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Petitioner: S. A. L. NARAYAN ROW VS Respondent: ISHWARLAL BHAGWANDASHonorable Justice SHAHC. K. Daphtary,A. V. Viswanatha Sastri
1966 P T D 17
1966 P T D 17
[Supreme Court India]
Present : P. B. Gajendragadkar, C. J., K. N: Wanchoo,
J. C. Shah, J. R. Mudholkar and S. M. Sikri, JJ
S. A. L. NARAYAN ROW AND ANOTHER
versus
ISHWARLAL BHAGWANDAS AND ANOTHER
AND
N. D. MEHROTRA AND ANOTHER
versus
VRAJLAL KEWALDAS
Civil Appeals Nos. 1003 and. 1004 of 1963, decided on 7th May 1965.
(a) Supreme Court‑Appeal‑"Civil proceeding"‑Certificate of fitness‑Tax proceedings Writ petition for relief Constitution of India, Arts. 132 (1), 133 (1) (c) &c 226.
Where a revenue authority seeks to levy tax or threatens action in the purported exercise of powers conferred by an Act relating to revenue, the primary impact of such an act or threat is on the civil rights of the party aggrieved and when relief is claimed in that behalf it is a "civil proceeding" within the meaning of Article 133 of the Constitution of India, even if relief is claimed not in a suit but by resort to the extraordinary jurisdiction of the High Court to issue writs.
The primary object of a taxation statute is to collect revenue for the governance of the State or for providing specific service and such a law directly affects the civil rights of the‑ taxpayer. If a person is called upon to pay tax which the State is not competent to levy, or which is not imposed in accordance with the law which permits imposition of the tax, or in‑ the levy, assess ment or collection of which rights of the taxpayer are infringed in a manner not warranted by the statute, a proceeding to obtain relief, whether it is from the Tribunal set up by the taxing statute or from the civil Court, would be a "civil proceeding" within the meaning of Article 133 of the Constitution of India.
Proceeding taken for recovery of a tax is a "civil proceeding" within the meaning of Article 132 (1) also.
(b) Advance tax‑Estimate‑Tax paid less than 80 per cent. of tax assessed‑Interest‑Statutory provision for discretion to reduce or waive interest‑‑Retrospective operation‑Rules framed subse quently whether retrospective‑Rectification of mistake‑Assess ment‑Interest not included‑Propriety of rectification‑Indian Income‑tax Act, 1922, Ss. 18‑A(6), 23 & 35‑Indian Income‑tax Rules, 1922, r. 48.
Although rule 48 of the Indian Income‑tax Rules, 1922, prescribing the cases in which and the circumstances under which the discretion of the Income‑tax Officer to reduce or waive interest payable to the assessee under the fifth proviso to section 18‑A (6) of the Indian Income‑tax Act, 1922, may be exercised, was framed only in December 1953, as soon as the rule was framed, which effectuated the purpose for which the proviso was enacted with retrospective effect from April 1, 1952, the rule became effective retrospectively from April 1, 1952.
