Full Judgment Text
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PETITIONER:
INSPECTING ASSISTANT COMMISSIONER AGRICULTURAL INCOME TAX
Vs.
RESPONDENT:
POOMUILLI MANAKKAL PARAMESWARAN NAMBOODRIPAD
DATE OF JUDGMENT18/08/1971
BENCH:
HEGDE, K.S.
BENCH:
HEGDE, K.S.
GROVER, A.N.
CITATION:
1972 AIR 294 1972 SCR (1) 298
1971 SCC (3) 744
CITATOR INFO :
RF 1991 SC2035 (6)
ACT:
Travancore-Cochin Agricultural Income-tax Act, 1950, as
amended by Act 12 of 1964, s. 29-Scope of.
HEADNOTE:
In 1958, there was a partition in the family of the
respondent by a registered partition deed. In January 1960,
it was conceded on behalf of the Agricultural Income-tax
Officer, before the High Court, that the respondent was
liable to be taxed only as an ’individual’, that is, it was
conceded that the respondent’s family was a divided family.
Various attempts made by the Department thereafter, to
assess the respondent as Karta of his family were set aside
by the High Court, and the respondent and other members of
his quondam family were assessed as ’individuals’ till 1964.
In 1965, notice was again issued to the respondent with
respect to the assessment year 1961-62 for assessing him as
the karta of his family, and the respondent filed a writ
petition in the High Court. The Department contended that
in view of the amendment of s. 29 of the Travancore-Cochin
Agricultural Income-tax Act, 1950, by Act 12 of 1964, it was
permissible for the Department to reassess the respondent as
the Karta of the family as no decision that the respondents
family was a divided family had been rendered by the
Agricultural Income-tax Officer and the family must hence be
deemed to be an undivided family. The High Court held in
favour of the assessee.
Dismissing the appeal to this Court,
HELD: (1) The amended s. 29 was given retrospective
effect from April 1, 1958; but it is only a machinery
section. It is attracted to an assessment proceeding only
if one of the two conditions prescribed in sub. s. (1) is
established, namely, either the family in question was being
assessed as an undivided family in the previous assessment
year, or, that the family was being assessed for the first
time. The deeming provision contained in s. 29(3) can have
application only in cases where one or the other conditions
prescribed by s. 29(1) is satisfied and not otherwise.
[303F-G; 307F-H]
In the present case, every attempt made by the assessing
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authority to assess the quondam family of the respondent was
set aside by the High Court and the department had not only
not assessed that family as an undivided family, but had
assessed the individual members of the family as divided
members. That is, the question whether the family was
divided or not had been gone into and decided. It cannot
also be said that the family was ’hitherto assessed as a
Hindu undivided family’. [307H; 308A-B]
299
(2) The expression ’which (meaning family) is being
assessed for the first time as a Hindu undivided family’
presupposes the existence of the family. Section 29(1) does
not permit the assessing authority to create a family by re-
joining the divided parties or otherwise. If the family has
ceased to exist even before the assessment proceeding
started then there can be no family which is being, assessed
to tax for the first time. [308-F]
In the present case, the family sought to be taxed was ’non-
existing’ in the concerned previous years and hence could
not be considered as a Hindu undivided family ’being
assessed for the first time’. Therefore,’ the ’deeming’
provision in s. 29(3) could not be applied. [308G-H]
Additional Income-tax Officer, Cuddapah v. A. Thimmarya 55
I.T.R. 666(S.C.), referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 62 and 63
of 1969.
Appeals from the judgment and order dated November 21, 1967
of the Kerala High Court in O. P. Nos. 2979 of 1965 and 1395
of 1966.
V. A. Seyid Muhammad, P. K. Pillai for M. R. Krishna
Pillai, for the appellant (in both the appeals).
S. T. Desai and A. S. Namblar, for the respondent (in both
the appeals).
The Judgment of the Court was delivered by
Hegde, J. In these appeals by certificates brought by the
Department, we have to decide as to what is the true scope
of s. 29 of the Kerala Agricultural Income-tax Act, 1950 as
amended in 1964 (to be hereinafter referred to as the Act) ?
