REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION Civil Appeal No 3211 of 2019 (Arising out of SLP (C) No 2810 of 2012) Commissioner of Income Tax, New Delhi Appellant(s) VERSUS Ram Kishan Dass Respondent(s) WITH Civil Appeal No(s). 3214, 3212, 3213, 3228, 3230, 3215, 3229, 3216, 3219, 3220, 3217, 3221, 3218, 3222, 3223, 3225, 3226, 3224, 3227 of 2019 @SLP (C) No. 6082, 2808, 2811, 27681, 36495, 6680, 36496, 7573, 8761, 9463, 7660, 9720, 8512, 10191, 10190, 12026, 12027, 11869, 16130 of 2012, Civil Appeal No 2951 of 2012, Civil Appeal Nos.4334, 4599, 5305 of 2017, Civil Appeal Nos.3231, 3232, 3233 of 2019 @ SLP (C) Nos 10248, 10247, 17500 of 2017 and Civil Appeal No 7076 of 2017 JUDGMENT Dr Dhananjaya Y Chandrachud, J. 1 Signature Not Verified Leave granted in Special Leave Petitions. Digitally signed by MAHABIR SINGH Date: 2019.03.27 2 This batch of appeals involves interpretation of cluster of provisions of 10:20:25 IST Reason: 1 Income Tax Act 19611, particularly Section 142(2C). Division Bench of Delhi High Court by its judgment dated 27 May 2011 dismissed batch of appeals filed by Revenue against order dated 18 September 2009 of Income Tax Appellate Tribunal2. Tribunal came to conclusion that prior to insertion of expression suo motu with effect from 1 April 2008 in Section 142(2C), assessing officer had no jurisdiction to extend time for submission of report of auditor appointed under sub section (2A), of his own accord. As consequence, it was held that assessment which was made under Section 153A, in respect of assessment years in question, was barred by limitation. 3 In present batch of cases, submission of assessees is that assessing officer had no jurisdiction or authority under Section 142 (2C), as it stood prior to 1 April 2008, to extend time for submission of audit report of auditor appointed under provisions of sub section (2A). In essence, submission is that assessing officer was authorized to extend time (not exceeding 180 days) from date on which direction under sub section (2A) was received by assessee, only on application made by assessee and for any good and sufficient reason. If assessee made no application, assessing officer would have no jurisdiction according to assessees to extend time. 1 IT Act 1961 2 Tribunal 2 4 Revenue adopted contrary position, submitting that even before 1 April 2008, jurisdiction of assessing officer to extend time for submission of audit report was not confined to situation in which assessee had made application for extension. Consequently, incorporation of provision for suo motu exercise of power by assessing officer, with effect from 1 April 2008 by Finance Act, 20083, was only intended to remove ambiguity and was clarificatory in nature. 5 Section 142(2A) as it stood at material time, provided as follows: (2A) If, at any stage of proceedings before him, Assessing Officer, having regard to nature and complexity of accounts of assessee and interests of revenue, is of opinion that it is necessary so to do, he may, with previous approval of Chief Commissioner of Commissioner, direct assessee to get accounts audited by accountant, as defined in Explanation below sub-section (2) of section 288, nominated by Chief Commissioner or Commissioner in this behalf and to furnish report of such audit in prescribed form - duly signed and verified by such accountant and setting forth such particulars as may prescribed and such other particulars as Assessing Officer may require: Provided that Assessing Officer shall not direct assessee to get accounts so audited unless assessee has been given reasonable opportunity of being heard. Sub section (2C) of Section 142 was in following terms: (2C) Every report under sub-section (2A) shall be furnished by assessee to Assessing Officer within such period as may be specified by Assessing Officer: Provided that Assessing Officer may, on application made in this behalf by assessee and for any good and sufficient reason, extend said period by such further period or periods as he thinks fit; so, however, that aggregate of period originally fixed and period or periods so extended shall not, in any case, exceed one hundred and eighty days from date on which direction under sub-section (2A) is received by assessee. 6 Consequent to Finance Act, sub section (2C) was amended to read as 3 Finance Act 3 follows: (2C) Every report under sub-section (2A) shall be furnished by assessee to Assessing Officer within such period as may be specified by Assessing Officer: Provided that Assessing Officer may, suo motu, or on application made in this behalf by assessee and for any good and sufficient reason, extend said period by such further period or periods as he thinks fit; so, however, that aggregate of period originally fixed and period or periods so extended shall not, in any case, exceed one hundred and eighty days from date on which direction under sub-section (2A) is received by assessee. 