Prospective tax liability under HUF partition rules cannot be applied to past assessments through reassessment machinery.

Section 171(6) of the Income-tax Act, 1961, which imposes joint and several personal liability on members of a Hindu undivided family where partition is discovered after assessment, was held to be substantive and prospective. It could not be applied to assessments already completed under the Income-tax Act, 1922, because it would create a new liability for past years. Section 297(2)(d)(ii) permitted reassessment of escaped income under the new Act, but only through the assessment machinery and not by importing fresh substantive liability. Accordingly, reopening under Sections 147 and 148 did not authorise recovery from individual members on the basis of Section 171(6).

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Issues: (i) Whether Section 171(6) and Section 171(7) of the Income-tax Act, 1961 could be applied to impose personal liability on members of a Hindu undivided family in respect of assessments completed under the Income-tax Act, 1922. (ii) Whether Section 297(2)(d)(ii) of the Income-tax Act, 1961 made Section 171(6) applicable to reassessments initiated under Sections 147 and 148 of the Income-tax Act, 1961 for earlier assessment years.

Issue (i): Whether Section 171(6) and Section 171(7) of the Income-tax Act, 1961 could be applied to impose personal liability on members of a Hindu undivided family in respect of assessments completed under the Income-tax Act, 1922.

Analysis: Section 25A of the Income-tax Act, 1922 dealt with assessment after partition but did not create personal liability of members in cases of partial partition. Section 171 of the Income-tax Act, 1961 introduced a wider scheme and, by sub-section (6), for the first time imposed joint and several personal liability where partition was discovered after assessment. A provision creating a new obligation or liability is presumed to operate prospectively unless the statute expressly or by necessary implication provides otherwise. Since the assessments in question had been completed under the earlier Act, applying Section 171(6) would fasten a new substantive liability on the members for past assessment years.

Conclusion: Section 171(6) and Section 171(7) of the Income-tax Act, 1961 were not applicable to assessments completed under the Income-tax Act, 1922, and no personal liability could be imposed on the members on that basis.

Issue (ii): Whether Section 297(2)(d)(ii) of the Income-tax Act, 1961 made Section 171(6) applicable to reassessments initiated under Sections 147 and 148 of the Income-tax Act, 1961 for earlier assessment years.

Analysis: Section 297(2)(d)(ii) permitted escaped income to be reassessed under the new Act, but the words that all provisions of the new Act would apply were confined to the assessment machinery. They did not import substantive provisions creating fresh liability. Section 171(6) is substantive in character because it imposes joint and several personal liability on members of a Hindu undivided family. Accordingly, reopening the assessments under Sections 147 and 148 did not authorise reliance on Section 171(6) for recovery from the individual members.

Conclusion: Section 297(2)(d)(ii) did not make Section 171(6) applicable for recovery of tax in the reassessment proceedings.

Final Conclusion: The tax demand could not be enforced personally against the members of the Hindu undivided family for the earlier assessment years, and the impugned orders allocating liability were set aside.

Ratio Decidendi: A provision imposing a new substantive tax liability is prospective unless clearly made retrospective, and reassessment machinery under a saving clause does not by itself import such substantive liability for earlier assessment years.

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