This case has a long history which by no means is
complimentary to the Department. The common respondent in
both these appeals moved the High Court of Kerala under Art.
226 of the Constitution praying that the appellant herein
may be prohibited from taking further proceedings for
assessing him as the karta of Poomulli Mana to agricultural
income-tax for the assessment year 1961-62.
The respondent was the karta of a Namboodri family known as
Poomulli Mana till March 30, 1958. The Namboodr is in the
Malabar District of the Kerala State were previously
governed by the Madras Nambudri Act, 1932. Now they are
governed by the Kerala Nambudri
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Act, 1958. The respondent’s family owned large tracts of
lands both in Malabar District which was a part of the
Madras State till November 1, 1956 as well as in the erst-
while Travancore and Cochin State. Under the States
Reorganization Act, 1954, the new State of Kerala was formed
consisting of the former Malabar District of the State of
Madras as well as the former Travancore-Cochin State. The
new State of Kerala came into being on November 1, 1956.
Thereafter the Travancore-Cochin Agricultural Income-tax
Act, 1950 was extended to the former Malabar District with
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effect from April 1, 1957 by Kerala Act 8 of 1957. In the
assessment year 1957-58, the assessing authorities assessed
Poomulli Mana as an undivided family. That order was
quashed by the High Court. On March 30, 1958, the members
of the family entered into a registered partition deed under
which the family became divided. Thereafter the respondent
ceased to be the karta of the family. Nevertheless the
authorities under the Act issued notices to the respondent
under S. 17 (2) and S. 39 of the Act proposing to assess him
as the manager of his H.U.F. for the assessment years 1957-
58 and 1958-59. The respondent challenged the validity of
those notices before the High Court of Kerala. When the
case came up for hearing before a Division Bench of the High
Court, the learned Counsel appearing for the Department
informed the Court that the Department was going to assess
the respondent only as an "individual" and not as the karta
of his family. On the basis of that representation, the
Court passed the following order :
"The learned Government Pleader submits, quite categorically
that the assessment proposed is of the petitioner as an
’individual’, and not in any other capacity.
In view of the submission we do not consider it necessary to
proceed further with the petition. We record the fact that
the Department does not propose to assess the petitioner
except as an individual and leave him to seek his remedies
under the Act or the Constitution in case he feels himself
aggrieved by any subsequent action of the Department."
Despite this assurance, the Department issued ’a notice
under S. 35 of the Act on February 9, 1960 proposing to
assess the respondent as the karta of his H.U.F. for the
assessment year 1959-60. The respondent again moved the
High Court to quash that notice. The said notice was
quashed by a learned single judge of the High Court on
January 3, 1961 on the ground that it is against the under-
taking given by the Government in the earlier proceedings
That decision was affirmed in appeal. Yet another notice
dated November 8, 1961 was issued by the Department under s.
35 to the respondent to show cause why he should not be
taxed as the karta of his H.U.F. for the assessment year
1958-59. This notice was again quashed by the High Court by
its judgment dated December 17, 1963.
Section 29 of the Agricultural Income-tax Act, 1950 was
amended by the Kerala legislature by Act 12 of 1964. We
shall now set out s. 29 as it stood before its amendment in
1964 as well as the amended section.
Section 29 of the Act (before the amendment by Act 12 of
1964) read thus :
"29. (1) Where at the time of making an
assessment under Section 18, it is claimed by
or on behalf of any member of a Hindu
undivided family, (Aliyasanthana family or
branch or Marumakkathayam tarwad) hitherto
assessed as undivided that a partition has
taken place among the members or groups of
members of such family or tarwad the Agri-
cultural Income-tax Officer shall make such
inquiry there into as he may think fit, and if
he is satisfied that the joint family property
has been partitioned among the various members
or groups of members in definite portions he’
shall record an order to. that effect :
Provided that no such order shall be recorded
until notice of the inquiry has been served on
all the adult members of the family or tarwad
entitled to the property as far as may be
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practicable or in such other manner as may be
prescribed.
