Stewart Science College Vs ITO (Orissa High Court)
Orissa High Court held that notice issued u/.s 148A of the Income Tax Act clearly demonstrates that the Assessing Authority had in possession of information about deposit of cash in the banks and hence the same is tenable in law
Facts-
A notice u/s. 148A of the Income Tax Act was issued based on the possession of information that there was deposit of cash in banks by the petitioner-College during the year 2014-2015.
In the present case, it is admitted fact that the petitioner-College has deposited cash of Rs.69,23,128/- with the State Bank of India, Corporate Centre and received interest amounting to Rs.1,77,782/-and Rs.32,578/- from the deposit accounts maintained with Tamilnadu Mercantile Bank Ltd. While explaining by way of reply dated 30.03.2022 to the notice dated 22.03.2022, the petitioners submitted before the Authority concerned that cash amounting to Rs.69,23,128/- is the money received from students, but the same is stated to have been exempted under Section 10(23C)(iiiab) of the IT Act.
Conclusion-
Bare reading of provisions of section 148 suggests that the Assessing Officer is required to obtain prior approval of specified authority; and afford opportunity of hearing by allowing not less than 7 days, but not exceeding 30 days from the date on which such notice was issued. Opportunity is extended to the petitioner by serving notice requiring it to explain as to why a notice under Section 148 for assessment should not be issued on the basis of information, which suggest that income chargeable to tax has escaped assessment in the case for the relevant assessment year and as a result of inquiry conducted, if any, as per clause (a) of Section 148A.
The notice dated 22.03.2022 issued under Section 148A clearly demonstrates that the Assessing Authority had in possession of information about deposit of cash in the banks by the petitioner-College during the Financial Year 2014-15.
Since the petitioner-College has not furnished return, the Assessing Authority-Income Tax Officer, Ward 1(1), Cuttack had no opportunity to examine the veracity of such claim for exemption. Therefore, there is justification to issue notice for assessment of escaped income on opining to initiate proceeding under Section 148 disclosing the reason by passing Order dated 31.03.2022 under Section 148A.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
This matter is taken up by virtual/physical mode.
1. The petitioner No.1, Stewart Science College (hereinafter referred to as “petitioner-College”), assails not only Notice dated 22.03.2022 issued under Section 148A(b), but also the Order dated 31.03.2022 passed under Section 148(A)(d) along with Notice dated 31.03.2022 issued under Section 148 indicating initiation of proceeding for assessment of escaped income under the Income-tax Act, 1961 (for brevity hereinafter referred to as “IT Act”) by the Income Tax Officer, Ward 1(1), Cuttack pertaining to Assessment Year 2015-16 [Previous Year 2014-15]. The writ petitioner craves for following reliefs:
“I. Issue a writ of mandamus and certiorari/or any other appropriate writ/writs quashing the impugned notice under Section 148A(b) of the IT Act, 1961 dated 22.03.2022 and consequential order under Section 148A(d) along with notice under Section 148 of the IT Act, 1961 dated 31.03.2022 and proceedings initiated pursuant thereto;
And
II. Issue a writ of and/or order and/or direction ion the nature of prohibition commanding respondents to forebear from giving effect to and/or taking any step whatsoever pursuant to and/or in furtherance of the issuance of notice under Section 148;
And
III. Award cost of litigation;
And
IV. Pass such other order/orders and/or direction/directions as this Hon’ble Court may deem fit and proper;
And
And/or allow this writ petition.”
