Holding

The word ‘order’ in Section 154(7) is not limited to the original assessment order but includes any order, such as a rectified order, so the four‑year limitation is measured from the date of the order being amended.

Summary

Mis Hind Wire Industries Ltd. was originally assessed for income tax on 21 September 1979. The assessee obtained a rectification of that order on 12 July 1982 under Section 154 of the Income‑Tax Act. A second rectification application was filed on 4 July 1986, which the Income‑Tax Officer rejected as time‑barred; the appellate authority affirmed. The Tribunal allowed the application, holding that the four‑year limitation under Section 154(7) should be measured from the date of the fresh order of 12 July 1982. The Calcutta High Court reversed, saying the period starts from the original 1979 order. The Supreme Court examined the meaning of “order” in the phrase “from the date of the order sought to be amended” and, relying on earlier decisions, held that the term includes any order, such as a rectified order. Consequently, the four‑year period runs from the date of the order being amended, and the Tribunal’s decision was restored, allowing the rectification.

Issues considered

The proper interpretation of the expression ‘from the date of the order sought to be amended’ in Section 154(7) of the Income‑Tax Act – whether the limitation period is calculated from the original assessment order or from any order, including a rectified order.
Whether a rectified assessment order constitutes a fresh order for the purpose of the four‑year limitation under Section 154(7).

Legislation cited

Income Tax Act, 1961s. 154(7), s. 155, s. 186, s. 34
Madhya Pradesh General Sales Tax Act, 1958s. 19
Mysore Sales Tax Acts. 12A, s. 21(2), s. 21(3)

Subjects

Income TaxSection 154Rectification of assessmentLimitation periodInterpretation of statuteTax assessment orderAppellate jurisdiction

Judgment

MIS HIND WIRE INDUSTRIES LTD. A
~-'-"
v.
THE COMMISSIONER OF INCOME TAX, WEST BENGAL-V

JANUARY 20, 1995

[P.B. SAWANT AND G.N. RAY, JJ.] B
1
>-- Income Tax Act, 1961-Section 154(7) as it stood on 21st Sepember,
1979--Expression 'from the date of the order sought to be amended'-lnter-
pretation of-Word 'order' would mean any order including amended or rec-
lifted order. c
The appellant assessee was assessed for income-tax originally under
the assessment order dated 21st September, 1979. The assessee filed a
petition for rectification of the assessment order U/s 154 of the Income Tax
., .... Act. The assessment order was rectified on 12th July, 1982. Thereafter, the
assessee again applied for rectification of the fresh order on 4th July, 1986. D
The Income Tax Officer dismissed the assessee's claim on the ground that
the application was beyond time. This order was confirmed by the Appel-
late Assistant Commissioner. On appeal, the Tribunal allowed the applica-
tion holding that the application for rectification made on 4th July, 1986
was within 4 years of the fresh order of assessment made on 12th July, E
1982 and hence within limitation.

On reference, the High Court reversed the order of the Tribunal
holding that the period of 4 years was to be calculated from the initial
order of assessment, viz., from 21st September, 1979. Hence this appeal. '"
The question raised was regarding the interpretation of Section 154(7) of F
the Act.

Allowing the appeal, this Court

HELD : The word 'order' in the expression 'from the date of the order G
sought to be amended' in sub-section (7) of Section 154 of the Income Tax.
Act as it stood at the time of the assessment order dated 21st September
1979, had not been qualified in any way and it did not necessarily mean the
original order. It would mean even the rectified order. [527-F]

International ~otton Cotporation v. C.T.O., [1975) 2 SCR 345 and H
519
)

520 SUPREME COURT REPORTS [1995) 1 S.C.R.

A Deputy Commissione~· of Commercial Taxes v. H.R. Sli Ranwlu, (1977) :.19
STC 180, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1323-27
of 1995.

B From the Judgment and Order dated 24.3.93 of the Calcutta High
Court in I.T.R. No. 51 of 1991.

