1968 (8) TMI 16 - SC - Income Tax

Manager of the family (HUF) was arrested and detained in civil prison - held that on failure to pay tax by the HUF, manager could not be arrested and detained in civil prision under Sch. II, O. 76 - Assessee s appeal allowed

Summary

Issues:
1. Liability of a manager of a Hindu undivided family for tax dues.
2. Interpretation of relevant sections of the Income-tax Act, 1961.
3. Distinction between the status of a manager and the assessee.
4. Applicability of penalties under specific sections of the Act.
5. Technicality in the High Court's decision and the principle of res judicata.

Analysis:

The judgment dealt with the liability of a manager of a Hindu undivided family for tax dues. The Income-tax Officer issued a certificate for recovery of tax due by the family, leading to the manager's detention in civil prison. The High Court held that the manager, by contravening rules, could be detained. However, the Supreme Court ruled that under the Income-tax Act of 1961, the manager cannot be arrested or detained for the family's tax default. The Act treats the assessee as the defaulter, and proceedings are to be taken against the assessee alone. The manager, representing the family, cannot be deemed the assessee for recovery purposes.

The judgment extensively analyzed the relevant sections of the Income-tax Act, 1961. It highlighted that the Act considers a Hindu undivided family as a distinct taxable entity, separate from its members. Sections 220 and 222 outline the payment and recovery of tax procedures, emphasizing that only the assessee may be deemed in default. The Act's scheme and rules specify that proceedings and liabilities pertain to the assessee alone, excluding the manager from personal liability for the family's tax dues.

The distinction between the status of a manager and the assessee was a crucial aspect of the judgment. While the manager can represent the family in proceedings, he cannot be equated with the assessee under the Act. Sections 140(b) and 282(2) were cited to support the revenue's argument, but the Supreme Court clarified that the manager's roles do not make him the assessee for tax assessment and recovery purposes. The Act's definitions and provisions do not extend the assessee's default to the manager of a Hindu undivided family.

Regarding penalties under specific sections of the Act, the judgment emphasized that penal provisions target individuals failing to comply with statutory duties. Sections 276, 276A, 277, and 278 focus on penalizing specific offenses, not extending liability to managers for family defaults. The Supreme Court concluded that these penalty sections do not apply to the manager in the context of a Hindu undivided family's tax liabilities.

Lastly, the High Court's technical approach and the principle of res judicata were discussed. The Supreme Court criticized the High Court for not allowing the manager's contention regarding his liability and for treating the earlier judgment as res judicata in the subsequent petition. The appeals were allowed, declaring the manager's detention unauthorized, and costs were awarded accordingly.

In conclusion, the judgment clarified the manager's non-liability for a Hindu undivided family's tax dues under the Income-tax Act, 1961, emphasizing the distinct treatment of the assessee and the manager in tax recovery proceedings.