Extension Of Period Of Limitation: A Historical, Proactive, Commendable And Timely Order

Dr. K. Shivaram, Sr. Advocate, and Advocates Aditya Ajgaonkar and Shashi Ashok Bekal, have conducted a detailed analysis of the recent order of the Supreme Court extending suo motu the period of limitation. The learned authors have explained the provisions of Articles 141 and 142 of the Constitution which enabled the Supreme Court to pass the extraordinary and unprecedented order. They have also analyzed whether the said order applies to the Income-tax Act and extends the period of limitation prescribed therein

I. INTRODUCTION

The Hon’ble Supreme Court through a bench presided over by the Chief Justice S. A. Bobde,  Justice L. N. Rao and Justice Surya Kant vide Order dated March 23, 2020 in the case for Cognisance for period of Limitation In re in Suo Motu Writ Petition No. 3 of 2020 (‘the Order’) has taken ‘suo-moto’ cognizance of the dire situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State).

This is an appreciable pro-active move by the Hon’ble Supreme Court, which deserves to be applauded. This is probably the first time such an action has been taken by the Hon’ble Court on its own cognizance as a measure to ensure minimum administrative inconvenience and quicker recovery post the crisis-situation.

This comes after the Hon’ble Supreme Court vide order dated March 20, 2020 in the case of Union of India vs. P. D. Sunny &Ors SLP (Civil) Diary No. 10669/2020 granted a stay on the orders of the Hon’ble High Court of Allahabad and High Court of Kerala restraining recovery of tax& dues.

II. RESPONSE FROM THE MINISTRY

It is imperative to understand that the situation in hand has unfortunately occurred in the month of March, a month which is the last month for the financial year in India. The date is vital for an umpteen number of compliance and procedural/regulatory requirements under the scheme of Income tax, GST, Company Law etc. Initiation of various proceedings, statutory compliances,  as well as the process of passing of certain orders, inter alia also get time barred as on March 31, making the last few weeks of the financial year hectic, for businesses, practicing professionals and the Central and State Governments.

Several appeals and requests were made by various professional bodies. Heeding the concerns expressed by various professional bodies, the Ministry of Finance, vide Press Release dated March 24, 2020 announced several relief measures relating to statutory and regulatory compliance in terms of various Central Legislations across Sectors in view of COVID-19 outbreak.

The following decisions have been taken with respect to Income tax Laws:

 

1. Extension of the last date for income tax returns for (FY 18-19) from 31st March, 2020 to  30th June, 2020.

2. Aadhaar-PAN linking date to be extended from 31st March, 2020 to 30th June, 2020.

3. Vivad se Vishwas scheme – no additional 10% amount, if payment made by June 30, 2020.

4. Due dates for  issue  of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains   under Income Tax Act,  Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act,  STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas  law  where the time limit is expiring between 20th March 2020  to 29th June 2020 shall be extended to 30th June 2020.  

5. For delayed payments of advanced tax, self-assessment tax,  regular tax, TDS, TCS, equalization levy,  STT, CTT  made between 20th March 2020  and  30th June 2020,  reduced interest rate  at 9%   instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged  for this period.  No late fee/penalty shall be charged for delay relating to this period.

6. Necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course.

III. ANALYSIS OF THE ORDER

This Order is issued by the Hon’ble Supreme Court in exercise of its powers under Article 142 & 141 of the Constitution of India. Article 142 of the Constitution, gives the Supreme Court the extraordinary power to rectify the lacuna in the statute so as to meet the ends of justice. Further, the phrase ‘complete justice’ is important to be understood, as the existence of the same shows the degree and the all-encompassing nature of this power to ensure that not just justice is done, but ‘complete justice’ is done.

Article 142 of the Constitution of India is usefully extracted as under:

"142. Enforcement of decrees and orders of Supreme Court and orders as to discovery, etc.-

(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe.

(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself."
(Emphasis added)

The object of this Article is to ensure the independence of the Judiciary and Separation of Powers, both of which are considered as a part of the basic structure of the Constitution. The Supreme Court cannot be subjected to depend on the executive for enforcement of its decrees and Orders. It can also be considered a panacea for the public at large to have justice done in any cause’ or ‘matter’ pending before it. The Article clothes the Hon’ble Court to pass orders that holds the field as a law, until the Legislature acts upon the same.

In the case of Bonkya v. State of Maharashtra 1996 AIR 257it was held that the amplitude of powers available to the Supreme Court under Article 142(1) of the Constitution of India is not conditioned by any statutory provision but it cannot be lost sight of that the Court exercises jurisdiction under Article 142 of the Constitution with a view to do justice between the parties but not in disregard of the relevant statutory provisions.

