TMI Blog1967 (10) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... rm for the year 1943-44 was completed on January 22, 1946, and the share income of each partner was determined at Rs. 8,265. The assessment of the respondent as individual was completed on January 24, 1946, wherein was included his income from the partnership just noted. Subsequently, the assessment of the firm was reopened by proceedings under section 34(1)(a) of the Act and a sum of Rs. 90,000 was added to the income of the firm liable to be brought to tax. The notice under section 34 was issued on September 11, 1952, and the reassessment of the firm took place on May 30, 1959. On July 24, 1959, notice under section 35(5) of the Act was served on the respondent for rectification of his assessment as an individual. The rectification was ultimately ordered to be made on August 31, 1959. The respondent applied to the High Court for quashing the said order. When the matter came to be heard by the High Court of Madras, there were already three reported decisions of this court bearing on the interpretation of section 35(5) of the Act. In the last of these decisions, a doubt had been cast as to the correctness of the two earlier decisions but the High Court felt that the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. . ." Section 35(5) was brought on the statute book by the Income-tax (Amendment) Act, 1953 (XXV of 1953). Section 1(2) of the Act provided that : "Subject to any special provision made in this behalf in this Act, it shall be deemed to have come into force on the 1st day of April, 1952." The Amendment Act contained provisions which show that some of the amendments introduced were to be effective from dates other than 1st April, 1952. Section 19 of the Act of 1953 introduced sub-sections (5), (6) and (7) of section 35 of the original Act. Under sub-section (1) of section 35 the income-tax authorities mentioned therein were empowered to rectify mistakes apparent from the record. Such power could, in the case of an Income-tax Officer, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer, the starting point of computation of the period of four years under section 35(5) is the date of the final order passed in the case of the firm. The point which has been canvassed in this case in favour of the respondent is that as the section was brought on the statute book on the 1st April, 1952, any mistake anterior to that date cannot be rectified. It was argued that the opening words of the section reading "Where in respect of any completed assessment of a partner in a firm" go to show that only assessments completed after the introduction of the provision, i.e., on 1st April, 1952, were in the contemplation of the legislature as proper subject for rectification. It was urged that according to the well known canons of construction legislation which impairs an existing right or obligation except as regards matters of procedure, is not to have retrospective operation unless such construction is clear from the terms of the Act itself. This argument was sought to be fortified by a reference to sub-section (2) of section 1 of the Income-tax Amendment Act of 1953 on the ground that the legislature was bringing this provision on the statute book as from an an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the finding as to the non-inclusion of the proper share of the partner in the profit or loss of the firm in the assessment of the partner should excite the power of rectification. The power is to be exercised whenever "it is found on the assessment or reassessment of the firm or on any reduction or enhancement made in the income of the firm". The subject matter of rectification is the completed assessment of a partner in a firm. This is brought out by the use of the words "where in respect of any completed assessment of a partner in a firm". There is nothing in the section to show that such "completed assessment" must take place after the provision i.e., section 35(5) was brought on the statute book. What is to take place to give rise to the power of rectification is the finding on the assessment or reassessment of the firm, etc. The finding alone must be made after the section comes into force. The finding is to be given effect to or made operative on the "completed assessment" of a partner. As the mischief sought to be rectified was the discrepancy between the income of the partner assessed as an individual and his income as computed on the assessment of the firm, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reference was made to sub-section (6) of section 35, which was introduced in the statute book by section 19 of the Amendment Act of 1953 at the same time as sub-section (5). There are certain words in sub-section (6) which are not to be found in sub-section (5) and on a contrast between the language used in the two sub-sections it was observed in Habibullah's case : "When the legislature under clause (6) of section 35 expressly authorised rectification in the circumstances mentioned therein even if the assessment has been completed before the Indian Income-tax (Amendment) Act, 1953, and it made no such provision in clause (5), it would be reasonable to infer that the legislature did not intend to grant to the revenue authorities a power to rectify assessments falling within clause (5) where the firm's assessment was completed before April 1, 1952." This reasoning