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S. 254(2): The Law On Limitation Period For Filing Rectification Applications Before The ITAT

Advocate S. M. Surana has analyzed the recent judgement of the ITAT in DCIT vs. Hita Land Pvt Ltd which holds that the reduced period of six months for filing rectification applications applies to all rectification applications filed after 1st June 2016 even if the order sought to be rectified was passed before that date. The author has argued with cogent reasons that this view of the Tribunal is wrong and requires reconsideration

Section 254(2) of the Income-tax Act 1961 deals with the powers of the Income Tax Appellate Tribunal for rectification of its order. Section 254(2) before amendment w.e.f. 1-6-2016 read as under:-

"254(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer."

The word 4 years was substituted by the word "six months" by Finance Act, 2016 and has been made effective from 1-6-2016. The amended provision stood as under:-

"254(2) The Appellate Tribunal may, at any time within six months from the end of the month in which the order was passed, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer."

The short question arises is with regard to applicability of the am·endment reducing the power of rectification from four years to six months. Whether the amendment shall apply to all rectification petitions filed on or after 1-6-2016 even if the order was passed by the Tribunal before 1-6-2016 or to the orders which were passed on or after 1-6-2016 or to the appeals filed on or after 1-6-2016.

The Hon’ble Mumbai "J" Bench of the ITAT in the case of DCIT vs. Hita Land Private Limited 8247/Mum/2017 in its order pronounced on 25th April, 2017 has taken the view that the amended provisions shall apply to all rectification petitions filed after 1-6-2016.

Whether the said decision requires reconsideration may be deliberated. The issues to be considered are, whether limitation provided in section 254(2) is applicable to the rectification petition filed by the appellant or respondent or to the suo motu rectification by the Tribunal itself? Whether right to appeal is substantive right or mere procedural right?

Whether amendment is retrospective and accordingly apply to all petitions fled on or after 1-6-2016?

On a close look to the provisions contained in section 254(2), it can be seen that the said provision is in two parts. The first part starts "The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the records amend any order passed by it under sub-section (1) and," There is also a comma after the word and which makes the intention more clear that the section is in two parts. This also makes the first part disjunctive of the first part. The first part puts a limitation on the powers to the Tribunal to rectify a mistake on its own. The second part is deal with the rectification of the mistake which is brought to its notice by the assessee or the Assessing Officer. Therefore when the Tribunal itself found any mistake in its order it has to rectify such mistake and for such rectification limitation provided is 4 years. It is noticeable that in the first part there is (,) after sub-section (1) and after (,) the word and is used. The use of (,) and thereafter the word "and" thus suggests that for the second part no limitation has been provided, may be for the reason that the appellant or the respondent may not suffer for mistakes if any in the order of the Tribunal since the Tribunal is the highest fact finding authority. We may also look into the provisions of section 154 which deals with the rectification of mistake by Income Tax Authorities. Section 154 read as under:-

154(7) "Save as otherwise provided in section 155 or sub-section (4) of section 186, no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended is passed."

154(8) Without prejudice to the provisions of sub section (7), where an application for amendment under this section is made by the assessee or by the deductor or by collector on or after the 1st day of June 2001 to an income tax authority referred to in sub-section (1), the authority shall pass an order within six months from the end of the month in which the application is received by it,-

(a) making the amendment or

(b) refusing to allow the claim.

The language clearly provides that no order can be rectified after 4 years and further if the application is made by the assessee or by the deductor or collector application so made within 4 years have to be disposed of within 6 months from the end of the month in which the application is made.

When language used in section 254(2) is different than the language used in section 154(7) and 154(8) and when plain meaning is given the language used in section 254(2) it is clear that no limitation is provided when rectification is moved by the appellant or the respondent. Moreover, the language of section 254(2) that it is in two parts have been noticed by the courts. Reference may be made to the judgment of the Hon’ble Supreme Court in the case of Sree Ayyanar Spinning & Weaving Mills Ltd. v. Commissioner of Income-tax (2008] 301 ITR 434 (SC) (Date of order 1-5-2008). The observations of the Hon’ble Supreme Court is as under:-

"Analysing the above provisions, we are of the view that section 254(2) is in two parts. Under the first part, the Tribunal may, at any time, within four years from the date of the order, rectify any mistake apparent from the record and amend any order passed by it under sub-section (1). Under the second part of section 254(2) reference is to the amendment of the order passed by the Tribunal under sub-section (1) when the mistake is brought to its notice by the assessee or the Assessing Officer. Therefore, in short, the first part of section 254(2) refers to suo motu exercise of the power of rectification by the Tribunal whereas the second part refers to rectification and amendment on an application being made by the Assessing Officer or the assessee pointing out the mistake apparent from the record."

