1982 (3) TMI 9 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the oral partition of the joint Hindu family in 1953.
2. Validity of the registered partition deed dated 9th April 1957.
3. Validity of the sale deed executed in favor of the plaintiff.
4. Continuation of the Hindu Undivided Family (HUF) for income tax purposes.
5. Legality of the assessment and recovery of income tax dues against the HUF.

Detailed Analysis:

1. Validity of the Oral Partition of the Joint Hindu Family in 1953:
The plaintiff argued that there was an oral partition of the joint Hindu family on 16th May 1953, evidenced by a memorandum dated 20th May 1953. The court examined the oral evidence of various witnesses, including P.W. 1-Shri V. K. Sanghi, P.W. 2-Seth Gopikishan, P.W. 3-Rameshchandra, P.W. 5-Wasudeoprasad, P.W. 6-Bharatlal, and D.W. 1-Harishchandra. The court found the evidence unreliable and noted strong circumstances negating the existence of such a partition. The memorandum of oral partition did not bear any endorsement of being produced before any court or authority, and the registered partition deed of 9th April 1957 did not refer to any prior partition. Therefore, the court did not accept the plaintiff's claim of an oral partition in 1953.

2. Validity of the Registered Partition Deed Dated 9th April 1957:
The court held that a valid partition took place on 9th April 1957, when the registered partition deed was executed. This deed divided the urban properties among Prabhudayal, Harishchandra, and Rameshchandra, indicating that they were members of a joint Hindu family until that date. The court found that the partition of the family occurred in April/May 1957, not in 1953 as pleaded by the plaintiff.

3. Validity of the Sale Deed Executed in Favor of the Plaintiff:
The sale deed dated 27th June 1962, executed by Prabhudayal and Harishchandra in favor of Seth Gopikishan, was found to be fictitious and sham. The court noted that the houses remained in possession of Prabhudayal and Harishchandra even after the sale deed. The trust deed executed by Seth Gopikishan on 12th November 1965 further indicated that the sale was a device to shield the properties from income tax recovery. The court concluded that the sale deed and the subsequent trust deed were unreal and executed with the intention of defrauding the Revenue, making the suit houses liable to be attached and sold for the income tax dues of the HUF.

4. Continuation of the Hindu Undivided Family (HUF) for Income Tax Purposes:
The court held that the HUF continued for income tax purposes as there was no adjudication by the Income Tax Officer (ITO) about the partition and consequent disruption of the family. The assessments for the years 1957-58 and 1958-59 were made in the status of an HUF. The court referred to the statutory fiction contained in sub-s. (3) of s. 25A of the Indian I.T. Act, 1922, which stated that the family must be deemed to continue as an HUF for the purposes of the Act, including recovery of tax.

5. Legality of the Assessment and Recovery of Income Tax Dues Against the HUF:
The court rejected the plaintiff's argument that the assessments were void for non-compliance with s. 25A(1) of the Indian I.T. Act, 1922. The court cited Supreme Court rulings, stating that the failure to make an order on the claim of partition does not affect the jurisdiction of the ITO to assess the income of the HUF. The court emphasized that the remedy for any error or irregularity in the assessment lies within the statutory machinery provided by the Act, not through a civil suit. The assessments for the years 1957-58 and 1958-59 were found to be valid, and the properties could be proceeded against for recovery of the tax dues.

Conclusion:
The appeal was dismissed with costs in favor of the Union of India. The court upheld the validity of the registered partition deed dated 9th April 1957, rejected the claim of an oral partition in 1953, and found the sale deed executed in favor of the plaintiff to be fictitious and intended to defraud the Revenue. The HUF was deemed to continue for income tax purposes, and the assessments for the years 1957-58 and 1958-59 were held to be valid, allowing the properties to be attached and sold for recovery of the income tax dues.