1970 (10) TMI 23 - HC - Income Tax

Expenditure Tax Act, 1957 - partition of HUF - applicability of section 19 - whether assessment must be made against all members

Issues Involved:

1. Legality of the notice dated August 5, 1966.
2. Requirement of an order under section 19 of the Expenditure-tax Act.
3. Assessment of the petitioner as karta after partition.
4. Entitlement to allowance under section 6(1)(h) of the Expenditure-tax Act.

Issue-wise Detailed Analysis:

1. Legality of the Notice Dated August 5, 1966:

The petitioner argued that the notice issued on August 5, 1966, was illegal because it did not provide the time fixed under section 13(2) of the Expenditure-tax Act for filing a return. The court found that the assessment proceedings had been pending since July 21, 1958, and the petitioner had ample opportunity to file the return and produce the accounts. The petitioner's consistent refusal to file a return or respond to notices was based on his contention that the illom was not liable to assessment as it ceased to exist before the Act came into force, and he was not liable as karta due to the partition. The court concluded that the petitioner did not specifically argue in the writ petition that the assessment order was vitiated for want of notice under section 13(2) of the Act. Therefore, the first point raised by the petitioner was not accepted.

2. Requirement of an Order Under Section 19 of the Expenditure-tax Act:

The petitioner claimed that the illom had been partitioned on March 30, 1958, and the respondent failed to pass an order under section 19 of the Act. The court noted that the respondent did not entertain the claim because the partition occurred after the end of the accounting year. Section 19(1) requires the Expenditure-tax Officer to record an order if satisfied that the joint family property has been partitioned and to make assessments on the expenditure of the undivided family for the relevant assessment year. The court referred to decisions from the Punjab High Court and a Full Bench decision of the Kerala High Court, which held that section 19 applies even if the partition occurred after the close of the accounting year. Consequently, the court held that the respondent was bound to make an inquiry into the partition claim and record an order as required by section 19. The failure to comply with this mandatory provision led to the quashing of the assessment order.

3. Assessment of the Petitioner as Karta After Partition:

The petitioner's status as karta depended on whether there had been a partition as claimed. If the partition was valid, the petitioner ceased to be karta, and the assessment proceedings should have been taken against all the members of the illom. The court referred to a Full Bench decision supporting this view. The court emphasized that the assessment order was invalid because it did not address the partition claim properly.

4. Entitlement to Allowance Under Section 6(1)(h) of the Expenditure-tax Act:

The petitioner raised this issue at a late stage, and the respondent did not file a counter-affidavit regarding the claim. The court noted that the assessment order did not show that the allowance under section 6(1)(h) was considered. However, since the assessment order was being set aside, the court did not express an opinion on this issue. The respondent was instructed to consider the claim if properly raised by the petitioner in future proceedings.

Conclusion:

The court quashed the impugned assessment order and allowed the respondent to take up the assessment proceedings afresh in accordance with the law and the observations made in the judgment. No order as to costs was made.

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