9911796707
TMI Blog1957 (4) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... of those properties by the revenue authorities were void and illegal and for other consequential reliefs. The circumstances leading up to this suit are the following: The plaintiffs, three in number, and their father one Nagappa constituted members of a joint Hindu family. The father carried on business in cotton and yarn and earned large profits. For the accounting years 1944-45, 1945-46 and 1946-47 assessments were made on 25th February, 1948, 12th March, 1948, and 15th April, 1948, and the tax payable by the assessee in regard to these three years amounted to ₹ 1,23,225-5-0. As the assessee defaulted in making the payment, the Income-tax Officer forwarded to the District Collector a certificate under his signature specifying the amount of arrears from the assessee. On receipt of the certificate, the Collector proceeded to recover from the assessee the amounts specified under the Revenue Recovery Act. It is in the process of realisation of these arrears that the properties in suit were brought to sale and purchased by defendants Nos. 6 to 29. Before confirmation of the sales could take place, the plaintiffs moved the High Court of Madras under article 226 of the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the joint Hindu family without holding any enquiry contemplated by section 25A of the Act with the result that the assessments could not be said to be assessments under the Act and, therefore, it was not competent to the authorities concerned to levy execution on the basis of such assessments. Before we examine the soundness of this submission, it is convenient to set out the terms of section 25A: 25A. (1) Where, at the time of making an assessment under section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income-tax Officer shall make such inquiry there into as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect: Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family. (2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a request that an order might be passed to the effect that the family property had been partitioned amongst the members and that an assessment should be levied as laid down in section 25 of the Act. Form C(1), i.e., the form prescribed by the Indian Income-tax Rules which is a form of appeal under section 25A, gives an indication as to how the claim should be made: To The Appellate Assistant Commissioner of Income-tax. The day of 19. The petition of post-office, District, sheweth as follows :- (1)Under section 25A of the Indian Income-tax Act, 1922, your petitioner/petitioners, who belong to a Hindu family hitherto assessed as undivided, claimed before the Income-tax Officer, at the time of assessment that a partition had taken place among the members of the family and that the joint family property had been partitioned among the various members (or groups of members) in definite portions and prayed that an order might be passed to this effect as laid down in section 25A(1) and that an assessment be levied as laid down in section 25A(2). (2)By his order, dated the, a copy of which is herewith attached, the Income-tax Officer has refused to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty should be partitioned. The words that the joint family has been partitioned imply that all the properties owned by the family were partitioned. Meyyappa Chetliar v. Commissioner of Income-tax [1950] 18 ITR 586 cited by Mr. Chalapathi Rao to substantiate his contention doesnot really support him. On the other hand, it has the effect of destroying it and strengthening our view. It is laid down there that an order under section 25A(1) could come into operation only where in addition to the severance in status there was a partition of all the family properties and until such order was made the family should be deemed to be an undivided family for purposes of income-tax. It follows that this provision could not come into play when there is a partial partition. So, even if the Income-tax Officer had proceeded in the first instance under that section the result would have been the same, i.e., the request to accept the partition could not have been granted. Quite aside, in the instant case, it would not have made any difference in practice in the particular circumstances of the case whether the assessment was continued to be made as before or levied under section 25 A, i.e., whether i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art from the powers of revision vested in the Commissioner of Income-tax under section 33A to set right any irregularities committed by the Income-tax Officers. Thus, it is open to the assessee to avail himself of all the remedies enumerated above. Despite this, could the correctness of the assessment be questioned in a Court of law? In our opinion, such a suit is not competent, especially in view of section 67 of the Act which recites: No suit shall be brought in any civil court to set aside or modify any assessment made under this Act... Mr. Chalapathi Rao argues that the present case does not fall within the purview of the section as his clients do not seek to set aside or modify the assessment made under the Act, but only asked for a declaration that it did not bind them and that their properties could not be sold for the realisation of arrears of tax. This is a distinction without difference. The case of the Privy Council reported in Raleigh Investment Co. Ltd. v. Governor-General in Council [1947] 15 ITR 332 and relied on by him shows how untenable the argument is. As pointed out by their Lordships though in form the relief claimed did not profess to modify or set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee, reversing a judgment of the High Court, allowed an appeal against the judgment of the subordinate judge who held that the court had no jurisdiction to entertain the suit, opined that the order of the Assistant Collector of Customs to the effect that the articles imported by the plaintiff were assessable at a particular rate was a decision or an order passed by an officer of customs within the meaning of section 188 of the Customs Act and the decision of the Collector of Customs on appeal therefrom which was confirmed on revision under section 191 was final and the jurisdiction of the civil courts was excluded. In dealing with the question whether the order of the Collector impugned by their Lordships excluded the jurisdiction of civil courts to entertain a challenge of the merits of that decision, they remark: It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well-settled that even if jurisdiction is so excluded the civil courts have jurisdiction to examine into cases where the provisions of the Act have not been compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the business belonged to the family consisting of himself and his two sons and the assessment would therefore be made on the family represented