Dr. Shankar Ghosh and R. Mukherjee for the Appellant. ,; (

'
G.V. Iyer, S.N. Terdol and R. Satis~ for the Respondent.
c The followin.g Order of the Court was delivered :

Special leave granted. Heard counsel on both sides.

What is challenged in these appeals is the decision of the Calcutta
D High Court interpreting the provisions of Section 154(7) of the Income Tax
Act (hereinafter referred to as the 'Act') as it stood at the time of the
assessment order dated 21st Septmber, 1979.

Shortly stated, facts are that the appellant assessee was assessed for
income tax originally under the assessment order dated 21st September,
E 1979. The assessee filed a petition for rectification of the said order under
Section 154 of the Act as it stood then on the ground that the Income Tax
Officer had not taken into consideration the shift allowance available to
the assessee. Consequent upon this application, the assessment order was
rectified on 12th July, 1982. Thereafter, the assessee again applied for
F rectification of th~ fresh order of 12th July, 1982 on 4th July, 1986 contend-
ing that while he was entitled to depreciation allowance on factory building
at the rate of 10%, he was allowed the depreciation only at the rate of 5%.
The Income Tax Officer dismissed the assessee's claim on the ground that
the application was beyond time. This order was confirmed by the Appel-
late Assistant Commissioner. In the appeal, the Tribunal, however, allowed
G the application holding that the application made on 4th July, 1986 was
within 4 years of the fresh order of assessment made on 12th July, 1982
and hence within limitation. On reference, the High Court reversed the
order of the Tribunal holding that the period of 4 years is to be calculated
from the initial order of assessment, viz., from 21st September, 1979 and
. H not fyom the fresh order of assessment passed on 12th July, 1982.
HIND WIRE INDS. LTD. v. COMMR. OF INCOME TAX 521

There is no dispute that the asses~ee would be entitled to 10% A
depreciation allowance on the factory building and it has lo be granted to
him if it is held that this rectification application was within time.

Section 154 of the Act, as it stood at the relevant time, read as
follows:
B
"154. Rectification of mistake -

(1) With a view to rectifying any mistake apparent from the record-

(a) the Income-tax Officer may amend any order of assessment or
of refund or any other order passed by him. c
xxxx xxxx xxxx

(lA) Where any matter has been considered and decided in any
proceeding by way of appeal or revision relating to an order D
referred to in sub-section (1), the authority passing such order may,
notwithstanding anything contained in any law for the time being
in force, amend the order under that sub-section in relation to any
matter other than the matter which has been so considered and
decided.
E
xxxx xxxx xxxx

(7) Save as otherwise in Section 155 or sub-section (4) of section
186 no amendment under this section shall be made after the expiry
of four years from the date of the order sought to be amended."
F
What falls for consideration in the present case is the interpretation
of the expression "from the date of the order sought to be amender!" in
sub-section (7) of Section 154 as it stood then. It is obvious that the word
'order' hs not been qualified in any way and it does not necessarily mean
the original order. It can be any order including the amended or rectified G
order. A similar expression in Rule 38 of the Mysore Sales .Tax Act fell for
- /" consideration in.Jntemation Cotton Corporation v. C.T.O., [1975] 2 SCR
345. Dealing with the point raised, this Court held as under :

"The other attack that the rectification order is beyond the point
of time provided in Rule 38 of the Mysore Sales Tax rules is also H
522 SUPREME COURT REPORTS (1995) 1 S.C.R.

