The Supreme Court had to consider the following important question of law: <\/p>\n
“ Whether sub-section (2) and sub-section (3) of Section 14A inserted with effect from 01.04.2007 will apply to all pending assessments? Whether Rule 8D is retrospectively applicable?”<\/p>\n
HELD by the Supreme Court: <\/p>\n
Important Principles of Statutory Interpretation<\/strong><\/p>\n 23. The legislature has plenary power of legislation within the fields assigned to them, it may legislate prospectively as well as retrospectively. It is a settled principle of statutory construction that every statute is prima facie<\/em> prospective unless it is expressly or by necessary implications made to have retrospective operations. Legal Maxim “nova constitutio futuris formam imponere debet non<\/em> praeteritis<\/em>“, i.e. ‘a new law ought to regulate what is to follow, not the past’, contain a principle of presumption of prospectively of a statute.<\/p>\n 24. Justice G.P. Singh <\/strong>in “Principles of Statutory Interpretation” (14th Edition, in Chapter 6) while dealing with operation of fiscal statute elaborates the principles of statutory interpretation in the following words:<\/p>\n “Fiscal legislation imposing liability is<\/em> generally governed by the normal presumption that<\/em> it is not retrospective and it is a cardinal<\/em> principle of the tax law that the law to be<\/em> applied is that in force in the assessment year<\/em> unless otherwise provided expressly or by<\/em> necessary implication. The above rule applies to<\/em> the charging section and other substantive<\/em> provisions such as a provision imposing penalty<\/em> and does not apply to machinery or procedural<\/em> provisions of a taxing Act which are generally<\/em> retrospective and apply even to pending<\/em> proceedings. But a procedural provision, as far as<\/em> possible, will not be so construed as to affect<\/em> finality of tax assessment or to open up liability<\/em> which had become barred. Assessment creates a<\/em> vested right and an assessee cannot be subjected<\/em> to reassessment unless a provision to that effect<\/em> inserted by amendment is either is either<\/em> expressly or by necessary implication<\/em> retrospective. A provision which in terms is<\/em> retrospective and has the effect of opening up<\/em> liability which had become barred by lapse of<\/em> time, will be subject to the rule of strict<\/em> construction. In the absence of a clear<\/em> implication such a legislation will not be given a<\/em> greater retrospectivity than is expressly<\/em> mentioned; nor will it be construed to authorize<\/em> the Income-tax Authorities to commence proceedings<\/em> which, before the new Act came into force, had by<\/em> the expiry of the period then provided become<\/em> barred. But unambiguous language must be given<\/em> effect to, even if it results in reopening of<\/em> assessments which had become final after expiry of<\/em> the period earlier provided for reopening them.<\/em> There is no fixed formula for the expression of<\/em> legislative intent to give retrospectivity to a<\/em> taxation enactment……”<\/em><\/p>\n 25. A threeJudge Bench of this court in 1976 (1) SCC 906,<\/em><\/strong> Govind Das and others Versus the Income Tax officer and<\/em><\/strong> another, <\/em><\/strong>noticing the settled rules of interpretation laid down following in paragraph 11:<\/p>\n “11. <\/em><\/strong>Now it is a well settled rule of<\/em> interpretation hallowed by time and sanctified by<\/em> judicial decisions that, unless the terms of a<\/em> statute expressly so provide or necessarily<\/em> require it, retrospective operation should not be<\/em> given to a statute so as to take away or impair an<\/em> existing right or create a new obligation or<\/em> impose a new liability otherwise than as regards<\/em> matters of procedure. The general rule as stated<\/em> by Halsbury in Vol. 36 of the Laws of England (3rd<\/em> Edn.) and reiterated in several decisions of this<\/em> Court as well as English courts is that<\/em><\/p>\n “all statutes other than those which<\/em> are merely declaratory or which relate<\/em> only to matters of procedure or of<\/em> evidence are prima facie prospective”<\/em> and retrospective operation should not<\/em> be given to a statute so as to affect,<\/em> alter or destroy an existing right or<\/em> create a new liability or obligation<\/em> unless that effect cannot be avoided<\/em> without doing violence to the language<\/em> of the enactment. If the enactment is<\/em> expressed in language which is fairly<\/em> capable of either interpretation, it<\/em> ought to be construed as prospective<\/em> only. If we apply this principle of<\/em> interpretation, it is clear that<\/em> subsection (6) of Section 171 applies<\/em> only to a situation where the assessment<\/em> of a Hindu undivided family is completed<\/em> under Section 143 or Section 144 of the<\/em> new Act. It can have no application<\/em> where the assessment of a Hindu<\/em> undivided family is completed under the<\/em> corresponding provisions of the old Act.<\/em> Such a case would be governed by Section<\/em> 25A<\/em> of the old Act which does not<\/em> impose any personal liability on the<\/em> members in case of partial partition and<\/em> to construe subsection<\/em> (6) of Section<\/em> 171 as applicable in such a case with<\/em> consequential effect of casting of the<\/em> members personal liability which did not<\/em> exist under Section 25A,<\/em> would be to<\/em> give retrospective operation to<\/em> subsection<\/em> (6) of Section 171 which is<\/em> not warranted either by the express<\/em> language of that provision or by<\/em> necessary implication. Subsection<\/em> (6)<\/em> of Section 171 can be given full effect<\/em> by interpreting it as applicable only in<\/em> a case where the assessment of a Hindu<\/em> undivided family is made under Section<\/em> 143 or Section 144 of the new Act. We<\/em> cannot, therefore, consistently with the<\/em> rule of interpretation which denies<\/em> retrospective operation to a statute<\/em> which has the effect of creating or<\/em> imposing a new obligation or liability,<\/em> construe subsection<\/em> (6) of Section 171<\/em> as embracing a case where assessment of<\/em> a Hindu undivided family is made under<\/em> the provisions of the old Act. Here in<\/em> the present case, the assessments of the<\/em> Hindu undivided family for Assessment<\/em> Years 1950-51<\/em> to 1956-57<\/em> were completed<\/em> in accordance with the provisions of the<\/em> old Act which included Section 25A<\/em> and<\/em> the Income Tax Officer was, therefore,<\/em> not entitled to avail of the provision<\/em> enacted in subsection<\/em> (6) read with<\/em> subsection<\/em> (7) of Section 171 of the<\/em> new Act for the purpose of recovering<\/em> the tax or any part thereof personally<\/em> from any members of the joint family<\/em> including the petitioners.”<\/em><\/p>\n