TMI Blog1975 (12) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 words "all the provisions of this Act shall apply accordingly" cannot therefore be construed as incorporating by reference Sub-section (6) of Section 171 so as to make it applicable for recovery of the tax reassessed on the Hindu Undivided Family in cases falling within Clause (ii) of Section 297(2)(d). This contention of the Revenue Authorities must accordingly be rejected. - Civil Appeals Nos. 702 and 840-843 of 1975. - - - Dated:- 18-12-1975 - A. Gupta, P. Bhagwati And S. M. Ali,JJ. S. T. Desai, S. C. Mandia and Shri Narain for the appellants. V. S. Desai and J. Ramamurthi and S. P. Nayar for the respondents. JUDGMENT 1. These five appeals by special leave raise a short but interesting question of law relating to the applicability of Section 171, Sub-section (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 consistin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the new Act. Consequent upon the reassessments of the income of the two firms for the assessment years 1950-51 to 1956-57. notices were issued to the Hindu Undivided Family for reassessments of its income for those years, since the Hindu Un divided 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 1950-51 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 Commissioner 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovery 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 for recovery of any share of the tax liability. That raised the question as to the applicability of Sub-section (6) read with Sub-section (7) of Section 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 Section 171, Sub-sections (6) 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 on the members of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was urged on behalf of the petitioners that even if Section 171, Sub-section (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-section (3) of Section 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. 7. We may first look at Section 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 account 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 Section 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 Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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-section (1), would be restricted to the assets of the Hindu Undivided family, was thus, by virtue of Sub-section (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 contradistinguished 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 on 15th November, 1955 was partial as regards the properties of the joint family and there was no total partition affected 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 would be recovered only out of the assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained 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-section (7) provides that "for the purposes of this section", that is. for the purposes of Sub-sections 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. 9. Now it is clear on a. plain grammatical construction of the language of Sub-sections (2) to (5). of Section 171 that these Sub-sections contemplate a case where at the time of making assessment under Section 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 Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 10. 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 an 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 Vol. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, Sub-section (6) of Section 171 was, on the plain terms of Section 297(2)(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 Section 297(2)(d). That Sub-section 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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