1991 (11) TMI 117 - AT - Wealth-tax

Summary

Issues Involved:
1. Claim of Partition under Section 171 of the Income-tax Act, 1961, and Section 20 of the Wealth-tax Act, 1957.
2. Rejection of Partition Claim by Income-tax and Wealth-tax Authorities.
3. Appellate Decisions and Finality of Partition.
4. Applicability of Supreme Court Decisions on Partition.
5. Doctrine of Res Judicata in Income-tax and Wealth-tax Proceedings.
6. Validity of Unequal Partition.

Issue-wise Detailed Analysis:

1. Claim of Partition under Section 171 of the Income-tax Act, 1961, and Section 20 of the Wealth-tax Act, 1957:
The assessee claimed that a partition had occurred within the family, requesting its acceptance under Section 171 of the Income-tax Act, 1961, and Section 20 of the Wealth-tax Act, 1957. The claim was initially rejected by the department due to the absence of a partition by metes and bounds, despite severance of status and appropriation of certain properties by a coparcener.

2. Rejection of Partition Claim by Income-tax and Wealth-tax Authorities:
The department refused to accept the partition claim, arguing that there was no physical division of properties as required under Section 171 of the Income-tax Act. This rejection was followed in wealth-tax proceedings as well.

3. Appellate Decisions and Finality of Partition:
The assessee appealed against the rejection. The Appellate Assistant Commissioner (AAC) found that there was a physical division of properties, ceasing the existence of the Hindu undivided family (HUF). This order was upheld by the Income-tax Appellate Tribunal (ITAT) and became final. Similar decisions were made for subsequent assessment years, and the Andhra Pradesh High Court dismissed the department's reference application, affirming the finality of the partition.

4. Applicability of Supreme Court Decisions on Partition:
The Tribunal referred to the Supreme Court's decision in Kalloomal Tapeswari Prasad (HUF) v. CIT, which held that a physical division by metes and bounds is required for an order under Section 171. The Tribunal, however, found that the facts of the case did not warrant the application of this decision, as there was already an order recognizing the partition.

5. Doctrine of Res Judicata in Income-tax and Wealth-tax Proceedings:
The Tribunal emphasized that once an order recognizing partition is passed, it continues to subsist unless set aside by a competent authority. This principle, derived from the Supreme Court's decision in Joint Family of Udayan Chinubhai v. CIT, implies that the doctrine of res judicata applies to orders recognizing partition, preventing the department from reopening the issue without fresh evidence.

6. Validity of Unequal Partition:
The Tribunal also addressed the issue of unequal partition, citing the Supreme Court's decision in Apoorva Shantilal Shah v. CIT, which held that income-tax authorities cannot refuse to recognize a partition on the grounds of inequality in the division of shares. The partition between R. Venkateswarulu and R. Krishnamurthy was thus deemed valid and not a sham or fictitious partition.

Conclusion:
The Tribunal upheld the views expressed by earlier Benches, affirming that there was a partition of the joint family and that the joint family ceased to exist on the relevant valuation dates. The departmental appeals were dismissed, and the assessments made on the joint family for the assessment years 1982-83 and 1983-84 were to be canceled.