# GOVINDDAS & ORS. ETC. ETC v. INCOME TAX OFFICER & ANOTHER

- **Citation:** [1976] 3 S.C.R. 44
- **Court:** Supreme Court of India
- **Decided:** 1976
- **Case number:** Civil Appeals Nos. 702 and 840-843 of 1975
- **Bench:** P. N. Bhagwati, A. C. Gupta Ands. Murtaza Fazal Ali
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/govinddas-ors-etc-etc-v-income-tax-officer-another-6759
- **Pages:** 11

## Headnote

lnconie Tax Act (11 0/1 1922) s. 25A and lncnnu~ Tax Act (43 of 1961)
ss. 171 and 297(2)(d)-Section 171(6) if retrospective-General rule of interpretation-"All the provisions of this Act shall apply accordingly", scope of.
Under s: 25A, Income Tax Act, 1922, a l-Iindu undivided family \Vhich has
been
assessed
to
tax shall
be deerne!f,
for
the purpose of that
I\ct, to continue to be treated as
undivided and,
therefore,
liable to
be taxed in that status, unless an order is passed in respect of the family re·
cording a partition of its property. Under s. 25A(l), if at the time of making
an assessment, it is
1 claimed by or on behalf of the members of the family that
the property of the joint family has been partitioned among the 1nembers or
groups of members in definite proportions, the Income-Tax Officer shall bold
an equiry and record an order to that effect, if satisfied.
Under s. 25A(2) when
"'uch an order has been recorded, the Income Tax Officer shall apportion the
tax assessed on the total income of the undivided family and assess each mernber or group of members in accordance with the provisions of s. 23 and add
to the tax for \Vhich such member or group of members may be separately liable,
tax proportionate to the portion of the undivided 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
l)ehalf of the joint family.
Thus a liability, which, so long as an order is not
recorded under s. 25A(l), would be restricted to the assets of the Hindu undivided fan1ily is by virtue of s. 25A(2) transformed, when the order of partition
is recorded, into the personal liability of the members for the amount of tax
Llue by the Hindu undivided family.
But, the order could be recorded
only
if there n·as total partition as contra-distinguished front partial partition.
[49 G-50 E]
Section 171 of the Income Tax Act, 1961, corresponds to s. 25A of the 1922-
~-\ct.
Sub-sections 2 to 5 of s. 171 contemplate a casei where at the time of
making assessn1ent under s. 143 or 144, a clain1 is made by or on behalf of any
member of a Hindu family that a total or partial partition has taken place
an1011g its members and the Income Tax Officer has recorded a finding.
In such
a case, all the members would be jointly and severally liable for the tax assessed
as payable by the joint family and for determining their several liability, the
tax assc:iiised on the joint family would be apportioned among the members according to the portion of the joint family property allotted to each of them.
Ins. 171 (6) it is provided that even where no claim of total or partial partition
is made at the time of making the assessment under s. 143 or s. 144 and hence
no order recording partition is n1ade in the course of assessment as con~emplated
under sub-ss. 2 to 5, if it is found, after the completion of tfte assessn1ent, that
1he fatnily has already effected a partition, total or partial, all the m~mbers shall
be jointly and severally liable for the tax assessed as payable by the joint family
and the tax liability shall be apportioned amongr the members according to the,
portion of the joint family property allotted to each of them. Section 171(6),
thus, for the first time imposes, ini cases of this kind, jo_int and several liability
on the n1e1nbers for the tax assesed on the Hindu undivided family and this is
personal liability as distinct from liability limited to the joint fap1ily property
received on partition.
Section 171(7) provides that 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 whetf1er total or
partial. [50 G-"51 F; 52 C-E]
Section 297(2) (d) (ii) of the 1961-Act provides that when a notice under
s. 148 of the 1961-Act is issued for the reopening an assessment 'all the provisions
of this Act shall apply accor

## Text

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GOVINDDAS & ORS. ETC. ETC.
v.
