Holding

The amendment’s proviso is retrospective and permits reopening of assessments up to eight years from the end of the assessment year, and notice service is not a condition precedent.

Summary

The Supreme Court examined whether a sales‑tax assessment for the year 1985‑86, completed before the expiry of the four‑year limitation under Section 21(2) of the U.P. Trade Tax Act, could be reopened after the legislature enlarged the limitation to eight years by inserting a proviso in the 1991 amendment. The Court held that the proviso is operative retrospectively and extends the permissible period for reassessment to eight years from the end of the assessment year, even where the original four‑year period had already lapsed. Consequently, the Commissioner of Sales Tax could authorise reassessment up to 31 March 1994 and the service of notice to the assessee is not a condition precedent. The High Court’s order quashing the Commissioner’s sanction and the reassessment notices was set aside. The appeals were allowed and the respondents were ordered to bear costs.

Issues considered

Whether the amendment inserting a proviso to Section 21(2) of the U.P. Trade Tax Act, 1948, has retrospective effect to extend the limitation period for reassessment to eight years, covering periods where the original four‑year period had already expired.
Whether service of notice to the assessee is a condition precedent to the reopening of a completed assessment under the Act.

Legislation cited

Income Tax Act, 1922
U.P. Trade Tax Act, 1948s. 21(1), s. 21(2)

Subjects

sales taxassessment reopeningstatutory amendmentretrospective operationlimitation periodnotice requirementfiscal statute interpretation

Judgment

ADDITIONAL COMMISSIONER (LEGAL) AND ANR. A
v.
M/S JYOTI TRADERS AND ANR. ETC.

NOVEMBER 20, I 998

[K. VENKATASWAMI AND D.P. WADHWA, JJ.] B

U.P. Trade Tax Act, 1948

Section 21 (2)-Proviso (As inserted by UP Sales Tax (Amendment and
Validation) Act, 1991-Scope of C
Sales Tax-Reassessment-Period for-Assessment period offour years
provided under the Act-Amendment of Act-Insertion of proviso-
Enlargement of period of assessment upto eight years under the proviso--
Held proviso was operative from the date of its coming into force relating
and encompassing back to previous eight assessment years-Held even to D
cases where the period of four years prescribed earlier had already expired
before addition to the proviso-Assessment of respondent assessees for the
assessment year 1985-86-Held could be re-opened upto 31.3.1994-Service
of notice to assessee not a condition precedent.

Taxing Statute-Interpretation of
E

The question involved in these appeals is whether a completed
assessment under the U.P. Sales Tax Law could be re-opened after the
prescribed period when that period was enlarged by amending the law. The
assessment of the respondent assessee for the year 1985-86 under the U.P.
F
Trade Tax Act, 1948 was completed on November 27, 1989. In the connected
appeal the assessee's assessment for the year 1985-86 was completed on
February 28, 1989. The assessment period of four years provided under
Section 21 of the Act for the assessment year 1985-86, expired on March
31, 1990. By the U.P. Sales Tax (Amendment and Validation) Act, 1991 a
proviso to sub-section (2) of Section 21 was inserted whereunder it was G
7 . provided that the Commissioner of Sales Tax may authorise the assessing
authority to make assessment or reassessment after the expiration of period
of four years but not after the expiration of eight years from the end of such
year notwithstanding that such assessment or reassessment may involve a
change of opinion. The said proviso came into force with effect from February H
67
68 SUPREME COURT REPORTS [19981 SUPP. 3 S.C.R.

A 19, 1991. Subsequent to the amendment, Commissioner Sales Tax issued
Sanctions dated December 12, 1993 and November 12, 1993 respectively for

-
assessment of both the assessees. Consequently notices dated September 8,
1994 and January 11, 1994 were also issued to both the assessees. As the
sanctions given and notices issued were after niore than four years with
B reference to the assessment year 1985-86 under the Act before its amendment
the respondent-assessees challenged both the sanction orders as well as
notices for reassessment before the Al!:-habad High Court. A Division Bench
of the High Court allowed the petition filed by the respondent assessees and
quashed the sanction orders of the Commissioner as well as notices issued
by the Sales Officer. rt held that (I) sanction issued by the Commissioner
C of Sales Tax for initiation of proceedings under Section 21 of the Act for the
assessment year 1985-86 was barred by limitation and that the proviso to
Section 21 (2) of the Act which had been introduced with effect from February
19, 1991 was inapplicable to the Assessment year 1985-86 as the assessment
order for this year had been made much before the introduction of the
proviso fo Section 21 (2) of the Act; (ii) when the period for assessment or
D reassessment for the year 1985-86 under Section 21 of the Act before
insertion of the proviso to sub-section(2) thereof had expired on March
31,1990, the amendment had no effect. Against the decision of the High
Court appeals were preferred before this Court.

