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TMI Blog1985 (10) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable by the assessee at Rs. 44,529. In the assessment year 1965-66, the Gift-tax Officer determined the value of the taxable gifts at Rs. 1,06,520 and determined the tax payable by the assessee at Rs. 5,503. The assessee filed returns for both the assessment years in the status of a Hindu undivided family. The Gift-tax Officer, however, completed the assessments in the status of an individual for both the assessment years without discussion in the assessment orders regarding the reasons for the same. The assessee is the holder of an impartible estate known as Dumraon Estate. The assessee, Maharaja Kumar Kamal Singh, had made gifts of shares and house property and the value of gifts was determined by the Gift-tax Officer. The assessment orders of the Gift-tax Officer for the two assessment years in question have been annexed and marked as annexures and A-1 forming part of the statement of the case. The assessee appealed before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner upheld the assessment orders of the Gift-tax Officer and dismissed the appeals of the assessee in both the assessment years. The orders of the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner of all the properties comprised in the estate. However, that fiction was held to be limited for the purposes of sections 22 to 28 of the Income-tax Act. Similar provision was made in section 4(6) of the Wealth-tax Act and that was also limited to the purpose of the Wealth-tax Act, 1957. The Tribunal considered the argument regarding the identity of the individual and the Hindu undivided family and held that the assessee in his capacity as individual, on whom the impugned assessments had been made, is a person different from the manager of the Hindu undivided family of which the assessee was a member who made the gifts and transfers under consideration. On this basis, the Tribunal came to the conclusion that the assessee in this case did not make any gift or transfer and so the assessments made on him were not justified. The Tribunal did not consider the other contentions raised, though they made mention about them. The Tribunal, therefore, cancelled the two assessment orders under consideration. Under those circumstances, the aforesaid common question of law has been referred to this court for its opinion. The facts are not disputed. The assessee, Maharaja Kumar Kamal Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. K. N. Jain has referred to section 2(iii) according to which It assessee " means a person by whom gift-tax or any other sum of money is payable under this Act, and, on this basis, Mr. K. N. Jain has submitted that the assessee made the gift in the status of a Hindu undivided family and so the gift-tax was payable by the assessee as Hindu undivided family and not as an individual. He has also referred to section 2(xviii) of the Act which shows that " person " includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not. He has also referred to section 3 of the Act which lays down that subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from April, 1, 1958, a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before April 1, 1957) at the rate or rates specified in the Schedule. On this basis, he has submitted that the gift-tax has to be charged from the Hindu undivided family and not from the individual as the gift was made by the Hindu undivided family. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee from " individual " to Hindu undivided family and the Allahabad High Court held that section 33(4) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), gives the Tribunal very wide powers to " pass such orders as it thinks fit ". It was also held that the Tribunal certainly had the necessary jurisdiction to do this provided there is material on the record to determine the correct status in which a party should be assessed. It has also been held in this decision that it cannot be said that if the Tribunal comes to the conclusion that the status is that of a " Hindu undivided family ", it should not have powers to correct the status and so it was held that the Tribunal has jurisdiction to direct the status of an assessee to be changed and to determine the correct status. Thus, this decision supports the view that if an assessee is assessed in the status of an individual and if the materials show that the assessee should be assessed in the status of a Hindu undivided family, then the Tribunal should change the status. Mr. B. P. Rajgarhia has also relied on the case of Chandmull Pannalal v. CIT [1965] 58 ITR 711. This is a decision of the Calcutta High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee but could only annul the assessment or remand the case to the Income-tax Officer to make a fresh assessment on the assessee in the status of an " association of persons ", and, in those circumstances, it was held by the Punjab and Haryana High Court that (i) the assessee was " an association of persons " and not " firm "; (ii) the Tribunal had power to uphold the assessment changing the status of the assessee into that of an association of persons as the question whether the assessee should be assessed as an unregistered "firm" or as " an association of persons " was raised before the Income-tax Officer and the Appellate Assistant Commissioner and before the Tribunal also. Mr. B. P. Rajgarhia has also relied on the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC), which is a decision of their Lordships of the Supreme Court. It appears from this decision that section 3 of the 1922 Act gives impliedly an option to assess the total income of either an association of persons or the members of the association individually, but it does not specify the particular officer who can exercise the option it is in the first instance for the Income-tax Officer to exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner in an appeal against