JOINT FAMILY OF UDAYAN CHINUBHAI ETC. versus COMMISSIONER OF INCOME-TAX, GUJARAT

913

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JOINT FAMILY OF UDAYAN CHINUBHAI ETC.

v.

COMMISSIONER OF INCOME-TAX, GUJARAT

October, 14 1966 [J.C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.)

Indian Income-tax Act (11of1922), s. 25A ands. 34- Order record· ing partition of Hindu undivided family-Power to reassess family as a unlt thereafter-Wh•ther exlsls.

In 1950

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 iu the High Court of Bombay for partition and separate possession of his share in the joint family estate. the High Court passed a decree. by consent declarine 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 th"at date, and that each member of the family was entitled to a fifth share in the properties movable and im movable belonging the right of maintenance family subject to to the 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 witfi 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 pro\isions 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 tho High Court's decree assessed all the members of the erstwhile family sepa rately. 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 bis sons, was issued on the ground that the income of the family bad escaped assess ment. The assessees' plea that they did not, in the years of assessment, ccnstitute 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 Commi• sioner reversed the Income-tax Officer's order but the Appellate Tribunal testored it. The High Court in reference held in favour of the Revenue. The assessee came to this Court in appeal.

HELD : (i) The Income-tax Officer has jurisdiction under s .. 25A(l) to make an order recording . that joint family property baa been parti tioned if he is satisfied that the property has been partitioned 'in deflnite 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 doeo the expression 'group ot members' refer only to a group consisting of a bead of a branch and his sons who remain undivided.

[916 G-HJ

In the present case there was no doubt that C took .possession of bis share in the family estate which was allotted to him. The asse.ssees con stituted a group and between them and C there bad been a partition in definite portions. The conditions for the passing ot an order under [918 A-Bl s. 25A(l) were thus satisfied.

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(ii) Afler !be High Court had decreed the partition the orisiAal 1& divided family bad no existence in fact or in point of law-personal or iDl:ome-tax. Section 25A(3) did not help the Revenue for it oa!J requirea the Income-tu Officer to continue to asses• a Hindu undivided fulily Wllich baa been divided under the pel'80Dlll law as Jong as i:o order under s. 25A(I) bas been order under s. 25A(l) bas been recorded cl. (3) of s. 25A bas no application. [918 DJ

recorded. Once an

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(iii) It is true that an assCSllllcnt year under the Income-tax Act Is a self contained assessment period and a decision in the assessment year doa not ordinarily operate as ra judicaJa. But this rule doet not app!J ln dealing with an order under s. 25A(l). Income from property of 1 Hindu undivided family 'hitherto' assessed as undivided may be assessed .eparately if an order under s. 25.Ai I) had been passed. When such an Older is made the family ceases to be a Hindu undivided family. ne ... dter that family cannot be aaseS'ed in the status of a Hindu undivided C 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 in ill power of reviewing an order passed under s. 25A(I) which b ft1Y nature effec1ive for all subsequent years. The only course for tbe Income-tax Officer, if he wants the order to be reconsidered ii to move the Commissioner of Income-tax to take action IJnder s. 33B ol tbe Act to set aside the order under s. 25A.

(920 C-DJ

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Gordhandas T. Mangaldas v. Commissioner of

lncume-tax, Bomba,, ll I.T.R. 183 and Commissioner of lncom•-tax, D•lhl and Rajasth<ut •· GllllOhi UJ Sham Loi, 61 I.T.R, 408, referred to.

CIVIL APPELLATE JUR1so1CTJON : Civil Appeals Nos. 946 to 948

of 1965.

Appeals from the judgment and order dated September 15, E

1964 of the Gujarat High Court in Income-tax Reference No. 19 of 1963.

A. K. Sen, 0. P. Malhotra, 0. C. Mathur, for the appellants.

S. T. Desai, S. K. Aiyar and R. N. Sachthey, for the respon

dent.

The Judgment of the Court was delivered by Shah, J. Sir Chinu bhai Madhavlal, Baronet, his wife Lady three sons Udayan, Kirtidev and Achyut Tanumati and his in the status of a Hindu were originally assessed to income-tax Income-tax Officer, A-III Ward, undivided family by the First Bombay. Sir Chinubhai filed suit No. 2176 of 1948 in die H!gh 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 waa entitled to a fifth share in the properties movable and immovable belonging to the family, subject to the right of maintenance in favour In Sch. A Part I properties which of the mother of Sir Chinubhai.

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ClllNUBHAI JT. FAMILY v. C.I.T. (Shah,/.)

915

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were allotted to Sir Chinubhai were set out; in Parts II & ill 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 im· movable "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 res· pective 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 liabi· lilies of the joint family. Pursuant to the decree, Sir Chinubhai took his share in the properties allotted to him, separately. The other proporties remained undivided between Udayan, Kirtidev, Achyut and Lady Tanumati-each holding a fourth share as tenant in-common with the other co-sharers.

D

On December 3, 1952 Sir Chinubhai applied to the Incomc- tu Officer, A·III Ward, Bombay for an order recording the parti tion 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 E 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.