E Allowing the appeals and setting aside the impugned Judgments and
Orders of the High Court, this Court

HELD: I. The High Court was not right in quashing the sanction given
by the Commissioner of Sales Tax and notices issued by the Assessing
Authority in p11rsuance thereto. 182-D)
F
2. Sub-section (2) of S. 21 and the proviso added to it do not leave
anyone in doubt that as on the date when the proviso came into force, the
Commissioner of Sales Tax could authorise making of assessment or
reassessment before the expiration of eight years from the end of that
G particulu assessment years. It is immaterial if a period for assessment or ·-
reassessment under sub-section (2) of Section 21 before the addition of the
said proviso had expired. Here, it is the completion of assessment or
reassessment under Section 21 which is to be done before the expiration of
eight years of that particular assessment year. Read as it is, these provisions r.
would mean that the assessment for the year 1985-86 could be re-opened
H upto March 31, 1994. Authorisation by the Commissioner of Sales Tax and
ADDL. COMMR. v. JYOTI TRADERS 69
completion of assessment or reassessment under sub-section (I) of Section A
· 21 have to be completed within eight years of the particular assessment year.
Notice to the assessee follows the authorisation by the Commissioner of
Sales Tax, its service on the assessee is not a condition precedent to re-open
the assessment. [81-E-G]

3. A fiscal statute can have retrospective operation. Commencement B
of an Act can be different than the operation of the Act though sometimes
both may be same. Proviso added to sub-section (2) of Section 21 of the Act
does not put any embargo on the Commissioner of Sales Tax not to reopen
the assessment if period, as prescribed earlier, had expired before the proviso
came into operation. One has to see the language of the provision. If it is C
clear, it has to be given its full effect. To reassure oneself, une may go into
the intention of the legislature in enacting such provision. The date of
commencement of the proviso to Section 21(2) of the Act does not control
its retrospective operation. The proviso is operative from February 19, 1991
and a bare reading of the proviso shows that the operation of this proviso
relates and encompasses back to previous eight assessment years. D
[81-H; 82-A-CI

Commercial Tax Officer and Ors. v. Biswanath Jhunjhunwalla & Anr.,
[1996] 5 SCC 626 and The Ahmedabad Manufacturing & Calico Printing
Co. Ltd. v. S.C. Mehta Income Tax Officer & Anr., [1963] Supp. 2 SCR 92,
relied on. E

S.S. Gadgil, ITO v. Lal & Co., 53 ITR 231; J.P. Jani, ITO v. Induprasad
Devshanker Bhatt, (1969) 72 ITR 595 and Y. Narayana Chetty & Anr. v.
Income-Tax Officer Ne/lore & Ors., (1953) 35 ITR 388, distinguished.

ITO v. S.K. Habibullah, (1962) 44 ITR 809, referred to. F

Commissioner ofIncome-Tax v. Ramsukh Motilal, (1955) 27 ITR 54 and
R.K. Das & Co. v. Commissioner of Income-tax, (1956) 30 ITR 439, cited.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5817 of 1998
fu. G
>· From the Judgment and Order dated 2.7.96 of the Allahabad High Court
in W.P. No. 323of1995.

A.K. Goel, Additional Advocate General, U.P., Bharatji Agrawal, Kavin
Gulati, Pradeep Misra, Vijay Hansaria, S.K. Jain, Dhruv Agrawal and Praveen H
70 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A Kumar for the appearing parties.
The Judgment of the Court was delivered by

D.P. WADHWA, J. Leave granted.

B In both these appeals which are against two separate judgment of the
same Division Bench of the Allahabad High Court, a common question of law
arises. It i~: that in the circumstance could a completed assessment under the
U.P. Sales Tax Law be re-opened after the prescribed period when that period
was enlarged by amending the law.

C Facts are similar.

In the appeal of Lohiz Machines Limited (arising out of SLP (C) No.
11015 of 1997) assessment for the year 1985-86 under the UP Trade Tax Act,
1948 (for short 'the Act') was completed on November 27, 1989. The Act is
also called the U.P. Sales Tax Act. In the appeal of Jyoti Traders (arising out
D of SLP(C) No. 8866 of 1997) assessment for the year 1985-86 was completed
on February 28, 1990. Period for assessment or re-assessment, which is four
years under section 21 of the Act, for the assessment year 1985-86 expired,
on March 31, 1990.