2. Shorn off detailed narration of facts, suffice it to describe that based on information which suggests that income chargeable to tax for the Assessment Year 2015-16 has escaped assessment within the meaning of Section 147 of the IT Act, notice dated 22.03.2022 under Section 148A was issued calling upon the petitioner-College, bearing PAN AAFAS2114P, to furnish response electronically in ‘e-proceeding’ facility on or before 30.03.2022. Enclosed to said notice was the following material particulars facilitating filing of show-cause by the petitioner:
“You have deposited cash amounting to Rs.69,23,128/- in your bank account maintained with State Bank of India Corporate Centre during the Financial Year 2014-15 relevant to assessment year 2015-16. You have also received interest amount of Rs.1,77,782/- and Rs.32,578/- from the deposit accounts maintained with Tamilnadu Mercantile Bank Limited and State Bank of India respectively during the said assessment year. However, you have failed to file your Income Tax Return for the relevant A.Y. 2015-16. Therefore, you are required to show cause as per provision of Section 148A(b) of the Act, that why such amount of Rs.71,33,488/- (69,23,128 + 1,77,782 + 32,578) will not be treated as your escaped income as per Section 147 of the Income Tax Act, 1961 for the A.Y. 2015-16 and why notice under Section 148 will not be issued to you for the relevant assessment year.”
2.1. Responding to aforesaid notice, a reply dated 30.03.2022 was filed by the petitioner-assessee which inter alia contained as follows:
“Since there is no taxable income being no liability for payment of tax, the law provides for Assessee like us not to file return of income. Not only our income is exempt from income tax by virtue of Section 10(23C)(iiiab), we are also not required to file return of income as the provisions of Section 139(4C) was effective from AY 2016-17. Thus there is no income chargeable to tax which has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. Merely due to non-filing of return does not amount to income escaping assessment and also does not require the department to take recourse to the provisions of Section 148 even when the reasons for non-filing of return has been informed and accepted by the department.”
2.2. The petitioner has stated to have furnished return for the assessment year 2015-16 on 30.04.2022 in response to notice dated 31.03.2022 issued under Section 148 along with Local Fund Audit Report, Tax Audit Report and Form No.10B prescribed under Rule 17B of the Income Tax Rules, 1961 read with Section 12A of the Income Tax Act.
2.3. The Assessing Officer-Income Tax Officer, Ward-1(1), Cuttack, upon consideration of reply of the petitioner-assessee proceeded to issue notice under Section 148 of the IT Act after assigning following reason in his Order dated 31.03.2022 passed under Section 148A(d):
“*** On perusal of the submission of the assesse it is seen that, the assesse accepted about the transactions made in the bank accounts. It claims the income to be exempted. However, the assessee should have filed ITR and could have claimed exemptions as per the provisions of the Act. This shows that, the assesse has nothing to explain against the show cause notice regarding non-filing of ITR and escapement of income for the assessment year 2015-16. The assesse has failed to discharge the onus to prove as per the show cause notice. In absence of any satisfactory explanation, the case of the assessee is considered as a fit case for issuance of notice under Section 148 of the Act.”
3. On the above factual backdrop, Sri Prajnaraj Mohanty, learned Advocate for the petitioner-assessee urged that the aforesaid reason ascribed by the Assessing Officer is not only bereft of application of mind but also the same is outcome of blameworthy preconceived approach. In furtherance to such argument, he submitted that the Assessing Officer has failed to address the core issue as to whether there was requirement of furnishing return with reference to Section 139(4C)(e) for Assessment Years prior to 2016-17. Amplifying such a contention, Sri Mohanty argued that since the expression “sub-clause (iiiab)” has been inserted in clause (e) of sub-section (4C) of Section 139 with effect from 01.04.2016 by virtue of the Finance Act, 2015, there was no requirement to furnish return of income of the educational institution like the petitioner-College, being exempted in terms of Section 10(23C)(iiiab) in respect of period prior to Assessment Year 2016-17. Therefore, it is submitted that the petitioner was not required to file return for the Assessment Year 2015-16.