M. K. Venkatachalam, Income‑tax Officer v. Bombay Dyeing and Manufacturing Co. Ltd. (1959) S C R 703 applied.
For the assessment year 1948‑49, a notice was served on the assessee under section 18‑A(1) of the Indian Income‑tax Act, 1922, for the payment of advance tax. The assessee first filed an estimate under section 18‑A(2) and thereafter also a revised estimate and paid tax accordingly. In the regular assessment which was made on March 31, 1953, it was found that the tax paid on the basis of the estimate of the assessee was less than 80 per cent. of the tax determined as a result of the regular assessment ; but no charge for interest under section 18‑A (6) was made. In 1956, upon objection being raised by the departmental auditor, the Income‑tax Officer proceeded under section 35 of the Act and passed an order rectifying the mistake on the ground that the failure to charge interest under section 18‑A (6) was a mistake apparent from the record and served a notice of demand for Rs. 14,929‑10‑0. The Commissioner confirmed the order under section 33‑A but modified the quantum of interest. He assumed that the Indian Income‑tax (Amendment) Act, 1953, which inserted the fifth proviso in section 18‑A (6) had not come into operation at the date when the order of assessment was made but became effective as from December, 1953, when rule 48 of the Indian Income‑tax Rules, 1922, was framed. The assessee thereupon moved the High Court on a petition under Article 226 of the Constitution for a writ of certiorari. Following its decision in Shantilal Rawji v. M. C. Nair, Income‑tax Officer (1958) 34 I T R 439, the High Court directed that the orders passed by the Income‑tax Officer and the Commissioner be quashed. The appellants appealed to the Supreme Court on a certificate granted by the High Court under Article 133 (1) (c) of the Constitution of India:
Held, by the Full Court (i) that the proceedings before the High Court on the petition under Article 226 were "civil proceedings" within the meaning of Article 133(1)(c) of the Constitution of India and the High Court therefore had power to issue the certificate under Article 133 (1) (c);
(ii) that rule 48 of the Indian Income‑tax Rules, 1922, which prescribed the circumstances and the cases in which the discretion of the Income‑tax Officer to reduce or waive interest payable by an assessee may be exercised, had retrospective effect from April 1, 1952 ;
(iii) by Gajendragadkar, C. J., Wanchoo, Shah and Sikri, JJ. (Mudholkar, J. dissenting): that the High Court was right in setting aside the orders passed by the Income‑tax Officer and the Commissioner of Income‑tax. By virtue of the retrospective amendment in section 18‑A (6) the order which was made by the Income‑tax Officer on the date of assessment and which was plainly inconsistent with the terms of the section as it then stood became one which he was competent to pass in exercise of .his powers. The assessee's case fell within the terms of rule 48(1) and the Income‑tax Officer was in law bound to consider whether he was entitled to reduction or waiver of interest under the fifth proviso. The amendment of section 18‑A(6) and the Rules which came into operation later has in view of the retrospective operation to be deemed to be extant at the time of the assessment order and the fact that the Income‑tax Officer could not in making the assessment have adjusted his approach to the problem before him in the light of those provisions was irrelevant in considering the legality of his order. The order of the Income‑tax Officer which did not take note of the law deemed to be in force was defective. In assuming that the Amendment Act of 1953 had no retrospective operation and rejecting the claim of the assessee on the ground that at the date when the order of assessment was made the Amendment Act of 1953 had not come into operation but became effective as from December 1953, when the rules were framed, the Commissioner committed an error of law apparent on the face of the record.
Per (Mudholkar, J. (dissenting): That the Income‑tax Officer was competent to rectify the mistake. Omission to charge interest at the time of making the regular assessment could be ascribed not to the exercise of discretion by the Income‑tax Officer but only to oversight.
[Cases referred to.]
C. K. Daphtary, Attorney‑General for India (R. Ganapathy Iyer and B. R. G. K. Achar with him) for Appellants.
A. V. Viswanatha Sastri, Senior Advocate (T. A. Ramchandran and J. B. Dadachanji, O. C. Mathur and Ravinder Narayan of J. B. Dadachanji & Co. with him) for Respondents.
JUDGMENT
SHAH, J.‑(Civil Appeal No. 1003 of 1963)‑The 1st Income -tax Officer, C‑II Ward, Bombay, served a notice under section 18‑A (1) of the Indian Income‑tax Act, 1922, calling upon Bhagwandas Kevaldas‑who will hereinafter be called "the assessee"‑to pay in four equal instalments Rs. 25,973‑5‑0 as advance tax for the assessment year' 1948‑49. On September 17, 1947, the assessee filed an estimate of his income under section 18‑A (2) and of the tax payable by him, and on January 10, 1948, he filed a revised estimate. An order under section 23‑B of the Act provisionally assessing the income was made by the Income‑tax Officer and pursuant thereto on August 23, 1950, the assessee paid the tax so assessed. Regular assessment of the income of the assessee was made on March 31, 1953, by the Income‑tax Officer, and it was found that the tax paid on the basis of the estimate of the assessee was less than eighty per cent. of the tax determined as a result of the regular assessment. But the Income‑tax Officer made no charge for interest under subsection (6) of section 18‑A of the Income‑tax Act.
