1. This is an application under Article 226 of the Constitution of India to issue a Writ of Certiorari to quash the notice in G. I. No. 137-A/ 46-47 dated 25-6-1958, issued by the Additional Income-tax Officer, Cuddapah.
2. One Krishnappa and his three sons, the petitioner, Venkatanarsu and Thimayya (Petitioner in W. P. No. 871 of 1958) constituted a Hindu undivided family, possessing properties moveable and immovenble and in addition doing mining business. For the years 1941-42, 1942-43, 1943-44, 1945-49 and 1940-47, the Hindu undivided family was assessed to income-tax. The assessments for the years 1941-42 to 1946-47 were made on 30-9-1948, 30-9-1948, 28-2-1949, 15-3-1950 and 30-11-1950. With respect to the two assessment years 1941-42 and 1942-43, there was re-assessment under Section 34 of the Act which was completed on 30-9-1948. A total of Rs. 65,750/- was imposed on the undivided family.
3. On 20-3-1948, Veukat Narsu, one of the sons of Krishnappa (slated to be since deceased) filed an application under Section 25-A of the lndian Income-tax Act before the Income-tax Officer, Cud.-dapah, alleging that the Hindu undivided family styled as Krishnappa and Sons which had hitherto been assessed as a Hindu undivided family had been disrupted and that the joint family properties had been divided between the members in definite portions, and that, therefore, an order under Section 25-A(l) may be recorded and assessments made on the various members in accordance with the provisions of Section 23 read with Section 25-A(2) of the Indian Income-tax Act.
The Income-tax Officer, Special Circle, Madras, passed an order dated 30-6-1952 holding that the partition of the family must bo deemed to have been effected on 2-11-1946. Again the assessments made by the Income-tax Officer for the years 1941-42 to 1946-47 appeals were filed before the Appellate Assistant Commissioner and the assessments were confirmed by an order dated 3-5-1953.
With respect to the assessments for the years 19-14-45, .1945-46 and 1946-47, appeals were filed before the Appellate Tribunal, Bombay. The appellate Tribunal dismissed the appeal with respect to the assessment for the year 1944-45, but partly allowed the appeals regarding the assessments for the years 1945-46 and 1946-47. A reference under Section 66(2) of the Income-tax Act is stated to be pending in this Court with regard to the assessments for the years 1944-45, 19-15-46 and 1946-47.
4. After the disruption of the family a registered partnership firm was formed by the erstwhile co-parceners for carrying on mining business. On 6-5-1947, a company under the name and style o! Krishnappa Asbestos and Barytes (Private) Ltd., was formed. On 20-5-1947 the registered firm was dissolved and as from 21-5-1947 the aforesaid private limited company took over the business and assets of the registered firm of Krishnappa and Sons for a consideration of 2 lakhs and four thousand rupees.
5. The petitioner claims now to be employed as the General Manager of the mines of the Krishnappa Asbestos and Barytcs (Private) Limited aforesaid, drawing a salary of Rs. 400/- per mensem. Similarly, Thirnmayya, the petitioner in W. P. No. 871 of 1958 who is one of the sons of Krishnappa claims now to be employed in the same Company as the Mines Superintendent, on a monthly salary of Rs. 500/-.
6. The Additional Income-tax Officer, Cud-dapah, who is the first respondent in both thesepetitions, issued a notice dated 25-6-1958 to the Managing Director of the Krishnappa Asbestos and Barytes (Private) Limited stating that a sum of Rs. 65,750/- was due from Ranganadhain on account of Income-tax and directing the 2nd respondent to these petitions, the Managing Director of the Company to deduct the amount of Rs. 65,750/-from the salary payable to the defaulter and credit the same forthwith to the credit of the Government of India. A similar notice under Seection 46(5) was issued to the 2nd respondent with respect to the same arrears stated to be due from Thimmayya, the petitioner in W. P. No. 871 of 195S, This petition and W. P. No. 871 of 1058 have been filed by Kangana-tham Thimmnyya respectively for the issue of Writ of Certiorari or any other writs or directions to quash the said notices.
7. Mr. Bamarao, the learned Counsel for the petitioners has advanced two principal contentions; (I) that the appropriate taxing authorities having passed on order on 30-6-1952 under Section 25-A(l) of the Indian Income-tax Act that the family had become disrupted with effect from 2-11-1946, the impugned notices are in violation of the mandatory terms of Section 25-A(2) of the Act, and consequently the present attempt of the 1st respondent to realise the tax due from the, undivided family from the petitioners is without legal sanction and authority; and (ii) that even if the petitioners art liable for the tax arrears due by the erstwhile undivided family, the salaries that are now being drawn by them are earned by them in their individual capacity and cannot be lawfully impounded for the arrears of Income-tax due from the erstwhile Hindu undivided family which was a different legal entity.