3.1. A Certificate dated 28.01.2021 issued by the Secretary of National Commission for Minority Educational Institutions, Ministry of Human Resources Development, Government of India, is brought to the notice of this Court to establish that the petitioner-College is minority educational institution. Said certificate is to the following effect:
“This is to certify that by the order dated 10th day of September, 2020 passed by the National Commission for Minority Educational Institutions, New Delhi in case No.1668 of 2012 (Stewart Science College, Madhusudan Road, P.O. Buxi Bazar, P.S. Lalbag, District Cuttack, Odisha, 753001 Vrs. Secretary, School and Mass Education Department, Government of Odisha) run by the Stewart Science College, Madhusudan Road, P.O. Buxi Bazar, Cuttack, Odisha – 753001 (NGO Darpan Unique ID : OR/2018/0215316) has been declared as a minority educational institution covered under Section 2(g) of the National Commission for Minority Educational Institutions Act, 2004 with the main objective of sub-serving the interests of the Christian minority community.
Given under my hand and the seal of the Commission on this 28th day of January, 2021.”
3.2. The learned counsel for the petitioner placed reliance on the Letter No.47301-V.E/C.22/80/EYS, dated 04.11.1980 whereby the Government of Odisha in Education and Youth Services Department allowed increase of seats in respect of the petitioner-College for opening of new subjects/Honours classes. Copy of Resolution dated 11.07.1984 of the Government of Odisha in Education and Youth Services Department published in the Odisha Gazette, Supplement No.33, dated 17.08.1984 has been referred to indicate that the employees of the Odisha Aided Educational Institutions are extended the retirement benefit. Said resolution is as follows:
“No. 27950—IXE-MB-25/84-EYS
Government of Orissa
Education and Youth Services Department
Resolution
the 11th July 1984
Subject— Extension of retirement benefits to the employees of educational institutions of their choice established and administered by minorities having the right under clause (1) of Article 30 of the Constitution which are under the direct payment system of grant-in-aid.
The Orissa Aided Educational Institutions Employees’ Retirement Benefit Rules, 1981 were made in exercise of powers conferred by sub-section (1) of Section 27, read with sub-section (1) of Section 10 of the Orissa Education Act, 1969 and brought into force with effect from the 1st April 1982. As provided in Section 2 of the said Act, the said Act does not apply to the educational institutions of their choice established and administered by minorities under clause (1) of Article 30 of the Constitution. Therefore, the Orissa Aided Educational Institutions Employees’ Retirement Benefit Rules, 1981 are not ipso facto applicable to such institutions.
2. Teachers of educational institutions established and administered by the minorities who have retired on or after the 1st April, 1982 on attaining the age of 60 years are not entitled to retirement benefits. This causes hardship to them as their couterparts in other aided educational institutions retiring on or after 1st April, 1982 are getting the retirement benefits provided in the said Retirement Benefit Rules of 1981.
3. After careful consideration, Government has been pleased to decide that the provisions in the above rules and executive institutions issued thereunder regarding the procedure of payment of retirement benefits under the said rules may be made applicable mutatis mutandis to the educational institutions established and administered by minorities which are covered by the Scheme of Direct Payment of grants-in-aid with effect from the 1st April, 1982, provided that, the employees are retired on attaining the age of 60 years.
Order— Ordered that the Resolution be published in the Orissa Gazette for general information and copies thereof be sent to all concerned.
By order of the Governor
S.M. Patnaik
Secretary to Government”
3.3. Enclosing copies of Letter No.50336-HE-AC-II-COL-0018-2021/HE, dated 10.12.2021 of Accounts Officer (HE), Department of Higher Education, Odisha and Letter No.16136-HE-AC-II-COL-0008-2022/HE, dated 20.04.2022 of Accounts Officer (HE), Department of Higher Education, Odisha to the writ petition, the counsel for the petitioner submitted that the Government of Odisha in Department of Higher Education releases Grant-in-Aid in favour of the petitioner-College, a Non-Government Aided College for disbursement of salary to the employees and in the said letters it has been stipulated that relevant papers are required to be kept open for test check by Accountant General Odisha, District Audit Officer, Local Fund Audit and auditor of the Higher Education Department if specially deputed for the purpose.
