Case: Income Tax Officer, Madras Vs. S. K.Habibullah, Madras

when the assessment of the firm is completed before the 1st of April, 1952. The Legislature has given to cl. (5) a partial retrospective operation. The provision enacted by cl. (5) is not procedural in character: it affects vested rights of the assessee. Therefore in the absence of compelling reasons the court would not be justified in giving a greater retrospectivity to the provision than is warranted by the plain words used by the Legislature. As observed by the Judicial Committee of the Privy Council in Income-tax Commissioner v. Khemchand Ramdas : " x x x x when once a final assessment is arrived at, it cannot, in s their Lordships opinion, be reopened except in the circumstances detailed in sections 34 and 35 of the Act x x x and within the time limited by those section."7. The orders of assessment are, subject to the provisions relating to appeals, revisions, reassessment and rectification, final: it is not open to the Income-tax Officer to reopen the assessment because he thinks fit to do so. The provisions relating to assessments and rectification or reopening thereof are exhaustive, and may not be extended by analogies. The right to rectify an assessment may therefore be exercised in strict compliance with conditions prescribed by the statute in that behalf. Before April 1, 1952, rectification of assessment of an individual on the disclosure of errors consequent upon assessment of the firm of which he is a partner was not for reasons already stated permissible under cl. (1) of s. 35 This power was conferred for the first time by cl. (5) as from April 1, 1952, and by the express words of the clause arose from the assessment of the firm. If by the law prevailing at the time when the assessment of the firm was made, no such result as is contemplated by the new clause (5) arose, to give a larger retrospective operation than is directed, is to ascribe to the Legislature an intention different from the one expressed, and to make a larger inroad upon the finality of that assessment than is permitted by the Legislature. Section 35(5) does not purport to amend cl. (1); that clause is left untouched by the amending statute. Its application, by fiction, is extended to other clauses of cases by declaring what in truth are not mistakes, as mistakes. clause (5), therefore confers an additional power of rectification upon the Income- tax authorities and in the absence of compelling reasons we will not be justified in upholding the exercise of the power to assessments of firms which have been completed before the date on which the power was invested.Some assistance may be derived from the phraseology used by the legislature in cl. (6) which was enacted simultaneously with. cl. (5). That clause provides, omitting parts which are not material: "Where the excess profits tax or the business profits tax payable by an assessee has been modified x x x x or where any excess profits tax or business profit tax has been assessed after the completion of the corresponding assessment for income-tax (whether before or after the commencement of the Indian Income-tax (Amendment) Act, 1953), and in consequence thereof it is necessary to recompute the total income of the assessee chargeable to income-tax, such recomputation shall be deemed to be a rectification of a mistake apparent from the record within the meaning of this section, x x x".8. Manifestly, by the express provisions contained in cl. (6) the fiction applies whether the assessment is completed before or after the commencement of the Indian Income-tax (Amendment) Act, 1953. Even though cl. (6) is also made retrospectively operative as from April 1, 1952, the legislature has authorised the revenue authorities after April 1, 1952 to pass an order recomputing the total income of the assessee whether or not the assessment was completed before the commencement of the Indian Income tax (Amendment) Act, 1953. It is true that by the Explanation to that clause, for the purposes of this sub-section, where the assessee is a firm, the provisions of sub-s. (5) shall also apply as they apply to the rectification of the assessment of the partners of the firm, but thereby an intention to give a larger retrospective operation to cl. (5), in so far as it deals with rectification of assessments of partners consequential upon the completion of the assessment of the firm in which they are partners, is not indicated. When the legislature under cl. (6) of s. 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 cl. (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 cl. (5) where the firms assessment was completed before April 1, 1952.In our view, it was rightly held in Kandan Lal v. Income-tax Officer following Kanumaralapudi Lakshminarayana Chetty v. First Additional Income- Tax Officer, Nellore that cl. (5), of s. 35 of the Indian Income-tax Act, which was enacted by the Income Tax, (Amendment) Act, 1953, was not declaratory of pre-existing law, and as it clearly affected vested right which had accrued to the assessee, must be deemed to have come into force from April 1, 1952. It had no greater retrospective effect than was expressly granted to it. The power to rectify assessment of a partner consequent upon the assessment of the firm of which he is a partner by including or correcting his share of profit or loss can therefore be exercised only in Case of assessment of the firm made on or after April 1, 1952. The Income-tax officer has no jurisdiction under cl. (5 ) of s. 35 of the Act to rectify the assessment of a partner of a firm consequent upon the assessment or reassessment of the firm disclosing an error made before April 1, 1952.9.