INCOME TAX OFFICER & ANOTHER
December 18, 197 5
[P. N. BHAGWATI, A. C. GUPTA ANDS. MURTAZA FAZAL ALI, JJ.J
lnconie Tax Act (11 0/1 1922) s. 25A and lncnnu~ Tax Act (43 of 1961)
ss. 171 and 297(2)(d)-Section 171(6) if retrospective-General rule of interpretation-"All the provisions of this Act shall apply accordingly", scope of.
Under s: 25A, Income Tax Act, 1922, a l-Iindu undivided family \Vhich has
been
assessed
to
tax shall
be deerne!f,
for
the purpose of that
I\ct, to continue to be treated as
undivided and,
therefore,
liable to
be taxed in that status, unless an order is passed in respect of the family re·
cording a partition of its property. Under s. 25A(l), if at the time of making
an assessment, it is
1 claimed by or on behalf of the members of the family that
the property of the joint family has been partitioned among the 1nembers or
groups of members in definite proportions, the Income-Tax Officer shall bold
an equiry and record an order to that effect, if satisfied.
Under s. 25A(2) when
"'uch an order has been recorded, the Income Tax Officer shall apportion the
tax assessed on the total income of the undivided family and assess each mernber or group of members in accordance with the provisions of s. 23 and add
to the tax for \Vhich such member or group of members may be separately liable,
tax proportionate to the portion of the undivided 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
l)ehalf of the joint family.
Thus a liability, which, so long as an order is not
recorded under s. 25A(l), would be restricted to the assets of the Hindu undivided fan1ily is by virtue of s. 25A(2) transformed, when the order of partition
is recorded, into the personal liability of the members for the amount of tax
Llue by the Hindu undivided family.
But, the order could be recorded
only
if there n·as total partition as contra-distinguished front partial partition.
[49 G-50 E]
Section 171 of the Income Tax Act, 1961, corresponds to s. 25A of the 1922-
~-\ct.
Sub-sections 2 to 5 of s. 171 contemplate a casei where at the time of
making assessn1ent under s. 143 or 144, a clain1 is made by or on behalf of any
member of a Hindu family that a total or partial partition has taken place
an1011g its members and the Income Tax Officer has recorded a finding.
In such
a case, all the members would be jointly and severally liable for the tax assessed
as payable by the joint family and for determining their several liability, the
tax assc:iiised on the joint family would be apportioned among the members according to the portion of the joint family property allotted to each of them.
Ins. 171 (6) it is provided that even where no claim of total or partial partition
is made at the time of making the assessment under s. 143 or s. 144 and hence
no order recording partition is n1ade in the course of assessment as con~emplated
under sub-ss. 2 to 5, if it is found, after the completion of tfte assessn1ent, that
1he fatnily has already effected a partition, total or partial, all the m~mbers shall
be jointly and severally liable for the tax assessed as payable by the joint family
and the tax liability shall be apportioned amongr the members according to the,
portion of the joint family property allotted to each of them. Section 171(6),
thus, for the first time imposes, ini cases of this kind, jo_int and several liability
on the n1e1nbers for the tax assesed on the Hindu undivided family and this is
personal liability as distinct from liability limited to the joint fap1ily property
received on partition.
Section 171(7) provides that 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 whetf1er total or
partial. [50 G-"51 F; 52 C-E]
Section 297(2) (d) (ii) of the 1961-Act provides that when a notice under
s. 148 of the 1961-Act is issued for the reopening an assessment 'all the provisions
of this Act shall apply accordingly'.
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GOVI~'DDAS V. I.T.O.
45
-
There \Vas a partial partition among the members of ·a Hindu undivided
family in 1955. For the assessment years 1950-Sl to 1956-57, the assessment
on the family \\'ere reopened after the 1961-Act had come into force by issuing
notices under s. 148 and \\·e_re completed by orders under s. 147 of the 1%1-Act.
