Skip to content


Bhupatrai Hirachand Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference Nos. 140, 166 and 167 of 1963
Judge
Reported in[1977]109ITR97(Cal)
ActsIncome Tax Act, 1922 - Sections 9(3) and 34
AppellantBhupatrai Hirachand
RespondentCommissioner of Income-tax
Respondent AdvocateB.L. Pal, Adv.
Cases ReferredC) and J. K. Bankers v. Commissioner of Income
Excerpt:
- r.n. pyne, j.1. this is a reference under section 66(1) of the indian income-tax act, 1922. the reference relates to the assessment years 1955-56, 1956-57 and 1957-58. in this reference four questions of law which are set out hereinafter have been referred by the tribunal for this court's consideration. for proper appreciation of the questions of law referred by the tribunal it would be necessary to refer to certain facts which have been found and stated in the statement of the case submitted by the tribunal.2. one liladhar hirachand, a hindu governed by mitakshara school of law, died on march 31, 1943, leaving behind his widow, smt. kankubai, and a son, the applicant, bhupatrai hirachand, who at the time was near about 18 years of age. it appears that after the death of his father,.....
Judgment:

R.N. Pyne, J.

1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922. The reference relates to the assessment years 1955-56, 1956-57 and 1957-58. In this reference four questions of law which are set out hereinafter have been referred by the Tribunal for this court's consideration. For proper appreciation of the questions of law referred by the Tribunal it would be necessary to refer to certain facts which have been found and stated in the statement of the case submitted by the Tribunal.

2. One Liladhar Hirachand, a Hindu governed by Mitakshara school of law, died on March 31, 1943, leaving behind his widow, Smt. Kankubai, and a son, the applicant, Bhupatrai Hirachand, who at the time was near about 18 years of age. It appears that after the death of his father, Bhupatrai Hirachand was married and got a son in August, 1950, by name, Tarun Kumar, who is still living.

3. During his lifetime Liladhar carried on business under the style of 'Liladhar Hirachand' and also had acquired house property. The business was his individual business. The house property was also his self-acquired property. In respect of income from the said business and also the house property Liladhar was assessed to income-tax in the status of individual up to the assessment year 1943-44. From the assessment year 1944-45, Bhupatrai Hirachand, the assessee, was assessed as individual in respect of the income from the said two sources right up to the assessment year 1952-53. For the assessment year 1953-54, the business income as well as the property income had been clubbed together as before. But, on appeal preferred by the assessee against the order of the Income-tax Officer for the said year, the Appellate Assistant Commissioner held that under the Hindu Women's Rights to Property Act, 1937, the assessee's widowed mother had half share and so only the half share of the income should be assessed in the hands of the assessee. Thereafter, assessments were made for the assessment years 1954-55, 1955-56, 1956-57 and 1957-58, on the assessee in the status of individual including therein income from business and half share of income from property. Such assessments for 1955-56, 1956-57 and 1957-58 were made on November 1, 1957, December 7, 1957, and July 31, 1957. In course of the assessment proceedings for the assessment year 1958-59, the Income-tax Officer went into the question of status and came to the conclusion that the correct status of the assessee should be that of Hindu undivided family and not individual. In that assessment year he held that the income from the business as well as the entire, income from house property were assessable in the hands of the assessee in the status of Hindu undivided family. The assessment for the assessment year 1958-59 was completed on July 11, 1959.

4. Subsequently, on March 9, 1960, the Income-tax Officer initiated proceedings lor reopening of the assessment under Section 34 of the Indian Income-tax Act, 1922, for the assessment years 1955-56, 1956-57 and 1957-58. The notice was in the following terms :

'To

Sri Bhupatrai Hirachand,

Karta of the H.U.F., M/s. Liladhar Hirachand,

55/6, Canning Street, Calcutta.

Whereas I have reason to believe that your income assessable to income-tax for the assessment year 1955-56, has

1956-57

1957-58

(a) escaped assessment,

(b) been under-assessed,... I therefore propose to assess the said income that has

(a) escaped assessments,... I hereby require you to deliver to me.....within 35 days of the receipt of this notice, a return in the attached form of your total income and total world income assessable for the said year ending 1st March, 1956/31st March, 1957/31st March, 1958.

This notice is being issued after obtaining the necessary sanction of the Commissioner of Income-tax, Calcutta.

(Sd.)

Illegible, Income-tax

Officer, Dist. (VI), Calcutta.'

5. Similar notices were issued in respect of assessment years 1953-54 and 1954-55. In this reference we are, however, not concerned with these years.