3.4. Sri Prajnaraj Mohanty, learned Advocate for the petitioners submitted that the assessee-College does fall within the meaning of expression “wholly or substantially financed by the Government” as employed in sub-clause (iiiab) of clause (23C) of Section 10 of the IT Act, it was not required to furnish return in view of provisions contained in Section 139(4C)(e). It is, therefore, contended that the Assessing Authority has misconstrued that there has been escapement of income for the Assessment Year 2015-16. In such view of the matter, not only the notice dated 31.03.2022 issued under Section 148 is tainted, but also the Order dated 22.03.2022 passed under Section 148A is vitiated.
4. Sri Radheyshyam Chimanka, learned Senior Standing Counsel for Income-tax Department countenancing the exercise of jurisdiction by the Income Tax Officer, Ward 1(1), Cuttack in initiating proceeding for assessment under Section 148, after consideration of reply dated 30.03.2022 furnished as required under Section 148A, submitted that the writ petition is premature inasmuch as the petitioner-assessee has ample opportunity to place its material before the Assessing Authority on merit as also raise objection against the Order dated 31.03.2022 passed under Section 148A(d) during the course of the assessment proceeding. Therefore, Sri Chimanka submitted that there being no prejudice caused to the petitioner, interference at this juncture by this Court under Article 226 of the Constitution of India would not be warranted.
5. Section 148A of the IT Act, which deals with conducting inquiry, providing opportunity before issue of notice under Section 148, reads thus:
“148A.
Conducting inquiry, providing opportunity before issue of notice under Section 148.—
The Assessing Officer shall, before issuing any notice under Section 148,—
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under Section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under Section 132 or requisitioned under Section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under Section 132 or requisitioned under Section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.
Explanation.—
For the purposes of this section, specified authority means the specified authority referred to in Section 151.”
5.1. Bare reading of aforesaid provisions suggests that the Assessing Officer is required to obtain prior approval of specified authority; and afford opportunity of hearing by allowing not less than 7 days, but not exceeding 30 days from the date on which such notice was issued. Opportunity is extended to the petitioner by serving notice requiring it to explain as to why a notice under Section 148 for assessment should not be issued on the basis of information, which suggest that income chargeable to tax has escaped assessment in the case for the relevant assessment year and as a result of inquiry conducted, if any, as per clause (a) of Section 148A.
5.2. The notice dated 22.03.2022 issued under Section 148A clearly demonstrates that the Assessing Authority had in possession of information about deposit of cash in the banks by the petitioner-College during the Financial Year 2014-15. Section 148A uses the word “information” which triggers action by the Assessing Officer. The connotation of “information” in the context of reopening of assessment has succinctly been laid down in the case of Larsen & Toubro Limited Vrs. State of Jharkhand, (2017) 103 VST 1 (SC) (Paragraphs 21, 22 & 27) = (2017) 13 SCC 780 which is as follows:
“21. It is also pertinent to understand the meaning of the word ‘information’ in its true sense. According to the Oxford Dictionary, ‘information’ means facts told, heard or discovered about somebody/something. The Law Lexicon describes the term ‘information’ as the act or process of informing, communication or reception of knowledge. The expression ‘information’ means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or having a bearing on the assessment. We agree that a mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute ‘information’ for the purposes of the State Act. But the word “information” used in the aforesaid Section is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated. Suppose a mistake in the original order of assessment is not discovered by the Assessing Officer, on further scrutiny, if it came to the notice of another assessor or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Officer in such circumstances is in one sense extraneous to the record. It will be information in his possession within the meaning of Section 19 of the State Act. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or underassessment or wrong assessment.
22. There are a catena of judgments of this Court holding that assessment proceedings can be reopened if the audit objection points out the factual information already available in the records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside the record or any arithmetical mistake, assessment can be re-opened.
***
27. The expression ‘information’ means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to reopening of assessment, if for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, were same. ***”
5.3. In the present case, it is admitted fact that the petitioner-College has deposited cash of Rs.69,23,128/- with the State Bank of India, Corporate Centre and received interest amounting to Rs.1,77,782/-and Rs.32,578/- from the deposit accounts maintained with Tamilnadu Mercantile Bank Ltd. While explaining by way of reply dated 30.03.2022 to the notice dated 22.03.2022, the petitioners submitted before the Authority concerned that cash amounting to Rs.69,23,128/- is the money received from students, but the same is stated to have been exempted under Section 10(23C)(iiiab) of the IT Act.