The departmental auditor raised an objection in auditing accounts of C‑II. Ward that a mistake was committed by the Income‑tax Officer in failing to charge interest in making the order of assessment against the assessee. On September 21, 1956, the Income‑tax Officer served a notice upon the assessee requiring him to show cause why the mistake in not levying interest be not rectified and why he should not be directed to pay "penal interest" under section 18‑A (b). On October 4, 1956, the Income‑tax Officer recorded the following order: "During the internal checking of C‑II Ward, the auditor has pointed out a mistake in not charging penal interest under section 18‑A (6). As this mistake is apparent from record the same is rectified under section 35 after giving due notice to the assessee."
and served a notice of demand calling upon the assessee to pay Rs. 14,929‑10‑0 as interest due under section 18‑A (6) for the period January 1, 1948 to July 22, 1950. ,
In exercise of his powers under section 33‑A., by order dated February 1, 1958, the Commissioner of Income‑tax confirmed the order of the Income‑tax Officer rectifying the original order of assessment and imposing liability to pay interest, subject to the modification that interest be paid only till June 13, 1950.
The assessee then moved the High Court of Judicature at Bombay by a petition under Article 226 of the. Constitution for issue of a writ of certiorari summoning the record of the case and for an order quashing or setting aside the order passed under section 33‑A(2) by the Commissioner of Income‑tax and the order passed by the Income‑tax Officer under section 35 and the notice of demand pursuant to that order. The High Court of Bombay, following its earlier judgment in the case of Shantilal Rawji v. M.. C. Nair, IV Income‑tax Officer, "E" Ward, Bombay((1958) 34 I T R 439), directed that the orders passed by the Income‑tax Officer and by the Commissioner of Income‑tax be quashed. Against the order passed by the High Court the Commissioner of Income‑tax and the‑ Income‑tax Officer have, with certificate granted by the High Court, appealed to this Court.
At the hearing of this appeal counsel for the assessee raised an objection in limine that the appeal filed by the Commissioner and the Income‑tax Officer was incompetent, because 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. It was urged that the proceeding before the High Court was not a "civil proceeding" within the meaning of Article 133. Article 133 of the Constitution, in, so far as it is material, by the first clause provides:‑
"An appeal shall lie to the Supreme Court from any judgment, decree or final order in a civil proceeding of a High Court in the territory of India if the High Court certifies‑
(a) that the ‑amount or value of the subject‑matter of the dispute in the Court of first instance and still in dispute on appeal was and is not less than twenty thousand, rupees .... ; or
(b) that the judgment; decree or final order involves directly or indirectly some claim or question respecting property of the like amount or value; or
(c) that the case is a fit one for appeal to the Supreme Court . . . . . ."
The power to issue a certificate under Article 133 may be exercised only in respect of a judgment, decree or final order of a High Court in a civil proceeding, and the order passed by the High Court disposing of the petition filed by the assessee for the issue of a writ under Article 226 is a judgment. But Mr. A. V. Viswanatha Sastri for the assessee contended in the first instance that the expression "civil proceeding" in Article 133 only means a proceeding in the nature of or tribal as a civil suit and a petition for the issue of a high prerogative writ not being such a proceeding, against the order passed by the High Court no appeal lay. to this Court with certificate under Article 133. In the alternative, counsel contended that even if a proceeding for the issue of a writ under Article 226 of the Constitution may in certain cases be treated as a civil proceeding, . it cannot be so treated when the party aggrieved seeks relief against the levy of tax or revenue claimed to be due to the State.
This Court is invested by the, Constitution with appellate jurisdiction of great amplitude exercisable over all Courts and Tribunals in India. The jurisdiction may be exercised in respect of any judgment, decree, determination, sentence or order in any cause or matter passed by any Court, or Tribunal other than a judgment, determination, sentence or order made or passed by any Court or Tribunal under any law relating to the Armed Forces: Article 136. Exercise of this power depends solely upon the discretion of the Court. Appeals lie to this Court from orders passed in certain classes of cases when certified by the High Courts. An appeal lies from the judgment, decree or final order of a High Court in a civil, criminal or other proceeding, if the High Court certifies that the case involves a substantial question of law as to the interpretation of the Constitution: Article 132 (1). An appeal also lies from any judgment, decree or final order in a civil proceeding of a High Court if the High Court certifies that the case satisfies the conditions in clause (a), (b) or (c) of Article 133 (1), or from any judgment or final order or sentence in a criminal proceeding, of a High Court, if the case falls within the description of clauses (a) and (b) of Article 134, or if the High Court certifies that the case is a fit one for appeal. It is clear that under Article 136 against the adjudications of all Courts and tribunals (subject to the exception already noticed), whatever be the character of the proceeding, appeals lie with leave to this Court. An appeal lies against the adjudication of a High Court as a matter of right, whatever the nature of the proceeding, with certificate that it involves a substantial question of law as to the interpretation of the Constitution, and in civil proceeding with certificate of the nature set out in clause (a), (b) or (c) of Article 133 and in criminal proceedings in conditions mentioned in clauses (a) and (b) and with certificate under clause (c) of Article 134.