A much larger amount of tax .was determined as payable by the Hindu undivided
family than \vhat was found due when the original assessments were made for
· those assessment years. Thereafter, the Income 'fax Officer
determined the
several lia'bi!ity of the membe_rs of the Hindu undivided family under s. 171(7)
of the 1961-Act. They filed petitions in the High Court challenging the validity
of the orders, which had the effect of imposing personal liability· on the members
of the family, on the ground, inter alia, that s. 171(6) and (7) do not apply,
'"·here the assessmeat of a Hindu undivided family \\'as made under the 1922-Act,
and at the time \Y'hen the tax was sought to be recovered, it was found that the
family had effected a partial partition, since these provisions of the 1961-Act
had the effect of imposing on the members of the fan)ily a new liability, (namely
a personal liability) \\·hich did not exist before and they could not be construed
so as to have retrospective effect. The High Court dismissed the petitions.
Allowing the appeals to this Court,.
HELD : The assessments of the Hindu Undivided Family for the assessment
years 1950-51 to 1956-57, \Y'ere completed in accordance with the provisions of
the 1922-Act which included s. 2SA, and the Income Tax Officer was, therefore,
not ·entitled to avail him.self of the provisions enacted in s. 171(6) and (7)
of the 1961-Act, for the purpose of recovering the tax or any part thereof
personally from any members of the joint fa~ily. [53 B-D]
. (1) lt is a \\1ell-settled rule of. interpretation that unless the term::J of a
statute c:xf>r:esSy so provide or necessarily require it, retrospective
operation
should net be given to a statute so as to take away or impair an existing right
or Create a ne\v obligation or impose a new liability otherwis~ than as regards
matters itf procedure, the gene.rat rule being "all statutes other than those which
are merely d'ec.Iaratory or v.·hich related only to matters of procedure or of evidence are prlma facie prospective and retrospective operation should not be given
to a statUW 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 ·J::insq~e of the enactment. If the enactment is expressed in language
\vhich is ~rJy capable of either interpretation, it ought to be construed as prospective .. OOly. [52 E--GJ
·
(2)_ On this principle, s .. 171(6) applies ·only to a situation \\·here the assess·
ment of a Hindu Undivided Family is completed under s. 143 ors. 144 of-the
1961-Act. , It can have no application where the assessment of Hindu Undivided
Family was ·completed -under the corresponding provisions of the old Act. Such
h _case, would be governed by s. 25A of 1922·Act which does not impose any
personal_ liability on the meiμbers in case of partial partition.· Since~ in the
rirescnt case, there was· only a partial partition, the liability of the undivided
family to Llx for the ·various years could be recovered only out of the. assets of
the join1 .family and it could not be apportioned ._among the members nor could
the members be held jointly :ind severally liable for payment of such tax liability und~r s. 25A. To con.strμe s. 171(6) of the 1961-Act as apPliooble in such
a case with the consequential effect of casting on the members personal ·liability
\\rhich_ did not exist under s. 25A, woul4 be to give retrospective operation to
the sub-section which is not w·arranted either by the express language of that
provision or by necessary implication._ Section 171(6) can be given full effect
by interpreting it as appliCable only in a case \\'here the assessment! of a Hindu
Undivided Family is made under s. 143 ors. 144 of the 1961-Act. [52 G-53 BJ
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(3) The words "all the provisions. of this Act shall apply accordingly in S.
297(2)(d)(ii), merely refer to the machinery provided in th• 1961-Act for the
assessment of escaped income. They do not import any substantive provisions
of the. 1961-Act v.·hich create rights or liabilities. The word "accordingly", in
H
~he context, means nothing more than "for the purpose of assessment" and it
clearly suggests that the provisions of the 1961-Act which are made applicable
arc those relating to the machinery of assessment. Though sub~sections ( 1) to
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SUPREME COURT REPORTS
[1976] 3 S.C.R.
(5) of s. 171 merely lay down the machinery for assessment uf a Hindu un·
divided family after partition, s. 171(6) is clearly a substantive provision imposing a new liability on the members for the tax determined as payable by the
joint family.
The words "all the provisions of this Act shall apply accordingly"
cannot, therefore, be construed as _incorporating, by reference, s. 171(6), so
as, to make it applicable for the recovery of tax re-assessed on the Hindu UndivicJ...
cd Family in cases falling within s. 297(2)(d)(ii).
