PETITIONER:
GOVINDDAS & ORS. ETC. ETC.
Vs.
RESPONDENT:
INCOME TAX OFFICER & ANOTHER
DATE OF JUDGMENT18/12/1975
BENCH:
BHAGWATI, P.N.
BENCH:
BHAGWATI, P.N.
GUPTA, A.C.
FAZALALI, SYED MURTAZA
CITATION:
1977 AIR 552 1976 SCR (3) 44
1976 SCC (1) 906
CITATOR INFO :
R 1982 SC 760 (18)
D 1991 SC1654 (35,47)
E 1991 SC2278 (7)
ACT:
Income Tax Act (11 of 1922) s. 25A and Income Tax Act
(43 of 1961 ss 171 and 297(2)(d)-Section 171(6) if
retrospective-General rule of interpretation- "All the
provisions of this Act shall apply accordingly", scope of.
HEADNOTE:
Under s. 25A, Income Tax Act, 1922, a Hindu undivided
family which has been assessed to tax shall be deemed, for
the purpose of that Act, to continue to be treated as
undivided and, therefore, liable to be taxed in that status,
unless an order is passed in respect of the family recording
a partition of its property. Under s. 25A(1), if at the time
of making an assessment, it is claimed by or on behalf of
the members of the family that the property of the joint
family has been partitioned among the members or groups of
members in definite proportions, the Income-Tax officer
shall hold an enquiry and record an order to that effect, if
satisfied. Under s. 25A(2) when, such an order has been
recorded, the Income Tax officer shall apportion the tax
assessed on the total income of the undivided family and
assess each member or group of members in accordance with
the provisions of s. 23 and add to the tax for which such
member or group of members may be separately liable, tax
proportionate to the portion of the undivided family
property allotted to him or to the group, and all members or
groups of members, shall be liable jointly and severally for
the tax assessed on the total income received by or on
behalf of the joint family. Thus a liability, which, so long
as an order is not recorded under s. 25A(I), would be
restricted to the assets of the Hindu undivided family is by
virtue of s. 25A(2) transformed, when the order of partition
is recorded, into the personal liability of the members for
the amount of tax due by the Hindu undivided family. But,
the order could be recorded only if there was total
partition as contra-distinguished from partial partition.
[49 G-50 E]
Section 171 of the Income Tax Act, 1961, corresponds to
s. 25A of the 1922 Act. Sub-sections 2 to 5 of s. 171
contemplate a case where at the time of making assessment
under s. 143 or 144, a claim is made by or on behalf of any
member of a Hindu family that a total or partial partition
has taken place among its members and the Income Tax officer
has recorded a finding. In such a case, all the members
would be jointly and severally liable for the tax assessed
17 as payable by the joint family and for determining their
several liability, the tax assessed on the joint family
would be apportioned among the members according to the
portion of the joint family property allotted to each of
them. In s. 171(6) it is provided that even where no claim
of total or partial partition is made at the time of making
the assessment under s. 143 or s. 144 and hence no order
recording partition is made in the course of assessment as
contemplated under sub-ss. 2 to 5, if it is found, after the
completion of the assessment, that the family has already
effected a partition, total or partial, all the members
shall be jointly and severally liable for the tax assessed
as payable by the joint family and the tax liability shall
be apportioned among the members according to the portion of
the joint family property allotted to each of them. Section
171(6), thus, for the first time imposes, in cases of this
kind, joint and several liability on the members for the tax
assessed on the Hindu undivided family and this is personal
liability as distinct from liability limited to the joint
family property received on partition. Section 171(7)
provides that the several liability of any member or group
of members shall be computed according to the portion of the
joint family property allotted to him or it at the partition
whether total or partial. [50 G-51 F; 52 C-E]
Section 297(2)(d)(ii) of the 1961-Act provides that
when a notice under s. 148 of the 1961-Act is issued for the
reopening an assessment 'all the provisions of this Act
shall apply accordingly'.
