1971 (8) TMI 90 - SC - Income Tax

Whether the family must be deemed to be an undivided family? Held that - It is not necessary for us in this case to decide whether that intention has been expressed with sufficient clarity so as to make it enforceable. Suffice it to say that, in this case, the family sought to be taxed was non-existing in the concerned previous years and, hence, cannot be considered as a Hindu undivided family being assessed for the first time . That being so there is no room for application of the deeming provision in section 29(3).Appeals dismissed.

Summary

Issues Involved:

1. Scope of Section 29 of the Kerala Agricultural Income-tax Act, 1950, as amended in 1964.
2. Validity of assessing the respondent as the karta of a Hindu undivided family (HUF) after partition.
3. Legality of retrospective application of the amended Section 29.
4. Conduct of the department in issuing repeated notices for assessment.

Issue-wise Detailed Analysis:

1. Scope of Section 29 of the Kerala Agricultural Income-tax Act, 1950, as amended in 1964:

The primary issue was to determine the true scope of Section 29 of the Kerala Agricultural Income-tax Act, 1950, as amended in 1964. The court examined both the original and amended versions of Section 29. The original Section 29 dealt with the assessment of HUFs and provided that if a partition was claimed, the Agricultural Income-tax Officer (AITO) must conduct an inquiry and record an order if satisfied. The amended Section 29, effective from April 1, 1958, retained similar provisions but clarified that the AITO shall assess the total agricultural income as if no partition had taken place and hold members jointly and severally liable for tax up to the date of partition.

2. Validity of assessing the respondent as the karta of a Hindu undivided family (HUF) after partition:

The respondent, who was the karta of a Namboodiri family known as Poomulli Mana, had entered into a registered partition deed on March 30, 1958, dividing the family. Despite this, the department issued notices to assess him as the karta of his HUF for various assessment years. The High Court had quashed these notices on multiple occasions, and the department had conceded in 1960 that the respondent would be assessed only as an "individual." The court noted that the family had been consistently assessed as divided from 1958 to 1964, and the assessments had become final. Therefore, it was not open to the department to reassess the respondent as the karta of a non-existing family.

3. Legality of retrospective application of the amended Section 29:

The amended Section 29 was given retrospective effect from April 1, 1958. The department issued a notice on June 1, 1964, to assess the respondent as the karta of his HUF for the period from November 1, 1956, to March 31, 1958. The court held that Section 29 is only a machinery section and is attracted to an assessment proceeding only if the family was either assessed as an undivided family in the previous assessment year or being assessed for the first time as an undivided family. Since the respondent's family had been assessed as divided in previous years, the retrospective application of the amended Section 29 was not permissible.

4. Conduct of the department in issuing repeated notices for assessment:

The court expressed regret over the department's persistence in harassing the respondent with repeated notices despite clear judicial orders. The department's actions were seen as lacking in confidence and professionalism. The court highlighted the importance of adhering to judicial decisions and not subjecting taxpayers to undue harassment.

Conclusion:

The court dismissed the appeals, holding that the department's actions were not justified under the amended Section 29. The respondent could not be assessed as the karta of a non-existing family, and the retrospective application of the amended Section 29 was not permissible. The court also criticized the department's conduct in issuing repeated notices, emphasizing the need for fair and just administration. The appeals were dismissed with costs.