1971 (2) TMI 14 - HC - Income Tax

Notices u/s 148 - revenue, contended that the question whether the HUF was in existence or not was a question of fact and on such a question of fact this court should not entertain this application

Summary

Issues Involved:
1. Justification of the Income-tax Officer in issuing notices under section 148 of the Income-tax Act, 1961.
2. Vagueness of the notices issued under section 148 of the Income-tax Act, 1961.
3. Existence of Hindu undivided family (HUF) for the relevant assessment years.

Issue-wise Detailed Analysis:

1. Justification of the Income-tax Officer in issuing notices under section 148 of the Income-tax Act, 1961:

The primary issue was whether the Income-tax Officer was justified in issuing notices under section 148 of the Income-tax Act, 1961, for the relevant assessment years. The petitioner contended that the Hindu undivided family (HUF) had disrupted after the institution of the partition suit and that the notices could not be issued to the HUF. The petitioner argued that there was no reason for the Income-tax Officer to believe that there was an HUF for the relevant assessment years or that any income belonging to the HUF had escaped assessment or been under-assessed.

The court examined the affidavit-in-opposition, which stated that there had been no actual partition by metes and bounds, and therefore, the coparceners did not become co-owners of the properties. The court noted that the Income-tax Officer's reasons for starting proceedings under section 147 were based on the assumption that an actual partition by metes and bounds had not taken place. However, the court highlighted that the law, as settled by the Privy Council and the Supreme Court, states that the disruption of an HUF occurs upon the institution of a suit for partition, and the joint status ends without needing a division by metes and bounds.

The court concluded that since there was no evidence or grounds to believe that the partition suit was filed fraudulently or as a make-belief, it could not be said that there was an HUF during the relevant assessment years. Therefore, the Income-tax Officer's basis for issuing the notices was erroneous, and the notices were liable to be quashed.

2. Vagueness of the notices issued under section 148 of the Income-tax Act, 1961:

The petitioner argued that the notices issued under section 148 were vague as they did not specify whose income was alleged to have escaped assessment. The notices were addressed to "Bijoy Kumar Burman and others," without indicating the status of the HUF or specifying the individuals involved. The petitioner contended that such vagueness made it unclear to whom the notices referred, especially since there was an HUF consisting of Bijoy Kumar Burman, his wife, and sons.

The court, however, did not delve deeply into this issue, as it had already decided in favor of the petitioner on the first point regarding the justification of the notices. Therefore, the court did not find it necessary to discuss the aspect of the vagueness of the notices further.

3. Existence of Hindu undivided family (HUF) for the relevant assessment years:

The revenue contended that the question of whether the HUF existed was a question of fact and should not be entertained by the court. However, the court emphasized that when the reasons for the formation of the belief are disclosed and it appears that they are not legally tenable or lack a rational nexus, the petitioner is entitled to seek relief under article 226 of the Constitution.

The court reiterated that the law is well-settled that the disruption of an HUF occurs upon the institution of a suit for partition, and the joint status ends without needing a division by metes and bounds. Since there was no evidence or grounds to believe that the partition suit was filed fraudulently or as a make-belief, it could not be said that there was an HUF during the relevant assessment years. Therefore, the court held that the department's assumption that the joint status continued until an actual division by metes and bounds was erroneous.

Conclusion:

In conclusion, the court directed the respondents to cancel, withdraw, and rescind the notices issued under section 148 of the Income-tax Act, 1961, for the assessment years 1960-61 to 1963-64 and 1956-57 to 1959-60. The court issued writs in the nature of mandamus accordingly and made the rule absolute to the extent indicated. The court also ordered a stay of operation of this order for six weeks from the date. There was no order as to costs.