the assessment for the year 1954-55 held that the status of the respondent, was that of a Hindu undivided family. Thereafter, the Income-tax Officer issued a fresh notice under section 34 on February 12, 1958, to reassess the income of the respondent for the year 1949-50 as a " Hindu undivided family". A second return was duly filed pursuant to the second notice and the Income-tax Officer made an assessment on August 16, 1958. Both the notices were, however, in identical terms. The question was whether the assessment made pursuant to the second notice and the second return, ignoring the first return filed pursuant to the first notice, was valid and, in those circumstances, it was held by their Lordships of the Supreme Court that since the correct status of the respondent was that of a " Hindu undivided family ", the first notice issued in the status of an individual was illegal and without jurisdiction and the Income-tax Officer could not have validly acted on the return filed by the respondent pursuant to that notice, notwithstanding that it was made in the status of a Hindu undivided family, and any assessment made on such a return would have been inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the return filed in the status of a Hindu undivided family. Mr. K. N. Jain has also relied on the case of Pannabai v. CIT [1985] 153 ITR 608, which is a Fall Bench decision of the Andhra Pradesh High Court. In this case, K was a partner in a firm. He died intestate leaving behind him his wife, P, and six minor children. P entered into an agreement with the other partners and was allotted the share in the firm held by K. P claimed that she was assessable only on 1/7th of the share from the firm because all the seven heirs of K were entitled to the income from the firm. The Income-tax Officer negatived the claim and assessed the entire share income in her hands. The Appellate Assistant Commissioner upheld this order. On further appeal, the Tribunal held that the correct status of the assessee was a "body of individuals", and in those circumstances, the Full Bench of the Andhra Pradesh High Court held that neither before the Appellate Assistant Commissioner nor before the Tribunal was it claimed by the Revenue that there could be an assessment in the status of " body of individuals " and that the Tribunal having held that P could not be assessed as an individual on the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 27. That assessment was clearly barred by time and limitation was not saved by the second proviso to section 34(3) of the 1922 Act. It was also held by their Lordships of the Supreme Court that the same person can be taxed both as an individual as well as the karta of his family. The two capacities are totally different and the individual and the Hindu undivided family are totally different units of taxation and they are two different assessees. Thus, it cannot be doubted that the individual and the Hindu undivided family are two different assessees and they are two different units of taxation, but, in this decision, it was also held that the assessment was made after setting aside the assessment under section 27 against the Hindu undivided family and this case is not covered by the second proviso to section 34(3) of the 1922 Act. Under such circumstances, it is necessary to look to the second proviso to section 34(3) of the 1922 Act, which lays down that nothing contained in section 34 limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to make a fresh assessment against the Hindu undivided family, then the case could have been covered by section 16(2) of the Act. Taking the aforesaid circumstances into consideration, let us look to the case of CIT v. Onkarmal Meghraj (HUF) [1974] 93 ITR 233, which is decision of the Supreme Court. In this case, N, M and H and their sons were partners in a firm. Up to the assessment year 1938-39, they were assessed to tax as individuals. From 1939-40 to 1941-42, they were assessed as three Hindu undivided families, on the basis of a settlement between them and the Department. Thereafter, they were to be assessed as individuals but the Income-tax Officer persisted in assessing them as three Hindu undivided families. They filed their returns for the assessment year 1944-45 separately as individuals. The Income-tax Officer again assessed their incomes in the status of three Hindu undivided families of which N, M and H were kartas, declaring the cases of the individuals as cases of " no assessment". On appeal, the Appellate Assistant Commissioner, on March 9, 1954, set aside the assessments on the Hindu undivided families and gave directions to make assessments on each individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be doubted that Maharaja Kumar Kamal Singh is the holder of an impartible estate and previously the holder of an impartible estate used to be assessed as individual but, he, for the first time, claimed before the Tribunal that his status should be taken as Hindu undivided family. If these facts are borne in mind, then the decision of the Allahabad High Court in Chiranji Lal v. CIT [1965] 56 ITR 715 discussed at pp. 356, 357 and the decision of the Punjab and Haryana High Court in Mangat Ram Hazari Mal v. CIT [1968] 67 ITR 788 discussed at pp. 357, 358 and of the Supreme Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 discussed at p. 358 of this judgment clearly go to show that the Tribunal has ample power under s. 33(4) of the 1922 Act to set aside an assessment made on the individual and direct the Income-tax Officer to assess the Hindu undivided family. The same power as is mentioned in section 33(4) of the 1922 Act has been given to the Tribunal under section 254(1) of the Income-tax Act, 1961, and similar power has been given to the Tribunal under section 23(5) of the G. T. Act. Thus, the Tribunal was competent to set aside the assessment against the individual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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