[54 C-F]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 702 and
840-843 of 1975.
Appeals by special leave from the judgment and order dated the
18-3-1975 of the Bombay High Court (Nagpur Bench) Nagpur in
special civil applications Nos. 1668, 1893, 1895 to 1897 of 1974.
•
S. T. Desai, S. C. Mandia and Shri Narain for the appellants in
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C.A. 702/75.
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S. P. Mehta, S. C. Mandia and Shri Narain for the appellants in
C.A. 840:843/75.
V. S. Desai and J. Ramarnurthi and S. P. Nayar for the respondents in all the appeals.
The Judgment of the Court was delivered by
BHAGWATI, J.-These five appeals by special leave raise a short but
interesting question of law relating to the applicability of s. 171, sub-s.
(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 :
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There was at all material times a Hindu Undivided Family consisting of one Gulabdas, his wife and five sons.
The Hindu Undivided
Family had considerable movable properties consisting of shares
in
limited companies and jewellery and it was also a partner through its
manager and Karta in two firms which may for the sake of convenience be referred to as the 'Export Firm' and the 'Mining Firm'. It
appears that besides these movable properties, the Hindu Undivided
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F · Family also owned some immovable properties. On 15th November,
1955 there was a partial partition among the members of the Hindu
Undivided Family and the movable properties were divided including
the credit balances after taking into account the debit balances in the
Export Firm and the Mining Firm. These movable properties, which
formed the subject-matter of partial partition, were of the value of
Rs. 4,87,054/- and they were divided amongst the members of the
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Hindu Undivided Family in such a manner that Gulabdas got properties worth Rs. 53,442/-, his wife got properties worth Rs. 50,000/-,
while each of the five sons got properties worth Rs. 76,722/-. The
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consequence of this partial partition was that the Hindu Undivided
Family ceased to be a partner in the Export Firm and the Mining Firm
and thereafter Gulabdas and his son Govinddas continued as partners
in these two firms in their individual capacity.
When the Hindu Undivided Family was sought to be assessed for
the assessment year 1957-58, for which the relevant previous year was
Samvat year commencing from 16th November, 1955 a claim
was
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GOVINDDAS v. I.T.O. (Bhagwati, !.)
47
made on behalf of the members of the Hindu Undivided Family that
they had effected a partial partition of their movable properties on 15th
November, 1955. This claim was accepted by the Income Tax Offtcer
after due inquiry and a finding was recorded by him in the order of
assessment that there was a partial partition of the movable properties
of the Hindu Undivided Family on 15th November, 1955. The result
was that from and after the assessment year 1957-58 no part of the
income of the Export Firm or the Mining Firm was included in the
assessment of the Hindu Undivided Family.
Now it appears that the assessments of the Export Firm and the
Mining Firm relating to the assessment years 1950-51 to 1956-57 were
reopened after the new Act came into force and reassessments were
made enhancing the assessable income of the two firms in accordance
with the procedure provided in 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 ,
Undivided 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 reassessment<; of the Hindu Undivided Family. The net effect of these orders of
rectification passed by the Income Tax Officer was that ultimately a
much larger amount of tax was determined as payable by the Hindu
Undivided Family than what was found due when the original assessments were made for the assessment years 1950-51 to 1956-57.
So far the members of the Hindu Undivided Family had no grievance because what was done by the Income Tax Officer was merely
to carry ont reassessment or rectification of assessment of the
income of the Hindu Undivided Family consequent upon enhancement of the assessable income of the two firms in which
the Hindu Undivided Family was a partner during the assessment years 1950-51 to 1956-57.
But on 25th January, 1974,
the Income Tax Officer made certain orders in respect of the
assessment years 1950-51 to 1954-55 and 1956-57 which prejudicially affected the interest of
the
petitioners.