7 Section 153B prescribes time limits for completion of assessments under Section 153A. Explanation (ii), as it stood at material time, provided that in computing period of limitation for purposes of Section, period commencing from day on which Assessing Officer directs assessee to get his accounts audited under sub-section (2A) of Section 142 and ending on day on which assesse is required to furnish report of such audit under that sub-section shall be excluded. While issuing direction under sub section (2A) of Section 142, assessing officer was vested with authority to require assessee to furnish report of audit in prescribed form, signed and verified by accountant, and setting forth such particulars as may be prescribed and as may be required by him. substantive part of sub section (2C) mandates that report under sub section (2A) shall be furnished by assessee to assessing officer within period that is specified by assessing officer under proviso, as it stood prior to its amendment by Finance Act. assessing officer was further empowered, on application made by assessee and for any good and sufficient reason, to extend period further, subject to stipulation that it shall 4 not exceed aggregate of 180 days from date on which direction under sub section (2A) has been received by assessee. 8 crucial words which fall for interpretation are On application made in this behalf by assessee and for any good and sufficient reason 9 Simply stated, contention of assessees is that above words indicate that assessing officer may extend period, which has been specified under substantive part of sub section (2C), only on application made by assessee and for good and sufficient reason. Contrariwise, according to Revenue, assessing officer, who issues direction to assessee under sub section (2A) to get his accounts audited, is vested with authority to specify period for submission of report, and within overall limit of 180 days it is open to assessing officer to extend time which has been fixed in first instance. Revenue posits that authority conferred upon assessing officer to extend time, on application made by assessee, does not take away authority of assessing officer, who has prescribed time for submission of report in first instance, to extend time without application for extension being made by assessee, subject to overall ceiling of 180 days. In submission of Revenue, expression and for any good and sufficient reason must be construed logically to mean or for any good and sufficient reason . 10 submission which has been urged on behalf of assessees is sought to be buttressed by adverting to legislative intent behind insertion of term suo motu in provisions of Section 142(2C) by Finance Act. Circular No 5 1/2009 dated 27 March 2009 contains following explanation for amendments made to Section 142(2C): 27. Granting of power to Assessing Officer to extend time for completion of special audit under sub-section (2A) of section 142 27.1 Sub-sections (2A) to (2D) of section 142 deal with power of Assessing Officer to order special audit. Such power is required to be exercised by Assessing Officer having regard to nature and complexity of accounts of assessee and interest of revenue. 27.2 Sub-section (2C) of said section specifies period within which audit reports is to be furnished. proviso to said sub-section empowers Assessing Officer to extend this period of furnishing of audit report. Further, it is also provided that aggregate of originally fixed period and period(s) so extended shall not exceed 180 days from date of issuance of direction of special audit. Further, such extension can be made only when application is made in this behalf by assessee and there are good and sufficient reasons for such extension. 27.3 With view to rationalise said proviso so as to also allow Assessing Officer to extend this period of furnishing of audit report suo motu, said proviso has been amended. Hence, while Assessing Officer shall continue to have power to grant extension on application made in this behalf by assessee and when there are good and sufficient reasons for such extension, he can also grant such extension on his own. 27.4 Applicability This amendment has been made applicable with effect from 1-4-2008. Hence, from this date and onwards, Assessing Officer shall also have power to extend period of furnishing of audit report suo motu. 11 Notes on clauses to Finance Bill, 2008 contain following explanation: Clause 28 seeks to amend section 142 of Income-tax Act, which relates to enquiry before assessment. Sub-sections (2A) to (2D) of said section deal with power of Assessing Officer to order special audit, where nature and complexity of accounts requires such audit, to seek assistance of chartered accountant. Sub-section (2C) of said section specifies period within which audit report is to be furnished. Proviso to said sub-section provides that Assessing Officer may extend 6 said period of furnishing of audit report, on application made in this behalf, by assessee