(2) Where such an order has been passed, the
Agricultural Income-tax Officer shall make an
assessment of the total agricultural income
received by or on behalf of the family or
tarwad as such, as if no partition. had taken
place, and each member
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or group of members shall, in addition to any
agricultural income-tax for which he or it may
be separately liable, and notwithstanding
anything contained in clause (a) of Section
10, be liable for a share of the tax on the
incomes so assessed according to the portion
of the family or tarwad property allotted to
him or it and the Agricultural Income-tax
Officer shall make assessments accordingly on
the various members and groups of members in
accordance with the provisions of Section 18 :
Provided that all the members and groups of
members whose family or tarwad property has
been partitioned shall be liable jointly and
severally for the tax on the total
agricultural income received by or on behalf
of the family or tarwad as such up to the date
of the partition.
(3) Where such an order has not been passed
in respect of a Hindu family, (Aliyasanthana
family or branch or Marumakkathayam tarwad)
hitherto assessed as undivided, such f
amily or
tarwad shall be deemed for the purposes of
this Act to continue to be an undivided family
or tarwad."
Section 29 after its amendment by Act 12 of
1964 reads
"(1) Assessment after partition of a Hindu
undivided family.-
Where at the time of making an assessment
under section 18, it is claimed by or on
behalf of any member of a family hitherto
assessed as a Hindu undivided family or which
is being assessed for the first time as a
Hindu undivided family that a partition has
taken place among the members or groups of
members of such family, the Agricultural
Income-tax Officer shall make such inquiry
there into as he may think fit, and if he is
satisfied that the joint family property has
been partitioned among the various members or
groups of members in definite portions he
shall record an order to that effect
Provided that no such order shall be recorded
until notice of the inquiry has been serve on
a the adult members of the family entitled to
the pro-
303
perty as far as may. be practicable or in such
other manner as may be prescribed.
(2) Where such order has been passed, the
Agricultural Income-tax Officer shall make an
assessment of the total agricultural income
received by or on behalf of the family as
such, as if no partition had taken place, and
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each member or group of members shall, in
addition to any agricultural income-tax for
which he or it may be separately liable, and notw
ithstanding
anything contained in clause (a) of sub-
section (1) of section 10, be liable for a
share of the tax on the incomes so assessed
according to the portion of the family
property allotted to him or it and the
Agricultural Income-tax Officer shall make
assessments accordingly on the various members
and groups of members in accordance with the
provisions of section 18 :
Provided that all the members and groups of
members whose family property has been parti-
tioned shall be liable jointly and severally
for the tax on the total agricultural income
received by or on behalf of the family as such
upto the date of the partition.
(3) Where such an order has not been passed
in respect of a family hitherto assessed as a
Hindu undivided family or which is being
assessed for the first time as a Hindu
undivided family, such family shall be deemed,
for the purpose of this Act, to continue to be
a Hindu undivided family."
The amended provision was given retrospective effect with
effect from April 1, 1958. Taking advantage of the
amendment of s. 29, the Department again issued a notice to
the respondent on June 1, 1964 under s. 35 of the Act
calling upon him to show cause why he should not be assessed
as the karta of his H.U.F. for the period from November 1,
1956 to March 31, 1958. It may be noted that uphill that
date the respondent and other members of his former family
were being assessed as ’individuals’ and the tax so levied
had been paid. In other words for the earlier assessment
years, the Department had proceeded on the basis that the
family was a divided family.
304
On receipt of the notice dated June 1, 1964, the respondent
again moved the High Court of Kerala to quash the same on
various grounds. One of the grounds taken was that the
family of the respondent having been treated as divided
family in the earlier assessment proceedings, it was not
open to the Department to proceed to assess him as the karta
of a non-existing family. When that proceeding was pending
before the High Court, the assessing authorities passed
orders assessing the respondent as karta of his family. A
Division Bench of the Kerala High Court quashed the impugned
notice as well as the assessment made.
During the pendency of the last mentioned proceeding, the
Department issued two more notices to the assessee (marked
Ex. P-1 and P-3 before the High Court). The relevant
notice for our present purpose is Ex. P-1 and it is dated
March 10, 1965. ’In that notice the assessing authority, in
the purported exercise of its powers under S. 35 of the Act
required the respondent to file a return of the agricultural
income of his family in the previous years beginning from
April 1, 1961 and ending on March 3 1, 1961, chargeable to
tax for the assessment year 1961-62 within 35 days of the
receipt of that notice. The notice further mentioned that
the action proposed therein was permissible in view of the
amendment of the Act, by Act 12 of 1964. The respondent
replied that in view of the partition in his family, he
could not be assessed as the karta of his family and further
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the partition in question had been accepted by the
Department and that the assessments were made on the members
of the family as "individuals" from 1959-60 to 1964-65.
