Joint Family of Udayan Chinubhai Vs.
Commissioner of Income-Tax, Gujarat [1966] INSC 222 (14 October 1966)
14/10/1966 SHAH, J.C.
SHAH, J.C.
RAMASWAMI, V.
BHARGAVA, VISHISHTHA
CITATION: 1967 AIR 762 1967 SCR (2) 913
CITATOR INFO:
R 1976 SC1678 (6) R 1982 SC 760 (13)
ACT:
Indian Income-tax Act ( 11 of 1922), s. 25A
and s. 34--Order recording partition of Hindu undivided family--Power to
reassess family as a unit thereafter-Whether exists.
HEADNOTE:
C.his wife, and his three sons were
originally assessed to income-tax in the status of 'a Hindu undivided family. C
filed a suit in 1948 in the High Court of Bombay for partition and separate
possession of his share in the joint family estate. In 1950 the High Court
passed a decree by consent declaring that as from October 15, 1947 the joint
family stood dissolved that all the members of the family had become separate
in food, worship and estate from that date, and that each member of the family
was entitled to a fifth share in the properties movable and immovable belonging
to the family subject to the right of maintenance in favour of C's mother.
Pursuant to the decree C took his share in the properties allotted to him,
separately. The other properties remained undivided between C's wife and his
three sons each holding a fourth share as tenant in common with the other
co-sharers. In December 1952, C applied to the Income-tax Officer for an order
recording the partition and requesting that assessment be made of the members
of the family separately in accordance with the provisions of s. 23 read with
s. 25A of the Income-tax Act, 1922. The Income- tax Officer by an order in
January 1953 granted the application and for the period after the High Court's
decree assessed all the members of the erstwhile family separately.
Subsequently however a notice under s. 34 of
the Act for the assessment years 1951-52, 1952-53, and 1953-54, for assessing
the Hindu undivided family of four members, namely, C's wife and his sons, was
issued on the ground that the income of the family had escaped assessment. The
assessees' plea that they did not, in the years of assessment, constitute a
Hindu undivided family and that they could not be so assessed after an order
under s. 25A had once been passed was not accepted by the Income-tax Officer.
The Appellate Assistant Commissioner reversed 'the Income-tax Officers order
but the Appellate Tribunal restored it. The High Court in reference held in
favour of the Revenue.
The assessee came to this Court in appeal.
HELD:(1) The Income-tax Officer has
jurisdiction under s. 25A(1) to make an order recording that joint family
property has been partitioned if he is satisfied that the property has been
partitioned 'in definite portions'. The jurisdiction may be exercised by the
Income-tax Officer even if there be partition between 'groups of members' of
the family. A complete partition in definite portions among all the members of
the family is not a condition of the exercise of that jurisdiction, nor does
the expression 'group of members' refer only to a group consisting of a head of
a branch and his sons who remain undivided. [916'G-H] In the present case there
was no doubt that C took possession of his share in the family estate which was
allotted to him. The assessees constituted a group and between them and C there
had been a partition indefinite portions. The conditions for the passing of an
order under s. 25A(1) were thus satisfied. [918 A-B] 914 (ii) After the High Court
had decreed the partition the original undivided family had no existence in
fact or in point of law-personal or income-tax. Section25A(3) did not help the
Revenue for it only requires the Income-taxOfficer to continue to assess a
Hindu undivided family which has been divided under the personal law as long,
as no order under s. 25A(1) has been recorded. Once an order under s. 25A(1)
has been recorded cl. (3) of s. 25A has no application. [918 D] (iii) It is
true that an assessment year under the Income- tax Act is a self contained
assessment period and a decision in the assessment year does not ordinarily
operate as res judicata. But this rule does not apply in dealing with an order
under s. 25A(1). Income from property of a Hindu undivided family 'hitherto'
assessed as undivided may be assessed separately if an order under s. 25A(1)
had been passed. When such an order is made the family ceases to be a Hindu
undivided family. Thereafter that family cannot be assessed in the status of a
Hindu undivided family unless the order is set aside by a competent authority.
[919 F-H] (iv)Section 34 of the Indian Income-tax Act confers no general power
of reviewing an order passed under s. 25A(1) which is in its very nature
effective for all subsequent years. The only course for the Income-tax Officer,
if be wants the order to be reconsidered is to move the Commissioner of
Income-tax to take action under s. 33B of the Act to set aside the order under
s. 25A. [920 C-D] Gordhandas T. Mangaldas v. Commissioner of Income-tax,
Bombay. 11 I.T.R. 183 and Commissioner of Income-tax, Delhi and Rajasthan v.
Ganeshi Lal Sham Lal, 61 I.T.R. 408, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 946 to 948 of 1965.