The
Income
Tax Officer, by these orders, determined the several liability of the
members of the Hindu Undivided Family under s. 171, sub-s. (7) of
the new Act by apportioning the tax assessed on the Hindu l:ndividcd
Family for the assessment years 1950-51 to 1954-55 and 1956-57
among.5t the members in the proportion of 2/7th share to Gulabdas--
this perhaps also included the share of his wife-and 1 /7th share to
each of the five sons.
These orders were subsequently rectified by
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SIJPREME COURT REPORTS
(J 976] 3 S.C.R.
orders dated 3rd September, 1974 revising the allocation of the tax
liability, consequent upon the rectification made in the orders of assessment against the Hindu Undivided Family as a result of the relief
granted to the two firms by the Tribunal. The orders dated 3rd September, 1974 also proceeded on the same lines and allocated the tax
liability of the Hindu Undivided Family amongst the members in the
same shares as the earlier orders. The Income Tax Officer also passed
an order dated 13th August, 1974 allocating the tax liability of the
Hindu Undivided Family for the assessment year 1955-56 among the
members in the same shares under s. 171, sub-s. (7) of the new Act.
This led to the filing of a petition by each of the five sons of Gulabdas in the High Court of Bombay challenging the validity of the orders
dated 13th August and 3rd September, l 974 which had the effect of
imposing personal liability on each of the members of the Hindu Undivided Family for the tax liability allocated to him.
Th~ petitioners
in these petitions did not object to the recovery 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-s. (6) read with sub-s. (7) of ·s. 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
lln::!i\ided 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 ins. 171, sub-s. (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, 192Z
(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 or the Hindu Undivided Family a new liability which
did not exist before and it could not be construed so as to have retrospective operation.
This contention was, however, rejected by the
High Court and it was held that sub-s, (6) read with sub-s. (7) of
s. 171 was applicable in the present case and since the Income Tax.
Officer found at the time when he sought to recover the tax liability
assessed on the Hindu Undivided Family, that the family had already
effected a partial partition on 15th November, 1955, he was entitled to·
recover the tax from every member of the Hindu Undivided Family
and each member was severally liable for his share of the tax computed
according to the portion of the joint family property allotted to him at
the partial partition.
The High Court also rejected the other contentions advanced on behalf of the petitioners and dismissed each of the
petitions with costs.
The petitioners thereupon preferred the present
appeals with special leave obtained from this Court.
Though several contentions were raised in the petitions and also·
argued before the High Court, the petitioners at the hearing of the
appeals before us confined their attack against the validity of the
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GOV!NDDAS v. I.T.O. (Bhagwati, J.)
49
orders dated 13th August, 1974 and 3rd September, 1974 to only one
contention and that related to the applicability of sub-s. (6) read with
sub-s. ( 7) o[ s. 171 of the new Act. The petitioners sought to repel
the applicability of sub-s. (6) of s. 171 of the new Act by a two fold
argument. In the first place, the petitioners contended that s. 25A of
the old Act did not impose any personal liability on the members for
the tax assessed on the Hindu Undivided Family in case of partial partition.
This liability was created for the first time by sub-s. ( 6) of
s. 171 of the new Act and this sub-section could not, therefore, be
construed to have retrospective effect so as to apply to assessments
made on the Hindu Undivided Family for any assessment year prior
to 1st April, 1962 when the new Act came into force.
The present
case, which related to the assessment years 1950-51 to 1956-57, was
in the circumstances governed by s. 25A of the old Act in so far as
the question of personal liability of the members was concerned and
sub-s. (6) of s. 171 of the new Act had no application to it. Secondly, it was urged on behalf of the petitioners that even if s. 171, sub-s.
( 6) of the new Act were applicable in a case like the present, the
conditions of this sul>-scction 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-s. (3) of s. 171 of the new
Act.
Oi these two· arguments, the first is, in our opinion, well founded
and hence it is not necessary to consider the second.
We may first look at s. 25A of th~ 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
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no machinery provided in the Act for levying tax and enforcing liabiE.
Iity 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 s. 14(1) which said that tax shall not
be payable by an assessee in respect of any sum which he received as
•
a member pf a Hindu Undivided Family.
