DIVAN, J. - (1.) IN this case, at the instance of the Revenue, the following questions have been referred to us for our opinion : "(1) Whether the finding of the Tribunal that the penalty order made by the IAC under S. 271(1)(c) r/w S. 274(2) as it stood before the amendment by the Taxation Laws (Amendment) Act, 1970, was time-barred, is erroneous in law in view of the amendment of S. 275 by the aforesaid Amendment Act w.e.f. 1st April, 1971 ? (2) Whether the finding of the Tribunal that the IAC had not jurisdiction under S. 274(2) of the Act, in view of its amendment by the abovesaid Amendment Act, 1970, was erroneous in law ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty levied by the IAC ?"
(2.) THE facts giving rise to this reference are as follows : The relevant assessment year is 1968-69. At the time of passing the assessment order, the ITO had held that a cash credit of Rs. 3,100 was not established by the assessee and hence it was added to the income of the assessee. The assessee had claimed deduction for two items of interest, namely, Rs. 2,680 paid to Harsukhlal Vadilal Chokshi and Rs. 880 paid to Gorakh Bachubhai & Company. The ITO held that these amounts of interest were also not in fact paid. These two items of interest were, therefore, disallowed. Thus, the total amount disallowed was Rs. 6,660. At the time of passing the assessment order on 3rd Oct., 1969, the ITO had also directed that penalty notice under S. 274 r/w s. 271 for not furnishing correct particulars of income should be issued. As the law then stood, the minimum penalty leviable being in excess of Rs. 1,000, it was only the IAC who was competent to impose the penalty in this case. Under S. 275 as it stood before the Amendment Act of 1970 which came into force w.e.f. 1st April, 1971, the period of limitation was two years from the date of the initiation of penalty proceedings. Hence, if the law had stood unamended, the IAC was required to pass the order of penalty before 3rd Oct., 1971. However, the new amendment Act, namely, the Taxation Laws (Amendment) Act, 1970, was brought into force w.e.f. 1st April, 1971, and as a result the period of limitation was enlarged from two years from the date of the initiation of penalty proceedings to two years from the end of the financial year in which the penalty proceedings were initiated. The IAC passed the order of penalty on 12th Oct., 1971, levying a penalty of Rs. 6,810. Against the order of the IAC the assessee, which is a registered firm, went in appeal to the Tribunal and the Tribunal held that if the Amendment Act of 1970 were to apply, then the IAC had no jurisdiction to hear the case and if the Amendment Act were not to apply, then the order of penalty was barred by limitation. Under these circumstances the, appeal filed by the assessee-firm was allowed and thereafter, at the instance of the Revenue, the above-mentioned three questions have been referred to us. Before the Amendment Act of 1970 which came into force w.e.f. 1st April, 1971, under S. 274, when the case was falling under cl. (c) of sub-s. (1) of S. 271 and the minimum penalty imposable exceeded a sum of rupees one thousand, the ITO was bound to refer the case to the IAC who was to have all the powers conferred under the Chapter in which S. 274 is set out for the imposition of penalty. Under S. 274 as it stood before the amendment, no order imposing a penalty under that Chapter could be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty had been commenced. The Taxation Laws (Amendment) Act, 1970 (42 of 1970), provided, inter alia, for amendment of ss. 274 and 275. By S. 49 of the Amendment Act, in S. 274 of the IT Act, in sub-s. (2), for the words "the minimum penalty imposable exceeds a sum of rupees one thousand" the word "the amount of income (as determined by the ITO on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees" were substituted. By S. 50 of the Amendment Act, an entirely new s. 275 was substituted for the old one and so far as we are concerned, under new S. 275(b) no order imposing a penalty under this Chapter shall be passed after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. If the period of limitation under the new section is to apply, then it is obvious that the financial year in which the order was passed by the ITO and the penalty proceedings were initiated was the financial year 1969-70. That financial year was expiring on 31st March, 1970, and hence the period of limitation would expire on 31st March, 1972. In the instant case, the IAC had passed the order of penalty on 12th Oct., 1971, and, therefore, if the new section is to apply, then the order of penalty would be within time. It is well-settled law that as regards matters of procedure, the legislature can make changes and those changes would apply so far as limitation is concerned to pending proceedings unless a vested right has accrued to any party by reason of the old period of limitation having expired. In the instant case, the new section came into force w.e.f. 1st April, 1971. On that day, even under the old unamended section the time for passing the order of penalty had not expired and, therefore, by this well recognised principle of interpretation the period of limitation stood enhanced or enlarged up to 31st March, 1972, so far as the facts of this case were concerned. In its order, the Tribunal has observed in paragraph 11 : "If we consider that the penalty has been imposed under the Act as it stood before amendment in 1970 then it is clearly out of time. Even if the amendment of 1970 has to be taken into consideration then the IAC is not competent to impose the penalty. Hence, in any of the alternative views, penalty cannot be sustained." At least so far as the question of limitation is concerned, it is obvious that the old section cannot apply after the Amendment Act since the entire old section was substituted by the new section and what we are concerned within the present case is the application of the well-settled rule of law that limitation is a matter of procedure and unless there is something in the context or by express words the legislature has expressed it, new period of limitation would always apply to pending proceedings as well. Under these circumstances, at least on one out of the two alternatives, the position is very clear, namely, that the order of the IAC, was within limitation.
(3.) AS regards the jurisdiction of the IAC to pass the order of assessment in view of the amendment in S. 274 by the Amendment Act, it is well-settled law that every litigant has a vested right in the procedural law so far as substance is concerned and if the substantive question of jurisdiction is to be affected by a new amendment the legislature must say so either in express terms or by necessary implication. Since the decision of the Privy Council in Colonial Sugar Refining Company Ltd. vs. Irving (1905) AC 369 (PC) the principle has been well recognised that though the right of appeal is a procedural right, it is a vested right. It becomes vested at the time when the proceedings are initiated in the Tribunal or the Court of first instance and unless the legislature has by express words or by necessary implication clearly so indicated, that vested right will continue to him in spite of the change in the jurisdiction of the different Tribunals of forums. At p. 372 of the report it has been stated : "To deprive a suitor in a pending action of an appeal to a superior Tribunal which belonged to him as of right is a very different thing from regulating procedure. In principle, their Lordships see no difference between abolishing an appeal altogether and transferring the appeal to a new Tribunal. In either case there is an interference with existing rights contrary to the well-known general principle that statutes are not to be held to act retrospectively unless a clear intention to that effect is manifested." ;