HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved A.F.R. Civil Misc. Writ Petition No. 1739 of 2006 *** Ghaziabad Development Authority Vs. The Commissioner of Income Tax, CGO-I, Hapur Road, Ghaziabad (U.P.) & Ors. Appearance: For the petitioner : Mr. Dhruv Agrawal, Senior Advocate, & Mr. Nikhil Agrawal, Advocate For the Respondents : Mr. Bharat Ji Agrawal, Senior Advocate Hon'ble Ferdino Inacio Rebello, C.J. Hon'ble Prakash Krishna, J.
(Delivered by Justice Ferdino I. Rebello, C.J.) The present petition is by an Authority constituted under the U.P. Urban Planning and Development Act, 1973.
2. The assessment year involved in the present case is the assessment year 2003-04 (Finance year 2002-2003). Prior to 1.4.2002, the entire income of the petitioner was exempted from the purview of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') by virtue of Section 10(20A) of the Act. 2003-2004 is the first assessment year when the petitioner is made liable to tax under the Act. The petitioner filed its return of income for the assessment year 2003-04 on 1.12.2003 showing a loss. After taking the case in scrutiny, a notice under Section 143(2) of the Act was issued on 14.10.2004. The petitioner complied with the said notice and appeared on various dates before the Assessing Authority through its Chartered Accountant and filed various replies supported with various voluminous documents and records to the queries made by the Assessing Authority. The period for making the assessment was due to expire on 31.3.2006.
3. By a communication of 10.3.2006, an order came to be passed under Section 142(2A) of the Act by respondent no. 3. appointing M/s Bansal Gupta & Associates, Chartered Accountants as Special Auditor with the prior approval of the CIT, Ghaziabad. No notice was issued to the petitioner while directing the special audit by M/s Bansal Gupta & Associates. The petitioner complied with the said notice and appeared on various dates before the Assessing Authority through its Chartered Accountant. It may be necessary to mention that order dated 10.3.2006 was received by the petitioner on 21.3.2006. The petitioner through its Chartered Accountant on 29.6.2006 requested an extension of further ten days for submitting the report. The respondent no. 3 extended the time for M/s Bansal Gupta & Associates to furnish their report by a further period of 30 days, i.e. upto 6.8.2006 instead of 10 days as requested. On 7.8.2006, the respondent no. 3 once again suo-motu extended time of M/s Bansal Gupta & Associates to furnish audit report by a further period of 20 days, though no such request or application was made by the petitioner. It appears that a further extension of 10 days was given on 25.8.2006. M/s Bansal Gupta & Associates the Special Auditors had furnished the audit report on 4.9.2006. The petitioner, it appears has preferred an appeal against the aforesaid order, which is pending before the ITAT, New Delhi. The impugned assessment order was passed on 31.10.2006. This was considering the proviso to explanation 1 of Section 153, which provides that where immediately after the exclusion of the aforesaid time, the period of limitation available to the Assessing Officer for making an order of assessment is less than 60 days, the remaining period is extended to 60 days. The proviso to sub section (2C) of Section 142 empowers the Assessing Officer to extend the period of the special auditor subject to maximum 180 from the date on which the direction of sub section (2A) is received by the assessee.
4. The petitioner, against the order of assessment, has a statutory remedy by way of an appeal under the Act. The petitioner, however, has not taken recourse to that remedy, and instead applied to this Court in the exercise of its extraordinary jurisdiction. The reasons, amongst others, for invoking the extraordinary jurisdiction are that - (1) the assessment order is barred by time and, therefore, without jurisdiction, and (2) the assessment order is made relying upon the report of the Special Auditor which is time barred, incomplete and not in accordance with the directions issued at the time of appointment of the Special Auditor and some other reasons.
5. It may be mentioned that the petitioner participated in the proceeding before the special auditor. Petition has thereafter been filed. At the hearing of this petition, the only point argued is that the order of assessment has been made beyond the time prescribed under Section 153 of the Act and consequently it ought to be set aside. We may also state that we have only heard the petitioner on this point.
