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TMI Blog2021 (9) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise. Where a claim was made on the basis of statute, viz., the provisions of Section 14(1) or Section 6 of the Hindu Succession Act, 1956, insofar as income tax law is concerned the matter has to be governed by Section 171(1) of the Act. The aforesaid decision is on completely different facts and not applicable to the present case in which the HUF was never assessed to tax prior to its disruption and hence provisions of Sec.171 of the Act are not attracted at all. The decision in the case of Thimmaiah [ 1964 (11) TMI 12 - SUPREME COURT] is on a different point as to whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer, while passing the order under section 155 of the Act, was not justified in treating the share income of profit from the partnership firms as unearned. The same is of no relevance to the present case. The decision in the case of Narendra Kumar J. Modi [ 1976 (8) TMI 1 - SUPREME COURT ] is a case where there was a challenge to an order passed under Sec.25A (3) of the Income Tax Act, 1922. The Hon ble Supreme Court held that Sub section (3) of s. 25A provides that where an order acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) read with Sec.147 of the Act, wherein the AO recorded the fact that in a reply dated 18.2.2005, K.Ramesh Reddy (Individual) has stated that except income derived from Renuka complex, the rest of the properties belong to his HUF. The portionof the reply reads as under: .All the income which is accruing to me or received by me are from out of the properties which are ancestral and they do not constitute my separate properties. Therefore, income except rent derived from a complex called Renuka complex, which was received by me by way of gift/settlement from my mother and on that count my separate property assessable in the status of (individual) are assessable in the hands of my joint family and not in my hands in individual status . 4. After taking note of the above, statement, the AO observed as follows: Keeping in view of the above statement and circumstances of the case, a protective assessment is made in the status of HUF to protect the interest of revenue. 5. Thereafter the AO completed the Assessment and computed total income as under: Income from house property Flats at KrishnaNagar Apartments as discussed Income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual hands was been upheld. 8. In the proceedings before the CIT(A) against the order of assessment dated 30.11.2006 in the case of K.Ramesh (HUF) which is the subject matter of this appeal, the Assessee contended that K.Ramesh (HUF) was Partitioned on 14.1.2005 and the partition deed was registered on 12.2.2005. The further contention of the Assessee before CIT(A), was that the joint family ceased to exist the HUF as on the date of order of assessment and HUF was never assessed to tax in such status in the past and therefore the HUF was not a hitherto assessed HUF u/s. 171 of the Act and therefore assessment order in the status of a HUF was invalid, void in law and had to be annulled. The Assessee relied on the decision of the Hon'ble jurisdictional High Court in the case of CIT V. LAKANNA in ITA No.57/1994 DATED 26/04/2005 wherein the Hon ble Court dealt in extenso of making an assessment on the HUF, which was not a hitherto assessed u/s. 171 of the Act as in the case of the Assessee, which ceased to exist at the time of assessment. The Hon ble Court had to deal with the following substantial question of law in the case of Lakanna (supra): I. Whether, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n undivided family. 13. From the aforesaid observation it is clear that the assessee is an undivided family no assessment can be made thereon if at the time of assessment it has become divided, because at that point of time there was no undivided family in existence which could be taxed, though when the income was received in the year of accounts the family was joined. In other words under the Income Tax Act, the definition of 'person' includes a HUF though it is not a legal entity or a juristic person. Section 4 of the Act is a charging section. The tax shall be assessed in respect of the total income of the previous year of every person. In the scheme of the Act, every person whose total income exceeds the maximum amount which is not chargeable to Income Tax shall furnish the return of his income before the date as provided under Section 139 of the Act When such return is filed, the assessment is done in accordance with the procedure prescribed under the Act. However, if no such return is filed by a person and the income has escaped assessment under Section 147, the Assessing Officer has been vested with the power to reopen the assessment. However, before embarking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . in these facts and