April a8 v. BOMBAY DYEING AND MFG. CO., LTD

force on the first day of April, 1952 " .. Bys. 13 of the Amendment, Act, a proviso was added to s. l 8A (5) of Venkatachalai .. the Act. The effect of the amendment made by the insertion of the said proviso to s. 18A (5) was that the Bombay Dyeing &. assessee was entitled to get interest at 2% not on the Mfg. co .. Ltd. whole of the advance amount of tax paid by him as . - · . _. before but only on the difference between the payment Ga;endragal!kar f. made and the amount at which the assessee was assessed to tax under the regular assessment under s. 23 of the Act. After the Amendment Act was passed, the first appellant exercised his power under s. 35 of the Act and purported to rectify the mistake appa- rent from the record in regard to the credit for Rs. 50,603-15-0 allowed by him to the assessee. The first appellant held that the assessee was really entitled to a ~redit of only Rs. 21,157-6-0 by way of interest ori tax paid in advance as a result of the retrospective operation of the amendment made in s.

18A (5) by the Amendment Act. In accordance with this order a notice of demand under s. 29 of the Act was issued against the assessee for the sum of Rs. 29,446-9-0 on the ground that the assessee had been given credit for this excess amount through mistake. Aggrieved by this notice of demand, the respondent filed a petition in the High Court of Bombay on January 4, 1954, under Art. 226 of the Constitution praying for a writ against the appellants inter alia prohibiting them from enforcing the said rectified order and the said n9tice of demand. It appears that this petition was admit- ted by Tendolkar J. on January 6, 1954, and a rule issued on it. Thereafter the said petition was referred to a Division Bench by the Hon'ble the Chief J ust'iee for final disposal. Accordingly on March 5, 1954, the petition was heard by Chagla C. J. and Tendolkar J. and a writ was issued against the app~llants. The High Court held thats.

35 of the Act had no applica- tion to the facts of the case because the mistake apparent from the record contemplated by the said section is not a mistake which is the result of the amendment of the law even. though the amending law may be retrospective in operation. words, the . High ~ourt, the in the opinion of In other" • 706 SUPREME COURT REPORTS [1959] - 1 · '958 v k h en at~~ a am mistake mentioned by s. 35 had to be apparent on the face of the order and it can only be judged in the light of the law as it stood on the day Bombay Dyeing & when the order was passed. The appellants then Mfg. co. Ltd. applied for and obtained a certificate from the High Court on October 8, 1954; on their behalf it is urged · . Ga1endragadkar J. that the High Court of Bombay has erred in law in taking the view that the appellant No. 1 was not entitled to rectify the mistake in question under s. 35 of the Act.

Thus the short question which arises before us in the present appeal is whether an order which was proper and valid when it was made can be said to disclose a mistake apparent from the record if the said order would be erroneous in view of a sub sequent amendment made by the Amendment Act intended to o:eerate when the Amendment Act is retrospectively ? It is unnecessary to refer to the provisions of s. ISA (5) as well as the provision of the proviso which was subsequently added by s. 13 of the Amendment Act. It is common ground that, in the absence of the subsequently inserted proviso, the assessee would be entitled to obtain a credit for Rs. 50,603-15-0. It is also common ground that, if the subsequently inserted proviso covered the assessee's case, he would be entitl ed to a credit only of Rs. 21,156-9-0. It is thus obvious that the order giving the relevant credit to the assessee was valid when it was made and that it would be erroneous under the subsequent amendment.

Under these circumsta.nces, was the first appellant justified in exercising his power of rectification under s. 35 of the Act ? In deciding this question it would be necessary to determine the true legal effect of the retrospective operation of the Amendment Act. i3ection 1, sub-s. (2) of the Amendment Act expressly provides that subject to the special provisions made in the said Act it shall be deemed to have come into force on the first day of April 1952. The result of this provision is that the amendment made in the Act by s. 13 of the Amend- · ment A6t must, by legal fiction, be deemed to have been inclu~ed i~ the principal Act as from the first of ' • • ,. • • ... S.C.R SUPREME COURT REPORTS 707 1958 April, 1952, and this inevitably means that, at the time when the Income-tax Officer passed his original order on October 9, 1952, allowing to the respondent Venkatachalam credit for Rs. 50,603-15-0, the proviso added by s.

