1975 Supreme(SC) 539

SUPREME COURT OF INDIA
P.N. BHAGWATI, A.C. GUPTA AND S. MURTAZA FAZAL ALI, JJ.
Govinddas and others, Appellants
Versus
The Income-tax Officer and another, Respondents.
Civil Appeals Nos. 702 and 840-843 of 1975,
D/- 18-12-1975.
Advocates appeared
In Civil Appeal No. 702/75 : Mr. S. T. Desai, Sr. Advocate, (Mr. S. C. Mandia, Mr. Shri Narain, Advocate for M/s. J. B. Dadachanji and Co., Advocates with him), for Appellants; In Civil Appeals 840-843/75; M/s. S. P. Mehta and S. C. Mandia, Advocates & Mr. Shri Narain Advocate, for M/s. J. B. Dadachanji and Co., Advocates for Appellants; Mr. V. S. Desai, Advocate and M/s. J. Ramamurthi & S. P. Nayar, Advocates, for Respondents, in all the Appeals.

Headnote:

Indian Income Tax Act, 1922 - Income Tax Act, 1961 - Section 171, Sub-section (6) - Movable properties – Claim of compensation - Members of Hindu Undivided Family - Whether enactment of sub-sections (6) and (7) of Section 171 of new Act has made any difference in this position - Whether total or partial has taken place among members of such family - Whether there has been a total or partial partition of family property and if there has been such a partition date on which it has taken place - Whether total or partial Income-tax Officer shall proceed to recover tax from every person who was a member of family before partition and every such person shall be jointly and several liable for tax on income so assessed - Hindu Undivided Family was sought to be assessed for the assessment year for which the relevant previous year was year commencing from November a claim was made on behalf of the members of Hindu Undivided Family that they had effected a partial partition of their movable properties on November - This claim was accepted by the Income Tax Officer after due inquiry and a finding was recorded by him in the order of assessment that there was a partial partition of movable properties of the Hindu Undivided Family - Result was that from and after the assessment year no part of the income of Export Firm or the Mining Firm was included in assessment of Hindu Undivided Family - It appears that the assessments of the Export Firm and the Mining Firm relating to the assessment years were reopened after the new Act came into force and reassessments were made enhancing the assessable income of two firms in accordance with procedure provided in new Act - Consequent upon the reassessments of the income of the two firms for the assessment years notices were issued to Hindu Undivided Family for reassessments of its income for those years since Hindu Undivided Family was a partner in these two firms during those years - Income-tax Officer after following the requisite procedure, passed an order of reassessment for each of the assessment years enhancing the assessable income of the Hindu Undivided Family - Appeals filed by the two firms against the orders of reassessment made on them partially succeeded before Appellate Assistant Commissioner and consequently, orders were passed by the Income Tax Officer rectifying the orders of reassessment made against the Hindu Undivided Family – Held, If court apply this principle of interpretation, it is clear that sub-section (6) of Section 171 applies only to a situation where assessment of a Hindu undivided family is completed under Section 143 or Section 144 of the new Act - It can have no application where the assessment of a Hindu undivided family is completed under the corresponding provisions of the old Act - Such a case would be governed by Section 25A of the old Act which does not impose any personal liability on the members in case of partial partition and to construe sub-section (6) of Section 171 as applicable in such a case with consequential effect of casting on the members personal liability which did not exist under Section 25A would be to give retrospective operation to sub-section (6) of Section 171 which is not warranted either by the express language of that provision or by necessary implication - Sub-section (6) of Section 171 can be given full effect by interpreting it as applicable only in a case where assessment of a Hindu undivided family is made under Section 143 or Section 144 of the new Act - Court cannot therefore consistently with rule of interpretation which denies retrospective operation to a statute which has the effect of creating or imposing a new obligation or liability construe sub-section (6) of Section 171 as embracing a case where assessment of a Hindu undivided family is made under the provisions of the old Act - But Revenue Authorities then fell back on another contention, namely, that since the assessments of the Hindu Undivided Family for the assessment years were reopened by the Income-tax Officer by issuing notices under Section 148 and reassessments were completed by orders under Section 147, in virtue of Sec. 297 (2) (d) of the new Act sub-section (6) of Section 171 was on plain terms of Section 297 (2) (d) applicable and the Income Tax Officer was entitled to recover personally from the members the tax reassessed on Hindu Undivided Family as it was found by him that family had already effected a partial partition - This contention requires an examination of the true meaning and effect of Sec. 297 (2) (d) - In present case clause (ii) of Section 297 (2) (d) applied since no proceedings under Section 34 of the old Act in respect of escaped income of the Hindu Undivided Family were pending at the time of the commencement of the new Act and it was for this reason that notices under Section 148 were issued by the Income Tax Officer for reopening the assessments of Hindu Undivided Family for the assessment years - Now clause (ii) of Section 297 (2) (d) provides that when a notice under Section 148 is issued for reopening an assessment "all the provisions of this Act shall apply accordingly - Argument of the Revenue Authorities therefore was that when notices under Section 148 were issued for reopening assessments of the Hindu Undivided Family all the provisions of the new Act became applicable and they included sub-sections (6) of Section 171 and therefore that sub-section was applicable for recovery of the tax reassessed on Hindu Undivided Family pursuant to the notices under Section 148. This argument is without force - Partition sub-section (6) of Section 171 is clearly a substantive provision imposing new liability on members for tax determined as payable by the joint family - Words all the provisions of this Act shall apply accordingly cannot therefore be construed as incorporating by reference sub-section (6) of Section 171 so as to make it applicable for recovery of the tax reassessed on Hindu Undivided Family in cases falling within cl. (ii) of Section 297 (2) (d) - This contention of Revenue Authorities must accordingly be rejected - Appeals allowed