8. Mr. Kondiah, the learned Counsel for the Department, on the contrary, has contended firstly, that on the date when the assessments were made there was no order passed under Section 25-A(l) of the Act, so much so, the family must be deemed to continue as an undivided family, and that being so, there was no need to apportion, the tax liability on the various members of disrupted family and make separate assessments on them in accordance with Section 23 of the Act; secondly, that even if the procedure laid down under Section 25-A(2) is not strictly followed, the petitioners cannot complain of any prejudice, as they are all jointly and severally liable for tho tax due from the erstwhile undivided family; and thirdly, that on the facts of this case the salaries drawn by tho two petitioners from Messrs. Krishnappa Asbestos and Barytes (Private) Limited, are really earned by them from out of the assets of the undivided family of which they were both the members and that, therefore, tho Department is entitled to attach the amounts. It was lastly contended also that tho petitioners are not entitled to pray for the issue of a Writ of Certiorari as the notices are not judicial or a quasi-judicial proceeding but are purely administrative or ministerial acts.
9. Section 25-A of the Indian Income-tax Act is in these terms:
'25A-(l) Where, at the time of making an assessment under Section 23, it is claimed by or on be' half of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income-tax Officer shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect:
Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family. (2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family whose joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income-tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members shall, in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in Sub-section (1) of Section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Income-tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of Section 23;
Provided that all the members and groups of members whose joint family properly has been partitioned shall he liable jointly and severally for the rax assessed on the total income received by or on behalf of the joint family as such. (3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family.'
The Section is a machinery provision for the collection of the tax due from a Hindu undivided family which had become disrupted. The scope of the Section and the reason for its enactment have been explained by the Privy Council in Sunder Singh Majithia v. Commr. of Income- tax in these terms;
'Section 25-A provides that if it be found that the family property has been partitioned in definite portions, assessment may be made, notwithstanding Section 14(1) on each individual or group in respect of his or its share of the profits made by the undivided family, while holding all the members jointly and severally liable for the total tax. If, however, though the joint Hindu family has come to an end St be found that is property has not been partitioned in definite portion, then the family is to be deemed to continue -- that is to be an existent Hindu family upon which assessment can be made on its gains of the previous year.'
In the same sense the Supreme Court of India in Lakhmichand Baijnath v. Commr. of Income-tax West Bengal. : 35ITR416(SC) has defined the scope of the Section in these words:
'Now, when a claim is made under Section 25-A the points to be decided by the Income-tax Officer are whether there has been a partition in the family, and if so, what the definite portions are in which the division had been made among the members or groups of members. The question as to what the income of the family assessable to tax under Section 33(3) was, would be foreign to the scope ol an enquiry under Section 25-A. That Section was, it should be noted, introduced by the Indian Income-tax Act (Amendment) Act 1927 (III of 1928) fur removing a defect which the working of the Act as enacted in 1922 had disclosed. Under the provisions of the Act as they stood prior to the amendment, when the assessee was an undivided family, no assessment could be made thereon if at the time of the assessment it had become divided, because at that point of time, there was no undivided family in existence which could be taxed, though when the income was received in the year of account the family was joint. Nor could the individual members of the family be taxed in respect of such in-come as the same is exempt from tax under Section 14(1) of the Act. The result of these provisions was that a joint family which had become divided at the time of the assessment escaped lax altogether. To remove this defect. Section 25-A enacted that until an order is made under that Section, the family should be deemed to continue as an undivided family. When an order is made under that Section, its effect is that while the tax payable on the total income is apportioned among the divided members or groups, all of them are liable for the tax payable on the total income of the family. What that tax is, would depend on the assessment of income in proceedings taken under Section. 23, and an order under Section 25-A would have no effect on that assessment.'
From the language of the Section it is clear that where an order is made under Section 25-A (1) the procedure laid down under Section 25-A (2) must be followed. In this connection Mr. Ramarao, placed strong reliance on the decision of the Supreme Court in Lakshminarain v. Commr. of Income-tax B. and O. : 20ITR594(SC) . The facts of that case were: There was a Hindu undivided family which was assessed to income-tax for the years 1039-40. In 1944 the Income-tax Officer considered that some income of the family taxable in 1939-40 had escaped assessment. In the meantime the family became disrupted and an order was made under Section 25-A(l) of the Income-tax Act.