The above judgment have been followed in the following cases:-

i. Desai Investment (P.) Ltd. vs. Income Tax Officer, 2(1)(2), Mumbai [31-3-2010] (2011] 10 taxmann.com 71 (Mumbai)

ii. Deputy Commissioner of Income-tax, Central Circle, Mangalore vs. HML Agencies (P.) Ltd. (7-1-2011] [2011] 12 taxmann.com 397 (Bengaluru)

iii . Peterplast Synthetics (P.) Ltd. vs. Assistant Commissioner of Income Tax [12-11-2013] (2014] 44 taxmann.com 302 (Gujarat)

iv. Commissioner of Income-tax, Madurai vs. Sree Ayyanar Spinning & Weaving Mills Ltd. [12-8- 2014] (2015] 54 taxmann.com 73 (Madras)

"254(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer."

The other questions that whether right to appeal is substantive right or mere procedural right and whether amendment is retrospectively applicable and accordingly apply to all petitions fled on or after 1-6-2016?

The amendment was introduced by Finance Bill 2016. The notes on clauses and memo explaining the Bill also suggests that that the amendment shall come into force w.e.f 1-6-2016. However both the notes on clauses and Memo explaining the provisions does not deal with the specific aspect as to which orders the amendment shall apply. Therefore to deliberate of the same we have to travel elsewhere. The provisions contained in Section 6 of the General Clauses Act, 1897 may be looked into:-

"6. Effect of repeal – Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not –

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed."

Section 6(c) mandates that the repeal shall not affect any right, privilege accrued or incurred under any enactment so repealed. Therefore one has to see whether the right to appeal and any right with regard to the appeal is substantive right or mere procedural right. There is no dispute that procedural right is applicable to all the pending matters but substantive right is to be governed by the repealed Act.

In the case of Colonial Sugar Refining Co. Ltd. v. Irving, 1905 AC 369, the facts were that a right of appeal was available from the Supreme Court of Queensland, to the King in Council. The aforesaid right was taken away by the Australian Commonwealth Judiciary Act, 1903 (hereinafter referred to as, the 1903 Act). Section 39(2) of the 1903 Act, provided for an appeal from the Supreme Court of Queensland, to the High Court of Australia. The question which arose for determination was whether from a suit pending when the 1903 Act was enacted, a remedy of appeal would lie before the King in Council or before the High Court of Australia.

It was held by the Privy Council : "As regards the general principles applicable to the case there was no controversy. On the one hand, it was not disputed that if the matter in question be a matter of procedure only, the petition is well founded. On the other hand, if it be more than a matter of procedure, if it touches a right in existence at the passing of the Act, it was conceded that, in accordance with a long line of authorities extending from the time of Lord Coke to the present day, the appellants would be entitled to succeed. The Judiciary Act is not retrospective by express enactment or by necessary intendment. And therefore the only question is, was the appeal to His Majesty in Council a right vested in the appellants at the date of the passing of the Act, or was it a mere matter of procedure? It seems to their Lordships that the question does not admit of doubt. To deprive a suitor in a pending action of an appeal to a superior Tribunal which belonged to him as the right is a very different thing from regulating procedure. In principle, their Lordships see no difference between abolishing an appeal altogether and transferring the appeal to a new tribunal. In either case there is an interference with existing rights contrary to the well-known general principle that statutes are not to be held to act retrospectively unless a clear intention to that effect is manifested."

In the case of Nana v. Sheku, 32 Born. 337(8) It was held that

"To disturb an existing right of appeal is not a mere alteration in procedure. Such a vested right cannot be taken away except by express enactment or necessary intendment. An intention to interfere with or to impair or imperil such a vested right cannot be presumed unless such intention be clearly manifested by express words or necessary implication"

In the case of Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commissioner, Delhi, AIR 1927 PC 242 (C) it was held that

"While provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment"

In the case of Kirpa Singh v. Rasalldar Ajaipal Singh, AIR 1928 Lah. 627 (FB) (D) it was held that

"Right of appeal was not a mere matter of procedure but was vested right which inhered in a party from the commencement of the action in the Court of first instance and such right could not be taken away except by an express provision or by necessary implication."

In the case of Sardar Ali v. Dolimuddin, AIR 1928 Cal. 640 {FB) (E) the facts were that the suit out of which the appeal arose was filed in the Munsiff’s Court at Alipore on 7-10-1920. The suit having been dismissed on 17-7-1924, the plaintiffs appealed to the Court of the District Judge but the appeal was dismissed. The plaintiffs then preferred a second appeal to the High Court on the 4-10-1926. That second appeal was heard by a Single Judge and was dismissed on 4-4-1928. In the meantime Cl. 15 of the Letters Patent was amended on the 14.1."1 928 so as to provide that no further appeal should lie from the decision of a Single Judge sitting in second appeal unless the Judge certified that the case was a fit one for appeal. In this case the learned Judge who dismissed the second appeal on the 4.4.1928, declined to give any certificate of fitness. The plaintiffs on the 30.4.1928, filed an appeal on the strength of Cl. 15 of the Letters Patent as it stood before the amendment. It was held that by Rankin C.J. vide 641-642:-

"Now, the reasoning of the Judicial Committee in The Colonial Sugar Refining Company’s case (A) is a conclusive authority to show that rights of appeal are not matters of procedure, and that the right to enter the superior court is for the present purpose deemed to arise to a litigant before any decision has been given by the inferior court. If the latter proposition be accepted, I can see no intermediate point at which to resist the conclusion that the right arises at the date of the suit."