6. According to the petitioner, the limitation should have been counted in the following manner:-
"(i) the direction under section 142 (2A) was received by the petitioner on 21.3.2006 and as such the period for making assessment was less than 60 days;
(ii)120 days in terms of order dated 10.3.2006 expires on 18.7.2006;
March ... 11 days April ... 30 days May ... 31 days June ... 30 days July ... 18 days.
(iii)time to furnish report extended by 30 days vide letter dated 7.7.2006 i.e. upto 17.8.2006;
July ... 13 days August ... 17 days
(iv)the direction under section 142(2A) of the Act lapsed on 17.8.2006;
(v)the report of the special auditor was, therefore, required to be submitted on or before 17.8.2006;
(vi)the report of the special auditor is dated 4.9.2006 and beyond time;
(vii)the time which can be extended in terms of the proviso of Section 153 in view of the fact that only 22 days were remaining at the time of the order under section 142(2A) would be 60 days i.e. upto 16.10.2006;
The assessment order has, however, been passed on 31.10.2006 and as such the same is barred by time even if the order under section 142(2A) is held to be a valid order."
7. Learned counsel has relied on various authorities for the purpose of interpretation of the provisions of Section 142 read with Section 153 of the Act, in support of the contention that the order of assessment was beyond the period prescribed by limitation.
8. On behalf of the respondents, reply has been filed by Mr. M.L. Sharma. A preliminary objection was raised that the appeal is available against the said order and consequently, the petition as filed is not maintainable. In the absence of the petitioner, exhausting the alternative remedy, this Court, it is submitted, should not interfere in the exercise of its extraordinary jurisdiction.
At the outset, it may be pointed out that this Court had on 6.12.2006 noted the said objection and held that the question raised is a pure question of law as there was no authoritative pronouncement of this Court or the Supreme Court, the objection was overruled. No liberty was granted to the respondents to raise the issue at the time of final hearing. In view of that, learned counsel for the Respondent fairly conceded that he would not press the said point.
9. It is set out that during the course of the audit, the assessing auditors by various letters dated 10.4.2006, 18.4.2006 and subsequent letters informed, that the petitioners were not cooperating to provide the requisite details and in view of this, the period for submitting the audit was extended. The last such was by letter dated 25.8.2006. Thus, a total period of 180 days was allowed to furnish the special audit report. It is set out that sub section (2C) of Section 142 empowers the Assessing Officer to allow the period within which the special audit report should be submitted / furnished.
10. According to the respondents, the limitation should be computed in the following manner:-
(i)Count from the date the direction under Section 142(2A) was issued to get the accounts audited.
(ii)To furnish report of such audit duly signed by auditor within 120 days from the date the assessee has received the direction under section 142(2A).
(iii)The period commencing from the date (10.3.2006) on which the Assessing Officer directed the assessee to get his accounts audited - ending with the last date on which the assessee is required to furnish such audit report.
(iv)Hence period from 10.3.2006 (date of issuing the direction by Assessing Officer) to 18.7.2006 i.e. 120 days from the date of 21.3.2006 has to be excluded.
(v)Under section 153 - Explanation I (iii), the period commending from the date on which the direction was issued - 10.3.2006
(vi)Period commencing from the date of 10.3.2006 when Assessing Officer directed the audit ending with last date when assessee was required to furnish the report has to be excluded.
11 days from 10.3.2006 to 21.3.2006 120 days from 21.3.2006 131 days has to be initially excluded.
+ 30 days further time granted on the application of the assessee.
Total 161 days
(vii)Even if the case of the assessee is accepted that suo motu power cannot be exercised by Assessing Officer for extending the time under section 142 (2C), still period of 161 days from 10th March, 2006 has to be excluded from the limitation period which expires on 31st March, 2006.
