GOVINDDAS & ORS. ETC. ETC. vs. INCOME TAX OFFICER & ANOTHER

CIVIL APPEAL No. 702/1975Supreme Court[1976] 3 S.C.R. 4418 December 1975Bench: 3 JudgesAuthor: P.N. BHAGWATI, A.C. GUPTA, S. MURTAZA FAZAL ALI B11 pages
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What were the facts?

The appeals concerned Hindu Undivided Families (HUFs) whose assessments for assessment years 1950-51 to 1956-57 were completed under the Income Tax Act, 1922. These assessments were reopened after the Income Tax Act, 1961, came into force, via notices under Section 148 and completed under Section 147 of the 1961 Act. A partial partition of the HUF property had occurred in 1955. The Income Tax Officer then sought to recover a larger amount of tax determined as payable by the HUF by imposing personal liability on the members under Sections 171(6) and 171(7) of the 1961 Act. The High Court had dismissed the petitions filed by the members challenging these orders.

What did the Supreme Court hold?

The Supreme Court allowed the appeals, quashing the orders imposing personal liability on the members. The Court held that Section 171(6) of the 1961 Act applies only to assessments completed under the 1961 Act. Since the assessments in question were completed under the 1922 Act, which did not impose personal liability on members in cases of partial partition (governed by Section 25A), Section 171(6) could not be applied. The Court reasoned that retrospective operation should not be given to statutes that create new obligations or liabilities unless expressly provided or necessarily implied. The phrase 'all the provisions of this Act shall apply accordingly' in Section 297(2)(d)(ii) was interpreted to refer only to the machinery for assessment of escaped income, not to substantive provisions creating new rights or liabilities. Therefore, the substantive law to be applied for determining liability was the law under the 1922 Act. The Court found that the Revenue authorities were not entitled to avail themselves of Section 171(6) and (7) for recovering tax personally from the members.

What were the issues?

1. Whether Section 171(6) of the Income Tax Act, 1961, which imposes joint and several liability on members of an HUF for tax assessed on the family even if no partition was claimed during assessment, applies retrospectively to cases where assessments were completed under the Income Tax Act, 1922, and a partial partition had occurred. - Assessee's contention: Sections 171(6) and 171(7) of the 1961 Act create a new personal liability and cannot be applied retrospectively to assessments made under the 1922 Act, as Section 25A of the 1922 Act did not impose such personal liability in cases of partial partition. - Revenue's contention: Section 297(2)(d)(ii) of the 1961 Act, which states that 'all the provisions of this Act shall apply accordingly' when reopening assessments under Section 148, makes Section 171(6) applicable. 2. Whether the phrase 'all the provisions of this Act shall apply accordingly' in Section 297(2)(d)(ii) of the Income Tax Act, 1961, imports substantive provisions creating new liabilities, such as Section 171(6), into proceedings initiated under the 1922 Act.

Which sections of the Income-tax Act were involved?

Section 25A,Section 171,Section 171(6),Section 171(7),Section 297(2)(d),Section 148,Section 147,Section 34

AI-generated summary — verify with the full judgment below

A B c D E F G H 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 inter- pretation-"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 i

The order continues below.

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