It was held that the new clause could not be given retrospective effect and accordingly the date of presentation of the second appeal to the High Court was not the date which determined the applicability of the amended clause of the Letters Patent and that the date of the institution of the suit was the determining factor.

In the case of Nagendra Nath v. Man Mohan Singha, AIR 1931 Cal. 100 (N) the facts were that the plaintiffs inst it ut ed a suit for rent valued at ` 1,306/15 and obtained a decree. In execut ion of that decree the defaulting tenure was sold on 20.11.1928, for ` 1,600. On 19.12.1928, an application was made, under O. XXI, R. 90, Civil PC, by the present petitioner, who was one of the judgment debtors, for setting aside the sale. That application having been dismissed for default of his appearance the petitioner preferred an appeal to the District Judge of Hoogly who refused to admit the appeal on the ground that the amount recoverable in execution of the decree had not been deposited as required by the proviso to S. 174, Cl. (c), of the Bengal Tenancy Act as amended by an amending Act in 1928. The contention of the petitioner was that the amended provision which came into force on 21.2.1929, could not affect the right of appeal from a decision on an application made on 19.12.1928, for setting aside the sale.

It was held by Mitter J. (at pp. 101-102) : "We think the contention of the petitioner is well-founded and must prevail. That a right of appeal is a substantive right cannot now be seriously disputed. It is not a mere matter of procedure. Prior to the amendment of 1928, there was an appeal against an order refusing to set aside a sale (for that is the effect also where the application to set aside the sale is dismissed for default) under the provisions of O.43, R. (1), Civil PC. That right was unhampered by any restriction of the kind now imposed by S. 174(5), Proviso. The Court was bound to admit the appeal whether appellant deposited the amount recoverable in execution of the decree or not. By requiring such deposit as a condition precedent to the admission of the appeal, a new restriction has been put on the right of appeal, the admission of which is now hedged in with a condition. There can be no doubt that the right of appeal has been affected by the new provision and in the absence of an express enactment this amendment cannot apply to proceedings pending at the date when the new amendment came into force. It is true that the appeal was filed after the Act came into force, but that circumstance is immaterial – for the date to be looked into for this purpose is the date of the original proceeding which eventually culminated in the appeal."

In the case of Janardan Reddy v. The State, AIR 1951 SC 124(0) and Ganpat Rai v. Agarwal Chamber of Commerce Ltd., AIR 1952 SC 409 (P) it was held that a right of appeal is not merely a matter of procedure. It is matter of substantive right. This right of appeal from the decision of an inferior tribunal to a superior tribunal becomes vested in a party when proceedings are first initiated in, and before a decision is given by, the inferior court.

In the case of Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh, AIR 1953 SC 221 the question, which arose for consideration in the cited case was, with reference to the maintainability of an appeal preferred by the appellant, under Section 22(1) of the Central Provinces of Berar Sales Tax Act, 1947, to the Sales Tax Commissioner, Madhya Pradesh, against an assessment order passed by the Assistant Commissioner. Since the appellant did not attach to the appeal any proof of payment of tax in respect of which the appeal had been preferred, the authorities declined to admit the appeal.It was held by the Hon’ble SC Court, following the decision of the Privy Council in Colonial Sugar Refining Co. Ltd. as well as certain other decisions that

"A right of appeal was not merely a matter of procedure. An appellate remedy, it was held, wasa substantive right. The right of appeal from the decision of an inferior Tribunal becomes vested in a party, when proceedings were first initiated before an inferior Court. Such a vested right, it was held, could not be taken away except by an express enactment or by necessary int endment . Accordingly, it was concluded, that the earlier provision which created the right of appeal, would continue to apply. The unamended provision was held, to govern the exercise and enforcement of the right of an appeal. It is thus concluded, that there could be no question of the amended provision divesting the aggrieved party of its right to appeal."

In the case of Daji Saheb v. Shankar Rao Vithalrao Mane, AIR 1956 SC 29 the facts were that on the date of the decree of the High Court, the defendants had a vested right of appeal to the Federal Court, as the properties were of the requisite value, and on 6-1-1950 they sought a certificate of leave to appeal, which was bound to be granted. The Constitution establishing the Supreme Court as the final appellate authority for India came into force on 26-1-1950. Did the vested right automatic right to go before the Federal Court before the Constitution and which we must hold was taken away from them for no fault of their own, merely because the Supreme Court came into existence in place of the Federal Court. An interpretation or construction of the provisions of the Constitution which would lead to such a result should be avoided, unless inevitable."