The result was that the
income of a Hindu Undivided Family could not he assessed and the
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tax could not be collected from the members of the family, if at the
time of making the assessment the family was divided.
This was obviously a lacuna and the legislature, therefore, introduced s. 25A in
the old Act for assessment of the income of a Hindu Undivided Family
and enforcement of the liability to tax, where the Hindu Undivided
Family \Vas no longer in existence at the date of assessment.
But, as
pointed out by this Court in Additional Income-Tax Officer v. ThimG
mayya(') this section went very much beyond what was required for
<
rectifying the defect. It made two substantive provisions, namely, (1)
a Hindu undivided family which has been assessed to tax shall be deemed, for the purposes of the Act, to continue to be treated as ~ndivided
and therefore liable to be taxed in that status, unless an order 1s passed
in respect of that family recording partition of its property .as contemplated by sub-ss. (1) and (2) if at the time of making an .assessH
ment, it is claimed by or on behalf of the members of the family that
(I) 55 l.T.R. 66.
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SUPREME COURT REPORTS
( 1976] 3 S.C.R.
the property of the joint family has been partitioned among the members or groups of members in definite portions, i.e., a complete partition of the entire estate is made, as distinct from a parti?l partition,
the Income Tax Officer shall hold an inquiry and if he is satisfied that
the partition has taken place, he shall record an order to that effect.
Where such order bas been passed, the Income Tax Officer would be
entitled to make an assessment of the total income received by or on
behalf of the Hindu Undivided Family as if no partition had taken
place. Now, ordinarily when tax is assessed on a Hindu undivided
family, it would be payable out of the properties of the joint family,
even after they are partitioned amongst the members and no member
would be personally liable for discharging the liability to tax.
But
sub-s. (2) made a radical departure and provided that when upon a
total partition, an order under sub-s. (1) has
been recorded, the
Income Tax Officer shall apportion the tax assessed on the
total
income of the Hindu undivided family and assess each member or
group of members in accordance with the provisions of s. 23 by adding
to the tax for which such member of group of members may be separately liable, tax proportionate to the portion of the undivided 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 assesscJ 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-s. ( 1),
would be restricted to the assets of the Hindu undivided family, was
thus, by virtue of sub-s. (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 contra-distinguished 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 of 15th No\·cmber,
1955 was partial as regards the properties of the joint family and there
was no total partition effected 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 could be recovered only out of
the assets of the joint family and it could not be apportioned amongst
the members nor could the members be held jointly and severally
liable for payment of such tax liability under s. 25A of the old Act.
The question is whether the enactment of sub-ss. (6)
and
(7)
of
s. 171 of the new Act has made any difference in this position.
Sectio~ 171 of the new Act corresponds to s. 25A of the old Act
and provides for assessment of a Hindu undivided family after partition.
But it has made various changes in the law.
The prii:cipal
change is that the new section applies not only to cases of total partition, but also to cases of partial partition. Sub-s. ( 1) ?f this s~ctiOn
reproduces the same fiction as in s. 25A and deems a Hmdu ~annly to
continue to be a Hindn undivided family "except where and m so far
as a finding of partition has been given in respect of th~ Hindu u°:divided family".
Sub-s. (2) provides that where, at the lime of making
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GOVINDDAS v. l.T.O. (Bhagwati, J.)
51
an assessment under s. 143 ors. 144, it is claimed by or on behalf of
any member of a Hindu family that a partitio11-, whether total or partial,
has taken place among the members of such family, the Income Tax
Officer shall make an inquiry after giving notice to all the members of
the family and sub-s. (3) proceeds to say that on the completion of
the inquiry, the Income Tax Officer shall record a finding as to whether
there has been a tctal or partial partition of the family property and
if there has been such a partition, the date on which it has taken place.
Where an order has beeu made recording the partition, the assessment
of the total income received by or on behalf of the joint family as such
is required to be made in a>:,Qrdance with the procedure laid down in
slib-ss. 4(a) and (5), which is the same as that under s. 25A, although
the relevant provisions arc differently cast.