by the assessee as its kartha. For the subsequent years the levy was made on the same footing. It is futile in the face of this material to maintain that the assessee was not the joint family but their father as an individual was assessed to tax. The attitude now adopted is also inconsistent with the stand taken by them in regard to section 25A. That provision of law could be invoked only on the assumption that on that date the family was assessed as a unit. If the assessee was only a particular individual there was no scope to call in aid that section because it has no application to the case of a Hindu family which has never been assessed before as a unit of assessment. It is only in cases where up to the date of the claim the tax was being imposed upon a family as an entity that the relief could be claimed under that section. This is an incongruous position taken by the appellants and is of no assistance to them. Once a family is assessed as an undivided family it continues to be so assessed even after partition unless and until an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject is stated by their Lordships in the following passage: The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense too the assessment must be to some extent arbitrary. On these remarks of their Lordships of the Privy Council, there is little scope for the submission that the assessments being arbitrary they could not be enforced against the appellants. In the case on hand, the Income-tax Officer found that the account books did not show the profits ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies. The ancestral property consisted only of two houses and two acres of wet land as admitted by P.W. Nos. 4 and 6 and it was Nagappa, the father of the plaintiffs, that obtained extensive properties for the family as appears from the evidence of P.W. Nos. 4 and 6 and even Nagappa. P.W. No. 4, mother of the plaintiffs, admitted that by the time she joined her husband he was having only two houses and he purchased thirty houses within the last ten years. P.W. No. 6 deposed that Nagappa was the biggest dealer in yarn in Nandyal and was making good profits from 1941 onwards and that after 1940 he purchased properties worth a lakh and a little more and he could do so because he was making good profits. He also stated that about 25 years back all the property possessed by the family was worth about ₹ 25,000. To a like effect are the statements of Nagappa in his cross-examination in the witness-box. That the property was worth at least ₹ 1,25,000 appears in Exhibit A-r, the deed of partition. In such a situation, there is absolutely no force in the argument that the father contracted debts for the business which was of a speculative nature and, therefore, the debts were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther was indulging in speculative transactions which weredetrimental tothe family or that the business was a separate one unconnected with the family. On the other hand, the reasons given for the partition are that the father was neglecting the education of his children and that he had fallen into evil ways. We shall presently show that these recitals were concocted by the father himself in order to defraud and defeat the creditors and the Income-tax Department. We have already shown that almost all the properties owned by the family were the acquisitions of the father. If the business was the separate business of the father and not of the family, then the earnings from it will belong exclusively to the father and the properties acquired therewith would constitute his self-acquisition in which case plaintiffs will have no sort of right or interest therein. So, assuming for argument's sake that it was separate business, they can take the properties only subject to the liability to pay the debts of the father. However in this case, it has only academic interest. There is thus no substance in the contentions either as regards the character of the business or the binding nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the liability to tax is not dependent on the assessment; that ex hypothesi has already been fixed and the order of assessment merely fixes the amount of liability which is already definitely and finally created by sections 3 and 4 which are the charging sections. What follows is that the liability to pay tax in regard to accounting years 1944-47 had arisen before partition though the assessments have been made subsequently and it is inapt to describe it as a post-partition debt. This contention also therefore fails and is rejected. There remains for consideration the objection that all the sales ought to be set aside for the reason that the purchasers did not deposit the balance of the price in time. The point made is that the auction-purchasers who paid out 15 per cent. of the purchase money at the time of the sale had not deposited the balance within the time prescribed and consequently all the sales have become void. Support is sought for this argument in the provisions of section 36, clause (4), of the Madras Revenue Recovery Act which provides: Where the purchaser may refuse or omit to deposit the said sum of money, or to complete the payment of the remaining purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings in furtherance of the sales in C.M.P. No. 4838 of 1950 which was taken out by the plaintiffs. Having thus prevented the purchasers from making the necessary deposit they cannot now turn round and say that the sales should be treated as non est by reason of the requisite deposits not having been made within the prescribed time. Therefore, this argument also lacks force and is overruled. It follows that the judgment under appeal is correct and is not open to any exception and the suit was rightly dismissed by the trial court with regard to items Nos. 1 to 45. In the result, the appeal is dismissed with costs. We will now take up the cross-objections filed by the first defendant which involved items Nos. 46 to 51. These properties were purchased under Exhibit A-230 on 15th March, 1944, in the names of the plaintiffs for a sum of ₹ 23,500. They were also brought to sale on the footing that they were the joint family properties of the assessees. The action was raised by the plaintiffs disputing the claim of the Department that they were the properties of the joint family and asserting that they formed their separate properties. The main point that falls for dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this land was traced to the family business, the story that either the whole or part of it having been contributed by the mother-in-law having been disbelieved. We will next turn to the oral evidence bearing on this aspect of the case. P.W. No. 4 deposed that her mother purchased these properties for the plaintiff with the money given to her by her, i.e., the money which was bequeathed to her mother Seshamma by her father. Seshamma is said