SARDAR LAKHMIR SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assesses is an individual, namely, Sardar Lakhmir Singh, son of Nehchal Singh, and the assessment year is 1946 -47. Up to the assessment year 1943 -44, Messrs. Nehchal Singh and Lakhmir Singh were being assessed in the status of a Hindu undivided family. The said Hindu undivided family consisted of Sardar Nehchal Singh and his two sons, Sardar Lakhmir Singh and Sardar Dhanbir Singh, The Hindu undivided family used to declare income from property, contract works, interest on securities and dividends from shares. From the assessment year 1944 -45 a claim was made under Sec.25A and it was contended that there was no joint family business or joint family property and that the income of Sardar Lakhmir Singh and Sardar Nehchal Singh were their individual income and should be separately assessed. The claim was rejected by the Income -tax Department and the income of both Sardar Lakhmir Singh and Sardar Nehchal Singh were amalgamated and the total amount was assessed in the hands of the Hindu undivided family with Sardar Nehchal Singh as the Karta. For the assessment year 1945 -46 Sardar Lakhmir Singh and Sardar Nehchal Singh filed two separate returns and reiterated their previous claim under Sec.25A. The claim was rejected by the Income -tax Department and the Income of Sardar Lakhmir Singh and Sardar Nehchal Singh was assessed as the income of the Hindu undivided family, but there was a protective assessment made upon Sardar Lakhmir Singh as an individual for the income he had returned. There was an appeal taken against the assessment of 1945. -46, and on the 15th of October, 1952 the Appellate Tribunal held that the income of the two individuals, namely, Sardar Nehchal Singh and Sardar Lakhmir Singh, was not the income of the Hindu undivided family but their individual income. The Appellate Tribunal, therefore, set aside the assessment of the Hindu undivided family. For the assessment year 1946. -47 three returns were filed. The first return was filed by Sardar Lakhmir Singh on the 15th March, 1951, in respect of his separate income. The second return; was filed by Sardar Nehchal Singh in his individual capacity with regard to his separate income. The third return was filed under protest by Sardar Nehchal Singh as the Karta of the Hindu undivided family. This return was dated 20 -6 -1950 and the total income in the return was declared as nil. There is an endorsement on the return to the following effect: "In view of the submission made in the attached application under Sec.25A, the so called Hindu family did not exist during the previous year for 1946 -47 assessment. Hence its income stands at nil. Returns of the disrupted members are being filed separately." On the 15th March, 1951, the Income -tax Officer amalgamated the income of the two individuals and assessed the total income as the income of a Hindu undivided family. The Income -tax Officer, however, did not make a protective assessment with regard to the separate income shown in the return of Sardar Lakhmir Singh. On the 20th March, 1953, there was an appeal taken against the assessment of 1946 -47. The appeal was allowed by the Appellate Assistant Commissioner and the assessment of the Hindu undivided family was set aside in view of the order of the Appellate Tribunal dated the 15th October, 1952, in the appeal against the assessment of the year 1945 -46. On the 27th November, 1953, the Income -tax Officer made an Assessment upon Sardar Lakhmir Singh in his individual capacity on the basis of the return filed by him on the 15th March, 1951. The assessee preferred an appeal against the order of the Income -tax Officer to the Appellate Assistant Commissioner and contended that the assessment made on the 27th November, 1953, was time -barred under the provisions of Sec.34 (3) of the Indian Income -tax Act. This contention was rejected by the Appellate Assistant Commissioner and the order of assessment made by the Income -tax Officer was upheld. The assessee took the matter in appeal to the Income -tax Appellate Tribunal, but the appeal was dismissed.

(2.) IN this state of facts the Income -tax Appellate Tribunal hag submitted the following question of law for the opinion of the High Court under Sec. 66(1) of the Indian Income -Tax Act: "Whether, having regard to the return dated the 7th March, 1951, by Sardar Lakhmir Singh in his individual capacity and to the provisions of Section 34(3), the assessment made on him on the 27th November, 1953, is validly made -

(3.) THE argument put forward by Mr. S.N. Dutta on behalf of the assesses is that under Sec.34 (3), as it stood before the amendment, the order of assessment made by the Income -tax Officer on the 27th November, 1953, would be time -barred. The period of limitation under that section was four years from the end of the year when the income was first assessable, It was, therefore, submitted that the period of limitation expired on the 31st March 1951. It was pointed out that the Amending Act came into force on the 24th May 1953, with retrospective effect from the 1st April, 1952. It was argued that even if the Amending Act is deemed to have come into force on the 1st April, 1952, the right of the Income -tax Officer to assess was already barred on the 31st March, 1951, and the. Amending Act cannot have the effect of reviving the right of the Income -tax Officer to assess. The question presented for determination, therefore, is whether the Amending Act, namely, Act 25 of 1953, has the effect of reviving the right of the Income -tax, Officer to assess by providing an extended period of limitation. In my opinion, the question must toe answered in favour of the assesses in the circumstances of this case. Although limitation is a matter of procedural law, and although it is open to the Legislature to extend the period of limitation, the amending law cannot be applied to a case where the right is already barred by the previous law of limitation. That is a well established proposition of law. For instance in Appasami Odayar V/s. Subra -manya Odayar, 15 Ind App 167 (PC) (A), it was decided by the Judicial Committee that a suit to recover a share of joint family property not brought within twelve years from the date of the last participation in the profits q £ it was barred by Sec.1, Clause 13 of Act XIV 1859; and once barred, the right to sue would not be affected by the later Acts of Limitation. There is also a similar decision in a subsequent caset Khunni Lal V/s. Gobind Krishna Narain ILR 33 All 356 (PC) (B). It is also well established that the presumption against retrospective operation of a statute as regards vested rights applies not merely to substantive rights but applies equally to remedial rights, like rights of action including rights of appeal etc. The principle is clearly stated by the Judicial Committee in Delhi Cloth and General Mills Co. V/s. Income -tax Commissioner, Delhi 54 Ind App 421 at p. 425: (AIR 1927 PC 242 at P. 244) (C) as follows: - - "......While provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively, in the absence of express enactment or necessary intendment. Their Lordships can have no doubt that provisions which if applied retrospectively, would , deprive of their existing finality orders which, when the statute came into force, were final, are Provisions which touch existing rights. Accordingly, if the section now in question is to apply to orders final at the date when it came into force, it must be. Clearly so provided. Their Lordships cannot find in the section even an indication to that effect." Applying the principle to the present case I hold that the Amending Act, namely, Act 25 of 1953, does not apply to the case of the assessee and the order of assessment of the Income -tax Officer dated the 27th November, 1953, must be held to be barred under the provisions of the un -amended section. The reason is that on the 1st of April, 1952, when the Amending Act came into operation, the right of the Income -tax Officer to assess tax for 1846 -47 had already become barred. A correlative right had, therefore, accrued in favour of the assessee before the 1st of April, 1952, and that right cannot be taken away by legislation except in clear and express language. As a matter of construction I hold that the Legislature did not intend to give a retrospective operation to the Amending Act, namely, Act 25. of 1953, further back than 1 -4 -1952. The right of the Income -tax Officer to make an assessment was lost in the present case on 31 -11 -1951. In other words, the right to assess was time -barred under Sec.34 (3) as it stood before the amendment and, in my opinion, that right of the Income -tax Officer was not revived or revitalised on 1 -4 -1952, when the Amending Act was passed. It follows, therefore, that the order of assessment made by the Income -tax Officer on 27 -11 -1953, with regard to Sardar Lakhmir Singh for the assessment year 1946 -47 is not legally valid.