6. Pursuant to the said notice under Section 34 of the Indian Income-tax Act, 1922, fresh assessments were made on February 22, 1961, by the Income-tax Officer, 'C' Ward, District VI, Calcutta, on the assessee as Hindu undivided family in respect of income from his business as well as entire income from the property. On appeal, the Appellate Assistant Commissioner by his three orders all dated June 17, 1961, and made in respect of assessment years 1955-56, 1956-57 and 1957-58 held that Section 34(1)(a) was applicable and that the correct status of the assessee should be that of Hindu undivided family and, therefore, upheld the said orders of the Income-tax Officer. The assessee preferred appeals to the Tribunal against these three orders. Here, it may be mentioned that for the assessment years 1953-54 and 1954-55, similar orders were made by the Income-tax Officers and in appeals by the Appellate Assistant Commissioner. Appeals were also preferred by the assessee to the Tribunal against the two orders of the Appellate Assistant Commissioner for the assessment years 1953-54 and 1954-55. By order dated June 17, 1961, the Appellate Assistant Commissioner upheld the orders of the Income-tax Officer dated July 11, 1959, for the assessment year 1958-59 mentioned hereinbefore and the assessee also preferred an appeal to the Tribunal against the said order of the Appellate Assistant Commissioner. Similarly, for the assessment years 1959-60 and 1960-61, the assessments were made by the Income-tax Officer on the assessee in the status of a Hindu undivided family on the entire income from the business and the property. These were regular assessments and were upheld in appeal by the Appellate Assistant Commissioner by his two orders both dated July 14, 1961. The assessee also preferred appeals to the Tribunal against these two orders.

7. The Tribunal, by a consolidated order dated November 27, 1961, disposed of the six appeals concerning the assessment years 1953-54, 1954-55, 1955-56, 1956-57, 1957-58 and 1958-59. The Tribunal held that Section 34(1)(a) of the Indian Income-tax Act, 1922, was not applicable but it was of the opinion that reassessment could be sustained under Section 34(1)(b) of the Act. In that view of the matter according to the Tribunal the assessments for the assessment years 1953-54 and 1954-55, were barred but the assessments for the assessment years 1955-56, 1956-57 and 1957-58 were valid under Section 34(1)(b) of the Indian Income-tax Act, 1922. The Tribunal, however, agreed with the conclusion of the Appellate Assistant Commissioner that the assessee derived income from property as well as business in the status of karta of a Hindu undivided family consisting of himself and his widowed mother and, therefore, the ircome from these two sources were assessable in the hands of the assessee in the status of Hindu undivided family.

8. Thereafter, at the instance of the assessee in respect of the assessment years 1955-56, 1956-57 and 1957-58, the Tribunal has referred four questions of law being the subject-matter of this reference, i.e., I.T. Reference No. 167 of 1963 said to arise out of the Tribunal's consolidated order dated November 27, 1962, for consideration of this court under Section 66(1) of Indian Income-tax Act, 1922. The questions of law are :

'(i) Whether, in the facts and circumstances of the case, Bhupatrai Hirachand constituted a Hindu undivided family consisting of himself and his widowed mother ?

(ii) If the answer to question No. (i) is in the affirmative whether the income from properly and from business could be assessed in the hands of such Hindu undivided family ?

(iii) Whether, in the facts and circumstances of the case, the half share of the property income (representing the interest of Bhupatrai Hirachand's widowed mother) should be excluded from the total income of the Hindu undivided family under Section 9(3) of the Indian Income-tax Act, 1922? And

(iv) Whether Tribunal could, in law, sustain the validity of assessments for the assessment years 1955-56, 1956-57 and 1957-58, with reference to the provisions of Section 34(1)(b) though the Income-tax Officer purported to initiate proceedings for these years under Section 34(1)(a) of the Indian Income-tax Act, 1922 ?'

9. In respect of the assessment year 1958-59, the Tribunal has referred three questions of law for this court's consideration under Section 66(1) of the Indian Income-tax Act, 1922. These three questions, which are identical with the first three questions referred for the assessment years 1955-56 to 1957-58 are the subject-matter of I.T. Reference No. 166 of 1963.;

10. For assessment years 1959-60 and 1960-61, the Tribunal, from its consolidated order dated February 21, 1963 (whereby it dismissed the assessee's appeal), has referred the following two questions of law, being the subject-mater of I. T. Reference No. 140 of 1963, to this court under Section 66(1) of Indian Income-tax Act, 1922.

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the status of the assessee was that of a Hindu undivided family consisting of Sri Bhupitrai Hirachand and his widowed mother ?

(2) If the answer to question No. 1 is in the affirmative whether the entire income from property and business had been correctly assessed in the hands of the Hindu undivided family ?'