45
There was a partial partition among the members of a
Hindu undivided A family in 1955. For the assessment years
1950-51 to 1956-57, the assessment on the family were
reopened after the 1961-Act had come into force by issuing
notices under s. 148 and! were completed by orders under s.
147 of the 1961-Act. A much larger amount of tax was
determined as payable by the Hindu undivided family than
what was found due when the original assessments were made
for those assessment years. Thereafter, the Income Tax
officer determined the several liability of the members of
the Hindu undivided family under s. 171(7) of the 1961 Act.
They filed petitions in the High Court challenging the
validity of the orders, which had the effect of imposing
personal liability on the members L of the family, on the
ground, inter alia, that s. 171(6) and (7) do not apply,
where the assessment of a Hindu undivided family was made
under the 1922-Act, and at the time when the tax was sought
to be recovered, it was found that the family had effected a
partial partition, since these provisions of the 1961-Act
had the effect of imposing on the members of the family a
new liability, (namely a personal liability) which did not
exist before and they could not be construed so as to have
retrospective effect. The High Court dismissed the
petitions.
Allowing the appeals to this Court,
^
HELD: The assessments of the Hindu Undivided Family for
the assessment years 1950-51 to 1956-57, were completed in
accordance with the provisions of the 1922-Act which
included s. 25A, and the Income Tax officer was, therefore,
not entitled to avail himself of the provisions enacted in
s. 171(6) and (7) of the 1961-Act, for the purpose of
recovering the tax or any part thereof personally from any
members of the joint family. [53 B-D]
(1) It is a well-settled rule of interpretation that
unless the terms of a statute expressly so provide or
necessarily require it, retrospective operation should not
be given to a statute so as to take away or impair an
existing right or create a new obligation or impose a new
liability otherwise than as regards matters of procedure,
the general rule being "all statutes other than those which
are merely declaratory or which related only to matters of
procedure or of evidence are prima facie prospective and
retrospective operation should not be given to a statute so
as to affect, alter or destroy an existing right or create a
new liability or obligation 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. [52 E-G]
(2) On this principle, s. 171(6) applies only to a
situation where the assessment of a Hindu Undivided Family
is completed under s. 143 or s. 144 of the 1961-Act. It can
have no application where the assessment of Hindu Undivided
Family was completed under the corresponding provisions of
the old Act. Such a case would be governed by s. 25A of
1922-Act which does not impose any personal liability on the
members in case of partial partition. Since, in the present
case, there was only a partial partition, tho liability of
the undivided family to tax for the various years could be
recovered only out of the assets of the joint family are it
could not be apportioned among the members nor could the
members be held jointly and severally liable for payment of
such tax liability under s. 25A. To construe s. 171(6) of
the 1961-Act as applicable in such a case with the
consequential effect of casting on the members personal
liability which did not exist under s. 25A, would be to give
retrospective operation to the sub-section which is not
warranted either by the express language of that provision
or by necessary implication. Section 171(6) can be given
full effect by interpreting it as applicable only in a case
where the assessment of a Hindu Undivided Family is made
under s. 143 or s. 144 of the 1961-Act. [52 G-53 B]
(3) The words "all the provisions of this Act shall
apply accordingly in S. 297(2)(d)(ii), merely refer to the
machinery provided in the 1961-Act for the assessment of
escaped income. They do not import any substantive
provisions of the 1961-Act which create rights or
liabilities. The word "accordingly", in 'the context, means
nothing more than "for the purpose of assessment" and it
clearly suggests that the provisions of the 1961-Act which
are made applicable arc those relating to the machinery of
assessment. Though sub-sections (1) to
46
(5) of s. 171 merely lay down the machinery for assessment
of a Hindu undivided family after partition, s. 171(6) is
clearly a substantive provision imposing a new liability on
the members for the tax determined as payable by the joint
family. The words "all the provisions of this Act shall
apply accordingly" cannot, therefore, be construed as
incorporating, by reference, s. 171(6), so as to make it
applicable for the recovery of tax re-assessed on the Hindu
Undivided Family in cases falling within s. 297(2)(d)(ii).
