Taxap/349/2002 Of M/S.narayan Construction Co v. Asstt.commissioner Of Income Tax

O/TAXAP/350/2002 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 350 of 2002 With TAX APPEAL NO. 349 of 2002With TAX APPEAL NO. 384 of 2003 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ?2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?5 Whether it is to be circulated to the civil judge ?================================================================M/S.NARAYAN CONSTRUCTION CO.....Appellant(s)VersusASSTT.COMMISSIONER OF INCOME TAX.....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1MR KM PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 10/10/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.Being aggrieved and dissatisfied with the impugned judgement and order dated 27.05.2002 passed by the Income Tax Appellate Tribunal, Ahmedabad ‘A’ Bench, (ITAT) in Income Tax Appeal No. 3247/AHD/1996 and 3246/AHD/1996 for the assessment year 1987-88 and 1985-86 respectively, the assessee has preferred the tax appeals no. 350 and 349 of 2002 respectively and being aggrieved with the impugned order dated 23.05.2003 passed by the ITAT in Income Tax Appeal No. 1210/AHD/2000 for the assessment year 1986-87, Tax Appeal No. 384 of 2003 is preferred. The common substantial question of law in these appeals are as under: “Whether on the facts and in the circumstances of the case, the Tribunal is right in its interpretation that the amendment made with effect from 1.4.1988 by the Finance Act, 1987 enlarging the scope of the word “transfer” used in section 2(47)(v) of the Income Tax Act, 1961 was retrospective in nature and therefore would apply for the A.Y 1977-78 also?” 2.The facts leading to the present tax appeal in a nutshell are set out as under: 2.1The appellant is a firm being regularaly assessed by the Income Tax Department at Vadodara and for the assessment years in question the appellant had filed income returns which were accepted u/s 143(1) of the Income Tax Act, 1961. Therafter, the assessment was re-opened by issuing notice u/s 148 of the Act whereby the Assessing Officer estimated the income of the appellant at the rate of 10% of the sale proceeds inspite of the fact that the actual sale proceeds had taken place in the assessment year 1990-91 when the appellant had already offered the income for taxation as per the regular method of accounting adopted by the appellant. 2.2The appellant challenged the assessment order before the CIT(Appeal) on the aspect of re-opening of assessment being bad in law as well as on the aspect of merits of the case whereby the Assessing Officer added assumed profit on estimate basis which was already taxed for assessment year 1990-91. The CIT(A) concluded that the proceedings u/s 147 for re-opening of the assessment was invalid and there could not be any reason for formation of belief by the Assessing Officer that income had escaped assessment and accordingly the re-assessment proceedings were cancelled. 2.2The appellant challenged the assessment order before the CIT(Appeal) on the aspect of re-opening of assessment being bad in law as well as on the aspect of merits of the case whereby the Assessing Officer added assumed profit on estimate basis which was already taxed for assessment year 1990-91. The CIT(A) concluded that the proceedings u/s 147 for re-opening of the assessment was invalid and there could not be any reason for formation of belief by the Assessing Officer that income had escaped assessment and accordingly the re-assessment proceedings were cancelled. 2.3Being aggrieved by the order of the first appellate authority sustaining the additions, the Revenue preferred appeal before the ITAT and the Tribunal vide impugned order reversed the order of CIT(A) and upheld the validity of re-assessment and the re-opening proceedings u/s 147 taken up by the Assessing Officer. Being dissatisfied with the said impugned order, the present appeals have been preferred by the assessee. 3.Mr. R.K. Patel, learned advocate appearing for the appellant submitted that the Tribunal has erred in law in concluding that the amendment made by the Finance Act, 1987 enlarging the scope of the word ‘transfer’ in section 2(47) (v) has to be treated as retrospective in nature and would therefore apply to assessment year 1977-78 without considering the fact that the said amendment is applicable with effect from 01.04.1988 and cannot be applied retrospectively to the facts of the case of the appellant. 4.Heard learned advocates for both the sides. In view of the statutory provisions which were made effective by way of 168 ITR(statutes) 92 reproduced hereinbelow, we are of the opinion that no law can be given retrospective effect. 11.3 These amendments shall come into force with effect from 1-4-1988 and will accordingly apply to the assessment year 1988-89 and subsequent years. [Section 3(g) of the Finance Act, 1987.] 4.1It goes without saying that the principles of interpretation of statutes will not permit this Court to hold that the provisions to legislation do not intend its retrospective application. The Tribunal even as per the principles of interpretation of statutes could not have applied the said provisions to have retrospective effect as far as the same is concerned. Therefore the same is ultravires and more particularly when the Government Circular itself makes it clear that the amendment shall come into force only after 1988 it cannot be applied to assessment year 1977-78. Therefore, we are of the opinion that the interpretation of the Tribunal is erroneous. The reliance placed by the Tribunal on a decision of the Apex Court in also erroneous. In that view of the matter, we are of the opinion that the question in the present appeals are required to be answered in the negative and the appeals are required to be decided in favour of the assessee. 5.In the premises aforesaid, appeals are allowed. The impugned orders passed by the Tribunal are hereby quashed and set aside. No further proceedings thereof are required to be undertaken. (K.S.JHAVERI, J.) divya (K.J.THAKER, J)