Income-Tax Officer, Alleppey v. M. C. Ponnoose & Ors.

INCOME-TAX OFFICER, ALLEPPEY v. M. C. PONNOOSE & ORS. _July_ 28, 1969 A [J. C. SHAH, ACTING CHIEF JUSTICE, V. R.\MAsWAMI AND A. N. GROVER, JJ.] _Income-tax Act,_ 1961, _s._ _2(44)-Definition_ _of_ _Tax Recovery_ _Otfie<r_ _in leCtion_ _aniended_ _bys._ 1 _of Fitwnce_ _Act_ _1963-Noti/icc.tion under uction_ _extending definition-Certain revenue. officials including Taluka 'lehsUdar_ _brought within_ _definition-Such_ _Notification being executive act cannot be_ _given retrospective_ _effect-Subordinate_ _legislation cannot_ _ordinarily_ _be_ C _retrospective._ By a notification dated August 14, 1963, issued by the Stale o[ Kerala the ·raluk.a l'chsildar was authorised 10 exercise the powers of a Tax Re-covery Officer under the Income-tax. Act, 1961. The notification was made effective from April J 962. The shares of the assessee, who was in <>rrears of his income-tax, were attached by the Taluka ·rchsildar after April 1. 1962 but prior to August 14. 1963. A petition under Art. 226 of the Constitu· D tion was filed challenging the action of the Tchsildar. The High Court held that the notification empowering the Tehsihlar to exercise the powers of a Tax Recovery Officer with relrospective effect was invalid and consequently quashed the attachments. l'his view was affirmed by the Division Bench in appeal. Dismissing the appeal by the Revenue, this Court, HELD : 'fhe courts will not ascribe retrospcctivity to new laws affecting righlc; unlc.\s by express words or necessary implication it appears that such was the intenticn of the Jegislature. The Parliament can dele&atc its legislative power \\'ithin the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possil,Ie to make the same so as to give retrospective operation. It \vill depend on the langu· .~c employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such lan~age is to be found it has been held by the courts that the person or authority exercising ~ubordiaale legislative functions rule, regulation or bye-law which can operate \lr'ith retrospective effect. [681 F-Hl E F I I It can hardly be said that the impugned notification promulgates any rule, regulation or bye·law all of which have a definite signification. The excrci .. of the power under sub-cl. (ii) of cl. ( 44) of s. 2 of the Income-tax _G_ Act, 1961 is more of an executive than a legislative act. [682 R] _Dr._ _lndramani Pyare/al Gupta_ v. _W. R. Nathu_ _&_ _Ors._ (1963] I S.C.R. 721, _Strawboard Manufacturing Co. Ltd._ v. _G11tta_ _Mill Workers_ [1953] S.C.R. 439. followed. _Pliil/ips_ v. _Eyre,_ 40 Law J. Rep. (N.S.) Q.B. 28 at p. 37, referred to. _Modi_ _Food Products Ltd._ v. _Commissioner_ _of_ _Sales-tax_ _U.P._ A.I.R. H [19561 All. 35, _India Refineries Ltd._ v. _State_ _of_ _M,\'sore,_ A.l.R. 1960 Mys. 326 and _General_ _S._ _Shivdev Singh_ & _Anr._ v. _The State_ _of_ _Punjab_ _&_ _Ors._ [1959] P.L.R. 514. approve~ A **B** c I. T .o. _v._ :M:. c. PONNOOSE _(Grover,_ _!._ ) 679 **By** **saying that new definition** **of** **"Tax Recovery Officer" substituted** **by** **s.** **1** **6f** **the Finance Act, ·1963.** **"shall** **be** **and** **shall be deemed ahvays** **to** **have been substituted" was to niake the** _**ne\V**_ **definition a part** **of.** **the Jncome** **Tax Act** **from** **the date** **it** **was** **enacted.** **The legal fiction could not** **be** **extended beyond** **its** **legiitimate field** **and** **the aforesaid words occurring** **in** **s.** **4** **of** **the** **Finance Act, 1963 could not be construed to embody confer-** **ment** **of ·a** **power for retrospective authorisation** **by** **the** **State** ~n **the** **absence** **of** **any express provision in** **s.** **2( 44)** **of the Income-Tax Act** **itself.** **[682 G]** _B._ _S._ _Vadera etc._ v. _Union_ _of_ _India_ _&_ _Ors._ [1968] 3 S.C.R. 575, distinguished. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 942 and 943 of 1966. Appeals by specilll leave from the judgment and order dated June 18, 1965 of the Kerala High Court in Writ Appeals Nos. 139 and 140 of 1964. _Jagdish Swarup, ·Solicitor-General, T._ _A._ _Ramachandran_ and _B._ _D._ _Sharma,_ for the appellant (in both the appeals). **D** _S._ _T._ _Desai,_ _M. C. Chacko,_ _A._ _K._ _Verma,_ _!._ _B._ _Dadaclzanji,_ and _0._ C. _Mathur,_ for respondent No. 1 (in C.A. No. 942 of 1966). _A._ _G._ _Pudissery,_ for respondents Nos. 2 and 3 (in C.A. No. 942 of 1966). E _J._ _B. Dadachanji,_ for respondents .Nos. 1 and 2 (in C.A. No. 943 of 1966). _A._ _G._ _Pudissery,_ for respondents Nos. 7 and 8 (in C.A. No. 943 of 1966). **F** G The Judgment of the Court was delivered b)'. **Grover,** **J.