(O. P. No. 2 of 1941).
(Judgment of the Court was delivered by the Honble the Chief Justice).
We agree with the Commissioner of Income-tax that there are only two points which arise on the question referred namely :-
(1) Is the assessee to be classed as an individual or a Hindu undivided family and
(2) Are the objections taken to the proceedings under Section 34 of the Act valid ?
We also agree with the opinions expressed by the Commissioner in his statement of the case.
The assessee died testate on the 23rd February 1938. He was a Nattukottai Chettiar and was joint with his son until the latters death on the 9th July 1934. After the death of the son the joint family consisted of Arunachalam Chettiar, his widowed step-mother and his widowed daughter-in-law. Until the assessment year 1936-37 Arunachalam was assessed to income-tax as the head of an undivided Hindu family. As the result of the decision of the Privy Council in Kalyanji Vithal Das v. Commissioner of Income-tax, Bengal the Income-tax Officer rightly came to the conclusion that Arunachalam should be assessed as an individual, which meant that he had to pay more in super-tax. The notice was served within one year of the end of the year of assessment and therefore was within time. Before us Mr. P. R. Srinivasan has very properly conceded that the decision of the Privy Council in Kalyanji Vithal Das v. Commissioner of Income-tax permitted action being taken under Section 34; but he says that that section cannot be invoked here for two reasons. The first is that the notice under Section 34 was issued to him as an individual, whereas he was assessed as the head of a joint family. The second is that Section 34 could not operate until an order had been passed under Section 25-A (1).
There is no defect in the notice which was issued to the assessee. It was addressed to him by name and it informed him that he had been assessed at too low a rate which was the case. He had been assessed as the head of a joint family, whereas he should have been assessed as an individual. In Kalyanji Vithal Das v. Commissioner of Income-tax, Bengal the Privy Council held that under the Mitakshara law the mere existence of a wife and daughter does not render ancestral property joint and the income that of a Hindu undivided family. A mistake had been made and proper steps to correct it were taken.
The second contention is equally fallacious. Section 25-A provides for the case where at the time of making an assessment it is claimed by or on behalf of a member of a Hindu family previously assessed as undivided, that a partition has taken place. When such a claim is made, the Income-tax Officer is required to hold an inquiry and, if he is satisfied that a separation of the members of the family has in fact been effected and the joint property partitioned among the various members, it is his duty to pass an order to the effect. When such an order is passed, the individual members are assessed on the shares of the family estate received by each of them respectively. Sub-section (3) says that where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, the family shall be deemed for the purposes of the Act to continue to be a Hindu undivided family. Mr. Srinivasan says that until an order has been passed under the first sub-section the assessee has to be assessed as the head of an undivided family. Section 25-A stands entirely apart from Section 34. There has been no partition and Section 25-A does not operate here.
The answers to the question referred is that there was a lawful assessment to super-tax under Section 34 of the Income-tax Act. The receivers of the estate of Arunachalam will pay the costs, Rs. 250 out of the estate.