[54 C-F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 702
and 840-843 of 1975.
Appeals by special leave from the judgment and order
dated the 18-3-1975 of the Bombay High Court (Nagpur Bench)
Nagpur in special civil applications Nos. 1668, 1893, 1895
to 1897 of 1974.
S. T. Desai, S. C. Mandia and Shri Narain for the
appellants ‘in C.A. 702/75.
S. P. Mehta, S. C. Mandia and Shri Narain for the
appellants in C.A. 840-843/75.
V. S. Desai and J. Ramamurthi and S. P. Nayar for the
respondents in all the appeals.
The Judgment of the Court was delivered by
BHAGWATI, J.-These five appeals by special leave raise
a short but interesting question of law relating to the
applicability of s. 171, sub-s. (6) of the Income Tax Act,
1961 (hereinafter referred to as the new Act). The facts
giving rise to these appeals are few and may be briefly
stated as follows:
There was at all material times a Hindu Undivided
Family consisting of one Gulabdas, his wife and five sons.
The Hindu Undivided Family had considerable movable
properties consisting of shares in limited companies and
jewellery and it was also a partner through its manager and
Karta in two firms which may for the sake of convenience be
referred to as the ‘Export Firm’ and the ‘Mining Firm’. lt
appears that besides these movable properties, the Hindu
Undivided Family also owned some irremovable properties. On
15th November, 1955 there was a partial partition among the
members of the Hindu Undivided Family and the movable
properties were divided including the credit balances after
taking into account the debit balances on the Export Firm
and the Mining Firm. These movable properties which formed
the subject-matter of partial partition, were of the value
of Rs. 4,87,054/- and they were divided amongst the members
of the Hindu Undivided Family in such a manner that Gulabdas
got properties worth Rs. 53,442/-, his wife got properties
worth Rs. 50,000/-, while each of the five sons got
properties worth Rs. 76,722/-. The consequence of this
partial partition was that the Hindu Undivided Family ceased
to be a partner in the Export Firm and the Mining Firm and
thereafter Gulabdas and his son Govinddas continued as
partners in these two firms in their individual capacity.
When the Hindu Undivided Family was sought to be
assessed for the assessment year 1957-58, for which the
relevant previous year was Samvat Year commencing from 16th
November, 1955 a claim was
47
made on behalf of the members of the Hindu Undivided Family
that they had effected a partial partition of their movable
properties on 15th November, 1955. 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 the movable properties of the
Hindu Undivided Family on 15th November, 1955. The result
was that from and after the assessment year 1957-58 no part
of the income of the Export Firm or the Mining Firm was
included in the assessment of the Hindu Undivided Family.
Now it appears that the assessments of the Export Firm
and the Mining Firm relating to the assessment years 1950-51
to 1956-57 were reopened after the new Act came into force
and reassessments were made enhancing the assessable income
of the two firms in accordance with the procedure provided
in the new Act. Consequent upon the reassessments of the
income of the two firms for the assessment years 1950-Sl to
1956-57, notices were issued to the Hindu Undivided Family
for reassessments of its income for those years, since the
Hindu Undivided Family was a partner in these two firms
during those years. The Income Tax officer, after following
the requisite procedure. passed an order of reassessment
dated 26th March, 1970 for each of the assessment years
1950-Sl to 1956-57 enhancing the assessable income of the
Hindu Undivided Family. The appeals filed by the two firms
against the orders of reassessment made on them partially
succeeded before the Appellate Assistant Cornmissioner and
consequently, orders were passed by the Income Tax officer
on 25th March, 1971 rectifying the orders of reassessment
dated 26th March, 1970 made against the Hindu Undivided
Family. The two firms obtained some further relief as a
result of appeals filed by them before the Tribunal and in
consequence, further rectification orders dated 3rd
September, 1974 were passed by the Income Tax officer
rectifying the reassessments of the Hindu Undivided Family.