But for the escaped income, the Income-tax Department gave notice only to the karta of the erstwhile undivided family under Section 34 read with Section 22 and an assessment of the escaped income was made and a notice of the demand was given to the karta and the other members of the joint family calling upon them to pay the full amount of tax due on the escaped income without apportioning the liability for it amongst the members of the disrupted family. It was held by the Supreme Court that such a proceeding was not in conformity with the provisions of Section 25-A (2). Kania C. J., held as follows:-
'On a true construction of Section 25-A (1) it appears that the Income-tax Officer, in the first place has to make an assessment of the total income as if no partition had taken place. That means that he has to find out what the total income was and calculate the amount of tax payable thereon as if it was payable by one unit. Having done that, it is the duty of the Income-tax Officer under the Section to apportion the amount payable by the unit amongst the members of the joint family according to the portion of the joint family property allotted to each of them. That duty also appears to be imperative having regard to the concluding words of Section 25-A(2). In the present case, the Income-tax Officer has omitted to make any apportionment. That fact is noticed in the judgment of the High Court and also by the Income-tax Appellate Tribunal. In the judgment of the High Court it has been stated that this could be put right. In our opinion, it is necessary that the Income-tax Officer should issue the notice of demand against each of the members of the family in accordance with the concluding words of Section 25-A (2) and that should be done.'
10. In this case admittedly there is an order of the Income-tax Authorities under Section 25-A(l) recognizing the disruption of the family with effect from 2-11-1946, and that being so, as their Lordships of the Supreme Court have observed, it was the imperative duty of the taxing authorities to con-1 form to the procedure laid down under Section 25-A(2), which, however, has not been done in this case.
11. Mr. Kondiah, however, contends that in the case before the Supreme Court there was actually an order passed under Section 25-A(l) before the assessment on the escaped income was sought to be made in 1944, unlike the present case where on the dates of the assessments there was no such order. In view of that difference it is contended that the decision of the Supreme Court is not applicable to the facts of this case. It is argued that until an order under Section 25-A(1) is passed, the family should be deemed for the purpose of the Act to continue to be an undivided family as provided for in Sub-section 3 of Section 25-A. The view contended for by the learned counsel does not appear to be sustainable either in principle or on authority.
In my opinion, sub-section 3 of Section 25-A does not refer to the date upon which the order is passed. It only means that where an order under Section 25-A(l) is not passed, the family should be deemed] to be undivided even if there had been a disruption. An exactly a similar contention was rejected by a Bench of the Madras High Court consisting of Gentle C, J. and Patanjali Sastri J. in Commr. Income-tax v. Swaminathan Chettiar AIR 1948 Mad 164. In that decision it was held that the opening words of Sub-section 3 are complementary to Sub-section 2 and both deal with cases falling under Sub-section 1. Patanjali Sastri J., observed as follows:
'Nor is it correct to say that the family should be deemed to continue undivided till the date of the Income-tax Officer's order is made accepting the partition alleged by the assessce; the family must be regarded having become disrupted on the date of partition as put forward by the assesses. In the present case, therefore, when the notice under Section 34 was issued to the assessee on 6th July 1942, the family must be taken to have ceased to exist though the partition which was put forward as having taken place on 21st January 1940, was accepted only on 17th August 1942.'
To the same effect is a subsequent decision of the Madras High Court in S. A. Raju Chettiar v. Collector of Madras AIR 1956 Mad 396 where Rajagopalan and Rajagopala Ayyangar JJ. held that the expression 'where' at the commencement of the Sub-section 3 of Section 25-A cannot be read as 'until'. The facts of that case may be briefly slated: There was a Hindu undivided family which had become disrupted on 25-1-1946.
The assessment proceedings for 1943-44 were completed on 30-9-1944. During the pendency of those proceedings on 4-9-1944, a notice was issued on the karta for the levy of penalty for concealment of the income under Section 28. Those proceedings terminated on 18-3-1948 when a penalty was imposed. In the meantime steps were taken under Section 25-A of the Act to get the partition dated 25-1-1946 recorded in an application filed on 18-9-1946. An order was made on 31-12-1948 recording the partition.
The penalty imposed on the family was sought to be recovered from the erstwhile members as an arrear of land revenue. On a Writ Petition filed by some of the members of the family the learned Judge held that no portion of the penalty under Section 28 of the Act could be recovered from the petitioners and, therefore the writ was allowed. The very argument advanced by Mr. Kondiah was there advanced and rejected in these words;-
'Learned Counsel contended that, since the order that was passed by the Income-tax Officer was only on 31-12-1948, the Hindu undivided family should be deemed to have continued in existence till that date. We are unable to accept this interpretation of Section 25-A(3). Each of the clauses under Section 25-A begins with the expression 'where'. To construe 'where' as 'until' does not seem to fit in with the scheme underlying Section 25-A of the Act.'
