1994 (7) TMI 23 - HC - Income Tax

Assessment Year, Delay In Filing Return, Interest Payable, Law Applicable To Assessment, Liability To Tax

Summary

Issues:
1. Whether income derived from partial partition should be added to the assessee's income.
2. Whether the levy of interest under section 139(8) was justified.

Analysis:

Issue 1:
The case involved the question of whether the income of Rs. 7,126 derived by the members of a Hindu undivided family from funds allotted to them as a result of a partial partition should be added to the assessee's income. The Income-tax Officer made an addition based on the provisions of section 171(9)(a) of the Income-tax Act, 1961, which stated that partial partitions after December 31, 1978, are not recognized. The Finance (No. 2) Act, 1980, introduced an amendment with retrospective effect from April 1, 1980, specifying that income arising from a partitioned property after the relevant date shall be taxed in the hands of the Hindu undivided family. The court held that the income from the partitioned assets is deemed to continue belonging to the Hindu undivided family, and the Income-tax Officer cannot inquire into the claim of partition. Therefore, the income derived from the partial partition was to be added to the assessee's income.

Issue 2:
Regarding the second issue of whether the levy of interest under section 139(8) was justified, the Tribunal found that the return for the assessment year 1980-81 was filed late, on September 14, 1981, instead of the due date of June 30, 1980. The liability for interest under section 139(8) arises for late or non-filing of the return. The Tribunal concluded that the power to waive interest under exceptional circumstances was not exercised in this case as the return was significantly delayed after the liability for tax was crystallized. The court agreed with the Tribunal that there were no exceptional circumstances proven by the assessee to warrant waiving the interest. Therefore, the Tribunal was justified in sustaining the levy of interest under section 139(8) against the assessee.

In conclusion, both issues were decided in favor of the Revenue and against the assessee, with no order as to costs.