KANUMARLAPUDI LAKSHMINARAYANA CHETTY Vs. INCOME TAX OFFICER FIRST ADDL
LAWS(APH)-1955-12-15
HIGH COURT OF ANDHRA PRADESH
Decided on December 09,1955

KANUMARLAPUDI LAKSHMINARAYANA CHETTY And ORS. Appellant
VERSUS
ADDITIONAL INCOME TAX OFFICER Respondents





Cited Judgements :-

MUNAGA PERAIAH VS. STATE OF ANDHRA PRADESH [LAWS(APH)-1961-6-6] [REFERRED TO]
UDIPI VASANTA VIHAR VS. DEPUTY COMMERCIAL TAX OFFICER GUNTUR-1 [LAWS(APH)-1968-7-30] [REFERRED TO]
DELUX WINES VS. STATE OF ANDHRA PRADESH [LAWS(APH)-1990-3-31] [REFERRED TO]
WALDIES LTD VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1978-2-17] [REFERRED TO]
ADDITIONAL COMMISSIONER OF INCOME TAX VS. SHANKAR AND CO [LAWS(MAD)-1978-2-42] [REFERRED TO]
Jeewankhan Musabhai (Firm) Ujjain VS. Madhya Pradesh State [LAWS(MPH)-1969-11-19] [REFERRED TO]
ASSISTANT CONTROLLER OF ESTATE DUTY, HYDERABAD VS. MIR OSMAN ALI KHAN BAHADUR AND OTHERS [LAWS(APH)-1962-11-27] [REFERRED TO]


JUDGEMENT

SUBBA RAO, J. - (1.)THIS is an application under Art. 226 of the Constitution of India for issuing a writ of certiorari to quash the orders of the First Addl. ITO, Nellore, dt. 20th March, 1954, and 31st March, 1954. The assessees are members of an HUF. On 18th March, 1948, the ITO, Nellore, assessed them to Income tax for the asst. 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 C. P. V. Kotaiah & Co. was completed only on 31st July, 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 dt. 18th March, 1948. On 15th Feb., 1954, the ITO gave the assessees notice to state their objections why the previous assessment dt. 18th March, 1948, should not be rectified under S. 35 of the IT Act (hereinafter referred to as the Act) as amended by the Income tax (Amendment) Act, 1953 (hereinafter referred to as the Amending Act). The assessees 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 ITO rejected the objections and called upon the assessees to pay the additional tax before 10th May, 1954.
(2.)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 : Sec. 35 (before amendment) :
"The CIT or AAC may, at any time within four years from the date of any order passed by him in appeal or, in the case of the CIT, in revision under S. 33A, and the ITO 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 S. 35 of the principal Act after sub s. (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 S. 31, S. 33, S. 33A, S. 33B, S. 66 or S. 66A 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 not 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 provisions of sub s. (1) 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." Sec. 1(2) : "Subject to any special provision made in this behalf in this Act, it shall be deemed to have come into force on the 1st April, 1952."

The effect of the aforesaid provisions may be stated thus : Under S. 35, as it originally stood, the CIT, the AAC or the ITO may within four years from the date of the order of assessment or other orders mentioned in the section made by them rectify any mistake apparent from the record. But under the amendment inserted by Act XXV of 1953, if on assessment or reassessment of a firm any reduction or enhancement is made in the income of the firm and it is found 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 though included it was not correct, the assessment can be reopened and corrected on the basis of the assessment of the firm within four years from the date of the final order passed in the case of the firm. The section further says that the inclusion of the share of the partner in the assessment or the correction thereof shall be deemed to be a rectification of a mistake apparent from the record within the meaning of the section. To put it differently, S. 19 of the Amending Act introduces a fiction to enable the IT authorities to invoke the provisions of S. 35 for amending the completed assessment for including the income falling to the share of the partner as ascertained from the final assessment of the firm. Under S. 1(2) the amendment came into operation from the 1st April, 1952.

(3.)BEFORE attempting to answer the question raised, it will be convenient at this stage to notice briefly the well settled rules of statutory construction in regard to the retrospective operation of Amending Acts. Craies on Statute Law (5th edition) says about retrospective enactments at page 357 as follows :
"A statute is to be deemed to be retrospective which takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty or attaches a new disability in respect to transactions or considerations already past . . . . . In Lauri vs. Renad (1892) 3 ch. 402 Lindley, L. J., said : 'It is a fundamental rule of English law that no statute shall be construed so as to have a retrospective operation unless its language is such as plainly to require such a construction.' And the same rule involves another and subordinate rule, to the effect that a statute is not to be construed so as to have a greater retrospective operation than its language renders necessary."
At page 360 the learned author states the rule of construction as follows :
"And perhaps no rule of construction is more firmly established than this that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation otherwise than as regards matter of procedure unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."
Maxwell on the Interpretation of Statutes, (tenth edition) says much to the same effect at page 213 as follows :
"It is a fundamental rule of English law that 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."

At page 214, the learned author proceeds to state : "A statute is not to be construed to have a greater retrospective operation than its language renders necessary." In Halsbury's Laws of England, Vol. 27, page 159, it is stated : "A statute is prima facie prospective, and does not interfere with existing rights, unless it contains clear words to that effect, or unless having regard to its object it necessarily does so." Further, "A statute is not to be construed to have a greater retrospective operation than its language renders necessary."
Bowen, L. J., in Reid vs. Reid (1886) 31 (Chd) 402 states the scope of the rules of construction in clear terms at page 408 as follows :
"Now the particular rule of construction which has been referred to, but which is valuable only when the words of an Act of Parliament are not plain, is embodied in the well known trite maxim omnis nova constitutio futuris formam imponere debit non praeteritis, that is, that except in special cases the new law ought to be construed so as to interfere as little as possible with vested rights. It seems to me that even in construing an Act which is to a certain extent retrospective, and in construing a section which is to a certain extent retrospective, we ought nevertheless to bear in mind that maxim as applicable whenever we reach the line at which the words of the section cease to be plain. That is a necessary and logical corollary of the general proposition that you ought not to give a larger retrospective power to a section, even in an Act which is to some extent intended to be retrospective, than you can plainly see the Legislature meant."

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