In computing the period of limitation of two years ending on 31st March, 2006, the period of 161 days commending from 10th March, 2006 shall be excluded which shall be counted from 31st March, 2006 upto 8th September, 2006.
31-3-2006 161 days to be excluded 30 days April 31 days May 30 days June 31 days July 31 days August 8 days September 161 days In view of first proviso to Section 153, Explanation 1, since the period available after the exclusion of the period of limitation available to the assessing officer is less than 60 days, the remaining period shall be extended to 60 days. Hence, the period of 8.9.2006 shall also be extended by another 60 days which will take it to 7.11.2006."
11. At the time of hearing of the petition, learned counsel for the petitioner has taken us through the Act to show various provisions where suo-motu power has been conferred on Assessing Officer or other authorities. Some such provisions are Sections 144A, 154 (2), 164 (1), 269N, 269 UAG, 273A(1), 273A (4) and some other provisions. Based on such provisions, learned counsel has contended that wherever legislature thought it fit to confer power on the Assessing Officer suo-motu, it has chosen to do so.
12. Reliance is placed on several judgements for the principles that have to be considered while interpreting the enactment. Learned counsel has placed reliance on the Finance Bill 2008 and on the Notes and Clauses, which are quoted as under:
"Clause 28 seeks to amend section 142 of the Income-tax Act, which relates to enquiry before assessment.
Sub-sections (2A) to (2D) of the said section deal with power of Assessing Officer to order special audit, where the nature and complexity of the accounts requires such audit, to seek the assistance of a chartered accountant.
Sub-section (2C) of the said section specifies the period within which the audit report is to be furnished. The proviso to the said sub-section provides that the Assessing Officer may extend the said period of furnishing of audit report, on an application made in this behalf, by the assessee and for any good and sufficient reason.
It is proposed to amend the said proviso so as to provide that the Assessing Officer may, suo motu, or on an application made in this behalf by the assessee, and for any good and sufficient reason, extend the said period by such further period or periods as he think fit.
This amendment will take effect from 1st April, 2008.
Clause 29 seeks to amend section 143 of the Income-tax Act, which relates to assessment.
Granting of power to the Assessing Officer to extend the time for completion of special audit under sub-section (2A) of section 142 Sub-sections (2A) to (2D) of section 142 deal with power of Assessing Officer to order a special audit. Such power is required to be exercised by the Assessing Officer having regard to the nature and complexity of the accounts of the assessee and the interest of the Revenue.
Sub-section (2C) of the said section specifies the period within which the audit report is to be furnished. The proviso to said sub-section empowers the Assessing Officer to extend this period of furnishing of audit report. Further, it is also provided that the aggregate of the originally fixed period and the period(s) so extended shall not exceed 180 days from the date of issuance of direction of special audit. Further, such extension can be made only when an application is made in this behalf by the assessee and there are good and sufficient reason for such extension.
It is proposed to amend the said proviso so as to also allow the Assessing Officer to extend this period of furnishing of audit report suo motu. Hence, while the Assessing Officer shall continue to have power to grant extension on an application made in this behalf by the assessee and when there are good and sufficient reasons for such extension, he can also grant such extension on his own.
The amendment will take effect from 1st April, 2008."
13. On behalf of the revenue, it is submitted that if the provisions of Section 142 and 153 are read in a proper perspective, it would be clear that there was power in the Assessing Officer even before the amendment to extend the period for submitting the report. The amendment in the proviso only clarifies that the Assessing Officer has also power to extend the period but not beyond 180 days.
14. For the purpose of understanding the controversy, it would be necessary to refer to the relevant provisions of Section 142 and 153.
"Section 142 (1) ... ... ...
(2) ... ... ... ...
(2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require:
(2B) The provisions of sub-section (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise.
(2C) Every report under sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer:
Provided that the Assessing Officer, may, on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub-section (2A) is received by the assessee."
As earlier set out the proviso to sub-section (2C) was amended by Finance Act, 2008 w.e.f. 1.4.2008 by adding the words "suo motu or" before the words 'on an application made in this behalf'.
