1991 (5) TMI 106 - AT - Wealth-tax

Assessment Order, Assessment Proceedings, Kerala Joint Hindu Family System (abolition) Act, Reassessment Proceedings

Issues Involved:

1. Existence of Joint Family System post Kerala Joint Hindu Family (Abolition) Act, 1975.
2. Validity of assessments made under the status of Hindu Undivided Family (HUF).
3. Necessity of serving notices on all sharers (tenants-in-common) post-abolition.
4. Provision in law for assessment once the assessee has ceased to exist.
5. Impact of filing returns by the Karta in the status of HUF post-abolition.

Detailed Analysis:

Issue 1: Existence of Joint Family System Post-Abolition Act
The Tribunal held that the Kerala Joint Hindu Family System (Abolition) Act, 1975, which came into effect on 1-12-1976, resulted in the extinction of the joint family system. The High Court observed that the assessments were pending when the Abolition Act was enacted, and the Hindu Undivided Family (HUF) was in existence on the relevant valuation dates. Therefore, the family ceased to exist legally post-abolition.

Issue 2: Validity of Assessments Made Under HUF Status
The Tribunal noted that assessments made in the status of HUF after the family became extinct are invalid. The High Court highlighted that the Tribunal did not consider the distinction between cases where proceedings started before and after the family became extinct. The Tribunal, following the High Court's direction, held that the assessments completed on 3-1-1983 were without jurisdiction since the HUF had become extinct with the enactment of the Abolition Act.

Issue 3: Necessity of Serving Notices on All Sharers Post-Abolition
The Tribunal emphasized that post-abolition, notices should have been served on all the tenants-in-common, not just the erstwhile Karta. The High Court raised the issue of whether notices should be served on the Karta or all sharers. The Tribunal concluded that since the Karta could no longer represent the family, notices must be served on all tenants-in-common to validate the assessment proceedings.

Issue 4: Provision in Law for Assessment Once the Assessee Has Ceased to Exist
The Tribunal found no provision in the Wealth-tax Act, 1957, allowing assessments on an HUF that has become extinct. The High Court's decision in K. Madhavan Nambiar's case and the Supreme Court's ruling in the State of Punjab v. Jullundur Vegetables Syndicate were cited to support this view. The Tribunal held that there cannot be an assessment on an HUF post-extinction, and any such assessments are invalid.

Issue 5: Impact of Filing Returns by the Karta in the Status of HUF Post-Abolition
The Tribunal determined that the filing of returns by the Karta post-abolition does not confer jurisdiction on the Wealth-tax Officer to make assessments on the HUF. The High Court in Bhagyam Ammal v. Mayilswamy Kounder held that post-abolition, the Karta cannot represent the family, and any returns filed by him are invalid. The Tribunal concluded that the returns filed by the Karta before the abolition were valid, but those filed after were not.

Conclusion:
The Tribunal set aside the assessment orders for the assessment years 1970-71 to 1973-74, directing the Wealth-tax Officer to implead all adult male members of the family in the proceedings. For the assessment year 1977-78, the Tribunal directed verification of the return filing date and held that if the return was filed after 1-12-1976, the assessment is void ab initio. The Tribunal allowed the appeals for statistical purposes, emphasizing the need to follow legal procedures post-abolition.

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