By the Bench
As the above appeals and COs involve common points so we are disposing them of by this common order for the sake of convenience.
2. Wealth Tax Act Nos. 153/Jp/1994 to 159/Jp/1994 are appeals by the Income Tax Department for the assessment years. 1984-85 to 1990-91 respectively, against the common order of Commissioner of Wealth Tax (Appeals), Udaipur, dated 11-2-1994, whereby he treated the reassessments made under section 160/17, Wealth Tax Act, to be void and accordingly allowed the assessees appeals for the aforesaid seven assessment years aggrieved by the same, the revenue is in appeal before the Tribunal.
3. CO Nos. 27/Jd/98 to 33/Jd/1998 are COs by the assessee for the assessment years 1984-85 to 1990-91 which are directed against the common order of Commissioner of Wealth Tax (Appeals), Udaipur, dated 11-2-1994, inasmuch as the learned Commissioner of Wealth Tax (Appeals) disposed of the appeals before her solely on the ground of invalidity of the assessments due to non-existence of HUF, and did not decide some other substantive grounds taken by the assessee before her on merits.
4. We have heard the arguments of both the sides and also perused the records.
5. We first take up the appeals of the revenue being Wealth Tax Act Nos. 153/Jp/1994 to 159/Jp/1994 in the above seven appeals for the seven assessment years 1984-85 to 1990-91. The revenue has raised the following common ground :
'On the facts and in the circumstances of the case the learned Commissioner of Wealth Tax (Appeals) has erred in holding the assessment made under section 16(3) as void by observing that the HUF consisted of two members and one of the members having died on 9-5-1991. As such the HUF had not existed when the assessment was made, ignoring the fact that for the Wealth Tax proceedings valuation date is relevant and on the relevant valuation date the HUF was very much existing and, therefore, assessment made subsequently was valid one'.
The learned Departmental Representative of revenue has contended that the death of one member of the family out of two members took place on 5-9-1991, whereas the valuation date for the last assessment year (assessment year 1990-91) involved in these appeals being 31-3-1990, none of these assessment years, gets affected by the said event of death on 5-9-1991. He has contended that the assessee-HUF has voluntarily filed Wealth Tax Return for all these years and this is mentioned in the assessment order also. He has contended that the learned Commissioner (Appeals)s basis for holding the reassessments for these assessment years to be invalid has been the death of one out of two remaining coparceners having already taken place by the time of making Wealth Tax Reassessments as the said reassessments for assessment years upto 1989-90 were made on 26-3-1992, and the reassessment for assessment year 1990-91 was made on 12-3-1993. He has contended that the learned Commissioner (Appeals) conclusion is not right inasmuch as it is only the valuation date of the respective assessment years which is relevant and not the date of assessment/reassessment. He has contended that on the respective valuation dates of the assessment years involved in these appeals, the HUF was very much existing. He has, in this regard, also drawn our attention to the provisions of section 3 of the Wealth Tax Act. He has contended that the HUF having once been in existence will come to an end only when complete partition of HUF is there. Citing N.V. Narendranath v. CWT : 74ITR190(SC) the learned Departmental Representative has contended that once property getting character of HUF the said character will not change till partition,. and that even on respective valuation dates in these cases there was no partition. He has contended that in the case of an HUF, property devolves by survivorship and not by inheritance to LRs. He has contended that the assessee voluntarily filed returns as HUF and so there is an admission on the part of the assessee regarding the existence of HUF. He also contended that in case the revenues plea is accepted then the matter should go back to the Commissioner (Appeals) for valuation to the properties as the valuation point has not been decided by the learned Commissioner (Appeals), but it was in issue before him. He has also contended that the Commissioner (Appeals) has relied on the Honble Karnataka High Court in CWT v. G.E. Narayana (1992) 60 Taxman 521 (Karn), but the same is distinguishable on facts.