Counsel for the assessee said that proceeding instituted in the High Court in exercise of its jurisdiction‑original or appellate‑may be broadly classified as (i) proceedings civil, (ii) proceeding criminal, and (iii) proceedings revenue, and where the case does not involve a substantial question as to the interpretation of the Constitution, from an order passed in a proceeding civil, an appeal lies to this Court with certificate granted under Article 133 of the Constitution, and from a judgment, final order or sentence in a criminal proceeding an appeal lies with certificate granted under Article 134 of the Constitution, but from an order passed in a proceeding relating to revenue the right of appeal may be exercised only with leave of this Court. Counsel seeks support for this argument primarily from the phraseology used in Article 132 of the Constitution. That article, by its first clause provides:‑
"An appeal shall lie to the Supreme Court from any judgment, decree or final order of a High Court in the territory of India, whether in a civil, criminal or other proceeding, if the High Court certifies that the case involves a substantial question of law as to the interpretation of this Constitution."
Counsel relies upon the classification of proceeding made in Article 132 (1) and seeks to contrast it with the phraseology used in Articles 133 (1) and 134 (1). He says that "other proceeding" in Article 132 (1) falls within the residuary class of proceedings other than civil or criminal, and such a proceeding includes a revenue proceeding. The expression "civil proceeding" is not defined in the Constitution, nor in the General Clauses Act. The expression in our judgment covers all proceedings in which a party, asserts the existence of a civil right conferred by the civil law or by statute, and claims relief for breach thereof. A criminal proceeding on the other hand is ordinarily one in which if carried to its conclusion it may result in the imposition of sentences such as death, imprisonment, fine or forfeiture of property. It also includes proceeding in which in the larger interest of the State, orders to prevent apprehended breach of the peace, orders to bind down. persons who are a danger to the maintenance of peace, and order or orders aimed at preventing vagrancy are contemplated to be passed. But the whole area of proceedings, which reach the High Courts is not exhausted by classifying the proceedings as civil and criminal. There are certain proceedings which may be regarded as neither civil nor criminal. For instance, proceeding for contempt of Court, and for exercise of disciplinary jurisdiction against lawyers or other professionals; such as chartered accountants, may not fall within the classification of proceedings, civil or criminal. But there is no warrant for the view that from the category of civil proceedings, it was intended to exclude proceedings relating to or which seek relief against enforcement of taxation laws of the State. The primary object of a taxation statute is to collect revenue for the governance of the State or for providing specific services and such laws directly affect the civil rights of the taxpayer. If a person is called upon to pay tax which the State is not competent to levy, or which is not imposed in accordance with the law which permits imposition of the tax, or in the levy, assessment and collection of which rights of the taxpayer are infringed in a manner not warranted by the statute, a proceeding to obtain relief whether it is from the tribunal set up by the taxing statute, or from the civil Court would be regarded as a civil proceeding. The character of the proceeding, in our judgment, depends not upon the nature of the tribunal which is invested with authority to grant relief but upon the nature of the right violated and the appropriate relief which may be claimed. A civil proceeding is therefore one in which a person seeks to enforce by appropriate relief the alleged infringement of his civil rights against another person or the State, and which if the claim is proved would result in the declaration express or implied of the right claimed and relief such as payment of debt, damages, compensation, delivery of specific property, enforcement of personal rights, determination of status, etc.
