute, which are sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only. That the date of search is the relevant date, which has to be taken into consideration for applying the amendment. The same is supported by the CBDT Circular No. 2/2018 dated 15.02.2018 wherein Section 153A was amended with effect from 01.04.2017. That Para 80.5 of the Circular clearly states that the amended provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt appeals be dismissed. 6. We have heard the learned counsel appearing on behalf of the respective parties at length. 7. The question of law that arises for consideration of this Court is:- Whether the amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under Section 132 of the Act, 1961 before 01.06.2015, i.e., the date of amendment? 8. While considering the aforesaid question and the submissions made on behalf of the respective parties, a few facts, which are necessary for determination of the question are required to be referred to, which are as under:- (i) That a search under Section 132 of the Act, 1961 was conducted at the various premises of one H.N. Safal Group on 04.09.2013. When the search came to be conducted, Section 153C as it stood then (pre amendment 2015) was applicable. (ii) Section 153C as it stood then provided that Notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act, 2015 w.e.f. 01.06.2015) became applicable. The notice under Section 153C against the non-searched persons on the basis of the material seized during the search conducted at the various premises of H.N. Safal Group (searched person) and the assessment orders were the subject matter of appeal before the High Court. 9. In light of the aforesaid facts, the question of law, which arises for consideration of this Court is, Whether amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under Section 132 of the Act, 1961 before 01.06.2015, i.e., the date of amendment , is required to be considered. 10. While considering the aforesaid question, the reason and the object and purpose of the amendment to Section 153C introduced vide Finance Act, 2015 w.e.f. 01.06.2015 is required to be considered. 10.1 As observed hereinabove, in the pre-amended Section 153C, the words used were belongs or belong to a person other than the searched person. In the case of Pepsico India Holdings Private Limited (supra), the Delhi High Court interpreted the expression belong to and observed and held that there is a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. 10.3 Thus, as per the proviso to Section 153C as inserted vide Finance Act, 2005, and the effect of the said proviso is that it creates a deeming fiction wherein any reference made to the date of initiation of search is deemed to be a reference made to the date when the Assessing Officer of the non-searched person receives the books of account or documents or assets seized etc. Thus, in the present case, even though the search under Section 132 was initiated prior to the amendment to Section 153C w.e.f. 01.06.2015, the books of account or documents or assets were seized by the Assessing Officer of the non-searched person only on 25.04.2017, which is subsequent to the amendment, therefore, when the notice under Section 153C was issued on 04.05.2018, the provision of the law existing as on that date, i.e., the amended Section 153C shall be applicable. 10.4 As observed hereinabove, Section 153C has been amended by way of substitution whereby the words belongs or belong to have been substituted by the words pertains or pertain to . As observed and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective operation is not applicable to declaratory statutes . In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended . An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on case [(1584) 3 Co Rep 7a : 76 ER 637] was decided that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide. 3rd. What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico. 10.6 It is the case on behalf of the Revenue that Section 153C is a machinery provision, which has been inserted with the purpose of carrying out the assessment of persons other than the searched person under Section 132 of the Act, 1961. Even, in the impugned judgment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the provisions of Section 142, sub-sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply; (c) the assessing officer, on determination of the undisclosed income of the block period in accordance with this Chapter, CIVIL APPEAL NO. 911 OF 2022 Page 56 of 67 shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under Section 132 or requisitioned under Section 132-A shall be dealt with in accordance with the provisions of Section 132-B. *** 158-BD.Undisclosed income of any other person. Where the assessing officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132-A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed under Section 158- BC against such other person and the provisions of this Chapter shall apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 1 (SC)]; CWT v. Sharvan Kumar Swarup Sons [(1994) 6 SCC 623]; CIT v. National Taj Traders [(1980) 1 SCC 370]; Associated Cement Co. Ltd. v. CTO [(1981) 4 SCC 578]). Francis Bennion in Bennion on Statutory Interpretation, 5th Edn., Lexis Nexis in support of the aforesaid proposition put forth as an illustration that since charge made by the legislator in procedural provisions is excepted to be for the general benefit of litigants and others, it is presumed that it applies to pending as well as future proceedings. 10.7 In the case of Girdhari Lal Sons (supra), it is observed and held by this Court that once the primary intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the Court to give the statute a purposeful or a functional interpretation. It is further observed that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote or advance the object and purpose of the enactment. It is further observed that the ascertainment of the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took away with the other. 21. The provisions of one section of the statute cannot be used to defeat those of another unless it is impossible to effect reconciliation between them. Thus a construction that reduces one of the provisions to a useless lumber or dead letter is not a harmonised construction. To harmonise is not to destroy. 10.8 Insofar as the submission on behalf of the respective respondents assessees that by way of amendment to Section 153C by Finance Act, 2015, it brings into its fold, the assessees persons, who were not so far covered by it and, therefore, it affects the substantive rights of the assessees and, hence, it should not be made applicable retrospectively, is concerned, the submission seems to be attractive but deserves to be rejected. As observed hereinabove, even the unamended Section 153C pertains to the assessment of income of any other person. The object and purpose of Section 153C is to address the persons other than the searched person. Even as per the unamended Section 153C, the proceeding against other persons (other than the searched person) was on the basis of the seizure of books of account or documents seized or requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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