E The Act was extensively amended by the UP Sales Tax (Amendment
and Validation) Act, 1991. The amending Act received the assent of the
Governor of Uttar Pradesh on August 19, 1991. Different dates were prescribed
for coming into force of various provisions of the amending Act. Section 21
of the Act also underwent an' amendment and the relevant provision with
which we are concerned came into force with effect from February 19, 1991.
F
Taking advantage of the amendment to section 21, which now prescribed
a period of eight years, the Sales Tax Officer after taking sanction from the
Commissioner of Sales Tax issued notices to the respondents in both these
appeals for re-assessment. In the case of Lohia Machine Ltd. sanction order
G is dated December 21, 1993 and notice is dated September 8, 1994. In the case
of Jyoti Traders date of sanction order is November 12, 1993 and the notice
had been issued for January 11, 1994. Sanctions given and notices thus
issued were after more than four years with reference to the assessment year
1985-86 under the Act before its amendment.

H The respondent challenged both these orders of sanction of the
ADDL. COMMR. v. JYOTI TRADERS [D.P. WADHWA, J.] 71
Commissioner of Sales Tax and the notices for re-assessment in two separate A
writ petitions which were allowed by the High Court and the sanction orders
of the Commissioner as well as notices issued by the Sales Tax Officer were
quashed. This led to filing of the present appeals.

Relevant prnvisions of section 21 of the Act are as under:-
B
"Section 21. Assessment of tax on the turnover not assessed during
the year.

(I) If the assessing authority has reason to believe that the whole or
any part of the turnover of the dealer, for any assessment year or part
thereof, has escaped assessment to tax or has been under assessed C
or has been assessed to tax at a rate lower than that at which it is
assessable under this Act, or any deductions or exemptions have
been wrongly allowed in respect thereof the assessing authority may,
after issuing notice to the dealer and making such inquiry as it may
consider necessary, assess or re-assess the dealer or tax according to D
law:

Provided that the tax shall be charged at the rate at which it would
have been charged had the turnover not escaped assessment, or full
assessment as the case may be.

Explanation........... .. E
(2) Except as otherwise provided in this section no order of assessment
or re-assessment under any provision of this Act for any assessment
year shall be made after the expiration of four years from the end of
such year."
F
By the amending Act a proviso was added to sub-section (2) as under:-

"Provided that if the Commissioner of Sales Tax, on being satisfied on
the basis of reasons recorded by the assessing authority that it is just
and expedient so to do authorises the assessing authority in that
behalf, such assessment or re-assessment may be made after the G
expiration of the period aforesaid but not after the expiration of eight
years from the end of such year notwithstanding that such assessment
or re-assessment may involve a change of opinion."

There are other amendments in section 21 which were made by
subsequent amending Acts but with those we are not concerned. H
72 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A As noted above, the proviso to sub-section (2) of section 21 as inserted
by the amending Act, 1991 came into force with effect from February 19, 199 l.

High Court had held that sanction issued by the Commissioner of Sales
Tax for imtiation of proceedings under Section 21 of the Act for the Assessment
Year 1985-86 was barred by limitation and that the proviso to Section 21 (2)
B of the Act which had been introduced with effect from February 19, 1991 and
was inapplicable to the Assessment Year 1985-86 as the assessment order for
this year had been made much before the introduction of the proviso to
Section 21 (2) of the Act. High Court was thus of the view that when the
period fo:r assessment or re-assessment for the year 1985-86 under Section 21
C of the Act before insertion of the proviso to Sub-section (2) thereof had
expired on March 31, 1990, the amendment, had no effect.

Mr. Goel, learned counsel for the app .:!ant submitted that if we accept
the interpretation to Sub-section (2) of Section 21 to hold that the amendment
is of prospective nature it will make the proviso redundant. He said proviso
D in fact operates after expiry of four years period prescribed under that sub-
section and that notice has to follow after the order is obtained from the
Commissioner and not before that. Strong reliance was placed by him on a
decision of this Court in Commeri:ial Tax Officer and others v. Biswanath
Jhunjhunwalla and another, [1996] 5 SCC 626. In this case, which is under
the Bengal Finance (Sales Tax) Act, 1941 the respondent, a registered dealer
E under this Act, was assessed for the assessment years Chaitra Sudi 2023 and
2024. T1e assessments were completed on February 17, 1969 and March 26,
1969 respectively. Under rule 80 (5) of the Bengal Sales Tax Rules 1941 made
under that Act the assessment could have been reopened only within a
period of four years. This Rule 80(5) in relevant part is as under:-

