1987-VIL-48-SC-DT

Equivalent Citation: [1987] 167 ITR 39 (SC)

Supreme Court of India

Date: 23.04.1987

UNION OF INDIA AND OTHERS

Vs

GOPAL DAS GUPTA

BENCH

G. L. OZA. and RANGANATH MISRA.

JUDGMENT

AMARESH ROY J.- A common question regarding interpretation, mainly of two sections of the Income-tax Act, 1961, viz., sections 131 and 135, has arisen in the two appeals which we have heard one after the other. The question arose by an action taken by the Assistant Director of Inspection of the Income-tax Department in connection with what was said to be a proceeding under the Income-tax Act, in the case of Aruna Estate Limited by issuing summons under section 131 of the Income-tax Act, 1961, to compel attendance before him of two persons who are the two respondents in the two appeals before us. It appears that by a notice dated June 19, 1968, purported to be a summons to witness under section 131 of the Income-tax Act, 1961, Sri D. K. Guha, Assistant Director of Inspection, required Sri Gopal Das Gupta who is respondent in Appeal No. 129 of 1971 and Sri Ranendra Chandra Roy who is respondent in Appeal No. 292 of 1970, informing each of them that his attendance was required " in connection with a proceeding under the Income-tax Act in the case of Aruna Estate Limited " to give evidence either personally or through an authorised representative, the books of account and other documents specified and not to depart until permitted to do so, in the respective letters dated June 19, 1968. It was also mentioned that " If you intentionally omit to so attend to give evidence, a fine up to Rs. 500 may be imposed upon you under section 131(2) of the Income-tax Act, 1961 ". Each of these persons, i.e., Sri Gopal Das Gupta and Sri Ranendra Chandra Roy, by separate letters, raised various objections and in the course of that correspondence, by letter dated June 24, 1968, each of them asked for information regarding " legal powers " to require attendance although " you are not an assessee of mine " as was mentioned in the letter of the Assistant Director of Inspection dated June 22, 1968. Then only, by a letter dated June 25, 1968, the Assistant Director of Inspection said " I am to inform that I called you to appear before me in terms of the summons issued under section 131 of the Income-tax Act, 1961. These summons have been issued under section 131 of the Income-tax Act, 1961, in exercise of my legal jurisdiction ".

Upon that controversy, each of these two persons, i.e., Gopal Das Gupta and Ranendra Chandra Roy, moved applications in this court under article 226 of the Constitution praying for writs to quash the proceedings and cancel the summons issued by the Deputy Director of Inspection. Two rules were issued and in each of these rules, the Assistant Director of Inspection, Shri D. K. Guha, was a party-respondent along with two other respondents, namely, Union of India through Director of Inspection and Assistant Director of Inspection (Intelligence), Income-tax Department. These two rules were heard and disposed of by K. L. Roy J. Before that learned trial judge, on behalf of the petitioners, contentions were raised by pointing out that the Director of Inspection, not being one of the authorities mentioned in section 131, the Assistant Director of Inspection had no jurisdiction to issue the impugned notice and the proceedings should be quashed. By contesting that proposition on behalf of the Department, it appears to have been contended that the definition in section 221 of the Income-tax Act, 1961, provides that in the Act, Director of Inspection includes an Assistant Director of Inspection also and that by dint of the provision in section 135 of the Act, that officer is authorised to exercise all the powers of the Income-tax Officer. under section 131 ; as such it was contended that the Officer of the Department had acted within his jurisdiction. These conflicting arguments advanced for the parties before the learned trial judge made it incumbent to examine the two sections to ascertain the true meaning and import of the contents of each of these. The two sections of the Income-tax Act, 1961, are quoted below :

"131.(1) The Income-tax Officer, Appellate Assistant Commissioner, Inspecting Assistant Commissioner and Commissioner shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit in respect of the following matters, viz. :

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;

(c) compelling the production of books of account and other documents; and

(d) issuing commissions.

(2) Without prejudice to the provisions of any other law for the time being in force, where a person to whom a summons is issued either to attend to give evidence or produce books of account or other documents at a certain place and time, intentionally omits to attend or produce the books of account or documents at the place or time, the income-tax authority may impose upon him such fine not exceeding five hundred rupees as it thinks fit, and the fine so levied may be recovered in the manner provided in Chapter XVII-D.

