Applicability of section 292BB of Income-tax Act

 

 

Section 292BB is applicable to assessment year 2008-09 and subsequent years and the assessee is precluded from taking any objection regarding invalidity of assessment/re-assessment on the ground of improper/invalid issuance/service of a notice for and from assessment year 2008-09

 

 

 

 

 

 

ITAT, SPECIAL BENCH, NEW DELHI

Kuber Tobacco Products (P.) Ltd.

v

DCIT

IT (SS) A. No. 261/Del/2001

January 14, 2009

 

RELEVANT EXTRACTS:

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38.       First and foremost rule of construction of interpretation is that in the absence of anything in the enactment to show that it is to have retrospective operation, the said enactment cannot be construed to have retrospective operation and when amendment relates to a procedural provision results into creating a new disability or obligation and which imposes new duty in respect of transactions already completed, then, the said procedural provision also cannot be applied retrospectively.  Similar is the position where a statute which not only changes the procedure, but also creates a new rights and liabilities which shall be construed to be prospective in operation unless otherwise provided either expressly or by necessary implication.

39.       Now, we proceed to examine that whether section 292-BB can be construed to be retrospective in the light of the above principles.  It is also observed that Section 292-BB has been made effective  by the legislature from 1st April, 2008 and there is nothing in the enactment to show that Section 292-BB has retrospective operation.  If it is so, according to Rule of Interpretation described above, Section 292-BB cannot be construed retrospectively.

40.       According to above mentioned principles laid down by the Hon'ble Supreme Court, every litigant has a vested right in substantive law, but no litigant has such right in procedural law.  No doubt, issue and service of notice though may relate to procedural law, but where procedural statute creates a new disability or obligation and imposes new duties in respect of transactions already accomplished, then the statute cannot be construed to have retrospective effect.

41.       It has already been pointed out that issue and service of notice in the manner prescribed by the statute has played a vital role in determining the validity or otherwise of    assessment/re-assessment and other proceedings under the Act and where the courts have found defect either in the notice or in its proper service, the validity of assessment/re-assessment and other proceedings have been struck down by the Courts subject, of course, to Section 292B of the Act introduced w.e.f. 1.10.1975. Thus, to challenge the validity of a particular action of the Department of making assessment or re-assessment on the basis of invalidly issuance/service of notice had become right of litigant assessee during the course of appellate proceedings even though such contention was never raised during the course of assessment proceedings.  Instances of striking down the validity of assessment and re-assessment proceedings have already been discussed in the earlier part of this order.  By insertion of Section 292-BB such right of the assessee to challenge the validity of assessment or re-assessment proceedings during the course of appellate proceedings has been taken away by the statute w.e.f. 1.4.2008.  It is also observed that the issue and service of notice relates to procedural law, but, at the same time, it created a new disability on the assessee litigant to the extent that he is debarred from taking a plea in the appellate proceedings to challenge the validity of the same on the ground of valid issuance/service of notice required to be given by the statute in a case where assessee has appeared in such proceedings or cooperated in the inquiry relating to assessment or re-assessment.  Therefore, applying the above principles of interpretation and keeping in view above discussion it has to be held that Section 292-BB cannot be construed to have retrospective operation and it has to be applied prospectively.

42. Having arrived at the conclusion that Section 292BB has no retrospective effect and is to be construed prospectively, it has to be held that prior to 1.4.2008 i.e., upto 31st March, 2008, as per Section 292BB, the assessee is not precluded from taking any objection (hereinafter referred to as ‘such objection') regarding invalidity of assessment/re-assessment on the ground of improper/invalid issuance/service of a notice.