was advanced before us in aid of the argument that sub-section (5) should have no retrospective operation beyond April 1, 1952. We do not want to express any view as to the interpretation of sub-section (6) but, in our opinion, sub-section (5) was clearly intended to give retrospective effect to final orders made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an individual need not happen after April 1, 1952. The completed assessment of the partner is the subject-matter of rectification and this may have preceded the above-mentioned date. Such completion does not control the operation of the sub-section. In the result, we find ourselves unable to concur in the decision or the reasoning in Atmala Nagaraj's case. The last case in the series is that of Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. S. C. Mehta. In this case the court had to consider sub-section (10) of section 35 which was introduced by section 19 of the Finance Act, 1956. The Bench hearing this appeal was composed of five judges and two of them, S. K. Das and J. L. Kapur JJ., took the view that Habibullah's case had been correctly decided but that Atmala Nagaraj's case might require reconsideration although they did not express any final opinion on that point. Sarkar J. did not think that much assistance could be had from Habibullah's case in the matter of interpretation of sub-section (10) of section 35. He said further : "There is nothing in S. K. Habibullah's case to indicate that in the opinion of the learned judges deciding it there were any words w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents in these appeals were the partners of a registered firm carrying on business in gunnies. For the assessment year 1943-44, i.e., the assessment year ending March 31, 1944, the firm in question was assessed to tax on January 22, 1946. Two days thereafter, namely, on January 24, 1946, the partners of the said firm were also assessed to tax for the assessment year 1943-44, after taking into consideration their share of profits in the firm. The Indian Income-tax Act, 1922, to be hereinafter referred to as "the Act," was amended by Act 25 of 1953. The said amending Act among other provisions incorporated section 35(5) into the Act. Section 1(2) of that Act provided that "subject to any special provision made in this behalf in this Act, it shall be deemed to have come into force on the 1st day of April, 1952". On September 11, 1952, the Income-tax Officer issued notice to the firm under section 34 of the Act requiring the firm to show cause why its assessment for the assessment year 1943-44 should not be reopened and enhanced for the reasons mentioned in that notice. In the proceedings that followed the assessment of the firm was substantially enhanced on May 30, 1959. Thereafter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are two different assessments though in assessing a partner his share in the firm's profits is added to his other income. In fact, the profits of a registered firm are subject to double tax, firstly in the hands of the firm and nextly, in the hands of its partners. As the law stood prior to the amending Act 25 of 1953, the assessment of a partner could not be rectified under section 35(1) on the ground that the firm's assessment had been enhanced as a result of reassessment. In other words, the reassessment of a firm could not be considered as a mistake apparent from the records of the assessment of its partners. That was the view taken by the Andhra Pradesh High Court in Kanumarlapudi Lakshminarayana Chetty v. First Additional Income-tax Officer, Nellore, and that view was accepted as correct by this court in Habibullah's case. Therefore, all that we have to see is whether section 35(5), one of the group of clauses added by Act 25 of 1953, could have been availed of by the Income-tax Officer in making the impugned rectifications. Section 35(5), to the extent it is material for our present purpose, reads as follows : "Where in respect of any completed assessment of a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested. This court quoted with approval the observations of the Privy Council in Commissioner of Income-tax v. Khemchand Ramdas : ". . . . . . . when once a final assessment is arrived at, it cannot, in their Lordships' opinion, be reopened except in the circumstances detailed in sections 34 and 35 of the Act . . . . . and within the time limited by those sections." From this decision, the correctness of which is not doubted by the majority, it follows that section 35(5) is only retrospective as from April 1, 1952 ; it has no greater retrospectivity and that section cannot affect vested rights. No doubt that decision was dealing with the assessment of a firm, but the ratio of that decision, in my opinion, applies with equal force to the assessment of a partner. If the assessment of a firm made before April 1, 1952, cannot be reopened under section 35(1) read with section 35(5), the same must be equally true of the assessment of a partner of a firm. The ratio of the decision in Habibullah's case is that rights which have become final, prior to April 1, 1952, cannot be affected by having recourse to section 35(5). By applying the ratio of the decision in Habibullah's case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and Atmala Nagaraj's case. But it appears that in the course of the arguments the correctness of those decisions was