13 Bombay "Dyeing & of the Amendment Act must be deemed to have been Mfg .. co., Ltd. inserted in the Act. As observed by Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. l'insbury Gajendragadkar ]. Borough Council (1), "if you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, ~f the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain ·state of affairs; it does not say that having done so, you m0ust cause or permit your. imagination to boggle when it comes to the inevitable corollaries of that state of affairs". Thus, there can be no doubt that the effec• of the retrospective operation of the A:r.nend ment Act is that the proviso inserted by the said section in s.

18A (5) of the Act would, for all legal purposes, have to be deemed to have been included in the Act as from April 1, 1952. But it is urged for the respondent that the retros pective operation of the relevant provision is not intended to affect completed assessments. It is con ceded that, if any assessment proceedings in respect of the assessee's income for a period subsequent to the first of April 1952 were pending at the time when the Amendment Act was passed, the proviso inserted by s. 13 would govern the decision in such assessment proceedings; but where an assessment proceeding has been completed and an assessment order has been passed by the Income- tax Officer against the assessee, such a completed assessment would not be affected and cannot be reopened under s. 35 by virtue of the retrospective operation of the Amendment Act. In support of this contention, reliance is placed on the observations of the Privy Council in J)elhi Cloth and (1) (1952] A. C. 109, 132. ' . -• • 708 SUPREME COURT REPORTS [1959] - c l" d d' 1958 h B f h B Venkatachalam v d t e oar re-'erre Mfg.

Co., Ltd. Irving (2 . General Milla Co. Ltd. v. Income-tax Commissioner, Delhi and Anr. (1 ). Lord Blanesburg who delivered the • d to t e oar s ear rer JU gment o Bombay Dyeing & decision in the Colonial Sugar Refining Company v. ) where it was in effect laid down that, while . provisions of a statute dealing merely with matters of Ga1endragadkar J. procedure may properly, unless that construction be textually inadmissible, have retrospective effect .attri buted to them, provisions which touch a right in exis tence at the passing of the statute are not to be applied retrosp\')ctively in the absence of express enact ment or necessary intendment. The learned Judge then added that "Their Lordships have no doubt that the provisions which, if applied retrospectively, would deprive of their existing finality orders which, when that statute came into force, were final, are pr~visions which touch existing rights.

" The argument for the respondent is that the assessee has obtained a right under the order passed by the Income-tax Officer to claim. credit for the specified amount under s. 18A(5) and the said right cannot be taken away by the retros pective operation of s. 13 of the Amendment Act. The same argument is put in another form by contend ing that the finality of the order passed by the Income tax Officer cannot be impaired by th!) retrospective operation of the relevant provision. In our opinion, this argument does not really help the respondent'B case because the order passed by the Income-tax Officer under s. 18A(5) cannot be said to be final in the literal sense of the word. This order was and con tinued to be liable to be modified under s. 35 of the .<\,ct. What the Income-tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by s.

13 of the Amendment Act alone, but to exercise his power under s. 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression "mistake apparent from the record" used in s. 35. That is why we think the principle of the finality of the orders or the sanctity of • 0 [1927] L.R. 54 I.A. 421 • (1) (2) [1?05] A.(:. 369. .. • S.C.R. SUPREME COURT REPORTS 709 the existing rights cannot be effectively invoked by the respondent in the present cdaseh. The respondent then urge t at t e men ment h A d r958 Venliataohalam v. - . Act should not be given greater retrospective opera- Bombay Dyeing <f>. tion than its language and its general scheme render Mfg. Co., Ltd. necessary. This comention is based on the provisions of s. 3, sub-s. (2), s. 7, sub-s. (2) ands. 30, sub-s. (2) ofGa;endragadkar J. the Amendment Act. Where the Amendment Act intended that its provisions should affect even conclud- ed orders of assessment it is expressly so provided.

