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Issues: Validity of assessment order, existence of partition in the family, jurisdiction of the respondent to assess as HUF, failure to file returns, impact of partition on tax liability.
The High Court of Karnataka addressed the validity of an assessment order passed by the Agrl. ITO against a group of brothers who had challenged the order. The petitioners, residents of a village, had undergone a partition of properties by metes and bounds and a panch palupatti in 1964. Despite the individual income of each petitioner being below the taxable limit, the respondent issued notices for filing returns, which the petitioners did not respond to. The respondent, disregarding evidence of partition, assessed the petitioners as members of an HUF based on total acreage owned by all brothers, leading to tax imposition under the Act. The petitioners contended that the assessment was without jurisdiction as they had no assessable income and that the respondent erred in not recognizing the partition. The Court noted that a clear intention to sever HUF status is sufficient for partition, as seen in the case law. The failure of the 1st petitioner to act did not justify taxing income that was otherwise not taxable. The Court held that upon learning of the partition, the respondent should have reassessed the petitioners individually or as tenants-in-common, taxing only individual income. Consequently, the Court quashed the impugned order and demand notice, ruling them as unauthorized and lacking jurisdiction due to the partition. No costs were awarded due to the 1st petitioner's negligence in representing the partition before receiving the notice under the Act.
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