1955 Supreme(AP) 311
Andhra Pradesh High Court
Judges : BHIMASANKARAM, K.SUBBA RAO
KANUMARLAPUDI LAKSHMINARAYANA GHETTY - Appellant
Versus
FIRST ADDITIONAL INCOME TAX OFFICER, NELLORE - Respondent
Decided On : 12-09-55
An amendment to a statute affecting vested rights is prima facie prospective unless the statute expressly or by necessary implication indicates to the contrary.
Headnote:
INCOME TAX - RECTIFICATION OF MISTAKE - AMENDMENT OF SECTION 35 OF THE INCOME TAX ACT, 1922 - RETROSPECTIVE OPERATION - VESTED RIGHTS - INTERPRETATION OF STATUTES.
Fact of the Case:
The assessee, a Hindu undivided family, was assessed to income tax for the assessment year 1947-48. In the assessment, a sum of Rs. 6,000 was included as the share of the family's income from a firm. The assessment was completed on 18-3-1948. Subsequently, the assessment of the firm was completed on 31-7-1951, and it was found that the share of the family's income from the firm was Rs. 21,659 instead of Rs. 6,000. On 15-2-1954, the Income Tax Officer issued a notice to the assessee to state why the previous assessment should not be rectified under section 35 of the Income Tax Act, 1922, as amended by the Income Tax (Amendment) Act, 1953. The assessee objected to the rectification on the ground that the amendment was not retrospective and could not affect an assessment completed before 1st April 1952.
Finding of the Court:
The Court held that the amendment to section 35 of the Income Tax Act, 1922, was not retrospective and could not be invoked to reopen an assessment completed before 1st April 1952. The Court observed that the amendment affected vested rights of the assessee and, therefore, could not be construed as retrospective unless the Act expressly or by necessary implication made it retrospective. The Court further held that the amendment did not expressly or by necessary implication make it retrospective, and therefore, it could not be invoked to reopen the assessment completed on 18-3-1948.
Issues: Whether the amendment to section 35 of the Income Tax Act, 1922, was retrospective and could be invoked to reopen an assessment completed before 1st April 1952.
Ratio Decidendi: The Court held that a statute affecting vested rights is prima facie prospective unless the statute expressly or by necessary implication indicates to the contrary. Even where it is retrospective in operation, Courts should confine its operation only to the extent the language renders it necessary. Further if an Act is to a certain extent retrospective, when we reach the line at which the words of the section cease to be plain, the same rule of construction leading against retrospectivity should be applied.
Final Decision: The Court quashed the orders of the Income Tax Officer dated 20-3-1954 and 31-3-1954, which were passed to rectify the assessment completed on 18-3-1948.
( 1 ) THE Order of the Court was delivered by the Hon ble The Chief Justice. This is an application under Article 226 of the Constitution of India for issuing a writ of certiorari to quash the orders of the First Additional income Tax Officer, Nellore dated 20-3-1954, and 31-3-1954. The assessees are members of a Hindu undivided family. On 18-3-1948, the Income Tax Officer, Nellore assessed them to income-tax for the assessment year 1947-48. In doing so, he had taken into consideration a sum of rs. 6,000/- as the share of the income of the joint family from the firm of c. P. V. Kotaiah Chetty and Co. Madras (Chillies Department ). In due course, the assessees paid the income-tax assessed on them. The assessment on the firm of Messrs. C. P. V. Kotaiah and Co. was completed only on 31-7-1951. By reason of that assessment the share of the profits of the assessees family for 1947-48 was found to be Rs. 21,659 instead of Rs. 6,000 which was the sum included in the assessment of the joint family by the assessment order dated 18-3-1948i On 15-2-1954 the Income-tax Officer gave the assessees notice to state their objections why the previous assessment dated 18-3-1948 should not be rectified under section 35 of the Income-tax Act (hereinafter referred to as the Act) as amended by the Income-tax (Amendment) Act 1953 (hereinafter referred to as the Amending Act ).- The assessee objected to the rectification on the ground, among others, that the said Act was not retrospective and would not affect the assessment completed prior to 1st april 1952. The Income-tax Officer rejected the objections and called upon the assessees to pay the additional tax before 10-5-1954, learned Counsel for the assessees contends that the Amending Act of 1953 is not retrospective and therefore it cannot be invoked to reopen an assessment completed before 1st April 1952, whereas the learned Advocate-General argues that the amendment is only declaratory of the pre-existing law and therefore on the basis of the amendment even a completed assessment can be reopened. The relevant provisions of the Act may usefully be extracted at this stage :"section 35 : (Before amendment) The Commissioner or Appellate Assistant commissioner may, at any time within four years from the date of any order passed by him in appeal or, in the case of the Commissioner, in revision under section 33-A and the income Tax Officer may, at any time within four years from the date of any assessment order or refund order passed by him on his own motion rectify any mistake apparent from the record of the appeal revision assessment or refund as the case may be and shall within the like period rectify any such mistake which has been brought to his notice by an assessee. Provided further that no such rectification shall be made of any mistake in any order passed more than one year before the commencement of the Indian Income-tax (Amendment) Act, 1939. "by the Indian Income-tax (Amendment) Act, 1953 the following sub-section among others was inserted in Section 35 of the principal Act after sub-sectipn (4 ). " (5) Where in respect of any completed assessment of a partner in a firm it is found on the assessment or reassessment of the firm or on any reduction or enhancement made in the income of the firm under section 31, section 33, section 33-A, section 33-B, section 66 or section 66-A that the share of the partner in the profit or loss of the firm has not been included, in the assessment of the partner or, if included, is npt correct, the inclusion of the share in the assessment or the correction thereof, as the. case may be, shall be deemed to be a rectification of a mistake apparent from the record within the meaning of this section and the provision of sub-section (i) shall apply thereto accordingly, the period of four years referred to in that sub-section being computed from the date of the final order passed in the case of the firm. "section 1 (2) : Subject to any special provision made in this
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