11. These three references were heard by Sankar Prasad Mitra J. (as his Lordship then was) and Chatterjee J. On November 27, 1968, by the judgment delivered in I.T. Reference No. 140 of 1963 their Lordships answered the first question set out above for the years 1959-60 and 1960-61 in the negative and held that the second question did not arise. According to their Lordships, Liladhar died leaving separate property and, therefore, Sub-section (1) of Section 3 of the Hindu Women's Rights to Property Act, 1937, would apply and in that case the son and widow would inherit in equal shares and, therefore, the shares were defined. Following the said judgment their Lordships answered the question No. 1 of this reference, i.e., I.T. Reference No. 167 of 1963, in the negative but did not answer the other three questions. Thereafter, appeals were preferred by the revenue to the Supreme Court for the assessment years 1955-56 till 1960-61 against the said judgment and answers given by this court. The Supreme Court vacated the answer given by the court and allowed the appeals. The Supreme Court answered the question, 'whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the status of the assessee was that of a Hindu undivided family consisting of Bhupatrai Hirachand and his widowed mother ?' in favour of the department subject to the qualification that the question whether the widow of Liladhar is a member of a Hindu undivided family can be more appropriately decided after deciding the other questions referred to and left unanswered by the High Court.

12. Regarding the question whether in computing the taxable income of the assessee the income of the property to which Bhupatrai's mother is entitled under the Hindu Women's Rights to Property Act, 1937, should be taken into consideration or not, the Supreme Court observed as follows :

'In this case, as mentioned earlier, we are concerned with the assessments for the years 1955-56 to 1960-61. Undoubtedly, in those years the family of Bhupatrai was a joint Hindu family. At that time admittedly that family consisted of two coparceners, namely, himself and his son. It is not disputed that both of them jointly owned the properties which devolved on Bhupatrai from his father. That being so Bhupatrai was lightly assessed in the status of the karta of the Hindu undivided family. But the question does arise whether in computing the taxable income of the Hindu undivided family the income of the property to which Bhupatrai's mother is entitled under the aforementioned provision should be taken into consideration or not. This question will arise for decision only when the High Court goes into the questions which remain unanswered. But at this stage suffice it if we merely formulate the contentions advanced before us on that point without expressing any opinion of our own.'

13. The Supreme Court after recording the respective contentions of the parties remitted the cases to this court for deciding all the remaining questions including the second part of the question, i.e., whether the widowed mother of Bhupatrai is a member of the Hindu undivided family of which Bhupatrai is a karta.

14. Now I shall deal with the four questions of law as set out hereinbefore referred by the Tribunal.

15. Question No. (i) :

In view of the judgment of the Supreme Court only a part of this question still remains to be answered and that is whether the widowed mother of the assessee is a member of the Hindu undivided family of which the assessee is the karta. It is now well-settled that the expression 'Hindu undivided family' used in the Indian Income-tax Act, 1922, means a joint family and not a coparcenary and for this reference to any case law is not necessary. It is, therefore, to be seen if the widowed mother of the assessee is a member of the joint family of which the assessee is the karta.

It is contended on behalf of the assessee that in view of the limited interest given to a widow under the Hindu Women's Rights to Property Act, 1937, a widow cannot have all the rights of or be a coparcener in a Hindu Mitakshara joint family and, therefore, she cannot also be a member of the joint family. It was further submitted that if a widow, who is given a limited interest under the Act, is treated as a member of a joint family, then that would amount to conferring upon her all the rights of a coparcener and also enlargement of her limited interest or estate, which, however, is not permissible. In our view there is no substance in these contentions. These contentions, it appears, are made on the assumption or footing that every member of a Hindu Mitakshara joint family must necessarily be a coparcener. This is not correct. Under the Mitakshara school of Hindu law there is a clear distinction between a joint family and a coparcenary, and naturally, therefore, all the members of a joint family may not and need not be coparceners. This distinction will appear from the following observations in Mulla's Principles of Hindu Law, 13th edition, pages 240-41 (Articles 212 and 213).

'212. (1) A joint Hindu family consists of all persons lineally descended from a common ancestor, and include their wives and unmarried daughters. A daughter ceases to be a member of her father's family on marriage, and becomes a member of her husband's family.'

'213. A Hindu coparcenary is a much narrower body than the joint family. It includes only those persons who acquire by birth an interest in the joint or coparcenary property. These are the sons, grandsons and great-grandsons of the holder of the joint property for the time being, in other words, the three generations next to the holder in unbroken male descent.'

16. Therefore, there is no bar for a widow to be a member of a joint family. It is, therefore, to be seen if in the facts and circumstances of this case Bhupatrai's widowed mother is a member of the joint family.

