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PETITIONER: THE AHMEDABAD MFG. & CALICOPRINTING CO., LTD.

       Vs.

RESPONDENT: S.   C. MEHTA, INCOME-TAX OFFICERAND ANOTHER

DATE OF JUDGMENT: 14/11/1962

BENCH: DAS, S.K. BENCH: DAS, S.K. KAPUR, J.L. SARKAR, A.K. HIDAYATULLAH, M. DAYAL, RAGHUBAR

CITATION:  1963 AIR 1436            1963 SCR  Supl. (2)  92  CITATOR INFO :  RF         1965 SC 171  (10)  F          1966 SC1481  (4)  RF         1968 SC 623  (21)

ACT: Income Tax-Rectification-Retrospective operation of statute- Rebate    granted   on   undistributed    profits-Subsequent declaration  of dividends on such profits--Recall of  rebate and  recomputation  of assessment-Finance Act, 1956  (18  of 1956), ss. 19, 28-Indian Income-tax Act, 1922 (11 of  1922), S.35 (10).

HEADNOTE: Sub-section  (10)  of s. 35 of the  Indian  Income-tax  Act, 1922,  which  was  brought  into force  on  April  1,  1956, provided  that where in any of the assessment years  1948-49 to 1955-56, a rebate of income-tax was allowed to a  company "and sub- 93 sequently  the amount on which the rebate of income-tax  was allowed..........  is availed of by the company,  wholly  or partly  for  declaring dividends in any  year",  the  amount shall  be deemed to have been made the subject of  incorrect relief,  and the Income-tax Officer shall recompute the  tax payable  by  the company by reducing the  rebate  originally allowed. For the assessment year 1952-53, the account year being  the calendar  year 195 1, the appellant company was assessed  to income-tax   and  super-tax  on  a  total  income   of   Rs. 1,02,07,808/- and was allowed a rebate of one anna per rupee on  the undistributed profits of Rs. 36,62,776/-  under  the provisions  of  the Finance Act, 1952.  For  the  assessment year  1953-54  the appellant was assessed to a loss  of  Rs. 5,98,363/on  April  17,  1954.   On  April  20,  1954,   the appellant declared a dividend of Rs. 19,32,000/- out of  the undistributed  profits of the calendar year 1951 on which  a rebate had been allowed.  On March 18, 1958, the  Income-tax Officer  issued a notice calling upon the appellant  company to  show  cause  why action under s.35 (10)  of  the  Indian

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Income-tax  Act,  1922  should not be taken  against  it  by withdrawing   the   rebate  allowed  on  the  sum   of   Rs. 19,32,000/-.  The appellant claimed that subsection (10)  of s.  35 was not applicable as the amount on which the  rebate was  granted was availed of for declaring  dividends  before the sub-section had come into force. Held (per Sarkar, Hidayatullah and Raghubar Dayal, JJ.,  Das and Kapur, JJ., dissenting), that sub-section (10) of s.  35 of  the Indian Income-tax Act, 1922, was intended to have  a retrospective  operation and was applicable to  the  present case. Per  Das and Kapur, JJ. (1) Sub-section (10) of s. 35  which created  a legal fiction was clearly prospective and  showed that  what  was  correct at the, time when  the  rebate  was granted  was  rendered  incorrect on the  happening  of  the crucial  event  after  the coming into  force  of  the  sub- section. (2)  The  principle in Income-tax Officer v. S.  K.  Habibu. llah, [1962] Supp. 2 S. C. R. 716, that ’a statute which  is not declaratory of a pre-existing law nor a matter  relating to  procedure but affects vested rights, cannot be  given  a greater  retrospective  effect  than  its  language  renders necessary,  and even in construing a section which is  to  a certain  extent retrospective, the line is reached at  which the words of the section cease to be plain, is applicable to the  present case. 94 Per   Sarkar,j.-The language used in sub-ss. (5) and  (10)is wholly different and Income-tax Officer v. S.  K.Habibullah, [1962] Supp. 2 S. C. R. 716, is distinguishable. Per, Hidayatullah and Raghubar Dayal,JJ.- (1)  Under  s.  35  (10) the only  condition  was  that  the declaration of the dividends must be after the grant of  the rebate.   Though  the section came into force from  April  1 1956, it was to be used retrospectively to recall rebate  on amounts  which  the law deemed to have been  subject  of  an incorrect relief; and though the recalling of the rebate was after the enactment of the section, the conditions for.  the exercise   of  the  power  may  be  before  or   after   the commencement of the section. (2)  Income-tax Officer v. S. K. Habibullah, [1962] Supp.  2 S.  C.  R. 716 and Second Additional Income-tax  officer  v. Atmala  Nagaraj,  [1962] 46, T. T. R. 609, may  have  to  be reconsidered on some future occasion.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil appeal No. 139 of 1962. Appeal from the judgment and decree dated November 6,  1958, of  the  Bombay  High Court  in  Special  Civil  Application No.1806 of 1958. R.   J.  Kolah, J. B. Dadachanji, O. C. Mathur and  Ravinder Narain, for the appellant. Gopal Singh and R. N. Sachthey, for the respondents. 1962.  November 14.  The following judgments were delivered. The  judgment  of  S.  K. Das and  J.  L.  Kapur,  JJ.,  was delivered  by S. K. Das,J.  The judgment of M.  Hidayatullah and Raghubar Daval, JJ. was delivered by M. Hidayatullah, J. A. K. Sarkar.  J., delivered a separate judgment. S.   K.  DAS,J.-This  appeal  on a  certificate  of  fitness granted  by  the High Court of Bombay raises a  question  of interrpetation of sub-s. (10) of s 35 of the Indian  Income- tax Act, 1922.  This sub-seption 95

