Retrospective rectification of partner assessments upheld where firm's later assessment triggers correction under income-tax law.

Section 35(5) of the Income-tax Act, 1922 was construed as a remedial provision enabling correction of a partner's completed assessment when the firm's assessment or reassessment was later finalised. The majority held that the decisive trigger was the firm's later final determination, not the date on which the partner's assessment had originally been completed, and that the four-year limitation ran from the final order in the firm's case. On that reading, the provision could operate on partner assessments completed before 1 April 1952. The earlier contrary view in Atmala Nagaraj was rejected, while Habibullah was treated as consistent with this construction.

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Issues: Whether section 35(5) of the Income-tax Act, 1922 applied to rectify a partner's completed assessment made before 1 April 1952, after the firm's assessment or reassessment was completed later.

Analysis: Section 35(5) deems inclusion or correction of a partner's share, on the assessment or reassessment of the firm, to be a rectification of mistake apparent from the record, with the four-year period running from the final order in the firm's case. The majority held that the provision was intended to operate on completed assessments of partners even if those assessments had been made before 1 April 1952, because the decisive event is the later finding on the firm's assessment or reassessment and not the date on which the partner's assessment was completed. The section was read as remedial and as designed to align the partner's assessment with the firm's final determination. The earlier contrary view in Atmala Nagaraj was rejected, and Habibullah was treated as consistent with the majority's construction.

Conclusion: The provision applied and the rectification orders were valid; the challenge to the reopened assessments failed.

Dissenting Opinion: Hegde J. held that section 35(5) was only partially retrospective from 1 April 1952 and could not reopen assessments of partners that had already become final before that date. He would have dismissed the appeals.

Ratio Decidendi: Where the statute deems correction of a partner's share to arise from the later assessment or reassessment of the firm, the power of rectification is attracted even if the partner's assessment had been completed earlier, provided the statutory conditions and limitation period are satisfied.

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