17. Daring the lifetime of Liladhar, who was governed by the Mitakshara school of Hindu law, the family consisted of himself, his wife and his minor son, the assessee. Thus, Liladhar with his wife and minor son constituted a Hindu joint family. Neither it is alleged nor the materials on record show that after Liladhar's death there was any disruption of the joint family. On the contrary, even after Liladhar's death the business and property left by him remained joint and Liladhar's son, the assessee, was assessed in respect of the entire income of the business and the property. All these, to our mind, go to show that after Liladhar's death the joint family continued. Further, until the contrary is proved, it is to be presumed that a Hindu family continues to be joint. In this connection reference may be made to Mulla's Principles of Hindu Law, 13th edition, at page 259, Article 233, wherein it is stated that: 'Generally speaking, 'the normal state of every Hindu family is joint. Presumably every such family is joint in food, worship and estate. In the absence of proof of division, such is the legal presumption'. In other words,' given a joint Hindu family, the presumption is, until the contrary is proved, that the family continues joint'.'

18. We are, therefore, of the opinion that after Liladhar's death the joint family continued and there were additions in the joint family which came to include the assessee's wife and son, and during the relevant assessment years the members of the joint family were the assessee, his widowed mother, his wife and son. Within this joint family the assessee and his son, Tarun Kumar, form a coparcenary. The cases, to wit, (1) Satrughan Isser v. Sabujpari : [1967]1SCR7 , (2) Shamlal v. Amar Nath : [1970]2SCR489 , (3) P. Govinda Reddy v. Golla Obulamma : AIR1971AP363 , (4) N. V. Narendranath v. Commissioner of Wealth-tax : [1969]74ITR190(SC) , (5) R. Sridharan v. Commissioner of Wealth-tax [1969] 73 ITR 360 (Mad), (6) Gowli Buddanna v. Commissioner of Income-tax : [1966]60ITR293(SC) , (7) Ramkawal Upadhaya v. Dudhanath Pandey : AIR1969Pat317 , (8) Commissioner of Income-tax v, Seth Govindram Sugar Mills : [1965]57ITR510(SC) , (9) Krishna Beharilal v. Gulabchand : AIR1971SC1041 , (10) Commissioner of Income-tax v. Pushpa Devi : [1971]82ITR7(Delhi) , (11) Commissioner of Income-tax v. Dr. (Mrs) Sita Bhateja : [1973]91ITR193(KAR) , (12) Kalyanji Vithaldas v. Commissioner of Income-tax [1937] 5 ITR 90 , (13) Rukmini Bai Rathor v. Commissioner of Wealth-tax : [1964]54ITR430(Orissa) and (14) Commissioner of Income-tax v. Bawa Aryan Singh : [1969]73ITR576(Delhi) cited by the counsel for the assessee in support of his contentions in respect of this question do not appear to us to be of any assistance to the assessee and we, therefore, do not think it necessary to deal with all these cases. On the contrary, some of these cases show that under the Hindu system of law there is a clear distinction between a coparcenary and a joint family.

19. In the aforesaid view of the matter we answer the part of the question No. (i) which has not been answered by the Supreme Court, viz., 'whether the widowed mother of Bhupatrai is a member of the Hindu undivided family of which Bhupatrai is the karta' in the affirmative and in favour of the revenue. Question No. (ii) :

After Liladhar's death the business and the house property devolved upon his son and his widow in equal shares. The widow became entitled to the business and the house property along with the son under the Hindu Women's Rights to Property Act, 1937. The business and the house property being ancestral in the hands of the assessee, his son, after his birth, also got an interest therein. After Liladhar's death the family continued to be joint as already stated. From the facts found it appears that after Liladhar's death and during the relevant years the business and the property remained joint and were held by the assessee and his widowed mother as members of the joint family. On the material on record and in view of our answer to question No. (i), we hold that the income from the business and the house property should be assessed in the hands of the Hindu undivided family subject to this qualification that in respect of the income from house property only half share thereof should be so assessed in view of our answer to question No. (iii) stated hereinafter. Question No. (iii):

The answer to this question, in our opinion, is dependent on the interpretation of Section 3(1) of the Hindu Women's Rights to Property Act, 1937. As Liladhar died some time in 1943, the Hindu Women's Rights to Property Act, 1937 (hereinafter referred to as 'the Act'), is applicable to this case. Since the property was Liladhar's separate property, his widow became entitled to it under Section 3(1) of the Act. Part of Section 3(1) relevant for the purpose of this case is as follows :'3. (1) When a Hindu governed by the Dayabhaga school of Hindu law dies intestate leaving any property, and when a Hindu governed by another school of Hindu law or by customary law dies intestate leaving separate property, his widow or if there is more than one widow, all his widows together, shall, subject to the provisions of Sub-section (3), be entitled in respect of property in respect of which he dies intestate, to the same share as a son.'