15. The other relevant provision is Section 153, the relevant part of which reads as under:
"153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of--
(a) two years from the end of the assessment year in which the income was first assessable ; or
(b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later :
(1A) ... ... ...
(1B) ... ... ...
(2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of one year from the end of the financial year in which the notice under section 148 was served :
[Provided that where the notice under section 148 was served on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 2002 :] [Provided further that where the notice under section 148 was served on or after the 1st day of April, 2005, the provisions of this sub-section shall have effect as if for the words "one year", the words "nine months" had been substituted:] [Provided also that where the notice under section 148 was served on or after the 1st day of April, 2006 and during the course of the proceedings for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA--
(i) was made before the 1st day of June, 2007 but an order under sub-section (3) of that section has not been made before such date; or
(ii) is made on or after the 1st day of June, 2007, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "twenty-one months" had been substituted.
(2A) ... ... ...
(3) ... ... ...
(4) ... ... ...
Explanation 1.-- In computing the period of limitation for the purposes of this section--
(i) ... ... ...
(ii) ... ... ...
(iia) ... ... ...
(iii) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section, or
(iv) ... ... ...
(iva) ... ... ...
(v) ... ... ...
(vi) ... ... ...
(vii) ... ... ...
shall be excluded :
Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1), (1A), (1B), (2), (2A) and (4) available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:"
16.A perusal of Section 142 (2A) would therefore show the power has been conferred on the Assessing Officer with the previous approval of the Chief Commissioner or Commissioner to direct the assessee to get the accounts audited by an Accountant. No limitation or period is prescribed for submitting the report. Under sub-section (2C) again no period is prescribed though the language used is the report to be submitted within such period as may be specified by the Assessing Officer. In other words, the period will be determined by the A.O. Then comes the proviso, which is the subject matter of controversy and of its interpretation.
The proviso before its amendment, if read literally, sets out that the period can be extended on an application made by the assessee and for any good and sufficient reason, for such further period so that the period shall not exceed 180 days from the date on which the direction under sub-section (2A) is received by the assessee. If so read it must mean that after the initial period fixed by the Assessing Officer, time can only be extended if the assessee makes an application and not otherwise. If the assessee chooses not to make the application, then if the report is not ready within the period originally given by the Assessing Officer, then the period beyond that time will not be counted for the purposes of making the order of assessment under Section 153 (1). On the other hand, if sub-section (2A) is read along with sub-section (2C) then it is always open to the Assessing Officer to direct audit report to be submitted to him within 180 days or beyond that time, if the proviso cannot be read into (2C), for limiting the period for submitting the report.
17. The proviso, thus, can only be resorted to if the period given by the Assessing Officer is less than 180 days. Before its amendment as contended on behalf of the petitioner, it could only be on an application made by the assessee and for any good and sufficient reason. After its amendment by the Finance Act, 2008 w.e.f. 1.4.2008, the words suo motu have been added. From the reading the proviso and the statements to the Bill, it would appear that this amendment is in force w.e.f. 1st April, 2008 and, therefore, for the relevant assessment year, the Assessing Officer if the petitioner's argument is accepted had no power to extend the period beyond the extended period granted on the application by the assessee to submit the report.
18. Let us now consider the various authorities cited by the parties.
In Mohd. Shahabuddin vs. State of Bihar and others, reported in (2010) 4 SCC 653, the Supreme Court in paras 179 & 180 observed as under:-
"179. Even otherwise, it is well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. The language employed in a statute is a determinative factor of the legislative intent. If the language of the enactment is clear and unambiguous, it would not be proper for the Courts to add any words thereto and evolve some legislative intent, not found in the statute. Reference in this regard may be made to a recent decision of this Court in Ansal properties and Industries limited versus State of Haryana (2009 (3) SCC 553).
