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Madhava Prasad and ors. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 140 of 1964
Judge
Reported in[1970]75ITR599(All)
ActsIncome Tax Act, 1922 - Sections 25A(2)
AppellantMadhava Prasad and ors.
RespondentCommissioner of Income-tax
Appellant AdvocateBrij Lal Gupta and ;A. Gupta, Advs.
Respondent AdvocateGopal Behari, Adv.
Excerpt:
- - upon an application by the assessee, the following question of law has been referred to this court :whether, in the facts and circumstances of the case, the assessment in the name of the hindu undivided family is bad in law ?' 2. although the assessee raised several contentions before the appellate tribunal, the sole point urged before us by mr. the tribunal disposed of the appeal before it on february 8, 1962. the tribunal very well knew that the appellate assistant commissioner had recognised the partition as far back as september 8, 1952. it was, therefore, possible for the appellate tribunal to give appropriate directions as contemplated by sub-section (2) of section 25a of the act......the assessment on a variety of grounds. one of the grounds related to the partition of the joint hindu family. the family was partitioned on may 31, 1951. the assessee's claim for partition was recognised by the appellate assistant commissioner by his order dated september 8, 1952, with effect from the date of partition. it was urged for the assessee that in view of the partition dated may 31, 1951, assessment of the erstwhile joint family was invalid. this contention was overruled by the tribunal. the assessee's appeal was dismissed. upon an application by the assessee, the following question of law has been referred to this court :'whether, in the facts and circumstances of the case, the assessment in the name of the hindu undivided family is bad in law ?'2. although the.....
Judgment:

V.G. Oak, C.J.

1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as 'the Act'). The assessee is a Hindu undivided family, which consisted of Sahu Jagdish Prasad and his sons. Books of account of the assessee were maintained by the Dasehrayear. In the business books maintained for the period Dasehra S. 1999-2000, which was the previous year relevant for the assessment year 1944-45, the Income-tax Officer noted two cash-credits of Rs. 20,000 and Rs. 50,000 on October 28, 1942, and November 16, 1942. These two items were treated by the Income-tax Officer as the assessee's income from undisclosed sources. The items were included in the assessment for the year 1944-45. When the matter went before the Appellate Tribunal, the Tribunal pointed out that the two items in question were within the financial year 1942-43. Consequently, they were really relevant to the assessment year 1943-44, and not to the assessment year 1944-45. Those items were, therefore, struck off from the assessment for 1944-45. Subsequent to that order of the Tribunal, the Income-tax Officer issued a notice to the assessee under Section 34 read with Section 22(2) of the Act for the assessment year 1943-44. The assessee furnished a return accordingly. When assessment was made, the two items dated October 28, 1942, and November 16, 1942, for the two sums of Rs. 20,000 and Rs. 50,000 were included in the total income for the assessment year 1943-44. Assessment was made accordingly. When the matter reached the Appellate Tribunal, the assessee challenged the assessment on a variety of grounds. One of the grounds related to the partition of the joint Hindu family. The family was partitioned on May 31, 1951. The assessee's claim for partition was recognised by the Appellate Assistant Commissioner by his order dated September 8, 1952, with effect from the date of partition. It was urged for the assessee that in view of the partition dated May 31, 1951, assessment of the erstwhile joint family was invalid. This contention was overruled by the Tribunal. The assessee's appeal was dismissed. Upon an application by the assessee, the following question of law has been referred to this court :

'Whether, in the facts and circumstances of the case, the assessment in the name of the Hindu undivided family is bad in law ?'

2. Although the assessee raised several contentions before the Appellate Tribunal, the sole point urged before us by Mr. Brij Lal Gupta, appearing for the assessee, related to the partition dated May 31, 1951. Mr. Brij Lal Gupta pointed out that the order of assessment passed by the Income-tax Officer is dated February 22, 1952. This was some time after the partition of the joint family. It was, therefore, urged by Mr. Brij Lal Gupta that the assessment of the joint family is invalid. On the other hand, Mr. Gopal Behari, appearing for the department, pointed out that the Appellate Assistant Commissioner did not pass his order recognising partition till September 8, 1952. That was after the assessment order had been passed by the Income-tax Officer.

3. Mr. Brij Lal Gupta contended that the matter is governed by Sub-section (2) of Section 25A of the Act. Section 25A deals with assessment after partition of a Hindu undivided family. Under Sub-section (1) of Section 25A the competent authority records an order to the effect that the Hindu undivided family has been partitioned with effect from a certain date. Sub-section (2) of Section 25A states :

'Where such an order has been passed,......the Income-tax Officer shall make an assessment of the total income received by or on behalf ot the joint family as such, as if no partition had taken place, and each member or group of members shall..... .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......'

4. According to Mr. Brij Lal Gupta, the case ought to have been disposed of under Sub-section (2) of Section 25A of the Act. According to Mr. Gopal Behari, since the assessment order was passed by the Income-tax Officer before the Appellate Assistant Commissioner passed his order recognising partition, there was no room for following the procedure laid down in subsection (2) of Section 25A.

5. It is true that the Income-tax Officer passed his assessment order before the Appellate Assistant Commissioner passed an order recognising partition. But the matter reached the Appellate Tribunal after several years. The Tribunal disposed of the appeal before it on February 8, 1962. The Tribunal very well knew that the Appellate Assistant Commissioner had recognised the partition as far back as September 8, 1952. It was, therefore, possible for the Appellate Tribunal to give appropriate directions as contemplated by Sub-section (2) of Section 25A of the Act.

6. But, as pointed out by the Tribunal, even Sub-section (2) of Section 25A provides for assessment of the total income received by the joint family as such as if no partition had taken place. So, even if the procedure laid down in Sub-section (2) of Section 25A were to be followed, the assessee could not avoid assessment on the footing that the family was joint.

7. Mr. Brij Lal Gupta relies upon a decision of the Andhra Pradesh High court in Additional Income-tax Officer v. A. Thimmayya, [1962] 46 I.T.R. 999. In that case it was held that where an order under Section 25A was passed recognising partition of a Hindu undivided family as having taken place on a particular date anterior to the date of the order, for all legal purposes, the order must be deemed to have been made on that anterior date. It must, however, be pointed out that in that very case it was held by the High Court that the passing of an order under Section 25A(1) recognising a partition in a Hindu undivided family did not affect the assessments made on the family as such. In Kalwa Devadattam v. Union of India, [1963] 49 I.T.R. (S.C.) 165 it was explained by the Supreme Court on page 172 that under Section 25A of the Act if at the date when the liability to pay tax arose there was in existence a joint family which has subsequently disrupted, the tax will still be assessed on the joint family.

8. In Lakshminarain Bhadani v. Commissioner of Income-tax, [1951] 20 I.T.R. 594 (S.C.) the question referred to the High Court for opinion was :

' Whether, in the circumstances of this case, proceedings under Section 34 in respect of the assessment year 1939-40 were validly initiated and completed against the Hindu undivided family, which had ceased to exist then, and an order under Section 25A(1) accepting the partition of the Hindu undivided family had already been passed ?'

9. The question was answered in the affirmative, and against the assessee.

10. In Commissioner of Income-tax v. K.M.N.N. Swaminathan Chettiar, [1947] 15 I.T.R. 430 it was held by the Madras High Court that Section 25A was applicable to the assessment under Section 34 in respect of income received by the joint Hindu family in 1938-39 even though the family had disrupted by partition on January 21, 1940.

11. There is thus clear authority in support of the proposition that, even though there has been partition of a joint family and such a partition has, been recognised under Section 25A(1) of the Act, it is permissible to assess, the erstwhile undivided Hindu family.

12. It was pointed out on behalf of the assessee that Sub-section (2) of Section 25A contemplates certain steps as regards apportionment of liability among members of the family in addition to the assessment of the family as such. The question of apportionment does not arise in the present reference. For purposes of the present reference, it is sufficient to note that the assessment in the name of the Hindu undivided family is valid.

13. We answer the question referred to the court in the negative, and against the assessee. The assessee shall pay the Commissioner of Income-tax, U.P., Lucknow, Rs. 200 as costs of the reference.


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