Further, the unbridled nature of the power was reiterated in the case of Keshabhai Malabhai Vankar v. State of Gujarat 1995 Supp (3) SCC 704 wherein the Apex Court held that undoubtedly it has the power untrammelled by any statutory limits.

Therefore, Article 142 of the Constitution is a double-edged sword, as should be exercised in a prudent and sagacious manner. In words of Late Justice P. N. Bhagwati, “It is the judiciary who infuses life and blood into the dry skeleton provided by the legislature and creates a living organism appropriate and adequate to meet the needs of the society; thus, by making and moulding the law, he takes part in the work of creation and this is much more true in the case of interpretation of the Constitution."

Further, Article 141 of the Constitution binds all the Courts within the territory of India to the law declared by the Supreme Court.

Article 141 of the Constitution is usefully extracted as under:

141. Law declared by Supreme Court to be binding on all courts.

The law declared by the Supreme Court shall be binding on all courts within the territory of India.

The Hon’ble Supreme Court while discussing the limitation to exercise of power under Article 142 (1) of the Constitution in the case of Ashok Kumar Gupta vs. State of U.P. WP(C) No 511 of 1995 dated March 21, 1997 held that, the phrase "complete justice" engrafted in Article 142(1) is the word of width couched with elasticity to meet myriad situations created by human ingenuity or cause or result of operation of statute law or law declared under Article 32, 136 and 141 of the Constitution and cannot be cribbed or crabbed within any limitations or phraseology. Each case needs examination in the light of its backdrop and the indelible effect of the decision.

Further, The Hon’ble Supreme Court has passed this order with a view to remove hardships which would have arisen from lapse of proceedings on account of the same being time-barred or delayed.

Para 1 of the Order is usefully extracted as under:

“This Court has taken Suo Motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/ appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State).”
(Emphasis supplied)

It is therefore apparent that the relief under the Order extends to all proceedings under Special laws viz. Income- tax Act, 1961, GST Act, 2017, Companies Act 2013 etc. being Central-Special laws. 

Further, para 3 of the Order does not restrict the implication and binding nature of the order to Courts & tribunal, but also includes ‘authorities’.

Para 3 of the order is usefully extracted as under:

“We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.”
(Emphasis supplied)

This would imply that the order is not merely restricted to just Judicial bodies but also included quasi-judicial bodies and other authorities such as Commissioners or Tax Officers etc.

Further, the Hon’ble Supreme Court in the case of Arjun Khiamal Makhijani v. Jamnadas C. Tuliani(1989) 4 SCC 612 held that, Article 142 does not contemplate doing justice to one party by ignoring mandatory statutory provisions and thereby doing complete injustice to the other party by depriving such party of the benefit of the mandatory statutory provisions. Therefore, the implications of the Order of the will safeguard the interest of the taxpayers and the Department, equally.

IV INCERTITUDE ABOUT THE APPLICATION OF THE ORDER

It is to be acknowledged that a level of ambiguity did exist with respect to the implications of the Order beyond the Courts and Tribunals. The confusion is mainly on account of the phrase “difficulty faced by the litigants across the country in filing their petitions/ applications/ suits/ appeals / all other proceedings”, which on plain reading is suggestive of the fact that the Order is for Litigants for the purpose of filing.

However, the very next line is important in the interpretation of the order, “To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.”
(Emphasis supplied)

The use of the phrase ‘such difficulties’ is indicative of the fact that the preceding words “difficulties faced by the litigants across the country in filing.” is not meant to be exhaustive.

This position is further bolstered by the fact that the entire purpose of the extension of the time for proceedings before all the various authorities mentioned in the order is so that the lawyers and litigants do not have to physically come to Courts / Tribunals. If this was to be made applicable only to courts and tribunals, the words ‘all other proceedings’ and ‘authorities’ would not be used. The words used in the order and indicative and not exhaustive and therefore need to be construed with enough latitude so as to confer the benefit that is sought to be given.

The Honourable Supreme Court in the case of Sun Engineering works v UOI (1992) 198 ITR 297 (SC) has held that it is neither desirable nor permissible to pick out a word or a sentence from the judgement  of this court, divorced from the context of the question under consideration and treat it to be the complete “law” declared by this court. The judgement must be read as a whole and observations from judgement have to be considered in the light of the questions which were before this Court. A decision of this court takes its colour from the questions involved in the case in which it rendered.
A judgement cannot be read like a statute, a judgement to be read in the context in which it has been rendered. Just because the revenue authorities are not referred specifically in the judgement will not lose the binding precedent as it is to be noted that the Department is a litigant party in all the matters. 

