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TMI Blog1991 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... s followed in wealth-tax proceedings also. 3. Against the order passed under section 171 of the Income-tax Act refusing to accept the partition, an appeal was filed before the Appellate Assistant Commissioner, Anantapur Range, Anantapur. The AAC found that on the facts there was a physical division of the properties and that, therefore, the Hindu undivided family had already ceased to exist. He directed the Income-tax Officer to accept the fact of partition of the HUF for Income-tax purposes. Against the order of the AAC accepting the partition, the department filed a further appeal before the Income-tax Appellate Tribunal, Hyderabad Bench 'B', but that appeal was dismissed as time barred by the Tribunal by its order in I.T.A. Nos. 1169 and 245/Hyd/1985. Thus, the order passed by the AAC accepting the partition had become final. 4. For the assessment years 1979-80 to 1982-83 again, the matter came up for consideration before the AAC, Anantapur, on appeals filed by the Official Receiver appointed by the Sub-Court, Madanapalli, in the matter of setting disputes of partition, and in those appeals, the AAC set aside the income-tax assessments directing the ITO to re-do the same aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation dates for these assessment years and, therefore, the assessments made on the joint family were to be cancelled. This order was passed on 17-9-1986. Against this order, the department came up in appeal before the Tribunal. Hyderabad Bench 'A' of the Tribunal, by its order dated 21-12-1987 in W.T.A. Nos. 506 to 509/Hyd/ 1986, dismissed the appeals of the department, upholding the view taken by the AAC that there was a partition. In this order, the Tribunal pointed out that it would be disharmonious and also unreasonable to hold that while the family ceased to exist for income-tax purposes, it would continue to exist for wealth-tax purposes and that if there had been a partition in fact or in substance, it would apply to proceedings under the Income-tax Act as well as under the Wealth-tax Act. Similar was the fate of the assessment for the assessment year 1980-81 made under the Wealth-tax Act. Following its order in W.T.A. Nos. 506 to 509/Hyd/1986, the Tribunal dismissed the wealth-tax appeal filed by the department before it reiterating the fact that there was a partition in the family and that the matter was squarely covered in favour of the assessee and against the Revenue by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have come up for consideration before this Bench. 9. After hearing the learned departmental representative as well as the learned Advocate for the assessee at length, we were unable to find any fault with the views expressed by the earlier Benches, nor can it be said on the facts of this case that the decision of the Supreme Court in the case of Kalloomal Tapeswari Prasad (HUF) was applicable or that the Benches have ignored the ruling laid down by the Supreme Court in that case. 10. Now, we may state briefly the facts touching upon the partition as agreed upon by the parties before us and also as found by the Tribunal. The assessee-HUF consisted of two brothers, R. Govindappa Naidu and R. Guravappa Naidu, both of whom constituted a joint family and both of whom died. Guravappa Naidu had one son, the assessee herein. Govindappa Naidu had one who died and that son had two sons, Guruswamy and Venkateswarulu. Thus, Guruswamy and Venkateswarulu are the grand-children of Govindappa Naidu. R. Krishnamurthy, son of Guravappa Naidu, and the grand-children of Govindappa Naidu constituted a joint family. The joint family continued till 4-9-1972. On that date, R. Venkateswarulu, grand-so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family and then the other members acquiesced in it and an Official Receiver was appointed by the Court, not for forcing the divided coparcener to return the properties to the joint family, but to distribute the other properties among the coparceners, a finding that there was no physical division of properties cannot be recorded. Insofar as the properties taken away by Venkateswarulu are concerned, there was partition. In respect of the properties enjoyed or being enjoyed by the other members of the family, it may be possible to say that there was no physical division of properties and those members may continue, in respect of those properties, to be a joint family. But, that is not the issue here. 13. Now, when the Tribunal held that there was a partition under section 171 of the Income-tax Act based upon this fact and when the High Court of Andhra Pradesh, which is the Jurisdictional High Court, held in wealth-tax proceedings that the recognition of partition in income-tax proceedings, having become final, applied to the wealth-tax proceedings also and, therefore, the partition had become final and no referable question of law arose from the orders passed by the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be treated as a partition under the Income-tax Act even though under Hindu law there has been a partition - total or partial." It was relying upon this decision of the Supreme Court that the department contended that there was no partition because there was no division of properties by metes and bounds, and again, it was based upon this decision as a foundation, the Bench which heard these appeals originally expressed doubts on the correctness of the decision given by the earlier Benches and referred this matter to the Special Bench. But, we find that the substratum of the decision of the Supreme Court is that there should be an order passed under section 171 of the Income-tax Act holding that a partial partition had taken place and till such time as an order was passed under section 171, the Hindu undivided family continues to exist. In this case, even though such an order was not passed by the ITO, in appeal proceedings, the order passed by the ITO rejecting the claim of partition was set aside, disapproved and it was categorically held that a partition had taken place. In other words, the appellate order had the effect of passing an order under section 171 of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property to the extent it is possible. Otherwise, the severance of status will not amount to partition. The Supreme Court has specifically pointed out in this case that in considering the factum of partition for the purpose of assessment to income-tax, it is not permissible to ignore the special meaning assigned to "partition" under the Explanation to section 171 even if the partition is effected through a decree of court and even though a decree of a civil court in a partition suit is good evidence of partition. Here again, the point to be noted is that there should be an order passed under section 171 if the Income-tax Act accepting partition on the basis of the division of properties, and as we have pointed out above, such an order exists in this case. 16. Now, the question, as forcibly put up before us by the department, is whether we can ignore the earlier orders of the Tribunal and come to a different conclusion that there was no partition. In other words, can we now hold in the proceedings for the assessment years 1982-83 and 1983-84 that no partition of the joint family had taken place at all on and from the date accepted by the appellate authority, viz., 14-4-1975 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu undivided family and thereafter it cannot be assessed in that status unless the order is set aside by a competent authority." This decision is, therefore, an authority for the proposition in law that the principle of res judicata does not apply to orders passed recognising the factum of partition in a family. Even though this decision was given under the Indian Income-tax Act, 1922, the principle underlying section 25A of the old Act and the principle of enacting section 171 of the present Act are not different. Both of them enjoin upon the Income-tax Officer to investigate into the fact of partial partition or total partition and pass orders thereon, and further provide that unless such order is passed accepting the partition, the joint family continues to exist. That is, once an order under section 25A of the old Act is passed, that order continues to hold good until it is set aside by a competent authority. In this case, such an order was passed under section 171, that was approved of by the appellate authorities and that order was not set aside so far by any competent authority. Therefore, the principle of res judicata not only does not apply to the proceedings under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to recognise the same". Applying this principle of law laid down by the Supreme Court, we have to hold that the partition recognised by the AAC between R. Venkateswarulu and R. Krishnamurthy is a valid partition and not a sham or fictitious partition which alone could be refused to be recognised by the income-tax authorities under section 171 of the Income-tax Act. 19. A point arose during the course of hearing of this case as to whether there is any difference in the language of section 171 of the Income-tax Act and section 20 of the Wealth-tax Act insofar as the claim to be made for recognising the partition is concerned. The Andhra Pradesh High Court in CWT v. Tatavarthi Rajah and Satyanarayana Murthy [1983] 143 ITR 441, has pointed out that there is no difference between these two Acts in principle, scope and object except that the words "hitherto assessed" occurring in section 171 of the Income-tax Act do not appear in the Wealth-tax Act and that omission had a different connotation and consequence but not the consequence to hold that a partition held to have taken place under the Income-tax Act has not taken place under the Wealth-tax Act. 20. For these reasons, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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