43.        The second aspect which requires to be considered is that when assessee can be said to be precluded from taking such objection Section 292 BB has been made applicable w.e.f. 1.4.2008 by the Finance Act, 2008.  As per well established law as explained by Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala 60 ITR 262 (SC) (which is a decision rendered by five Judges of Hon'ble Supreme Court) that the Income-tax Act as it stands amended on the first day of any financial year must apply to the assessments of that year.  The facts in that case were that for assessment year 1957-58 the company was assessed to agricultural income-tax under The Kerala Agricultural Income-tax Act, 1950 and in the assessment surcharge @ 5% on the agricultural income-tax and super tax was levied and collected from the assessee under the provisions of Surcharge Act.  The levy of surcharge was agitated by the assessee on the ground that Surcharge Act came into force only from 1st September, 1957 and, therefore, it does not have retrospective effect and surcharge could not be levied for assessment year 1957-58.  Such contention of the assessee was rejected by the Assessing Officer as well as by the first appellate authority.  However, the Tribunal held that surcharge could not be levied as Surcharge Act did not have retrospective operation unless there was a specific provision therein to that effect and the question of law was referred to Kerala High Court to state that whether surcharge could be levied for assessment year 1957-58.  The Hon'ble High Court decided the question in favour of the Revenue and, thus, the matter went to Hon'ble Supreme Court and their Lordships of Hon'ble Supreme Court have observed that the law is well settled that the Income-tax Act as it stands amended on the first day of April of any assessment year must apply to that assessment year.  Any amendment in the Act which come into force after the first day of April of an assessment year, would not apply to that assessment year, even if the assessment is actually made after the amendments come into force.  Their Lordships referred to the earlier decision of Apex Court in the case of CIT vs. Scindia Steam Navigation Company Ltd. (supra) in which similar proposition of law was laid down while interpreting Section 10(2)(vii) and proviso (iv) and Section 66 (1), (2) and (5) and in the said case it was held that the proviso though came into force on 5th May, 1946 could not be made operative from 1st April, 1946 and, therefore, no retrospective effect could be given to that provision by accepting the contention of the Revenue.  In that case the Revenue has sought to apply proviso for assessment year 1946-47 despite the fact that the proviso had come into force from 5th May, 1946 and it was held that the proviso is not retrospective and it was held that the court cannot import into its construction matters which are ‘ ad extra legis' and thereby alter its true effect. It will be relevant to reproduce the observations of Their Lordships from the said decision.

“It is well settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year.  Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force.

In Scindia steam Navigation co. Ltd. v. Commissioner of Income-tax, a Division Bench of the Bombay High Court consisting of Chagla C.J. and Tendolkar J., has considered the question as to the effect of an amendment which came into force after the commencement of the financial year.  The fact in that case were these.  The assessee's ship was lost as a result of enemy action.

The Government paid the assessee in 1944 a certain amount as compensation which exceeded the original cost of the ship.  The Income-tax Officer included the difference between the original cost and the written down value of the ship in the total income of the assessee for the assessment  year 1946-47.  The Tribunal upheld that decision and referred the question, whether the sum representing the difference between the original cost and the written down value was properly included in the assessee's total income computed for the assessment year 1946-47.  It was argued that the fourth proviso to section 10(2)(vii) of the Income-tax Act (inserted by the Amendment Act of 1946 with effect from May 4, 1946) under which the inclusion of the amount was justified by the department, had no application to the case.

The learned judges held that as it was the Finance Act of 1946 that imposed the tax for the assessment year 1946-47, the total income had to be computed in accordance with the provisions of the Income-tax Act as on April 1, 1946; that as the amendments made by the Amendment Act of 1946 with effect from May 4, 1946, were not retrospective, they could not  be taken into consideration merely because the assessee was assessed after  that date and that the assessee was not liable to pay tax on the sum because the fourth proviso to section 10(2)(vii) of the Income-tax Act under which it was sought to be taxed was not in force in respect of the assessment year 1946-47.

44.       If the present issue is considered in the light of the above decision of Hon'ble Supreme Court, then, it has to be held that Section 292BB is applicable to assessment year 2008-09 and subsequent years.  Therefore, answer to the second aspect of the question is that assessee is precluded from taking such objection for and from assessment year 2008-09

 

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