With a view to remove any possible doubts, the Finance Ministry vide Press release dated March 24, 2020 has provided a 360-degree protection by providing clarification to its tax payers with regard to compliances and time barred assessments. Regardless, if  any issues of limitation have been left unaddressed inadvertently by the Press Release, it is comforting to note that this order of the Hon’ble Supreme Court shall operate as a safety net for genuine cases given these extraordinary circumstances.

V. THE ORDER VIS-À-VIS INCOME TAX LAWS

It is pertinent to understand that the Order has issued a stay on the period of limitation, retrospectively starting March 15, 2020 until further orders.

Section 153 of the Income tax Act, 1961 deals with the time limit for completion of assessment, reassessment and re-computation. According to Explanation 1 (ii) to section 153 of the Act, the period during which the assessment proceeding is stayed by an order or injunction of any court is excluded.

Relevant portion of the section is usefully extracted as under:

“Time limit for completion of assessment, reassessment and re-computation.
…
Explanation 1.—For the purposes of this section, in computing the period of limitation—
…
(ii) the period during which the assessment proceeding16 is stayed by an order or injunction of any court;
…
shall be excluded”

Therefore, the period commencing from March 15, 2020 until further orders, as mentioned in the Order, will be excluded from the period of limitations. The same will be compensated from starting from the effective date as per the subsequent order of the Hon’ble Supreme Court. 

VI. CONCLUSION

Our Honourable Prime Minister of India Shri Narendra Modi has by making an appeal to the Nation to observe one day “Janata Curfew” has taken measure not to spread the deadly disease. Entire nation is grateful to our beloved Prime Minster for such innovative measure.

Currently, several states have imposed a lockdown. The principles of Lex not cogitimpossibila i.e. law does not compel a man to do that which he cannot possibly perform and impossibiliumnullaobligatioest i.e. law does not expect a party to do the impossible, would be applicable in the given situation.

At this juncture, we must acknowledge that the Honourable Supreme Court from the very beginning has taken proactive measure vide Notification dated March 13, 2020 that only very important cases will be taken.

Further, the Honourable Bombay High Court vide Notification dated March 14, 2020 stated that only very important matters will be taken and all stay granted and ad interim relief given will be extended automatically  by the Court.

In lieu the guidelines issued by the Honourable Supreme Court and the Hon’ble Bombay High Court the representatives of the Income tax Appellate Tribunal (‘ITAT’) Bar Association requested the Honourable President of the ITAT, Justice P.P Bhat and Honourable Vice-President Shri Pramod Kumar (Mumbai) to pass similar orders. It is worth acknowledging that the ITAT vide Office order dated March 16, 2020 has passed an order by which one need not be present to seek an adjournment, even the intimation of adjournments and response thereof are exchanged via e-mail. Further, provisions are made to hear the urgent matters through video conferences. Tax Professionals across the Country highly appreciate the timely measures adopted by the ITAT.

Further, tax professionals were made to attend the office of the Tax department to attend time barring assessments, penalty matters, giving effect to penalty matters, reassessment notices inter alia.  Most professionals are unable to commute to their offices nor the department; on the other hand, clients have access to their files as most of them are quarantined. The Learned Principle Chief Commissioner of Income tax has vide letter dated March 23, 2020 to the CBDT seeking an extension limitation under the Act.

The Hon’ble Ministry of Finance with the fiscal package has lifted the burden of confusion and compliance that would have been a Herculean task upon the shoulders of the tax payers in these difficult times. This timely action of the Government in extending this deadline before announcing an unprecedented twenty one day lockdown to combat the menace of the Covid-19 is to be applauded and the proactive approach needs to be appreciated. An income tax payer is now protected from his statutory compliance dates and the litigations, if any.

It is a matter of time that the situation will be tackled and normalcy will be restored in the world. An effective and efficient recovery should be kept in mind while framing policies amidst the situation. The Hon’ble Supreme Court has been gracious enough to proactively provide relief to the Nation. In the history of the Nation and the Judiciary, this order of 23rd March 2020 shall be marked as a watershed moment. The Judiciary has acted with alacrity to combat the situation.

Tax professionals  have always played a proactive role in the process of building the nation. We are sure all of them will follow the mandate of the Honourable Prime Minster of India Shri Narendra Modi  as regards lock down directions for safety  and health of their family, staff  and community .

Edit 18.04.2020: Word ‘not’ added in first para of Para VI

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