** These two appeals by special leave involve a common question relating to the validity .of a notification issued by the Government of Kerall: in August 1963 empowering certain revenue officials including the Taluka Tahsildar to exercise the powers of a Tat Recovery Officer under the Income Tax Act 1961, hereinafter called the Act. The notification was expressly stated to be effective. from 1st April 1962-a date prior to the date of the notification. The facts in one of the appeals ( C.A. 942/ 66) may be stated : One Kunchacko of Alleppey allowed the income tax dues from him to fall into arrears. The Income Tax Officer took steps to **H** recover the arrears through the Tahsildar. Certain shares standing in the name o~ the assessee were attached by the Tahsildar. The first respondent Ponnoose claimed to have obtained a decree for a certain sum 'against the assessee. He also got the shares _14_ Sup. C.I./69-14 680 SUPREME COURT REPORTS [1970] 1 S.C.R. standing in the name of the as.s~ssee attached in execution i;roceedings. Ponnoose filed a pet1t10n under Art. 226 of the Constitution in the High Court of Kerala in which he challenged the action taken by the revenue officials including the Tahsildar for getting the shares, which had been attached, sold for satisfaction of the income tax dues of the assessee. The learned Single Judge held that the notification empowering the Tahsildar to exercise the powers of a Tax Recovery Officer under the Act with retrospective effect was invalid. Consequently the attachments made by the Tahsildar were quashed. This view was affirmed by a division bench in appeal. The Act came into force on first April 1962. Section 2 ( 44) defined the expression "Tax Recovery Officer" in the following terms: " 'Tax Recovery Officer' means( i) a Collector; (ii) an additional Collector or any other officer authorised to exercise the powers of a Collector under any law relating to land revenue for the time being in force in a State; or (iii) any gazetted officer of the Central or a State Government who may be authorised by the Central Government by notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer". Section 4 of the Finance Act, 1963 substituted a new definition for the original definition of Tax Recovery Officer. It was provided that the new definition "shall be and shall be deemed always to have been substituted". The new definition was as follows : "Tax Recovery Officer" means(i) a Collector or an additional Collector; (ii) any such officer empowered to effect recovery of arrears of land revenue or other public demand under any law relating to land revenue or other public demand for the time being in force in the State as may be authorised· by the State Government, by general or special notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer; A B c D E F G •. ##### "" (iii) any Gazetted Officer of the Central or a State H Government who may be authorised by the Central Government, by general or special noti 681 **A** **B** c I) ### .. F G ## - H 1 [:4-H-,;::: ] [-] I.T.O. _v._ **M.** c. PONNOOSE _(Grover,_ **J.)** fication in the Official Gaz.ette, to exercise the powers of a Tax Recovery Officer." The impugned notification dated August 14, 1963 which was published in the Kerala Gaz.ette dated August 20, 1963 referred to the powers conferred by sub-clause (ii) of clause ( 44) of s. 2 of the Act read with sub-rule (2) of rule 7 of the Income tax (Certificate Proceedings) Rules, 1962 and authorised the various revenue officials mentioned therein including the Taluk Tahsildar to ex~rcise the powers of a Tax Recovery Officer under the Act in respect of the arrears etc. The concluding portion was, "This notification shall be deemed to have come into force on the fast day of April 1962". The Tahsildar had effected attachment of the shares subsequent to first April 1962 but prior to August 14, 1963. In other words on the date on which he had effected attachment he was not a Tax Recovery Ofticer but he got the powers of a Tax Recovery Officer by virtue of the notification dated August 14, 1963. The short question for determination, therefore, was and is whether the State Government could invest the Tahsildar with the powers of a Tax Recovery Officer under the aforesaid provisions. of the Act with effect from a date prior to the date of the notification, _i.e.,_ retroactively or retrospectively. Now it is open to a sovereign legislature to enact laws which have retrospective qperation. Even when the Parliament enacts retrospective laws s\,ch laws are--in the words of Willes, **J.** in _Phillips_ v. _Eyre(')-"no doubt prima_ _facie_ of questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law." The courts will not, therefore, ascribe retrospectivity to new laws affecting rights unless by express words or ' necessary implication it appears that such was the intention of the legislature. The Parliament can delegate its legislative power within the recognised ·limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the .same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by neces&ary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect; _(see_ Subba Rao J., in _Dr._ _lndramani Pyarelal Gupta_ v. _W._ _R._ _Nathu_ _&_ (I) 40 Law J. Rep, (N.S.) Q.B. 28 at r. )7. 