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The orders of assessment are, subject to the provisions relating to appeals, revisions, reassessment and rectification, final: it is not open to the Income-tax Officer to reopen the assessment because he thinks fit to do so. The provisions relating to assessments and rectification or reopening thereof are exhaustive, and may not be extended by analogies. The right to rectify an assessment may therefore be exercised in strict compliance with conditions prescribed by the statute in that behalf. Before April 1, 1952, rectification of assessment of an individual on the disclosure of errors consequent upon assessment of the firm of which he is a partner was not for reasons already stated permissible under cl. (1) of s. 35 This power was conferred for the first time by cl. (5) as from April 1, 1952, and by the express words of the clause arose from the assessment of the firm. If by the law prevailing at the time when the assessment of the firm was made, no such result as is contemplated by the new clause (5) arose, to give a larger retrospective operation than is directed, is to ascribe to the Legislature an intention different from the one expressed, and to make a larger inroad upon the finality of that assessment than is permitted by the Legislature. Section 35(5) does not purport to amend cl. (1); that clause is left untouched by the amending statute. Its application, by fiction, is extended to other clauses of cases by declaring what in truth are not mistakes, as mistakes. clause (5), therefore confers an additional power of rectification upon the Income- tax authorities and in the absence of compelling reasons we will not be justified in upholding the exercise of the power to assessments of firms which have been completed before the date on which the power was invested.Some assistance may be derived from the phraseology used by the legislature in cl. (6) which was enacted simultaneously with. cl. (5). That clause provides, omitting parts which are not material: "Where the excess profits tax or the business profits tax payable by an assessee has been modified x x x x or where any excess profits tax or business profit tax has been assessed after the completion of the corresponding assessment for income-tax (whether before or after the commencement of the Indian Income-tax (Amendment) Act, 1953), and in consequence thereof it is necessary to recompute the total income of the assessee chargeable to income-tax, such recomputation shall be deemed to be a rectification of a mistake apparent from the record within the meaning of this section, x xby the express provisions contained in cl. (6) the fiction applies whether the assessment is completed before or after the commencement of the Indian Income-tax (Amendment) Act, 1953. Even though cl. (6) is also made retrospectively operative as from April 1, 1952, the legislature has authorised the revenue authorities after April 1, 1952 to pass an order recomputing the total income of the assessee whether or not the assessment was completed before the commencement of the Indian Income tax (Amendment) Act, 1953. It is true that by the Explanation to that clause, for the purposes of this sub-section, where the assessee is a firm, the provisions of sub-s. (5) shall also apply as they apply to the rectification of the assessment of the partners of the firm, but thereby an intention to give a larger retrospective operation to cl. (5), in so far as it deals with rectification of assessments of partners consequential upon the completion of the assessment of the firm in which they are partners, is not indicated. When the legislature under cl. (6) of s. 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 cl. (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 cl. (5) where the firms assessment was completed before April 1, 1952.In our view, it was rightly held in Kandan Lal v. Income-tax Officer following Kanumaralapudi Lakshminarayana Chetty v. First Additional Income- Tax Officer, Nellore that cl. (5), of s. 35 of the Indian Income-tax Act, which was enacted by the Income Tax, (Amendment) Act, 1953, was not declaratory of pre-existing law, and as it clearly affected vested right which had accrued to the assessee, must be deemed to have come into force from April 1, 1952. It had no greater retrospective effect than was expressly granted to it. The power to rectify assessment of a partner consequent upon the assessment of the firm of which he is a partner by including or correcting his share of profit or loss can therefore be exercised only in Case of assessment of the firm made on or after April 1, 1952. The Income-tax officer has no jurisdiction under cl. (5 ) of s. 35 of the Act to rectify the assessment of a partner of a firm consequent upon the assessment or reassessment of the firm disclosing an error made before April 1, 1952.