to have given the money to Nagappa when the properties were purchased and the latter paid to the vendee before the sub-registrar. This story is not capable of belief. That her husband could not have willed away his property to Seshamma could be gathered from the admission of P.W. 4, that he and his brother were joint till the former's death, that the expenses and earnings of Seshamma's husband and his brother were joint. The will said to have been executed was not forthcoming and no explanation is furnished for its non-production. In the course of the cross-examination, witness changed the story by saying that her uncle left everything to them as he had no children or family but he did not execute any document in favour of her mother ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to her daughter by a will. She was having a house at Atmakur also by the time of her death. I know that my mother-in-law executed a will but I do not know when she executed it. If, according to him, all the properties of Seshamma including cash were given to P.W. 4 under a will she could not have paid ₹ 23,500 into the hands of this witness for the purchase of the lands. The statement given by Seshamma before the Inspector of Income-tax reveals that when her husband died she might have had with her about ₹ 4,000 to ₹ 5,000 which she might have given to her daughter, the assessee's wife, now and then. This statement was marked by consent. P. W. 8 was questioned about this when he was in the witness-box. The answers given by him were: I learnt she gave statement before the Income-tax Inspector. I sent a wire to the Income-tax authorities that my mother-in-law's statement was taken by coercion. I did not give a notice to the Income-tax authorities to produce the telegram. Thus, the story given by each of the witnesses in their regard conflicts with that of the other. This is because they came forward to speak to something which had no exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain evidence which conclusively establishes it. A careful appraisal of all the facts leads to the conclusion that part of the profits of the business formed the bulk of the consideration for sale in question. As regards the finding of the judge bearing on motive, we must observe that he had overlooked an important factor. At that time, an attachment of the properties of the family was pending. A suit was filed by one Kamaji Saremal Firm against Nagappa in 1942 for about ₹ 16,000 and an attachment before judgment was effected. It is seen that on the date on which the purchase was made the attachment was subsisting and it was raised only on 31st August, 1944, when the suit was dismissed by the trial court. So, in taking the property in the name of the minor sons the object of the father is evidently to keep it beyond the reach of the creditors. The learned judge poses the question as to why Nagappa who acquired large properties inhis own name between the years 1945 and 1946 should resort to benami transactions in respect of these items. The answer is this. The exact dates of the purchases are not known. In all probability, they might have been bought after the dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors. A scrutiny of the recitals of the document, the subsequent conduct of the parties and other relevant factors can only lead to the reasonable inference that the partition was not a genuine one. Before we enter upon a discussion as to the genuineness of the partition we may conveniently deal with the contention that if the object of the parties is found to be to place the family properties from the reach of the father's creditors the partition must be found to be a real one since a sham one would not serve the purpose. The foundation for this argument is a judgment of the Madras High Court in Ramanathan Chettiar v. Shanmugam [1944] 1 MLJ 384. We cannot subscribe to this proposition. The ruling cited did not lay down any rule in such broad terms. On the facts of the case, the learned Judges decided that there was an effective partition even if it was an unequal one by reason of the father having been allotted a smaller share. The passage which gave occasion to this argument is found in page 387 of the report: But these considerations, while no doubt giving rise to a strong suspicion that the parties intended to secure, if possible, the son's shares in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons should be treated as a sham one and ignored by the creditors and they could proceed against the share allotted to the sons in execution of the decree obtained by the creditors if the suit for partition was promoted by a desire to defeat the rights of the creditors and was not made in good faith. As already pointedout, the very ruling relied on for the appellants furnishes an authority for the view we have taken. The submission on this topic is therefore overruled. It was next urged that the partition was a bona fide one as it was primarily intended to protect the interests of the minor sons against a father who was acting to the detriment of the sons. There is very little room for this contention in the circumstances of this case. At the outset, it must be remembered that Exhibit A-1 was brought into being about a week after a decree was passed by the High Court in A.S. No. 174 of 1945 reversing that of the trial court. We have already pointed out that prior to 1947 the father had acquired vast and extensive properties for the family. That could not have been the attitude of a person who was either ill-disposed towards his sons or at any rate not actuated by desires to promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re engineered by P.W. 8 himself and that P.W. 8 is the only person that has been attending to the prosecution of these suits. There can therefore be no question of any one interested in the minors trying to save the minors from the reckless conduct or the hostile attitude of the father. There is no acceptable evidence that he ever acted prejudicially to his minor sons. Nor could there be any ground for such apprehension. In this context, we are aware of the rule that it is for the person who alleges that a partition or any transaction is sham or colourable to establish it. With this in mind, we have to assess the evidence bearing on the nature of the transaction evidenced by Exhibit A-1. In the decision of the question as to the genuineness of the partition it is not out of place to remember that the plaintiffs were at that time minors being less than 14, 11 and 3 years respectively as seen from the plaint. This is no doubt not a conclusive circumstance. But if the partition was to take effect, some one was to look after the properties to be allotted to the minors. It is in this connection that the evidence of D.W. 1 and the admissions of P.Ws. 4 and 5 have great importance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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