1991 (7) TMI 133 - AT - Income Tax

Summary

Issues Involved:
1. Legality of reassessment under section 147(a) for the assessment years 1980-81, 1982-83, and 1983-84.
2. Validity of partial partition recognized under section 171.
3. Application of section 171(9) introduced by Finance (No. 2) Act, 1980.

Issue-wise Detailed Analysis:

1. Legality of Reassessment under Section 147(a) for the Assessment Years 1980-81, 1982-83, and 1983-84:
The Revenue's appeals were directed against the consolidated order of the CIT(A) that canceled the reassessments for the assessment years 1980-81, 1982-83, and 1983-84. The CIT(A) held that the assessee had disclosed all material facts, and there was no failure or suppression of income by the assessee. Therefore, the action under section 147(a) was not justified. The CIT(A) restored the original assessments and canceled the reassessments without delving into the merits of other issues like disallowances and additions.

2. Validity of Partial Partition Recognized under Section 171:
The partial partition of the Hindu Undivided Family (HUF) assets was claimed and recognized by an order dated 22-4-1980. The Assessing Officer, relying on section 171(9) introduced by the Finance (No. 2) Act, 1980, held that the partial partition was not permissible and proceeded to assess the income as if no partition had taken place. The CIT(A) held that the Assessing Officer should have first canceled the order recognizing the partition before proceeding with reassessments.

3. Application of Section 171(9) Introduced by Finance (No. 2) Act, 1980:
Section 171(9) was introduced to nullify partial partitions that took place after 31-12-1978. The Assessing Officer included income from the assets divided in the partial partition in the total income of the HUF for the relevant assessment years. The CIT(A) and the Tribunal both noted that the provision of section 171(9) did not affect partial partitions already recognized in the assessment year 1979-80. The Tribunal referred to judgments from various High Courts, including the Madras High Court, which declared section 171(9) void on the grounds of discrimination and arbitrariness. However, the Tribunal noted that a Special Leave Petition was admitted by the Supreme Court, and the operation of the High Court judgment was stayed.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to cancel the reassessments for the assessment years 1980-81, 1982-83, and 1983-84. The Tribunal concluded that the Assessing Officer could not disturb the partial partition recognized by the order dated 22-4-1980, making the reassessments ab initio void. The appeals of the Revenue were dismissed, and the status quo ante was restored for all the assessment years under appeal.