Rule of Retrospective Operation of Law
1. There cannot be imposition of any tax without the authority of law. If it is not very clear from the provisions of the Act as to whether or not the particular tax is to be levied on a particular class of persons, the subject should not be fastened with any liability to pay tax
2. No statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication
3. An amendment made to a taxing statute can be said to be intended to remove “hardships” only of the assessee, not of the Department
1. Minda Group is engaged in the business of manufacturing of various automobile components e.g. locks, panels, speedometers, heater assembly, door latches, panel switches, handle bar switches, combination switches, instrument clusters etc. and supplying them to major automobile manufacturers like Maruti Udyog Ltd
2. These components are also sold in the open market as replacement products
3. On 19.03.2001, a search operation u/s 132(1) of Income Tax Act, 1961 (in brief-‘the Act’) was conducted on this group at their business as well as residential premises, including assessee’s residence at A-9, Ashok Vihar, Phase-1, New Delhi which was jointly occupied by the assessee alongwith the families of his father Shri J.P. Minda and brother Shri Anil Minda
4. As per the AO, to conduct the entire business, the group is having thirteen companies. Some of them are under direct control of Minda family as they are the major shareholder in these companies. The remaining companies are controlled by the benamidar shareholders, who are their trusted employees or closely linked persons
5. M/s Jay Yuhshin Limited is the main flagship company of the group, which was established in early 1980s in collaboration with M/s Yuhshin Ltd. of Japan. This company manufactures main auto components
6. During search operation it was revealed that the group is earning huge unaccounted profits by way of unaccounted sales of automobile components in the open market and by debiting bogus bills for job work & bogus purchases. The modus operandi as explained by the AO is that the manufactured components are removed from M/s Jay Yuhshin Ltd. and M/s Anu Auto Industries P. Ltd. and sold in the open market through benami concerns like M/s Shri Vinayak Trading Company P. Ltd. and M/s S.N. Kohli & Company Pvt. Limited
7. It was found that most of the bogus job work bills were debited in the books of M/s Mew Tools Pvt. Ltd. Evidence of debiting the bogus purchases was also found in M/s Anu Auto Industries P. Ltd. and M/s JPM Auto Industries Pvt. Ltd.
8. It was stated that the money so earned is channelized in the form of benami share capital of the group companies, bogus loans, payment of cash for unaccounted consideration for purchase of properties, bogus sale of jewellery and household expenses
9. In manipulating these transactions, the family was actively helped by Shri Vinod Garg, their trusted employee and accountant, Shri Rajinder Aggarwal, CA and Director of M/s Jay Yuhshin Ltd.
10. The assessment u/s 158BC of the Act for the block period 01.04.1990 to 19.03.2001 was finalized at Rs. 3,48,85,259/- after making the following alleged adjustments/additions -
a. Unexplained cash Rs. 3,00,000/-
b. Bogus sale of jewellery/conversion charges Rs. 58,43,707/-
c. Undisclosed Investment in purchase of farm land Rs. 30,28,697/-
d. Benami Share Capital Rs. 1,21,15,114/-
e. Income from Bogus Job Work through M/s MEW Tools (P) Ltd. Rs. 1,35,97,741/-
11. On appeal, the ld. CIT(A) confirmed the addition of Rs. 3,00,000/- on account of unexplained cash. The addition on account of sale of jewellery was deleted. The addition on account of conversion charges on the sale of jewellery was also deleted. The ld. CIT(A) also deleted the addition on account of purchase of farm land. Addition made on account of Benami Share Capital was also deleted. The ld. CIT(A) also deleted addition on account of job work. In addition, the AO had also levied a surcharge @ 17% on the tax due which was challenged by the assessee before the ld. CIT(A) but this ground was dismissed by the ld. First Appellate Authority
12. Both, the assessee as well as the Department, have filed appeals before Tribunal
13. Honb. Tribunal partly allowed the appeal of the Assessee and dismissed the appeal of Department fully relying on CIT(A)'s order
There cannot be imposition of any tax without the authority of law. If it is not very clear from the provisions of the Act as to whether or not the particular tax is to be levied on a particular class of persons, the subject should not be fastened with any liability to pay tax.
An amendment made to a taxing statute can be said to be intended to remove “hardships” only of the assessee, not of the Department. Imposing a retrospective levy on the asesee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002. Where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. Where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature.
Cases Referred to