The Judgment of the Court was delivered by
SUBBA RAO, C.J. - This is an application under article 226 of the Constitution of India for issuing a writ of certiorari to quash the orders of the First Additional Income-tax Officer, Nellore, dated March 20, 1954, and March 31, 1954. The assessees are members of Hindu undivided family. On March 18, 1948, the Income-tax Officer, Nellore, assessed them to income-tax for the assessment year 1947-48. In doing so, he had taken into consideration a sum of Rs. 6,000 as the share of the income of the joint family from the firm of C. P. V. Kotaiah Chetty and Co., Madras (Chillies Department). In due course, the assessees paid the Income-tax assessed on them. The assessment on the firm of Messrs. C. P. V. Kotaiah and Co., was completed only on July 31, 1951. By reasons of that asssessment the share of the profits of the assessees family for 1947-48 was found to be Rs. 21,659 instead of Rs. 6,000 which was the sum included in the assessment of the joint family by the assessment order dated March 18, 1948. On February 15, 1954, the Income-tax Officer gave the assessees notice to state their objections why the previous assessment dated March 18, 1948, should not be rectified under section 35 of the Income-tax Act (hereinafter referred to as the Act) as amended by the Income-tax (Amended) Act, 1953 (hereinafter referred to as the Amending Act). The assessees objected prior to April 1, 1952. The Income-tax officer rejected the objections and called upon the assessees to pay the additional tax before May 10, 1955.
Learned counsel for the assessees contends that the Amending Act of 1953 is not retrospective and therefore it cannot be invoked to reopen an assessment completed before April 1, 1952, whereas the learned Advocate-General argues that the amendment is only declaratory of the pre-existing law and therefore on the basis of the amendment even a completed assessment can be reopened.
The relevant provision of the Act may usefully be extracted at this stage :
Section 35 (before amendment) : 'The Commissioner or Appellate Assistant Commissioner may, at any time within four years from the date of any order passed by him in appeal or, in the case of the Commissioner, in revision under section 33A, and the Income-tax Officer may, at any time within four years form the date of any assessment order or refund order passed by him on his own motion rectify any mistake apparent from the record of the appeal revision, assessment or refund as the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee........... :
Provided further that no such rectification shall be made of any mistake in any order passed more than one year before the commencement of the Indian Income-tax (Amendment) Act, 1939.'
By the Indian Income-tax (Amendment) act, 1953, the following sub-section among others was inserted in section 35 of the principal Act after Sub-section (4) :
'(5) Where in respect of any completed assessment of a partner in a firm it is found on the assessment or reassessment of the firm or on any reduction or enhancement made in the income of the firm under section 31, section 33, section 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 (I) shall apply therefore accordingly, the period of four years referred to in that sub-section being computed from the date of final order passed in the case of the firm.'
Section I(2) : 'Subject to any special provision made in this behalf in this Act, it shall be deemed to have come into force on April 1, 1952.'
The effect of the aforesaid provisions may be stated thus : Under section 35, as it originally stood, the Commissioner, the Appellate Assistant Commissioner or the Income-tax Officer may within four year from the date of the order of assessment or other orders mentioned in the section made by them rectify any mistake apparent from the record. But under the amendment inserted by Act XXV of 1953, if on assessment or reassessment of a firm any reduction or enhancement is made in the income of the firm and it is found that the share of the parter in the profit or loss the firm has not been included in the assessment of the partner or though included it was not correct, the assessment can be reopened and corrected on the basis of the assessment of the firm within four year from the date of the final order passed in the case of the firm. The section further says that the inclusion of the share of the partner in the assessment or the correction thereof shall be deemed to be rectification of a mistake apparent from the record within the meaning of the section. To put it differently, section 19 of the Amending Act introduces a fiction to enable the Income-tax authorities to invoke the provisions of section 35 for amending the completed assessment for including the income falling to the share of the partner as ascertained from the final asessment of the firm. Under section I(2) the amendment came into operation from April 1, 1953.