Thereafter the respondent again moved the High Court to
quash those notices on various grounds. The Department
contended that in view of the amendment of S. 29 of the Act
by Act 12 of 1964, it was permissible for it to reassess the
respondent as the karta of the family as no decision that
the respondent’s family is a divided family had been
rendered by the Agricultural Income-tax Officer and
therefore the family must be deemed to be an undivided
family.
The Writ Petition wag heard by a bench of three judges
consisting of Mathew, Krishnamoorthy lyer and Balakrishna
Eradi, JJ. By a majority (Krishnamoorthy lyer
305
and Eradi, JJ.) the Writ Petition was allowed and the im-
pugned notices were quashed. Mathew, J. was of the opinion
that the action taken by the Department was, permissible
under s. 29 of the Act as amended.
Now turning to s. 29 of the Act before its amendment,. it
corresponded with s. 25-A of the Indian Income-tax Act,
1922. The scope of s. 25-A of the Indian Income-tax Act,
1922 came up for consideration both before the Judicial
Committee as well as before this Court in various cases. It
is sufficient if we refer to the decision of this Court in
Additional Income-tax Officer Cuddapah v. A. Thimmayya and
another (1). Therein this court considered the object with
which that provision was enacted as well as its scope.
Delivering judgment of the Court Shah, J. (as he then was)
observed :
"Under the Indian Income-tax Act, 1922, as it
originally stood, a Hindu undivided family was
regarded by section 3 as a unit of assessment,
but no machinery was set up for levying tax or
for enforcing liability to tax on the members
of the family, if before the order of
assessment the family was divided. Absence of
this machinery was more acutely felt because
of section 14 (1) which provided that tax
shall not be payable by an assessee in respect
of any sum which he received as a member of a
Hindu undivided family. Income received by a
Hindu undivided family could not therefore be
assessed and collected from the members, of
the family, if at the time of making the
assessment the family was divided. To rectify
what was obviously a lacunas, the legislature
in. corporated section 25A for assessment and
enforcement of liability to tax income
received by a Hindu undivided family, which
was no longer in existence at the date of
assessment. But the new section went very
much beyond rectifying the defect in the
statute which necessitated the amendment
The section makes two substantive provisions
(i) that a Hindu undivided family which has
been
(1) 55 I.T.R. 666.
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assessed to tax shall be deemed, for the
purposes of the Act, to continue to be treated
as undivided and therefore liable to be taxed
in that status unless an order is passed in
respect of that family recording partition of
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its property as contemplated -by sub-section
(1); and (ii) if at the time of making an
assessment it is claimed by or on behalf of
the members of the family that the property of
the _joint family has been partitioned among
the members or members in definite portions
i.e., a complete partition of the entire
estate is made resulting in such physical
division of the estate as it is capable of
being made, the Income-tax Officer shall hold
an enquiry and if he is satisfied that the
partition had taken place, he shall record an
order to that effect."
Before proceeding to examine the scope of S. 29, let us
recapitulate the events that had taken place.-(i) As long
back as March 30, 1958, there was a partition in the family
,of the respondent; that partition is evidenced by a regis-
tered deed. The genuineness as well as the validity of the
-deed is not in dispute; (ii) On January 18, 1960 on behalf
of the Agricultural Income-tax Officer, it was conceded
before the High Court that the respondent was liable to be
taxed only as an "individual". The implication of this
concession was that the respondent’s family was a divided
,family; (iii) Various attempts made by the Department to
assess the respondent as extra of his family even after the
decision of the High Court on January 18, 1960 were
frustrated by the orders of the High Court referred to
,earlier and; (iv) The respondent and the other members of
his quondam family were assessed as "individuals" from 1958-
1964. Those assessments had become final and tax levied on
them had been paid.
