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Commissioner of Agricultural Income-tax Vs. Chullikkan Parameswara Bhat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 62 of 1978
Judge
Reported in(1980)16CTR(Ker)378; [1980]125ITR28(Ker)
ActsHindu Succession Act, 1956 - Sections 6; Kerala Agricultural Income Tax Act, 1950 - Sections 18 and 19
AppellantCommissioner of Agricultural Income-tax
RespondentChullikkan Parameswara Bhat
Appellant AdvocateGovernment Pleader
Respondent Advocate T.S. Venkiteswara Iyer and; P.K. Balasubramoniam, Advs.
Excerpt:
.....its disruption so far as surviving members concerned and they will continue to constitute joint hindu family with seniormost member functioning as 'katra' - question answered in negative. - - it was further clearly laid down by the said ruling that the carving out of the share of the deceased will not affect the continuance of the joint family or bring about its disruption so far as the surviving members are concerned and that they will continue to constitute a joint hindu family with the seniormost member functioning as its karta. it is now well established that even though the same person can be taxed both as an 'individual' and as the karta of an huf the two capacities are totally different. we are, therefore, clearly of the opinion that the tribunal was fully right in holding..........so far as the surviving members are concerned and that they will continue to constitute a joint hindu family with the seniormost member functioning as its karta. this decision was subsequently followed by another division bench of this court and the same principle was reiterated in the judgment dated 11th april, 1975, rendered in i.t.r. nos. 29 and 30 of 1973. in the light of these pronouncements with which we are in respectful agreement it must be held that the view expressed by the tribunal that on the death of narasimha bhat an automatic disruption of the huf was brought about by reason of the operation of section 6 of the hindu succession act is legally incorrect and unsustainable. accordingly, we answer question no. 4 in the negative, that is, against the assessee and in favour.....
Judgment:

Balakrishna Eradi, C.J.

1. The Kerala Agricultural income-tax Appellate Tribunal, Additional Bench, Kozhikode (hereinafter called 'the Tribunal'), has referred to this court under Section 60 of the Kerala Agrl. I.T. Act (hereinafter called 'the Act') the following questions ;

'(i) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that when an assessment made against an 'individual' under Section 18(4) has been reopened under Section 19 of the Act, the proceedings are pending against the 'individual' only and not against the Hindu undivided family of which he is the karta or ejaman ?

(ii) Whether, on the facts and in the circumstances of the case, the order of assessment completed against the karta or ejaman of a Hindu undivided family is vitiated, if it is finalised after reopening an order of assessment under Section 19 of the Agricultural Income-tax Act against him as an individual ?

(iii) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that as no notice under Section 35 has been issued calling upon the karta to file a return of the income representing the Hindu undivided family, the proceedings against the Hindu undivided family are vitiated ?

(iv) Whether, on the facts and circumstances of the case, the Tribunal is justified in law in holding that on the death of Shri Narasimha Bhat there is a disruption of status of the Hindu undivided family under the provisions of the Hindu Succession Act and his share is devolving upon his wife and children, which is automatic and statutory and provisions of Section 29 of the Agricultural Income-tax Act are not attracted in these circumstances '

2. From the statement of the case furnished to this court by the Tribunal the facts material for our present purpose may be extracted and briefly stated thus : The respondent herein, Parameswara Bhat, son of Narasimha Bhat, filed a return before the Agrl. ITO, Kasaragod, for the assessment year 1958-59. That return was filed by him as an 'individual'. The assessment for that year was finalised by the Agrl. ITO under s, 18(4) of the Act, and assigning the status of ' individual ' to the assessee, his net income was estimated at Rs. 25,473. On receipt of the order of assessment and demand notice, the assessee, Parameswara Bhat, filed a petition praying for reopening of the assessment under Section 19 of the Act. That application was allowed by the assessing authority and the assessment was reopened as per an order dated January 5, 1960. Subsequently, the files appear to have been transferred to the IAC of Agricultural Income-tax and Sales Tux, Special, Kozhikode, who issued a pre-assessment notice to the assessee on March 6, 1967, purporting to assess him afresh under Section 19, By the said notice, the IAC proposed to finalise the assessment of the assessee under Section 18(4) of the Act. It was, however, stated in the notice that since the respondent herein was a karta of the Chullikana, HUF, the status claimed in his return as 'individual' was not correct or acceptable and consequently the entire income of the family was assessable in his hands as karta of the HUF,

3. On receipt of the aforesaid reassessment notice, the assessee filed a petition, wherein he questioned, inter alia, the legality and propriety of assessing him as the karta of the HUF in the course of reassessment proceedings taken under Section 19 of the Act when the original assessment made against him was in the status of an ' individual '. He also put forward a contention that no HUF was in existence at that time ; since there had been an automatic disruption of the family on the death of his father, Narasimha Bhat, which took place on February 17, 1957, by virtue of the operation of Section 6 of the Hindu Succession Act. The IAC rejected the aforesaid contention put forward by the assessee and passed an order of assessment against the respondent herein as karta of an HUF estimating his net. income at Rs. 1,08,442. The respondent-assessee thereupon preferred an appeal before the Deputy Commissioner of Agricultural Income-tax and Sales Tax (Appeals), Kozhikode, but that appeal was disposed of by the said authority by an order dated August 26, 1974, holding that the IAC had acted rightly in assigning to the assessee the status of karta of a HUF and assessing the joint family income in his hands, but making some modification in the estimate of the income.

