Prospective operation of tax law bars reopening completed assessments beyond express rectification limits and limitation periods.

A statute affecting vested rights is presumed to operate prospectively unless retrospective application is clearly expressed or necessarily implied. On that basis, proceedings for rectification and reassessment arising from completed assessments made under the Indian Income-tax Act, 1922 were held to remain governed by the 1922 Act, not the Income-tax Act, 1961. The rectification provisions of section 35(1) were unavailable because the alleged mistake was not corrected within the prescribed four-year period, and section 35(5) could not be used to reopen final individual assessments indirectly through firm-related adjustments. The limitation bar was treated as jurisdictional, so the attempted proceedings were not authorised.

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Issues: (i) Whether the proceedings for rectification and reassessment were governed by the Indian Income-tax Act, 1922 or the Income-tax Act, 1961. (ii) Whether the Income-tax Officer had jurisdiction to proceed under the relevant rectification provisions.

Issue (i): Whether the proceedings for rectification and reassessment were governed by the Indian Income-tax Act, 1922 or the Income-tax Act, 1961.

Analysis: The proceedings arose out of completed individual assessments made before the commencement of the 1961 Act, but they were initiated after the new Act came into force. The Court applied the settled rule that a statute affecting vested rights is prima facie prospective unless the legislature clearly indicates retrospective operation. Section 297(2) of the Income-tax Act, 1961 was examined and held not to contain any express or necessary implication covering proceedings of the present kind. The Court further held that the proceedings were in substance proceedings for assessment, and that the relevant appellate orders giving rise to the proposed rectification had been made while the 1922 Act was in force.

Conclusion: The proceedings were governed by the Indian Income-tax Act, 1922, not the Income-tax Act, 1961.

Issue (ii): Whether the Income-tax Officer had jurisdiction to proceed under the relevant rectification provisions.

Analysis: Section 35(1) of the 1922 Act was held inapplicable because the alleged mistake was not corrected within four years from the date of the assessment orders. Section 35(5) was also held inapplicable because it was confined to cases where, on the assessment or reassessment of the firm or on variation of the firm's income, the partner's share income had to be included or corrected, and it could not be used to bypass the limitation attached to completed individual assessments. The Court treated the bar of limitation as one affecting jurisdiction and rejected the attempt to invoke section 35(5) to reopen final assessments indirectly.

Conclusion: The Income-tax Officer had no jurisdiction to take the impugned proceedings under the rectification provisions.

Final Conclusion: The writ appeals failed because the proposed action could not be sustained under the 1961 Act and was not authorised under the rectification scheme of the 1922 Act; the final assessments were protected by limitation and could not be reopened in the manner attempted.

Ratio Decidendi: A statute affecting vested rights is presumed to operate prospectively, and a completed income-tax assessment cannot be reopened except within the limits and conditions expressly provided by the applicable rectification provisions.

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