Full Judgment Text
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PETITIONER:
THE AHMEDABAD MFG. & CALICOPRINTING CO., LTD.
Vs.
RESPONDENT:
S. C. MEHTA, INCOME-TAX OFFICERAND ANOTHER
DATE OF JUDGMENT:
14/11/1962
BENCH:
DAS, S.K.
BENCH:
DAS, S.K.
KAPUR, J.L.
SARKAR, A.K.
HIDAYATULLAH, M.
DAYAL, RAGHUBAR
CITATION:
1963 AIR 1436 1963 SCR Supl. (2) 92
CITATOR INFO :
RF 1965 SC 171 (10)
F 1966 SC1481 (4)
RF 1968 SC 623 (21)
ACT:
Income Tax-Rectification-Retrospective operation of statute-
Rebate granted on undistributed profits-Subsequent
declaration of dividends on such profits--Recall of rebate
and recomputation of assessment-Finance Act, 1956 (18 of
1956), ss. 19, 28-Indian Income-tax Act, 1922 (11 of 1922),
S.35 (10).
HEADNOTE:
Sub-section (10) of s. 35 of the Indian Income-tax Act,
1922, which was brought into force on April 1, 1956,
provided that where in any of the assessment years 1948-49
to 1955-56, a rebate of income-tax was allowed to a company
"and sub-
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sequently the amount on which the rebate of income-tax was
allowed.......... is availed of by the company, wholly or
partly for declaring dividends in any year", the amount
shall be deemed to have been made the subject of incorrect
relief, and the Income-tax Officer shall recompute the tax
payable by the company by reducing the rebate originally
allowed.
For the assessment year 1952-53, the account year being the
calendar year 195 1, the appellant company was assessed to
income-tax and super-tax on a total income of Rs.
1,02,07,808/- and was allowed a rebate of one anna per rupee
on the undistributed profits of Rs. 36,62,776/- under the
provisions of the Finance Act, 1952. For the assessment
year 1953-54 the appellant was assessed to a loss of Rs.
5,98,363/on April 17, 1954. On April 20, 1954, the
appellant declared a dividend of Rs. 19,32,000/- out of the
undistributed profits of the calendar year 1951 on which a
rebate had been allowed. On March 18, 1958, the Income-tax
Officer issued a notice calling upon the appellant company
to show cause why action under s.35 (10) of the Indian
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Income-tax Act, 1922 should not be taken against it by
withdrawing the rebate allowed on the sum of Rs.
19,32,000/-. The appellant claimed that subsection (10) of
s. 35 was not applicable as the amount on which the rebate
was granted was availed of for declaring dividends before
the sub-section had come into force.
Held (per Sarkar, Hidayatullah and Raghubar Dayal, JJ., Das
and Kapur, JJ., dissenting), that sub-section (10) of s. 35
of the Indian Income-tax Act, 1922, was intended to have a
retrospective operation and was applicable to the present
case.
Per Das and Kapur, JJ. (1) Sub-section (10) of s. 35 which
created a legal fiction was clearly prospective and showed
that what was correct at the, time when the rebate was
granted was rendered incorrect on the happening of the
crucial event after the coming into force of the sub-
section.
(2) The principle in Income-tax Officer v. S. K. Habibu.
llah, [1962] Supp. 2 S. C. R. 716, that ’a statute which is
not declaratory of a pre-existing law nor a matter relating
to procedure but affects vested rights, cannot be given a
greater retrospective effect than its language renders
necessary, and even in construing a section which is to a
certain extent retrospective, the line is reached at which
the words of the section cease to be plain, is applicable to
the present case.
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Per Sarkar,j.-The language used in sub-ss. (5) and (10)is
wholly different and Income-tax Officer v. S. K.Habibullah,
[1962] Supp. 2 S. C. R. 716, is distinguishable.
Per, Hidayatullah and Raghubar Dayal,JJ.-
(1) Under s. 35 (10) the only condition was that the
declaration of the dividends must be after the grant of the
rebate. Though the section came into force from April 1
1956, it was to be used retrospectively to recall rebate on
amounts which the law deemed to have been subject of an
incorrect relief; and though the recalling of the rebate was
after the enactment of the section, the conditions for. the
exercise of the power may be before or after the
commencement of the section.
(2) Income-tax Officer v. S. K. Habibullah, [1962] Supp. 2
S. C. R. 716 and Second Additional Income-tax officer v.
Atmala Nagaraj, [1962] 46, T. T. R. 609, may have to be
reconsidered on some future occasion.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil appeal No. 139 of 1962.
Appeal from the judgment and decree dated November 6, 1958,
of the Bombay High Court in Special Civil Application
No.1806 of 1958.
R. J. Kolah, J. B. Dadachanji, O. C. Mathur and Ravinder
Narain, for the appellant.
Gopal Singh and R. N. Sachthey, for the respondents.
1962. November 14. The following judgments were delivered.
The judgment of S. K. Das and J. L. Kapur, JJ., was
delivered by S. K. Das,J. The judgment of M. Hidayatullah
and Raghubar Daval, JJ. was delivered by M. Hidayatullah, J.
A. K. Sarkar. J., delivered a separate judgment.
S. K. DAS,J.-This appeal on a certificate of fitness
granted by the High Court of Bombay raises a question of
interrpetation of sub-s. (10) of s 35 of the Indian Income-
tax Act, 1922. This sub-seption
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is one of a group of sub-sections substituted or inserted in
the said section by s. 19 of the Finance Act, 1956 (Act 18
of 1956). By s. 28 of the said Finance, Act, sub-s. (10) of
s. 35 of the Income-tax Act, 1922, came into force on April
1, 1956. The short question before us is, whether on its
true construction, sub-s. (10) of s. 35 applies in a case
where a company declares dividends by availing itself wholly
or partly of the amount on which a rebate of income-tax was
earlier allowed to it under clause (1) of the proviso lo
Paragraph B of Part I of the relevant Schedules to the
Finance Acts, when such dividends were declared prior to the
coming into force of the subsection, that is, prior to April
1, 1956.
The facts which have given rise to the appeal are these.
The Ahmedabad Manufacturing And Calico Printing Co., Ltd.,
is the appellant before us. The appellant company was
incorporated under the Indian Companies Act, 1866, and has
its office at Ahmedabad. It carries on the business of
manufacturing, and selling cotton piece goods and chemicals.