4. Aggrieved by the said order passed by the appellate authority, the assessee preferred a second appeal--A.I.T.A. No. 266 of 1974--before the Tribunal, reiterating the contentions which he had urged before the assessing authority and the first appellate authority. Upholding both the contentions raised by the assessee, the Tribunal held that the assessing authority had acted illegally and without jurisdiction in assigning to the assessee the status of karta of an HUF while effecting a reassessment in proceedings under Section 19 of the Act, when the original assessment was made against the assessee in his status as 'individual'. It was further held by the Tribunal that on the death of the father, Narasimha Bhat, which had taken place subsequent to the coming into force of the Hindu Succession Act, the HUF had become automatically disrupted by virtue of the operation of the provisions of Section 6 of the said Act and thereafter there could be no question of the assessee occupying the status of karta of the HUF. On both the aforesaid grounds, the Tribunal held that the assessment made by the IAC could not stand. Accordingly, it set aside the order of assessment passed by the IAC and remitted the proceedings to the assessing authority with the direction to finalise the proceedings afresh in accordance with law and in the light of the observations contained in the Tribunal's judgment. On the motion made by the Commissioner of Agrl. I.T., Kerala, under Section 60 of the Act, the Tribunal has thereafter referred the aforesaid questions to this court.

5. At the very outset we have to observe that it is rather surprising that the department did not bring to the notice of the Tribunal two Division Bench rulings of this court which directly conclude the point raised by question No. 4. Though both those decisions are unreported, the department was a party to those rulings and it ought to have brought those decisions to the notice of the Tribunal. Only because that was not done, the Tribunal has decided the said question in the way in which it has now done and the matter has been quite unnecessarily got referred to this court again at the instance of the department. As early as on 10th August. 1973, this court held in the judgment rendered in I.T.R. Nos. 69, 70 and 71 of 1971 that Section 6 of the Hindu Succession Act does not operate to bring about an automatic disruption of an HUF on the death of any of its members occurring subsequent to the commencement of the Act and that the only effect of the said section read along with the proviso thereto is to lay down that when a male Hindu dies after the commencement of the said Act leaving behind him a female relative specified in class I of the Schedule or a male relative specified in that class who claims through such female relative, the interest of the deceased in the coparcenary property shall devolve by testamentary or intestate succession under the said Act and not by survivorship. It was further clearly laid down by the said ruling that the carving out of the share of the deceased will not affect the continuance of the joint family or bring about its disruption so far as the surviving members are concerned and that they will continue to constitute a joint Hindu family with the seniormost member functioning as its karta. This decision was subsequently followed by another Division Bench of this court and the same principle was reiterated in the judgment dated 11th April, 1975, rendered in I.T.R. Nos. 29 and 30 of 1973. In the light of these pronouncements with which we are in respectful agreement it must be held that the view expressed by the Tribunal that on the death of Narasimha Bhat an automatic disruption of the HUF was brought about by reason of the operation of Section 6 of the Hindu Succession Act is legally incorrect and unsustainable. Accordingly, we answer question No. 4 in the negative, that is, against the assessee and in favour of the department.

6. The next point to be considered is whether, in the pre-assessment proceedings that were pending against the respondent, Parameswara Bhat, in pursuance of the order dated January 5, 1960, allowing his prayer under Section 19 of the Act for setting aside the ex parte assessment, the assessing authority was legally entitled to assess him in the status of a karta of an HUF when the return submitted by the assessee was in his capacity as 'individual' and the original ex parte assessment had also been made against him only in the said capacity. In a proceeding under Section 19 of the Act, the assessing authority after cancelling the original assessment is entitled to proceed to make a fresh assessment in accordance with the provisions of Section 18. That necessarily implies that the fresh assessment to be made under that section can be only against the same assessee. It is now well established that even though the same person can be taxed both as an 'individual' and as the karta of an HUF the two capacities are totally different. His liability to be taxed as an ' individual ' is distinct and different from his liability to be taxed on behalf of his HUF. The individual and the HUF are totally different units of taxation and they are two different assessees--see CIT v. Rameshwarlal Sanwarmal : [1971]82ITR628(SC) . It cannot, therefore, admit of doubt that in reassessment proceedings taken under Section 19 against a person who had been originally assessed in the status of an ' individual ' he cannot be 'reassessed' in the capacity of the karta of an HUF. The reason is clear, namely, that 'reassessment' necessarily implies that there had been an earlier assessment against the same person. The individual and the joint family being distinct and different persons, the assessment made against the respondent in his capacity as 'individual' cannot be regarded in law as an assessment made against the HUF. Hence, no question of 'reassessment' of the respondent's-HUF under Section 19 of the Act could legally arise in this case. We are, therefore, clearly of the opinion that the Tribunal was fully right in holding that the assessing authority had acted illegally and without jurisdiction in proceeding to assess the income of the joint family in the hands of the respondent by assigning to him the status of the karta of an HUF in the reassessment proceedings taken under Section 19 of the Act. We, accordingly, answer question Nos. 1 to 3 in the affirmative, that is, in favour of the assessee and against the department., These references are disposed of as above. There will be no direction regarding costs.

7. A copy of this judgment, under the signature of the Registrar and the seal of the court, will be communicated to the Tribunal, as required by law.


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