circumstances there is no legal infirmity in the AO's action. It is seen that the Hon'ble Karnataka High Court in the case of the same family in its order in ITA No. 96, 97 and 98 of 2009 dated 08/12/2014 has finally held that, the impugned assessments were to be made in the hands of HUF and not individual. Therefore the earlier findings of the Hon'ble ITAT were set-aside. The relevant portion of the Hon'ble Karnataka High Court order (Cited supra) are extracted as under: These three appeals are preferred by three brothers who belonging to the joint family, challenging the order passed by the Tribunal which has held the property in dispute is an individual property of these appellants and accordingly assessment orders are framed. The tribunal came to that conclusion on the basis of the order passed by the Tribunal for the earlier years. The orders passed by the Tribunal for the earlier years was the subject matter of the appeals before this court in Appeal Nos. 52, 53 and 54 of 2006. The said appeals were preferred by the Assessee and this Court by its order dated 03/10/2012 allowed these appeals and held the property in dispute is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned DR on the other hand apart from relying on the order of the CIT(A) made a submission that Chapter XV Section G containing Sec.171, deals with liability in special cases and it is not a general provision. He relied on the following judicial pronouncements: 91 taxman 20 ACIT Vs. Maharani Laxmi Devi (SC); 55 ITR 666 Additional CIT Vs. Thimmaiah (Karn.) 105 ITR 109 Narendra Kumar J Modi 15. We have considered the rival submissions. The question that arises for our consideration is as to whether assessment can be made in the case of disrupted HUF when the HUF ceased to exist on the date when the order of assessment is made. The further question would be as to whether an HUF which was not hitherto assessed in the status of a HUF, can be assessed by taking recourse to Sec.171 of the Act. In this regard, it is undisputed that the assessee HUF was dissolved by a partition amongst its members on 14.01.2005 much prior to the passing of the order of assessment. It is also undisputed that the HUF was never assessed to tax in the past. 16. As far as the question whether assessment can be made on a disrupted HUF after its disruption, the Hon'ble Karnataka High Court has held i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des only in the case of 'families hitherto assessed as undivided', it is difficult to find any machinery to assess a Hindu undivided family which had never been assessed before, after it had disrupted. A Hindu undivided family is a taxable entity and is a juristic person. It can only be proceeded against in the manner provided in the Act or under the general principles of the Hindu law after the disruption of the family. The general law does not provide for any machinery to determine the liability of the individual members of the undivided family before disruption. Unfortunately, the machinery provisions of Section 171 and the corresponding provisions in Section 25A are limited in scope to tax only the Hindu undivided family, which has been 'hitherto assessed'. Undoubtedly, after Hindu undivided family had disrupted and in the view of the fact that assessment were completed after the HUF got disrupted, it must be held, therefore, that the proceedings were irregular and without jurisdiction. The following judicial pronouncements lays down the view as stated above: Roshan Di Hatti v. CIT [1968] 68 ITR 177 (SC), Rameswar Sirkar v. ITO [1973] 88 ITR 374 (Cal.), Shyam Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the miner son as Maharaja? The facts were that Maharaja P.P. Singh of Balrampur was being assessed as an individual up to and including the assessment year 1964- 65, He had no issue of his own. On December 28, 1963, he adapted Maharaja Dharmendra Pratap Singh, who was a minor, as his son. After the said adoption the status of Maharaja P.P. Singh was taken as that of the Hindu Undivided Family (for short 'HUF'). Maharaja P.P. Singh died on June 20, 1964. Thereafter his wife, Maharani Raj Laxmi Devi, became the karta of the HUF consisting of herself and the afresaid minor son, Maharaja Dharmendra Pratap Singh. For the assessment year 1966-67 the assessee filed. For the assessment year 1966-67 the assesses filed a return declaring the total income of the Huf as ₹ 28935/- Subsequently she filed another return showing the total income as ₹ 25,288/- The difference between the original and revised returns was explained on the basis that the revised return had been filed by the HUF after excluding 1/6th share belonging to the minor son. Maharaja Dharmendra Pratap Singh, As an individual because according to Section 6 of the Hindu Succession Act, 1956, 1/3rd share of Lat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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