20. Mr. B. L. Pal, appearing for the revenue, submitted that as the share of Liladhar's widow in the property is not definite and ascertainable, Section 9(3) of the Indian Income-tax Act, 1922, has no application to this case. According to him, in cases of Hindus governed by the Mitakshara School when a widow becomes entitled to her deceased husband's interest in the joint family property under Section 3(2) of the Act such interest is undefined and unascertainable and it continues to remain so until there is a partition in the joint family. He further contended that such interest until there is a partition in the joint family, remains liable to fluctuation due to births and deaths in the family. It is only upon partition such interest becomes definite and ascertainable. In support of this contention he relied upon the case of Potti Lakshmi Perumallu v. Potti Krishnavenemma : [1965]1SCR26 . Mr. Pal added that the share which a widow gets in the separate property of her deceased husband governed by Mitakshara School under Section 3(1) of the Act is similarly undefined and unascertainable and also subject to fluctuations until partition takes place in the family. Mr. Pal further contended that in the Act both the word 'share' in Sub-section (1) and the word 'interest' in Sub-section (2) of Section 3 have been used in the same sense and they also mean the same thing. This, according to him, is clear from Sub-section (3) where only the word 'interest' has been used, though this sub-section is applicable to cases contemplated in both Subsections (1) and (2). In support of his contention reliance was placed in the case of Umayal Achi v. Lakshmi Achi reported in [1945] FCR 1 . We do not think this case really helps Mr. Pal. It appears to us that when Varadachariar J. used the words 'share' in connection with Sub-section (2) of the Act, he means undefined share. The words 'share' and 'interest' may in some cases convey the same sense. But the meaning of these two words is to be ascertained with reference to the context in which they are used. In the context of Sub-sections (1) and (2) where different situations are contemplated, these two words, in our view, do not convey the same meaning. We are unable to accept the contention of Mr. Pal that under Sub-section (1) of Section 3 of the Hindu Women's Rights to Property Act, 1937, the share of the widow is not definite or determined. From the language used in the two sub-sections it is quite clear that the nature of the 'interest' or share' in the property which a widow gets under the two sub-sections cannot be the same. Under sub-section (1) a widow becomes entitled to the 'same share as a son', that is, both the son and the widow inherit in equal shares and, therefore, the shares are defined and determinate. Under sub-section (2) the widow is entitled to her husband's interest in the joint family property. The interest of the husband in the joint family property until partition is undefined and liable to fluctuation and, therefore, it continues to remain so in the hands of the widow until there is a partition in the family. Therefore, from the language of the two sub-sections it is quite clear that the two words do not mean the same thing as suggested by the counsel for the revenue. The modes of devolution of the properties inherited by the widow under the two sub-sections after her death are different. The interest which a widow gets under Sub-section (2) passes upon her death to the other coparceners of her husband by survivorship if there is no partition during the widow's lifetime, whereas the share which a widow inherits under Sub-section (1) passes after her death to her husband's heirs as reversioners by inheritance. This difference in the modes of devolution after the widow's death is due to different nature of the interest in the property which a widow gets under the two subsections. Further, the principle of fluctuation of interest which applies when a widow receives her husband's interest in the joint family property under Sub-section (2) does not fit in with the nature of interest which a widow receives in the separate property of her husband under Sub-section (1). This can be explained by means of an illustration. Suppose X, a Hindu governed by Mitakshara school of law and having an interest in the joint family property dies leaving a widow, W, and two sons, A and B. Neither A nor B is married. Upon X's death W becomes entitled to the same interest which X had in the joint family property. Now, so long there is no partition the respective shares of W, A and B in the joint family property are undefined. But, if there is a partition each of them will be entitled to one-third share. Suppose B dies while still unmarried and after his death a partition takes place between W and A. Then each of them will be entitled to a half share in the joint family property. This is because due to B's death before partition there is a fluctuation in the interest of the members in the joint family property. On the contrary, if X dies only leaving self-acquired or separate property, then W will get the same share as that of a son. Therefore, if there is partition between W, A and B each will get 1/3 share in the property. If after X's death and before partition B dies there will be no fluctuation in the share of W. Her one-third share will remain static. But, as the property in the hands of A and B is ancestral and there is no partition, B's share or interest will go to A by survivorship. If there is a partition after B's death the respective shares of A and W will be 2/3 and 2/3. The above position was before the Hindu Succession Act, 1956.