(3) Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act :

Provided that an Income-tax Officer shall not (a) impound any books of account or other documents without recording his reasons for so doing, or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor.

135. The Director of Inspection, the Commissioner and the Inspecting Assistant Commissioner shall be competent to make any enquiry under this Act, and for this purpose shall have all the powers that an Income tax Officer has under this Act in relation to the making of enquiries."

The learned trial judge, K. L. Roy J., accepted the contentions advanced for the petitioners before him that the claim of the Department that the officer was authorised under the provisions of section 135 to exercise all the powers of the Income-tax Officer under section 131 should be rejected mainly on the reason of the particular language that appears in the two sections and also for the reason that was advanced before him by pointing out that in 1965, section 131 was amended by adding "Inspecting Assistant Commissioner of Income-tax " which amendment, according to the contentions of the petitioners, would be unnecessary if the meaning attributed to section 135 by the Department were correct because in that section 135, " Inspecting Assistant Commissioner " has been mentioned. To strengthen that contention the learned counsel for the petitioners before the learned trial judge referred to the Finance Bill, 1965, and the Statement of Objects and Reasons in respect of clause 38 therein which subsequently was enacted as section 38 of the Finance Act, 1965, effecting the aforesaid amendment in section 131. By relying on that Statement of Objects and Reasons, it was contended that the Legislature interpreted section 131 before its amendment as authorising only the three officers mentioned therein, namely, the Income-tax Officer, the Appellate Assistant Commissioner and the Commissioner, to exercise the powers mentioned in that section, The amendment to enlarge the number of officers so authorised by that section 131 was therefore felt necessary.

Objection was taken on behalf of the Department about the propriety of referring to the Objects and reasons because it was contended on their behalf that the words of section 135 are absolutely plain and free from any ambiguity. To justify reference to and reliance on the Objects and Reasons above mentioned, reliance was placed on two decisions of the Supreme Court, one in the case of CIT v. Sodra Debi [1957] 32 ITR 615 and the other in the case of Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC) at p. 20.

Before the learned trial judge on behalf of the Department, reliance was placed mainly on the language in section 135 of the Income-tax Act, 1961, for the proposition that it confers on the Director and other authorities mentioned therein all the powers of an Income-tax Officer to make any enquiry under the Act and such enquiry must necessarily involve summoning of witnesses and production of material books or documents.

The learned trial judge, K. L. Roy J., overruled the contentions advanced on behalf of the Department by holding that the question raised was not entirely one of construction of the relevant section of the Act. He held that the authority to issue the impugned notice is sought to be derived from section 131 which section specifically empowers the four authorities mentioned therein to exercise the powers vested in a court under the Civil Procedure Code. Section 135, inter alia, gives the Director all the powers of the Income-tax Officer to make any enquiry under the Act, but section 131 does not specifically deal with any enquiry under the Act though it authorises taking of certain steps to facilitate such an enquiry. Further, the learned trial judge was inclined to agree with the contention raised on behalf of the petitioner that when section 135 speaks of the power of an Income-tax Officer to make any enquiry, the enquiry is one as is provided in section 142 for the purpose of making an assessment and/or proceeding in relation thereto. The learned judge pointed out in his judgment that in either of the cases there is no allegation that any assessment is pending before the Officer who had issued the summons under section 131 of the Act and the learned judge held, therefore, no question could arise out of his exercising any power under section 131.

K. L. Roy J. also did not agree with the contention that the words of section 131 are so plain that no reference could be made to the Objects and Reasons for introducing the amendment in 1965. He also held that the Objects and Reasons make it clear that it was never in the contemplation of the authorities that power under section 131 could be exercised by any one other than the three officers mentioned therein. And the Legislature did not contemplate that section to authorise anybody else excepting the persons named therein to exercise the powers conferred by that section. As a reason for further strengthening his views, the learned judge also held that the maxim generalia specialibus non-derogant is applicable to this case and section 135 cannot be utilised to enable the officer of the Department to exercise any authority specifically conferred under section 131. On that view of the matter, the learned judge made both the rules absolute. It was ordered that a writ in the nature of mandamus would issue upon the respondents commanding them to act according to law and cancelling the notice dated June 19, 1968, issued under section 131 of the Income-tax Act, 1961, by the Assistant Director of Inspection (Intelligence), Income-tax Department and also that a writ in the nature of certiorari would issue and the said notice was set aside and cancelled and the proceedings thereunder quashed. The learned judge, however, did not award any costs.