12. It seems to me, therefore, that in the instant case an order under Section 25-A(l) having been passed, the tax imposed on the Hindu undivided family should have been apportioned between the members thereof and notice of demand issued against each of them as laid down by the Supreme Court in Laksbminarain's case : 20ITR594(SC) .
13. Mr. Kondiah contended that there could be no prejudice to the petitioners even if there was no apportionment or separate demand for the reasons that the proviso to Section 25-A(2) casts a Joint and several liability on the members of the erstwhile undivided family. In support of that contention he placed reliance on the decision of this court in Kalwa Devadatham v. Union of India : 33ITR56(AP) .
In the judgment delivered in that case by My Lord the Chief Justice it was held on the facts, firstly, that there was no claim as to partition put forward by the father on behalf of the family at the time of the assessment, and secondly, that there was no division of the business amongst the members of the family, and therefore, the entire family properties could not have been deemed to have been divided into definite portions. On those facts it was held that the request for the recognition of the partition even if it was made could not have been granted in terms of Section 25-A(I). Mr. Kondiah, however, relies upon the following passage in the judgment of My Lord the Chief Justice.
'Quite aside in the instant 'case, it would not have made any difference in practice in the particular circumstances of the case whether the assessment was continued to be made as before or levied under Section 25-A i.e., whether it was made on the family as an entity through its manager the father, or made on individual members on the footing of the previous disruption. Even on the latter basis, the assessment was to be made as if no partition had taken place and notwithstanding that the assessment had to be made on the members of the family under sub-section 2 their properties could be proceeded against since all the members were jointly and severally liable for the whole tax so that one or other or all could be proceeded against.'
14. It seems to me that the above passage must be understood in the context of the findings earlier given. I am unable to read the above pas-sago to mean that even in a case where an order under Section 25-A(l) had been passed by the appropriate taxing authorities, the mandatory provision of Section 25-A(2) could be ignored on the ground that since there is a joint and several liability on all the members, there could be no prejudice to them. I may be observed that the joint and several liability is enacted in a clause which is a proviso to Section 25-A(2) of the Act and in a case where an order under Section 25-A(l) had been passed the joint and several liability could arise only when the procedure laid down in Section 25-A(2) had been complied with.
15. It is next contended by Mr. Kondiah that a proceeding under Section 46(5) is an administrative act and in support of that contention, ho placed re-liance on the decision of the Calcutta High Court in Union of India v. Elbridge Watson : 20ITR400(Cal) . There the learned Judges held that an order under Section 46(5) of the Income-tax Act was neither a judicial, nor a quasi-judicial order, but only an administrative act and as such a Writ of Ccrtiorari cannot be granted, and the proper relief could only bo by way of granting a Writ of Mandamus which in appropriate cases the Court might decline to grant, as was done in that case.
16. The nature of the Writ prayed for is not by any means decisive as the petitioners have prayed not only for a Writ of Certiorari, but also for any other Writ or Order. Further the failure to choose appropriate writ in itself is not a ground (or rejecting the petition (vide T. Venkateswararao v. State of Andhra Pradesh (1958) 1 AP WR 480: AIR 1958 A P 458)).
17. Mr. Kondiah has also contended that since interference under Article 226 of the Constitution is discretionary, no relief should be granted to the petitioners who are in large arrears of public revenue and who had resorted to several devices to evade the payment of tax. However, relevant these considerations may be they cannot relieve the taxing authorities of their obligation to comply with the-terms of Section 25-A (2).
18. I therefore hold that the notices given are not in accordance with law and the further proceedings sought to be taken in pursuance thereof ought to be interdicted.
19. In the view I have taken as to the validityof the notice, it is not necessary for me to decidethe question whether the salaries are personal earnings of the petitioners which are not liable to be attached for arrears of tax due from them as mem-bers of the disrupted family.
20. There shall, therefore, issue a Writ of Mandamus to the Income-tax Officer not to proceed with the realisation of the tax due from the petitioners in this case in pursuance of the notice dated 25-6-1958. This will not, however preclude the Income-tax authorities, if in law they can do so from apportioning the tax due from the erstwhile Hindu undivided family and issuing fresh notices of demand against its erstwhile members and seeking to realise the tax in accordance with law.
21. The petition is allowed with costs, payable by R-l. Advocates fees Rs. 100/-. W. P. No. 871 of 1938:
22. For the reasons stated in W. P. No. 869 of 1958 this petition is also allowed, but in the circumstances I make no order as to costs.