The procedure is to compute the total income of the joint family upto the date of the partition
and also determine the tax payable by the joint family as such as if no
partition had taken place and as if the joint family was still in existence.
Sub-s. 4 (b) makes each member or group of members jointly
and severally liable for the whole amount of the tax determined as
payable by the joint family.
Then follows sub-s. (6) which is material and reads as follows :-
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"notwithstanding anytb:ng contained in this section, if
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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."
E
Sub-s. (7) provides that "for the purposes of this section", that is, for
the purposes of sub-ss. 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".
Now it is clear on a plain granunatical construction of the language
of sub-s. (2) to (5) of s. 171 that these sub-sections contemplate a
case where at the time of making assessment under ss. 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 Officer would record a finding that there has
been such partition of the joint family property and the assessment of
the total income of the joint family would then be made as if no such
partition had taken place.
And in such a case all the members would
be jointly and severally liable for the tax assessed as payable by the
joint family and for determining their several liability, the tax assessed
on the joint family would be apportioned among the members "according to the portion of the ioint family property allotted to" each of
them.
But it may happen that at the time of making assessment under ss. 143 or 144 no claim of partition, total or partial, is put
fotw~rd on behalf. of any member of a Hindu family, either because
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no snch partition has taken place or because of inadvertent or deliberate omission on the part of the members of the Hindu family and
where that happens, the Hindu family would continue to be assessed
as a Hindu undivided family and the tax determined as payable by it
would be recoverable only out of the joint family properties and no
member would be personally liable for any part of the tax, even
though an order recording partition may have been passed after the
assessment, since sub-s. ( 4) (b) of s. 171 would have no application in such a case.
That was also the position under s. 25A of the
old Act with this difference that under that section the only partition
which could be recorded was total partition and not partial partition.
The legislature, while enacting s. 171 in the new Act, dccidcJ to
introduce another radical departure from the old Act by providi:ig in
sub-s. ( 6) that even where no claim of total or partial partitica is
made at the time of making assessment under s. 143 or s. 14-: and
hence no order recording partition is n1ade in the course of a':::,essmcnt as contemplated under sub-ss. (2) to (5), if it is found, after
the completion of the assessment, that the family has already etkctcd
a partition, total or partial, all the members shall be jointly and
severally liable for the tax assessed as payable by the joint famiiy and
the tax liability shall be apportioned among the members acw:ding
to the portion of the joint family property allotted to each of them.
Sub-s. ( 6) of s. 171 thus for the first time imposed, in cases of this
kind, joint and several liability on the members for the tax assc•scd
on the Hindu undivided family and this was a personal liability &·, distinct from liability limited to the joint family property recciwJ on
partition.
Now it is a well settled rule of interpretation hallowed by time
and sanctified by iudicial decisions that. unless th.c terms of a stJtutc
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 ol. 36 of the Laws of England (3rd E·J.)
and reiterated in several decisions of this Court as well as English
Courts is that "alt statutes other than those which are merclv dcc1aratory or which relate only to matters of procedure or of evidence arc
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 of either inkrl'l·ctation, it ought to be construed as prospective only.
'If we applv this
principle of interpretation, it is clear that sub s. (6) of s. 171 applies
only to a situation where the assessment of a Hindu undivided family
is completed under s. 143 or s. 144 of the new Act.
It can haYc• no
application where the assessment of a Hindu undivided family is completed under the corresponding provisions of the old Act.
Such a case
would be governed by s. 25A of the old Act which does not impose
any personal liability on the members in case of partial partition and
to construe sub-s. ( 6) of s. 171 as applicable in such a case with
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GOVINDDAS v. I.T.O. (Bhagwati, J.)
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consequential effect of casting on the members personal liability which
.did not exist under s. 25A, would be to give retrospective operation te>
:sub-s. ( 6) of s. 171 which is not warranted either by the express !an-
,guage of that provision or by necessary implication.
Sub-s. (6) of s.
171 can be given full effect by interpreting it as applicable only in a
.case where the assessment of a Hindu.undivided family is made under
.s. 143 or s. 144 of the new Act.