5.4. Provisions of Section 10(23)(iiiab) so far as is relevant for the present purpose is extracted hereunder:
“10. Incomes not included in total income.—
In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—
***
(23C) any income received by any person on behalf of—
***
(iiiab) any … other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government;”
5.5. To ascertain whether an educational institution like the petitioner-College is “wholly or substantially financed by the Government”, Rule 2(bbb) of the Income Tax Rules, 1961, is referred to, which stands thus:
“For the purposes of sub-clauses (iiiab) or (iiiac) of clause (23C) of Section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty percent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.”
[Emphasis supplied]
5.6. Conjoint reading of Section 10(23C) (iiiab) and Rule 2(bbb) makes it clear that in order to claim exemption from income tax, the petitioner is required to establish by furnishing required evidence before the Assessing Authority to the effect that the Government grant to Stewart Science College, Cuttack-educational institution exceeded fifty percent of the total receipts including any voluntary contributions during the relevant previous year. Added to this, another condition for claiming exemption under Section 10(23C)(iiiab) is required to be justified, i.e., the petitioner-College is “existing solely for educational purposes and not for purposes of profit”. These are matters of fact which are required to be adjudicated upon by the Assessing Officer at the first instance and thereafter in the event of any grievance, the same can be agitated and ventilated before the fora vested with power under the statute as the Income Tax Act is a self-contained code and exhaustive of the matters dealt with therein as held in Rao Bahasur Ravula Subba Rao Vrs. Commissioner of Income Tax, 1956 SCR 577 = AIR 1956 SC 604 = (1956) 30 ITR 163 (SC).
5.7. Since the petitioner-College has not furnished return, the Assessing Authority-Income Tax Officer, Ward 1(1), Cuttack had no opportunity to examine the veracity of such claim for exemption. Therefore, there is justification to issue notice for assessment of escaped income on opining to initiate proceeding under Section 148 disclosing the reason by passing Order dated 31.03.2022 under Section 148A.
5.8. The action based on the subjective opinion or satisfaction can judicially be reviewed first to find out the existence of the facts or circumstances on the basis of which the authority is alleged to have formed the opinion. It is true that ordinarily the court should not inquire into the correctness or otherwise of the facts found except in a case where it is alleged that the facts which have been found existing were not supported by any evidence at all or that the finding in regard to circumstances or material is so perverse that no reasonable man would say that the facts and circumstances exist. The courts will not readily defer to the conclusiveness of the authority’s opinion as to the existence of matter of law or fact upon which the validity of the exercise of the power is predicated. The doctrine of reasonableness thus may be invoked. Where there are no reasonable grounds for the formation of the authority’s opinion, judicial review in such a case is permissible. When we say that where the circumstances or material or state of affairs does not at all exist to form an opinion and the action based on such opinion can be quashed by the courts, we mean that in effect there is no evidence whatsoever to form or support the opinion. The distinction between insufficiency or inadequacy of evidence and no evidence must, of course, be borne in mind. A finding based on no evidence as opposed to a finding which is merely against the weight of the evidence is an abuse of the power which courts naturally are loath to tolerate. Whether or not there is evidence to support a particular decision has always been considered as a question of law. It is in such a case that it is said that the authority would be deemed to have not applied its mind or it did not honestly form its opinion. The same conclusion is drawn when opinion is based on irrelevant matter. The existence of circumstances is a condition precedent to form an opinion. The court can inquire whether the facts and circumstances so found to exist have a reasonable nexus with the purpose for which the power is to be exercised. In other words, if an inference from facts does not logically accord with and flow from them, the Courts can interfere treating them as an error of