The net effect of these orders of rectification passed by
the Income Tax officer was that ultimately a much larger
amount of tax was determined as payable by the Hindu
Undivided Family than what was found due when the original
assessments were made for the assessment years 1950-51 to
1956-57.
So far the members of the Hindu Undivided Family had no
grievance because what was done by the Income Tax officer
was merely to carry out reassessment or rectification of
assessment of the income of the Hindu Undivided Family
consequent upon enhancement of the assessable income of the
two firms in which the Hindu Undivided Family was a partner
during the assessment years 1950-Sl to 1956-57. But on 25th
January, 1974, the Income Tax officer made certain orders in
respect of the assessment years 1950-Sl to 1954-55 and 1956-
57 which prejudicially affected the interest of the
petitioners. The Income Tax officer, by these orders,
determined the several liability of the members of the Hindu
Undivided Family under s. 171, sub-s. (7) of the new Act by
apportioning the assessed on the Hindu Undivided Family for
the assessment years 1950-51 to 1954-55 and 1956-57 amongst
the members in the proportion of 2/7th share to Gulabdas-
this perhaps also included the share of his wife-and l/7th
share to each of the five sons. These orders were
subsequently rectified by
48
orders dated 3rd September, 1974 revising the allocation of
the liability, consequent upon the rectification made in
the orders of assessment against the Hindu Undivided Family
as a result of the relief granted to the two firms by the
Tribunal. The orders dated 3rd September, 1974 also
proceeded on the same lines and allocated the tax liability
of the Hindu Undivided Family amongst the members in the
same shares as the earlier orders. The Income Tax officer
also passed an order dated 13th August, 1974 allocating the
tax liability of the Hindu Undivided Family for the
assessment year 1955-56 among the members in the same shares
under s. 171, sub-s. (7) of the new Act.
This led to the filing of a petition by each of the
five sons of Gulab das in the High Court of Bombay
challenging the validity of the orders dated 13th August and
3rd September, 1974 which had the effect of imposing
personal liability on each of the members of the Hindu
Undivided Family for the tax liability allocated to him. The
petitioners in these petitions did not object to the
recovery of the tax liability of the Hindu Undivided Family
from out of the joint Family properties come to their hands
on partial partition, but their argument was that they were
not jointly and severally liable for the tax liability nor
was
the Income Tax officer entitled to proceed against them
personally or recovery of any share of the tax liability.
That raised the question as to the applicability of sub-s.
(6) read with sub-s. (7) of s. 171 of the. new Act, for, it
was under this provision that the Income Tax officer claimed
to allocate the tax liability amongst the members of the
Hindu Undivided Family and to recover from the petitioners
personally the share of the tax liability allocated to them.
The principal contention. of the petitioners was that the
provision in s. 171, sub-s. (63 and (7). had no application,
where the assessment of a Hindu Undivided Family was made
under the provisions of the Indian Income Tax Act, 1922
(hereinafter referred to as, the old Act) and at the time
when the tax was sought to be recovered, it was found that
the family had effected a partial partition, since this
provision had the effect of imposing one the members of the
Hindu Undivided Family a new liability which did not exist
before and it could not be construed so as to have
retrospective operation. This contention was, however,
rejected by the High Court and it was held that sub-s. (6)
read with sub-s. (7) of s. 171 was applicable in the present
case and since the Income Tax Officer found at the time when
he sought to recover the tax liability assessed on the Hindu
Undivided Family, that the family had already effected a
partial partition on 15th November, 1955, he was entitled to
recover the tax from every member of the Hindu Undivided
Family and each member was severally liable for his share of
the tax computed; according to the portion of the joint
family property allotted to him at the partial partition.
The High Court also rejected the other contentions advanced
on behalf of the petitioners and dismissed each of the
petitions with costs. The petitioners thereupon preferred
the present appeals with special leave obtained from this
Court.
Though several contentions were raised in the petitions
and also argued before the High Court, the petitioners at
the hearing of the appeals before us confined their attack
against the validity of the
49
orders dated 13th August, 1974 and 3rd September, 1974 to
only one contention and that related to the applicability of
sub-s. (6) read with sub-s. (7) of s. 171 of the new Act.
The petitioners sought to repel the applicability of sub-s.
(6) of s. 171 of the new Act by a two fold argument. In the
first place, the petitioners contended that s. 25A of the
old Act did not impose any personal liability on the members
for the tax assessed on the Hindu Undivided Family in case
of partial partition. This liability was created for the
first time by sub-s. (6) of s. 171 of the new Act and this
sub-section could not, therefore, be construed to have
retrospective effect so as to apply to assessments made on
the Hindu Undivided Family for any assessment year prior to
1st April, 1962 when the new Act came into force. The
present L- case, which related to the assessment years 1950-
51 to 1956-5 /, was in the circumstances governed by s. 25A
of the old Act in so far as the question of personal
liability of the members was concerned and sub-s. (6) of s.
171 of the new Act had no application to it. Secondly, it
was urged on behalf of the petitioners that even if s. 171,
sub-s. (6) of the new Act were applicable in a case like the
present, the conditions of this sub-section were not
satisfied, as there was no finding of partial partition
recorded by the Income Tax officer after making due inquiry
as contemplated in sub-s. (3) of s. 171 of the new Act. Of
these two arguments, the first is, in our opinion, well
founded and hence it is not necessary to consider the
second.
We may first look at s. 25A of the old Act. The
position which obtained before this section was introduced
in the old Act was that though a Hindu Undivided Family was
a unit of assessment, there was no machinery provided in the
Act for levying tax and enforcing liability to tax in cases
where a Hindu Undivided Family had received income in the
year of ac`count but was no longer in existence as such at
the time of assessment. This difficulty was the more acute
by reason of the provision contained in s. 14(1) which said
that tax shall not be payable by an assessee in respect of
any sum which he received as a member of a Hindu Undivided
Family. ` The result was that the income of a Hindu
Undivided Family could not be assessed and the tax could not
be collected from the members of the family, if at the time
of making the assessment the family was divided. This was
obviously a lacuna and the legislature, therefore,
introduced s. 25A in the old Act for assessment of the
income of a Hindu Undivided Family and enforcement of the
liability to tax, where the Hindu Undivided Family was no
longer in existence at the date of assessment. But, as
pointed out by this Court in Additional Income-Tax Officer
v. Thimmayya(1) this section went very much beyond what was
required for rectifying the defect. It made two substantive
provisions, namely, (1) a Hindu undivided family which has
been assessed to tax shall be deem ed, for the purposes of
the Act, to continue to be treated as undivided and
therefore liable to be taxed in that status, unless an order
is passed in respect of that family recording partition of
its property as contemplated by sub-ss. (1) and (2) if at
the time of making an assessment, it is claimed by or on
behalf of the members of the family that
(1) 55 I.T.R. 66.
50
the property of the joint family has been partitioned among
the members or groups of members in definite portions, i.e.,
a complete partition of the entire estate is made, as
distinct from a partial partition, the Income Tax Officer
shall hold an inquiry and if he is satisfied that the
partition has taken place, he shall record an order to that
effect. Where such order has been passed, the Income Tax
officer would be entitled to make an assessment of the total
income received by or on behalf of the Hindu Undivided
Family as if no partition had taken place. Now, ordinarily
when tax is assessed on a Hindu undivided family, it would
be payable out of the properties of the joint family, even
after they are partitioned amongst the members and no member
would be personally liable for discharging the liability to
tax. But J sub-s. (2) made a radical departure and provided
that when upon a total partition, an order under. sub-s.
(1) has been recorded, the Income Tax officer shall
apportion the tax assessed on the total income of the Hindu
undivided family and assess each member or group of members
in accordance with the provisions of s. 23 by adding to the
tax for which such member of group of members may be
separately liable, tax proportionate to the portion of the
undivided family property allotted to him or’ to the group
and all members or groups of members shall be “liable
jointly and severally for the tax assessed on the total
income received by or on behalf of the joint family”. The
liability which, so long as an order is not recorded under
sub-s. (1), would be restricted to the assets of the Hindu
undivided family, was thus, by virtue of sub-s. (2),
transformed, when the order is recorded, into personal
liability of the members for the amount of tax due by the
Hindu undivided family. But the order could be recorded only
if there was total partition, as contra-distinguished from
partial partition, and on a claim made by or on behalf of
the members of the family, the Income Tax officer, after
holding an inquiry, was satisfied that such total partition
had taken place. Now, in the present case, the partition
which took place between the members of 15th November, 1955
was partial as regards the properties of the joint family
and there was no total partition effected amongst the
members at any time. Hence the liability of the Hindu
Undivided Family to tax for the assessment years 1950-51 to
1956-57 could be recovered only out of the assets of the
joint family and it could not be apportioned amongst the
members nor could the members be held jointly and severally
liable for payment of such tax liability under s. 25A of the
old Act. The question is whether the enactment of sub-ss.
(6) and (7) of s. 171 of the new Act has made any difference
in this position.
Section 171 of the new Act corresponds to s. 25A of the
old Act and provides for assessment of a Hindu undivided
family after partition. But it has made various changes in
the law. The principal change is that the new section
applies not only to cases of total partition, but also to
cases of Partial Partition. Sub-s. (1) of this section
reproduces the same fiction as in s. 25A and deems a Hindu
family to continue to be a Hindu undivided family “except
where and in so far as a finding of partition has been given
in respect of the Hindu undivided family”. Sub-s. (2)
provides that where, at the time of making
51
an assessment under s. 143 or s. 144, it is claimed by or on
behalf of any member of a Hindu family that a partition,
whether total or partial, has taken place among the members
of such family, the Income Tax officer shall make an inquiry
after giving notice to all the members of the family and
sub-s. (3) proceeds to say that on the completion of the
inquiry, the Income Tax officer shall record a finding as to
whether there has been a total or partial partition of the
family property and if there has been such a partition, the
date on which it has taken place. Where an order has been
made recording the partition, the assessment of the total
income received by or on behalf of the joint family as such
is required to be made in accordance with the procedure laid
down in sub-s. 4(a) and (S), which is the same as that under
s. 25A, although the relevant provisions are differently
cast. The procedure is to compute the total income of the
joint family upto the date of the partition and also
determine the tax payable by the joint family as such as if
no partition had taken place and as if the joint family was
still in existence. Sub-s. 4(b) makes each member or group
of members jointly and severally liable for the whole amount
of the tax determined as payable by the joint family. Then
follows sub-s. (6) which is material and reads as follows:-
“notwithstanding anything contained in this
section, if the Income-tax officer finds after
completion of the assessment of a Hindu undivided
family that the family has already effected a
partition, whether total or partial, the Income tax
officer shall proceed to recover the tax from every
person who, was a member of the family before the
partition, and every such person shall be jointly and
severally liable for the tax on the income so
assessed.”
Sub-s. (7) provides that “for the purposes of this section”,
that is, for the purposes of sub-ss. 4(b) and (6), “the
several liability of any member or group of members shall be
computed according to the portion of the joint family
property allotted to him or it at the partition, whether
total or partial”.
Now it is clear on a plain grammatical construction of
the language of sub-s. (2) to (5) of s. 171 that these sub-
sections contemplate a case where at the time of making
assessment under ss. 143 or 144, a claim is made by or on
behalf of any member of a Hindu family that a total or
partial partition has taken place among its members. Then
the claim would be investigated by the Income tax officer
and if satisfied, the Income Tax Officer would record a
finding that there has been such partition of the pint
family property and the assessment of the total income of
the joint family would then be made as if no such partition
had taken place. And in such a case all the members would be
Jointly and severally liable for the tax assessed as payable
by the joint family and for determining their several
liability, the assessed on the joint family would be
apportioned among the members “according to the portion of
the joint family property allotted to” each of them. But it
may happen that at the time of making assessment under ss.
143 or 144 no claim of partition, total or partial, is put
forward on behalf of any member of a Hindu family, either
because
52
no such partition has taken place or because of inadvertent
or deliberate omission on the part of the members of the
Hindu family and where that happens, the Hindu family would
continue to be assessed as a Hindu undivided family and the
tax determined as payable by it would be recoverable only
out of the joint family properties and no member would be
personally liable for any part of the lax, even though an
order recording partition may have been passed after the
assessment, since sub-s. (4)(b) of s. 171 would have no
application in such a case. That was also the position under
s. 25A of the old Act with this difference that under that
section the only partition which could be recorded was total
partition and not partial partition. The legislature, while
enacting s 17.1 in the new Act, decided to introduce another
radical departure from the old Act by providing in sub-s (6)
that even where no claim of total or partial partition is
made at the time of making assessment under s. 143 or s. 144
and hence no order recording partition is made in the course
of assessment as contemplated under sub-ss. (2) to (5), if
it is found? after the completion of the assessment, that
the family has already effected. a partition, total or
partial, all the members shall be jointly and severally
liable for the tax assessed as payable by the joint family
and the tax liability shall be apportioned among the members
according to the portion of the joint family property
allotted to each of them. Sub-s. (6) of s. 171 thus for the
first time imposed, in cases of this kind, joint and several
liability on the members for the tax assessed on the Hindu
undivided family and this was a personal liability as
distinct from liability limited to the joint family property
received on partition.
Now it is a well settled rule of interpretation
hallowed by time and sanctified by judicial decisions that,
unless the terms of a statute expressly so provide or
necessarily require it, retrospective operation should not
be given to a statute so as to take away or impair a
existing right or create a new obligation or impose a new
liability otherwise than as regards matters of procedure.
The general rule as stated by Halsbury in ol. 36 of the Laws
of England (3rd Ed.) and reiterated in several decisions of
this Court as well as English Courts 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 operation should not be
given to a statute so as to affect, alter or destroy an
existing right or create a new liability or obligation
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. If we apply this principle of interpretation, it is
clear that sub s. (6) of s. 171 applies only to a situation
where the assessment of a Hindu undivided family is
completed under s. 143 or s. 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 s. 25A of the
old Act which does not impose any personal liability on the
members in case of partial partition and to construe sub-s.
(6) of s. 171 as applicable in such a case with
53
consequential effect of casting on the members personal
liability which did not exist under s. 25A, would be to give
retrospective operation to sub-s. (6) of s. 171 which is not
warranted either by the express language of that provision
or by necessary implication. Sub-s. (6) of s. 171 can be
given full effect by interpreting it as applicable only in a
case where the assessment of a Hindu undivided family is
made under s. 143 or s. 144 of the new Act. We cannot,
therefore, consistently with the rule of interpretation
which denied retrospective operation to a statute which has
the effect of creating or imposing a new obligation or
liability, construe sub-s. (6) of s. 171 as embracing a case
where assessment of a Hindu undivided family is made under
the provisions of the old Act. Here in the present case, the
assessments of the Hindu Undivided Family for the assessment
year 1950-Sl to 1956-57 were completed in accordance with
the provisions of the old Act which included s. 25A and the
Income tax officer was, therefore, not entitled to avail of
the provision enacted in sub-s. (6) read with sub-s. (7) of
s. 171 of the new Act for the purpose of recovering the tax
or any part thereof personally from any members of the joint
family including the petitioners.
But the Revenue Authorities then fell back on another
contention, namely, that since the assessments of the Hindu
Undivided Family for the assessment years 1950-51 to 1956-57
were reopened by the Income Tax Officer by issuing notices
under s. 148 and the reassessments were completed by orders
dated 26th March, 1970 under s. 147, in virtue or s.
297(2)(d) of the new Act, sub-s. (6) of s 171 was, on the
plain terms of s. 297(e)(d), applicable and the Income Tax
officer was entitled to recover personally from the members,
the tax reassessed on the Hindu Undivided Family, as it was
found by him that the family had already effected a partial
partition. This contention requires an examination of the
true meaning and effect of s. 297(2) (d) That subsection has
two clauses and it reads as follows:
“(d) Where in respect of any assessment year after the
year ending on the 31st day of March, 1940,-
(i) a notice under section 34 of the repealed Act
had been issued before the commencement of
this Act, the proceedings in pursuance of
such notice may be continued and disposed of
as if this Act had not been passed;
(ii) any income chargeable to tax had escaped
assessment within the meaning of that
expression in section 147 and no proceedings
under section 34 of the repealed Act in
respect of any such income are pending at the
commencement of this Act, a notice under
section 148 may, subject to the provisions
contained in section 149 or section 150, be
issued with respect to that assessment year
and all the provisions of this Act shall
apply accordingly. ‘
Admittedly, in the present case, cl. (ii) of s. 297(2)(d)
applied since no proceedings under s. 34 OF the old Act in
respect of escaped
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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 s. 148 were issued by the Income
Tax officer for Reopening the assessments of the Hindu
Undivided Family for the assessment years 1950-51 to 1956-
57. Now clause (ii) of s. 297(2) (d) provides that when a
notice under s. 148 is issued for reopening an assessment
“all the provisions of this Act shall apply accordingly”.
The argument of the Revenue Authorities, therefore, was that
when notices under s. 14 were issued for reopening the
assessments of the Hindu Undivided Family, all the
provisions of the new Act became applicable and they
included sub-s. (6) of s. 171 and, therefore, that sub-
section was applicable for recovery of the tax reassessed on
the Hindu Undivided Family pursuant to the notices under s.
148. This argument is without force. It is based on a
misconstruction of the words “all the provisions of this Act
shall apply accordingly” in cl. (ii) of s 297(2) (d). These
words merely refer to the machinery provided in the new Act
for the assessment of the escaped income. They do not import
any substantive provisions of the new Act which create
rights or liabilities. The word ‘accordingly’ in the context
means nothing more than ‘for the purpose of assessment” and
it clearly suggests that the provisions of the new Act which
are made applicable are those relating to the machinery of
assessment. The substantive law to be applied for
determining the liability to tax must necessarily be the law
under the old Act, for that is the law which applied during
the relevant assessment years and it is that law which must
govern the liability of the parties. Though sub-ss. (1) to
(S) of s. 171 merely lay down the machinery for assessment
of a Hindu undivided family after partition, sub-s. (6) of
s. 171 is clearly a substantive provision imposing new
liability on the members for the tax determined as payable
by the joint family. The words “all the provisions of this
Act shall apply accordingly” cannot therefore be consumed as
incorporating by reference subs. (6) of s. 171 so as to make
it applicable for recovery of the tax reassessed on the
Hindu Undivided Family in cases falling within cl. (ii) of
s. 297(2) (d). This contention of the Revenue Authorities
must accordingly be rejected.
In the circumstances we allow these appeals and issue a
writ in each appeal quashing and setting aside the orders
dated 13th August, 1974 and 3rd September, 1974. The
respondents will pay the costs of the petitioners
throughout.
V.P.S. Appeals allowed
55