1984 (1) TMI 132 - AT - Wealth-tax

Summary

Issues Involved:
1. Status of the assessee: Individual vs. Hindu Undivided Family (HUF) for the assessment years 1975-76 and 1978-79.
2. Validity of the notice issued under section 17B of the Wealth-tax Act, 1957.
3. Double taxation of assets in the hands of both individual and HUF for the assessment year 1975-76.

Detailed Analysis:

1. Status of the Assessee: Individual vs. HUF

For the assessment year 1975-76, the assessee filed a return of wealth in the status of HUF declaring net wealth as nil, claiming that the HUF ceased to exist from 15-11-1974 due to a mutual agreement between the assessee and his wife to live apart. The WTO refused to accept this contention, stating that there cannot be any legal separation except by a decree of the Court. The AAC upheld the status of HUF but cancelled the assessment on the grounds of double taxation. For the assessment year 1978-79, the WTO again assessed the status as HUF, which was confirmed by the AAC.

The Tribunal concluded that even though the wife relinquished her interest in the joint family property, she could not relinquish her status as a member of the joint family. Thus, the authorities were correct in assessing the assessee in the status of HUF for both assessment years.

2. Validity of the Notice Issued Under Section 17B

The assessee argued that proceedings initiated under section 17B based on an audit objection were not maintainable, citing the Supreme Court's judgment in Indian & Eastern Newspaper Society v. CIT. The AAC considered the notice under section 17B a procedural irregularity but not illegal, as the return was pending before the notice was issued. The Tribunal agreed with the AAC that the notice under section 17B was non est in the eye of law since the return was already pending.

3. Double Taxation of Assets

For the assessment year 1975-76, the AAC cancelled the assessment in the status of HUF on the grounds that the same assets were already taxed in the individual hands of the assessee. The Tribunal referenced several Supreme Court judgments, including CIT v. Murlidhar Jhawar & Purna Ginning & Pressing Factory and ITO v. Bachu Lal Kapoor, which held that the same income cannot be taxed twice. The Tribunal concluded that while the AAC was correct in stating that the same assets could not be taxed twice, the remedy lay in cancelling the wrong assessment and not the right one. Therefore, the Tribunal restored the WTO's order for the assessment year 1975-76, subject to adjustment of tax paid in individual hands.

Conclusion:

The Tribunal upheld the status of the assessee as HUF for both assessment years 1975-76 and 1978-79. The notice issued under section 17B was deemed a procedural irregularity but not illegal. The Tribunal also addressed the issue of double taxation by restoring the WTO's order for the assessment year 1975-76, subject to appropriate tax adjustments. The appeal by the assessee for the assessment year 1978-79 was dismissed.