For the assessment year 1952-53, the corresponding account
year being the calendar year 1951, the appellant was
assessed to income-tax and super-tax on a total income of
Rs. 1,02,79,808/- and was allowed a rebate of one anna per
rupee on the undistributed fits of Rs. 36,62,776/- under the
first proviso to paragraph B of. Part I of the first
Schedule to the Finance Act, 1952. The amount of rebate
allowed was Rs. 2,28,924/-. For the assessment year 1953-
54, the corresponding account year being the calendar year
1952, the appellant showed a book profit of Rs.
45,67,96,66,/-, but was assessed to a loss of Rs. 5,98,353/-
on April 17, 1954. For the said calendar year 1952, the
appellant declared a dividend of Rs. 19,32,0000/- on April
20, 1954. This dividend came out of the undistributed
profits of the calendar year 1951 on which the appellant had
been allowed rebate,.
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On March 18, 1958, the Income-tax Officer, Special Circle,
Ahmedabad, respondent No. 1 before us, issued a notice to
the appellant calling upon the latter to show cause why
action under sub-s. (10) of s. 35 should not be taken
against the appellant by withdrawing the rebate allowed on
the sum of Rs. 19,32,000/-. The appellant raised some
objections, one of which was that sub-s. (10) of s. 35 did,
not apply to his case. The Income-tax Officer, however,
held that sub-s. (10) of s. 35 applied and accordingly
directed that the rebate allowed on the sum of Rs.
19,32,000/- should be withdrawn, by recomputing the tax
payable by the appellant. He ordered the issue of a demand
notice for a sum of Rs. 1,20,750/- which was the rebate
allowed on Rs. 19,32,000/-. The Income-tax Officer passed
this order on March 27, 1958.
Being aggrieved by that order, the appellant moved the High
Court of Bombay by a writ petition filed on June 26, 1958.
The main ground taken by the appellant was that sub-s. (10)
of s. 35 did not apply to a case where dividend was
declared, as in this case, before the coming into force of
sub-s. (10) of s. 35. The High Court rejected this
contention and dismissed the writ petition. The appellant
then obtained certificate of fitness and has preferred the
present appeal in pursuance of,, that. certificate.
We may now read some of the provisions of s. 35 in so far as
they are relevant for our purpose-
"S. 35(1) The Commissioner or Appellate
Assistant Commissioner may, at any time within
four years from the date of any order passed
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by him in appeal or, in the case of the Commi-
ssioner, in revision under s. 33A 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
97
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 :
xx xx xx
(2) xx xx
(3) xx xx
(4) xx xx
(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 th
e
income of the firm under section 31, section
33, section 33A, section 33B, section 66 0
section 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-section (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.
(6) Where the excess profits tax or the
business profits tax payable by an assessee
has been modified in appeal, revision or any
other proceeding, or where any excess profits
tax or business profits tax has been assessed
after the completion of the corresponding
assessment for income-tax (whether before or
after the corm.
98
mencement of the Indian Income-tax (Amendment)
Act, 1953), and in consequence thereof it is
necessary to recompute the total income of the
assessee chargeable to income-tax, such re-
computation shall be deemed to be a rectifica-
tion of a mistake apparent from the record
within the meaning of this section and the
provisions of sub-section (1) shall apply
accordingly, the period of four years referred
to in that subsection being computed from the
date of the order making or modifying the
assessment of such excess profits tax or
business profits tax.
(7) xx xx
(8) xx xx
(9) xx xx
(10) Where, in any of the assessments for the
years beginning on the 1st day of April of the
years 1948 to 1955 inclusive, a rebate of
income-tax was allowed to a company on a part
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of its total income under clause (1) of the
proviso to Paragraph B of Part I of th
e
relevant Schedules to the Finance Acts
specifying the rates of tax for the relevant
year, and subsequently the amount on which the
rebate of income-tax was allowed as aforesaid
, is availed of by the company, wholly or
partly, for declaring dividends in any year,
the amount or that part of the amount availed
of as aforesaid, as the case may be, shall, by
reason of the rebate of income-tax allowed to
the company and to the extent to which it has
not actually been subjected to an additional
income-tax in accordance with the provisions
of clause (ii) of the proviso to Paragraph B
of Part I of the Schedule to the Finance Acts
above referred to, be deemed to have been made
99
the subject of incorrect relief under this
Act, and the Income-tax Officer shall
recompute the tax payable by the company by
reducing the rebate originally allowed, as if
the computation is a rectification of a
mistake apparent from the record within the
meaning of this section and the provisions of
sub-section (1) shall apply accordingly, the
period of four years specified therein being
reckoned from the end of the financial year in
which the amount on which the rebate of
income-tax was allowed as aforesaid was
availed of by the company wholly or partly for
declaring dividends."
Speaking generally, s. 35 deals with rectification of
mistakes in circumstances detailed in the various sub-
sections thereof and provides for orders consequent on such
rectification. Sub-section (1) empowers the Income-tax
authorities to rectify mistakes apparent from the record in
respect of certain orders passed by them. It provides that
the Income-tax Officer concerned may at any time within four
years from the date of any assessment order passed by him on
his own motion rectify any mistake apparent from the record
of the assessment: The power of rectification may be
exercised subject to two conditions : (1) that there is a
mistake apparent from the record of the assessment, and (2)
that the order of rectification is made within four years
from the date of the assessment sought to be rectified.
Sub-section (5) deals with inclusion or correction of the
income of a partner in a firm consequent upon assessment or
reassessment of the firm of which he was a partner. Sub-
section (6) deals with recomputation of total income of an
assessee in consequence of modifications made in the excess
profits tax or the business profits tax payable by an
assessee subsequent to an assessment made under the Income-
tax Act. These two subsections were considered by this
court in two decisions
100
to which we shall presently refer. They have been relied on
by the appellant and have some bearing on the interpretation
of sub-s. (10). Sub-sections (2), (3), (4), (7), (8) and
(9) are not relevant for our purpose and need not be
referred to.
Now, we come to sub-s.(10). It deals with a case where a
rebate was allowed to a company on a part of its income
(viz., undistributed profits) by virtue of the concessions
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given by the Finance Acts of 1948 to 1955. This is clear
from the first part of the sub-section. The second part
states the condition in which, or rather the crucial event
on the happening of which, the rebate granted. to a company
is deemed to have been given by a mistake apparent from the
record, this condition or crucial event is the declaration
of dividends by ’the company out of the amount in whole or
part, on which abate was earlier granted to it. The third
and operative part states that on the happening of the
crucial event, the amount on which rebate was granted and
which has been subsequently utilised for declaring dividends
shall be deemed to have been made the subject of incorrect
relief under the Act and the Income-tax Officer shall re-
compute the tax payable by the company by reducing the
rebate originally allowed as if the recomputation is a
rectification of a mistake apparent from the record within
the meaning of the section. The fourth and last part
introduces a period of limitation of four years, the four
years being reckoned not from the date of the order passed
as in sub-s.(1), but from the end of the financial year in
which the amount on which rebate of income-tax was allowed
was availed of by the company wholly or partly for declaring
dividends. This, in brief, appears to be the scheme of sub-
s. (10) of s. 35.
Now, the argument on behalf of the appellant is this. Like
sub-s. (5) of s. 35, sub-s. (10) affects a
101
vested right, namely, the right to a rebate of income-tax on
a part of the total income of the company under clause (1)
of the proviso to Paragraph B of Part I of the relevant
Schedules to the Finance Acts of 1948 to 1955, and the
further right to declare dividends out of the undistributed
profits of the previous year. Under the well settled rules
of statutory construction, no statute which impairs an
existing right or obligation except as regards a matter of
procedure, shall have retrospective operation unless such a
construction appears very clearly in the terms of the Act or
arises by necessary and distinct implication. Put
differently, a statute is not to be construed to have a
greater retrospective operation than its language renders
necessary;............ and it is submitted that "the general
rule is that all statutes other than those which are merely
declaratory, or which relate only to matters of procedure or
of evidence are prima facie prospective; and retrospective
effect is not to be given to them unless by express words or
necessary implication, it appears that this was the
intention of the legislature" and "’it is a corollary of
this general presumption against retrospection that, even
when a statute is intended to be to some extent
retrospective,’ it is not to be construed as having a
retrospective effect than its language renders necessary".
(Halsbury’s Laws of England, Vol. 36. Third edition, p. 423
and p. 426). ’The argument on behalf of the appellant is
that by s. 28 of the Finance Act. 1956, sub-s. (10) has
undoubtedly retrospective effect from April 1, 1956; but the
language of the sub-section does not expressly, nor by
necessary implication, show that it has any greater
retrospective effect. It is pointed out that, on the
contrary, where the legislature wanted a particular sub-
section to have greater retrospective effect, it had said
so, e. g. in sub-s. (6). It is also pointed out that sub-s.
(5) of s. 35 was inserted by the Indian Income-tax
(Amendment) Act, 1953, and by s. 1 (2)
102
of the said Act it came into force on April 1, 19.52. Where
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the legislature wanted to give greater retrospective effect
to particular provisions, it said so in ss. 3 (2), 7 (2) and
30 (2) of the said Act. That being the position, the
argument on behalf of the appellant is that we should not
give any greater retrospective effect to sub-s. (10) of s.
35 than what has been done by s. 28 of the Finance Act,
1956. Learned Counsel for the appellant has strongly relied
on the decision of this Court in Income-tax Officer v. S. K.
Habibullah (1) wherein with regard to sub-s. (5) of s. 35 it
was held that the subsection was not declaratory of the pre-
existing law nor a matter relating to procedure but effected
vested rights and must be deemed to have come into force
only from April 1, 1952; therefore, the Income-tax Officer
had no jurisdiction under the said sub-section to rectify
the assessment of a partner consequent on the assessment of
the firm in cases where the firm’s assessment was completed
before April 1, 1952. The argument of the learned counsel
for the appellant is that the same principle must apply in
the present case and sub-s. (10) of s. 35 does not apply to
a case where dividend was declared by the company before the
date of the coming into force of the sub-section, namely,
April, 1, 1956.
The second part of the argument of the learned counsel for
the appellant is that there is no real difference in
language between the two sub-sections, sub-s. (5) and sub.s.
(10) of s. 35. In both cases 1 rectification or correction
is made by reason of a subsequent event; in sub-s. (5) the
subsequent event is the assessment of the firm which
discloses the inaccuracy in the earlier assessment of a
partner; in sub-s. (10) the subsequent event is the
declaration of dividend out of the amount on which a rebate
was earlier granted. It is pointed out that in their true
scope and effect, the two sub-sections stand on the
(1) [1962] Supp. 2 S. C.. R, 716,
103
same footing. Sub-section (10) further makes it clear that
by a ’legal fiction that which was correct at the time when
it was made is rendered incorrect after the coming into
force of the sub-section. The sub-section states clearly
"shall, by reason of the rebate of Income-tax
allowed to the
company.............................. be
deemed to have been made the subject of
incorrect relief under this Act, and the
Income-tax Officer shall re-compute the tax
payable by the company by reducing the rebate
originally allowed................."
This language, it is argued, is clearly prospective and does
not justify the carrying of the legal fiction to a period
earlier than April 1, 1956.
As against these arguments, learned counsel for the
respondent has contended that the language of sub-s. (10) is
different from that of sub-s. (5) and the principle laid
down by this court in S. K. Habibullah’s (1) cannot be
applied to the present case. Alternatively, he has argued
that the decision is incorrect and should be reconsidered by
us. The argument of learned counsel for the respondent is
that sub-s. (10) by necessary implication has a greater
retrospective effect than what is laid down by S. 28 of the
Finance Act, 1956. He points out that the first part of the
subsection talks of the assessments made for any of the
years beginning on April 1, 1948, to April 1, 1955, when a
rebate of income-tax was allowed; then the second part
refers to the subsequent declaration of dividend by the
company in any year. Learned counsel for the respondent has
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emphasised the expression "in any year" and has submitted
that this shows that the intention was to take in a
declaration of dividend made even earlier than April 1,
1956, According
(1) [1962] Supp, 2 S.C.R. 716,
104
to him, the only effect of s. 28 of the Finance Act, 1956,
is that the income-tax Officer can take action only after
April 1, 1956, but the language of the sub-section does not
justify the conclusion that the legal fiction created by it
must be restricted to the declaration of dividends on or
after April 1, 1956.
We have carefully considered these arguments. The language
of sub-s. (10) of s. 35 is perhaps not as clear as one might
wish it to be. There is no doubt, however, that the sub-
section affects vested rights and should not be given a
greater retrospective operation than its language renders
necessary. Even through the sub-section is to a certain
extent retrospective, and s. 28 of the Finance Act, 1956, in
express terms makes it retrospective from April 1, 1956, it
is clear to us that there is nothing in the language of the
sub-section which would justify the inference that the
legislature intended to carry the legal fiction created by
the sub-section to a period earlier than the date on which
the sub-section came into force. The maxim applicable in
such cases is that even in construing a section which is to
a certain extent retrospective, the line is reached at which
the-words of the section cease to be plain. We are further
of the opinion that when the first part of the sub-section
refers to the assessments in the years 1948 to 1955, it
merely. refers to the period during which the rebate
provisions were in force. It is not disputed before us that
the rebate provisions came into force from the Finance Act
of 1948 and ended with the Finance Act of 1955. The first
Part therefore is merely a reference to the period during
which the rebate provisions were in force. It is indeed
true that in the second part of the sub-section the ex-
pression used is "declaring dividends in any year and this
has to be read in conjunction with the word "subsequently"
which can only mean subsequent to the allowance or the
rebate. But in the very
105
same part, it is further stated that the declaration of
dividend in any year shall, by reason of the rebate be
deemed to have made the amount on which the rebate was
granted, the subject of incorrect relief etc.. This language
which creates the legal fiction is clearly prospective and
shows that what was correct at the time when the rebate was
granted is rendered incorrect on the happening of the
crucial event after the coming into force of the sub-
section, and by the express terms of s. 28 of the Finance
Act, 1956, the sub--section comes into force on April 1,
1956. We are unable, therefore, to agree with the learned
counsel for the respondent that the language of sub-s. (10)
by necessary implication takes the legal fiction back to a
period earlier than April 1, 1956. In coming to this
conclusion, we have kept in mind the principle that a
statute does not necessarily become retrospective because a
part of the requisites for its action is drawn from a time
antecedent to its passing.
Further more we see no reason why the principle laid down in
S. K. Habibullah’s case (1) will not apply in the present
case nor are we satisfied that decision with regard to sub-
s. (5) of s. 35 was incorrect. We may point out, however,
that in Second Additional Income-tax Officer v. Atmala
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Nagaraj (2) this court went a step further and held that
sub-s. (5) of s. 35 was not applicable to cases where the
assessment of the partner was completed before April 1,
1952, even though the assessment the firm was completed
after April 1, 1962 of Learned counsel for the appellant
frankly conceded before us that he did not wish to go
as far as that and contend that even in a case where a
declaration of devidend was made after April 1, 1956, sub-s.
(10) would not apply; because that would make sub-s. (10)
unworkable. The
(1) [1962] Supp. 2 S.C.R. 716.
(2) [1962] 46 I.T.R. 609.
106
decision in Second Additional Income-tax Officer v. Atmala
Nagaraj (1) may perhaps require reconsideration as to which
we need not express any final opinion now; but so far as
this case is concerned we see no reason why the principle in
S. K. Habibullah’s case (2) will not apply. The principle
is simply this. A statute which is not declaratory of a
preexisting law nor a matter relating to procedure but
affects vested rights cannot be given a greater
retrospective effect than its language renders necessary,
and even in construing a section which is to a certain
extent retrospective, the line is reached at which the words
of the section cease to be plain. These are well settled
principles and there is no reason to doubt their accuracy.
For the reasons given above, we would allow the appeal, set
aside the order and judgment of the High Court and quash the
order of the Income-tax Officer dated March 27, 1958, and
the notice of demand dated March 28, 1958. The appellant
will be entitled to its costs throughout.
SARKAR, J.-In its assessment to income-tax for the year
1952-53, the appellant, a company, had been granted under
the provisions of the Finance Act, 1952, a rebate on a
portion of its profits of the previous year, that is, 1951
which it had not distributed as dividends to its
shareholders.’ In the next assessment year 1953-54, the
appellant used a part of the aforesaid undistributed profits
for declaring dividends. As the law then stood, nothing
could be done by the revenue authorities to withdraw the
rebate earlier granted on the ground of the profits being
utilised in declaring dividends in a latter year. From
April 1, 1956, however, there was a change in the law as
sub. s. (10) of s. 35 of the Income-tax Act, 1922, was
brought into force then. By an order made on March 27,
1958, under that sub-section, the terms of
(1) [1962] 46 I.T.R. 609
(2) [1962] Supp. 2 S.C R. 716.
107
which I will set out presently, the aforesaid rebate was
withdrawn and the appellant was called upon to refund it.
The appellant then applied to the High Court at Bombay for a
writ to quash the order of March 27, 1958, on the ground
that sub-s. (10) was not applicable to the facts of this
case for reasons which I will later state. That application
was dismissed. This appeal is against this decision of the
High Court at Bombay dismissing the application.
Now sub-s. (10) of s. 35 of the Income-tax Act was enacted
by the Finance Act of 1956 and it was given effect from
April 1, 1956. That sub-section, in so far as it is
necessary to state for the purpose of this case, provides
that where in any of the assessment 1948-49 to 1955-56, a
rebate of income-tax was allowed to a company under the
Finance Act prevailing in that year on a part of its total
income "and subsequently the amount on which the rebate of
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income-tax was allowed as aforesaid is availed of by the
company, wholly or partly, for declaring dividends in any
year................................. the Income-tax Officer
shall re-compute the tax payable by the company by reducing
the rebate originally allowed." The sub-section in substance
permits a rebate duly allowed in any year before. it came
into force to be withdrawn if "subsequently’,’ the amount on
which the rebate was allowed "is availed of" "for declaring
dividends in any year."
The appellant contends that the sub-section does not apply
unless the amount on which the rebate was granted is availed
of for declaring dividends after the sub section had come
into force, that is after April 1, 1956, and therefore it
does not apply to the present case. It is said that if it
were not so the sub-section would be given a retrospective
operation and the rule is that it is to be presumed that a
statute dealing with substantive rights is not to have such
108
operation. The case of Income-tax Officer, Madras v. S. K.
Habibullah was cited in support of this contention.
I will assume that if the sub-section were applied to a case
like the present, it would affect a vested right. The rule
no doubt is that a statute is presumed not to do so. Bat
this rule does pot apply if the language of the statute
indicates an intention to give it a retrospective operation.
It seems to me that subs. (10) uses language which indicates
sufficiently clearly that it was intended to be applied
where the amount on which rebate had been obtained was
availed of for declaring dividends before the subsection
came into force, that is’ to say, to have a retrospective
operation. It says, "subsequently the amount an which the
rebate of income-tax was allowed as aforesaid is availed
of.................. for declaring dividends in any year".
There is no doubt that the words "subsequently " and "in any
year" mean in any year subsequently to the year in which the
rebate was granted. They would, therefore, clearly include
a year before the sub-section came into force. But it is
said that these words should in view of the rule be read as
not including a year before the sub-section came into force
as they also include years subsequent to the coming into
force of the sub-section and are therefore ambiguous.
I am unable to accept this contention. I find no ambiguity.
If the intention was that the subsection would apply only
when the amount was availed of for declaration of dividends
after it was enacted then the words ""subsequently" and "in
any year" were wholly unnecessary. Without these words the
sub-section would have read, "and the amount is availed of
for declaring dividends." There would then be no doubt that
it was intended to operate only prospectively. But the
legislature used some more words. It must have done so with
(1) [1962] Supp. 2 S.C.R.716.
109
some purpose. What that purpose was if it was not to give
the sub-section retrospective operation, I failed to see. I
am unable to read the words "subsequently" and "in any year"
as otiose and as indicating no different intention.
Therefore, it seems to me that the language of the sub-
section plainly requires it to have a retrospective
operation. The subsection is properly applicable to this
case.
There is another consideration leading me to the view that
the presumption against retrospective operation does not
arise here. It was said in Pardo v. Bingham(1) that it was
not an invariable rule that a s could not have a
retrospective operation unless so expressed in its very
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terms, and that it was necessary to look to the ’general
scope and purview of the statute and at the remedy sought to
be applied and consider what was the former state of the law
and what it was that the legislature contemplated. It is
quite plain that in providing for the grant of rebate on
undistributed profits by the ,Finance Acts of 1948 to 1955
the legislature wanted to encourage the employment of the
profit made in a business in the business itself. The
object presumably was to expand the industries of the
country. This involved a long term employment of the,
profits in the business. It could not have been the
intention of the legislature to grant rebate when a company
only kept the profits for a short time with itself and
having earned the rebate distributed the profits without the
industry having had any real benefit of them. I think
should state here that the provisions for the grant of
rebate did not require that dividend was not to be declared
at all. The object was to encourage a reasonable division
of the profits between the shareholders and the industry.
Allowance of rebate was provided for on that part of the
profits which was left for employment in the industry after
reasonable dividends had been
(1) (1869) L. R. 4 Ch. 735.
110
distributed to the shareholders. The rebate was allowed on
a graded scale depending on the amount of profits which was
not distributed as dividends.
Now the system of granting rebates started in 1948-49. It
was stopped in 1955-56. The subsection was brought into
force on April 1, 1956, that is,seven years after the system
had first been started. The sub-section provided for
withdrawal of the rebate when the amount on which it had
been granted was availed of in declaring dividends. It is
fairly clear from this that the legislature did not approve
of these amounts being utilised in declaration of dividends.
It is also not too much to suppose that there had been many
previous cases of such utilisation of profits for if it had
not happened earlier, there is no reason to think that the
legislature anticipated the evil happening in future and
passed the law to stop it. In view of the large number of
years that had passed between the time when the allowance of
rebate commenced and the time when the sub-section was
brought into force, it can be imagined that a very large
number of cases of distribution of profits on which rebate
had been allowed, had already taken place. I find it
difficult to think that many cases remained after April 1,
1956, where a company which intended to utilise the amounts
on which rebate had been granted in the declaration of
dividends, had not already done so.
There is no dispute that by sub-s. (10) the legislature
intended to penalise a case where subsequent to its
enactment, the amount on which rebate had been granted was
utilised in declaration of dividends. Now is there any
reason to think that the legislature did not want to impose
the penalty also on those who had earlier utilised the
amount in declaration of dividends ? There was no special
merit in these latter
111
cases, And I also think that they formed the majority of the
cases. The grant of rebate having been stopped after March
31, 1956, there was no occasion to provide for cases of such
grant thereafter. All these circumstances lead me to the.
view that the intention of the legislature was to penalise
the cases of utilisation of amounts on which rebate had been
granted in payment of dividends which had happened before
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the sub-section came into force. The remedy which the sub-
section provided would largely fail in any other view. The
general scope and purview of the subsection and a
consideration of the evil which it was intended to remedy
lead me to the opinion that the intention of the legislature
clearly was that the subsection should apply to the facts
that we have in this case.
As to S. K. Habibullah’s case (1) I do not think that much
assistance can be had from it. It applied the rule of
presumption against a statute having a retrospective
operation-as to which rule, of course, there is no dispute
to sub-s. (5) of s. 35. Now cases on the construction of
one statute are rarely of value in construing another
statute, for each case turns on the language with which it
is concerned and statutes are not often expressed in the
same language. The language used in sub-ss. (5) and (10)
seems to me to be wholly different. There is nothing in S.
K. Habibullah’s case (1) to indicate that in the opinion of
the learned judges deciding it there were any words which
would indicate that sub-s. (5) was to have a retrospective
operation. In my view, sub-s. (10) contains such words.
Furthermore, I do not find that the other considerations to
which I have referred, arose for discussion in that case.
In my view, the two cases are entirely different.
I therefore, think that sub-s. (10) of s. 35 properly
applies to this case. In my view, the appeal should be
dismissed with costs.
(1) [1962] Supp. 2 S. C. R. 716.
112
HIDAYATULLAH, J.-This is an appeal by an assessee with’
certificate under Art. 133 (i)(c) of the Constitution from
the judgment and order of the High Court of Bombay
dismissing the assessee company’s petition under Art. 226 of
the Constitution which challenged an order under s. 35(10)
of the Income-tax Act rectifying the earlier assessment and
sought a writ or writs to prohibit the Income-tax
Authorities from giving effect to that order.
The assessee (The Ahmedabad Manufacturing & Calico Printing
Co. Ltd.) is a public limited company carrying on business
of manufacture of cotton price-goods and chemicals. The
year of account of the assessee company is the calendar
year.In the assessment year 1952-53, corresponding to the
calendar year 1951, the appellants were assessed on January
31, 1953, on a total income of Rs. 1,02,79,808. The
assessee company was allowed a rebate of one anna per rupee
amounting to Rs. 2,28,924 on the undistributed profits of
Rs. 26,62,776 tinder the first proviso to Paragraph B of
Part I of the first Schedule to the Finance Act, 1952. For
the assessment year 1953-54 (account year calendar year
1952) the books of the assessee company showed a profit of
Rs. 45,67,966. That profit became a loss of Rs. 5,98,353.
after deductions like depreciation etc. were allowed.
Inspite of there being a loss, the assessee company declared
on April 20, 1953, a dividend of Rs. 19,32,000 for the year
of account 1952.
The Income-tax Officer,’ by an order dated March 18, 1958,
called upon the assessee company to show cause why action
under s. 35(10) of the Income-tax Act should not be taken to
recall a proportionate part of the rebate because in his
opinion the entire dividend of Rs. 19,32,000 came out of’
the undistributed profits of the calendar year 1951 on which
the appellant had received a rebate. The
113
"(5) Where in respect of any completed assess-
ment of a partner in a firm it is found on the
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assessment or re-assessment of the firm or on
any reduction or enhancement made, in the
income of the firm under section 31, section
33 section 33A, section 33B, section 66 or
section 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-section
(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."
It must be noticed that under this amendment time limit
started from the date of the final order passed in the case
of the firm though the rectification is to be made in the
assessment of the’ partners of the firm.
By s. 19 of the Finance Act, 1956, sub-s. (10) (among
others) was added as from April 1, 1956. That subsection
reads as follows :-
"(10) Where in any of the assessments for the
years beginning on the 1st day of April of the
114
rectify any such mistake which has . been brought to his
notice by an assessee :"
It must be noticed that the, time limit started from the
date of the order of assessment which was to be rectified.
In 1953, by s. 19 of the Indian Income-tax (Amendment) Act,
1952 (25 of 1953), sub-s. (5) (among others) was added as
from April 1, 1952. That sub-section reads as follows :-
"(5) Where in respect of any completed assessment of a
partner in a firm it is found on the assessment or re-
assessment of the firm or on any reduction or enhancement
made in the income of the firm under section 31, section 33
section 33A, section 33B, section 66 or section 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-section (1) shall apply thereto
accordingly, the period of four years referred to in that
subsection being computed from the date of the final order
passed in the case of the firm."
It must be noticed that under this amendment time limit
started from the date of the final order passed in the case
of the firm though the rectification is to be made in the
assessment of the partners of the firm.
By s. 19 of the Finance Act, 1956, sub-s. (10) (among
others) was added as from April 1, 1956. ’Mat sub-section
reads as follows :-
"(10) Where in any of the assessments for the years
beginning on the 1st day of April of the
115
years’ 1948 to 1955 inclusive, a rebate of
income-tax was allowed to a company on a part
of its total income under clause (i) of the
proviso to Paragraph B of Part I of the rele-
vant Schedules to the Finance Acts specifying
the rates of tax for the relevant year, and
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subsequently the amount on which the rebate of
income-tax was allowed as aforesaid is availed
of by the company, wholly or partly, for
declaring dividends in any year, the amount or
that part of the amount availed of as
aforesaid, as the case may be, shall, by
reason of the rebate of income-tax allowed to
the company and to the extent to which it has
not actually been subjected to an additional
income-tax in accordance with the provisions
of clause (ii) of the proviso to Paragaph B of
Part I of the Schedules to the Finance Acts
above refer-red to, be deemed to have been
made the subject of incorrect relief under
this Act, and the Income-tax Officer shall
recompute the tax payable by the company by
reducing the rebate originally allowed, as if
the recomputation is a rectification of a
mistake apparent from the record within the
meaning of this section and the provisions of
sub-section (1) shall apply accordingly, the
period of four years specified therein being
reckoned from the end of the financial year in
which the amount on which rebate of income-tax
was allowed as aforesaid was availed of by the
company wholly or partly for declaring
dividends."
It will be noticed that the time limit under this sub-
section was to commence from the end of the financial year
in which the dividends were declared from profits on which
the rebate was earned earlier.
The question in this case is whether sub-s. (10) can apply
Co an assessment which had been nude be-
116
fore sub-s. (10) came into force. The contention of the
assesse-company is that sub-s. (10) was given
retrospectivity only up to April 1, 1956, and the words of
that at sub’-section should be interpreted in such a way as
to give the sub-section no greater retrospectivity.
According to the assessce company the assessment for the
year 1953-54 had become final on April 17, 1954, that is to
say, before the 1st day of April, 1956, from which date sub-
s. (10) was made to operate. The provisions of s. 35(10),
according to the assessee company, could only be utilised if
dividends were declared after April 1, 1956, but not if the
declaration took place earlier. Reliance was placed upon
the decision of this Court in Income-tax Officer v.
Habibullah(1), and reference was also made to another
decision following Habibullahs’ case, (1), Second Additional
Income-tax Officer v. Atmala Nagaraj.(2)
Our learned brother Das, J., following Habibullah’s case(’)
has held that the contention of the assessee company is
well-founded and has expressed the opinion that Atmala
Nagaraj’s Case (2) may need re-consideration. He has,
therefore, ordered the reversal of the judgement and order
of the High Court. In our judgement, and we say it with
profound respect, this appeal must be dismissed. We are
also of the opinion that both the above cases (which are of
the same Divisional Bench) may have to be reconsidered
hereafter. Amala Nagaraj’s case(") followed Habibullah’s
case.(’) The difference in the facts of the two cases was
only in one respect and that was not sufficient to take
Atmala Naagaraj’s case (2) out of the ratio of the earlier
decision. We shall deal with these two cases later.
The Income-tax Act imposes a charge of tax for a year at a
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time and that year is the year of assessment. The charge is
in respect of a previous year which is commonly known as the
year of account.
(1) [1962] Supp. 2 S.C.R. 716.
(2) [1962] 46 T. T. R 609.
117
The rate at which the tax is to be charged is enacted by an
annual Finance Act for each assessment year. The assessment
year is the Financial Year. From the nature of things an
amendment of the Income-tax. Act, made in the middle of the
assessment,year,if made to operate from the beginning of
the, assessment year, operates on incomes which had been
earned before. Since an amendment cannot be. allowed to
operate from the mid-term, each such amendment is made to,
comprise a whole assessment year whether it be the
assessment year then running. or an earlier or a later
assessment, year. Amendments are thus .give retrospective.
operation from the first day of April in the same, or a
preceding, or prospective operation for a future assessment
year. Ordinarily, the law, as it stands on the 1st of April
in any assessment year, applies to, assessments in that
year. but the law may expressly or by necessary implication
give itself a greater retrospective operation.
The date on which the amendment comes into force is the date
of the commencement of the amendment. It is read as amended
from that date. Under ordinary circumstances, an Act does
not have retrospective operation on substantial rights which
have become fixed before the date of the commencement of,
the Act. But this rule is not unalterable. The legislature
may affect substantial rights by enacting laws which are
expressly retrospective or by, using language which has that
necessary result. And this language may give an enactment
more retrospectivity than what the commencement clause gives
to any of its provisions. When this happens the provisions
thus made retrospective expressly or by necessary intend-
ment, operate from a date earlier than the date of
commencement and affect rights which, but for such
operation, would have continued undisturbed.