From the two judgments in these two matters, two appeals have been preferred by the Union of India and the questions raised in both these appeals are the same questions regarding the interpretation of sections 131 and 135 of the Income-tax Act, 1961. In Appeal No. 129 of 1971, Mr. Balai Lal Pal appeared on behalf of the appellants. In appeal No. 292 of 1970, Mr. Suhas Sen appeared before us for the appellant. III both the appeals Mr. A. K. Roy Chowdhury appeared on behalf of the respondents. Arguments advanced in both the appeals have been the same and we shall deal with these judgment in this statute for disposing of both the appeals.

Mr. Pal, for the appellant, in Appeal No. 129 of 1971, adhered to the same contentions that were raised for the Department before the learned trial judge and only in elaboration Mr. Pal drew our attention to the definition of Director of Inspection as it appears in section 2, sub-section (21), to show that the definition includes the Additional Director of Inspection, Deputy Director of Inspection, and also Assistant Director of Inspection. The learned counsel also drew our attention to section 116 which mentions the income-tax authorities in six categories: (a) the Central Board of Revenue, (b) the Director of Inspection, (c) Commissioners of Income-tax, (d) Assistant Commissioners of Income-tax, (e) Income-tax Officers and (f) Inspectors of Income-tax.

Next, Mr. Pal referred to section 117 to show how appointment of income-tax authorities are made, particularly emphasis was put by Mr. Pal on section 120 which deals with the jurisdiction of Directors of Inspection and is in these words:

"Directors of Inspection shall perform such functions of any other income-tax authority as may be assigned to them by the Board."

And in passing also referred to section 124 which deals with the jurisdiction of Income-tax Officers. In that background, the learned counsel for the appellant, Mr. Pal invited us to read the two sections 131 and 135, which we did with the help of the assistance of the learned counsel, who, in his accustomed fairness and deep learning, himself brought out the importance of the particular phraseology in each of these sections. To mention the most important of it, of section 131, is the phrase " shall, for the purpose of this Act have" and in section 135 those important phrases are " shall be competent to make an enquiry under this Act " and " for this purpose " which occurs before the phrase " shall have all the powers that an Income-tax Officer has under this Act in relation to the making of enquiries ".

Mr. Pal's contention is that the enquiries that section 135 speaks of are all sorts of enquiries that it may be necessary to make particularly either under section 142 or under section 143 of the Act. He emphatically contested the view of the learned trial judge that the powers given by section i31 of the Act are limited only for the proceeding of enquiry which is provided for in section 142 and he also argued against the view of the learned trial judge that if the interpretation sought to be put on section 135 by the Department is accepted, then a strange anomaly would arise because the Director of Inspection will have to record his reasons and obtain the approval of the Commissioner before impounding any books and documents and before detaining them beyond a period of 15 days and the result thereby obtained would be very near absurdity, because the Director of Inspection is not an officer subordinate to the Commissioner.

