1992 (7) TMI 123 - AT - Income Tax

Summary

Issues:
1. Validity of re-opened assessment under section 58(3) r.w.s. 59(b) of the Estate Duty Act, 1953.
2. Legality of partial partition and adoption under Hindu Law.
3. Interpretation of orders passed under section 171(3) of the Income-tax Act.
4. Applicability of orders under section 171(3) in proceedings under different tax laws.

Analysis:

Issue 1: Validity of re-opened assessment
The accountable person appealed against the re-opened assessment made under section 58(3) r.w.s. 59(b) of the Estate Duty Act, 1953. The Assistant Controller of Estate Duty reopened the assessment based on an order by the Commissioner of Wealth-tax, which set aside the wealth-tax assessment due to an alleged illegal adoption and partial partition. The Tribunal previously held that the order under section 171(3) of the IT Act was valid until set aside by competent authority. The Appellate Controller confirmed the re-opening, leading to the current appeal.

Issue 2: Legality of partial partition and adoption
The first appellate authority found the partial partition and adoption invalid under Hindu Law, leading to the re-assessment. The accountable person argued that the order under section 171(3) recognizing the partial partition was valid and binding until overturned by competent authority. The appellant's counsel contended that the adoption of the uterine brother was legal under customary Hindu Law, citing relevant legal texts and case law.

Issue 3: Interpretation of orders under section 171(3)
The Income-tax Officer's order under section 171(3) recognized the partial partition, which the accountable person argued should be legally binding across all Direct Tax Laws. The Tribunal emphasized that the order under section 171(3) was quasi-judicial and should be given full effect until lawfully overturned. The Tribunal cited various legal precedents supporting the binding nature of such orders.

Issue 4: Applicability of orders under section 171(3)
The Tribunal held that the order under section 171(3) must be respected in all proceedings under Direct Tax Laws, including the Estate Duty Act. Ignoring the order in Estate Duty proceedings would be erroneous, as the order was valid and binding until overturned by competent authority. The Tribunal overturned the Appellate Controller's decision, quashing the re-opening action and allowing the appeal of the accountable person.