68% SUPREME COURT REPORTS [I 'HO] I S.C.R _Others('_ )-the majority not havi!lg expressed any different ·opinion on the point; _Modi Food Products Ltd._ v. _Commissioner_ _of_ _Sales Tax U.P.(_ _[2]_ _);_ _India Sugar Refineries Ltd._ v. _State_ _of_ _Mysore(')_ and _.General S. Shivdev Singh_ _&_ _Another_ v. _The State_ _of_ _P1U1iab_ _&_ _Others(')._ lt can hardly be said that the nnpugned notification promulgates any rule, regulation or bye-law all of which have a definite signification. The exercise of the power under sub-clause (ii) of cl. ( 44) of s. 2 of the Act is more of an executive than a legislative act. It becomes, therefore, all the more necessary to consider how such an act which has retrospective operation can be valid in the absence of any power conferred by the aforesaid provision to so perform it as to give it retrospective operation. In _Straw-_ _board Manufacturing Co., Ltd._ v. _Gutta Mill Workers' Union(')_ an industrial dispute had been referred by the Governor to the Labour Commissioner or a person nominated by him with the direction that the award should be submitted not later than April 5, 1950. The award, however, was made on April 13, 1950. On April 26, 1950 the Governor issued a notification extending the time up to April 30. It was held that in the absence of a provision authorising the Stat~ Government to extend from time to time the period within which the Tribunal or the adjudicator could pronounce the decision the State Government had no authority to extend the time and the award was, therefore, one made without jurisdiction and a nullity. This decision is quite apposilr and it is difficult to hold in the present case that the Taluka Tehsildar could be authorised by the impugned notification to exercis~ powers of a Tax Recovery Officer with effect from a date prior to the date of the notification. It may next be considered whether by saying that the new definition of "Tax Recovery Officer" substituted by s. 4 of the Finance Act, 1963 "shall be and shall be deemed always to have been substituted" it could be said that by necessary implication or intendment the State Government had been authorised to invest the officers mentioned in the notification with the powers of a Tax Recovery Officer with retrospective effect. The only effect of the substitution made by the Finance Act was to make the new definition a part of the Act from the date it was enacted. The legal fiction could not be extended beyond its legitimate field and· the -aforesaid words occurring in s. 4 of the Finance Act 1963 could not be construed to embody conferment of a power for a retrospective authorisation by the State in the absence of any e~prcss _(t)_ [1963] S.C.R. 721. (2) A:l.R. 1956 AIL 35. (2) A.LR. t960 Mys. 326. (4) [1959] P.LR. 514, lS) [1953] S.C. R. 439, A II c ###### n • E F G #### H .. I.T.O. v. M. _C:_ PONNOOSE _(Grover,_ J.) 683 A B c D # E F The .appeals ~erefor~ fail and are dismissed with costs. One hearing fee. provision in s. 2( 44) of the Act itself. It may be noticed that in a recent decision of the Constitution Bench of this Court in _B._ _S._ _Vodera_ _etc.,_ v. _Union_ _of_ _India_ & _Others(_ [1 ] ) it has been observed with reference to rules framed under the proviso to Art. 309 of the Constitution that these rules can be made with retrospective operation. This view was, however, expressed oW:ing to the language employed in the proviso to Art. 309 that "any rules so made shall have effect subject to the provisions of any such Act". As has been pointed out the clear and unambiguous expressions used in the Constitution, must be given their full and unrestricted meaning unless hedged in by any limitations. Moreover when the language employed in the main part of f,rt. 309 is compared with that of the proviso it becomes clear that the power given to the legislature for laying down the conditions is identical with the power given to the President or the Governor, as the case may be, in the matter of regulating the recruitment of Government servants and their conditions of service. The fegislature, however, can regulate the recruitment and conditions of service for all times whereas the President and the Governor can do so only till a llrovision in that behalf is made by or under an Act of the appropriate legislature. As the legislature can legislate prospectively, 'as well as retrospectively there. can be hardly any justification for sayip:g that the President or the Governor should not be able to make rules in the same manner so "llS to give them prospective !as well as retrospective operation. For these reasons the ambit and content of the rule making power under Art. 309 call' furnish no analogy or. parallel to the present case. _:_ The High Court was consequently right in coming to the con-' • clusion that the *ction taken by the Tahsildar in attaching the· sfiares was unsuslainable Y.P. (I) [1968] 3 S.C.R. 575. ,I I _Appeals dismi11ed._