Mr. Pal, in this branch of his argument, argued that for smooth working of the statute by adaptation of its particular provisions to fit with other provisions in the statute, it is proper and necessary for the court to adapt the different provisions with each other by modifications in the language appearing to the extent of giving meanings thereto mutatis mutandis. For that proposition, Mr. Pal relied on the decision of the Supreme Court in the case of Third ITO v. M. Damodar Bhat [1969] 71 ITR 806 and also the judgment in the case of Jain Brothers v. Union of India [1970] 77 ITR 107. In furtherance of this contention, Mr. Pal also referred to section 297 of the Income-tax Act, 1961, and the decision of the Supreme Court in the case of Kalawati Devi Harlalka v. CIT [1967] 66 ITR 680. Reference was also made by the learned counsel to the decision of the Supreme Court in the case of CIT v. Singh Engineering Works P. Ltd. [1970] 78 ITR 90. We do not feel the necessity of going into the detailed facts of the cases cited by the learned counsel except that we may at once point out that the decision of the Supreme Court, turning on section 297(g) of the Income-tax Act, was in a case in which the provision that was held to be per se unnecessary but added by way of abundant caution was not provision of legislative enactment by Parliament but was by an order made by the Executive Government on the authority of a section in the statute. That distinction has to be kept in mind for considering the matter of the loud fact that an amendment of section 131 of the Income-tax Act has been carried out by Parliament in 1965 by adding the Inspecting Assistant Commissioner, although that officer would have power conferred by section 131 of the Act by dint of the provisions in section 135 if the interpretation sought to be put by Mr. Pal for the Department is to be accepted. This fact of amendment, by the Legislature without drawing any assistance from the Statement of Objects and Reasons appearing in the Bill is reason enough in our view to enable us to accept the contention raised on behalf of the respondents before us and to reject the contentions raised on behalf of the Department regarding the interpretation.

Apart from that we need only point out that the provision in the present section 131 had existed in the old Act of 1922 in the provision of section 37 of that Act. The provision in section 135 in the present Act was existing as a part of the old section 57B of the Act of 1922. The present section 142 was existing as sub-section (4) of section 22 of the repealed Act of 1922 and section 143 of the present Act has its predecessor in the old section 23 of the Act of 1922. While that history of the different sections in the present Act of 1961 has been delineated before us by Mr. Pal for the appellants, we cannot omit to notice that there are a little additions or a little omissions here and there between the language of the corresponding provisions of the present and the old Acts in these respects. Not much turns on that but what in our view is important to be considered is the language which appears in the relevant section of the present Act. First, we take up the important phrases of the two sections 131 and 135. While section 135 says that the " Inspecting Assistant Commissioner shall be competent to make an enquiry under this Act and for this purpose shall have all the powers that an Income-tax Officer has under this Act in relation to the making of enquiries ", section 131 provides that the Officers mentioned therein " shall for the purpose of this Act have the same powers as are vested in the court under the Code of Civil Procedure, 1908, when trying a suit in respect of matters delineated in the section ". Giving our full consideration to the particularity of the language, it appears to us that Parliament has made a distinction between the powers that have been conferred directly by this statute, that is, the Income-tax Act, 1961, mentioned in section 135 and the powers which have been made available by drawing from the sources in another statute, i.e., " the powers as are vested in the court under the Code of Civil Procedure ", and that is why the insertion of " Inspecting Assistant Commissioner " in section 131 by amendment in 1965 was felt necessary although that category of officer has been mentioned in section 135. There is great force in the contention on behalf of the respondents before us that if section 135 has conferred by these general words also the specific powers mentioned in section 131, then the amendment of section 131 in 1965 would have been unnecessary and that is in our view, quite enough reason for rejecting the contention raised on behalf of the Department. We also accept the view of the learned trial judge that by weighing the two sections 131 and 135, it appears clear that section 135 is a general provision while section 131 is a special provision and the special provision will have to be given the meaning for the special and limited purpose for which the provision has been incorporated in the section.