and for any good and sufficient reason. It is proposed to amend said proviso so as to provide that Assessing Officer may, suo motu, or on application made in this behalf by assessee, and for any good and sufficient reason, extend said period by such further period or periods as he thinks fit. This amendment will take effect from 1st April, 2008. Memorandum accompanying Finance Act similarly provides: Granting of power to Assessing Officer to extend time for completion of special audit under sub-section (2A) of section 142 Sub-sections (2A) to (2D) of section 142 deal with power of Assessing Officer to order special audit. Such power is required to be exercised by Assessing Officer having regard to nature and complexity of accounts of assessee and interest of revenue. Sub-section (2C) of said section specifies period within which audit report is to be furnished. proviso to said sub- section empowers Assessing Officer to extend this period of furnishing of audit report. Further, it is also provided that aggregate of originally fixed period and period(s) so extended shall not exceed 180 days from date of issuance of direction of special audit. Further, such extension can be made only when application is made in this behalf by assessee and there are good and sufficient reasons for such extension. It is proposed to amend said proviso so as to also allow Assessing Officer to extend this period of furnishing of audit report suo motu. Hence, while Assessing Officer shall continue to have power to grant extension on application made in this behalf by assessee and when there are good and sufficient reasons for such extension, he can also grant such extension on his own. amendment will take effect from 1st April, 2008. 12 In context of above background, it has been submitted that purpose of amendment was to also allow assessing officer to extend 7 period for furnishing of audit report, suo motu . amendment to Section 142(2C) preserves jurisdiction of assessing officer to grant extension on application made by assessee and for any good and sufficient reasons. In addition, amendment allows assessing officer to extend period suo motu. amendment having taken effect from 1 April 2008, it has been urged on behalf of assessees that this power was not vested in assessing officer prior to that date. Moreover, learned counsel appearing on behalf of assessee urged that: (i) consequence of exercise of jurisdiction to extend time for submission of audit report under proviso to sub section (2C) is extension of period of limitation for completion of assessment under Explanation (ii) to Section 153B. This is indicative of fact that provision for extension is not procedural in nature; (ii) consequence of failure of assessee to comply with direction of submitting audit report by date prescribed by assessing officer is that under Section 144(1)(b), assessing officer is empowered to frame best judgment assessment; (iii) expression in Explanation (ii) to Section 153B ending on date on which assesse is required to furnish report of such audit signifies end of period of exclusion of time for framing of assessment under Section 153B; (iv) Section 142(2C) must consequently be interpreted in context of provisions of Sections 153B and 144; and (v) expression and in substantive part of Section 142(2A) has been held to be conjunctive by decision of this Court in Sahara India (Firm), 8 Lucknow v Commissioner of Income Tax, Central-I 4. expression and in proviso to sub-section 2C must be given same meaning. 13 On other hand, it has been submitted on behalf of Revenue that: (i) In construing proviso to Section 142(2C), it is primarily language of statutory provision which must be construed; (ii) amendment to sub section (2C) was necessitated by reason of ambiguity in provision as it stood prior to 1 April 2008; (iii) legislature having stepped in to remove ambiguity, amendment brought about by Finance Act must necessarily be regarded as clarificatory in nature; and (iv) amendment is purely procedural and must be retrospective in character. 14 rival submissions now fall for consideration. 15 Sub-section (2A) of Section 142 empowers assessing officer to direct assessee to get accounts audited by accountant, on formation of opinion that conditions specified in provision for recourse to power are fulfilled. power to order audit is vested with assessing officer. As necessary incident of this power, sub-section (2C) imposes obligation on assessee to furnish report to assessing officer within period which is specified by assessing officer. substantive part of sub-section (2C) places obligation on assessee to comply with time schedule which is prescribed by assessing officer. overall ceiling of time appears in proviso to sub- section (2C), which mandates that aggregate of time fixed and extended period cannot exceed 180 days, after which there can be no further extension of 4 (2008) 14 SCC 151 9 time. 16 submission of assessee would have this Court interpret proviso to mean that assessing officer can extend period which was originally fixed only on request of assessee. Besides leading to absurd consequences, such construction of proviso is patently contrary to its language, purpose and intendment. 17 proviso was intended to deal with situation where assessee, for valid reasons, may not be able to furnish audit report within period that was fixed by assessing officer. enactment of proviso was necessary to give remedy to assessee who, for genuine reasons, is unable to comply with direction issued in first instance by assessing officer. Hence, proviso stipulates that for good and sufficient reason, assessing officer may extend time on application submitted by assessee. good and sufficient reason requirement is intended to ensure that extension of time cannot be demanded by assessee as matter of right. Indeed, use of expression may indicates that whether or not time should be extended is discretionary. discretion is intimated to Assessing officer. 18 In determining whether power to extend time vests in assessing officer in situation where assessee has not made application for extension, it is well to remember that under substantive part of sub-section (2C), assessing officer can fix time for submission of audit report. Subject to overall limit of 180 days, assessing officer is fully clothed with authority to determine 10 time within which audit report should be submitted. For instance, assessing officer may in given case consider grant of 90 days as adequate for completion of exercise. Though assessing officer has power, in first instance, to fix even longer period subject to overall ceiling of time, she may fix particular period within limit. To then postulate that while assessing officer could in first instance have fixed longer time limit but, having fixed limit of time, is precluded from extending time thereafter would be absurd course of interpretation. assessing officer while fixing time in first instance will do so on estimate of reasonable time which is likely to be taken in completing exercise and submitting audit report. exigencies of situation may however require extension of time for genuine reasons or, as statute calls it, for any good and sufficient reason . 19 There are two ways of looking at situation. Firstly, proviso to sub- section (2C) creates remedy for assessee to apply for extension where, for good and sufficient reason, audit report could not be submitted. Otherwise, assessee may face penalty under Section 271 apart from being subjected to best judgment assessment under Section 144. By extending time at behest of assessee, assessing officer allows original order calling for audit report to be duly implemented. creation of remedy under proviso in favour of assessee cannot be construed to detract from authority which vests in assessing officer, who has specified time limit for submission of audit report in first instance, to extend time without application by assessee. To hold otherwise, and to construe proviso to sub-section (2C) as foreclosing 11 authority of assessing officer to extend time without request by assessee, would lead to absurd consequence. assessee would then be in control of whether or not to seek extension of time, where audit report has not been finalized. Even if auditor, for genuine reasons (not bearing on default of assessee), was unable to comply with time schedule, having regard to nature or complexity of accounts, assessee would then have sole and unrestricted power to determine whether extension should be sought. Not seeking extension would in effect defeat underlying purpose and object of directing assessee to obtain report of auditor under sub-section (2A). legislature could not have intended this consequence. interpretation which would defeat purpose underlying sub-section (2A) must be avoided. assessing officer who has fixed time in first instance must necessarily, as incident of authority to fix time, be entitled to extend time without application by assessee. While extending time, assessing officer will be subject to overall ceiling of time fixed under proviso to sub section 2C. 20 Secondly, alternate construction of proviso is that expression and for any good and sufficient reason should be read to mean or for any good and sufficient reason . As matter of statutory interpretation, it is well settled that expression and can in given context be read as or (see in this context Ishwar Singh Bindra v State of UP5). This submission was opposed on behalf of assessees by urging that in context of sub-section (2A), it has been held by this Court in Sahara India (Firm), Lucknow v CIT (supra) that word and is used in 5 (1969) 1 SCR 219 = AIR 1968 SC 1450 12 conjunctive sense. Undoubtedly expression and in sub-section (2A) has been held to conjunctive, while delineating circumstances on basis of which opinion can be arrived at by assessing officer. This would not necessarily furnish index to how expression and in proviso to sub- section (2C) should be construed. interpretation of expression must be based on context in which it is used. In proviso to sub-section (2C), expression and is used in connection with grant of extension of time and not in context of formation of opinion for ordering special audit. power is of procedural nature. 