1959 (3) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Validity of proceedings under section 33B of the Income Tax Act.
2. Legality of the order passed under section 33B canceling the orders under sections 25A, 26A, and 23(3).
3. Whether the Tribunal was right in holding that the order under section 33B is only prejudicial to the Hindu undivided family and no one else.
4. Whether T. G. Sulakhe had the right to file an appeal in his individual capacity or only as the Kartha of the Hindu undivided family.
5. Whether the finding that there was no intention to partition or actual partition of the assets of the Hindu undivided family is based on mere inferences and conjectures.

Detailed Analysis:

1. Validity of Proceedings under Section 33B:
The court examined whether the proceedings initiated by the Commissioner under section 33B were valid. The contention was that the Income Tax Officer must give notice to each member of the family before making an order under section 25A. The court held that the Commissioner must give notice to all members affected by the order. It was found that no notice was served on K. G. Sulakhe or B. G. Sulakhe, and thus, the Commissioner did not fulfill the requirements of section 33B, rendering the proceedings invalid.

2. Legality of the Order Canceling Orders under Sections 25A, 26A, and 23(3):
The court noted that if the proceedings under section 33B were invalid, the order canceling the orders under sections 25A, 26A, and 23(3) would also be invalid. The Commissioner's basis for canceling the registration and renewal of the firm was found to be without proper notice to all members. The court concluded that the cancellation of the registration and renewal of the firm and the assessment for 1951-52 were invalid.

3. Prejudice to the Hindu Undivided Family:
The court found the third question to be redundant as it was covered by the first question. The court concluded that the notice served on T. G. Sulakhe was not sufficient to validate the proceedings under section 33B, thus making the order prejudicial to the Hindu undivided family.

4. Right of T. G. Sulakhe to File an Appeal:
The court held that T. G. Sulakhe had the right to file an appeal in his individual capacity as a partner of the firm. The appeal was valid whether filed in his individual capacity or as the Kartha of the Hindu undivided family. The court emphasized that the notice served on T. G. Sulakhe as a partner was valid.

5. Finding of No Intention to Partition:
The court reviewed the finding that there was no intention to partition or actual partition of the assets. It was noted that the reasons given by the Commissioner and the Tribunal were based on irrelevant considerations. The court stated that the unequal nature of the partition or the motive behind it was irrelevant as long as the partition was intended and executed. The court found no material basis to invalidate the partnership formed by the members of the erstwhile Hindu undivided family.

Conclusion:
The court answered the first two questions in the affirmative, declaring the proceedings under section 33B invalid and the subsequent orders canceling the registrations and assessments as bad in law. The court also held that T. G. Sulakhe had the right to appeal in his individual capacity. The miscellaneous reference applications were dismissed, and the reference was answered with costs to the assessee.