9911796707
TMI Blog1985 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, in fact, had taken place and the order of the Income-tax Officer was prejudicial to the interests of the Revenue, reversed the same. Aggrieved thereby, the assessee approached the Appellate Tribunal, which confirmed the findings of the Commissioner but on merits set aside his order on the technical ground that all the members of the family were neither issued notice nor afforded any opportunity of being heard. On separate applications under section 256(1) of the Act filed by both the assessee and the Revenue, the following four questions have been referred to this court: " 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the order of the Commissioner under section 263 of the Income-tax Act was vitiated for non-issue of notices to the wife and minor sons of the karta of the family ? 2. Whether the Appellate Tribunal, after coming to the conclusion that the order of the Commissioner, passed under section 263 of the Income-tax Act, 1961, stood vitiated, was right in law in not sending the case back to the Commissioner for passing an order afresh after giving due opportunity to all the members of the family ? 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if it may be accepted for the sake of argument that the four members of the Hindu undivided family held the right to share the profits of the business not as members of the Hindu undivided family but as co-sharers/joint owners, even then notice served on any one of them would be sufficient compliance with the provisions of section 171(2) by virtue of the provisions of section 282(2)(a) of the Act. Question No. 1 is, therefore, answered in the negative, i.e., against the assessee and in favour of the Revenue. Question No. 2.-Learned counsel for the Revenue contended that there being no requirement of serving any notice prior to the initiation of the proceedings by the Commissioner under section 263 of the Act, his order could not be said to be without jurisdiction and, at best, suffered from the vice of non-compliance with the principles of natural justice. He, therefore, argued that even if the notice had not been served individually on all the four members of the Hindu undivided family, the Tribunal after setting aside the order ought to have remanded the case for fresh decision after the service of the requisite notice. In support of his contention, he relied on the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Question No. 3.-The findings relevant on this question recorded by the Tribunal and contained in the statement of the case are that the agreement dated July 13, 1971, purports to divide the business belonging to the Hindu undivided family amongst its four members in equal shares with effect from April 1, 1971 ; that the dry-cleaning business was the only asset which belonged to the Hindu undivided family and that the capital account of the Hindu undivided family business remained intact, which necessarily meant that the capital assets of the business were not divided. On these findings, obviously no finding of partial partition could be recorded because whereas the agreement purported to partition the business, in fact, it was never partitioned nor the capital divided. However, learned counsel for the assessee sought to put a different interpretation on the terms of the agreement and urged that, in fact, its intent and purpose was to divide the right to receive profits from the Hindu undivided family business which, according to him, was a distinct property as opposed to the business itself. Support for this contention was sought from two Supreme Court decisions in Charandas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property admits of physical division, a mere division of the income without the physical division of the property producing the income, shall not be deemed to be partition, according to the Explanation noticed above. In the present case, admittedly, the capital assets which are the income producing properties have not been divided. Even though, under common law, such a partition may be possible, but by virtue of the provisions of the Explanation, such an arrangement shall not be deemed to be a partition. If such an arrangement is not a partition of any property, it would not be possible to claim it to be a partial partition of any such property as well. The cases cited by learned counsel for the assessee have been rendered on different sets of facts and have no direct bearing on the present case. In Charandas Haridas' case [1960] 39 ITR 202 (SC), the karta of Hindu undivided family was a partner in six managing agency firms and the share of the managing agency commission received by him as such partner was being assessed as the income of the family. On December 31, 1945, he acting for himself, his minor sons and his wife entered into an oral agreement of a partial partition by wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Therefore, it is distinguishable on facts and is of no help to the assessee. K. Ramachandra Chettiar's case [1983] 141 ITR 771 (Mad), was one under the Wealth-tax Act and was probably relied upon to show that any bundle of proprietary rights would be property as compared to the property itself. That case related to the life interest of the assessee in number of houses. There can be no dispute that life interest in an immovable property is a distinct property, but no such situation being available in the present case, this decision is hardly of any relevance. We are, therefore, of the considered view that neither a mere right to appropriate profits without the obligation to share losses was a distinct property nor its partition would be partial partition of the Hindu undivided family property within the meaning of section 171 of the Act. Question No. 3 is accordingly answered in the affirmative, i.e., in favour of the Revenue and against the assessee. Question No. 4.-Learned counsel for the assessee stated at the Bar that there was never a partition of the running business of the Hindu undivided family and, as such, this question does not arise in the present case. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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