We cannot, therefore, cousistently
•with the rule of interpretation which denied retrospective operation to
.a statute which has the effect of creating or imposing a new obligation
.or liability, construe sub-s. (6) of s. 171 as embracing a case where
:assessment of a Hindu undivided family is made under the provision•
of the old Act.
Here in the present case, the assessments of the
Hindu Undivided Family for the assessment year 1950-51 to 1956-57
were. completed in accordance with the provisions of the old Act which
included s. 25A and the Income-tax Officer was, therefore, not entitled
to avail of the provision enacted in sub-s. (6) read with sub·s. (7) of
s. 171 of the new Act for the purpose of recovering the tax or any
.Part thereof personally from any members of the joint family including
the petitioners.
·
But the Revenue Authorities then fell back on another contention.
namely, that since the assessments of the Hindu Undivided Family for
"the assessment years 1950-51to1956-57 were reopened by the Incom0-
{ax Officer by issuing notices under s. 148 and the reassessments were
completed by orders doted 26th March, 1970 under s. 14 7, in virtue
of s. 297(2)(d) of the new Act, sub-s. (6) of s. 171 was, on the
plain terms of s. 297(12)(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 re-
,quires an examination of the true meaning and effect of s. 297(2) (d).
That subsection has two clauses and it reads as follows :
"(d) Where in respect of any assessment year after the year end-
·ing 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 14 7
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
shall apply accordingly."
Admittedly, in the present case, cl. (ii) of s. 297(2) (d) applieJ,
-since no proceedings under s. 34 of the old Act in respect of esca!Rd
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SUPREME COURT REPORI S
[1976] 3 S.C.R.
income of the Hindu Undivided Family were pending at the time of
the commencement of the new Act and it was for this reason that notices under.s. 148 were issued by the Income Tax Officer for reopening
the assessments of the Hindu Undivided Family !or the assessment years
1950-51 to 1956-57. Now clause (ii) of s. 297(2) (d) provides that
when a notice under s. 148 is issued for reopening an assessmenl "all
the provisions of this Act shall apply accordingly".
The argumen• of
the Revenue Authorities, therefore, was that when notices under s. 148
were issued for reopening the assessments of the Hindu Undivided
Family, all the provisions of the new Act became applicable and they
included sub-s. ( 6) of s. 171 and, therefore, that sub-section was applicable for recovery of the tax reassessed on the Hindu Undivided
Family pursuant to the notices under s. 148. This argument is without force.
It is based on a misconstruction of the words "all the
provisions of this Act shall apply accordingly" in cl. (ii) of s. 29702)
( d). These words merely refer to the machinery provided in the
new Act for the assessment of the escaped income.
They do not
import any substantive provisions of the new Act which create rights or
liabilities.
The word 'accordingly' in the context means nothing more
than 'for the purpose of assessment" and it clearly suggests that the
provisions of the new Act which arc made applicable are those relating
to _the machinery of assessment. The substantive law to be applied for
determining the liability to tax must necessarily be the Jaw under the
old Act, for that is the law which applied during the relevant assessment years and it is that law which must govern the liability of the
parties.
Though sub-ss. (I) to (5) of s. 171 merely lay down the
machinery for assessment of a Hindu undivided family after partition,.
sul>-s. (6) of s. 171 is clearly a substantive provision imposing new
liability on the members for the tax determined as payable by the joint
family.
The words "all the provisions of this Act shall apply accordingly" cannot therefore be construed as incorpo_rating by reference subs. (6) of s. 171 so as to make it applicable for recovery of the tax
reassessed on the Hindu Undivjded Family in cases falling
within·
cl. (ii) of s. 297(2) (d). This contention of the Revenue Authorities
must accordingly be· rejected.
In the circumstances we allow these appeals and issue a writ in·
each appeal quashing and setting aside the orders dated 13th August,.
1974 and 3rd September, 1974.
The respondents will pay the costs
of the petitioners throug_hout.
V.P.S.
Appeals allowed ..
,