1984 (11) TMI 131 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the ITO under section 147(a) of the Income-tax Act.
2. Inclusion of minors' income in the assessee's hands under section 64(1)(iii) of the Income-tax Act.
3. Nature of the right to archakathvam and its classification as individual or family property.
4. Validity of the partial partition and the formation of the partnership.
5. Assessment of the firm's income and the assessee's share in the income.

Issue-wise Detailed Analysis:

1. Jurisdiction of the ITO under section 147(a) of the Income-tax Act:
The ITO initiated action under section 147(a) of the Income-tax Act, asserting that no return had been filed by the assessee in his individual capacity. The first appellate authority confirmed the ITO's jurisdiction. The assessee contended that the assessment lacked jurisdiction, citing the Supreme Court decision in Joint Family of Udayan Chinubhai v. CIT and the Orissa High Court decision in Damodar Hansraj v. ITO. However, the Tribunal upheld the proceedings under section 148, noting that the assessee was liable to tax in respect of the aggregate income of the minor children.

2. Inclusion of minors' income in the assessee's hands under section 64(1)(iii) of the Income-tax Act:
The ITO included the minors' income in the assessee's hands, which was disputed by the assessee. The first appellate authority upheld the aggregation of the minors' income under section 64(1)(iii), referencing the Andhra Pradesh High Court decision in Sivalal Sogaji, In re. The Tribunal agreed with the first appellate authority, confirming the inclusion of the minors' income in the assessee's hands.

3. Nature of the right to archakathvam and its classification as individual or family property:
The ITO argued that the right to archakathvam was a personal right and not alienable. The first appellate authority, however, viewed the archakathvam as an office and property, citing various Supreme Court and High Court decisions. The Tribunal agreed with the first appellate authority, recognizing the right to archakathvam as hereditary property and subject to partition. The Tribunal noted that the right to archakathvam was not merely a matter of contract but a pre-existing right recognized by custom and tradition.

4. Validity of the partial partition and the formation of the partnership:
The ITO did not acknowledge the partial partition or the formation of the partnership. The first appellate authority found the partition valid and recognized the firm's formation. The Tribunal upheld this view, noting that the partial partition was recognized by an order under section 171 and that the firm's registration had been continued for all relevant years. The Tribunal concluded that the partition and the partnership were valid, and the assessee's share should be included in the family assessment.

5. Assessment of the firm's income and the assessee's share in the income:
The ITO assessed the entire income from the archakathvam in the assessee's individual capacity. The first appellate authority directed that the firm's assessment was valid and should be treated as a regular assessment. The Tribunal upheld this decision, noting that the firm's income was assessable in the hands of the family. The Tribunal emphasized that the assessment should follow the firm's assessment as prescribed by section 67 of the Act.

Conclusion:
The Tribunal dismissed the departmental appeal, upholding the first appellate authority's decision. The Tribunal confirmed the jurisdiction of the ITO under section 147(a), the inclusion of minors' income under section 64(1)(iii), the classification of the right to archakathvam as family property, the validity of the partial partition and the partnership, and the assessment of the firm's income in the family assessment.