180. Further, it is a well established principle of statutory interpretation that the legislature is specially precise and careful in its choice of language. Thus, if a statutory provision is enacted by the legislature, which prescribes a condition at one place but not at some other place in the same provision, the only reasonable interpretation which can be resorted to by the courts is that such was the intention of the legislature and that the provision was concisely enacted in that manner. In such cases, it will be wrong to presume that such omission was inadvertent or that by incorporating the condition at one place in the provision the legislature also intended the condition to be applied at some other place in that provision."
In B. Premanand and others versus Mohan Koilkal and others reported in (2011) 4 SCC, 266, the Supreme Court, inter alia, held as under:-
"9. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation, etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible result or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule, vide Swedish Match AB versus SEBI.
10.As held in Prakash Nath Khanna vs. CIT the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words used by the legislature, the court cannot correct or make up the deficiency, vide Delhi Financial Corp. vs. Rajiv Anand. Where the legislative intent is clear from the language, the Court should give effect to it, vide Govt. of A.P. v. Road Rollers Owners Welfare Assn, and the Court should not seek to amend the law in the garb of interpretation."
19. The settled law, therefore, is that a Court cannot read anything into a statutory provision which is plain and unambiguous. The language employed in a statute is a determinative factor of the legislative intent. If the language of the enactment is clear and unambiguous, it would not be proper for the Courts to add any words thereto and evolve some legislative intent, not found in the statute. The other aspect, which is well established principle of statutory interpretation is that the legislature is specially precise and careful in its choice of language. Thus, if a statutory provision is enacted by the legislature, which prescribes a condition at one place but not at some other place in the same provision, the only reasonable interpretation which can be resorted to by the courts is that such was the intention of the legislature and that the provision was concisely enacted in that manner. In such cases, it will be wrong to presume that such omission was inadvertent or that by incorporating the condition at one place in the provision the legislature also intended the condition to be applied at some other place in that provision. [(Mohd. Shahabuddin vs. State of Bihar and others (supra)].
20. In construing the statutory provision, the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation, etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible result or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule. [(B. Premanand and other vs. Mohan Koilkal and others (supra)].
21. In S.S. Gadgil vs. Lal and Co., ITR (Vol. LIII 1964) 231, the Supreme Court observed as under:-
"...The legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., up to April I, 1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred."
22. Insofar as the taxing provisions are concerned and its interpretation, we may make a reference to the judgment of K.M. Sharma vs. Income-tax Officer, 2002 ITR (Vol.254) page 772. The Supreme Court observed as under:-
"...The taxing provision imposing a liability is governed by the normal presumption that it is not retrospective and the settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect the finality of tax assessments or to open up liabilities, which have become barred by lapse of time..."
23. For the purpose of interpretation of statutory provisions, we may also refer to the judgment in OXFORD UNIVERSITY PRESS vs. COMMISSIONER OF INCOME TAX, (2001) 3 SCC, 359. In para 34, the Supreme Court observed as under:-
"34. In Keshavji Ravji and Co. v. CIT this Court held that in a taxation statute where literal interpretation leads to a result not intended to subserve the object of the legislation another construction in consonance with the object should be adopted. Therein referring to the words of Thomas M. Cooley in Law of Taxation, Vol. 2, this Court observed: (SCC at p. 243, para 12).
"12. Artificial and unduly latitudinarian rules of construction which, with their general tendency to 'give the taxpayer the breaks', are out of place where the legislation has a fiscal mission. Indeed, taxation has ceased to be regarded as an 'impertinent intrusion into the sacred rights of private property' and it is now increasingly regarded as a potent fiscal tool of State policy to strike the required balance - required in the context of the felt needs of the times - between citizen's claim to enjoyment of his property on the one hand and the need for an equitable distribution of the burdens of the community to sustain social services and purposes on the other. These words of Thomas M. Cooley in Law of Taxation, Vol. 2 are worth mentioning:
'Artificial rules of construction have probably found more favour with the courts than they have ever deserved. Their application in legal controversies has oftentimes been pushed to an extreme which has defeated the plain and manifest purpose in enacting the laws. Penal laws have sometimes had all their meaning construed away and in remedial laws, remedies have been found which the legislature never intended to give. Something akin to this has befallen the revenue laws..."