Appeals from the judgment and order dated
September 15, 1964 of the Gujarat High Court in Income-tax Reference No. 19 of
1963.
A. K. Sen, O. P. Malhotra, O. C. Mathur, for
the appellants.
S. T. Desai, S. K. Aiyar and R. N. Sachthey,
for the respondent.
The Judgment of the Court was delivered by
Shah, J. Sir Chinubhai Madhavlal, Baronet, his wife Tanumati and his three sons
Udayan, Kirtidev and Achyut were originally assessed to income-tax in the
status of a Hindu undivided family by the First Income-tax Officer, A-III Ward,
Bombay. Sir Chinubhai filed suit No. 2176 of 1948 in the High Court of
Judicature at Bombay for partition and separate possession of his share in the
joint family estate.
On March 8, 1950, the High Court of Bombay
passed a decree by consent declaring that as from October 15, 1947 the joint
family stood dissolved and that all the members of the family had become separate
in food, worship and estate from that date and that each member of the family
was entitled to a fifth share in the properties movable and immovable belonging
to the family, subject to the right of maintenance in favour of the mother of
Sir Chinubhai. In Sch. A Part I properties which 915 were allotted to Sir
Chinubhai were set out; in Parts 11 & III of Sch. A properties which were
collectively allotted to the share of Udayan, Kirtidev, Achyut and Lady
Tanumati were set out. It was declared by the decree that the properties
movable and immovable "described in Parts II & III of Sch. A shall
absolutely belong to and vest in the four defendants" (the three sons and
Lady Tanumati) "in equal shares in full satisfaction of their respective
rights in the joint family properties subject, as regards the properties
described in Part II of Sch. A, to the provisions of the Baronetcy Act".
Schedules B, C & D set out the debts and liabilities of the joint family.
Pursuant to the decree, Sir Chinubhai took his share in the properties allotted
to him, separately. The other properties remained undivided between Udayan,
Kirtidev, Achyut and Lady Tanumati-each holding a fourth share as
tenantin-common with the other co-sharers.
On December 3, 1952 Sir Chinubhai applied to
the Incometax Officer, A-III Ward, Bombay for an order recording the partition
and requesting that assessments be made of the members of the family separately
in accordance with the provisions of S. 23 read with s. 25A of the Income-tax
Act.
The Income-tax Officer by order dated January
6, 1953, granted the application. He observed that pursuant to the decree of
the High Court for partition the properties of the "Hindu undivided family
were distributed between two groups- one consisting of Sir Chinubhai and the
other consisting of his wife and his three sons", and since all the
conditions of s. 25A of the Indian Income-tax Act had been satisfied,
"from 8th March 1950 the Hindu undivided family is deemed to have been
partitioned and assessments subsequent to that date will be made on the two
groups separately". The Income-tax Officer, Ahmedabad, thereafter assessed
Lady Tanumati and the sons of Sir Chinubhai separately.
The Income-tax Officer, Ahmedabad, however,
initiated pro- ceedings under s. 34 of the Indian income-tax Act, 1922, for the
assessment years 1951-52, 1952-53 and 1953-54 for assessing the, Hindu
undivided family of the four members "Udayan, Kirtidev, Achyut and Lady
Tanumati"--who will hereinafter collectively be called "the assessees"
on the plea that the income of the family had escaped assessment.
The assessees contended that they did. not in
the years of assessment referred to in the notice constitute a Hindu undivided
family and the Income-tax Officer had no power,.
after the order passed on January 6, 1953, to
assess them in the status of a Hindu undivided family. The Income-tax Officer
rejected the contention.
In appeal to the Appellate Assistant
Commissioner the order of assessment under s. 34 was set aside, The Appellate
Assistant Commissioner held that the decree passed by the High Court of"
916 Bombay brought about a complete disruption and severance of the joint
status of the original family, and merely because the assessees after severance
had lived and traded together, they could not be assessed as a Hindu undivided
family. He also held that after an order under s. 25A was passed by one
Income-tax Officer, another Income-tax Officer had no power to modify it or to
circumvent the same by seeking to assess the assessees as a Hindu undivided
family.
In appeal by the Income-tax Officer,
Ahmedabad, the Appellate Tribunal restored the order passed by the Income- tax
Officer. In the view of the Tribunal, by the decree of the High Court there was
severance of the joint status between the members of the joint Hindu family,
but the partition was partial, and "it did not follow that as regards the
remaining persons or the remaining properties which had not gone out of the
fold of the Hindu undivided family the assessment in respect thereof could not
be made in the status of a Hindu undivided family." The Tribunal rejected
the view that once an order under s. 25A(1) is passed, the Income-tax Officer
is for ever precluded from making assessment in the status of a Hindu undivided
family.