Again, on examining section 142, it cannot be missed that while taking the provision from the old section 22(4) of the Act of 1922, certain improvements appear to have been made. Most important of them is the heading of section which is " enquiry before assessment " which was latently appearing in the old provision in the Act of 1922 though had not been patently expressed there. Keeping that in mind, when we notice that the provision of section 143 of the Act of 1961 is headed " assessment " the distinction in the nature of the proceedings between these two sections 142 and 143 are revealed. Mr. Pal made an earnest endeavour to impress on us that in the provision of section 143 itself, there is scope for what Mr. Pal calls enquiries by calling for documents and examining witnesses but the word " enquiry " is not occurring in section 143 at all while section 142 expressly makes it the heading of that section. Not only so, the heading is " enquiry before assessment " Therefore, the proceeding, i.e., enquiry under section 142 is an earlier stage of the proceeding, that is, the proceeding of assessment provided for in section 143, and no part of section 143 can be, in our view, brought within the words " enquiry under the Act ", though Mr. Pal was emphasising " during assessment " which is a proceeding under the Act. The Income-tax Officer may draw upon documents, call for and examine witnesses, which in ordinary parlance and in a loose way could also be an enquiry. But that enquiry is dictionary meaning of enquiry which is not what is connoted as an enquiry under the Act as has been mentioned in section 135. For this reason, we agree with the learned trial judge that the provision in section 135 which speaks of enquiry under the Act refers to the enquiry that is provided by section 142 of the Act. But to say that much and no more may be misleading. It has also to be made clear that when the officers in section 135 are making enquiry under section 142 they, by dint of section 135, shall have all the powers that have been conferred on the Income-tax Officer under the Act, which means the powers which the Income-tax Act, 1961, directly confers and does not include the powers that section 131 enables them to avail of as drawn from the Civil Procedure Code which has vested the courts with the powers while dealing with suits. If, however, as Mr. Pal has tended to suggest, a particular officer is performing any function being assigned by the Board under section 120 of the Income-tax Act, 1961, then by dint of that assignment, all the powers for discharge of these functions will be available to that particular officer. Mr. Pal tended to make the point that the petitioners who are the respondents before us had not challenged the impugned notice or summons on the ground that there was no such assignment under section 120. In doing so, in our view, Mr. Pal was really not following the logic of events. During the controversy by correspondence, the petitioners who are the respondents before us had sought for information as to the legal authority and in answer they were only told about the legal proceeding by pointing to section 131 of the Income-tax Act. It was never contended by the officer or Department that during that correspondence or even in their affidavit in opposition at the trial stage they were under the authority of section 135 or for that matter under the authority of any assignment of function under section 120. That being so, there was no occasion for the petitioner to challenge any imaginary contention that will be raising a Frankenstein only to slay the demon. What is more important is that even in their affidavit-in-opposition in paragraph 9, the Department said only this in paragraph 7 at page 29:

" I deny and dispute the correctness of each and every submission made in paragraphs 12 and 13 of the petition. In particular, I deny that respondent No. 2 has no competence or authority or jurisdiction to issue the notice under section 131 of the said Act or that the said section does not authorise the said respondent to issue summons or require a person to appear before him as alleged or at all. At all material times, I was and still continue to be the Assistant Director of Inspection, Intelligence. "

Therefore, it is not open to Mr. Pal to plead for the first time before us with section 120 as a shield. In any event, we make it clear that in the circumstances and facts appearing in the materials on record, there is nothing to show that there was any such assignment under section 120 of the Act to the particular officer we are concerned with. That being so, the decision of the learned trial judge that the impugned notice and the proceeding are without jurisdiction and without any authority in law must be held to be the correct decision. We make it clear that if in fact there be any assignment, it will be open to the officer and the Department to take legal and appropriate action by making that authority known.

In the result, we uphold the decision of the learned trial judge and dismiss both the appeals. In the circumstances of the case, however, we do not award any costs in either.

AMIYA KUMAR MOOKERJI J.-I agree.

The Department took the matter in appeal to the Supreme Court.

C. M. Lodha, Senior Advocate (Miss A. Subhashini, Advocate, with him) for the appellants.

T. A. Ramachandran, Senior Advocate (Mrs. A. K. Verma, Advocate, of J. B. Dadachanji & Co., with him) for the respondents.

ORDER

The short question which arises in these two appeals is as to whether the Assistant Director of Inspection was entitled to issue a notice under section 131 of the Income-tax Act, 1961, to the two persons, to appear before him as witnesses. The Calcutta High Court held that such power was not vested in the said Officer. Accepting the decision of the Calcutta High Court as correct, by Amending Act 41 of 1975, sub-section (1A) was inserted into section 131 of the Act to confer that power on the Assistant Director of Inspection. In view of the fact that the position has now been covered by an amendment as early as 1975, we are of the view that the question raised has become academic and no useful purpose would be served by deciding the question as to whether at that time the power vested in the Assistant Director and the judgment of the High Court was therefore not correct. We dismiss these appeals. No costs.

Appeals dismissed.

 

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