24. Dealing with the interpretation of taxing statutes, in N.B. Sanjana, Assistant Collector of Central Excise, Bombay and others vs. The Elphinstone Spinning and Weaving Mills Company Ltd., reported in 1971 (1) SCC 337, the Supreme Court observed as under:-
"20. ...While rejecting the said contention this Court held:
"The proper way to deal with such a provision is to give it an interpretation which, to use the words of the Privy Council in Mahiram Kamjidas's case, "makes the machinery workable utres valeat potius quam pereat. We, therefore, think that we should read sub-section (6) according to the provision of which interest has to be calculated as provided in sub-section (8) in a manner which makes it workable and thereby prevent the clear intention of sub-section (8) being defeated. Now, how is that best done? As we have earlier said sub-section (6) deals with a case in which tax has been paid and therefore, it says that interest would be calculated 'from the 1st day of January in the financial year in which the tax was paid'. This obviously cannot literally be applied to a case where no tax has been paid. If however the portion of sub-section (6) which we have quoted above is read as 'from the 1st day of January in the financial year in which the tax ought to have been paid', the provision becomes workable. It would not be doing too much violence to the words used to read them in this way. The tax ought to have been paid on one or other of the dates earlier mentioned. The intention was that interest should be charged from January 1, of the financial year in which the tax ought to have been paid. Those who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially which is obviously fair and was clearly intended."
25. Many a time, the legislature chose to amend the provision not with a view to bring about the change in law but to clarify the law. We may only refer to the observation of the Supreme Court in State of Bihar vs. S.K. Roy, AIR 1966 SC 1995:
"6....In our opinion, the change in the language of S. 2 (b) of the earlier Act brought about by the amending Act (Act 45 of 1955) was not meant to bring about a change of law in this respect but was meant to fix a proper interpretation upon the earlier Act. It is a well recognized principle in dealing with matters of construction that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation (see Ormound Invesment Co. Ltd. v. Belts, 1928 AC 143 at p. 156."
26. In the instant case, what we find is that words have been added in the proviso. Two High Courts had occasion to consider Section 142 before its amendment. In Jagatjit Sugar Mills Co. Ltd. v. Commissioner of Income Tax and others (1994) 210 ITR 468, the very issue which is issue over here was for consideration. While dismissing the petition preferred by the assessee and interpreting sections and relevant provisions, the Punjab and Haryana High Court observed as under:
"...The proviso to sub-section (2C) of section 142 of the Act makes it clear that the Assessing Officer may, either on the application made by the assessee and/or for any good and sufficient reasons, extend the said period which cannot extend to more than 180 days from the date on which the direction under section 142(2A) is received by the assessee..."
27.On the other hand the Madhya Pradesh High Court in Commissioner of Income-Tax v. Dharival Sales Enterprises, (1996) 221 ITR 240, while considering a case where the special audit was ordered and the audit report was not submitted and the order of the assessment was made beyond the period, held that the maximum period to submit the report is 180 days and that period stood automatically curtailed when the Income-tax Officer was informed that the report was not likely to be received and as such the Income-tax Officer could only have legitimately taken the period spent for obtaining a copy of the report up to the time when the intimation was given by the assessee that the report was not likely to come. In this view of the matter, the Court held that the assessment decided on September 3, 1985, was beyond the period of limitation.
28.As we have noted earlier a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Section 142 (2A) read with section 142 (2C) is the power in the Assessing Officer to call for the special audit and to call for a report within such period as may be specified. Sub-section (2C) does not prescribe a period. The proviso on the other hand enables an assessee to apply for additional time for submitting the report. Extending the period under the proviso is purely in the discretion of the Assessing Officer. If the Assessing Officer decides to extend the period at the instance of the assessee, then the total period shall not exceed 180 days.