6. As against this, the learned authorised representative of assessee has contended that the factual details are all available on record. He has contended that as regards the merits of the case, he relies on the orders of the learned Commissioner (Appeals) wherein the learned Commissioner (Appeals) has relied on the judgment of Honble Karnataka High Court (supra), and that the said judgment was followed in income-tax case also. He has referred to the order of Bangalore Tribunal in Asst. CIT v. Nanjappa (HUF) (2000) 74 ITD 407 (Bang). He has contended that the assessees HUF consisted of two members, that is, Karta Durlabhlal and his wife Shyama Devi. He has contended that they had one daughter who was married as long back as the year 1975. He has contended that for the purpose of making valid assessment/reassessment, the date of assessment/reassessment is material and on that date HUF of assessee was not existing. He has contended that Wealth Tax Act provides machinery for assessing LRS of individuals but not in the case of an HUF. He has also contended that in this case the issue regarding the character of property is not involved.
7. In the rejoinder, the learned Departmental Representative of revenue has referred to section 19(2) of the Wealth Tax Act and contended that the said provision provides for the assessment of net wealth of a deceased-assessee, being an individual, to be made in the hands of the LRs of the deceased individual assessee. He has contended that so far as HUF and company are concerned, there are no provisions regarding assessments in respect of them in the hands of their LRs, and that it is presumed that an HUF never comes to an end. He has contended that HUF is governed by Hindu Law and a company is governed by Company Law and machinery is provided in those laws. He has contended that according to Hindu Law the assessees HUF was very much existing and the sole surviving member Durlabhlal continues to constitute HUF.
8. We have considered the rival contentions, the relevant material on record as also the cited decisions. In : 74ITR190(SC) (supra), the Honble Supreme Court has referred to their decision in the case of Gowli Buddanna v. CIT : 60ITR293(SC) . In that case, one Buddappa, his wife, his two unmarried daughters and his unmarried son, Buddanna were members of an HUF. Buddappa died and after his death the question arose as to whether the income of the properties held by Buddanna as the sole surviving coparcener was assessable as the individual income of Buddanna or as the income of the HUF. It was held by the Honble Supreme Court that since the property which came, into the hands of Buddanna as the sole surviving coparcener was originally joint family property, it did not cease to belong to the joint family and income from it was assessable in the hands of Buddanna as income of the HUF.
9. In the cited facts of the case : 74ITR190(SC) (supra) the property sought to be taxed in the hands of the appellant originally belonged to the HUF consisting of the appellant, his father and his brothers. On partition of the said HUF, the appellant received his share of the properties originally belonging to the said HUF. Relying on the decision of Judicial Committee in Attorney General of Ceylon v. Arunachalam (1958) 34 ITD 42 (PC) it was held that 'it is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as joint property of the undivided family'. The Honble Supreme Court held that when a coparcener having a wife and two minor daughters receives his share of the joint family properties on partition, such property in the hands of the coparcener belongs to the HUF of himself, wife and two minor daughters and cannot be assessed as individual property.'
10. For proper appreciation of the issue, it will be desirable to clarify some concepts of Hindu Law being relevant in the matter in hand. Here, we will discuss/elaborate the Hindu Law as per the Mitakshara School being the law prevalent in almost all the parts of India except West Bengal where Dayabhaga School of Hindu Law is followed which is also known as the Bengal School of Law. Under the Mitakshara School of Hindu Law there are two distinct concepts being of (i) 'A Joint Hindu family' and (ii) 'A Hindu coparcenary'. So far as the concept of 'Joint Hindu family' or an 'HUF' under Hindu Law is concerned, it simply means a Hindu family consisting of all persons lineally descended from a common male ancestor together with their wives and unmarried daughters. Thus, the term 'Family' signifies group of people or plurality of members mutually related by blood or by marriage or by adoption. Neither is it necessary that there must be two existing male members to constitute a Hindu joint family nor is it necessary that there must be at least one existing male member in the family to constitute a Hindu joint family. Under this system of Hindu law, even two females may constitute a joint Hindu family, no male member being there notwithstanding. As such, a 'Joint Hindu family' or an 'HUF under Hindu Law, essentially denotes plurality of members and mutually so related as, mentioned above.