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is one of a group of sub-sections substituted or inserted in the  said section by s. 19 of the Finance Act, 1956 (Act  18 of 1956).  By s. 28 of the said Finance, Act, sub-s. (10) of s. 35 of the Income-tax Act, 1922, came into force on  April 1,  1956.  The short question before us is, whether  on  its true  construction, sub-s. (10) of s. 35 applies in  a  case where a company declares dividends by availing itself wholly or partly of the amount on which a rebate of income-tax  was earlier  allowed  to it under clause (1) of the  proviso  lo Paragraph  B  of  Part I of the relevant  Schedules  to  the Finance Acts, when such dividends were declared prior to the coming into force of the subsection, that is, prior to April 1, 1956. The  facts  which have given rise to the appeal  are  these. The  Ahmedabad Manufacturing And Calico Printing Co.,  Ltd., is  the  appellant  before us.  The  appellant  company  was incorporated  under the Indian Companies Act, 1866, and  has its  office  at Ahmedabad.  It carries on  the  business  of manufacturing, and selling cotton piece goods and chemicals. For  the assessment year 1952-53, the corresponding  account year  being  the  calendar  year  1951,  the  appellant  was assessed  to income-tax and super-tax on a total  income  of Rs.  1,02,79,808/- and was allowed a rebate of one anna  per rupee on the undistributed fits of Rs. 36,62,776/- under the first  proviso  to  paragraph B of.  Part  I  of  the  first Schedule  to  the Finance Act, 1952.  The amount  of  rebate allowed  was Rs. 2,28,924/-.  For the assessment year  1953- 54,  the corresponding account year being the calendar  year 1952,   the   appellant  showed  a  book   profit   of   Rs. 45,67,96,66,/-, but was assessed to a loss of Rs. 5,98,353/- on  April  17, 1954.  For the said calendar year  1952,  the appellant  declared a dividend of Rs. 19,32,0000/- on  April 20,  1954.   This  dividend came out  of  the  undistributed profits of the calendar year 1951 on which the appellant had been allowed rebate,. 96 On  March 18, 1958, the Income-tax Officer, Special  Circle, Ahmedabad,  respondent No. 1 before us, issued a  notice  to the  appellant  calling upon the latter to  show  cause  why action  under  sub-s. (10) of   s. 35 should  not  be  taken against  the appellant by withdrawing the rebate allowed  on the  sum  of  Rs. 19,32,000/-.  The  appellant  raised  some objections, one of which was that sub-s. (10) of s. 35  did, not  apply  to his case.  The Income-tax  Officer,  however, held  that  sub-s.  (10) of s. 35  applied  and  accordingly directed  that  the  rebate  allowed  on  the  sum  of   Rs. 19,32,000/-  should  be withdrawn, by  recomputing  the  tax payable by the appellant.  He ordered the issue of a  demand notice  for  a sum of Rs. 1,20,750/- which  was  the  rebate allowed  on Rs. 19,32,000/-.  The Income-tax Officer  passed this order on March 27, 1958. Being aggrieved by that order, the appellant moved the  High Court  of Bombay by a writ petition filed on June 26,  1958. The main ground taken by the appellant was that sub-s.  (10) of  s.  35  did  not apply to  a  case  where  dividend  was declared,  as in this case, before the coming into force  of sub-s.  (10)  of  s.  35.   The  High  Court  rejected  this contention  and dismissed the writ petition.  The  appellant then  obtained certificate of fitness and has preferred  the present appeal in pursuance of,, that. certificate. We may now read some of the provisions of s. 35 in so far as they are relevant for our purpose-               "S.   35(1)  The  Commissioner  or   Appellate               Assistant Commissioner may, at any time within               four  years from the date of any order  passed

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             by him in appeal or, in the case of the Commi-               ssioner,  in  revision under s.  33A  and  the               Income-tax  Officer  may, at any  time  within               four  years  from the date of  any  assessment               order or refund order passed by him on his own               motion rectify               97               any  mistake. apparent from the record of  the               appeal, revision, assessment or refund as  the               case may be, and shall within the like  period               rectify  any  such  mistake  which  has   been               brought to his notice by an, assessee :               xx         xx        xx               (2)   xx        xx               (3)   xx        xx               (4)   xx        xx               (5)   Where  in  respect  of   any   completed               assessment of a partner in a firm it is  found               on the assessment or reassessment of the  firm                             or on any reduction or enhancement made in  th e               income  of the firm under section 31,  section               33,  section  33A, section 33B, section  66  0               section  66A that the share of the partner  in               the  profit or loss of the firm has  not  been               included in the assessment of the partner,  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.               (6)   Where  the  excess profits  tax  or  the               business  profits tax payable by  an  assessee               has  been modified in appeal, revision or  any               other proceeding, or where any excess  profits               tax or business profits tax has been  assessed               after  the  completion  of  the  corresponding               assessment  for income-tax (whether before  or               after the corm.               98               mencement 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  re-               computation shall be deemed to be a rectifica-               tion  of  a mistake apparent from  the  record               within  the  meaning of this section  and  the               provisions  of  sub-section  (1)  shall  apply               accordingly, the period of four years referred               to in that subsection being computed from  the               date  of  the order making  or  modifying  the               assessment  of  such  excess  profits  tax  or               business profits tax.               (7)   xx   xx               (8)   xx   xx               (9)   xx   xx               (10)  Where, in any of the assessments for the               years beginning on the 1st day of April of the               years  1948  to 1955 inclusive,  a  rebate  of               income-tax was allowed to a company on a  part

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             of  its total income under clause (1)  of  the                             proviso  to  Paragraph  B  of  Part  I  of  th e               relevant   Schedules  to  the   Finance   Acts               specifying  the rates of tax for the  relevant               year, and subsequently the amount on which the               rebate of income-tax was allowed as  aforesaid               ,  is  availed of by the  company,  wholly  or               partly,  for declaring dividends in any  year,               the amount or that part of the amount  availed               of as aforesaid, as the case may be, shall, by               reason of the rebate of income-tax allowed  to               the company and to the extent to which it  has               not  actually been subjected to an  additional               income-tax  in accordance with the  provisions               of  clause (ii) of the proviso to Paragraph  B               of Part I of the Schedule to the Finance  Acts               above referred to, be deemed to have been made               99               the  subject  of incorrect relief  under  this               Act,   and   the  Income-tax   Officer   shall               recompute  the tax payable by the  company  by               reducing the rebate originally allowed, as  if               the  computation  is  a  rectification  of   a               mistake  apparent from the record  within  the               meaning of this section and the provisions  of               sub-section  (1) shall apply accordingly,  the               period  of four years specified therein  being               reckoned from the end of the financial year in               which  the  amount  on  which  the  rebate  of               income-tax   was  allowed  as  aforesaid   was               availed of by the company wholly or partly for               declaring dividends." Speaking  generally,  s.  35  deals  with  rectification  of mistakes  in  circumstances  detailed in  the  various  sub- sections thereof and provides for orders consequent on  such rectification.   Sub-section  (1)  empowers  the  Income-tax authorities to rectify mistakes apparent from the record  in respect of certain orders passed by them.  It provides  that the Income-tax Officer concerned may at any time within four years from the date of any assessment order passed by him on his own motion rectify any mistake apparent from the  record of  the  assessment:  The  power  of  rectification  may  be exercised  subject to two conditions : (1) that there  is  a mistake apparent from the record of the assessment, and  (2) that  the order of rectification is made within  four  years from  the  date of the assessment sought  to  be  rectified. Sub-section  (5) deals with inclusion or correction  of  the income of a partner in a firm consequent upon assessment  or reassessment  of the firm of which he was a  partner.   Sub- section  (6) deals with recomputation of total income of  an assessee in consequence of modifications made in the  excess profits  tax  or  the business profits  tax  payable  by  an assessee subsequent to an assessment made under the  Income- tax  Act.   These two subsections were  considered  by  this court in two decisions 100 to which we shall presently refer.  They have been relied on by the appellant and have some bearing on the interpretation of  sub-s. (10).  Sub-sections (2), (3), (4), (7),  (8)  and (9)  are  not  relevant  for our purpose  and  need  not  be referred to. Now,  we  come to sub-s.(10). It deals with a case  where  a rebate  was  allowed to a company on a part  of  its  income (viz.,  undistributed profits) by virtue of the  concessions