A without substance. What was sought to be rectified was th~ assess-
ment order rectified as a consequence of this Court's decision in
Yaddalam's case. After such rectification the original assessment
order was no longer in force and that was not the order sought to
be rectified. It is admitted that all the rectification orders would
be within time calculated from the original rectification order. Rule
B 38 itself speaks of "any order" and there is no doubt that the
rectified order is also "any order" which can be rectified under
j
Rule 38"

This decision was endoresed in Deputy Commissioner of Commercial
C Taxes v. H.R Sri Ramulu, [1977) 39 STC 180 when this court observed there
as follows :-

"The reason for that is that once an assessment is reopened, the
initial order for assessment ceases to be operative. The effect of
reopening the assessment is to vacate or set aside the initial order
D
for assessment and to substitute in its place the order made on
re-assessment. The initial order for re-assessment cannot be said
to survive, even partially, although the justification for re-assess-
ment arises because of turnover escaping assessment in a· limited
field or only with respect to a part of the matter covered by the
E initial assessment order. The result of reopening the assessment is
that a fresh order for reassessment would have to be made includ-
ing for those matters in respect of which there is no allegation of
the turnover escaping assessment. As it is, we find that in the
present case the assessment orders made under section 12A were
comprehensive orders and were not confined merely to matters
F
which had escaped assessment earlier. In the circumstances, the
only orders which could be subject-matter of revision by the
appellant were the orders made under Section 12A of the Act and
not the initial assessment orders.

G In the case of J. Jaganmohan Rao v. Commissioner of Income-tax
and Excess Profits Tax, Andhra Pradesh, (1970) 75 ITR 373 SC,
this Court dealt with section 34 of the Indian Income-tax Act, 1922,
which relates to reassessment in the case of income escaping
assessment. It was held by this Court that once assessment is
H reopened, the previous under-assessment is set aside and the whole
HIND WIRE INDS. LTD. v. COMMR. OF INCOME TAX 523

proceedings start afresh. Ramaswamy, J., speaking for the Court A
observed:

"Section 34 in terms states that once the Income- tax
Officer decides to reopen the assessment he could do so
within the period prescribed by serving on the person liable
to pay tax a notice containing all or any of the requirements B
which may be included in a notice under section 22(2) and
may proceed to assess or reassess such income, profits or
gains. It is, therefore, manifest. that once assessment is
reopened by issuing a notice under sub-section (2) of section
22 the previous under- assessment is set aside and the whole c
assessment proceedings start afresh~ When once valid
proceedings are started under section 34(1)(b), the Income-
tax Officer had not only the jurisdiction but it was his duty
to levy tax on the entire income that had escaped assessment
during that year."
D
In the case of Commissioner of Sales Tax, Madhya Pradesh v. H.M.
Esufali H.M. Abdulali, (1973] 32 STC 77 SC= 90 ITR 271 SC, this
Court dealt with reassessment made under section 19 of the
Madhya Pradesh General Sales Tax Act, 1958. It was held that
when reassessment is made, the former assessment is completely E
reopened and in its place fresh assessment is made, Hegde, J .,
speaking for the Court, observed:

"What is true of the assessment must also be true of
• reassessment because reassessment is nothing but a fresh F
assessment. When reassessment is made under section 19, the
former assessment is completely reopened and in its place
fresh assessment is made. While reassessing a dealer, the
assessing authority does not merely assess him on the escaped
turnover, but it assesses him on his total estimated turnover.
While making reassessment under section i9, if the assessing G
authority has no power to make best judgment assessment,
all that the assessee need do to escape reassessment is to
refuse to file a return or refuse to produce his account books.
If the contention taken on behalf of the assessee is correct,
the assessee can escape his liability to be reassessed by H
524 SUPREME COURT REPORTS (1995) 1 S.C.R.

A adopting an obstructive attitude. H is difficult to conceive that
such could be the position in law.".

What fell for consideration in this decision were Sect~ons 12A, 21 .
and 21(2) and 21(3) of the Mysore Sales Tax Act. The relevant provisions
of Section 12A are as under :
B
"(1) Where for any reason the whole or any part of the turnover
of a dealer has escaped assessment to tax or licence fee or has
been assessed at a lower rate than the rate at which it is assessable,
the assessing authority may, subject to the provisions of sub-section
c (2) at any time within a period of five years from the expiry of the
year to which the tax or licence fee relates, assess to the best of
its judgment, the tax or licence fee payable on the turnover referred
to after issuing a notice to the dealer and after making such enquiry
'as it considers necessary."