Section 3(1) is the charging section in the Act. That
-section reads :
"Agricultural Income-tax at the rate or rates
specified in the Schedule to this Act shall be
charged for each financial year in accordance
with and subject to the provisions of this
Act, on the total agricultural income of the
previous year of every person."
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"Person" is defined in s. 2 (in) as follows :
" person" means any individual or association
of individuals, owning or holding property for
himself or for any other, or partly for his
own benefit and partly for another, either as
owner trustee, receiver, common manager
administrator, or executor or in any capacity
recognised by law and includes, a firm, or a
company, an association of individuals,
whether incorporated or not, a
nd any
institution capable of holding property."
Hindu Undivided Family as defined in s. 2 (kk) includes a
family governed by Madras Nambudiri Act, 1932.
Under the Act what is brought to tax in an assessment year
is the income of the assessee in the previous year. The
scheme of taxation under the Act is similar to that. under
the Indian Income-tax Act, 1922. The liability to pay tax
under the Act in respect of any income is incurred as and
when the income is earned and the total income on which the
tax is payable in any particular previous. year gets settled
at the end of the previous year. Section 29 is only a
machinery section. This Court has held that s. 25A of the
Indian Income-tax Act, 1922 is only a machinery section.
The same must be the position in regard to s. 29 of the Act.
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Section 29 is attracted to an assessment proceeding-. only
if one of the two conditions prescribed in s. 29 (1) is
established. Either the family in question was being,
assessed as an undivided family in the previous assessment
year or that family is being assessed for the first time.
If’ neither of these conditions exists 29 has no
application whatsoever. The deeming provision contained in
s. 29, (3) can have application only in cases where one or
the other condition prescribed in s. 29 (1) is satisfied and
not otherwise. As seen earlier, every attempt made by the,
assessing authority to assess the quondam family of the
respondent was set aside by the High Court. The High.
Court has repeatedly held that family is a divided family.
Again the assessing authority itself in the previous years
had proceeded on the basis that the family in question is a
divided family. It had not only not assessed
308
that family as an undivided family but had assessed the
individual members of that family as divided members of that
family. Hence the question whether that family was divided
or undivided had been gone info in the earlier years and
decided. That being so, it cannot be said that the family
was "hitherto assessed as a Hindu undivided family". Nor
can it be said that the family was "being assessed for the
first time as a Hindu undivided family". As seen earlier
that family was sought to be assessed as Hindu undivided
family earlier but ultimately the assessing authority had to
assess the members of that family as members of a divided
family. In other words it had held the family to be divided
one. Such a family cannot be considered as being "assessed
for the first time as a Hindu undivided family". The
expression "which (meaning family) is being assessed for the
first time as a Hindu undivided family" presupposes the
existence of the family. That is a condition precedent.
Section 29 (1) does not permit the assessing authority to
create a family by rejoining the divided parts or otherwise.
If that is not so, families which had been divided years
back can be again resurrected by the assessing authorities
for the purpose of the Act. The family referred to in S. 29
(1) is a family known to law and not a deemed family. The
amendment of S. 29 has introduced considerable confusion
into that section. At the time of the assessment either
there is a family or there is no family. If there is a
family its liability has to be ,judged on the basis of the
Act. If the family has ceased to exist even before the
assessment proceedings started then there can be no family
which is being assessed to tax for the first time. Possibly
the intention of the legislature was to bring in the cases
of undivided families lot taxed in the previous years which
were in existence during the whole or part of the previous
year but were divided before the assessment proceedings
commenced. It is not necessary for us in this case to
decide whether that intention has been expressed with
sufficient clarity so as to make it enforceable. Suffice is
to say that in this case, the family sought to be taxed was
non-existing in the concerned previous years and hence
cannot be considered as a Hindu undivided family ’.’being
assessed for the first time". That being so there is no
room for application of the "deeming" pro,vision in S. 29
(3).
309
Looking at the course of events, one cannot fail to notice
with regret the persistence with which the Department was
harassing the respondent. To say the least the conduct of
the concerned officers in this case cannot inspire
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confidence in the functioning of the Department.
For the reasons mentioned above we see no merit in these
appeals- They are accordingly dismissed with costs.
Appeals dismissed.
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