1999 (8) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Whether the property of a Hindu undivided family (HUF) can be attached or auctioned for recovery of income-tax arrears due from an individual member.
2. The nature and rights associated with coparcenary property under Hindu law.
3. The procedure for partition of Hindu undivided family property.
4. The legality of the notice issued under section 222 of the Income-tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Attachment or Auction of HUF Property for Individual Member's Tax Arrears:
The petitioner, acting as the karta of a Hindu undivided family, challenged the certificate issued by the Tax Recovery Officer under section 222 of the Income-tax Act, 1961, arguing that the property of the HUF cannot be attached or auctioned for the individual tax liability of a member, Prakash Chand Lunia. It was contended that the property in question belonged to the HUF and not to Lunia in his individual capacity. The court held that while the notice was issued to recover the individual tax liability of Prakash Chand Lunia, the share of Lunia in the HUF property could be attached. The court concluded that attaching the share of the petitioner in the HUF property was not illegal, and such a share could be sold, with the purchaser obtaining the right to seek partition.

2. Nature and Rights Associated with Coparcenary Property:
The court referred to the principles of Hindu law, particularly the Mitakshara law, which defines coparcenary property as having unity of ownership vested in the whole body of coparceners. Each coparcener has a fluctuating interest in the property, which becomes definite only upon partition. Until partition, there is community of interest and unity of possession among all coparceners. The court cited several legal precedents, including the Supreme Court's observations in CGT v. N. S. Getti Chettiar and State of Maharashtra v. Narayan Rao Sham Rao Deshmukh, which reiterated that no individual coparcener can claim a specific share in the undivided property until partition.

3. Procedure for Partition of HUF Property:
The court discussed the procedure for partition as per Hindu law and the Income-tax Act. It noted that partition under Hindu law involves physical division of the property, and the definition of "partition" under section 171 of the Income-tax Act requires actual physical division for it to be recognized for tax purposes. The court referred to the Supreme Court's ruling in ITO v. Smt. N. K. Sarada Thampatty, which emphasized that a mere severance of status or a preliminary decree is not sufficient; there must be an actual physical division of the property.

4. Legality of the Notice Issued under Section 222 of the Income-tax Act:
The court examined the legality of the notice issued under section 222 of the Income-tax Act. It noted that the notice was issued to Prakash Chand Lunia in his individual capacity for recovery of his tax arrears. The court observed that the share of a coparcener in the HUF property could be attached and sold for the recovery of individual debts. The court relied on precedents such as Sidheshwar Mukherjee v. Bhubneshwar Prasad Narain Singh and Dropdi Devi v. Jagdish Chandra, which supported the attachment and sale of a coparcener's undivided interest in the HUF property for individual debts.

Conclusion:
The court dismissed the writ petition, holding that the attachment and proposed auction of the petitioner's share in the HUF property for recovery of individual tax arrears were legal. The purchaser of such a share would step into the shoes of the petitioner and could seek partition to realize the share. The court found no illegality in the issuance of the notice under the relevant provisions of the Income-tax Act. No order as to costs was made.