law. Thus, the Court can see whether on the basis of the facts and circumstances found, any reasonable man can say that an opinion as is formed can be formed by a reasonable man. That would be a question of law to be determined by the Court. Where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only. The Court can interfere if the constitutional or statutory term essential for the exercise of the power has either been misapplied or misinterpreted. The Courts have always equated the jurisdictional review with the review for error of law and have shown their readiness to quash an order if the meaning of the constitutional or statutory term has been misconstrued or misapplied. It is permissible to interfere in a case where the power is exercised for improper purpose. If a power granted for one purpose is exercised for a different purpose, then it will be deemed that the power has not been validly exercised. If the power in this case is found to have not been exercised genuinely for the purpose of taking immediate action but has been used only to avoid embarrassment or wreck personal vengeance, then the power will be deemed to have been exercised improperly. The grounds which are relevant for the purpose for which the power can be exercised have not been considered or grounds which are not relevant and yet are considered and an order is based on such grounds, then the order can be attacked as invalid and illegal. On the same principle, the administrative action will be invalidated if it can be established that the authority was satisfied on the wrong question. The aforesaid principles of exercise of power vis-à-vis validity of exercising power has been discussed elaborately by the Hon’ble Supreme Court of India in Amarendra Kumar Pandey Vrs. Union of India, 2022 SCC OnLine SC 881.
5.9. “Proceeding” is frequently used to denote a step in an action and obviously it has that meaning in such phrases as proceeding in any cause or matter. When used alone, however, it is in certain statutes to be construed as synonymous with or including action. Reference may be had to Halsbury’s Laws of England, Vol. 1, 3rd Edition, page 6.
5.10. The term “proceeding” is a very comprehensive term and generally speaking means a prescribed course of action for enforcing a legal right. It is not a technical expression with a definite meaning attached to it, but one the ambit of whose meaning will be governed by the statute. It indicates a prescribed mode in which judicial business is conducted. Refer: Babu Lal Vrs. Hazari Lal Kishori Lal, AIR 1982 SC 818 = (1982) 1 SCC 525.
5.11. In Commander Coast Guard Region (East) Vrs. O. Konavalov, MANU/TN/0029/2001 = (2001)1MLJ420 = O.S.A. No. 309 & 350 of 2000, decided on 10.01.2001 by Madras High Court = 2001 SCC OnLine Mad 28 = (2001) 1 CTC 247 = (2001) 1 Mad LJ 420 it is laid down that the word “Proceeding” has not been defined in the General Clauses Act, 1897.
Oxford Dictionary explains the term “Proceeding” as “an action taken in a Court to settle a dispute.”
The Black’s Law Dictionary, Seventh Edition, Edited by Bryan A. Garner, Editor-in-Chief, gives the meaning of the word “Proceeding” as:
“the regular and orderly progression of a law suit. Including all acts and events between the time of commencement and the entry of judgment; any procedural means for seeking redress from a tribunal or agency”.
Words and Phrases (Legally Defined) [2nd Edition] Butterworths Publication explains the term “Proceedings” as:
“The term ‘proceeding’ is frequently used to note a step in an action, and obviously it has that meaning in such phrases as “proceeding in any cause or matter”. When used alone, however, it is in certain statutes to be construed as synonymous with, or including “action” [Halsbury’s Laws (3rd Edition) 5, 6].”
The term “Legal Proceedings” is explained as :
“ ‘Legal Proceedings’ mean prima facie that which the words would naturally import— i.e., legal process taken to enforce the rights of the Shipowner, Runchiman & Co. Vrs. Smyth & Co., 1994 (20) T.L.R. 625, per Lord Alverstone,C.J., at P.626.”
The said Dictionary also refers to a Book “The Law of Pleading under the Code of Civil Procedure” by Edwin E. Bryant, and quoted as under:
“ ‘Proceeding’ is a word much used to express the business done in courts. A proceeding in Court is an act done by the authority or direction of the court, express or implied. It is more comprehensive than the word ‘action’, but it may include in its general sense all the steps taken or measures adopted in the prosecution or defense of an action, including the pleadings and Judgment.”
