1967 (11) TMI 28 - HC - Income Tax

Travancore-Cochin Agricultural Income Tax Act, 1950 - assessment after partition of family - validity

Summary

Issues Involved:

1. Legality of the notices issued under sections 35 and 17(4) of the Agricultural Income-tax Act, 1950.
2. Existence of a Hindu undivided family (HUF) during the relevant accounting year.
3. Applicability of the principle of res judicata.
4. Constitutionality of section 29 of the Agricultural Income-tax Act, 1950, in light of Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Legality of the Notices Issued Under Sections 35 and 17(4) of the Agricultural Income-tax Act, 1950:

The petitioner challenged the validity of the notices issued under sections 35 and 17(4) of the Agricultural Income-tax Act, 1950. The court observed that the reasoning in O.P. No. 1495 of 1964, which quashed a similar notice, is equally applicable here. The court reiterated that the notices were against the undertaking given by the Government Pleader in O.P. No. 340 of 1959 and contrary to the court's previous directions. Therefore, exhibits P-1 and P-3 were quashed on this ground.

2. Existence of a Hindu Undivided Family (HUF) During the Relevant Accounting Year:

The court examined whether there was a Hindu undivided family in existence during the accounting year from April 1, 1960, to March 31, 1961. The court noted that the members of the Poomuli Mana had partitioned their properties by metes and bounds on March 30, 1958, and the petitioner ceased to be the manager of the family. The court held that section 29 of the Agricultural Income-tax Act, 1950, as amended by Act 12 of 1964, does not alter the fact that there was no HUF during the relevant accounting year. The court stated that the income must be received by the joint family as such for it to be assessed under section 29. Since the family was no longer joint, the notices issued to assess the petitioner as the manager of the HUF were illegal and without jurisdiction.

3. Applicability of the Principle of Res Judicata:

The petitioner argued that the assessment proceedings were barred by res judicata due to previous court decisions. The court noted that the principle of res judicata applies to tax cases only to the extent that it prevents re-litigation of the same issue between the same parties. The court observed that the previous decisions had become final and binding, and the department could not bypass those orders to assess the petitioner as the manager of the HUF. Therefore, the court held that the assessment proceedings based on the impugned notices were barred by res judicata.

4. Constitutionality of Section 29 of the Agricultural Income-tax Act, 1950, in Light of Article 14 of the Constitution:

The petitioner contended that section 29 of the Agricultural Income-tax Act, 1950, as amended, violated Article 14 of the Constitution. The court did not express an opinion on this issue, as the petitioner had already succeeded on the findings regarding the other points. However, the court noted that the legislature has wide latitude in making classifications in taxing statutes, and the burden of proving that the classification is unreasonable lies on the petitioner.

Separate Judgment by Mathew J.:

Mathew J. dissented from the majority opinion. He argued that the legislature has the power to create a legal fiction and treat a disrupted family as a Hindu undivided family for the purpose of assessment. He stated that the amendment to section 29 extended the fiction to families being assessed for the first time and that the petitioner could be assessed as the manager of the HUF unless he proved that all the properties were divided in definite portions. Mathew J. concluded that the respondent had jurisdiction to proceed under the notices issued and would have dismissed the petition.

Conclusion:

In conclusion, the majority allowed the petition and issued a writ of prohibition restraining the respondent from taking further proceedings against the petitioner based on exhibits P-1 and P-3. The petitioner was awarded costs, including an advocate's fee of Rs. 250. Mathew J. dissented, arguing that the respondent had jurisdiction to proceed with the assessment.