21 learned counsel for assessees sought to urge that legislative history surrounding amendment to proviso to sub-section (2C) by Finance Act would indicate that amendment was intended to be prospective with effect from 1 April 2008 and, that prior to this date, assessing officer had no jurisdiction to grant extension of time, save on application by assessee. Circular 1/2009 dated 27 March 2009 indicates that amendment was brought about with view to rationalize said proviso . Learned counsel argued that expression in Circular 1/2009 that amendment was to also allow assessing officer to extend period for furnishing of audit report suo motu, indicates that such power did not exist prior to amendment. submission cannot be accepted. mere fact that amendment has been made with effect from 1 April 2008 does not detract from it being clarificatory in nature or that it was designed to obviate ambiguity. In Justice GP Singh s Principles of Statutory Interpretation6 6 11th Edition (2008) 13 issue of whether statutory provision is retrospective has been analysed thus: presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by Supreme Court: For modern purposes declaratory Act may be defined as Act to remove doubts existing as to common law, or meaning or effect of any statute. Such Acts are usually held to be retrospective. usual reason for passing declaratory Act is to set aside what Parliament deems to have been judicial error, whether in statement of common law or in interpretation of statutes. Usually, if not invariably, such Act contains preamble, and also word declared as well as word enacted . But use of words it is declared is not conclusive that Act is declaratory for these words may, at times, be used to introduce new rules of law and Act in latter case will only be amending law and will not necessarily be retrospective. In determining, therefore, nature of Act, regard must be had to substance rather than to form. If new Act is to explain earlier Act, it would be without object unless construed retrospective. explanatory Act is generally passed to supply obvious omission or to clear up doubts as to meaning of previous Act. It is well settled that if statute is curative or merely declaratory of previous law retrospective operation is generally intended. language shall be deemed always to have meant or shall be deemed never to have included is declaratory, and is in plain terms retrospective. In absence of clear words indicating that amending Act is declaratory, it would not be so construed when amended provision was clear and unambiguous. amending Act may be purely clarificatory to clear meaning of provision of principal Act which was already implicit. clarificatory amendment of this nature will have retrospective effect . (emphasis supplied) above extract was cited by this Court in Commissioner of Income Tax-1, Ahmedabad v Gold Coin Health Food Pvt Ltd 7. Constitution Bench of this Court also cited above extract with approval in Commissioner of Income Tax (Central I) v Vatika Township (P) Ltd.8. 22 Notes on Clauses as well as Memorandum to Finance Act do not 7 2008 (9) SCC 622 8 [2014] 31 ITR 466 (SC); 2015 1 SCC 1 14 indicate contrary hypothesis. reason for introduction of amendment arose because of element of ambiguity inherent in erstwhile position as it stood before 1 April 2008. ambiguity was precisely on question as to whether assessing officer was precluded from granting extension of time of his own accord merely because assessee was permitted to apply for extension. Since purpose of amendment was to remove this ambiguity, we are clearly of view that by Finance Act, Parliament essentially clarified position as it existed prior to amendment. 23 Moreover, there exists presumption of retrospective application in regard to amendments which are of procedural nature. This position was stated in Maxwell on Interpretation of Statutes9: general principle, however, seems to be that alterations in procedure are retrospective, unless there be some good reason against it. In Commissioner of Income Tax (Central I) v Vatika Township (P) Ltd. (supra), this Court held thus: 30. We would also like to point out, for sake of completeness, that where benefit is conferred by legislation, rule against retrospective construction is different. If legislation confers benefit on some persons but without inflicting corresponding detriment on some other person or on public generally, and where to confer such benefit appears to have been legislators' object, then presumption would be that such legislation, giving it purposive construction, would warrant it to be given retrospective effect. This