The term ‘proceeding’ would only mean a legal process taken to enforce the rights.
5.12. The dictionary meaning of the word “proceeding” is “the institution of a legal action, any step taken in a legal action”. In a general sense, the form and manner of conducting juridical business before a Court or judicial officer. Regular and orderly progress in form of law, including all possible steps in an action from its commencement to the execution of judgment. Term also refers to administrative proceedings before agencies, tribunals, bureaus or the like. See: Most Rev. P.M.A. Metropolitan & Others Vrs. Moran Mar Marthoma & Another, 1995 Supp (4) SCC 286 = AIR 1995 SC 2001.
5.13. In P.L. Kantha Rao Vrs. State of AP, AIR 1995 SC 807 = (1995) 2 SCC 471, it is stated that the word ‘proceeding’ would depend upon the scope of the enactment wherein the expression is used with reference to a particular context where it occurs. It may mean a course of action for enforcing legal right. In the journey of litigation, there are several stages, one of which is the realisation of the judicial adjudication which attained finality.
5.14. The expression “proceeding” is not a term of art, which has acquired a definite meaning. What its meaning is when it occurs in a particular statute or a provision of a statute will have to be ascertained by looking at the relevant statute. Bearing in mind that the term “proceeding” indicates something in which, business is conducted according to a prescribed mode it would be only right to give it a comprehensive meaning so as to include within it all matters coming up for judicial adjudication and not to confine it to a civil proceeding alone. Vide : Ram Chandra Aggarwal & Another Vrs. State of Uttar Pradesh & Another, AIR 1966 SC 1888 = 1966 Supp. SCR 393.
5.15. The term ‘proceeding’ is a very comprehensive term and generally speaking, means a prescribed course of action for enforcing a legal right. It is a term giving the widest freedom to a Court of law so that it may do justice to the parties in the case. See: Kantaru Rajeevaru Vrs. Indian Young Lawyers Association, (2020) 9 SCC 121 [9-Judge Bench].
5.16. Reference is made to Mathew M. Thomas & Others Vrs. Commissioner of Income Tax, (1999) 2 SCC 543, wherein it has been said that it is sufficient to refer to the Judgment of the Court in Garikapati Veeraya Vrs. N. Subbiah Choudhry, AIR 1957 SC 540 wherein the court said at p.553:
“(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.”
5.17. In Oriental Gas Co. Ltd. Vrs. State of WB, (1973) 32 STC 141 (Cal) it is observed that a proceeding under the sales tax statute comprehends the whole procedure for the levy, assessment, and collection of the tax liability of a dealer. When some step or action is taken for the ascertainment of imposition of that liability, the proceeding can be said to have commenced under the Act. Filing of return is a step in the procedure for the assessment of the liability of a dealer under the Act. By filing of such a return the machinery for assessment and imposition of liability is set in motion and with the filing of such a return a proceeding commences under the Act.
5.18. The word ‘initiate’ has been employed in Section 20 of the Contempt of Courts Act, 1971, which provides that no Court shall initiate any proceedings for contempt, either on its own motion or otherwise, after the expiry of a period of one year from the date on which the contempt is alleged to have been committed. In the Pallav Sheth Vrs. Custodian, (2001) 107 Comp Cas 76 (SC) = (2001) 7 SCC 549 it has been held that in the case of suo motu proceedings, contempt proceeding must be initiated by the Court by issuing a notice and in other cases initiation can only be by a party filing an application. Under Section 20 of the Contempt of Courts Act, 1971 action can be initiated, either by filing an application or by the Court issuing notice suo motu, within a period of one year from the date on which the contempt is alleged to have been committed.
