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Wealth-tax Officer Vs. B. Ranga Reddy - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1983)4ITD639(Mad.)
AppellantWealth-tax Officer
RespondentB. Ranga Reddy
Excerpt:
.....should be partial or total are all quite irrelevant.3. a case of exact nature arose before the kerala high court in the case of k. madhavan nambiar v. wto [1982] 134 ttr 695. there it was held as follows: if there has been no prior assessment of the family concerned, i do not think any proceedings could be initiated against the family under section 17 of the act, after the family had become disrupted. where is the karta of the family on whom notice could be served ?....4. the departmental representative relied very heavily on goswami brijratanlalj maharaji v. cwt [1971] 79 itr 373 (guj.) and on an un-reported decision of the andhra pradesh high court within whose jurisdiction the case of this assessee before us falls (the appeals having been transferred from hyderabad to this bench).....
Judgment:
1. These are nine departmental wealth-tax appeals relating to the nine assessment years 1958-59 to 1966-67, both inclusive. The assessee is a HUF. The wealth having escaped assessment because of the omission to make returns for these nine years, notice under Section 17 of the Wealth-tax Act, 1957 ('the Act'), was served on the karta on 14-3-1967.

The assessee then contended before the WTO that there was a partition on 27-7-1966 which document was registered on 28-4-1967. The WTO held that there was within the meaning of Section 20 of the Act, no partition as a whole in definite portions. So, he made the assessments.

The AAC held that there was no HUF in existence on the date on which the notice under Section 17 was served, viz., on 14-3-1967. So, he cancelled all these assessments. Hence, the departmental appeals.

2. The right question on which a right decision of the case depends is the question rightly raised by the AAC as to whether a HUF is in existence on 14-3-1967, the date on which the notice was served on the karta. If HUF is not in existence on account of disruption, whether by partition total or partial or otherwise by simple severance in status, then the initiation of assessment proceeding is not proper. If HUF is in existence, then it is quite proper. The subsequent disruption will not abrogate the rights of the department to make an assessment. Rest of the matters like Section 20 and its interpretation and the allied question whether the partition should be partial or total are all quite irrelevant.

3. A case of exact nature arose before the Kerala High Court in the case of K. Madhavan Nambiar v. WTO [1982] 134 TTR 695. There it was held as follows: If there has been no prior assessment of the family concerned, I do not think any proceedings could be initiated against the family under Section 17 of the Act, after the family had become disrupted.

Where is the karta of the family on whom notice could be served ?....

4. The departmental representative relied very heavily on Goswami Brijratanlalj Maharaji v. CWT [1971] 79 ITR 373 (Guj.) and on an un-reported decision of the Andhra Pradesh High Court within whose jurisdiction the case of this assessee before us falls (the appeals having been transferred from Hyderabad to this Bench) where the Gujarat High Court's judgment is followed. That unreported case is case referred No. 23 of 1973 in the case of CIT v. P.V.G. Raju, Raja of Vizianagaram decided on 18-12-1974. But those have no application to the facts of these appeals. There in those cases the application of Section 20 was very relevant and appropriate. The Kerala High Court in the case of K. Madhavan Nambiar (supra), at page 711 pointed out that in the Gujarat High Court's case the partition had taken place after the initiation of the proceedings and that in the Kerala High Court's case only after the disruption the proceedings are first initiated under Section 17. The fact that the disruption and the resultant extinguishment of HUF took place after initiation of proceedings for assessment makes all the difference and distinction between the Kerala High Court case, to which the appeals before us has a greater affinity, than the Gujarat High Court case, to which these cases have no similarity at all. The assessee had referred to a Calcutta High Court case in Srilal Bagri v. CWT [1970] 77 ITR 901, but there even by the relevant valuation date the HUF had got disrupted.

5. The departmental representative then argued that the partition took effect only from 28-4-1967 the date of registration and that, therefore, the HUF ceased to be in existence only from that date. That argument is contrary to the general law as well as to the express provisions of the Registration Act. The partition deed is compulsorily registrable. When it is registered it takes effect from the date of execution. That is the genera! law. There need be no doubt about these simple and elementary proposition. The reliance of the departmental representative on Darbar Shivrajkumar v. CGT [1981] 131 ITR 647 (Guj.) is not appropriate. That was a case of gift-tax. The Transfer of Property Act provides that the gifts take effect only with the registration of document. Therefore, it cannot be said in gift-tax that the document relates back to the date of execution. Therefore, the HUF had got disrupted even on 27-7-1966. So, the initiation for assessment proceedings after disruption is not proper. So, these appeals are governed by the Kerala High Court judgment.

6. A Special Bench of the Tribunal to which one of us, the Vice President, was a party had in an exactly similar case held in favour of the department--C. Chenni Chettiar v. WTO [1982] 1 ITD 232 (Mad.).

Since then the Kerala High Court has rendered this direct decision to the contrary. So, we are not following the Special Bench decision.

Following the Kerala High Court judgment we uphold the finding of the AAC that when notice was served, there was no HUF in existence and his conclusion thereon that the initiation of assessment proceedings is invalid. So, the result is cancellation of the assessments for the nine assessment years. The nine departmental appeals are dismissed.


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