It must be remembered,-that if the Income-tax Act
prescribes a period during which the, tax due in
118
any particular assessment year may be assessed, then on the
expiry of that period the Department cannot make an
assessment. Where no period is prescribed the assessment
can be completed at any time but once completed it is final.
Once a final assessment has been made, it can only be
reopened to rectify a mistake apparent from the record (s.
35) or to reassess where there has been an escapement of
assessment of income for one reason or another (s. 34).
Both these sections which enable reopening of back
assessments provide their own periods of time for action but
all these periods of time, whether for the first assessment
or for rectification, or for reassessment, merely create a
bar when that time passes against the machinery set-up by
the Income-tax Act for the assessment and levy of the tax.
They do not create an exemption in favour of the assessee or
grant an absolution on the expiry of the period. The
liability is not enforceable but the tax may a in be come
eligible if the bar is removed and the tax-payer is brought
within the jurisdiction of the said machinery by reason of a
new power. This is, of course subject to the condition
that the law must say that such is the jurisdiction, either
expressly or by-clear implication. If the language of
the law has that clear meaning, it must be given that
effect and where the language expressly so declares or
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clearly implies it, the retrospective operation is not
controlled by the commencement clause.
The amendment, with which we are concerned, was made by the
Finance Act, 1956 (18 of 1956). By s. 2, it dealt with
the year beginning on the 1st day of April, 1956, and fixed
the rates of taxes,for the assessment year commencing on
that date. It also amended the Income-tax Act by ss. 3 to
35. Section 28 then prescribed the dates of commencement of
these sections. It read :-
"28. Commencements of amendments to Act’ 11
of 1922.-The amendments made in the
Income-tax Act, by section 4 and clause (b) of
section 15 shall be deemed to have come into
force on the 1st day of April 1955, and the
amendments made by section 3 to 27 inclusive
shall come into force on the 1st day of April,
1956."
Sub-section (10) was introduced into s. 35 of the Income-tax
Act by s. 19 of this Act. If there was nothing more in the
language of the sub-section to give it operation from an
earlier date it would have operated only from 1st April,
1956, but the language of the sub-section gives it
additional retrospectively and says so in such clear and
unambiguous language as to leave no doubt. There is no room
for the application of Lord justice Bowmen’s dictum in. Reid
v. Reid (1) that even in construing a section which is to a
certain extent retrospective, the maxim that statutes are
prospective only, ought to be borne in mind as applicable
whenever the line is reached at which the words of the
section cease to be plain.
The topic of s. 35 is rectification of mistakes apparent
from the record. Sub-section (10) introduced a new basis
for rectification in s. 35 which already prescribed a period
of four years from-the order of assessment and the new sub-
section enabled rectification to be made in new
circumstances and within a new time limit. Those
circumstances when analyzed, furnish the key to the
retrospectivity of the section. We shall begin by quoting
only the material portion of that sub-section, which has
been quoted in full earlier
"Where, in any of the assessments for the
years beginning on the 1st day of April of the
years 1948 to 1955 inclusive, a rebate of
income-tax was allowed......... and
subsequently the amount on which the rebate of
income-tax was
(1) (1886) 31 Ch. D. 409.
120
allowed... is availed of .......for declaring dividends in
any year...... the, amount .....shall be deemed to have
been, made the subject, of incorrect relief and the Income-
tax Officer shall recompute the tax as if the recomputation
is a rectification of a mistake apparent from the record
within the, meaning of this section and. the provisions of
subsection (1) shall apply accordingly, the period of four
years being reckoned from the end of the financial year in
Which. the amount on which rebate of income-tax Was allowed
was, availed of for declaring dividends."
The purport of this new sub-section was the recall of rebate
which had. been allowed in any of the assessments for the
years 1-4-1948 to 31-3-1956 under certain. circumstances.
At the very start, the sub-section takes one to assessment
years to which S. 28 which prescribed the commencement as 1-
4-1956 did not take one to. We do not accept the argument
of the learned counsel for the assessee company that the
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mention of the years is merely a repetition of a historical
fact for ready reference. The words "in any of the
assessments for the years etc. II show in respect ofwhich,
assessments rectification, would be possible.The years
are mentioned individually by usingthe word "any". The
law. speaking in 1956 was thusspeaking of all the
assessment years individuallygoing.back to 1st April, 1948.
;The language wasclearly one of retrospectivity and the
suggestion,that there is no intent behind these words
and that they merely refer to a historical fact is -not
acceptable to us. This conclusion is further fortified by
the words :-
"and subsequently the amount.... .... is availed of for
declaring.. dividends in any year.."
121
Having mentioned the years individually in the opening part,
an event is mentioned which is subsequent, namely,
declaration of dividend from an amount on’ which rebate was
allowed. "Subsequently" here obviously means subsequent to
"any. of the assessments for the years beginning on the 1st
day of April of the years 1948 to 1955 inclusive", not
necessarily subsequent to the Amending Act. The declaration
of the dividends must be after’ the grant of the rebate.
That is the only condition and it does not import the date
of commencement of the subsection in any way . Then comes
the operative part and it is this. If in the earlier
assessment in any of the years mentioned a rebate’ was
allowed and subsequently in any year there was a declaration
of dividend utilising the amount on which the rebate Was
given, the amount so utilised should be deemed to be the
subject of incorrect relief. This fiction comes into force
from 1-4-1956 but it is not stated that the circumstances in
which it comes into being should also be after 1-4-1956.
The sub-section no doubt is to be used from 1-4-1956 but it
is to be used retrospectively to recall rebate on amounts
which the law deems to have been the subject of an incorrect
relief in the past. The recalling of the rebate is after
the enactment of sub-s. (10) but the -conditions for the
exercise of the power may be before or after’ the
commencement of the sub-section. The only curb on the
exercise of the power is that the Income-tax Officer may go
back a period of four years reckoned from the end of the
financial year in which the declaration of dividend was made
to the date when the action is taken.
In the present case, this is so. The assessee company
declared dividends in the calendar year 1952. The
assessment year was 1-4-1953 to 31-3-1954. The letter
written on March 18, 1958, asking the assessee company to
show cause was
122
within the four years reckoned from the end of the financial
year (31-3’1954) in which the amount on Which rebate of
Income-tax was availed of for declaring dividends. It
complied with the letter of the sub-section. Since the
power commenced. on 1-4-1956, the utmost reach of the
Income-tax Officer would be the end of the assessment year A
1952. Any declaration of dividend after 1st day of April,
1952, out of accumulated profits of any of the years in
which rebate was earned would be within time for the recall
of the rebate. But a declaration prior to 1-4-1952 would be
beyond the power of the Income-tax Officer to recall. This
meaning is the only meaning which the plain words of the
section can bear. Any other’ meaning might make sub.s. (10)
unworkable because no company.,, with the knowledge that
rebate would be recalled, would like to declare dividends
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after April 1, 1956, out of amounts- on which rebate was
earned. If the other meaning was attributed, sub-s. (10)
might well be a dead letter. The sub-section was obviously
the result of noting how rebates were earned and later were
being utilized to fill the pockets of the shareholders. The
amendment met this situation and did it in very clear terms.
