1980 (9) TMI 111 - AT - Income Tax

Summary

Issues Involved:

1. Validity of the partial partition under Section 171 of the Income Tax Act.
2. Authority of the CIT to revise the order under Section 263(1) of the Income Tax Act.
3. Requirement of consent from minor coparceners for partial partition.

Issue-wise Detailed Analysis:

1. Validity of the Partial Partition under Section 171:

The assessee, a Hindu Undivided Family (HUF), claimed a partial partition of assets, including capital and profit shares from a partnership firm, M/s Khetu Ram Bishamber Dass. The Income Tax Officer (ITO) accepted this claim and recorded a finding under Section 171 of the Income Tax Act, leading to the exclusion of the share of profit from the assessee's income for the assessment years 1975-76 and 1976-77. The Commissioner of Income Tax (CIT) later vacated this finding, arguing that the partial partition was not valid as it lacked a valid agreement and the consent of minor coparceners. The CIT relied on the Madhya Pradesh High Court decision in CIT vs. Seth Gopal Dass (HUF), which held that a Hindu father could not effect a partial partition without the consent of his sons.

2. Authority of the CIT to Revise the Order under Section 263(1):

The CIT, upon reviewing the ITO's orders, issued notices under Section 263(1) of the Income Tax Act, proposing to revise the assessments on the grounds that the ITO's acceptance of the partial partition was erroneous and prejudicial to the interests of the Revenue. The CIT argued that the minors' incapacity to consent and the lack of a valid agreement invalidated the partial partition. Despite the assessee's objections and submissions, both oral and written, the CIT proceeded to revise the assessments.

3. Requirement of Consent from Minor Coparceners for Partial Partition:

The primary objection raised by the CIT was that the partial partition was not valid due to the lack of consent from the minor coparceners. The CIT argued that a valid agreement among all coparceners was essential for a partial partition, and since the minors could not consent, the partition was invalid. The CIT's stance was supported by the Madhya Pradesh High Court's decision in CIT vs. Seth Gopal Dass (HUF), which emphasized that partial partitions require mutual agreement among all parties.

Analysis and Judgment:

The Tribunal, after considering the arguments and precedents, disagreed with the CIT's view. The Tribunal noted that the decision in CIT vs. Seth Gopal Dass (HUF) was not universally accepted and contradicted several High Court and Supreme Court rulings. The Tribunal cited the Supreme Court's decision in Charan Dass Haridass vs. CIT, where a partial partition effected by a father among himself, his wife, and minor sons was upheld as valid. The Tribunal emphasized that under Hindu Law, a partition is a unilateral act by the Karta (head of the family) and does not require the consent of other coparceners, including minors.

The Tribunal also referred to authoritative texts on Hindu Law, which support the view that a father can effect a partition without the consent of his sons, provided the partition is fair and equal. The Tribunal concluded that the CIT's reliance on the Seth Gopal Dass case was misplaced and that the ITO's finding of partial partition was correctly recorded.

Conclusion:

The Tribunal set aside the CIT's orders under Section 263(1) and restored the ITO's finding under Section 171, validating the partial partition. The Tribunal held that the CIT was misdirected in disregarding the Supreme Court's authority in Charan Dass Haridass and that the partial partition was valid despite the lack of consent from the minor coparceners. The assessments for the years 1975-76 and 1976-77 were restored to their original state as determined by the ITO.