Full Judgment Text
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PETITIONER:
JOINT FAMILY OF UDAYAN CHINUBHAI ETC.
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX, GUJARAT
DATE OF JUDGMENT:
14/10/1966
BENCH:
SHAH, J.C.
BENCH:
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
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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]
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(ii) After the HighCourt had decreed the partition the
original undivided family had noexistence 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 beendivided 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.
JUDGMENT:
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.
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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
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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.
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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
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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
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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.
921