1951 (9) TMI 2 - SC - Income Tax

Whether in the circumstances of this case proceedings under section 34 in respect of the assessment year 1939-40 were validly initiated and completed against the Hindu undivided family, which had ceased to exist then, and an order under section 25A(1) accepting the partition of the Hindu undivided family had already been passed? Whether section 25A(2) requires that the assessment should be made against each member of the joint family for a proportionate share of the tax and it is only after one of them had failed to pay such share that the Income-tax Officer could proceed to recover it from the others? Held that - It does not appear necessary, when proceedings are initiated under section 34 read with section 22 of the Income-tax Act, to issue notice to every member of the family. The position is as if the Income-tax Officer was proceedings to assess the income of the Hindu undivided family as in 1939-40. In our opinion, therefore, that contention that the High Court had held that the proceedings were irregularly initiated and completed they were invalid and no order for assessment could be made. must be rejected. We are unable to accept the second part of the argument of Mr. Umrigar that it is only on the failure or default of payment by one of the members that the Government has the right to recover that portion of the amount from others. The proviso to section 25A(2) makes the position very clear. In contrast with that the proviso to section 26 shows that when the Legislature wanted to give power to the Income-tax authority to recover from others only on failure of payment by a party, it said so expressly. The absence of similar words in the proviso to section 25A(2) must result in the rejection of this part of Mr. Umrigar s argument. Appeal failed substantially

Summary

Issues:
1. Validity of proceedings under section 34 in respect of the assessment year 1939-40 against the Hindu undivided family after partition.
2. Interpretation of section 25A(1) and 25A(2) of the Income-tax Act regarding assessment and apportionment of tax liability among joint family members.

Analysis:
The case involved an appeal from a High Court judgment regarding income-tax assessment of a joint Hindu family for the year 1939-40. The Income-tax Officer initiated proceedings under section 34 against the family, which had become divided, for escaped income. The appellant, as the karta, contended that the proceedings were irregular and he was not liable to pay. The High Court opined that there were irregularities but no prejudice to the appellant, thus ordering payment of costs. The appellant appealed, arguing that the proceedings were invalid due to irregular initiation. The Supreme Court rejected this contention, stating that notice to every member was not necessary under section 34. The Court held that the Income-tax Officer should have apportioned the tax liability among family members as per section 25A(2), which was not done in this case. Therefore, the Court directed the Income-tax Officer to issue separate notices to each member for the apportioned amount.

Regarding the interpretation of section 25A(2), the appellant argued that recovery from other members was only possible upon default by one member. The Court disagreed, citing the proviso to section 25A(2) which does not require prior default for recovery from others. The absence of specific language in section 25A(2) similar to section 26's proviso led to the rejection of this argument. Consequently, the Court upheld the High Court's decision on the irregularities in the proceedings but directed proper apportionment of tax liability among family members as per section 25A(2). As the appeal substantially failed, the appellant was ordered to pay the costs of the appeal.