put into issue. Three separate judgments were delivered in that case, one on behalf of S. K. Das and Kapur JJ. by Das J., another on behalf of Hidayatullah and Raghubar Dayal JJ. by Hidayatullah J., and the third by Sarkar J. Sarkar J., in his judgment, merely referred to Habibullah's case and not to Atmala Nagaraj's case. Dealing with Habibullah's case, this is what his Lordship observed : "As to S. K. Habibullah's case 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-section (5) of section 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-sections (5) and (10) seems to me to be wholly different. There is nothing in S. K. Habibullah's case to indicate that in the opinion of the learned judges deciding it there were any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge must receive a strict construction in the sense that there is no room for any intendment, and regard must be had to the clear meaning of the words. If the Crown claims a duty under a statute, it must show that that duty is imposed by clear and unambiguous words, and where the meaning of the statute is in doubt, it must be construed in favour of the subject, however much within the spirit of the law the case might otherwise appear to be ; but a fair and reasonable construction must be given to the language used without leaning to one side or the other. The rule that the literal construction of a statute must be adhered to, unless the context renders it plain that such a construction cannot be put on the words, is especially important in cases of statutes which impose taxation. There is no rule admitting equitable construction of a taxing statute ; that is to say, cases which are not within the actual words of the statute cannot be brought within the statute by consideration of its governing principle or intention." Rowlatt J. observed in Cape Brandy Syndicate v. Inland Revenue Commissioners : ". . . in a taxing Act one has to look merely at what is clearly said. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation v. Henry B. Wright, the Judicial Committee held that if a statute professed to impose a charge, the intention to impose a charge on the subject must be shown by clear and unambiguous language. In Canadian Eagle Oil Co. v. R., Viscount Simon L.C. observed : 'In the words of Rowlatt J . . . . in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.' In other words, a taxing statute must be couched in express and unambiguous language. The same rule of construction has been accepted by this court in Gursahai Saigal v. Commissioner of Income-tax, wherein it was stated : ' . . . . it is well recognised that the rule of construction that if a case is not covered within the four corners of the provisions of a taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter, applies only to a taxing provision and has no application to all provisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law as it stood prior to the enactment of section 35(5), those assessments could not have been interfered with. Section 35(5) unlike several other provisions in the amending Act of 1953 had been given only a partial retrospective effect. It is made to be operative as from April 1, 1952. In this background let us now proceed to examine section 35(5). Before a case can be held to fall within the scope of section 35(5), two requirements must be satisfied, namely, (1) that the assessment or reassessment of the firm must have taken place on or after April 1, 1952, and (2) the assessment of the partner must be a "completed assessment". The next question to be decided is whether the "completed assessment" referred to in section 35(5) includes an assessment which had become final prior to April 1, 1952. I am unable to find out how the firm's assessment could have been validly reopened under section 34, in September 1952. By the time the notice under section 34 was issued, the eight year's period of limitation prescribed in section 34 had expired. But the validity of the firm's reassessment does not appear to have been challenged at any time before the hearing of these appeals. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 35(5) could not have been exercised to rectify the assessments in question. From the foregoing it follows that the decision of this court in Atmala Nagaraj's case is correct. Even assuming that section 35(5) can receive a different interpretation and that interpretation is more reasonable than that adopted by this court in Atmala Nagaraj's case, in that event also this court would not be justified in overruling its previous decision, which has the force of law in view of article 141 of the Constitution. I am of the opinion that the decisions of this court should not be overruled excepting under compelling circumstances. It is only when this court is fully convinced that public interest of a substantial character would be jeopardized by a previous decision of this court, this court should overrule that decision. Every time this court overrules its previous decision, the confidence of the public in the soundness of the decision of this court is bound to be shaken. Reconsideration of the decisions of this court should be confined to questions of great public importance. In law finality is of utmost importance. Legal problems should not be treated as mere subjects fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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