1961 (8) TMI 42 - HC - Income Tax

Summary

Issues Involved:
1. Consequences of an order under Section 25A of the Indian Income-tax Act recognizing a partition from an earlier date.
2. Interpretation of Section 25A, particularly subsections (2) and (3).
3. Validity of the tax demand notices issued under Section 46(5) of the Act.
4. Applicability of Section 25A to assessment years predating the date of partition.
5. Appropriateness of invoking the court's jurisdiction under Article 226 of the Constitution of India.

Detailed Analysis:

1. Consequences of an Order under Section 25A Recognizing a Partition from an Earlier Date:
The primary issue revolves around the consequences that flow from an order under Section 25A of the Act recognizing a partition as having been effected from an earlier date. The court noted that the assessments for the years 1941-42 to 1946-47 were made on the Hindu undivided family as a unit. However, the partition was recognized with effect from November 2, 1946, by an order dated June 30, 1952. The court held that the order recognizing the partition must be deemed to have been made on the date from which it was intended to take effect, i.e., November 2, 1946. Consequently, the family should be treated as disrupted from that date, and the tax should be apportioned among the members as per Section 25A(2).

2. Interpretation of Section 25A:
The court interpreted Section 25A, particularly subsections (2) and (3), to determine the applicability of the section in the context of the case. Subsection (2) provides a mechanism for the collection of tax due from a Hindu undivided family that has become disrupted. The court emphasized that the Income-tax Officer must make an apportionment of the tax payable by the family according to the portion of the joint family property allotted to each member. Subsection (3) states that in the absence of an order under subsection (1), the family shall be deemed to continue as a Hindu undivided family. The court clarified that once an order recognizing the partition is made, it should date back to the date of partition, thereby affecting the assessments accordingly.

3. Validity of Tax Demand Notices Issued under Section 46(5):
The court examined the validity of the tax demand notices issued under Section 46(5) to the managing director of Krishnappa Asbestos and Barytes (Private) Ltd., directing the deduction of the tax amount from the salaries of Ranganatham and Thimmaiah. The court held that the tax payable by the family could not be demanded from the petitioners individually, given the order under Section 25A recognizing the partition. The court granted a writ of mandamus quashing the notices, emphasizing that the department must follow the consequences of the order recognizing the partition from an anterior date.

4. Applicability of Section 25A to Assessment Years Predating the Date of Partition:
The court addressed the argument that Section 25A is applicable only to assessment years following the date of partition. The court rejected this contention, stating that the relevant time is the date of making the assessment, not the assessment year. The section begins with the words "where, at the time of making an assessment under section 23," indicating that it applies to assessments made subsequently, regardless of the assessment year.

5. Appropriateness of Invoking the Court's Jurisdiction under Article 226:
The court considered whether the extraordinary jurisdiction under Article 226 of the Constitution should be exercised in this case. The department argued that the assessees had the opportunity to raise their concerns during appeals against the original assessments but did not do so. The court dismissed this argument, noting that there is no res judicata in income-tax proceedings, and the assessees were only concerned with the correctness of the assessments during the appeals. The court held that the assessees could seek relief for the apportionment of tax, despite not challenging the assessments earlier.

Conclusion:
The appeals were dismissed, and the court upheld the writ of mandamus directing the appellant to apportion the tax payable by the Hindu joint family as contemplated by Section 25A(2) of the Indian Income-tax Act. The court emphasized the retrospective effect of the order recognizing the partition and the necessity for the department to follow the consequences of such an order. The court also clarified the interpretation of Section 25A and its applicability to assessments made subsequently, regardless of the assessment year.