In the case of Garikapatti Veeraya v. N. Subbiah Chaudhry, AIR 1957 SC 540 (Constitution Bench Judgement) the headnotes are as under:-

This application for special leave to appeal arose out of a suit instituted on April 22, 1949, and valued at ` 11,400. The Trial Court dismissed the suit and the High Court in appeal reversed that decision on February 10, 1955. Application for leave to appeal to the Supreme Court was refused by the High Court on the ground that the value did not come upto ` 20,000 . It was contended on behalf of the applicant that he hada vested right of appeal to the Federal Court under the law as it then stood and that Court having been substituted by the Supreme Court, he was as of right entitled to appeal to that Court under Art. 135 of the Constitution.

In the above case, the Hon’ble SC observed that from the decisions cited above the following principle clearly emerge :

"(i) That the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding.

(ii) The right of appeal is not a mere matter of procedure but is a substantive right.

(iii) The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties there to till the rest of the career of the suit.

(iv) The right of appeal is a vested right and such a right to enter the superior Court accrues to the litigant and exists as on and from the date the lsi commences and although it may be act u all y exercised when the adverse judgment is pronounced such right is to be governed by t he law prevailing at the date of the institution of t he suit or proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal.

(v) This vested right of appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise."

It was held that "For reasons stated above we think that the suit, out of which this application arises, having been instituted before the date of the Constitution the parties thereto had, from the date of the institution of the suit, a vested right of appeal upon terms and conditions then in force and the judgment sought to be appealed from being a judgment of reversal and the value of the subject matter being above Rs 10,000 the applicant had a vested right of appeal to the Federal Court under the provisions of the old Civil Procedure, Code read with the Government of India Act, 1935, and the Federal Court (Enlargement of Jurisdiction) Act, 1947. Such a vested right of appeal was a matter which did not fall within Art. 133 and jurisdiction and powers with respect to such right of appeal was exercisable by the Federal Court immediately before the commencement of the Constitution and consequently the applicant had a right of appeal under Art. 135 and the High Court was in error in refusing leave to appeal to the petitioner. As in our opinion the petitioner was entitled under Art. 135 to come up on appeal to this Court as of right and such right has been wrongly denied to him we are prepared, in the circumstances of this case, to grant him special leave to appeal to this Court under Art. 136 of the Constitution. The petitioner will have the costs of this application from the respondents Nos. 1 and 2."

In the case of Manujendra Dutt v. Purmedu Prasad Roy Chowdhury, AIR 1967 SC 1419 the facts were that the appellant was the tenant of the respondents on a piece of land. According to the lease agreement the period of lease was fixed at ten years but the lessee was entitled to renew the lease after that period under certain conditions. The lease agreement further provided that if the lessor required the lessee to vacate the premises whether at the time of the expiry of the lease or thereafter (in case the lessee exercised his option to renew the lease), six months’ notice to the lessee was necessary. The lessee exercised his option to continue the lease and offered to fulfill the conditions therefor. The Court of Wards on behalf of the respondents, sought to impose further conditions for the renewal of the lease which the appellant did not accept.

The Court of Wards thereupon filed a suit in the Court of the First Subordinate Judge, Alipore for the eviction of the appellant on the ground that he was a trespasser. In the meanwhile the Calcutta Thika Tenancy Act, 1949 was passed by the West Bengal Legislature. As Provided in s. 29 of the Act the suit was transferred to the Thika Controller.

Thereafter Amendment Act 6 of 1963 was passed which deleted s. 29 and the appellant urged before the Controller that he no longer had jurisdiction to try the matter. This contention was rejected and on the merits the Controller decided against the appellant holding that in view of s. 3 of the Act the six months’ notice required by the lease agreement for the eviction of the appellant was not necessary. The High Court also decided against the appellant who thereupon came to this Court with certi fi cate . It was held that

"(i) Though s. 29 was deleted by the Amendment Act of 1953 the deletion could not affect pending proceedings and would not deprive the Controller of his jurisd ict ion to try such proceedings pending before him at the date when the Amendment Act came into force. Though the Amendment Act did not contain any saving clause, under s. 8 of the Bengal General Clauses Act, 1899 the transfer of the suit having been lawfully made under s. 29 of the Act its deletion would not have the effect of altering the law applicable to the claim in the litigation. There is nothing in s. 8 of the Amending Act, 1953 suggesting a different intention and therefore the deletion would not affect the previous operation of s. 5 of the Calcutta Thika Tenancy Act, or the transfer of the suit to the Controller or anything duly done under s. 29. That being the correct position in law the High Court was right in holding that in spite of the deletion of s. 29 the Controller still had the jurisdiction to proceed with the said suit transferred to him."