There is therefore under the Constitution a right of appeal to this Court with special leave from the adjudications of all Courts and Tribunals (except tribunals constituted by or under laws relating to Armed Forces). An appeal also lies to this Court against all adjudications by a High Court from judgments, decrees and orders in cases in which a substantial question as to the interpretation of the Constitution is involved, whatever the nature of the proceeding. Appeals from criminal proceedings lie as a matter of right in cases falling within clauses (a) and (b) of Article 134, and in cases certified as fit for appeal under clause (c) of Article 134, and from civil proceedings of the nature certified by the High Court under Article 133 (1), clause (a), (b) or (c).
For reasons already stated, a proceeding for relief against infringement of civil right of a person is a civil proceeding even if the infringement be in purported enforcement of a taxing statute. Section 261 of the Income‑tax Act, 1961, under which an appeal lies to this Court from any judgment delivered on a reference made under section 256 in any case which the High Court certifies to be a fit one for appeal to this Court is not an exception to that rule. It is not because the reference is not a civil proceeding that a certificate under Article 133 may not be granted: it is because of the advisory character of the jurisdiction exercised by the High Court under section 256 that the opinion delivered by the High Court in a reference under section 256 is not a judgment, order or decree within the meaning of Article 133. Similarly, the enactment of section 54 of
the Land Acquisition Act which expressly provides for an appeal to this Court subject to the provisions, contained in section 110 of the Code of Civil Procedure, from an award, or from any part of the award made by the Court is easily appreciated, if regard be had to the character of the adjudication, which is in the nature of an. award in an arbitration: see Rangoon Botatoung Co. Ltd.1v. Collector, Rangoon ((1912) L R 29 I A 197).
By a petition for a writ under Article 226 of the Constitution, extraordinary jurisdiction of, the High Court to issue high prerogative writs granting relief in special cases to persons aggrieved by the exercise of authority‑statutory or otherwise‑by public officers or authorities is invoked. This jurisdiction is undoubtedly special and exclusive, but on that account the nature of the proceeding in which it is exercised is not altered. Where a revenue authority seeks to levy tax or threatens action in purported exercise of powers conferred by an Act relating to revenue, the primary impact of such an act or threat is on the civil rights of the party aggrieved and when relief is claimed in that behalf it is a civil proceeding, even if relief is claimed not in a suit but by resort to the extraordinary jurisdiction of the High Court to issue writs.
It is not easy to attribute to the expression "revenue proceeding" any precise connotation, and in interpreting Articles 132(1) and 133 it would be difficult to project the somewhat anomalous provision contained in section 226 of the Government of India Act, 1935, under which, for historical reasons, it was enacted that unless otherwise provided by the appropriate Legislature, no High Court shall have any original jurisdiction in any mater con cerning the revenue, or concerning any act ordered or done in the collection thereof according to the usage and practice of the country or the law for the time being in force. This section barred the High Court from exercising original jurisdiction in matters concerning revenue. There was no such bar against subordinate Courts, nor against the exercise of appellate jurisdiction by the High Courts in matters concerning revenue instituted in subordinate Courts. No provision has been made in the Constitution similar to section 226 of the Government of India Act, and there is no reason to think that it was intended 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. No ground is suggested for acceptance that while removing the ban against the High Court's original jurisdiction in matters concerning revenue, the Constitution imposed another ban against the exercise of power to certify cases decided by the High Court in the appellate as well as original jurisdiction when the cases concerned revenue.
We have already set out our reason for holding that a proceeding taken for recovery of tax is not "other proceeding" under Article 132 (1): such a proceeding is a civil proceeding with the meaning of Article 132 (1). The object of referring to "other proceeding" in that clause is merely to 'emphasize that adjudications made in proceedings which are not included in the description civil or criminal would still attract the provisions of Article 132 (1) in case they raise a substantial question of law as to the interpretation of the Constitution. A proceeding in which relief is claimed against action of revenue authorities is included in the civil proceeding and not in "other proceeding" within the meaning of Article 132 (1), and an aggrieved party's right to appeal to this Court from orders in those proceedings is exercisable in the same manner as it would be in the case of a decree, order or judgment in any other civil proceeding.
A large number of cases have arisen before the High Courts in India in which conflicting views about the meaning of the expression "civil proceeding" were expressed. In some cases it was held that the expression "civil proceeding" excludes a proceeding instituted in the High Court for the issue of a writ whatever may be the nature of the right…
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