F "80(5) The Commissioner or any other authority to whom power
in this behalf has been delegated by the Commissioner, shall not, of
his own motion, revise any assessment made or order passed under
the Act or the rules thereunder if -

*** *** *** ***
G (ii) the assessment has been made or the order has been passed
more than four years previously."

Bengal Sales Tax Ordinance, 1973 was promulgated which was later
replaced by the Bengal Finance (Sales Tax) (Third Amendment) Act, 1974.
This amending Act substituted Section 26( 1) of the principal Act under which
H now the State Government was empowered to make rules, with prospective
ADDL. COMMR. v. JYOTI TRADERS [D.P. WADHWA,J.] 73
or retrospective effect for carrying out the purposes of the Act. With this new A
'power conferred on the State Government Rule 80(5) was amended by
notification issued on March 30, 1974 amending the same with effect from
November I, 1971, and in relevant part now it reads as under:-

"80(5) The Commissioner or any other authority to whom power
in this behalf has been delegated by the Commissioner shall not of B
his own motion, revise any assessment made or order passed under
the Act or the rules thereunder if -

*** *** ***
(ii) the assessment has been made or the order has been passed C
more than six years previously."

After this amendment to Rule 80(5) as aforesaid Commercial Tax Officer
issued notices on November 7, 1974 re-opening the completed assessments
for the years Chaitra Sudi 2023 and 2024. These notices were challenged in
the Calcutta High Court by writ petition questioning the legality of the D
notices. High Court upheld the contention of the respondent-assessee that,
by the amendment of the Rule, assessments which had been completed could
be revised within six years of the date of such completion, but when the right

- to revise the assessments under the unamended provision of the rule stood
barred on the date of the amendment, such assessments could not be re-
opened or revised. High Court said that the notification did not either expressly E
or by necessary implication confer any power of revision of assessment
which stood barred on the date on which it was issued. After referring to
decision of this Court in the cases of ITO v. S. K. Habibullah, ( 1962) 44 !TR
809; S.S. Gadgil, ITO v. Lal and Co., 53 !TR 231 and J.P. Jani, ITO v.
!nduprasad Devshanker Bhatt, (1969) 72 !TR 595 this Court held as under:-
F
"12. What, therefore, we have to seek is the clear meaning of the said
Notification. If there be no doubt about the meaning, the amendment
brought about by the said Notification must be given full effect. If the
language expressly so states or clearly implies, retrospectivity must
be given with effect from l. l l .1971, so as to encompass all assessments
)
made within the period of six years theretofore, whether they have G
become final by reason of the expiry of the period of four years or not.
13. By reason of the said Notification, with effect from l.11.1971, Rule
80(5)(ii) has to be read as barring the Commissioner (or other authority
to whom power in this behalf has been delegated by the Commissioner)
from revising of his own motion any assessment made or order passed H
74 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A under the Act or the rules if the assessment has been made or the
order has been passed more than six years previous to I.I I.I 971. Put
conversely, with effect from 1.11.1971, Rule 80(5)(ii) permits th1:
Commissioner (or other authority) to revise of his own motion any
assessment made or order passed under the Act or the rules provided
the assessment has not been made or the order passed more than six
B years previously. This being the plain meaning, the said Notification
must be given full effect. Full effect can be given only if the said
Notification is read as being applicable not only to assessments which
were incomplete but also to assessments which had reached finality
by reason of the earlier prescribed period of four years having elapsed.
Where language as unambiguous as this is employed, it must be
assumed that the legislature intended the amended provision to apply
even to assessments that had so become final; if the intention was
otherwise, the legislature would have so stated."

Mr. Agrawal, who appeared for Lohia Machines Ltd. and Mr. Bansaria,
D for Jyoti Traders, submitted that the amendment would not have any
retrospective operation and that High Court was right in its view. To get

E
support for their arguments reference was made to the decisions of this Court
in Y. Narayana Chetty & Anr. v. Income-Tax officer, Ne/lore, & Ors., (1953)
35 !TR 388; S.S. Gadgil v. Lal & Co., (1964) 53 !TR 231; JP. Jani, ITO v.
lnduprasad Devshanker Bhatt, (1969) 72 !TR 595 and The Ahmedabad
-
Manufacturing & Calico Printing Co. ltd v. SC. Mehta Income-tax Officer
and another, [1963] Supp. 2 SCR 92.

In Y. Narayana Chetty & Anr. v. Income-Tax Officer Ne/lore & Ors., one
of the questions raised was that proceedings taken by the Income Tax officer
F under Section 34 of the Income Tax Act, 1922 were invalid because the notice
required to be issued under the said section had not been issued against the
ass1:ssees contemplated therein. This Court said that the Income Tax Officer
had purported to act under Section 34(J)(a) against the assessee and proceeded
to hold as under:

"The said sub-section provides inter alia that "if the Income-tax officer
G
has reason to believe that by reason of the omission or failure on the
part of the assessee to make a return of his income under Section 22
for any year or to disclose fully and truly all material facts necessary
-
"
for his assessment for that year, income, profits or gains chargeable
to income-tax has been under-assessed", he may, within the time
H prescribed, "serve on the assessee a notice containing all or any of
ADDL. COMMR. v. JYOTI TRADERS [D.P. WADHWA, J.] 75
the requirements which may be included in the notice under sub- A
section (2) of section 22 and may proceed to re-assess such income,
profits or gains." The argument is that the service of the requisite
notice on the assessee is a condition precedent to the validity of any
re-assessment made under Section 34; and if a valid notice is not
issued as required, proceedings taken by the Income-Tax Officer in
pursuance of an invalid notice and consequent orders of re-assessment B
passed by him would be void and inoperative. In our opinion, this
contention is well-founded. The notice prescribed by section 34 cannot
be regarded as a mere procedural requirement; it is only if the said
notice is served on the assessee as required that the Income-tax
Officer would be justified in taking proceedings against him. If no C
notice is issued or if the notice issued is shown to be invalid then the
validity of the proceedings taken by the Income-tax Officer without a
notice or in pursuance of an invalid notice would be illegal and void.
That is the view taken by the Bombay and Calcutta High Courts in
Commissioner of Income-tax v. Ramsukh Motila/, (1955) 27 ITR 54
and R.K. Das & Co. v. Commissioner ofIncome-tax, (1956) 30 ITR 439 D
and we think that view is right".

In S.S. Gadgil v. Lal & Co. Section 34 of Income Tax Act, 1922 was
considered which prescribed a period of one year for assessment or re-
assessment in the case of income escaping assessment in the case of a E
person deemed to be an agent of a non-resident person. By Section 18 of the
Finance Act, 1956, period of one year was increased to two years. The
relevant clauses of Section 34 prescribing the period within which notice may
be issued read as follows:

"(!) If............................ . F
he may in cases falling under clause (a) at any time within eight years
and in cases falling under clause (b) at any time within four years of
the end of that year, serve on the assessee, ...... a notice containing all
or any of the requirements which may be included in a notice under
sub-section (2) of section 22 and may proceed to assess or reassess G
such income, profits or gains or recompute the loss or depreciation
allowance; ........................ .

provided that... ......................... .

(iii) Where the assessment made or to be made is an assessment made H
76 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A or to be made on a person deemed to be the agent of a non-resident
person under section 43, this sub-section shall have effect as if for
the periods of eight years and four years a period of one year was
substituted."

By section 18 of the Finance Act, 1956 section 34 was extensively
B amended and clause (iii) of the proviso was substituted by the following
proviso:

"Provided further that the Income-tax Officer shall not issue a notice
under this sub-section for any year after the expiry of two years from
that year if the person on whom an assessment or reassessment is to
c be made in pursuance of the notice is a person deemed to be the agent
of a non-r,\:sident person under section 43."

Income-tax Officer, therefore, could issue a notice to a person deemed
to be the agent of a non-resident after the expiry of two years from the date
of the expiry of the assessment year. It was common ground that section 18
D of the: Fina-:ce Act, 1956 was not given retrospective operation before April
I, 1956. The question before this Court was whether the Income-tax Officer
could issue a notice of assessment to a person as an agent of a non-resident
party under the amended provisions when the period prescribed for such
notic1~ had, before the Amended Act came into force, expired. This Court said
E that the Amending Act came into force after the period provided for issue of
a notice under Section 34, before it was amended, had expired. The Court said
that i1n considering whether the amending statute applied, the question was
one of interpretation, i.e., to ascertain whether -it was the intention of the
legislature to deprive a taxpayer of the plea that action for assessment or re-
asses.sment could not be commenced, on the ground that before the amending
F Act became effective, it was barred. The Court then held as under:

"As we have already pointed out, the right to commence a proceeding
for assessment against the assessee as an agent of a non-resident
party under the Income-tax Act before it was amended, ended on
March 31, 1956. It is true that under the amending Act by Section 18
G of the Finance Act, 1956, authority was conferred upon the Income- '
tax Officer to assess a person as an agent of a foreign party under -
Section 43 within two years from the end of the year of assessment.
But authority of the Income-tax Officer under the Act before it was
amended by the Finance Act of 1956, having already come to an end,
H the amending provision will not assist him to commence a proceeding
ADDL. COMMR. v. JYOTI TRADERS [D.P. WADHWA, J.] 77

even though at the date when he issued the notice it is within the A
period provided by that amending Act. This will be so, notwithstanding
the fact that there has been no determinable point of time between the
expiry of the time provided under the old Act and the commencement
of the amendin6 Act. The legislature has given to Section 18 of the
Finance Act, 1956, only a limited retrospective operation, i.e., up to B
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." C
JnJ.P. Jani, Income-Tax Officer, Circle IV Ward G, Ahmedabad & Anr.
v. lnduprasad Devshanker Bhatt, the assessment for the assessment year
1947-48 was completed on January 31, 1952 under the Income Tax Act, 1922.
Thereafter, the Income-tax Officer received informatior. that a certain profit
made by the assessee had escaped assessment by reason of the assessee not D
having disclosed at the time of the original assessment. The Income-tax
Officer, therefore, after obtaining the approval of the Commissioner of lncome-
tax issued notice dated March 27, 1956 under Section 34(l)(a) of the Income
Tax Act, 1922. By order dated March 29, 1957, of the Income-tax Officer
completed re-assessment proceedings. Assessee went in appeal to the E
Appellate Assistant Commissioner who allowed the same by order dated
January 5, 1963 and set aside the order of assessment on the ground that
there was no valid service of notice. By this time, Income Tax Act, 1961 had
come into force. On January 4, 1963, the Income-tax Officer issued a notice
calling upon the assessee to show cause why proceedings should not be
taken under Section 147(a) of the new Act for bringing to tax the escaped F
profit of the assessee. Subsequently, notice under section 148 of the new Act
was issued. Assessee protested against this new notice on the ground that
action under the old Act had become time barred and the new Act had no
application to his case. After considering the provisions of the old Act and
Section 297 of the new Act which repealed the old Act and on the effect of G
the repeal, this Court said that all the new sections must be read as applicable
only to those cases where right of the Income-tax Officer to re-open the
assessment was not barred under the repealed section. The Court held as
under :

"In our view, the new statute does not disclose in express terms or H
78 SUPREME COURT REPORTS [1'-198) SUPP. 3 S.C.R.

A by necessary implication that there was a revival of the right of the
Income-tax Officer to re-open an assessment which was already barred
under the old Act. This view is borne out by the decision of this
Court in S.S. Gadgil v. Lal & Co., (1964) 53 ITR 231."

This Court observed that neither by express terms nor by necessary implication
B did section 297(2)( d)(ii) disclosed that there was revival of the right of the
Incom1:-tax Officer to re-open an assessment which was already barred under
the oldl Act. The Section was applicable only to those cases where the right
of the Income-Tax Officer to re-open the assessment was not barred under the
old Act.

C In The Ahmedabad Manufacturing & Calico Printing Co., Ltd. v. S.C.
Mehta, Income-tax Officer & Anr. in its assessment to income tax for the year
1952-53, the appellant, a company, had been granted under the provisions of
the Finance Act, 1952, a rebate on a portion of its profits of the previous year,
that is, 1951 which it had not distributed as dividends to its shareholders. In
the next assessment year 1953-54, the appellant used a part of the aforesaid
D undistributed profits for declaring dividends. As the law then stood, nothing
could be done by the revenue authorities to withdraw the rebate earlier
granted on the ground of the profits being utilised in declaring dividends in
a latter year. From April 1, 1956, however, there was a change in the law as
sub-section (I 0) of Section 35 of the Income-tax Act, 1922, was brougnt into
E force then. By an order made on March 27, 1958, under that sub-section, the
aforesaid rebate was withdrawn and the appellant was called upon to refund
it. The appellant then applied to the High Court at Bombay for a writ to quash
the order of March 27, 1958, on the ground that sub-section (10) was not
applicable to the facts of this case. That application was dismissed by the
High Court. The appeal in the Supreme Court was against this decision of the
F High Court at Bombay dismissing the application. Now sub-section (JO) of
Section 35 of the Income-Tax Act was enacted by the Finance Act of 1956.
That sub-section, in so far as it is necessary to state for the purpose of this
case, provided that where in any of the assessment years 1948-49 to 1955-
. 56, a n:bate of income-tax was allowed to a company under the Finance Act
G prevailing in that year on a part of its total income "and subsequently the
amount on which the rebate of income-tax was allowed as aforesaid is availed ...
of by the company, wholly or partly, for declaring dividends in any year
............ the Income-tax Officer shall re-compute the tax payable by the company
by reducing the rebate originally allowed." The sub-section in substance
permits a rebate duly allowed in any year before it came into force to be
H withdrawn if"subsequently" the amount on which the rebate was allowed "is
ADDL. COMMR. v. JYOTI TRADERS (D.P. WADHWA, J.] 79
availed of' "for declaring dividends in any year". The appellant contended A
that the sub-section did not apply unless the amount on which the rebate was
granted was availed of for declaring dividends after the sub-section had come
into force, that is, after April 1, 1956 and, therefore, it did not apply to the
present case. It was said that if it were not so, the sub-section would be given
a retrospective operation and the rule was that it was to be presumed that
a statute dealing with substantive rights was not to have such operation. This B
Court, per majority (3 : 2), held that sub-section (I 0) of Section 35 was
intended to have a retrospective operation and was applicable to the present
case. Sarkar, J. who was in majority, in his concurring judgment, observed as
under:

"There is no dispute that by sub-section (I 0) the legislature intended
c
to penalise a case where subsequent to its enactment, the amount on
which rebate had been granted wa~ utilised in declaration 'of dividends.
Now is there any reason to think that the legislature did not want to
impose the penalty also on those who had earlier utilised the amount
in declaration of dividends? There was no special merit in these latter D
cases. And I also think that they formed the majority of the cases. The
grant of rebate having been stopped after March 31, 1956, there was
no occasion to provide for cases of such grant thereafter. All these
circumstances lead me to the view that the intention of the legislature
was to penalise the cases of utilisation of amounts on which rebate E
had been granted in payment of dividends which had happened
before the sub-section came into force. The remedy which the sub-
section provided would largely fail in any other view. The general
scope and purview of the sub-section and a consideration of the evil
which it was intended to remedy lead me to the opinion that the
intention of the legislature clearly was that the sub-section should F
apply to the facts that we have in this case."

Hidayatullah, J. who spoke for the majority said that sub-section (I 0)
was introduced into section 35 of the Income Tax Act, 1922 by the Finance
Act, 1956 and that if there was nothing more in the language of the sub-
section to give it operation from an earlier date it would have operated only G
from April I, I 956 but the language of the sub-section gave it additional
retrospectivity and said so in such clear and unambiguous language as to
leave no doubt. He then observed :

"In the present case, this is so. The assessee company declared
dividends in the calendar year 1952. The assessment year was l .4.1953 H
80 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A to. 31.3.1954. The letter written on March 18, 1958, asking the assessee
company to show cause was within the four years reckoned from the
end of the financial year (31-03-1954) in which the amount on which
rebate of Income-tax was availed of for declaring dividends. It complied
with the letter of the sub-section. Since the power commenced on
1.4.1956, the utmost reach of the Income-tax Officer would be the end
B of the assessment year 1952. Any declaration of dividend after !st day
of April, 1952, out of accumulated profits of any of the years in which
rebate was earned would be within time for the recall of the rebate.
But a declaration prior to 1.4 .1952 would be beyond the power of the
Income-tax Officer to reca!L This meaning is the only meaning which
c the plain words of the section can bear. Any other meaning might
make sub-s.(10) unworkablebecause no company, with the knowledge
that the rebate would be recalled, would like to declare dividends after
April I, 1956 out of amounts on which rebate was earned. If the other
meaning was attributed, sub-s. (I 0) might well be a dead letter. The
sub-section was obviously the result of noting how rebates were
D earned and later were being utilized to fill the pockets of the
shareholders. The amendment met this situation and did it in very
clear terms."

We do not think that decisions in the cases of Y. Narayana Chetty &
E Anr; S.S. Gadgil and J.P. Jani, ITO are of any help in interpreting the
provisions of law now before us, In Y. Narayana Chetty's case, this Court
upheld the contention of the assessee that the notice on the assessee is a
condition precedent to the validity of reassessmerit made under Section 34
of th(: Income Tax Act, 1922. The Court said that notice prescribed under this
section could not be regarded as a mere procedural requirement and that the
F Income-tax Officer gets jurisdiction to reassess only when notice is served on
the a.ssessee as required. In S.S. Gadgi/'s case, this Court said that in
considering whether the amending statute applied, the question was one of
the interpretation and that the amending provision must be read subject to
the mies that in the absence .of an express provision or clear implication the
G legislature does not intend to attribute to the amending provision a greater
retrospectivity than expressly mentioned. J.P. Jani 's case, was concerned with
the retrospective operation of the new Income Tax Act, 1961 when assessment
proceedings under the old Income Tax Act, 1922 had already concluded and
period to re-open the assessment under the old Act had become barred.