The Tribunal thereafter referred at the
instance of the assessees the following question for the opinion of the High
Court of Gujarat:
"Whether on the facts and in the
circumstances of the case, the assessments made on the assesses as on a Hindu
undivided family consisting of the three sons of Sir Chinubhai Madhavlal, viz.,
"Udayan, Kirtidev and Achyut and the wife of Sir Chinubhai Madhavlal, viz.
Lady Tanumati, were correctly so made?" The High Court answered the
question in the affirmative.
Against that order, these appeals have been
preferred by the assessees.
An application under sub-s. (1) of s. 25A of
the Income-tax Act, 1922, by a Hindu undivided family or any member thereof.
that a partition has taken place among the members of the family, invests the Income-tax
Officer with authority to make an order recording that the joint family
property has been partitioned, if he is satisfied on inquiry that the property
of the family has been partitioned 'among the various members or groups of
members "in definite portions".
The jurisdiction may be exercised by the
Income-tax Officer, even if there be partition between groups, of members of
the family. A complete partition in definite portions among all the members of
the family is not a condition of the exercise of that jurisdiction. We do not
agree with the plea raised by counsel for the Department that by the expression
"group of members" it is intended to refer to a group consisting of a
head of a branch and his sons who remain undivided. Section 25A(1) applies to
families governed by the Dayabhaga school of Hindu law as well as the Mitakshra
school of law: and if the interpretation suggested by counsel for the Revenue
be correct, the expression "group of members" will be meaningless in
relation to a Hindu family governed by the Dayabhaga school of Hindu law.
But an order recording partition can be made
only if the properties of the joint family are partitioned in "definite
portions", that is, the properties are physically divided if they admit of
such division, otherwise in such division as they admit of. In Gordhandas T.
Mangaldas v. Commissioner of Income-tax, Bombay(1) the High Court of Bombay
held that s. 25A contemplates a physical division of the joint family property:
a mere division of interest in such property is not enough. Beaumont, C. J., in
delivering the judgment of the Court observed at p. 195:
"I think that the expression
"definite portions" indicates a physical division in which a member
takes a particular house in which he can go and live, or a piece of land which
he can cultivate, or which he can sell or mortgage, or takes particular
ornaments which he can wear or dispose of, and that the expression
"definite portions" is not appro- priate to describe an undivided
share in property where all a particular member can claim is a proportion of
the income, and a division of the corpus, but where he cannot claim any
definite portion of the property. . . . No doubt the expression ','division in
definite portions" will have to be construed with regard to the nature of
the property concerned. A business cannot be divided into parts in the same
manner as a piece of land; division may only be possible in the books. Special
cases will have to be dealt with by the Income-tax Officer when they arise. If
he comes to the conclusion, that, having regard to the nature of the property,
what has been done amounts to a division in definite portions, he will record
his finding under sub-section (1); If he comes to the conclusion that it does
not, then he will have to go on assessing the family under sub- section
(3)." There is no doubt that Sir Chinubhai took possession of his share in
the family estate which was allotted to him.
Between Sir Chinubhai and the assessees there
was therefore partition of the joint family property in definite portions.
The shares allotted to the assessees were
however not divided in definite portions inter se. It is true that Part 11 of
Sch. A of the decree described the settled properties under the Baronetcy Act 8
of 1924 (1)11 I.T.R. 183.
918 and those properties were not capable of
physical division.
How. ever Part III described properties
movable and immovable which were not subject to any such statutory restrictions
and those Properties were not divided among the assessees. But the assessees
constituted a group and between them and Sir Chinubhai there had been partition
in definite portions-the portion of the property allotted to Sir Chinubhai
being completely separated from the property allotted to the assessees.
Under the decree of the High Court of Bombay
the assessees did not continue to remain members of an undivided Hindu family.
it was expressly provided by the decree that the assessees were divided inter
se and held the property allotted to them as tenantsin-common. The affect of
the order recording a partition was to recognize for purposes of income-tax
administration that the joint family status was severed, and the property was
divided in definite portions between groups of members of the family. After the
order was recorded the original Hindu undivided family had no existence in fact
or in point of law-personal or income-tax.
Section 25A(3) on which strong reliance was
placed by counsel for the Revenue only requires the Income-tax Officer to
continue to assess a Hindu undivided family which has been divided under the
personal law so long as no order under S. 25A(1) has been recorded. Once an
order under S.
25A(1) has been recorded, cl. (3) of S. 25A
has no application. If the members of the family who constituted a group between
whom and the other group there has been a partition in definite portions
constitute a Hindu undivided family, that group may undoubtedly be assessed as
a Hindu undivided family: they may be so assessed because of their relation
inter se and not by virtue of S. 25A(3) The order passed by the Income-tax
Officer, Bombay, was apparently a valid order which he was competent to make.