In the case of Maria Cristina De Souza Sadder v. Amria Zurana Pereira Pinto, (1979) 1 sec 92 the Question of Law before the Court was "What was the law of limitation applicable in the Union Territories of Goa, Daman and Diu to proceedings launched therein prior to and pending at the date of liberation? The question arises in these circumstances." It was held

"5. On the question as to where the appeal could be lodged we are clearly of the view that the forum was governed by the provisions of the Goa, Daman and Diu (Extension of Code of Civil Procedure, 1908 and Arbitration Act, 1940) Act, 1965 (Central Act XXX of 1965) read with the provisions of the Goa, Daman & Diu Civil Court Act, 1965 (Goa Act XVI of 1965) both of which came into force simultaneously on June 15, 1966 and the appeal was required to be filed in the Judicial Commissioner’s Court. Under the Central Act XXX of 1965 with effect from June 15, 1966 the provisions of the Indian Civil Procedure Code were extended to the Union Territories of Goa, Daman and Diu and the corresponding provisions of the Portuguese Code were repealed while under the Goa Act XVI of 1965 the instant suit which was pending before the Comarca Court at Margao was continued and decreed by corresponding Court of the Senior Civil Judge, who ultimately decreed it on March 8, 1968. Under the Indian Civil Procedure Code read with Section 22 of the Goa Act since the property involved in the suit was of the v;:ilue exceeding Rs.10,000/- the appeal clearly lay to the Judicial Commissioner’s Court. The contention that since the right of appeal had been conferred by Portuguese Code, the forum where it could be lodged was also governed by the Portuguese Code cannot be accepted. It is no doubt well-settled that the right of appeal is a substantive right and it gets vested in a litigant no sooner the lis is commenced in the Court of the first instance, and such right or any remedy in respect thereof will not be affected by any repeal of the enactment conferring such right unless the repealing enactment either expressly or by necessary implication takes away such right or remedy in respect thereof. This position has been made clear by Clauses (b) and (c) of the proviso to Section 4 of the Central Act XXX of 1965 which substantially correspond to Clauses (c) and (e) of Section 6 of the General Clauses Act, 1897. This position has also been settled by the decisions of the Privy Council and this Court (vide the Colonial Sugar Refining Company Ltd. v. Irving, 1905 AC 369 and Garikapatti Veeraya v. N. Subbiah Choudhury, (1957) 1 SCR 488, but the forum where such appeal can be lodged is indubitably a procedural matter and, therefore, the appeal, the right to which has arisen under a repealed the Act, will have to be lodged in a forum provided for by the repealing Act. That the forum of appeal, and also the limitation for it, are matters pertaining to procedural law will be clear from the following passage appearing at page 462 of Salmond’s Jurisprudence (12th Edn.):

Whether I have a right to recover certain property is a question of substantive law, for the determination and the protection of such rights are among the ends of the administration of justice; but in what courts and within what time I must institute proceedings are questions of procedural law, for they relate merely to the modes in which the courts fulfill their functions.

It is true that under Clause (c) of the proviso to Section 4 of Central Act XXX of 1965 (which corresponds to Section 6(e) of the General Clauses Act, 1897) it is provided that a remedy or legal proceeding in respect of a vested right like a right to an appeal may be instituted, continued or enforced as if this Act (meaning the repealing Act) had not been passed. But this provision merely saves the remedy or legal proceeding in respect of such vested right which it is open to the litigant to adopt notwithstanding the repeal but this provision has nothing to do with the forum where the remedy or legal proceeding has to be pursued. If the repealing Act provides new forum where the remedy or the legal proceeding in respect of such vested right can be pursued after the repeal, the forum must be as provided in the repealing Act. We may point, out that such a view of Section 6(e) of the General Clauses Act, 1897 has been taken by the Rajasthan High Court in the case of Purshotam Singh v. Narain Singh and State of Rajasthan, AIR 1955 Raj. 203. It is thus clear that under the repealing enactment (Act XXX of 1965) read with Goa Enactment (Act XVI of 1965) the appeal lay to the judicial Commissioner’s Court and the same was accordingly filed in the proper Court."