Since s. 13 does not specifically authorise ·the reopen- ing of concluded assessments it should be held that its retrospective operation is not intended to cover such concluded assessments. That in. brief is the argument. We are, however, not satisfied that this argument is wellfounded. Let us examine the three provisions of the Xmendment Act on which the argument rests. Section 3, sub-s. (1) of the Amendment Act makes several additions and modifications in s. 4 of the principal Act. Section 3, sub-s. (2) then provides that the amendments made by sub-cl. (3) of cl. (b) of sub-s. (1) shall be deemed to be operative in relation to all assessments for any year whether such assessments have or have not been concluded before the.com- mencement of the Amendment Act of 1953. It would be noticed that the main object of this sub-section is to extend the retrospective operation of the relevant provisions of the Amendment Act beyond the first of April 1952 mentioned by s.

1, sub-s. (2) of the Amend- ment Act. Since it was intended to provide for such further retrospective operation of the relevant provi- sion the legislature tho?ght it advisable to clarify the position by saying that the said extended retrospective operation would cover all assessments whether they had been completed or not before the commencement of the Amendment Act. Section 7, sub-s. \1) adds two provisos to s. 9 of the principal Act by els. (a) and (b). Sub-section (2) of s. 7 then lays down that the amend- ments made in cl. (a) of sub-s. ( 1) shall be deemed to be operati~e for any assessment for the year ending the 31st day of March, 1952, whether made before, or after. the commencement of this Act and, where any such • 710 SUPREME COURT REPORTS [1959] • d T h • r958 , Mfg. ca. Ltd. v rnkatacnalom v. assessment has been made before such commencement, the Income-tax Officer concerned shall revise it when- a ever necessary to g1 ve e1rnct to t is amen ment.

Bombay Dyeing &·position under s. 30, sub-s. (2) of the Amendment Act is substantially similar. By sub-s. (1) of this section certain additions and fl.mendments are made in the Coj-.drngodka' J. schedule to the principal Act by els. (a), (b), (c) and (d). Sub-s. (2) then provides for the retrospective operation of the amendment made by sub-s. (1) in terms similar to those used in s. 7, sub-s. (2). It is clear that the provisions fo ss. 7 and 30 are intended for the benefit of the assessees and so the legislature may have thought it necessary to confer on the Income-tax. Officer specific and express power to revise his orders in respect of the relevant assessments wherever neces sary to give effect to the amendments in question. The effect of this provision is to make it obligatory on the Income-tax Officer to revise his original orders in the light of the amendments and also to confer on the assessee right to claim such revision.

It may be con ceded that in respect of the other retrospective provi sions of the Amendment Act such a power to revise the earlier orders cannot be c'laimed or exercised by the lncome-tax Officer. In other words, a distinction can be qrawn between these two provisions of the Amendment Act and the rest in respect of the power which the Income-tax Officer can purport to exercise to give effect to the amendments made by the Amend ment Act. Whereas, in respect of the amendments made by s. 7 and s. 30 of the Amendment Act, the Income-tax Officer can and must revise his earlier orders covered by s. 7, sub-s. f2) and s. 30, sub-s. (2), such a power of revision has not been conferred on him in the matter of giving effect to the other amend ments made in the Amendment Act. Even so, we do not think it'would be legitimate or reasonable to hold that the provisions of s. 7(2) and s. 30(2) lead to the inference that the retrospective operation of the other provisions of the Amendment Act is not intended to affect concluded assessments in anv manner whatever . . In this c'onnection, it would be pertinent to remember that the power to revise which has been conferred on • S.C.R. SUPREME COURT REPORTS 711 the Income-tax Officer by s.