D Section 21 of the said Act deals, inter alia, with revisional powers of
the Deputy Commissioner. Sub-sections (2) and (3) of that section read as
under:

(2) The Deputy Commissioner may of his own motion call for and
E examine the record of any order passed or proceeding recorded
under the provisions of the Act by a Commercial Tax Officer
subordinate to him and against which no appeal has been preferred
to him under section 20, for the purpose of satisfying himself as to
the ·legality or propriety of such order or as to the regularity of
such proceeding and pass such order with respect thereto as he
F
thinks fit.

(3) In relation to an order of assessment passed under this Act,
the power under sub-sections (1) and (2) shall be exercisable only
within a period of four year~ from the date on which the order was
G passed."

While holding that the expression "the date on which the order was
passed" in sub section (3) of Section 21, did not qualify the word 'order'
and hence the period of four years has to be calculated from the date of
H the rectified order, this Court referred to its earlier decision in Jntemation-
.
HIND WIRE INDS. LTD. v. COMMR. OF INCOME TAX 525

al Cott<?n case (supra) and also followed the decision of this Court in H.M. A
Esufali H.M. Abdulali case (1973) 90 ITR 271 at 280 as under :

"What is true of the assessment must also be true of re-assessment
because re-assessment is nothing but a fresh assessment. When
reassessment is made under section 19, the former assessment is B
completely reopened and in its place fresh assessment is made.
While reassessing a dealer, the assessing authority does not merely
assess him on the escaped turnover but it assesses him on his total
estimated turnover. While making reassessment under section 19,
if the assessing authority has no power to make best judgment C
assessment, all that the assessee need do to escape reassessment
is to refuse to file a return or refuse to produce taken on behalf
of the assessee is correct, the assessee can escape his liability to
be reassessed by adopting an obstructive attitude. It is difficult to
conceive that such could be the position in law."
D
The Court while dealing with the provisions of the M.P. General
Sales Tax Act, 1958 quoted Section 19 and Rule 33(1) and (2) which read
as under:

"19. Assessment of turnover escaping Assessmfmt - (1) Whereas an E
assessment has been made under the Act repealed by Section 52
and if for any reasons any sale or purchase of goods chargeable
to tax·under this Act or·any Act repealed by Section 52 during any
period has been under-assessed or has escaped assessment or
assessed at a lower rate or any deduction has been wrongly made F
therefrom, the Commissioner may, at any time within five calendar
years from the date of ·order of assessment, after giving the dealer
a reasonable opportunity of being heard and after making such
enquiry as he considers necessary, proceed in such manner as may
be prescribed to reassess wi_thin a period of two calendar years G
from the commencement of such proceedings, the tax payable by
such dealer and the commissioner may, where the omission leading
to such reassessment is attributable to the dealer, direct that the
dealer shall pay, by way of penalty in addition to the amount of
tax so assessed, a sum not exceeding that amount : H
526 SUPREME COURT REPORTS (1995) 1 S.C.R.

.. A Provided that in the case of an assessment made under any Act
repealed by section 52, the period for re-assessment, escapement
or wrong deduction shall be provided in such Act notwithstanding
the repeal thereof:

Provided further that any reassessment proceedings p:!nding
B on the date of commencement of the Madhya Pradesh General
Sales Tax (Amendment) Act, 1978 (No. 25 of 1978) be completed
in accordance with the provisions in force before the date of such
commencement and within a period of two calendar years from
the date of such commencement."
c
xxxx xxxx xxxx

"33. Manner of Assessment and re-assessment and imposition of
penalty. - (1) Where -

D (a) a registered dealer has rendered himself liable to tax and
penalty under sub-section (1) of Section 14-A, or