29. In the light of the judicial pronouncements and how a proviso should be interpreted, let us now understand and consider the proviso to sub-section (2C) of Section 142 of the Act. Sub-section (2A) of Section 142 speaks only about furnishing of report. It does not set out the period. It is sub-section (2C) of Section 142, which provides that the report must be submitted within such period as may be specified by the Assessing Officer. What is that period is also not set out. On a careful examination of Clause (iii) of Explanation 1 to sub-section (4) of Section 153 of the Act, which we have earlier reproduced, we find that in computing the period of limitation to make an assessment, what is to be excluded is the date from which the Assessing Officer directs the assessee to get his account audited under sub-section (2A) of Section 142 and ending with the last date on which the assessee is required to furnish the report of such audit under that sub-section. A literal construction of the two provisions would also indicate that neither sub-section (2A) nor sub-section (2C) of Section 142 of the Act, by themselves, provide for any period. An Assessing Officer could have granted more than 180 days in the first instance for submitting the report. What, therefore, is excluded is the entire period commencing from the date the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of Section 142 and ending with the last date on which the assessee is required to furnish the report of audit under that sub-section. Is that period governed by the proviso to Section 142 (2C)?
30. Let us now consider the proviso to sub-section (2C) of Section 142 of the Act. The proviso enables an assessee, as the proviso stood before its amendment, to apply to extend the period for submitting the report so that such period does not exceed 180 days. A reading of the proviso in its literal sense, would mean that only when an assessee asks for grant of more time than directed by the Assessing Officer to submit the report, then such extension may be granted so that the period, in its totality, does not exceed 180 days. Can this proviso be read into sub-section (2C) to limit the suo motu power of the Assessing Officer. If it is so read, then it would be assumed that the power of the Assessing Officer to extend the period under Section 142 is absent nor was it available under the proviso. This construction leads to the inference that once time has been granted, then the power to extend beyond that period no longer subsists. How does one then reconcile the power of the Assessing Officer under sub-section (2A) or sub-section (2C) with the proviso. The proviso, read literally, would mean that the Assessing Officer has been conferred power to extend the period of submitting the report only if the assessee applies and not beyond a total period of 180 days. If the Assessing Officer had already provided for period of 180 days or more, then the proviso cannot be resorted to. The language of sub-section (2C) by itself shows that there is nothing to limit the power of the Assessing Officer in fixing the period to submit the report.
31. The amendment has introduced the words 'suo motu' in the proviso to sub-section (2C) of Section 142 of the Act. In other words, it appears that before the proviso was inserted, there was only power in the Assessing Officer to consider an application of an asssessee for extending the period to submit the report and a limitation on that period. After the amendment there is also a limitation on the power of the Assessing Officer in fixing the period for submitting a report.
32. The Punjab & Haryana High Court took the view that the words 'and for any good and sufficient reason' is independent of the power conferred under the proviso to act suo motu and should be read independently. If the proviso is considered in this aspect and if the audit report is to enable the Assessing Officer to pass an order of assessment, why should the legislature have thought it proper to use the expression 'by the assessee and for any good and sufficient reason'. These words would by implication indicate that the power to extend the time at the instance of the assessee is only if there be good and sufficient reasons.
33. As noted earlier, Clause (iii) of Explanation 1 to sub-section (4) of Section 153 of the Act, sets out what can be excluded, for the purposes of computing the period as provided under sub-section (2A) of Section 142 of the Act to furnish a report. Neither in sub-section (2A) nor sub-section (2C) of Section 142, any period of limitation is provided for. The only period which can be excluded is the period which the Assessing Officer sets out for submitting the report. Does this mean that the period as provided in the proviso would not be considered for the purpose of assessment? If we so read it, it may lead to making the proviso otiose and this, as a rule of interpretation, ought not to be considered. There must be a harmonious construction between the sub-section and the proviso. The proviso, to that extent, enables an assessee, who otherwise had no right or say in fixing the period by the Assessing Officer for submitting the report, to also apply for good and sufficient reason.
34. The proviso, in our opinion, therefore, will have to be read with sub-section (2C) and sub-section (2A) of Section 142 of the Act at least to the extent that the period which the Assessing Officer gives to the assessee to produce the report and the extended period for submitting the report at the instance of the assessee as set out in sub-section (2C), will have to be excluded. Once the legislature has thought it fit to confer power on the Assessing Officer, then sub-section (2C) is the provision wherein the prescribed period as provided by the proviso would have to be read into. At the highest before its amendment the proviso could also be read to mean that though it is the power of the Assessing Officer to fix the period, taking into consideration the limitation provided insofar as an assessee is concerned, the same limitation shall also be read into sub-section (2C) when the Assessing Officer fixes the period for submitting the report.
35. The other way the proviso to sub-section (2C) could be interpreted is, that before the amendment to the proviso, under sub-section (2A) and sub-section (2C) of Section 142, there was no limitation, but by virtue of the proviso, even the power of the Assessing Officer is limited to 180 days, which will be the maximum period to be excluded for computation under Section 153 of the Act. The language of sub-section (2C) is 'within such period as may be specified by the Assessing Officer'. As noted earlier, de hors the period it could be 180 days or 200 days depending upon the reasonability of the time required. To that extent, invocation of the proviso at the instance of an assessee is for extending the period for submitting the report, but a limitation on the Assessing Officer to extend the period but not beyond the period of 180 days. The power, therefore, of the Assessing Officer to extend time is not located in the proviso but in sub-section (2C). Furnishing a report would be on the day ordered or on an extended day. Considering the limitation of 180 days, that proviso can be read into sub-section (2C) if the assessee had made an application for extension of time. The proviso so read in this context, would mean that the Assessing Officer suo motu could have granted time even beyond 180 days but on an application made by the party, at the maximum, can provide for a period of 180 days, if not already provided beyond which the period would not be extended for the purposes of passing the order of assessment. Our discussion, therefore, leads us to an inference firstly that under sub-section (2C), there was a power in the Assessing Officer to extend the period beyond the period first granted and the limitation contained in the proviso did not interfere with that exercise of power. The proviso, to that extent, only enables an assessee, also to apply for extension. The proviso, in no way, dilutes or takes away the powers of the Assessing Officer, as set out in sub-section (2C) of Section 142 of the Act. As an illustration, if the Assessing Officer had given a period of 120 days for submitting the report and the report for various reasons was not possible to be submitted within that period and the Assessing Officer was not inclined to exercise his power to extend the period, the assessee could then apply, instead of having the Assessing Officer passing a best judgement / order of assessment. If so read, then the mandate of Section 153 (4) (iii) will be properly construed.
36. We, thus, arrive at a conclusion that the power to grant time will include, within its ambit, the power to extend time. Where the assessee applies to extend the period, it is within the power of the Assessing Officer to extend the period, as provided for in Section 142 (2C) of the Act. After the amendment to the proviso, the suo motu power has to be exercised in such a manner that the period for submitting the report and / or extended period, should not be more than 180 days. The amendment, therefore, is purely clarificatory and / or intended to limit the period for submitting a report even when the Assessing Officer suo-motu extends the period.
37. If we so read, the provision then, in our opinion, and notwithstanding what has been set out in the Explanation to the Bill which introduced the expression 'suo motu', there was always power in the Assessing Officer which is now limited by the proviso to a maximum of 180 days.
38. Insofar as the present case is concerned, if the period, as set out earlier, are excluded, then by virtue of Section 153 of the Act, that period would be excluded. On excluding that period, on the facts of the present case, the assessment order would be within limitation.
39. In the light of what has been stated above, we find no merit in the petition, which is accordingly dismissed.
July 25th , 2011
AHA/RK (Prakash Krishna, J.) (F.I. Rebello, C.J.)