5.19. In Kishan Lal & Co. Vrs. Additional Commissioner of Commercial Tax, (2017) 102 VST 343 (Chhatisgarh) = 2017 SCC OnLine Chh 584 the initiation of proceeding has been described in the following manner:
“11. The word ‘initiate’ or ‘initiation’ has not been defined in the Act. Since it has not been defined in the Act, it would be appropriate to refer to the dictionary meaning of the word ‘initiate’. In Webster’s Third New International Dictionary, the word ‘initiate’ has been defined as to begin or set going; make a beginning of; perform or facilitate the first actions, steps or stages of. Likewise, in Shorter Oxford English Dictionary, the word ‘initiate’ has been defined as to begin, commence, enter upon; to introduce, set going, originate.
12. Black’s Law Dictionary, 6th Edition, defines the words ‘initiate’ and ‘initiative’ as:
“Initiate: Commence; start; originate; introduce; inchoate. Curtesy initiate is the interest which a husband has in the wife’s lands after a child is born who may inherit, but before the wife dies. To propose for approval – as schedule of rates. Idaho Power Co. Vrs. Thompson, D.C. Idaho, 19 F. 2d 547, 579.
Initiative: An electoral process whereby designated percentages of the electorate may initiate legislative or constitutional changes through the filing of formal petitions to be acted on by the legislature or the total electorate. The power of the people to propose bills and laws, and to enact or reject them at the polls, independent of legislative assembly. Hughes Vrs. Bryan, Okl., 425 P. 2d 952, 954. Not all state constitutions provide for initiative.”
13. Thus, the word ‘initiation’ of suo motu revision as stated in proviso (a) to Section 9(3) of the Chhatisgarh Value Added Tax Act, 2005, has a definite connotation. Initiation of revisional proceeding is the time when the revisional authority applies its mind to the facts/materials on record and decides to direct issuance of notice in accordance with Rule 61 of the Rules proposing the proposed order and intimating the assessee his intention to take the proceeding in suo motu proceeding. Proviso (a) to Section 49(3) of the Act is the condition precedent to exercise the power of revisional authority under that procedure. It merely contemplates initiation of proceeding by the revisional authority on its own or otherwise. The proceeding can be said to be initiated only when the revisional authority on its own motion or on the motion made otherwise decides to issue notice to the other side.
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16. Therefore, what is required and condition precedent for initiation of proceeding by invoking Section 9(3) of the Chhatisgarh Value Added Tax Act, 2005, would be initiation of proceeding under Section 9(3) of the Act and initiation can be done only when the revisional authority applies its mind to the facts of the case on his own motion or on the information received. Once there is application of mind by the revisional authority for suo motu proceeding or on the basis of the information received and he decides to issue notice as contemplated under Rule 61 of the Chhatisgarh Value Added Tax Rules, then the exercise of initiation is complete and initiation cannot be said to be made only when the notice is received under Rule 61 by the assessee.”
5.20. Perusal of record reveals that after passing of the Order dated 31.03.2022 under Section 148A(d) and issue of notice for assessment under Section 148 of the IT Act, having filed return under Section 139(4A) in Form ITR-7 on 30.04.2022 for the Assessment Year 2015-16 along with Audit Report (Annexure-4 series), the petitioner has participated in the proceeding and surrendered to the jurisdiction of the Assessing Authority-Income Tax Officer, Ward 1(1), Cuttack before whom said return is stated to have been filed.
5.21. In the above premises, it is unwarranted to show indulgence in matter pertaining to the Order dated 31.03.2022 passed under Section 148A(d) of the IT Act in exercise of extraordinary jurisdiction under Article 226 of the Constitution of India. Acceding to the contention of the petitioner would tantamount to rendering violence to provisions of Section 148.
6. Sri Prajnaraj Mohanty, learned counsel for the petitioner advanced argument that since the income of the petitioner-College falls within the ambit of Section 10(23C)(iiiab) of the IT Act, it was not required to furnish return in view of provisions contained in Section 139(4C)(e). It is noteworthy that the petitioner has furnished return under Section 139(4A) after receipt of notice for assessment under Section 148.
6.1. Relevant provisions contained in sub-sections (4A), (4C) and (4D) of Section 139, as they stood at the relevant point of time, are quoted hereunder:
