INCOME - TAX OFFICER, TUTICORIN versus T. S. DEVINATH NADAR & ORS.

Citation: [1968] 2 S.C.R. 33 · Decided: 25-10-1967 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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D 
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INCOME-TAX OFFICER, TUTICORIN 
v. 
T. S. DEVINATH NADAR & ORS. 
October 25, 1967 
(K. N. WANCHOO, C.J., R. S. BACHAWAT, V. RAMASWAMI, 
G. K. MITTER AND K. S. HEGDE, JJ.] 
Indian Income-tax Act, 1922 as amended by Act 25 of 1953, s. 35(5) 
· -Rectifictition of partner's 
assessment 
consequent 
on 
reassessment 
of firm-Section permitting such r.ctification in 
re,.pect of "completed 
assessment" of partners-Section whether applies to partner's assessmenrs 
finalised before 1st April 1952. 
The respondent and his four brothers were partners in a firm carrying · 
on. business in gunnies. The assessment of the firm for the year 194344 
was compleied on January 22, 1946 and the share income of each partner 
was also determined. The as.•essment of the respondent as an individual 
on the basis of his share so determined was completed 
on January 24, 
1946. Subsequently the assessment of the firm was reopened by notice 
under s. 34 of the Indian Income-tax Act, 1922 issued on September 11. 
1952 and re-assessment by including some additional income was made 
in May 1959. In July 1959 notice under s. 35(5) was served on the 
respondent for consequential rectification of his assessment as an indivi-
dual. 
The rectification was ultimately ordered 
to be made in August 
1959. The respondent filed a writ petition )n the High Co.urt for quash-
ing· the order. 
Relying on the decision of this Court in Second Addi. 
Income-tax Officer v. Atmala Nagaraj the High Court quashed the im-
pugned order. The Revenue appealed to this Court: The question that 
fell for consideration was whether s. 35(5) which was introduced by the 
Income-tali Amendment Act, 1953 could be used to rectify assessments 
made before ht Aoril 1952. the date from which the said amendment 
came into force. 
The respondent urged that since the 
amendment had 
be~n brought into force from an anterior date no greater retrospectivity 
could be given to it. 
HELD : (Per Wanchoo CJ., Bachawat, Ramaswami and Mitter. JJ.). 
The aim of the legislation was to bring into line the assessment of the 
individual partner with that of the firm. It does not stand to reason that 
if the assessment of the firm is completed Jong after that of the individual 
by reason of proceeding;; under s. 34 or otherwise the discrepancy in the 
income of the partner as shown by the assessment of the firm and as an 
individual ·should continue or be left untouched. and the obvious 
and 
logical com-,;e should be to rectify the assessment 
of the individual on 
the basis of the final assessment of the firm. 
[39B] 
-
On a plain reading of s. 35(5) it appears that the legislature intended 
that the finding as to the non-inclusion of the proper share of the partner 
in the profit or loss of the firrri in the assessment of the partner should 
excite the power of rectification. 
The power is to be exercised whenever 
"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!' 
The subject 
matter of rectification is the completed assessment 
of a partner in 
the 
:firm. 
This is brought out by the use of the words "when in rcsoect of 
any completed assessment of a· partner in a firm." · "Fhere is nothing in 
the section to show that such "completed assessment" 
must take place 
afters. 35(5) was brought on the statute book. What must take place to 
give rise to the power of rectification is th~ finding on t~e assessment or 
34 
SUPREME COURT REPORTS 
(1968) 2 S.C.R. 
r~~. 
or the firm. 
The finding alone must be made after 
the 
lll!Ctior\ came into force. 
The finding IS to be 
given effect to or maile 
operative on the 'completed a~'lessment' of a partner. As 
the mischief 
sought to be rectified was the discrepancy hetween the income of the part-
ner auesscd as lln individual and his income as computed on the assess-
ment of the firm, the legislature must be held to have made the remedy 
applicable whenever the mischief was discovered. There would have been 
nothing unjull in making the power of rectification 
exercisable at any 
time alter lhc discovery of the discrepancy but !he 
legislalure 
in 
its 
wisdom did not think that the power should be used except within a limit-
ed period of four years from the date of the final order in the ca;e of the 
firm. 1390-HJ 
.. Second Addi. lncome 0 1ax 0/Tkn v. Atma/4 Nagaraj 46 I.T.R. 
609, 
reversed. 
A 
B 
Km1umar/rrpuc// Ldhhmlnaraynna Chmy v, First Additional lnc

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