1991 (11) TMI 29 - HC - Income Tax

Summary

Issues:
Interpretation of the Income-tax Act regarding the assessment of share income from a partnership firm in the hands of an individual or Hindu undivided family.

Analysis:
The judgment dealt with the interpretation of the Income-tax Act concerning the assessment of share income from a partnership firm in the hands of an individual or Hindu undivided family for the assessment years 1969-70 and 1970-71. The assessee, a partner in two firms, contended that the share income from one firm should be assessed as income of the Hindu undivided family, not as individual income. The Income-tax Officer initially assessed the share income as individual income, which was challenged by the assessee. The Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee, considering the inheritance of capital and past treatment of income. The Department argued that the share income should be assessed as individual income based on the Hindu Succession Act. However, the court held that the question of whether the capital was self-acquired or ancestral was a factual matter not raised earlier and could not be considered at the reference stage.

The judgment emphasized that in reassessment proceedings, all issues relating to the assessment of the assessee, including the question of status, can be redetermined. It was established that the original order of assessment becomes non est in such cases. Therefore, the appellate authorities were justified in considering the objection raised by the assessee regarding the assessment of share income in his individual capacity. The court concluded that the share income should be assessed as income of the Hindu undivided family, ruling in favor of the assessee and against the Department. The judgment did not award costs and directed the transmission of the order to the Income-tax Appellate Tribunal.

In a concurring opinion, the second judge agreed with the decision and analysis provided by the primary judge. The judgment clarified the legal aspects surrounding the assessment of share income from a partnership firm and the relevance of reassessment proceedings in determining the status for tax purposes.