Before attempting to answer the question raised, it will be convenient at this stage to notice briefly the well-settled rule of statutory construction in regard to the retrospective operation of Amending Acts. Craies on Statute laws (5th edition) says about retrospective enactments at page 357 as follows :
'A statute is to be deemed to restrospective which takes aways or impairs any vested right acquired under existing laws, or creats a new obligation, or imposes a new duty or attaches a new disability in respect to transactions or consideration already past....... In Lauri v. Renad Lindley, L.J., said : It is fundamental rule of English law that no statute shall be construted so as to have a restrospective operation unless its language is such as plainly to require such a construction. And the same rule involves another and subordinate rule to the effect that a statute is not to be construed so as to have a greater retrospective operation than its language renders necessary.'
At page 360 the learned author states the rule of construction as follows :
'And perhaps no rule of construction is more firmly established than this - that a retrospective operation is not to be given to a statute so as to impair an existing right of obligation otherwise than as regard matter of procedure unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation it ought to be construed as prospective only.'
Maxwell on the Interpretation of statutes, (tenth edition) says much to the same effect at page 213 as follows :
'It is fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication.'
At page 214, the learned author proceeds to state :
'A statute is not to be construed to have a greater retrospective operation than its language renders necessary.'
In Halsburys Laws if England, Vol. 27, page 159, it is stated :
'A statute is prima facie prosective, and does not interfere with existing rights, unless it contains clear words to that ef fect, or unless having regard to its object it necessarily does so,' Further, 'A statute is not to be construed to have a greater retrospective operation than its language renders necessary.'
Bowen, L.J., in Reid v. Reid state the scope the scope of the rule of construction in clear terms at page 408 as follows :
'Now the particular rule of construction which has been referred to, but which is valuable only when the words of an Act of parliament are not plain, is embodied in the well-know trite maxim omnis nova constitutio futuris formam imponere debit non praeteritis that is, that except in special cases the new law ought to be construed so as to interfere as little as possible with vested rights. It seems to me that even in construing an Act which is to a certain exteno retrospective, we ought nevertheless to bear in mind that maxim as applicable whenever we reach the line at which the words of the section cease to be plain. That is necessary and logical corollary of the general proposition that you ought not to give a larger retrospective power to a section, even in an Act which is to some extent intended to be retrospective, than you can plainly see the legislature meant.'
It is, therefore, clear from the statement of law made by recognised authorities that a statute affecting vested is prima facie prospective unless the statute affecting expressly or by necessary implication indicates to the contrary. Even where it is retrospective in operation, courts should confine its operation only to the extent the language renders it necessary. Further if an Act is to a certain extent retrospective, when we reach the line at which the words of the section cease to be plain, the same rule of construction leaning against retrospectivity should be applied.
Bearing the aforesaid principles in mind, let us approach the relevant provision of the Indian Income-tax (Amendment) Act, 1943. Does the Amending Act affect vested rights or does it only regulate the procedure Before the Amending Act came into force, the final assesssment made by an Income-tax Officer could not be reopened except under sections 34 and 35 of the Act. If an authority is necessary for this obvious proposition, it is found in the decision of the Judicial Committee in Commissioner of Income-tax, Bombay Presidency and Aden v. Messrs. Khemchand Ramdas. Lord Romer says at page 424 :
'But when once a final assessment is arrived at it cannot in their Lordships opinion, be reopened except in the circumstance detailed in section 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections.'
It is not suggested that this assessment could have been reopened under section 34 of the Act. But it is said that section 35 of the Act even without the amendment would have enable the Income-tax authorities to reopen the assessment on the ground that there was a mistake apparent from the record. But from the record of final assessment, it is impossible to say that there was a mistake apparent from the record for the assessing authority accepted a certain figure as representing for share of the assessees in the firm and made a final assessment. The mistake is not in the records but by a subsequent assessment of the firm, it was discovered that the earlier assessment was wrong to the extent of the assessees share in the firm. It is not a mistake apparent from the record but a mistake discovered from the disposal of another case. It is, therefore, manifest that before the amendment came into force, the assessment on the assesses had become final and it could not force, the assessment on the assessees had become final and it could not have been rectified on the ground of a mistake apparent from the record, and therefore the assessees have acquired a vested right against any interference with the finality of the assessment made on them. The Income-tax authorities, therefore, had to rely only on the Amending Act, which must be deemed to have come into force on April 1, 1952, for amending the assessment. Sub-section (5) inserted by the new Act clearly indicates that parliatment did not consider that the inclusion of the correct figure on the basis of the final assessment of the firm was an error apparent from the record of the earlier assessment, for it designedly used the word 'shall be deemed to be a rectification of a mistake apparent from the record' indicating thereby that a fiction was introduce to treat a rectification which is not in terms 'a mistake apparent from the record' as one of that caterory. Further sub-section (5) introduces a fresh point for computing the period of limitation. While under section 35(I) four point for computing the period of limitation. While under section 35(I) four year is computed from the date of the final order of assessment, under sub-section (5), four year would be computed from the date of the final order passed in the case of a firm. This will enable the Income-tax authorities to correct an assessment long after the expiry of four years from the date of the final assessment. Therefore sub-section (5) is not declartory of a pre-existing law as the learned Advocated-General contends but it clearly affects vested rights which have accured to the assesses. If so, the well settled rule of construction precludes the court from construing the section as retrospective.