11. A 'Hindu coparcenary' is still a narrower term than a Hindu joint family. A Hindu coparcenary, under Mitakshara School of Hindu Law, consists of a common male ancestor together with his lineal descendants in the male line within three generations (degrees) next to him or within four generations/degrees inclusive of such ancestor, in unbroken line of male descent. No coparcenary can commence without, a common male ancestor, though after his death, it may consist of collaterals like brothers, uncles and nephews, cousins, etc. Thus, a Hindu coparcenary will include a common male ancestor, his sons, his grandsons and his great-grandsons. These male persons, three generations next to the holder of joint/coparcenary property are coparceners or the members of Hindu coparcenary (under Mitakshara School) and they acquire by birth an interest in the coparcenary property. A coparcener has a right to enforce partition of coparcenary property. A Hindu coparcenary, under the Mitakshara School, does not include any female person as a 'coparcener' or as a 'coparcener member' of the coparcenary. Under the Mitakshara School of Hindu Law, neither the female members of the family become members (coparceners) of the coparcenary nor do they acquire any right of ownership in the coparcenary property, nor do they have any right to claim partition, though female members of the family do have the right of maintenance out of the coparcenary property.
12. A Hindu coparcenary may possess coparcenary property also known as joint family property which may consist of the following categories of properties :
(i) Ancestral property, i.e., the property inherited by a male Hindu from his paternal ancestors. The sons, grandsons and great-grandsons acquire an interest in it by birth;
(ii) Separate property thrown into the common hotchpot i.e., the property received by a member of the joint Hindu family from any relation other than a paternal ancestor and thus being that members separate property but put into the common/joint stock of property of the Hindu family intending thereby to merge it therewith;
(iii) Self-acquired property, i.e., the property earned by a member of his own self and this being that members self-acquired property but thrown into the common hotchpot and thus blended therewith;
(iv) Joint acquisitions with the aid of joint family property.
12.1. It may be noted that in the coparcenary property or in the joint family property of a coparcenary, the male issue of coparcenars acquire an interest by birth, and every coparcener has a joint interest and a joint possession. On the death of a coparcener his interest in the coparcenary property devolves on other members of coparcenary by survivorship and does not pass to his heirs by succession.
12.2. We may, in short, also mention here that under Dayabhaga School of Hindu Law, which prevails in Bengal, the sons do not acquire an interest by birth in ancestral/joint property. Their rights arise for the first time on fathers death whereupon they take the deceased fathers property, whether ancestral or separate, as heirs and not by survivorship. Inasmuch as the sons do not acquire any interest in ancestral property in their fathers lifetime, so during fathers lifetime there can be no coparcenary in the strict sense of the word between a father and sons under Dayabhaga School of Hindu Law. Under this school of law it is only on the death of father leaving two or more male issues that a coparcenary, for the first time, comes into existence.
13. A 'Joint Hindu Family', simpliciter, may also hold similarly joint family property. Such joint family property may also include similarly (i) ancestral property., (ii) separate property, blended/merged with coparcenary property, (iii) self-acquired property blended with coparcenary property, and (iv) joint acquisitions with the help of joint property.
14. We may note here that under Wealth Tax/Income Tax Law the term used to describe the family as a taxable unit is 'HUF' and the said concept of HUF is synonymous with a Joint Hindu family and not with a Hindu coparcenary. In other words, the taxable entity under Wealth Tax/Income Tax Law is HUF and not a Hindu coparcenary. Therefore, for the purposes of Wealth Tax/Income Tax Law, we should understand the term HUF to simply connote and mean a joint Hindu family.
15. When there exists a Hindu coparcenary holding coparcenary property and it one coparcener, that is, one member of the Hindu coparcenary gets separated from the coparcenary on partition, and receives his share of the coparcenary property, then the question arises as to what exactly remains the character/nature of that property in the hands of that separated coparcener
16. As the term 'family denotes plurality of persons to comprise it, there can be no family when there remains one single person (member) alone as has been held by the Honble Supreme Court in C. Krishna Prasad v. CIT : 97ITR493(SC) . As such, a single person, whether male or female, cannot constitute a family nor in turn an HUF. Therefore, when on partition of a Hindu coparcenary, or otherwise by survivorship, the separated/partitioned coparcener or the sole surviving coparcener remains altogether one single person alone then notwithstanding whether earlier he being coparcener or a member of the joint Hindu family or not, he will simply constitute an individual and not a family, accordingly an HUF.
16.1. Obvious as it is, an assessment in the status of HUF cannot be made when there is a single person and that for an assessment as HUF there need necessarily be more than one person so as to constitute a 'family' and in turn an HUF.