(a-i) a dealer has failed to comply with a notice issued under
sub-section (1) of Section 17, or
E (b) a registered dealer has failed without sufficient cause to furnish
prescribed returns for any period by the prescribed date as re-
quired by sub-section (1) of Section 17, or

(c) a registered. dealer has rendered himself liable to best judgment
.,._
F assessment under clauses (a) and (b) of sub-section (4) of Section •
18, or

(d) a dealer has rendered himself liable to best judgment assess-
ment under sub-section (6) or sub-section (7) of Section 18, or
G (e) a dealer being liable to pay tax, has wilfully failed to apply for
registration, or -\r

(t) the sale or purchase of goods by a dealer during any period
has been under-assessed or has escaped assessment or has been
H assessed at a lower rate or any deduction has been wrongly made
HIND WIRE INDS. LTD. v. COMMR. OF INCOME TAX 527

therefore within the meaning of sub-section (1) of Section 19, or A

(g) a dealer has deliberately concealed his turnover of sale or
purchase in respect of any goods or has furnished a false return,

then in every such case, the assessing authority shall serve on the
dealer a notice which shall as far as may be, be in Form XVI B
specifying the default, escapement or concealment, as the case may
be, and calling upon him to show cause by such date, ordinarily
not less than 30 days from the date of service of the notice as may
be fixed in that behalf, why he should not be assessed or reassessed
to tax and/or penalty should not be imposed upon him and direct- C
ing him to produce on the sale date his books or account and other
documents which the assessing authority may require and any
evidence which he may wish to produce in support of his objection:

Provided that no such notice shall be necessary where the dealer,
having appeared before the assessing authority, waives such notice. D
(2) On the date fixed in the notice issued under sub-rule (1) or in
case the notice is waived on such date which may be fixed in this
behalf the assessing authority shall after considering the objections
raised by the dealer and examining such evidence as may be
produced by him and after taking such other evidence as may be E
available, assess or re-assess the dealer to tax and/or impose a
penalty or pass any other suitable order".

In view of these authorities taking th~ view that the word 'any' in the

- expression "order sought to be amended" would mean even the rectified
order, we are satisfied that the High Court was wrong in setting aside the
decision of the Tribunal. Shri G. Vishwartatha Iyer, learned senior counsel
cited before us the decisions of the Calcutta, Gujarat, Madras and Orissa
p

High Courts in Bharat Taxtile Works & Ors. v. Income-tax Officer, Circle-IV,
.,
3-A, (Company), (1978) 114 ITR 28; Ahmedabad Sarangpur Mills Co. Ltd.
v. A.S. Manohar, Income-Tax Officer, Cirle IV, Ward-A, (Companies, Ah- G
medabad, (1976) 102 ITR 712; Kothari (Madras) Ltd. v.Agricultural Income
.. /r
Tax Officer, (1989) 177 ITR 538 and Commissioner of Income Tax v.
Kalinga Tubes, (1991) 187 ITR 595 respectively in support of his contention
that the word 'order' used in the expression "order sought to be amended"
would mean the original order of the assessment. As against this, Dr. H
528 SUPREME COURT REPORTS [1995] 1 S.C.R.
/

A Shankar Gho~e, learned senior counsel referred us to ther decisions of the
Patna and Karnataka High Courts in Bihar Staie Road Transp01t Co1pora-
tio11 v. Commissioner of Income Tax, (1986) ITR 162 114 at 130 and
Commissioner of Income-tax, Kamataka-II, Bangalore v. Mysore Iron & Steel
Ltd., (1986) 157 ITR at 531 respectively which decisions have taken the
B contrary view. However, in view of the decisions of this Court referred to
above, we are of the opinion that the view taken by the Tribunal in the
present case is the correct one. We, therefore, set sside the impugned order
of the High Court and restore that of the Tribunal. The appeals are allowed
accordingly with no order as to costs.

A.G. Appeals allowed.