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given  by the Finance Acts of 1948 to 1955.  This  is  clear from  the  first part of the sub-section.  The  second  part states  the condition in which, or rather the crucial  event on the happening of which, the rebate granted. to a  company is deemed to have been given by a mistake apparent from  the record,  this condition or crucial event is the  declaration of  dividends by ’the company out of the amount in whole  or part,  on which abate was earlier granted to it.  The  third and  operative  part  states that on the  happening  of  the crucial  event, the amount on which rebate was  granted  and which has been subsequently utilised for declaring dividends shall  be deemed to have been made the subject of  incorrect relief  under the Act and the Income-tax Officer  shall  re- compute  the  tax  payable by the company  by  reducing  the rebate  originally  allowed  as if the  recomputation  is  a rectification  of a mistake apparent from the record  within the  meaning  of  the section.  The  fourth  and  last  part introduces  a period of limitation of four years,  the  four years  being reckoned not from the date of the order  passed as  in sub-s.(1), but from the end of the financial year  in which  the amount on which rebate of income-tax was  allowed was availed of by the company wholly or partly for declaring dividends.  This, in brief, appears to be the scheme of sub- s. (10) of s. 35. Now, the argument on behalf of the appellant is this.   Like sub-s. (5) of s. 35, sub-s. (10) affects a 101 vested right, namely, the right to a rebate of income-tax on a  part of the total income of the company under clause  (1) of  the  proviso to Paragraph B of Part I  of  the  relevant Schedules  to  the  Finance Acts of 1948 to  1955,  and  the further right to declare dividends out of the  undistributed profits of the previous year.  Under the well settled  rules of  statutory  construction,  no statute  which  impairs  an existing  right or obligation except as regards a matter  of procedure, shall have retrospective operation unless such  a construction appears very clearly in the terms of the Act or arises   by   necessary  and  distinct   implication.    Put differently,  a  statute is not to be construed  to  have  a greater  retrospective operation than its  language  renders necessary;............ and it is submitted that "the general rule is that all statutes other than those which are  merely declaratory, or which relate only to matters of procedure or of  evidence are prima facie prospective; and  retrospective effect is not to be given to them unless by express words or necessary   implication,  it  appears  that  this  was   the intention  of  the legislature" and "’it is a  corollary  of this  general presumption against retrospection  that,  even when   a   statute  is  intended  to  be  to   some   extent retrospective,’  it  is  not to be  construed  as  having  a retrospective  effect than its language renders  necessary". (Halsbury’s Laws of England, Vol. 36.  Third edition, p. 423 and  p. 426).  ’The argument on behalf of the  appellant  is that  by  s. 28 of the Finance Act. 1956,  sub-s.  (10)  has undoubtedly retrospective effect from April 1, 1956; but the language  of  the  sub-section does not  expressly,  nor  by necessary   implication,  show  that  it  has  any   greater retrospective  effect.   It  is pointed  out  that,  on  the contrary,  where  the legislature wanted a  particular  sub- section  to have greater retrospective effect, it  had  said so, e. g. in sub-s. (6).  It is also pointed out that sub-s. (5)  of  s.  35  was  inserted  by  the  Indian   Income-tax (Amendment) Act, 1953, and by s. 1 (2) 102 of the said Act it came into force on April 1, 19.52.  Where

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the legislature wanted to give greater retrospective  effect to particular provisions, it said so in ss. 3 (2), 7 (2) and 30  (2)  of  the said Act.  That  being  the  position,  the argument  on behalf of the appellant is that we  should  not give  any greater retrospective effect to sub-s. (10) of  s. 35  than  what  has been done by s. 28 of the  Finance  Act, 1956.  Learned Counsel for the appellant has strongly relied on the decision of this Court in Income-tax Officer v. S. K. Habibullah (1) wherein with regard to sub-s. (5) of s. 35 it was held that the subsection was not declaratory of the pre- existing law nor a matter relating to procedure but effected vested  rights  and must be deemed to have come  into  force only  from April 1, 1952; therefore, the Income-tax  Officer had  no jurisdiction under the said sub-section  to  rectify the assessment of a partner consequent on the assessment  of the firm in cases where the firm’s assessment was  completed before  April 1, 1952.  The argument of the learned  counsel for  the appellant is that the same principle must apply  in the present case and sub-s. (10) of s. 35 does not apply  to a case where dividend was declared by the company before the date  of the coming into force of the  sub-section,  namely, April, 1, 1956. The  second part of the argument of the learned counsel  for the  appellant  is  that  there is  no  real  difference  in language between the two sub-sections, sub-s. (5) and sub.s. (10) of s. 35.  In both cases 1 rectification or  correction is  made by reason of a subsequent event; in sub-s. (5)  the subsequent  event  is  the  assessment  of  the  firm  which discloses  the  inaccuracy in the earlier  assessment  of  a partner;  in  sub-s.  (10)  the  subsequent  event  is   the declaration of dividend out of the amount on which a  rebate was  earlier granted.  It is pointed out that in their  true scope and effect, the two sub-sections stand on the (1)  [1962] Supp. 2 S. C.. R, 716, 103 same footing.  Sub-section (10) further makes it clear  that by a ’legal fiction that which was correct at the time  when it  was  made is rendered incorrect after  the  coming  into force of the sub-section.  The sub-section states clearly               "shall, by reason of the rebate of  Income-tax               allowed                 to                 the               company..............................       be               deemed  to  have  been  made  the  subject  of               incorrect  relief  under  this  Act,  and  the               Income-tax  Officer shall re-compute  the  tax               payable by the company by reducing the rebate               originally allowed................." This language, it is argued, is clearly prospective and does not  justify the carrying of the legal fiction to  a  period earlier than April 1, 1956. As   against  these  arguments,  learned  counsel  for   the respondent has contended that the language of sub-s. (10) is different  from  that of sub-s. (5) and the  principle  laid down  by  this  court in S. K. Habibullah’s  (1)  cannot  be applied  to the present case.  Alternatively, he has  argued that the decision is incorrect and should be reconsidered by us.   The argument of learned counsel for the respondent  is that  sub-s.  (10) by necessary implication  has  a  greater retrospective effect than what is laid down by S. 28 of  the Finance Act, 1956.  He points out that the first part of the subsection  talks  of the assessments made for  any  of  the years  beginning on April 1, 1948, to April 1, 1955, when  a rebate  of  income-tax  was allowed; then  the  second  part refers  to  the subsequent declaration of  dividend  by  the company in any year.  Learned counsel for the respondent has

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emphasised  the expression "in any year" and  has  submitted that  this  shows  that  the intention  was  to  take  in  a declaration  of  dividend made even earlier  than  April  1, 1956, According (1)  [1962] Supp, 2 S.C.R. 716, 104 to  him, the only effect of s. 28 of the Finance Act,  1956, is  that the income-tax Officer can take action  only  after April 1, 1956, but the language of the sub-section does  not justify the conclusion that the legal fiction created by  it must  be  restricted to the declaration of dividends  on  or after April 1, 1956. We have carefully considered these arguments.  The  language of sub-s. (10) of s. 35 is perhaps not as clear as one might wish  it to be.  There is no doubt, however, that  the  sub- section  affects  vested rights and should not  be  given  a greater  retrospective operation than its  language  renders necessary.   Even  through the sub-section is to  a  certain extent retrospective, and s. 28 of the Finance Act, 1956, in express terms makes it retrospective from April 1, 1956,  it is clear to us that there is nothing in the language of  the sub-section  which  would  justify the  inference  that  the legislature  intended to carry the legal fiction created  by the  sub-section to a period earlier than the date on  which the  sub-section came into force.  The maxim  applicable  in such cases is that even in construing a section which is  to a certain extent retrospective, the line is reached at which the-words of the section cease to be plain.  We are  further of  the opinion that when the first part of the  sub-section refers  to  the assessments in the years 1948  to  1955,  it merely.  refers  to  the  period  during  which  the  rebate provisions were in force.  It is not disputed before us that the  rebate provisions came into force from the Finance  Act of  1948 and ended with the Finance Act of 1955.  The  first Part  therefore is merely a reference to the  period  during which  the  rebate provisions were in force.  It  is  indeed true  that  in the second part of the  sub-section  the  ex- pression  used is "declaring dividends in any year and  this has  to be read in conjunction with the word  "subsequently" which  can  only  mean subsequent to the  allowance  or  the rebate.  But in the very 105 same  part,  it is further stated that  the  declaration  of dividend  in  any  year shall, by reason of  the  rebate  be deemed  to  have  made the amount on which  the  rebate  was granted, the subject of incorrect relief etc.. This language which  creates the legal fiction is clearly prospective  and shows that what was correct at the time when the rebate  was granted  is  rendered  incorrect on  the  happening  of  the crucial  event  after  the coming into  force  of  the  sub- section,  and by the express terms of s. 28 of  the  Finance Act,  1956,  the sub--section comes into force on  April  1, 1956.  We are unable, therefore, to agree with  the  learned counsel for the respondent that the language of sub-s.  (10) by  necessary implication takes the legal fiction back to  a period  earlier  than  April 1, 1956.   In  coming  to  this conclusion,  we  have  kept in mind  the  principle  that  a statute does not necessarily become retrospective because  a part  of the requisites for its action is drawn from a  time antecedent to its passing. Further more we see no reason why the principle laid down in S.  K. Habibullah’s case (1) will not apply in  the  present case nor are we satisfied that decision with regard to  sub- s.  (5) of s. 35 was incorrect.  We may point out,  however, that  in  Second  Additional Income-tax  Officer  v.  Atmala

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Nagaraj  (2)  this court went a step further and  held  that sub-s.  (5) of s. 35 was not applicable to cases  where  the assessment  of  the partner was completed  before  April  1, 1952,  even  though the assessment the  firm  was  completed after  April  1, 1962 of Learned counsel for  the  appellant frankly conceded        before us that he did not wish to go as  far  as  that and contend that even in a  case  where  a declaration of devidend was made after April 1, 1956, sub-s. (10)  would not apply; because that would make  sub-s.  (10) unworkable.  The (1) [1962] Supp. 2 S.C.R. 716. (2) [1962] 46 I.T.R. 609. 106 decision  in Second Additional Income-tax Officer v.  Atmala Nagaraj (1) may perhaps require reconsideration as to  which we  need  not express any final opinion now; but so  far  as this case is concerned we see no reason why the principle in S.  K. Habibullah’s case (2) will not apply.  The  principle is  simply  this.  A statute which is not declaratory  of  a preexisting  law  nor  a matter relating  to  procedure  but affects   vested   rights   cannot  be   given   a   greater retrospective  effect than its language  renders  necessary, and  even  in  construing a section which is  to  a  certain extent retrospective, the line is reached at which the words of  the section cease to be plain.  These are  well  settled principles and there is no reason to doubt their accuracy. For the reasons given above, we would allow the appeal,  set aside the order and judgment of the High Court and quash the order  of the Income-tax Officer dated March 27,  1958,  and the  notice of demand dated March 28, 1958.   The  appellant will be entitled to its costs throughout. SARKAR,  J.-In  its assessment to income-tax  for  the  year 1952-53,  the appellant, a company, had been  granted  under the  provisions  of  the Finance Act, 1952, a  rebate  on  a portion  of its profits of the previous year, that is,  1951 which   it   had  not  distributed  as  dividends   to   its shareholders.’  In  the next assessment  year  1953-54,  the appellant used a part of the aforesaid undistributed profits for  declaring  dividends.  As the law then  stood,  nothing could  be  done by the revenue authorities to  withdraw  the rebate  earlier granted on the ground of the  profits  being utilised  in  declaring dividends in a  latter  year.   From April  1,  1956, however, there was a change in the  law  as sub.  s.  (10)  of s. 35 of the Income-tax  Act,  1922,  was brought  into  force then.  By an order made  on  March  27, 1958, under that sub-section, the terms of (1) [1962] 46 I.T.R. 609 (2) [1962] Supp. 2 S.C R. 716. 107 which  I  will set out presently, the aforesaid  rebate  was withdrawn  and the appellant was called upon to  refund  it. The appellant then applied to the High Court at Bombay for a writ  to  quash the order of March 27, 1958, on  the  ground that  sub-s.  (10) was not applicable to the facts  of  this case for reasons which I will later state.  That application was dismissed.  This appeal is against this decision of  the High Court at Bombay dismissing the application. Now  sub-s. (10) of s. 35 of the Income-tax Act was  enacted by  the  Finance Act of 1956 and it was  given  effect  from April  1,  1956.   That  sub-section, in so  far  as  it  is necessary  to state for the purpose of this  case,  provides that  where in any of the assessment 1948-49 to  1955-56,  a rebate  of  income-tax was allowed to a  company  under  the Finance  Act prevailing in that year on a part of its  total income  "and subsequently the amount on which the rebate  of

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income-tax  was  allowed as aforesaid is availed of  by  the company,  wholly or partly, for declaring dividends  in  any year................................. the Income-tax Officer shall re-compute the tax payable by the company by  reducing the rebate originally allowed." The sub-section in substance permits  a rebate duly allowed in any year before.  it  came into force to be withdrawn if "subsequently’,’ the amount on which the rebate was allowed "is availed of" "for  declaring dividends in any year." The  appellant contends that the sub-section does not  apply unless the amount on which the rebate was granted is availed of  for declaring dividends after the sub section  had  come into  force, that is after April 1, 1956, and  therefore  it does  not apply to the present case.  It is said that if  it were  not so the sub-section would be given a  retrospective operation  and the rule is that it is to be presumed that  a statute dealing with substantive rights is not to have such 108 operation.  The case of Income-tax Officer, Madras v. S.  K. Habibullah was cited in support of this contention. I will assume that if the sub-section were applied to a case like the present, it would affect a vested right.  The  rule no  doubt is that a statute is presumed not to do  so.   Bat this  rule  does pot apply if the language  of  the  statute indicates an intention to give it a retrospective operation. It seems to me that subs. (10) uses language which indicates sufficiently  clearly  that it was intended  to  be  applied where  the  amount  on which rebate had  been  obtained  was availed  of  for declaring dividends before  the  subsection came  into force, that is’ to say, to have  a  retrospective operation.   It says, "subsequently the amount an which  the rebate  of  income-tax was allowed as aforesaid  is  availed of..................  for declaring dividends in any  year". There is no doubt that the words "subsequently " and "in any year" mean in any year subsequently to the year in which the rebate was granted.  They would, therefore, clearly  include a  year before the sub-section came into force.  But  it  is said that these words should in view of the rule be read  as not including a year before the sub-section came into  force as  they  also include years subsequent to the  coming  into force of the sub-section and are therefore ambiguous. I am unable to accept this contention.  I find no ambiguity. If  the intention was that the subsection would  apply  only when the amount was availed of for declaration of  dividends after it was enacted then the words ""subsequently" and  "in any year" were wholly unnecessary.  Without these words  the sub-section  would have read, "and the amount is availed  of for declaring dividends." There would then be no doubt  that it  was  intended to operate only  prospectively.   But  the legislature used some more words.  It must have done so with (1)  [1962] Supp. 2 S.C.R.716. 109 some  purpose.  What that purpose was if it was not to  give the sub-section retrospective operation, I failed to see.  I am unable to read the words "subsequently" and "in any year" as   otiose  and  as  indicating  no  different   intention. Therefore,  it  seems to me that the language  of  the  sub- section   plainly  requires  it  to  have  a   retrospective operation.   The subsection is properly applicable  to  this case. There  is another consideration leading me to the view  that the  presumption  against retrospective operation  does  not arise here.  It was said in Pardo v. Bingham(1) that it  was not   an  invariable  rule  that  a  s  could  not  have   a retrospective  operation  unless so expressed  in  its  very

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terms,  and  that it was necessary to look to  the  ’general scope and purview of the statute and at the remedy sought to be applied and consider what was the former state of the law and  what it was that the legislature contemplated.   It  is quite  plain  that in providing for the grant of  rebate  on undistributed  profits by the ,Finance Acts of 1948 to  1955 the  legislature wanted to encourage the employment  of  the profit  made  in  a business in the  business  itself.   The object  presumably  was  to expand  the  industries  of  the country.   This  involved  a long term  employment  of  the, profits  in  the  business.   It could  not  have  been  the intention of the legislature to grant rebate when a  company only  kept  the  profits for a short time  with  itself  and having earned the rebate distributed the profits without the industry having had any real benefit of them.  I  think should state here that the provisions   for  the  grant   of rebate did not require that dividend was not to be  declared at  all.  The object was to encourage a reasonable  division of  the profits between the shareholders and  the  industry. Allowance  of  rebate was provided for on that part  of  the profits which was left for employment in the industry  after reasonable dividends had been (1)  (1869) L. R. 4 Ch. 735. 110 distributed to the shareholders.  The rebate was allowed  on a graded scale depending on the amount of profits which  was not distributed as dividends. Now  the system of granting rebates started in 1948-49.   It was  stopped  in 1955-56.  The subsection was  brought  into force on April 1, 1956, that is,seven years after the system had  first  been  started.   The  sub-section  provided  for withdrawal  of  the rebate when the amount on which  it  had been  granted was availed of in declaring dividends.  It  is fairly clear from this that the legislature did not  approve of these amounts being utilised in declaration of dividends. It is also not too much to suppose that there had been  many previous cases of such utilisation of profits for if it  had not  happened earlier, there is no reason to think that  the legislature  anticipated  the evil happening in  future  and passed  the law to stop it.  In view of the large number  of years that had passed between the time when the allowance of rebate  commenced  and  the time when  the  sub-section  was brought  into  force, it can be imagined that a  very  large number  of cases of distribution of profits on which  rebate had  been  allowed,  had already taken  place.   I  find  it difficult  to think that many cases remained after April  1, 1956, where a company which intended to utilise the  amounts on  which  rebate  had been granted in  the  declaration  of dividends, had not already done so.  There  is  no dispute that by sub-s. (10)  the  legislature intended  to  penalise  a  case  where  subsequent  to   its enactment,  the amount on which rebate had been granted  was utilised  in  declaration of dividends.  Now  is  there  any reason to think that the legislature did not want to  impose the  penalty  also  on those who had  earlier  utilised  the amount  in declaration of dividends ? There was  no  special merit in these latter 111 cases, And I also think that they formed the majority of the cases.  The grant of rebate having been stopped after  March 31, 1956, there was no occasion to provide for cases of such grant  thereafter.  All these circumstances lead me to  the. view  that the intention of the legislature was to  penalise the cases of utilisation of amounts on which rebate had been granted  in payment of dividends which had  happened  before

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the sub-section came into force.  The remedy which the  sub- section provided would largely fail in any other view.   The general   scope  and  purview  of  the  subsection   and   a consideration  of the evil which it was intended  to  remedy lead me to the opinion that the intention of the legislature clearly  was that the subsection should apply to  the  facts that we have in this case. As  to S. K. Habibullah’s case (1) I 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-s. (5) of s. 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-ss. (5)  and  (10) seems to me to be wholly different.  There is nothing in  S. K. Habibullah’s case (1) to indicate that in the opinion  of the  learned judges deciding it there were any  words  which would  indicate that sub-s. (5) was to have a  retrospective operation.   In  my view, sub-s. (10) contains  such  words. Furthermore, I do not find that the other considerations  to which  I have referred, arose for discussion in  that  case. In my view, the two cases are entirely different. I  therefore,  think  that sub-s. (10)  of  s.  35  properly applies  to  this case.  In my view, the  appeal  should  be dismissed with costs. (1)  [1962] Supp. 2 S. C. R. 716. 112 HIDAYATULLAH,  J.-This  is an appeal by  an  assessee  with’ certificate  under Art. 133 (i)(c) of the Constitution  from the  judgment  and  order  of  the  High  Court  of   Bombay dismissing the assessee company’s petition under Art. 226 of the  Constitution which challenged an order under s.  35(10) of the Income-tax Act rectifying the earlier assessment  and sought   a  writ  or  writs  to  prohibit   the   Income-tax Authorities from giving effect to that order. The assessee (The Ahmedabad Manufacturing & Calico  Printing Co.  Ltd.) is a public limited company carrying on  business of manufacture of cotton price-goods  and  chemicals.    The year of account     of the assessee company is the  calendar year.In the    assessment year 1952-53, corresponding to the calendar year 1951, the appellants were assessed on  January 31,  1953,  on  a  total income  of  Rs.  1,02,79,808.   The assessee company was allowed a rebate of one anna per  rupee amounting  to Rs. 2,28,924 on the undistributed  profits  of Rs.  26,62,776  tinder the first proviso to Paragraph  B  of Part I of the first Schedule to the Finance Act, 1952.   For the  assessment  year 1953-54 (account  year  calendar  year 1952)  the books of the assessee company showed a profit  of Rs.  45,67,966.  That profit became a loss of Rs.  5,98,353. after  deductions  like  depreciation  etc.  were   allowed. Inspite of there being a loss, the assessee company declared on April 20, 1953, a dividend of Rs. 19,32,000 for the  year of account 1952. The  Income-tax Officer,’ by an order dated March 18,  1958, called  upon the assessee company to show cause  why  action under s. 35(10) of the Income-tax Act should not be taken to recall  a  proportionate part of the rebate because  in  his opinion  the entire dividend of Rs. 19,32,000 came  out  of’ the undistributed profits of the calendar year 1951 on which the appellant had received a rebate.  The 113               "(5) Where in respect of any completed assess-               ment of a partner in a firm it is found on the

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             assessment or re-assessment of the firm or  on               any  reduction  or enhancement  made,  in  the               income  of the firm under section 31,  section               33  section  33A, section 33B, section  66  or               section  66A that the share of the partner  in               the  profit or loss of the firm has  not  been               included in the assessment of the partner  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." It  must  be noticed that under this  amendment  time  limit started from the date of the final order passed in the  case of  the firm though the rectification is to be made  in  the assessment of the’ partners of the firm. By  s.  19  of the Finance Act,  1956,  sub-s.  (10)  (among others)  was  added as from April 1, 1956.  That  subsection reads as follows :-               "(10) Where in any of the assessments for  the               years beginning on the 1st day of April of the 114 rectify  any  such mistake which has . been brought  to  his notice by an assessee :" It  must  be noticed that the, time limit started  from  the date of the order of assessment which was to be rectified. In 1953, by s. 19 of the Indian Income-tax (Amendment)  Act, 1952  (25 of 1953), sub-s. (5) (among others) was  added  as from April 1, 1952.  That sub-section reads as follows :- "(5)  Where  in  respect of any completed  assessment  of  a partner  in  a  firm it is found on the  assessment  or  re- assessment  of the firm or on any reduction  or  enhancement made in the income of the firm under section 31, section  33 section 33A, section 33B, section 66 or section 66A that the share  of the partner in the profit or loss of the firm  has not  been included in the assessment of the partner  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 subsection  being computed from the date of the final  order passed in the case of the firm." It  must  be noticed that under this  amendment  time  limit started from the date of the final order passed in the  case of  the firm though the rectification is to be made  in  the assessment of the partners of the firm. By  s.  19  of the Finance Act,  1956,  sub-s.  (10)  (among others)  was added as from April 1, 1956.  ’Mat  sub-section reads as follows :- "(10)  Where  in  any  of  the  assessments  for  the  years beginning on the 1st day of April of the                115               years’  1948  to 1955 inclusive, a  rebate  of               income-tax was allowed to a company on a  part               of  its total income under clause (i)  of  the               proviso to Paragraph B of Part I of the  rele-               vant Schedules to the Finance Acts  specifying               the  rates of tax for the relevant  year,  and

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             subsequently the amount on which the rebate of               income-tax was allowed as aforesaid is availed               of  by  the  company, wholly  or  partly,  for               declaring dividends in any year, the amount or               that   part  of  the  amount  availed  of   as               aforesaid,  as  the  case may  be,  shall,  by               reason of the rebate of income-tax allowed  to               the company and to the extent to which it  has               not  actually been subjected to  an  additional               income-tax  in accordance with the  provisions               of clause (ii) of the proviso to Paragaph B of               Part  I of the Schedules to the  Finance  Acts               above  refer-red  to, be deemed to  have  been               made  the  subject of incorrect  relief  under               this  Act,  and the Income-tax  Officer  shall               recompute  the tax payable by the  company  by               reducing the rebate originally allowed, as  if               the  recomputation  is a  rectification  of  a               mistake  apparent from the record  within  the               meaning of this section and the provisions  of               sub-section  (1) shall apply accordingly,  the               period  of four years specified therein  being               reckoned from the end of the financial year in               which the amount on which rebate of income-tax               was allowed as aforesaid was availed of by the               company   wholly  or  partly   for   declaring               dividends." It  will  be  noticed that the time limit  under  this  sub- section  was to commence from the end of the financial  year in  which the dividends were declared from profits on  which the rebate was earned earlier.  The question in this case is whether sub-s. (10) can  apply Co an assessment which had been nude be- 116 fore  sub-s.  (10) came into force.  The contention  of  the assesse-company    is   that   sub-s.   (10)    was    given retrospectivity  only up to April 1, 1956, and the words  of that at sub’-section should be interpreted in such a way  as to   give  the  sub-section  no   greater   retrospectivity. According  to  the assessce company the assessment  for  the year 1953-54 had become final on April 17, 1954, that is  to say, before the 1st day of April, 1956, from which date sub- s.  (10) was made to operate.  The provisions of s.  35(10), according to the assessee company, could only be utilised if dividends were declared after April 1, 1956, but not if  the declaration  took place earlier.  Reliance was  placed  upon the  decision  of  this  Court  in  Income-tax  Officer   v. Habibullah(1),  and  reference  was  also  made  to  another decision following Habibullahs’ case, (1), Second Additional Income-tax Officer v. Atmala Nagaraj.(2) Our learned brother Das, J., following Habibullah’s  case(’) has  held  that the contention of the  assessee  company  is well-founded  and  has  expressed the  opinion  that  Atmala Nagaraj’s  Case  (2)  may need  re-consideration.   He  has, therefore,  ordered the reversal of the judgement and  order of  the  High Court.  In our judgement, and we say  it  with profound  respect,  this appeal must be dismissed.   We  are also of the opinion that both the above cases (which are  of the  same  Divisional  Bench) may have  to  be  reconsidered hereafter.   Amala Nagaraj’s case(")  followed  Habibullah’s case.(’)  The difference in the facts of the two  cases  was only  in  one respect and that was not  sufficient  to  take Atmala  Naagaraj’s case (2) out of the ratio of the  earlier decision.  We shall deal with these two cases later. The  Income-tax Act imposes a charge of tax for a year at  a

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time and that year is the year of assessment.  The charge is in respect of a previous year which is commonly known as the year of account. (1) [1962] Supp. 2 S.C.R. 716. (2) [1962] 46 T. T. R 609. 117 The rate at which the tax is to be charged is enacted by  an annual Finance Act for each assessment year.  The assessment year  is the Financial Year.  From the nature of  things  an amendment of the Income-tax.  Act, made in the middle of the assessment,year,if  made  to operate from the  beginning  of the,  assessment  year, operates on incomes which  had  been earned  before.   Since an amendment cannot be.  allowed  to operate  from the mid-term, each such amendment is made  to, comprise   a  whole  assessment  year  whether  it  be   the assessment  year  then  running. or an earlier  or  a  later assessment, year.  Amendments are thus .give  retrospective. operation  from  the first day of April in the  same,  or  a preceding, or prospective operation for a future  assessment year.  Ordinarily, the law, as it stands on the 1st of April in  any  assessment year, applies to,  assessments  in  that year. but the law may expressly or by necessary  implication give itself a greater retrospective operation. The date on which the amendment comes into force is the date of the commencement of the amendment.  It is read as amended from  that date.  Under ordinary circumstances, an Act  does not have retrospective operation on substantial rights which have  become fixed before the date of the  commencement  of, the Act.  But this rule is not unalterable.  The legislature may  affect  substantial rights by enacting laws  which  are expressly retrospective or by, using language which has that necessary  result.  And this language may give an  enactment more retrospectivity than what the commencement clause gives to any of its provisions.  When this happens the  provisions thus  made retrospective expressly or by  necessary  intend- ment,  operate  from  a  date  earlier  than  the  date   of commencement   and  affect  rights  which,  but   for   such operation, would have continued undisturbed. It   must  be  remembered,-that  if  the    Income-tax   Act prescribes a period during which the, tax due in 118 any particular assessment year may be assessed, then on  the expiry  of  that  period  the  Department  cannot  make   an assessment.   Where no period is prescribed  the  assessment can be completed at any time but once completed it is final. Once  a  final  assessment has been made,  it  can  only  be reopened  to rectify a mistake apparent from the record  (s. 35)  or  to reassess where there has been an  escapement  of assessment  of  income for one reason or  another  (s.  34). Both   these  sections  which  enable  reopening   of   back assessments provide their own periods of time for action but all these periods of time, whether for the first  assessment or  for rectification, or for reassessment, merely create  a bar  when that time passes against the machinery  set-up  by the  Income-tax Act for the assessment and levy of the  tax. They do not create an exemption in favour of the assessee or grant  an  absolution  on the expiry  of  the  period.   The liability  is not enforceable  but the tax may a in be  come eligible if the  bar is removed and the tax-payer is brought within the jurisdiction of the said machinery by reason of a new power.  This is, of course     subject to the  condition that the law must say that such is the  jurisdiction, either expressly or by-clear implication.      If  the language  of the law has that clear   meaning,  it  must  be  given  that effect and where the     language  expressly so declares  or

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clearly  implies  it,  the retrospective  operation  is  not controlled by the commencement clause. The amendment, with which we are concerned, was made by  the Finance  Act,  1956 (18 of 1956).  By s. 2,  it  dealt  with the year beginning on the 1st day of April, 1956, and  fixed the  rates  of taxes,for the assessment year  commencing  on that  date.  It also amended the Income-tax Act by ss. 3  to 35.  Section 28 then prescribed the dates of commencement of these sections.  It read :-               "28.   Commencements of amendments to Act’  11               of 1922.-The amendments made in the               Income-tax Act, by section 4 and clause (b) of               section  15 shall be deemed to have come  into               force  on the 1st day of April 1955,  and  the               amendments  made by section 3 to 27  inclusive               shall come into force on the 1st day of April,               1956." Sub-section (10) was introduced into s. 35 of the Income-tax Act by s. 19 of this Act.  If there was nothing more in  the language  of  the sub-section to give it operation  from  an earlier  date  it would have operated only from  1st  April, 1956,   but  the  language  of  the  sub-section  gives   it additional  retrospectively  and says so in such  clear  and unambiguous language as to leave no doubt.  There is no room for the application of Lord justice Bowmen’s dictum in. Reid v. Reid (1) that even in construing a section which is to  a certain  extent retrospective, the maxim that  statutes  are prospective  only, ought to be borne in mind  as  applicable whenever  the  line  is reached at which the  words  of  the section cease to be plain. The  topic  of s. 35 is rectification of  mistakes  apparent from  the record.  Sub-section (10) introduced a  new  basis for rectification in s. 35 which already prescribed a period of four years from-the order of assessment and the new  sub- section   enabled   rectification   to  be   made   in   new circumstances   and   within  a  new  time   limit.    Those circumstances   when  analyzed,  furnish  the  key  to   the retrospectivity  of the section.  We shall begin by  quoting only    the material portion of that sub-section, which  has been quoted in full earlier               "Where,  in  any of the  assessments  for  the               years beginning on the 1st day of April of the               years  1948  to 1955 inclusive,  a  rebate  of               income-tax     was    allowed.........     and               subsequently the amount on which the rebate of                             income-tax was (1)  (1886) 31 Ch.  D. 409. 120 allowed...  is availed of .......for declaring dividends  in any  year......  the, amount .....shall be  deemed  to  have been, made the subject, of incorrect relief and the  Income- tax Officer shall recompute the tax as if the  recomputation is  a  rectification of a mistake apparent from  the  record within  the, meaning of this section and. the provisions  of subsection  (1) shall apply accordingly, the period of  four years  being reckoned from the end of the financial year  in Which. the amount on which rebate of income-tax Was  allowed was, availed of for declaring dividends." The purport of this new sub-section was the recall of rebate which  had. been allowed in any of the assessments  for  the years  1-4-1948 to 31-3-1956 under  certain.  circumstances. At  the very start, the sub-section takes one to  assessment years to which S. 28 which prescribed the commencement as 1- 4-1956  did not take one to.  We do not accept the  argument of  the  learned counsel for the assessee company  that  the

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mention of the years is merely a repetition of a  historical fact  for  ready  reference.   The  words  "in  any  of  the assessments for the years etc. II show in respect ofwhich, assessments rectification, would be possible.The  years are mentioned individually by usingthe word "any".  The law. speaking in 1956 was thusspeaking  of all    the assessment years individuallygoing.back to 1st April, 1948. ;The language wasclearly one of retrospectivity  and  the suggestion,that   there is no intent behind these  words and  that  they merely refer to a historical  fact  is  -not acceptable  to us.  This conclusion is further fortified  by the words :- "and  subsequently  the amount.... .... is availed   of  for declaring.. dividends in any year.." 121 Having mentioned the years individually in the opening part, an   event  is  mentioned  which  is   subsequent,   namely, declaration of dividend from an amount on’ which rebate  was allowed.  "Subsequently" here obviously means subsequent  to "any. of the assessments for the years beginning on the  1st day  of  April  of the years 1948 to  1955  inclusive",  not necessarily subsequent to the Amending Act.  The declaration of  the  dividends must be after’ the grant of  the  rebate. That  is the only condition and it does not import the  date of  commencement of the subsection in any way .  Then  comes the  operative  part  and it is this.   If  in  the  earlier assessment  in  any  of the years mentioned  a  rebate’  was allowed and subsequently in any year there was a declaration of  dividend  utilising the amount on which the  rebate  Was given,  the  amount so utilised should be deemed to  be  the subject of incorrect relief.  This fiction comes into  force from 1-4-1956 but it is not stated that the circumstances in which  it  comes into being should also be  after  1-4-1956. The sub-section no doubt is to be used from 1-4-1956 but  it is  to be used retrospectively to recall rebate  on  amounts which the law deems to have been the subject of an incorrect relief  in the past.  The recalling of the rebate  is  after the  enactment  of sub-s. (10) but the -conditions  for  the exercise   of  the  power  may  be  before  or  after’   the commencement  of  the  sub-section.  The only  curb  on  the exercise of the power is that the Income-tax Officer may  go back  a  period of four years reckoned from the end  of  the financial year in which the declaration of dividend was made to the date    when the action is taken. In   the present    case, this is so.  The assessee  company declared dividends in the calendar year 1952.     The assessment  year  was  1-4-1953 to  31-3-1954.   The  letter written  on March 18, 1958, asking the assessee  company  to show cause was 122 within the four years reckoned from the end of the financial year  (31-3’1954)  in which the amount on  Which  rebate  of Income-tax  was  availed  of for  declaring  dividends.   It complied  with  the letter of the  sub-section.   Since  the power  commenced.  on  1-4-1956, the  utmost  reach  of  the Income-tax Officer would be the end of the assessment year A 1952.   Any declaration of dividend after 1st day of  April, 1952,  out  of accumulated profits of any of  the  years  in which rebate was earned would be within time for the  recall of the rebate.  But a declaration prior to 1-4-1952 would be beyond the power of the Income-tax Officer to recall.   This meaning  is  the only meaning which the plain words  of  the section can bear.  Any other’ meaning might make sub.s. (10) unworkable  because  no company.,, with the  knowledge  that rebate  would be recalled, would like to  declare  dividends

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after  April  1, 1956, out of amounts- on which  rebate  was earned.   If the other meaning was attributed,  sub-s.  (10) might well be a dead letter.  The sub-section was  obviously the result of noting how rebates were earned and later  were being utilized to fill the pockets of the shareholders.  The amendment met this situation and did it in very clear terms. It  remains  to  consider, the decisions of  this  court  in Habibullah’s  case  (1) and Atmala Nagaraj’s case  (2).   In those two cases this Court was called upon to interpret sub- s.  (5)  quoted above which was introduced as from  April  1 1952,  by the Indian Income-tax (Amendment) Act,  1953.,  In both  the cases there was a final assessment of the  incomes of  partners in registered firms.  Later the  assessment  of the  registered firms took place and it was found  that  the share  of  income of the partners was larger than  what  had been  assessed.  Under s. 35 (1), as it stood before  sub-s. (5)  was introduced, rectification could be made in  respect of a mistake apparent (1) [1962] Supp, 2 S.C.R. 716.  (2) [1962] 46 I. T. R. 609.  123 from  the record and the records of the firms could  not  be read  with  those of the partners to find an  error  in  the latter.   There  was thus an impasse.  It was ruled  by  the Privy  Council  in Commissioner of Income-tax  v.  Khemchand Ramdas(1), at p. 248 :               "............... When once a final assessment,               is arrived at, it cannot, in their  Lordships’               opinion,  be reopened except in  circumstances               detailed   in  section  34  and  35   of   the               Act........... and within the time limited  by               those acts." Therefore,   unless   the  original  s.  35   allowed   such rectification  there  was no help.  Often the  firm’s  final assessment  dragged  on  for  years and  by  the  time  that assessment  was  done  the time  limited  by  (sub.s.1)  had already  run out.  Parliament therefore stepped in  with  an amendment  which  was  to commence on April  1,  1952.   Two matters were provided by sub-s. (5).  Firstly, the result of the assessment of the firm showing that the partners’ income was  not properly included in their own assessments, was  to be  deemed  to  disclose  an error  in  the  record  of  the partners’ assessment and secondly, the period of four  years instead of being computed  from the order of assessment made against the partners as under sub-s. (1) was to be  computed from  the date of the final order passed in the case of  the firm. No  doubt this. power could be exercised from  1-4-1952  but the question that had to be considered was whether it  could be exercised only to reopen the assessment of partners of  a firm  if,  and only if, the order in the assessment  of  the firm  was  passed after the amendment came into  force.   In dealing with the matter in Habibullah’s  case(2)  this Court referred to the finality which attaches to a final (1) (1938) L. R. 65 I. A. 236, 248. (2) [1962] Supp. 2 S.C.R. 716. 124 assessment as stated by the Privy Council.  This Court  then referred to the date of the commencement of sub-s. (5) which ’was  fixed  retrospectively as 1-4-1952 and held  that  the sub-section  could not be used to reopen  assessments  which had  become  final before the commencement of the  new  sub- section,  contrasting its language with that of  sub-s.  (6) which wits, simultaneously introduced.  In Habibullah’s case (1) the dates were :- Partners’ assessment for 1946-47 on 22-2-1950

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  -do        -do-         1947-48 on   -do- Registered firms’ assessment for 46-47 on 31-10-1950       -do-           -do-       1947-48 on 30- 6-1951 Sub-s.(5) to s. 35 introduced from 1-4-1952 Order under s. 35 (5) on 27-3-1954 If  sub-s. (5) could be used in this case it is  plain  that the  ’four  years period had  not  passed  between31-10-1950 ’(;which was the earlier assessment) and 27-3-1954 when  the rectification  was made.  No doubt, the two  assessments  of the firm were also before 1-4’-1952 but the sub-section  has nowhere said that the power was only to be exercised if the’ assessment of the firm was after that date.  Such a  meaning is  also difficult to imply.  Under a fiction created  after 1-4-1952 the assessment of the partners disclosed a  mistake and  if the fiction and the rest of the sub-section were  to be given their full and logical effect the assessment of the partners could, be reopened and rectified.  But it was  held otherwise  by  this  Court.  The main reason  was  that  the partners’  assessments  had become final  before’  1-4-1952, that  under the law, as it then stood, there’ was’ no  error in   their  record,  and  Sub-s.(5)  having   been   enacted retrospectivity from (1)  [1962] Supp. 2 S. C.R. 716. 125 1-4-1952  could not be given more retrospectivity  That  the firm’s assessment was also before 1-4-1952 was not given  as a  reason  and in any  event it was not very  relevant.   It neither added to nor detracted from the finality (such as it was  on  22-2-1952) on the Partners’  assessment.   The  law obviously   mentioned   the  final  order  in   the   firm’s assessement  as  the starting point in view  of  the  length time  the  firm’s  assessments  take  to  reach  their   own finality.   But  there was nothing to ’show  that  this  new terminus a quo must be after 1-4-1952 before sub-s(5)  could be  used.   The  words  of the  sub-section  were   entirely indifferent  to this aspect In Atmala Nagraj’s Case (1)  the assessment  of  the  was  also  completed   before  partners (22-1-1952) 1-4-1952 and had become final  subject   however to  section 34 and 35.  No doubt the assessment of the  firm was  completed after 1-4-1952 but this distinction  made  no difference to the finality such as had been gained on  22-1- 1952. We  do not naturally express a final opinion on sub-s.  (5). We must leave that to a future case.  We must, however,  say that  the two earlier cases may have to be  reconsidered  on some future occasion.  When the occasion comes the questions to ask would be               1.    Did finality attach in Habibullah’s case               (2) to the partners’ assessment under the  law               as  it  then stood from  22.2-1950  (partners               assessment)  or from 31-10-1950 and  30-6-1951               (the firm’s assessment) ?               2.    Was  there no finality in so far as  the               partner’s  assessment was concerned in  Atmala               Nagaraj’s    case   (1)   between    22-1-1952               (partner’s                    assessment)  and               1-4-1952 (the commencement of sub-s. (5)) ?               (1)  [1962]  46 I.T.R. 609.        (2)  (19621               Supp. 2 S.C.R. 716.               126               3.    Was   the  finality  of  the   partner’s               assessment, if any, controlled in the one case               by  the fact that the assessment of  the  firm               was  before 1-4-1952 and in the other  by  the               fact that the assessment of the firm was after

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             1-4-1952 We have detailed these questions because they high-light the only point of difference between the two cases.  We  express no opinion of these questions. In view of what we have said on. the interpretation of s. 35 (10)  we are of opinion that the judgment of the High  Court was  right.  We would, therefore, dismiss this  appeal  with costs. By COURT : In accordance with the opinion of the  majority,- this appeal is dismissed with costs. Appeal dismissed.  127