21. In the aforesaid view of the matter we are of the opinion that the share of the widow in the property left by Liladhar is defined and ascertained.

22. In connection with this question reliance was placed by Mr. Pal on the cases of Commissioner of Income-tax v. Lakshmanan Chettiar : [1940]8ITR545(Mad) , Arunachala Mudaliar v. Commissioner of income-tax : [1961]41ITR432(Mad) , Biswa Ranjan Sarbadhikaty v. Income-tax Officer : [1963]47ITR927(Cal) , Commissioner of Income-tax v. Smt. Bani Rani Rudra : [1966]59ITR216(Cal) and Commissioner of Wealth-tax v. Gouri Shankar Bhar : [1968]68ITR345(Cal) .

23. In Commissioner of Income-tax v. Lakshmanan Chettiar : [1940]8ITR545(Mad) the widow obtained an interest in the ancestral property and as she was a member of the joint family the income was regarded as income of the joint family. Therefore, this case is not of any help to Mr. Pal.

24. In the case of Arunacnala Mudaliar v. Commissioner of Income-tax : [1961]41ITR432(Mad) what happened was that a father, his two major sons and a minor son, comprised a joint Hindu family governed by the Madras school of law. The suit for partition was effected but only a part of the property was divided. It was held that the family should be deemed to continue to be a Hindu undivided family and Section 25A of the Indian Income-tax Act, 1922, directed that in such a case the family should be deemed to continue to exist. It was stated that the provisions of Section 9(3) of the Act had relevance to a case where two or more persons acquired a property jointly and their shares therein were defined and ascertainable. The Section is not directed to a case of mere severance of status of the members by partition in a joint Hindu family. So long as there was no partition in definite portions, the Hindu undivided family is the owner of the property for the purposes of assessment to tax of the income of the property. It was further held that Section 9(3) could not override the provisions of Section 25A. Therefore, the decision turned on the particular facts of that case and it does not consider the scope and effect of Section 3(1) of the Hindu Women's Rights to Property Act, 1937. This decision according to us does not help Mr. Pal.

25. The other three cases cited by Mr. Pal are under the Dayabhaga school of Hindu law. In Biswa Ranjan Sarbadhikary v. Income-tax Officer : [1963]47ITR927(Cal) one N died intestate in 1940, leaving him surviving his widow and his only son, the petitioner. For many years they were separately assessed in regard to income from immovable property. In December, 1959, the Income-tax Officer sent a letter to the petitioner stating that he was of the opinion that the income should have been assessed in the hands of the Hindu undivided family and wanted to assess the income on that basis. It was held that as the widow and the son had defined shares in the properties they could not be assessed in the status of either of an association of persons or of a Hindu undivided family.

26. In the case of Commissioner of Income-tax v. Smt. Bani Rani Rudra : [1966]59ITR216(Cal) the widow of a person governed by the Dayabhaga school of Hindu law inherited her husband's property under Section 3(1) of the Hindu Women's Rights to Property Act, 1937, along with her son. It was held that the share of each of them in the income from house property inherited should be included in his or her total income, for the purpose of assessment to income-tax under Section 9(1) read with Section 9(3) of the Indian Income-tax Act, 1922, though they may be members of an undivided family.

27. In the case of Commissioner of Wealth-tax v. Gouri Shankar Bhar : [1968]68ITR345(Cal) , which is a case under the Wealth-tax Act, it was held that on the death of a Hindu governed by the Dayabhaga school of Hindu law his heirs do not spontaneously by operation of law become members of a Hindu joint family. They remain as co-owners with definite and ascertained shares in the property left by the deceased unless they voluntarily decide to live as a joint family.

28. In our view the above cases do not support Mr. Pal's contention. On the contrary the cases decided under the Dayabhaga school of Hindu law support the contention of the assessee. In our view, as Section 3(1) of the Hindu Women's Rights to Property Act applies to cases where a Hindu governed by the Dayabhaga school of Hindu law dies leaving any property as also to cases where a Hindu governed by any other school of Hindu law dies intestate leaving separate property both the cases should be treated on the same footing and the ratio of those decisions, in our opinion, apply equally to a case where a, Hindu governed by the Mitakshara school dies leaving separate property. In the aforesaid view of the matter we are of the opinion that as the share of the assessee's widowed mother in the property is definite and ascertainable Section 9(3) of the Indian Income-tax Act, 1922, is applicable. We, therefore, answer question No. (iii) in the affirmative and in favour of the assessee. Question No. (iv)

