This is a reference under Section 66(1) of the Income-tax Act, by which the following question of law has been referred to this Court :-
'Whether the Commissioner of Income-tax, C.P. and Berar (now Madhya Pradesh and Bhopal) was competent under Section 33B of the Indian Income-tax Act to revise the order made by the Income-tax tax Officer on 22nd July, 1947 ?'
2. The assessee Niranjanlal Rambhallabh claimed registration of their firm for the assessment year 1944-45 and by the order dated the 22nd July, 1947, the Income-tax Officer granted this application and registered the firm for the assessment year J1944-45. By the order dated the 19th July, 1949, the Commissioner, in exercise of the powers conferred upon him by Section 33B of the Act, set aside the order on the ground that there was no genuine firm in existence for the relevant assessment year. The Commissioner further observed that 'inasmuch as the assessment case was pending before the Income-tax Officer, having been remanded by the Appellate Assistant Commissioner, it was open to the assessee to press its claim for registration for that year if made and supported by a more convincing and reliable evidence.' The assessees appeal to the Appellate Tribunal to set aside this order was rejected on the 15th April, 1950, and that order has given rise to this reference.
3. It is settled law that the assessment for any year is to be made in accordance with the law in force on the date the Indian Finance Act for that year comes into force. In Maharajah of Pithapuram v. Commissioner of Income-tax, Madras, their Lordships of the Judicial Committee observed :-
'It should be remembered that the Indian Income-tax Act, 1922, as amended from time to time, forms a code which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. This may be illustrated by pointing out that there was no charge on the 1938-39 income either of the appellant or his daughters, nor assessment of such income, until the passing of the Indian Finance Act of 1939, which imposed the tax for 1939-40 on the 1938-39 income and authorized the present assessment. By sub-section (1) of Section 6 of the Indian Finance Act, 1939, income-tax for the year beginning on the 1st April, 1939, is directed to be charged at the rates specified in Part I of Schedule II and rates of super-tax are also provided for, and by sub-section (3) it is provided that for the purposes of this section and of Schedule II the expression 'total income' means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922. This can only refer to the Indian Income-tax Act, 1922, as it stood amended at the date of the Indian Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on 1st April, 1939.'
In Mishrimal Gulabchand of Beawar, In re the learned Judges of the Allahabad High Court had to consider the effect of the first proviso to Section 24(1) in the case of assessment for the year 1944-45. The amendment was made on 12th April, 1944, after the passing of the Finance Act for that year. It was held following the above Privy Council decision, that the added proviso would not apply to the assessment made for the year 1944-45.
4. Under the Act assessment is made in the case of registered firms on the share income of the individual partners and not on the income of the firm as such. Section 26A and the rules framed thereunder provide for registration of a firm and the order passed by the Income-tax Officer is appealable under Section 30 at the instance of the assessee and not at the instance of the Commissioner. The registration is operative for that assessment year only. If, however, the bogus nature of the firm comes to light after the firm is registered, the Income-tax Officer has the power under Rule 6B to cancel the certificate of registration. That power was not exercised in the instant case by the Income-tax Officer.
5. Section 33B was added by Section 7 of the Income-tax and Business Profits Tax (Amendment) Act of 1948 which received the assent of the Governor General on the 8th September, 1948. Section 1 sub-section (2), of this Amending Act runs thus :-
'Sections 3 to 12 shall be deemed to have come into force on the 30th day of March, 1948, and the amendment made in the Indian Income-tax Act, 1922 (XI of 1922) by Section 2 shall be deemed to be operative so as to apply in relation to all assessments subsequent to the assessment for the year ending on the 31st day of March, 1948.'
The Act is thus made retrospective only to the extent of its applicability to the assessment year 1948-49. Otherwise, in view of the pronouncement of their Lordships of the Privy Council this section would have been applicable prospectively to the assessment years 1949-50 and onwards. The Legislature had thus obviously in view the rule laid down by their Lordships of the Privy Council that the provisions of the Indian Income-tax Act applicable to the assessment for any particular year is the law in force on the date the Indian Finance Act for that year becomes law. There is, therefore, no substance in the contention advanced for the Commissioner that the provision being procedural is retrospective in operation. We do not agree. Section 1, sub-sectiom (2), reproduced above, unmistakably demonstrates the intention of the Legislature to make the section retrospective only to the extent specified therein.
6. We therefore answer the question in the negative. The Commissioner had no jurisdiction under Section 33B to revise the order made by the Income-tax Officer relating to the assessment year 1944-45. The Commissioner will pay the costs of this reference including the costs of the paper book. Counsels fee Rs. 100.
Reference answered accordingly.