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TMI Blog1975 (12) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... rm.' It appears that besides these movable properties, the Hindu Undivided Family also owned some immovable properties. On 15th November, 1955 there was a partial partition among the members of the Hindu Undivided Family and the movable properties were divided including the credit balances after taking into account the debit balances in the Export Firm and the Mining Firm. These movable properties. which formed the subject-matter of partial partition, were of the value of ₹ 4,87,054/- and 'they were divided amongst the members of the Hindu Undivided Family in such a manner that Gulabdas got properties worth ₹ 53,442/-. his wife got properties worth ₹ 50,000/-, while each of the five sons got properties worth ₹ 76.722/-. The consequence of this partial partition was that the Hindu Undivided Family ceased to be a partner in the Export Firm and the Mining Firm and thereafter Gulabdas and his son Govinddas continued as partners in these two firms in their individual capacity. 2. When the Hindu Undivided Family was sought to be assessed for the assessment year 1957-58, for which the relevant previous year was Samvat year commencing from 16th November, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly had no grievance because what was done by the Income Tax Officer was merely to carry out reassessment or rectification of assessment of the income of the Hindu Undivided Family consequent upon enhancement of the assessable income of the two firms in which the Hindu Undivided Family was a partner during the assessment years 1950-51 to 1956-57. But on 25th January, 1974, the Income Tax Officer made certain orders in respect of the -assessment years 1950-51 to 1954-55 and 1956-57 which prejudicially affected the interest of the petitioners. The Income Tax Officer, by these orders, determined the several liability of the members of the Hindu Undivided Family under Section 171, Sub-section (7) of the new Act by apportioning the tax assessed on the Hindu Undivided Family for the assessment years 1950-51 to 1954-55 and 1956-57 amongst the members in the proportion of 2/7th share to Gulabdas - this perhaps also included the share of his wife - and 1/7th share to each of the five sons. These orders were subsequently rectified by orders dated 3rd September, 1974 revising the allocation of the tax liability, consequent upon the rectification made in the orders of assessment against the Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case and since the Income Tax Officer found at the time when he sought to recover the tax liability assessed on the Hindu Undivided Family, that the family had already effected a partial partition on 15th November, 1955, he was entitled to recover the tax from every member of the Hindu Undivided Family and each member was severally liable for his share of the tax computed according to the portion of the joint family property allotted to him at the partial partition. The High Court also rejected the other contentions advanced on behalf of the petitioners and dismissed each of the petitions with costs. See 1976 Tax LR 89 (Bom). The petitioners thereupon preferred the present appeals with special leave obtained from this Court. 6. Though several contentions were raised in the petition and also argued before the High Court, the petitioners at the hearing of the appeals before us confined their attack against the validity of the orders dated 13th August, 1974 and 3rd September, 1974 to only one contention and that related to the applicability of Sub-section (6) read with Sub-section (7) of Section 171 of the new Act. The petitioners sought to repel the applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of a Hindu Undivided Family and enforcement of the liability to tax, where the Hindu Undivided Family was no longer in existence at the date of assessment. But, as pointed out by this Court in Additional Income-Tax Officer v. Thimmayya [1965]55ITR666(SC) this section went very much beyond what was required for rectifying the defect. It made two substantive provisions, namely, (1) a Hindu Undivided Family which has been assessed to tax shall be deemed, for the purposes of the Act; to continue to be treated as undivided and therefore liable to be taxed in that status, unless an order is passed in respect of that family recording partition of its property as contemplated by Sub-sections (1) and (2) if at the time of making an assessment, it is claimed by or on behalf of the members of the family that the property of the joint family has been partitioned among; the members or groups of members in definite portions, i.e., a complete partition of the entire estate is made, as distinct from a partial partition, the Income Tax Officer shall hold an inquiry and if he is satisfied that the partition has taken place, he shall record an order to that effect. Where such order has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new Act has made any difference in this position. 8. Section 171 of the new Act corresponds to Section 25A of the old Act and provides for assessment of a Hindu undivided family after partition. But it has made various changes in the law. The principal change is that the new section applies not only to cases of total partition, but also to cases of partial partition. Sub-section (1) of this section reproduces the same fiction as in Section 25A and deems a Hindu family to continue to be a Hindu undivided family except where and in so far as a finding of partition has been given in respect of the Hindu Undivided Family. Sub-section (2) provides that where, at the time of making an assessment under Section 143 or Section 144 it is claimed by or on behalf of any member of a Hindu family that a partition, whether total or partial, has taken place among the members of such family, the Income Tax Officer shall make an inquiry after giving notice to all the members of the family and Sub-section (3) proceeds to say that on the, completion of the inquiry, the Income Tax Officer shall record a finding as to whether there has been a total or partial partition of the family property a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly liable for the tax assessed as payable by the joint family and for determining their several liability, the tax assessed on the joint family would be apportioned among the members according to the portion of the joint family property allotted to each of them. But it may happen that at the time of making assessment under Section 143 or 144 no claim of partition, total or partial, is put forward on behalf of any member of a Hindu family, either be-cause no such partition has taken place or because of inadvertent or deliberate omission on the part of the members of the Hindu family and where that happens, the Hindu family would continue to be assessed as a Hindu undivided family and the tax determined as payable by it would be recoverable only out of the joint family properties and no member would be personally liable for any part of the tax, even though an order recording partition may have been passed after the assessment, since Sub-section (4)(b) of Section 171 would have no application in such a case. That was also the position under Section 25A of the old Act with this difference that under that section the only partition which could be recorded was total partition and not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143 or Section 144 of the new Act. It can have no application where the assessment of a Hindu undivided family is completed under the corresponding provisions of the old Act. Such a case would be governed by Section 25A of the old Act which does not impose any personal liability on the members in case of partial partition and to construe Sub-section (6) of Section 171 as applicable in such a case with consequential effect of casting on the members personal liability which did not exist under Section 25A, would be to give retrospective operation to Sub-section (6) of Section 171 which is not warranted either by the express language of that provision or by necessary implication. Sub-section (6) of Section 171 can be given full effect by interpreting it as applicable only in a case where the assessment of a Hindu undivided family is made under Section 143 or Section 144 of the new Act. We cannot, therefore consistently with the rule of interpretation which denies retrospective operation to a statute which has the effect of creating or imposing a new obligation or liability, construe Sub-section (6) of Section 171 as embracing a case where assessment of a Hindu undivided family is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the new Act and it was for this reason that notices under Section 148 were issued by the Income Tax Officer for reopening the assessments of the Hindu Undivided Family for the assessment years 1950-51 to 1956-57. Now Clause (ii) of Section 297(2)(d) provides that when a notice under Section 148 is issued for reopening an assessment all the provisions of this Act shall apply accordingly. The argument of the Revenue Authorities, therefore, was that when notices under Section 148 were issued for reopening the assessments of the Hindu Undivided Family, all the provisions of the new Act became applicable and they included Sub-sections (6) of Section 171 and, therefore, that Sub-section was applicable for recovery of the tax reassessed on the Hindu Undivided Family pursuant to the notices under Section 148. This argument is without force. It is based on a misconstruction of the words all the provisions of this Act shall apply accordingly in Clause (ii) of Section 297(2)(d) These.' words merely refer to the machinery provided in the new Act for the assessment of the escaped income. They do not import any substantive provisions of the new Act which create rights or liabilities. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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