Learned counsel relies upon section I(2) of the Amending Act in support of his contention that the Legislature expressly made the said Act retrospective. Under section I(2 the said Act shall be deemed to have come into force on April 1, 1952, subject to any special provision made in that behalf. We cannot read into the section more than what it says. The Amending Act received the assent of the president on May 24, 1953, and ordinarily it should have come into force on that date. The Legislature expressly gave the date April 1, 1952. The Act, therefore, subject to any special provision, must be deemed to have come into force on April 1, 1952, instead of on May 24, 1953. Then the dating back cannot give the provision of the Act a greater retrospective operation than its language renders necessary. If the assessments made prior to the Act could not have been reopened the Act come into force on May 20, 1953, the fictiona l dating back of the Act could not enable the authorities concerned to reopen assessments completed prior to April 1, 1952. This would enable them to do so only in respect of assessment completed between April 1, 1952, and May 24, 1953.
The Legislature also expressly provided for the reopening of the assessment where it intended to do so. Under section 3(2) the amendments made by sub-section (iii) of clause (b) of sub-section (I) shall be deemed to be operative in relation to all assessments for any year whether such assessments have or have not been completed before the commencement of the Indian Income-tax (Amendment) Act, 1953. Section 7(2) prescribes that the amendments made by clause (a) of sub-section (I) shall be deemed to be operative for any assessment for the year ending on March 31, 1952, whether made before or after the commencement of this Act and where any such assessment has been made before such commencement the Income-tax Officer concerned shall revise it wherever necessary to give effect to this amendment. Under section 30(2) the amendments made by sub-section (I) shall be deemed to be operative in relation to any assessment subsesquent to the assessment for the year ending on March 31, 1951, whether such assessment has or has not been made before the commencement of this Act and where any such assessment has been made before such commencement it shall be lawful for the Income-tax Officer to revise it, wherever necessary to give effect to such amendments. The aforesaid specific provision for reopening the assessments already made prior to the coming into force of the Act is a sure indication that in other cases, the Legislature did not intend to give power to reopen assessments made prior to the coming into force of the Act. Reliance is placed upon the proviso to section 35(I) of the Act which says that no rectification shall be made of any mistake in our order passed more than one year before the commencement of the Indian Income-tax (Amendment) Act, 1939 and it is contended that the absence of any such section (5) in section 35 has unlimited retrospective activity. The said omission does not lead to any such irresistible conclusion. It may be that the provisio to section 35 was added expressly to give a Limited retrospective operation to the amendment introduced by the Income-tax (Amendment) Act, 1939.
