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TMI Blog1971 (7) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessment was made on August 21, 1967, and the amount due under it was Rs. 5,549 and the certificates for the last two years were issued on September 30, 1967. With an addition of Rs. 5,449.59 towards interest due till February 13, 1969, the total amount due was Rs. 39,368. In order to recover this amount on the basis of the said certificates, the Tax Recovery Officer attached several properties including a wet land of 3 acres and 70 cents situated at Pentapadu, i.e., R. S. Nos. 41/1 admeasuring 90 cents and R.S. No. 42/2 admeasuring 2 acres and 80 cents. We are not concerned with the attachment of other properties except these lands. After the attachment of the said lands, the petitioner filed a claim petition on April 28, 1969. It was claimed that the properties cannot be attached for recovery of amounts due from Karri Venkatareddi as the properties were partitioned and the lands fell to his share under a registered deed dated September 2, 1962. In the claim petition he further averred that the assessment related to the tax dues of a Hindu undivided family of which the petitioner was a member, that the father of the petitioner for the accounting year 1963-64 showed his stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bear in mind the legislative antecedents of section 171. Its corresponding section in the 1922 Act was section 25A. It was inserted by an amending Act of 1928. Its chief aim was to meet the difficulty of levying and collecting the tax in cases where a Hindu undivided family had received income in the accounting year but the Hindu undivided family was no longer in existence as such at time of assessment. The difficulty was the more acute by reason of the provision contained in section 14(1) : " The tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family . ....." Section 25A was also found to be inadequate to meet the intended situations. The present section 171 therefore was enacted. This section unlike section 25A of the 1922 Act, applies not only to cases of total partition but also to cases of partial partition. It applies not only for the purpose of assessing and collecting tax but also for the purpose of levying and collecting penalty, fine or interest. It also provides that the Income-tax Officer should record a finding as to the date on which the total or partial partition took place and it further makes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry such person shall be jointly and severally liable for the tax on the income so assessed. (7) For the purposes of this section, the several liabilities of any member or group of members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial. (8) The provisions of this section shall, so for as may be, apply in relation to the levy and collection of any penalty, interest, fine or other sum in respect of any period up to the date of the partition, whether total or partial of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of any such period. Explanation.- In this section.- (a) 'partition' means- (i) Where the property admits of a physical division, a physical division of the property, but a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition ; or (ii) where the property does not admit of a physical division, then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition ; (b) 'partial partition' means a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the family ; and (4) the Income-tax Officer must be satisfied that the joint family property has been partitioned among the various members or groups of members by a physical division or otherwise as provided in the Explanation. What is plain is that if at the time of assessment a claim is made by any member of the family that a partition has taken place, the Income-tax Officer has no other choice but to give notice to all the members and to make enquiry and to give a finding relating to the claim. The sub-section is couched in mandatory language and, therefore, makes it imperative on the part of the Income-tax Officer to comply with the requirements of that sub-section, whenever a claim of partition is made. It is clear that " at the time of making an assessment under sections 143 and 144 " means, during the course of the process of assessment and not at the time of making final order determining the tax payable under an assessment order. Thus, even before the date of assessment, but during the process of assessment, any member of a family hitherto assessed as undivided, may put forward a claim in respect of partition effected prior to or after the close of the relevant accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers of the disputed family would be a different assessable entity. Coming then to sub-sections (4) to (7), it is evident that in every case where an order has been made regarding the partition of joint family property among the members or groups of members, the assessment of the total income received by on behalf of the joint family as such must be made in accordance with the procedure laid down in these sub-sections. The procedure is to compute the total income of the joint family up to the date of partition and also determine the tax payable by the joint family as such, as if no partition had taken place and as if the joint family was still in existence and then to hold each member or group of members liable for a share of the tax determined as payable by the joint family. The tax assessed as payable by the joint family has to be apportioned among the members or groups of members according to the partition of the joint family property allotted to each of them ; but fresh assessment orders under section 143 or 144 have not to be made on them in respect of the in come of the joint family. In other words, it is provided that the total income of the joint family in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguage, in fact no assessment order can be passed either under section 143 or section 144 or under section 171 unless and until notices are served on all the members of the family, inquiry is held and a finding is given in respect of partition claimed. And it is only in the light of the finding given that the assessment order either under section 143 or section 144 or under section 171 can be made. In view of the clear and unambiguous language of section 171, the contextual relationships of various sub-sections with each other and the composite structure of the whole section can leave no one in doubt that if disregarding the claim of partition made by any member, whether deliberately or inadvertently, an assessment is made it would be