16.2. However, a typical situation, under Hindu Law, does arise when a member coparcener remains a single person on partition of Hindu coparcenary or otherwise becomes a sole surviving coparcener. The coparcenary property. which falls to the share of a partitioned coparcener or of a sole surviving coparcener, and if he remains a single person alone, then it practically becomes his absolute individual property (separate property) for the time being till this coparcener adopts a son or makes marriage wherefrom male offspring may result. Till such birth/adoption of a son, the coparcenary property of such single partitioned coparcener remaining alone or a sole surviving coparcener remaining alone, the coparcenary property falling to his share on partition or due to survivorship will remain his absolute separate individual property and taxable as such. Such property cannot accordingly be assessed as HUF property.
16.3. However, if a Hindu coparcener, who receives his share of the coparcenary property on partition by separating from his father, brothers, or other coparceners also has his own coparcenary, he being joint with his male issues, then the property falling to his share on partition will be his ancestral property as regards his male issues who acquire an interest in it by birth whether they are in existence at the time of partition or are born subsequently. But the said property will be his separate property as regards the other relations (partitioned other members) and if this coparcener dies without leaving male issue, the said property will pass to his heirs by succession.
16.4. Similarly if a Hindu coparcener, separating from other coparceners on partition has his own Joint Hindu Family simpliciter, as distinguished from a Hindu coparcenary as for example, such coparcener having his wife, his unmarried daughters whether with or without any son, will hold that property which had fallen to his share on partition of coparcenery as a Joint family property for the reason of the said property being originally a joint Hindu family property and the same will be assessable as a joint Hindu family property, or for that matter HUF property.
16.5. The very same principle, as mentioned just above, will also to a member of a joint Hindu family simpliciter, as distinguished from a Hindu coparcenary, strictly so called, becoming separate on partition and receiving his share of the joint family property and after such partition he happens to have along with him his own joint family comprising of members like wife, unmarried daughters, whether with or without any son.
17. However, we may also make it clear that no such jointness will attach to that property of the partitioned coparcener separating from other coparceners on partition of coparcenary or a partitioned member of the joint Hindu family which happens to be his separate property or a self-acquired property, provided the same was not thrown into the common hotchpot lest it should have attuned itself with the joint family property, entailing in turn, the other consequential incidents mentioned just above.
18. Now coming to the fact-situation of the case in hand, we find that at the time of reassessment (26-3-1992 for assessment years 1984-85 to 1989-90 and 12-3-1993, for assessment years 1990-91) involved in these appeals, one Shri Durlabhlal alone was surviving as a single individual, his wife Shyama Devi having expired on 5-9-1991. Thus, as held by the Honble Supreme Court in : 97ITR493(SC) (supra), the said individual, being single, sole survivor, could not constitute a family inasmuch as the concept of family essentially requires the existence of plurality of persons. No doubt, once a property is HUF property, it retains its character as such till HUF is brought to end by partition or it comes to an end due to there remaining in existence only one single person and there being no other person in existence to comprise with him a 'family'. Accordingly the property which, though was originally HUF property in character but the property shed off its character to said jointness due to the family having been reduced to one single person. In that view of the matter, on 26-3-1992, as also on 12-3-1993, the relevant dates of reassessments involved in these appeals under consideration there was no family of Shri. Durlabhlal in existence, and in turn no HUF. There not being the situation of there being any son through birth or adoption, the question of the property, which had fallen to the share of Shri. Durlabhlal which was originally joint family property, to retain its characters as such also does not arise in the circumstances.