Learned Advocate-General strongly relied upon the decision of a Division Bench of the Calcutta High Court in Income-tax Officer, Companies District I, Calcutta v. Calcutta Discount Co. Limited. There, under section 23(3) of the Indian Income-tax Act the respondent company was assessed to Income-tax for the assessment year 1942-43, 1943-44 and 1944-45 on January 24, 1944, February 12, 1944, and February 15, 1945, respectively. The tax was paid in due course. Subsequently under section 34 of the Indian Income-tax Act as amended by the Income-tax and business Profits Tax (Amendment) Act (XLVIII of 1948) fresh notices were issued to the respondent on March 28, 1951, on the ground that the Income-tax Officer concerned had reason to believe that the income for each of the years notices were bad been under-assessed. It was contended, inter alia, that the notices were bad on the ground that the amendment had no retrospective operation. Under section I(2) of Act XLVIII of 1948, section 3 to 12 shall be deemed to have into force on March 30, 1948. The learned Judges held having regard to the history of section 34 and the provisions of a section I(2) of the Act that section 34 was to be deemed to have been on the statute book on March 30, 1948, and therefore by its own express language it applied it on and from that date to all assessments in cases coming under clause (a) of sub-section (I) and in which 8 years had not coming under date of the issue of notice. Chakravartti, C.J., observed at page 48I :
'The question is not one of retrospective operation at all but a question of what the section says and how far the section having come into force on March 30, extends by its own words.......... The plain effect of the substitution of the new section 34 with effect from March 30, 1948, is that from that date the Income-tax Act is to be read as including the new section as a part thereof and if it tis to be so read, the further effect of the express language of the section is that so far as cases coming within clause (a) of sub-section (I) (are concerned, all assessment years ending within 8 year from March 30, 1948, and from subsequent dates, are within its purview and it will apply to them, provided the notice contemplated is given within such eight years.'
We regret our inability to accept the reasoning of the learned Chief Justice. Section I(2) of Act XLVIII of 1948 gave a limited retrospective operation to the Act. Though the Act itself came into force on September 8, 1948, for certain purpose, it was deemed to have come into force on March 30, 1948. The effect was that to the extent the Act must be deemed to have come into force on that date. Unless retrospective operation was given to the amended section, the assessment which become final before March 30, 1948, could not be reopened. Though the learned chief Justice stated that the question was not one of retrospective operation at all, in effect the construction adopted by him gave retrospective operation to the amending Act in that it enabled the reopening of the assessment made prior to March 30, 1948. It is not necessary to express our view whether the conclusion of the learned Judge was correct and whether it could be sustaind on their reasoning.
Equally strong reliance is placed by the counsel for the assessees on the Judgement of a Division Bench of the Bombay Highh Court in Bombay Dyeing and Manufacturing Company Limited v. M. K. Venkatachalam, Income-tax Officer, Company Circle I, Bombay. In that case the assessment on the petitioners for the year 1952-53 was completed on October 9, 1952, credit for the sum of Rs. 50,603-15-0 representing interest at 2 per cent. On the advance payment of income-tax in accordance with the provisions of section 18A(5) of the Income-tax Act, 1922 as it then stood was given to the petitioners. On May 24, 1953, section 18A(5) was amended by section 13 of the Income-tax (Amendment) Act, 1953. Under section I(2) the amendment came into operation from April 1, 1952. Pursuant to the amendment the Income-tax Officer, purporting to act under section 35 of the Act, passed an order that the petitioner were entitled to interest amounting to Rs. 21,187-6-0 only for the year 1953-53 and issued a notice of demand for the balance of Rs. 29,446-9-0. The petitioner filed an application for the issue of a writ in the nature of prohibition, prohibiting, the respondentds from enforcing the said order and notice of demand. The court held that the liability of the petitioners to be assessed in a particular amount for the year 1952-53 was finally determined according tolaw on October 9, 1953, and that the liability could not be altered because the law subsequently altered or amended. Chagla, C.J., observes at page 302 :
'The present assessment order was made on the basis of the law as it then stood and it was only because the law subsequently altered that the liability of the petitioner might be considered to be assessed in a particular amount was finally determined on October 9, 1952, and that liability was determined according to law. That liability altered cannot be altered becuase the law has been subsequently altered or amended.'
Though the learned Judges were dealing with a different point, they held that the retrospective operation of the Amending Act would not extend to the extent of reopening an assessment finally made on the basis of the then existing law by the change of law introduced by the amendment. If it was so in the case of final assessment made subsequent to the coming into force of the Amending Act, it would a fortiori be not permissible to reopen the final assessment made prior to the coming into force of the Amending Act on the basis of change in law.
In the result we hold that the Income-tax Officer has no jurisdiction to reopen assessments finally made before April 1, 1952, on the basis of the provisions of sub-section (5) insreted in section 35 by the Amending Act 1953. We, therefore, quash the orders made by the First Additional Income-tax officer, Nellore, dated March 20, 1954, and March 31, 1954. The applicant will have have his costs. Advocates fee Rs. 200.