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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 re jected the contention.

In appeal to the Appellate Assistant Commissioner the order of assc:ss':llent under s. 34 was set aside, The Appellate Assistant Comm1ss1oner held that the decree passed by the High Court of

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Bombay brought about a complete disruption and severance of A the joint status of the original family, and merely because the asses· sees 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 circum vent the same by seeking to assess the assessees as a Hindu undivided B 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 C 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(I) is passed, the Income-tax Officer is for ever precluded from making assessment in the status of a D 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 cricumstances of the case, the assessments made on the assesseo as on a Hindu undivided family consisting of the three sons of Sir Chinubhai Madhavlal, viz.,

"Udayan, Kirtidev and A~hyut and the wife of Sir Chinubhai Madhavlal, viz. Lady Tanumati, were correctly so made?"

E

The High Court answered the question in the affirmative. Against that order, these appeals have been preferred by the asscssecs.

JI

An application under sub-s. (I) 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 bas been partitioned among of the various members members "in definite portions". The jurisdiction may be exercised by the Income-tax Officer, even if there be partition between group5 of members of the family. A complete partition in definite por tions among all the members of the family is not a condition of the exercise of that jurisdiction. We do not agree with the plea railed by counsel for the Department that by the expression "group of rnemben" it is intended to refer to a group consisting of a head of

or groups

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CHINUBHAI JT. FAMILY V. C.I.T. (Shah, J.)

SJ';

a branch and his sons who remain undivided. Section 25A(I) applies to families governed by the Dayabhaga school of Hindu law as well as the Mi1akshra 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 Hmdu family governed by the Dayabhaga school of Hindu law.

But an order recording partition can be made only if the pro perties 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. Manga/das v. Commissioner of Income-tax, Bombay(') 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 in delivering the judgment of the Court observed at p. 195:

not enough. Beaumont, C. J.,

"I think that the expression "definite portions" indi cates a physical division in which a member takes a parti cular 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 orna_ments 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 (I); 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. 1!etween Sir Chinubhai and the assessees there was therefore parti tion of the joint family property in definite portions. The shares to the assessees were however not divided in definite allotted It is ttue that Part II of Sch. A of the decree portions inter se. de11cribed the settled properties undec the Baronetcy Act 8 of 1924

(I) II I.T.R. 183.

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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 pro perties 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 asscssees.

Under the decree of the High Court of Bombay the assessees did not continue to remain members of an undivided Hindu farruly. It was expressly provided by "the decree that the assessces were divided inter se and held the property allotted to them as tenant. in-common. The effect 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 Jaw-personal or income-tax. Sec tion 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(l) has been recorded. Once an order under recorded, cl. (3) of s. 25A has no application. If the members of the family who constituted :i group between whom and the other group there has been a partition in definite portions constitute a Hindu un family, that group may undoubtedly be a;sessed as a divided Hindu undivided family: they may be so assessed because of their relation inter se and not by virtue of s. 25A(3)

25A(I) has

been

s.

The order passed by tho Income-tax Officer, Bombay, was apparently a valid order which he was competent to make. When as a result of that order, the l'roperty of the family wu deemed for purposes of the Income-tax Act partitioned, it was not open t.o the Income-tax Officer, Ahmedabad, to ignore the order either for the year in which the partition of the joint family pro perty was recorded, or for any subsequent year, and to assess the income in the hands of the assessees as if the original Hindu un divided family continued to exist. An order assessing the asscs- 5ees 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 tlle Tribunal that the original Hindu undivided family of Sir Chunubhai Madhavlal con-

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CHINUBHAI JT, FAMILY V. C.I.T. (Shah,],)

919

tinued to exist, notwithstanding the order of partition recorded under s. 25A(l), 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, record ing 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 b~en 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, not withstanding the order passed under s. 25A(l) in a previous year to ignore that order in proceedings for assessment relating to a 11ubsequent 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 procoodings 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 ('.ase so warrant. It is true that an asseas ment year under the Income-tax Act is a self-contained assessment period and :i decision in the assessment year does not ordinarily operate as res judicata in respect of the matter decided in any subse quent year, for the assessing officer is not a court and he is not precluded from arriving at a conclusion inconsistent with his con clusion 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 rela tion 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(l). Income from property of a Hindu undivided family "hitherto' assessed as undivided may b! ai;sessed 'eparately if an o'der under s. 25A(l) had been passed.

in another year.

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When such an order is made, the family ceases to be assessed as a Hindu undivided family. Thereafter that family cannot be asses sed 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.

Jn Commissioner of /11come-1ax, Delhi and Rajastlzan v. Ganesi TAI Shyam Lal,(') 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 lax 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 infor mation that the order under s. 25A was obtained by misrepresenta tion. 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. 338 of the Act to set aside the order under s. 25A.

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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( I), which is in its very nature effective for all subsequent years.

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The answer to the question referred will be in the negative. fhe appellants will be entitled to their costs in this Court as well as in the High Court. One hearing fee.

G.C.

Appeal allowed.

(I) 61 1.T.R. '4<JS •

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