29. According to Mr. Pal this point is fully covered by the recent Division Bench judgment of this court in Mriganka Mohan Sur v. Commissioner of Income'tax : [1974]95ITR503(Cal) . In that case for the assessment years 1950-51 to 1955-56 the Income-tax Officer issued a notice under Section 34(1)(a) on July 10, 1958, in order to include income from property at 53A and 53B, Gariahata Road, Calcutta, standing in the name of the asses-see's wife on the footing that Section 16(3) was applicable. The assessments were completed on August 25, 1958. The Appellate Assistant Commissioner held that the proceedings under Section 34 had been validly initiated. In appeal the Tribunal was of the view that, in the facts and circumstances of the case Section 34(1)(a) was not applicable but it considered that Section 34(1 )(b) might have been applicable following its decision in respect of the earlier years. The Tribunal held that the assessments for the years 1950-51 to 1953-54 could have been reopened only under Section 34(1)(b) and as the period of limitation of four years had expired the assessments were bad in law. As regards the assessment years 1954-55 and 1955-56, the Tribunal observed that the proceedings under Section 34 were commenced and completed within four years from the end of the relevant assessment years. Though the Income-tax Officer had acted under Section 34(1)(a) the Tribunal supported the assessments as having been made with reference to the powers available under Section 34(1)(b) of the Indian Income-tax Act, 1922. The High Court upheld the decision of the Tribunal. It held that, as it appeared from the record that the conditions for taking action under Clause (b) had been fulfilled, the action could be justified under Clause (b) of Section 34(1) though it was purported to be taken under Clause (a) of Section 34(1). Therefore, according to this decision, though action is purported to be taken by the Income-tax Officer under Clause (a) of Section 34(1) the same can be justified under Clause (b) of that Section if, in the facts and circumstances of the case, it appears that the conditions for taking action under Clause (b) are fulfilled. Counsel for the assessee has strongly criticised this decision and submitted that while deciding the case the Division Bench has not properly appreciated the decision of the Supreme Court in John Lal v. Commissioner of Income-tax : [1973]88ITR439(SC) . In the Supreme Court case the question for decision was whether, on the facts and circumstances of the case, the proceedings which were commenced under Section 34(1)(b) could have been converted into proceedings under Section 34(1)(a) by the Income-tax Appellate Tribunal. The material facts in that case were that for the assessment year in question the assessee was assessed without any objection. Thereafter, the Income-tax Officer issued a notice to it under Section 3 4 of the Act without mentioning therein whether he was taking action under Section 34(1)(a) or 34(1)(b), The assessee filed its objection to the notice and pleaded that it had supplied to the Income-tax Officer correct information and there was no justification for taking action against the assessee under Section 34. The Income-tax Officer in his order opined that it had not given the full particulars but all the same it was not necessary to go into that question as he was taking action under Section 34(1)(b). The assessee's objection that the proceedings under Section 34(1)(b) were barred by limitation was rejected by the Income-tax Officer. In appeal against the said order the only point considered by the Appellate Assistant Com-missioner was whether proceedings under Section 34(1)(b) were barred by limitation or not. He, however, did not go into the question whether proceedings taken by the Income-tax Officer should be justified under Section 34(1 }(a). The Appellate Assistant Commissioner agreeing with the Income-tax Officer came to the conclusion that the required notice had been served within time and, therefore, the proceedings taken under Section 34(1 )(b) were valid proceedings. Against this order of the Appellate Assistant Commissioner there was a second appeal to the Tribunal. The Tribunal not only upheld the order of the Appellate Assistant Commissioner but upheld that order on an alternative ground, namely, that the impugned proceedings could be justified under Section 34(1)(a). Thereafter, at the instance of the assessee, the Tribunal submitted several questions for the court's opinion, one of which was as follows :

'(1) Whether the reopening of the case by the Income-tax Officer by the issue of a notice under Section 34 of the Indian Income-tax Act fell within the ambit of Section 34(1)(a) of the Act or under Section 34(1)(b) of the Act ?'

30. The High Court, in answering the above question, came to the conclusion that the notice in question was a valid notice and it was a notice under Section 34(1)(a). On the above facts it was held by the Supreme Court that the Tribunal erred in upholding the impugned proceedings under Section 34(1)(a) and the High Court also did not address itself to this question properly. The Supreme Court observed at page 442:

'In the instant case, as seen earlier, the Income-tax Officer did not choose to proceed under Section 34(1)(a). Consequently, he may or may not have recorded the reasons as required by this Section nor do we know whether those reasons were submitted to the required authority and his sanction obtained on the basis of those reasons. This court also has ruled that the Commissioner or the Board of Revenue, while granting sanction, will have to examine the reasons given by the Income-tax Officer and come to an independent decision and the authority in question should not act mechanically. From the material on record there is no basis to hold that those requirements had been fulfilled. Possibly, they could not have been fulfilled because the Income-tax Officer proceeded only on the basis of Section 34(1)(b) and not on the basis of Section 34(1)(a). He himself had declined to proceed on the basis of Section 34(1)(a) for whatever reason it may be. Therefore, it was not open to the Tribunal to justify the proceedings taken by the Income-tax Officer under Section 34(1)(a). The Tribunal could not have initiated proceedings under Section 34(1)(a). If the Tribunal converts the proceedings into one under Section 34(1)(a) then the conditions prescribed in Section 34(1)(a) cannot be satisfied.'

