1981 (12) TMI 79 - AT - Income Tax

Issues Involved:
1. Validity of partial partition under Hindu law.
2. Competence of a minor to consent to partition.
3. Applicability of the decision in CIT vs. Seth Gopaldas (HUF).
4. Authority of the father to effect partial partition without sons' consent.
5. Whether the order passed by the ITO under Section 171 was erroneous and prejudicial to the interest of revenue.

Issue-wise Detailed Analysis:

1. Validity of Partial Partition under Hindu Law:
The assessee claimed a partial partition of the business capital of the HUF effective from 4th Nov., 1975. The ITO, after conducting necessary inquiries and reviewing the evidence, accepted the claim and passed an order under Section 171 of the IT Act on 20th Feb., 1979. The CIT, however, found the order erroneous and prejudicial to the interest of revenue, citing the decision in CIT vs. Seth Gopaldas (HUF). The Tribunal noted that the Supreme Court in Kalyani Narayanan & Ors. AIR 1980 SC 1173 ruled that a father has the right to effect partial partition among himself and his sons without their consent, thus supporting the ITO's order.

2. Competence of a Minor to Consent to Partition:
The CIT argued that the minor son, Pankaj Kumar, was not legally competent to consent to the partial partition. However, the assessee contended that the partition was consented to by the guardian on behalf of the minor. The Tribunal observed that the partition deed was signed by the Karta and his wife on behalf of their minor son, and the partition was duly acted upon and bona fide.

3. Applicability of the Decision in CIT vs. Seth Gopaldas (HUF):
The CIT relied on the decision in CIT vs. Seth Gopaldas (HUF) to argue that the ITO's order was erroneous. The Tribunal distinguished the present case from Seth Gopaldas, noting that in Seth Gopaldas, the partition was made without the consent of the sons and did not include the entire family properties. In contrast, in the present case, the partition was consented to by the guardian on behalf of the minor, and relevant entries were made in the books of account.

4. Authority of the Father to Effect Partial Partition without Sons' Consent:
The Tribunal referred to the Supreme Court's decision in Kalyani Narayanan & Ors. and other High Court rulings, which upheld the father's authority to effect partial partition among himself, his wife, and minor sons without their consent. The Tribunal concluded that the father's authority to make partial partition was valid under Hindu law.

5. Whether the Order Passed by the ITO under Section 171 was Erroneous and Prejudicial to the Interest of Revenue:
The Tribunal examined the CIT's contention that the ITO's order was erroneous and prejudicial to the interest of revenue. The Tribunal found that the ITO's order was based on a thorough inquiry and was consistent with the latest Supreme Court decision in Kalyani Narayanan & Ors., which supported the validity of the partial partition. Consequently, the Tribunal held that the ITO's order was not erroneous or prejudicial to the interest of revenue and cancelled the CIT's order under Section 263.

Conclusion:
The Tribunal allowed the appeal, holding that the order passed by the ITO under Section 171 was not erroneous and prejudicial to the interest of revenue. The Tribunal distinguished the present case from CIT vs. Seth Gopaldas (HUF) and relied on the Supreme Court's decision in Kalyani Narayanan & Ors. to validate the partial partition effected by the father.

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