exactly is justification to treat procedural provisions as retrospective 9 11th Edition, Sweet and Maxwell (1962) at pg 217 15 31 Thus, rule against retrospective operation is fundamental rule of law that no statute shall be construed to have retrospective operation unless such construction appears very clearly in terms of Act, or arises by necessary and distinct implication. Dogmatically framed, rule is no more than presumption, and thus could be displaced by outweighing factors. (emphasis supplied) 24 We find no substance in submission urged on behalf of assessees that to adopt interpretation which we have placed on provisions of Section 142(2C) would enable assessing officer to extend period of limitation for making assessment under Section 153B. Explanation (iii) to Section 153B(1), as it stood at material time, provided for exclusion of period commencing from date on which assessing officer had directed assessee to get his accounts audited under sub-section (2A) of Section 142 and ending on day on which assesee is required to furnish report under that sub-section. day on which assessee is required to furnish report of audit under sub-section (2A) marks culmination of period of exclusion for purpose of limitation. Where assessing officer had extended time, period, commencing from date on which audit was ordered and ending with date on which assessee is required to furnish report, would be excluded in computing period of limitation for framing assessment under Section 153B. principle governing exclusion of time remains same. act on which exclusion culminates is date which assessing officer fixes originally, or on extension for submission of report. 16 25 issue as to whether amendment which has been brought about by legislature is intended to be clarificatory or to remove ambiguity in law must depend upon context. Court would have due regard to (i) general scope and purview of statute; (ii) remedy sought to be applied; (iii) former state of law; and (iv) what power that legislature contemplated (See Zile Singh v State of Haryana10). decision in Sedco Forex International Drill Inc. v Commissioner of Income Tax11 on which learned counsel for assesses relied involved substitution of Explanation to Section 9(1)(ii) of IT Act, 1961 with effect from 1 April 2000. two Judge Bench of this Court held that given legislative history of Section 9(1)(ii), it can only be assumed that it was deliberately introduced with effect from 1 April 2000 and was therefore intended to be prospective. This was also so construed by CBDT, and in explanatory notes to provisions of Finance Act, 1999. As we have indicated, interpretation is matter of determining path on basis of statutory context and legislative history. In taking view that we have, we have also taken note of fact that same view was adopted by several High Courts. Among them are (i) Punjab and Haryana High Court in Jagatjit Sugar Mills Co Ltd v Commissioner of Income Tax12; (ii) Kerala High Court in Commissioner of Income Tax, Cochin v Popular Automobiles13; and (iii) Allahabad High Court in Ghaziabad 10 (2004) 8 SCC 1 11 [2005] 279 ITR 310 (SC); (2005) 12 SCC 717 12 (1994) 74 Taxman 8 (Pun.&Har.); [1994] 210 ITR 468 13 (2011) 333 ITR 308 17 Development Authority v Commissioner of Income Tax, Ghaziabad (UP) 14. decision of Kerala High Court in Popular Automobiles (supra) is subject matter of Civil Appeal No 2951 of 2012 in these proceedings. 26 For reasons we have adduced, we have come to conclusion that provisions of Section 142(2C) of Income Tax Act 1961, as they stood prior to amendment which was enacted with effect from 1 April 2008 by Finance Act, 2008 did not preclude exercise of jurisdiction and authority by assessing officer to extend time for submission of audit report directed under sub- section (2A), without application by assessee. We hold and declare that amendment was intended to remove ambiguity and is clarificatory in nature. As consequence of our decision, we specifically overrule judgment of Division Bench of Delhi High Court in Commissioner of Income Tax v Bishan Swaroop Ram Kishan Agro Pvt. Ltd.15 dated 27 May 2011. 27 Accordingly, Civil Appeals @ SLP (C) Nos 6082, 7573, 8761 and C.A. No. 2951 of 2012 are restored to file of Commissioner of Income Tax (Appeals) for decision on merits. Civil Appeals @ SLP(C) Nos 2808, 2811, 36496, 6680, 36495, 11869, 12026, 12027, 10191, 10190, 9720, 8512, 2810, 7660, 9463, 16130, 27681 of 2012; Civil Appeal Nos 4599, 4334, 7076 of 2017; Civil Appeals @ SLP(C) Nos 17500, 10248, 10247 of 2017 and C.A. No. 5305 of 2017 are restored to file of Income Tax Appellate Tribunal for decision on merits. 14 (2011) 12 Taxman.com 334 (Allahabad); 2011 SCC On Line All 1151 15 [2011] 203 TAXMAN 326 (Delhi) ITA No. 1775/2010 - 2011 SCC Online Del 2463 18 28 There shall be no order as to costs. ....J [Dr Dhananjaya Y Chandrachud] ....J [Hemant Gupta] New Delhi; March 26, 2019 19 Commissioner of Income-tax, New Delhi v. Ram Kishan Da