When as a result of that order, the property
of the family was deemed for purposes of the Income-tax Act partitioned, it was
not open to the Income-tax Officer, Ahmedabad, to ignore the order either for
the year in which the partition of the joint family property was recorded, or
for any subsequent year, and to assess the income in the hands of the assessees
as if the original Hindu undivided family continued to exist. An order
assessing the assessees as members of a Hindu undivided family could be made
after an order under S. 25A had been recorded only it was proved that under the
personal law they formed a joint Hindu family; and of that there was no
evidence.
The contention raised on behalf of the
Department which appealed to the Income-tax Officer and the Tribunal that the
original Hindu undivided family of Sir Chunubhai Madhavlal con- 919 tinned to
exist, notwithstanding the order of partition recorded under s. 25A(1), in our
judgment, cannot be sustained. When the Income-tax Officer, Bombay, recorded an
order that the property had been partitioned in definite portions, the family
ceased to exist. It is true that among the assessees the property had not been
divided by metes and bounds, but they could still not be assessed as members of
a Hindu undivided family because such a relation did not exist between them
after severance of the joint family status of the family in which Sir Chunubhai
was the karta. The Income-tax Officer, Ahmedabad, in substance sought to revise
the previous order passed by the Income-tax Officer, Bombay, recording
partition under s. 25A, and to revive the original family so as to make the
income of the assessees as well as of Sir Chinubhai liable to be assessed as if
no partition had taken place and no partition of the joint family properties
had been recorded under the Income-tax Act.
That, the Income-tax Officer was plainly
incompetent to do.
Counsel for the Revenue sought to support the
order passed by the Income-tax Officer, Ahmedabad, and confirmed by the
Tribunal, on the ground that it was open to the Income-tax Officer,
notwithstanding the order passed under s. 25A(1) in a previous year to ignore
that order in proceedings for assessment relating to a subsequent year, and to
hold that there was no severance in fact between the members of the family and
to assess them as a Hindu undivided family, as if no partition had taken place.
It was said that each assessment year is a self-contained unit and whatever
view may have been taken in proceedings for assessment of an earlier year, it
is open to the Income-tax Officer to arrive at an independent conclusion
contrary to that decision in respect of another year, if the circumstances of
the case so warrant. It is true that an assessment year under the Income-tax
Act is a self-contained assessment period and a decision in the assessment year
does not ordinarily operate as res judicata in respect of the matter decided in
any subsequent year, for the assessing officer is not a court and he is not
precluded from arriving at a conclusion inconsistent with his conclusion in
another year. It is open to the Income-tax Officer, therefore, to depart from
his decision in subsequent years, since the assessment is final and conclusive
between the parties only in relation to the assessment for the particular year
for which it- is made. A decision reached in one year would be a cogent factor
in the determination of a similar question in a following year, but ordinarily
there is no bar against the investigation by the Income-tax Officer of the same
facts on which a decision in respect of an earlier year was arrived at. But
this rule, in our judgment, does not apply in dealing with an order under s.
25A(1). Income from property of a Hindu undivided family "hitherto'
assessed as undivided may be assessed separately if an order under s. 25A(1)
had been passed.
920 When such an order is made, the family
ceases to be assessed as a Hindu undivided family. Thereafter that family
cannot be assessed in the status of a Hindu undivided family unless the order
is set aside by a competent authority. Under cl. (3) of s. 25A if no order has
been made, notwithstanding the severance of the joint family status, the family
continue to be liable to be assessed in the status of a Hindu undivided family,
but once an order has been passed, the recognition of severance is granted by
the Income-tax Department, and cl. (3) of s. 25A will have no application.
In Commissioner of Income-tax, Delhi and
Rajasthan v. Ganesi Lal Shyam Lal,(1) the High Court of Punjab held that when
an order recognising the total disruption of a Hindu family has been passed
under s. 25A Indian Income tax Act 1922, and an order of assessment is made on
the basis of such an order, it -is not open to the Income-tax Officer to take
proceedings for reassessment under s. 34 of the Act ignoring the earlier order
under s. 25A of the Act on the ground that he has received information that the
order under s. 25A was obtained by misrepresentation. The proper course for the
Income tax Officer to adopt in such a case is to move the Commissioner of
Income-tax to take action under s. 33B of the Act to set aside the order under
s. 25A We agree with the High Court of Punjab that s. 34 of the Indian
Income-tax Act confers no general power of reviewing an order passed under S.
25A(1), which is in its very nature effective for all subsequent years.
The answer to the question referred will be
in the negative.
The appellants will be entitled to their
costs in this Court as well as in the High Court. One hearing fee.
G.C.
Appeal allowed.
(1) 61 I.T.R. 408.
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