inconsistent with section 171 and will be an assessment order passed without following the essential procedure and consequently would be illegal. The effect of sub-sections (2) and (3) seems to us to be clear that if no notice is served upon the other members of the family after a claim of partition is made, and if no order is made regarding the partition and yet the Hindu undivided family is assessed, such an assessment order would be void inasmuch a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 5 years were completed. Appeals were preferred against the orders of assessment to the Appellate Assistant Commissioner and then to the Appellate Tribunal, but they were not challenged on the ground that they were made without disposing of the claim for partition. On June 30, 1952, an order was made under section 25A recording that the property of the family was partitioned on November 2, 1946. As the tax assessed was not paid, the Income-tax Officer made an order under section 46(5) on June 25, 1958, calling upon the managing director of the company, which had ultimately taken over the business of the family, to withhold the amount of tax due from the salaries payable to T and V and to show the sum to the credit of the Government of India. T and V thereupon presented petitions under article 226 of the Constitution of India to the High Court for the issue of writs to quash the order. The High Court held that, without an order for apportionment under section 25(A)(2), proceedings for collection of tax could not be commenced against T and V under the proviso to section 25A(2). On appeal, the Supreme Court held, firstly, that the Income-tax Act contained no machinery authorising th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undivided. The Income-tax Officer may assess the income of the Hindu family hitherto assessed as undivided notwithstanding partition, if no claim in that behalf has been made to him or if he is not satisfied about the truth of the claim that the joint family property has been partitioned in definite portions, or if on account of some error or inadvertence he fails to dispose of the claim. In all the se cases his jurisdiction to assess the income of the family hitherto assessed as undivided remains unaffected, for the procedure for making assessment of tax is statutory. Any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, and the assessment is not liable to be challenged collaterally. " The observation has, however, to be understood in the context in which it is made. The Supreme Court was discussing the scheme of section 25A in the earlier paragraph. And it is in that context that the above said observation is made. It was common ground that in so far as the observation relates to the two aspects, that is to say, if no claim of partition has been made or if the Income-tax Officer is not satisfied about the truth of the claim th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in defiance of section 171. That point was not canvassed before the Supreme Court at all, and that is the point with which we are confronted in the present inquiry. It is true that the Supreme Court observed that " failure to make an order on the claim made does not affect the jurisdiction of the Income-tax Officer to make an assessment of the Hindu family which had hitherto been assessed as undivided ". That observation, if taken in general, can well be understood, because that is the law declared in the first part of sub-section (1) of section 171 as discussed above. The question, however, is when a claim is set up and assessment order is passed, without complying with the imperative requirements of sub-sections (2) and (3) of section 171, what would be the effect of an assessment order made. That was not the view presented to the Supreme Court and the decision does not throw any light upon any such question. The jurisdiction of the Income-tax Officer cannot be in doubt. After the assumption of jurisdiction if an essential step as is envisaged by sub-sections (2) and (3) of section 171 are not taken, then the assessment order passed would be void not on the ground that the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's decision above and if we may say so the same observations of ours apply to the Full Bench case also. Kalwa Devadattam v. Union of India can easily be distinguished on the facts of that case. The question there was whether a suit questioning the validity of an assessment order and for setting it aside is maintainable. It was held that under section 67 of the Indian Income-tax Act no such suit was maintainable. In that case also, no question specifically bringing under consideration sub-sections (2) and (3) of section 171 or equivalent law of the previous Act was brought under discussion. The said decision, therefore, cannot be an authority on the proposition with which we are concerned in this case. We are fortified in our conclusion by a Bench decision of the Bombay High Court in Tuljansa Janardhansa Pawar v. Commissioner of Income-tax. The contention of the Attorney-General in that case was based upon the difference in language of section 25A and section 30 of the Income-tax Act. Whereas section 25A provides for a notice to be served by the Income-tax Officer on all the members of the family before any order is recorded under that section, section 30 does not cast a similar o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply with this essential requirement, any order passed by them prejudicially affecting the rights of any member of the family would be held invalid. The locus standi of the petitioner to file the claim petition and the writ petition was canvassed on the ground that on the date of the so-called partition itself the petitioner had transferred the land in question by way of gift to his minor son. It is not denied by the petitioner that on the date of the partition itself he had executed a gift deed in favour of his minor son. The minor son, therefore, becomes the owner of the land and it is he who ought to have preferred the claim. But, in our view, the petitioner had the necessary locus standi to file the writ petition under article 226 of the Constitution. He may not be permitted to question the validity of the attachment of the land which he had transferred in favour of his son. It cannot be attacked, for we have held him liable to a large extent. But, he can certainly question his liability on the basis of the assessment made in contravention of section 171 of the Act. For the reasons we have endeavoured to give, we allow the writ petition in part. We hold that the petitioner is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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