It remains to consider, the decisions of this court in
Habibullah’s case (1) and Atmala Nagaraj’s case (2). In
those two cases this Court was called upon to interpret sub-
s. (5) quoted above which was introduced as from April 1
1952, by the Indian Income-tax (Amendment) Act, 1953., In
both the cases there was a final assessment of the incomes
of partners in registered firms. Later the assessment of
the registered firms took place and it was found that the
share of income of the partners was larger than what had
been assessed. Under s. 35 (1), as it stood before sub-s.
(5) was introduced, rectification could be made in respect
of a mistake apparent
(1) [1962] Supp, 2 S.C.R. 716. (2) [1962] 46 I. T. R. 609.
123
from the record and the records of the firms could not be
read with those of the partners to find an error in the
latter. There was thus an impasse. It was ruled by the
Privy Council in Commissioner of Income-tax v. Khemchand
Ramdas(1), at p. 248 :
"............... When once a final assessment,
is arrived at, it cannot, in their Lordships’
opinion, be reopened except in circumstances
detailed in section 34 and 35 of the
Act........... and within the time limited by
those acts."
Therefore, unless the original s. 35 allowed such
rectification there was no help. Often the firm’s final
assessment dragged on for years and by the time that
assessment was done the time limited by (sub.s.1) had
already run out. Parliament therefore stepped in with an
amendment which was to commence on April 1, 1952. Two
matters were provided by sub-s. (5). Firstly, the result of
the assessment of the firm showing that the partners’ income
was not properly included in their own assessments, was to
be deemed to disclose an error in the record of the
partners’ assessment and secondly, the period of four years
instead of being computed from the order of assessment made
against the partners as under sub-s. (1) was to be computed
from the date of the final order passed in the case of the
firm.
No doubt this. power could be exercised from 1-4-1952 but
the question that had to be considered was whether it could
be exercised only to reopen the assessment of partners of a
firm if, and only if, the order in the assessment of the
firm was passed after the amendment came into force. In
dealing with the matter in Habibullah’s case(2) this Court
referred to the finality which attaches to a final
(1) (1938) L. R. 65 I. A. 236, 248.
(2) [1962] Supp. 2 S.C.R. 716.
124
assessment as stated by the Privy Council. This Court then
referred to the date of the commencement of sub-s. (5) which
’was fixed retrospectively as 1-4-1952 and held that the
sub-section could not be used to reopen assessments which
had become final before the commencement of the new sub-
section, contrasting its language with that of sub-s. (6)
which wits, simultaneously introduced. In Habibullah’s case
(1) the dates were :-
Partners’ assessment for 1946-47 on 22-2-1950
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-do -do- 1947-48 on -do-
Registered firms’ assessment for 46-47 on 31-10-1950
-do- -do- 1947-48 on 30- 6-1951
Sub-s.(5) to s. 35 introduced from 1-4-1952 Order under s.
35 (5) on 27-3-1954
If sub-s. (5) could be used in this case it is plain that
the ’four years period had not passed between31-10-1950
’(;which was the earlier assessment) and 27-3-1954 when the
rectification was made. No doubt, the two assessments of
the firm were also before 1-4’-1952 but the sub-section has
nowhere said that the power was only to be exercised if the’
assessment of the firm was after that date. Such a meaning
is also difficult to imply. Under a fiction created after
1-4-1952 the assessment of the partners disclosed a mistake
and if the fiction and the rest of the sub-section were to
be given their full and logical effect the assessment of the
partners could, be reopened and rectified. But it was held
otherwise by this Court. The main reason was that the
partners’ assessments had become final before’ 1-4-1952,
that under the law, as it then stood, there’ was’ no error
in their record, and Sub-s.(5) having been enacted
retrospectivity from
(1) [1962] Supp. 2 S. C.R. 716.
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1-4-1952 could not be given more retrospectivity That the
firm’s assessment was also before 1-4-1952 was not given as
a reason and in any event it was not very relevant. It
neither added to nor detracted from the finality (such as it
was on 22-2-1952) on the Partners’ assessment. The law
obviously mentioned the final order in the firm’s
assessement as the starting point in view of the length
time the firm’s assessments take to reach their own
finality. But there was nothing to ’show that this new
terminus a quo must be after 1-4-1952 before sub-s(5) could
be used. The words of the sub-section were entirely
indifferent to this aspect In Atmala Nagraj’s Case (1) the
assessment of the was also completed before partners
(22-1-1952) 1-4-1952 and had become final subject however
to section 34 and 35. No doubt the assessment of the firm
was completed after 1-4-1952 but this distinction made no
difference to the finality such as had been gained on 22-1-
1952.
We do not naturally express a final opinion on sub-s. (5).
We must leave that to a future case. We must, however, say
that the two earlier cases may have to be reconsidered on
some future occasion. When the occasion comes the questions
to ask would be
1. Did finality attach in Habibullah’s case
(2) to the partners’ assessment under the law
as it then stood from 22.2-1950 (partners
assessment) or from 31-10-1950 and 30-6-1951
(the firm’s assessment) ?
2. Was there no finality in so far as the
partner’s assessment was concerned in Atmala
Nagaraj’s case (1) between 22-1-1952
(partner’s assessment) and
1-4-1952 (the commencement of sub-s. (5)) ?
(1) [1962] 46 I.T.R. 609. (2) (19621
Supp. 2 S.C.R. 716.
126
3. Was the finality of the partner’s
assessment, if any, controlled in the one case
by the fact that the assessment of the firm
was before 1-4-1952 and in the other by the
fact that the assessment of the firm was after
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1-4-1952
We have detailed these questions because they high-light the
only point of difference between the two cases. We express
no opinion of these questions.
In view of what we have said on. the interpretation of s. 35
(10) we are of opinion that the judgment of the High Court
was right. We would, therefore, dismiss this appeal with
costs.
By COURT : In accordance with the opinion of the majority,-
this appeal is dismissed with costs.
Appeal dismissed.
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