31. From the above observations of the Supreme Court it is clear that according to it on the material on record the Tribunal could not uphold the proceedings under Section 34(1)(a). In our view the above decision of the Supreme Court cannot be said to have laid down that where proceedings are taken under Section 34(1)(a) by the Income-tax Officer the same cannot be upheld by the Tribunal under Section 34(1)(b) even though relevant conditions for taking action under that sub-section are fulfilled. Section 34 confers on the Income-tax Officer the jurisdiction and power to reopen an assessment already made. The said jurisdiction and power can, however, only be exercised by the Income-tax Officer, if the necessary conditions laid down in Clause (a) or (b) of Section 34(1) are satisfied. If the necessary conditions laid down in either of the said clauses are satisfied, the exercise of jurisdiction and power by the Income-tax Officer will be valid and lawful. In the instant case, the Tribunal, on the basis of its findings that the requirements of Section 34(1)(b) are satisfied, has upheld the order of the Income-tax Officer under the said clause, although the Income-tax Officer purported to make the order under Section 34(1)(a). In the instant case, in view of the nature and form of the question referred to the court we do not think that in this reference we can go into the question whether the Tribunal was right in holding that the conditions for taking action under clause (b) of Section 34(1) were fulfilled. It is the duty of this court to follow the decision of another Division Bench and agree with the view taken in the case of Mriganka Mohan Sur v. Commissioner of Income-tax : [1974]95ITR503(Cal) .

32. Counsel for the assessee relied on two cases, viz., Nazir Ahmad v. Emperor and State of Uttar Pradesh v. Singhara Singh : [1964]4SCR485 for the proposition that where power is given to do a certain thing in a certain way the thing must be done in that way or not at all. We do not think these two cases help the assessee. Firstly, in those cases the Privy Council and the Supreme Court were considering Section 164 of the Code of Criminal Procedure, 1908, and the observations were made on the basis of the language of that section. In our view, power of reassessment which is given under Section 34 of the Indian Income-tax Act, 1922, to the Income-tax Officer can be exercised by him, provided, however, the provisions laid down either in Clause (a) or Clause (b) of Section 34(1) are fulfilled. Whether the necessary conditions have been satisfied or not, must necessarily depend on the facts and circumstances of each particular case.

33. It was further argued by the counsel for the assessee that it was not open to the Tribunal to go into the question whether action taken under Clause (a) of Section 34(1) could be justified under Clause (b) of that section, as the said question was beyond the scope of appeal. With regard to the scope of the Tribunal's power under Section 33(4) of the Indian Income-tax Act, 1922, reliance was placed on the cases of Hukumchand Mills v. Commissioner of Income-tax : [1967]63ITR232(SC) and J. K. Bankers v. Commissioner of Income-tax : [1974]94ITR107(All) . These cases have held that Section 33(4) of the Indian Income-tax Act, 1922, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal and the subject-matter of the appeal is stated in the original grounds of the appeal and such additional grounds as may be raised by leave of the Tribunal. In our view these decisions do not help the assessee. One of the subject-matters of the appeal before the Tribunal was the question of validity of reassessment and this, in our opinion, is wide enough to cover the question whether the impuged proceedings were valid under Section 34(1)(a) or 34(1)(b). In Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) , regarding the wide nature of the Tribunal's jurisdiction the Supreme Court observed that:

'Under sub-section (4) of Section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal.'

34. In the aforesaid view of the matter we hold that the Tribunal was competent to deal with the point and was justified in upholding the assessment under Section 34(1)(b) of the Indian Income-tax Act, 1922. Accordingly, we answer question No. (iv) in the affirmative and in favour of the revenue.

Accordingly, our answers to the four questions are as follows:

Question No. (i):Yes.(part not answered by the Supreme Court) Question No. (ii):Yes; but only the half share of the income from house property should be included in the income of the Hindu undivided family.Question No. (iii):Yes.Question No. (iv):Yes.

35. In the facts and circumstances of this case, we make no order as to costs.

A.N. Sen, J.

I agree.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //