1988 (4) TMI 15 - HC - Income Tax

Court Rules Retrospective Tax Amendment Not Applicable to 1979-80 Assessment Year

The court ruled in favor of the petitioners in a case concerning assessment proceedings under the Income-tax Act for the assessment year 1979-80. The ... HUF, Law Applicable To Assessment, Partial Partition In HUF Issues:Assessment proceedings under the Income-tax Act for the assessment year 1979-80; Validity of the amendment inserting sub-section (9) to section 171 of the Income-tax Act, 1961, by the Finance (No. 2) Act of 1980; Application of sub-section (9) of section 171 to the assessment year 1979-80.Analysis:The judgment pertains to four writ petitions heard together, challenging the assessment proceedings under the Income-tax Act for the assessment year 1979-80. The petitioners claimed partial partition of the family between January 1, 1979, and March 31, 1979, and sought an order under section 171 of the Act. However, after the Finance (No. 2) Act of 1980, the Income-tax Officer decided to ignore the partial partition and the orders passed under section 171. The main issue revolves around the validity of the retrospective amendment introduced by sub-section (9) to section 171, which disregards partial partitions post-December 31, 1978, among Hindu undivided families. The petitioners argued that the chosen date was arbitrary and affected their rights adversely.The counsel for the Revenue contended that the amendment was within the legislative competence of Parliament and aimed at curbing tax avoidance. The court, after reviewing the relevant provisions of the Finance (No. 2) Act of 1980, concluded that the retrospective provision in sub-section (9) did not apply to the assessment year 1979-80. The court highlighted the definition of 'assessment year' and 'previous year' under the Income-tax Act to establish that the amendment was meant for assessment years commencing after April 1, 1980. Therefore, the Income-tax Officer was not justified in applying sub-section (9) to the petitioners' cases for the assessment year 1979-80.The judgment emphasized that the amendment was only applicable from the assessment year 1980-81 onwards and directed the Income-tax Officer not to apply sub-section (9) of section 171 to the petitioners' proceedings for the assessment year 1979-80. The court allowed the writ petitions, ruling in favor of the petitioners and indicating that no costs were to be awarded in this matter.