H The two decisions in the cases of The Ahmedabad Manufacturing &
ADDL. COMMR. v. JYOTI TRADERS [D.P. WADHWA, J.] 81
Calico Printing Co. Ltd. and Biswanath Jhunjhunwal/a & Anr. are more A
closer to the issue involved in the present case before us. They laid down
that it is the language of the provision that matters and when meaning is clear,
it has to be given full effect. In both these cases this Court held that the
proviso which amended the existing provision gave it retrospectivity. When
the provision of law is explicit, it has to operate fully and there could not be B
any limits to its operation. This Court in Biswanath Jhunjhunwalla case said
that if the language expressly so states or clearly implies, retrospectivity must
be given to the provision. Under Section 34 of the Income Tax, 1922, it is the
service of the notice which is sine qua non, an indispensable requisite, for
the initiation of assessment or reassessment proceedings where income had
escaped assessment. That is not so in the present case. Under sub-section C
(1) of Section 21 of the Act before its amendment, the assessing authority
may, after issuing notice to the dealer and making such inquiry as it may
corisider necessary, assess or reassess the dealer according to law. Sub-
section (2) provided that except as otherwise provided in this Section no
order for any assessment year shall be made after the expiry of 4 years from
the end of such year. However, after.the amendment, a proviso was added to D
sub-section (2) under which Commissioner of Sales Tax authorises the
assessing authority to make assessment or reassessment before the expiration
of 8 years from the end of such year notwithstanding that such assessment
or reassessment may involve a change of opinion. The proviso came into
force w.e.f. February 19, 1991. We do not thinkthat sub-section (2) and the E
proviso added to it leave anyone in doubt that as on the date when the
proviso came into fore;;:, the Commissioner of Sales Tax could authorise
making of assessment or reassessment before the expiration of 8 years from
the end of that particular assessment year. It is immaterial if a period for
assessment or reassessment under sub-section a) of Section 21 before the
addition of the said proviso had expired. Here, it is the completion of assessment F
or reassessment under Section 21 which is to be done before the expiration
of 8 years of that particular assessment year. Read as it is, these provisions
would mean that the assessment for the year 1985-86 could be re-opened up
to March 31, 1994. Authorisation by the Commissioner of Sales Tax and
completion of assessment or reassessment under sub-section (1) of Section G
21 have to be completed within 8 years of the particular assessment year.
Notice to the assessee follows the authorisation by the Commissioner of
Sales Tax, its service on the assessee is not a condition precedent to re-open
the assessment. It is not disputed that a fiscal statute can have retrospective
operation. If we accept the interpretation given by the respondents, the
proviso added to sub-section (2) of Section 21 of the Act becomes redundant. H
82 SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.

A Commencement of Act can be different than the operation of the Act though
sometime both may be the same. Proviso now added to sub-section (2) of
Section 21 of the Act does not put any embargo on the Commissioner of Sales
Tax not to reopen the assessment if period, as prescribed earlier, had expired
before the proviso came into operation. One has to see the language of the
B provision. If it is clear, it has to be given its full effect. To reassure oneself,
one may go into the intention of the legislature in enacting such provision.
The date of commencement of the proviso to Section 21(2) of the Act does
not control its retrospective operation. Earlier the assessment/ re-assessment
could have been completed within four years of that particular assessment
year and now by the amendment adding proviso to section 21 (2) of the Act
C it i1; eight years. The only safeguard being that it is after satisfaction of the
Cci.mmissioner of Sales Tax. The proviso is operative from February 19, 1991
and a bare reading of the proviso shows that the operation of this proviso
relates and encompasses back to previous eight assessment years. We need
not: refer to the provisions of Income Tax Act to interpret proviso to Section
21(2) language of which is clear and unambiguous and so is the intention of
D Legislature. We are thus, of the view that High Court was not right in
quashing the sanction given by the Commissioner of Sales Tax and notices
issued by the Assessing Authority in pursuance thereto.

We, therefore, set aside the impugned judgments and orders of the High
E Court and allow the appeals with cost.

T.NA. Appeals allowed.

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