7(2) and s. 30(2) of the Amendment Act is distinct and independent of the Venkatachalam power to rectify mistakes which the Income-tax Officer can exercise under s. 35 of the Act. v. Bombay Dyeing .s. r958 It is in the light of this position that the extent of Mfg. co., Ltd. - . the Income-tax Officer's power under s. 35 to rectify mistakes apparent from the record must be deter- Ga;~ndragadk<<r 1 · mined ; and in doing so, the scope and effect of the expression "mistake apparent from the record" has to be ascertained. At the time when the Income-tax O:fl; icer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the· inserted proviso as from April 1, 1952. If that be the true position then the order which he made giving credit to tlte respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provi- sion of the statute and that must inevitably be treated as a mistake of law apparent from the record.

If a mistake of fact apparent from the record of the assess- ment order can be rectified under s. 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima f acie it may appear somewhat strange that an order which was good and valid when it was made should be treat- ed as patently invalid and wrong by virtue of the retrospective operation of the Amendment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment If, as a result of the said fiction we must read Act. the subsequently inserted proviso as forming part of s. 18A(5) of the principal Act as from April 1, 1952, the conclusion is inescapable that the order in question is inconsistent with the provisions of the said proviso and must be deemed to suffer from a mistake apparent from the record. That is why we think that the Income-tax Officer was justified in the present case in exercising his power under s.

35 and rectifying the said Incidentally we may mention that in Moka mistakes. Venkatappaiah Income-Tax Officer, Bapatla (1 ), the High Court of Andhra has ·taken the • same view . v. Additional (1) (1957) 32 I. T. R. 274. .. .. • 712 SUPREME COURT REPORTS [1959] ). '958 - . V enkatachalam v. Bomboy Dyeing & chand Ramdas (1 In this connection it would be useful to refer to the decision of the Privy Council in the Commissioner of 'J Income-Tax, Bombay Presidency and Aden v. Khem- In Khemchand's case, the assessees Mfg. Co., Ltd. were registered as a. firm and they were assessed under s. 23(4) on an income of Rs. 1,25,000 at the c.ajendragadkar f·maximum rate. Being a registered firm no super-tax was levied. A notice of demand was also made before March 1927. On February 13, 1928, the Commissioner, in exercise of his powers under s. 33, cancelled the order registering the assessee as a firm and directed the Income-tax Officer to take necessary action.

The Income-tax Officer accordingly assessed the firm to super-tax on May 4, 1929. The Privy Council held that the assessment made on January 17, 1927, was final both in respect of the income-tax and super-tax. The fresh action taken by the Income-tax Officer on May 4, 1929, was out of time though it had been taken in pursuance of the directions of the Commissioner and that the order of May 4, 1929, was one which the Income-tax-Officer had no power to make. One of the points raised before the Privy Council. was whether, under the relevant circumstances the Income-tax Officer had power to make the impugned order in view of the provisions of ss. 34 and 35 of the Act. The Privy Council dealt with this question on th.e footing that the Commissioner's order cancelling the registra tion had been properly made. On this basis their Lordships thought that it was unnecessary to consider whether the case would attract the provisions of s.

34 "inasmuch as in Their Lordships' opinion the case clearly would have fallen within the provisions of s. 35 had the Income-tax Officer exercised his powers under the section within one year from the date on which the earlier de111and was ·served upon the respondents. ". The judgment shows that Their Lordships took the view that looking at the record of the assessments made upon the respondents as it stood after the cancel lation of the respondents' registration and the order effecting the cancellation would have formed part of • the recotd-it would be apparent that a mistake (1) (1938) L,R. 651.A. 236. • s.c.R. SUPREME COURT REPORTS en a~'~ ~.am had been made in stating that no super-tax was r95'8 1eviable. This decision clearly shows that the sub- v k-h 1 sequent cancellation of the assessees' registration was held by Their Lordships of the Privy Council to form Bombay nyeing &.. part of the record retrospectively in the light of the Mfg. co., Ltd. said subsequent event, and the order was deemed to suffer from a mistake apparent from the record SO as Ga;enliragaflkar ]. to justify the exercise of the rectification powers under s.