19. In CWT v. G. E. Narayana (1992) 60 Taxman 521 (Karn) the Honble Karnataka High Court has held that there is no provision in the Wealth Tax Act, 1957, to make assessment on erstwhile HUF which ceased to exist after filing of return because of the death of one member (Karta) out of the two members who comprised the HUF. It was held that a specific provision is necessary to make an order of assessment against a taxable entity which does not exist on the date of assessment even though the said entity was in existence. When the liability to pay tax arose. It was also observed that HUF is an assessable entity and without the presence of an entity it is not possible to make assessment unless the law provides a machinery to assist the erstwhile HUF by enabling the assessment proceedings to be initiated or continued against a proper successor. It has also been observed that section 19 of the Wealth Tax Act is one such provision which enables the proceedings against legal representative of the deceased person who was liable to pay the tax under the Act, and that section 19A ,20 and 21 also provide for certain similar contingencies but there is no provision, in the Wealth Tax Act enabling the assessing officer to make an assessment against the person succeeded to the wealth of erstwhile HUF which was in existence on the date of valuation but ceased to exist by the time of assessment. It was also observed that it cannot be said that an HUF dies as a result of death of one coparcener out of two, leaving behind only one member of the family and that such a surviving member could not be said to be the legal representative of the deceased HUF. No contrary decision whether of the Honble jurisdictional High Court or of any other High Court or of the Honble Apex Court has been brought to our notice. In that view of the matter, respectfully following the aforesaid decision of the Karnataka High Court, we hold that for making an assessment against an HUF, it was essential that the HUF should have existed not only on the valuation date but also on the date of assessment and that the Wealth Tax Act does not provide for any machinery for making an assessment order against an erstwhile HUF which had exist after the filing of the return. In that view of the matter, assessments/reassessments dated 26-3-1992 for assessment years 1984-85 to 1989-90 and dated 12-3-1993, for assessment year 1990-91 made under section 16(3)/17 of the Wealth Tax Act are found to be not valid in the eye of the law and void as such. Accordingly, we find no fault with the learned Commissioner (Appeals)', impugned order on this count.
20. Now we come to the COs of the assessee bearing Nos. 27/Jd/1998 to 33/Jd/1998. The assessee-respondent has taken as many as seven common, grounds in his COs. Ground No. 7 is general. Ground Nos. 1 and 2 of CO pertain to various substantive grounds taken by the assessee-responded the first appellate authority in his appeal but copy of those substantive ground have not been placed on record before us and so we are not in a position to appreciate as to what exactly were those substantive grounds which the assessee had raised before the first appellate authority. Ground No..3 of CO also comprises a challenge to legality and propriety of various proceedings and as this concerns the legality and elaborate arguments have been raised before us on this count together with placing copy of order of the first appellate authority the case of Govind Lal so may look into this ground in its limited aspect.
21. The learned authorised representative of assessee has contended that for assessment years 1984-85 to 1988-89 all materials were already disclosed on record and there was no non-disclosure of any material fact and so there was no valid reason for reopening assessments for the above assessment years. He has furnished a copy of the order of the first appellate authority, dated 10-2-1994 in the case of Govind Lal Sewa Lal Yagnik placed on pp. 25-30 and contended that on similar facts the reopening of assessment in the case of other coparcener Govind Lal was declared invalid by the first appellant authority and so the reopening in the case of this assessee as well ought to have been similarly declared invalid. He has also contended that for two assessment years 1989-90 and 1990-91, the issuance of notice under section 16(2) was beyond the limit prescribed under proviso to section 16(2). He has contended that the last date for issuance of notice for assessment years 1989-90 and 1990-91 were 31-3-1990, and 31-3-1991, respectively, whereas the said notices were issued on 10-1-1991, and thus beyond the prescribed date. He has contended that the notices accordingly having been issued after expiry of prescribed time the same were invalid which in result invalidated the reassessment proceedings.
22. As against this, the learned Departmental Representative of revenue has objected to the above contentions of the learned authorised representative of assessee stating that such contentions of assessee are not on record neither in assessing officers order nor in Commissioner (Appeals)s order. He has contended that when the facts are not on record then it is not proper for the Bench to decide those arguments and that rather the Tribunal may direct the first appellate authority for considering these contentions.
23. We have considered the rival contentions as also the relevant material on record. Considering the contentions raised by the two rival representatives before us, though we would have preferred to restore the issue to the first appellate authority for considering and disposing of the issue in the light of the. contentions raised before us but we decline to do so for the reason that in view of our conclusion drawn above in appeals of the department the same has remained no more necessary nor are the other grounds of CO any more necessary for us to decide on merits similarly. In that view of the matter, we dispose of the above COs accordingly.
24. In the result, the above seven appeals of revenue are dismissed, and the above seven COs of the assessee are disposed of as indicated above.