In the case of CIT v. Bengal Card Board Industries & Printers (P.) Ltd. (1989) 176 ITR 193 (Calcutta) (Date of Order 13.06.1988), the facts were that on completion of the assessment relating to the assessment year 1974-75, the assessee made an appeal to the AAC on
9-1-1975. Meanwhile, sub-section (4) was inserted in section 249 by section 59 of the Taxation Laws (Amendment) Act, 1975 with effect from 1-10-1975. As required under the aforesaid sub-section, the assessee had not paid the undisputed tax before filing the appeal to the AAC. The AAC, therefore, held the appeal as incompetent and dismissed it. However, on appeal, the Tribunal held that the right of appeal was a substantive right and, therefore, the same could not be withdrawn or curtailed by the amendment which came into effect from 1-10-1975. He, therefore, allowed the assessee’s case.It was held that

"The right of appeal is a statutory right. It is a creature of the statute. The right of appeal is not merely a matter of procedure. It is a substantive right. This right is vested in an assessee when proceedings are first initiated and before a decision is given by the first Court or the authority. For the purpose of the accrual of the right of appeal, the crucial and relevant date is the date of initiation of the assessment proceeding, i.e. , the date of issue of notice under section 143(2). It is the law existing on the day the proceeding was first initiated which governs the exercise and enforcement of the right of appeal. A subsequent amendment cannot curtail this right. Where, on the date of initiation of the assessment proceeding, law permitted an appeal to be preferred without payment of the admitted tax liability, but subsequently, if the law is amended requiring deposit of the entire amount of admitted liability before the appeal is entertained, the right of appeal in such a case should be governed by the unamended law.

The provisions of sub-section (4) of section 249 came into force with effect from 1-10-1975. Under the said sub-section, the assessee is required to pay the undisputed tax, i. e. , tax on the returned income, in order to enable him to file an appeal before the AAC. This new requirement regarding payment of tax on the income returned cannot be said to be merely to regulate the exercise, of the assessee’s pre-exist ing right of appeal. It, in effect, curtails the right itself and cannot be regarded as a mere rule of procedure. The provisions of section 249(4) are substantive provisions. It is now well-settled that a statute pertaining to the right of appeal has to be given a liberal construction since it is remedial in nature. A right of appeal will not be restricted or denied unless such construction is unavoidable.

In the instant case, the appeal was a continuation of the original proceedings. Although the appeal was preferred on 9-10-1975, the right of the assessee to prefer an appeal accrued when the notice under section 143(2) was issued or in any event when the assessment was made. The right of appeal having accrued to the assessee prior to 1-10-1975, when the amendment came into force, the date of filing of the appeal was neither relevant nor material. Law as it stood prior to 1-10-1975 should, therefore, govern this case.

For the aforesaid reasons, the provisions of section 249(4) could not be applied to the facts of the instant case and, therefore, the Tribunal was justified in holding that the appeal before the AAC was maintainable.

In the case of Commissioner of Income Tax, Orissa v. Dhadi Sahu (1992) 199 ITR 610 (SC) the facts were that for the assessment years 1968-69 and 1969-70, the ITO initiated penalty proceedings under section 271(1)(c) for concealment of income and the matter was then referred to the IAC under section 274(2). Pending reference before the IAC, section 274(2) was amended with effect from 1-4-1971. The IAC imposed penalties by order dated 15-2-1973. On appeal, the Tribunal cancelled the penalties holding that the IAC had no jurisdiction to levy the penalty. On second appeal, the High Court affirmed the order of the Tribunal. On appeal to the Supreme Court: HELD

"20. It will be noticed that the Amending Act did not make any provision that the references validly pending before the Inspecting Assisting Commissioner shall be returned without passing any final order if the amount of income in respect of which the particulars have been concealed did not exceed Rs 25,000.00. This supports the inference that in pending references the Inspecting Assistant Commissioner continued to have jurisdiction to impose penalty. The previous operation of Section 274(2) as it stood before April 1, 1971, and anything done thereunder continued to have effect under Section 6(b) of the General Clauses Act, 1897, enabling the Inspecting Assistant Commissioner to pass orders imposing penalty in pending references. In our opinion, therefore, what is material to be seen is as to when the references were initiated. If the reference was made before April 1, 1971, it would be governed by Section 274(2) as it stood before that date and Inspecting Assistant Commissioner would have jurisdiction to pass the order of penalty."

In the case of Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 sec 602 it was observed by the Hon’ble Court in Para 26 of the order as under:-

(i) A statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such as construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly defined limits.

(ii) Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature.

(iii) Every litigant has a vested right in substantive law but no such right exists in procedural law.

(iv) a procedural statute should not generally speaking be applied retrospective where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished.

(v) a statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation unless otherwise provided, either expressly or by necessary implication."

In the case of In the case of K.S. Paripoornan v. State of Kerala, (1994) 5 sec 593 the Hon’ble Court observed as under:-

"67. In the instant case we are concerned with the application of the provisions of sub-section (1-A) of Section 23 as introduced by the Amending Act to acquisition proceedings which were pending on the date of commencement of the Amending act. In relation to pending proceedings, the approach of the courts in England is that the same are unaffected by the changes in the law so far as they relate to the determination of the substantive rights and in the absence of a clear indication of a contrary intention in an amending enactment, the substantive rights of the parties to an action fall to the determined by the law as it existed when the action was commenced and this is so whether the law is change before the hearing of the case at the first instance or while an appeal is pending (See Halsbury’s Laws of England, 4th Edn., Vol. 44, para 922)". Similar is the approach of the courts in India. In United Provinces v. Atiqa Begum26 Sulaiman, J. has observed: (FCR p. 163) "Undoubtedly, an Act may in its operation be retrospective, and yet the extent of its retrospective character need not extend so far as to affect pending suits. Courts have undoubtedly leaned very strongly against applying a new Act to a pending action, when the language of the statute does not compel them to do so."

In the case of Shyam Sunder v. Ram Kumar, (2001) 8 sec 24, the issues were framed and the trial court decided all the issues in favour of the plaintiffs/ respondents and consequently on 30.5.1990 the suit was decreed. The respondents after passing of the decree by the court of the first instance deposited the purchase money as required under Order 20 rule 14 CPC. The appeal preferred by the appellants before the first appellate court and the second appeal before the High Court were dismissed and the decree of the trial court was affirmed. The appellants thereafter preferred this appeal by way of special leave petition. During pendency of the appeal, Section 15(1)(b) of parent Act, on the basis of which the suit was filed by the plaintiffs/respondents was amended and was substituted by new Section 15 whereby the right of a co- sharer to preempt a sale was taken away. It was held that

"28. From the aforesaid decisions the legal position that emerges is that when a repeal of an enactment is followed by a fresh legislation, such legislation does not effect the substantive rights of the parties on the date of suit or adjudication of suit unless such a legislation is retrospective and a court of appeal cannot take into consideration a new law brought into existence after the judgment appealed from has been rendered because the rights of the parties in an appeal are determined under the law in force on the date of the suit. However, the position in law would be different in the matters which relate to procedural law but so far as substantive rights of parties are concerned they remain unaffected by the amendment in the enactment. We are, therefore, of the view that where a repeal of provisions of an enactment is followed by fresh legislation by an amending Act, such legislation is prospective in operation and does not effect substantive or vested rights of the parties unless made retrospective either expressly or by necessary intendment. We are further of the view that there is a presumption against the retrospective operation of a statue and further a statute is not to be construed to have a greater retrospective operation than its language renders necessary, but an amending act which affects the procedure is presumed to be retrospective, unless amending act provides otherwise. We have carefully looked into the new substituted section 15 brought in the parent Act by the Amendment Act, 1995 but do not find it either expressly or by necessary implication retrospective in operation which may affect the rights of the parties on the date of adjudication of suit and the same is required to be taken into consideration by the appellate Court. In Shanti Devi v. Hukum Chand, (1996) 5 SCC 768, this Court had occasion to interpret the substituted section 15 with which we are concerned and held that on a plain reading of section 15, it is clear that it has been introduced prospectively and there is no question of such section affecting in any manner the judgment and decree passed in the suit for pre-emption affirmed by the High Court in the second appeal. We are respectfully in agreement with the view expressed in the said decision and hold that the substituted Section 15 in the absence of anything in it to show that it is retrospective, does not effect the right of the parties which accrued to them on the date of suit or on the date of passing of the decree by the Court of first instance. We are also of the view that present appeals are unaffected by change in law insofar it related to determination of the substantive rights of the parties and the same are required to be decided in light of law of pre-emption as it existed on the date of passing of the decree."

In the case of Ambalal Sarabhai Enterprises Limited v. Amrit Lal and Co., (2Q01) 8 sec 397 the question for consideration before the Court was what is the effect of the amendment which incorporated Section 3(c) in the Delhi Rent Control Act, hereinafter referred to as the Rent Act in the pending eviction proceedings. It was held that

"36. In view of the aforesaid legal principle emerging, we come to the conclusion that since proceeding for the eviction of the tenant was pending when the repealing Act came into operation, Section 6 of the General Clauses Act would be applicable in the present case, as it is Landlord’s accrued right in terms of Section 6. Clause (c) of Section 6 refers to "any right" which may not be limited as a vested right but is limited to be an accrued right. The words ‘any right accrued’ in Section 6(c) are wide enough to include landlord’s right to evict a tenant in case proceeding was pending when repeal came in. Thus a pending proceeding before the Rent Controller for the eviction of a tenant on the date when the repealing Act came into force would not be affected by the repealing statue and will be continued and concluded in accordance with the law as existed under the repealed statute"

In the case of Thirumalai Chemicals Ltd. v. Union of India, (2011) 6 sec 739 it was held that

"16. Therefore, unless the language used plainly manifests in express terms or by necessary implication a contrary intention a statute divesting vested rights is to be construed as prospective, a statute merely procedural is to be construed as retrospective and a statute which while procedural in its character, affects vested rights adversely is to be construed as prospective."

In the case of Radiance Fincap Pvt. Ltd. v Union of India & Ors. (Civil Appeal No. 4283 of 2011) Date of Order 12.01.2015, it was argued by the UOI that in view of promulgation of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014 on 31.12.2014, by inserting the proviso to sub-section (2) of Section 24 of the Act, the period of stay obtained in the judicial proceedings shall be excluded for computation of five years’ period to hold that the acquisition proceedings are lapsed and, therefore, the said provision does not enure to the benefit of the applicants it was held that

"The right conferred to the land holders/owners of the acquired land under Section 24(2) of the Act is the statutory right and, therefore, the said right cannot be taken away by an Ordinance by inserting proviso to the abovesaid sub-Section without giving retrospective effect to the same."

The aforesaid judgement was followed in the case of Arvind Bansal v. State of Haryana (Civil Appeal Nos.417- 418 of 2015 decided on 13.01.2015), Karnail Kaur v. State of Punjab (Civil Appeal No. 7424 of 2013 decided on 22.01.2015) and Competent Automobiles Co. Ltd. v. Union of India & Ors. (Civil Appeal No. 5054 of 2008 decided on 26.02.2015)

In the case of Videocon International Ltd.v SEBI (SC) Civil Appeal No. 117 of 2005 (Date of Order 13.01.2015) the facts were that as per Section 15Z of the SEBI Act prior to the amendment, potulated that the appellate remedy would extend to" …any question of fact or law arising out of such order.". Whereas, the appellate remedy was curtailed consequent upon the amendment, whereunder the appellate right was limited to, "…any question of law arising out of such order." It was held that

"28. In the facts and circumstances of this case, it is apparent that Section 15Z of the SEBI Act prior to the amendment, postulated that the appellate remedy would extend to "…any question of fact or law arising out of such order.". Whereas, the appellate remedy was curtailed consequent upon the amendment, whereunder the appellate right was limited to, " …any question of law arising out of such order.". Accordingly, by the amendment, the earlier appellate package stands reduced, because under the amended Section 15Z, iris notopen to an appellant, to agitate an appeal on facts. That being the position, it is not possible for us to accept the contention advanced at the hands of the learned counsel for the appellant, that the amendment to Section 15Z of the SEBI Act, envisages only an amendment of the forum, where the second appeal would lie. In our considered view, the amendment to Section 15Z of the SEBI Act, having reduced the appellate package, adversely affected the appellate right vested of the concerned litigant. The right of appeal being a vested right, the appellate package, as was available at the commencement of the proceedings, would continue to vest in the parties engaged in a lis, till the eventual culmination of the proceedings."

In the case of Dr. Bhim Rao Ambedkar Educational Society v CIT(E) ITA No. 25 of 2016 (Allahabad HC), the assessee made an application under Section 10(23() which came to be rejected on 26.12.2008 and the order was served on the appellant admittedly on 06. 0 1.2009 . At that point of time, no statutory right of appeal was available against such an order. The right of appeal emerged only with effect from 01.06.2015 under the Finance Act, 2015 that inserted Clause (f) in Sub-section (1) of Section 253. The appellant has urged that that cause having arisen with this right of appeal, the limitation against the order dated 26.12.2008 deserves to be waived. It was held that

"The only ground seeking condonation of delay is that since the right of appeal has now been created, therefore, the appellant has a right of appeal against the order passed in 2008. We are unable to agree with this proposition in as much as, a right of appeal isa matter of procedure that gets converted intoa substantive right as a creature of statute. The appeal has to be filed within the limitation prescribed. It cannot create a retrospective right to file an appeal which did not exist in the year 2008 or even on 06.01.2009 when the order was served on the appellant. In the absence of existence of such a right, it was open to the appellant to have fileda writ petition challenging the same in 2008-09. The very same view has been taken by the Tribunal and it has declined to grant any benefit of a bona fide act as urged by the appellant. The statutory remedy of appeal having come into existence on 01.06.2015, cannot be stretched retrospectively for extending the benefita s claimed by the appellant for condoning the delay. The reliance placed on the judgment by the learned counsel for the appellant is misplaced and no substantial question of law having arisen, the appeal deserves to be rejected."

The Hon’ble Supreme Court in the case of Shah Sadiq & Sons 166 ITR page 102 has clearly laid down that the rights which have accrued are saved unless they are taken away expressly.

From the aforesaid judgements the principles laid down by the Courts the law appears to be well settled that right to appeal and connected petition with the appeal is a substantive right. The law as on the date of fling of the appeal should be applicable to alls uc h matters. Therefore section 254(2) as amended in my view is applicable only to the appeal which are filed on or after 1.6.2016.

In that view of the matter, the decision of the Hon’ble Mumbai Bench of the Tribunal require reconsideration.

Reproduced with permission from the AIFTP Journal
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org

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