9911796707
TMI Blog1981 (1) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... arwad house and the jenmam rights in a few items of agricultural lands, all in the possession of tenants besides some tracts of forest land, of about 900 acres, which were in the possession of one Erinhal Kareevande Valappil tarwad, referred to hereinafter as " A.K. family " on saswatham right on an annual rent of Rs. 20.. In respect of the remaining portion of the forest lands there were serious title disputes with six claimants over the same claiming exclusive rights, the claimants being the said A.K. family, the Govt. of Kerala and the Kerala Wakf Board, the petitioner's family and two others. The lands owned and possessed by the tarwad were not fetching any appreciable, income. In regard to the forest land, in view of the serious disputes over the same, the title remained uncertain and doubtful. There was also no real income from the same and, therefore, nobody would have come forward to purchase the tarwad's rights in these lands for any price at that time. Therefore, according to the petitioner, the tarwad was never considered to possess and own a net wealth beyond the taxable limits under the provisions of the Act. On June 25, 1969, the Govt. of Kerala initiated proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, 'C' Ward, Cannanore, issued another notice to him under s. 131 of the I.T. Act, 1961, requiring him to produce before the officer the order passed by the court in the land acquisition reference. A copy of the said notice is marked as ex. P-2. In pursuance of ex. P-1, the petitioner filed a return of his net wealth on March 29, 1979, showing the amount awarded to him by the Sub-Court, Tellicherry, which is very much below the taxable limit under the provisions of the Act. By a letter sent along with the return, copy of which is ex. P-3, the petitioner questioned the validity of the proceedings initiated. According to him, he was never the karnavan of the tarwad. In the O.P. he has also stated that his tarwad had finally got itself statutorily disrupted by the Kerala joint Hindu Family System (Abolition) Act, 1975 (Act 30 of 1976), which came into force on December 1, 1976. By the action taken under s. 34C of the Act, the respondent has virtually frozen the compensation amount given to the members of the petitioner's tarwad because he has attached the amounts deposited by the petitioner and some other members of his tarwad in the bank from out of the compensation amounts wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... karta of the tarwad, especially when at no time during the period when such a tarwad was in existence was he its karta, was void in law and had no legal effect. In regard to the attachments effected, the petitioner would urge that since the assessment proceedings were totally without jurisdiction, the attachment had no legal validity. Anyhow, the attachment of the whole compensation amount was excessive in nature. The WTO, the respondent in the counter, tries to sustain the validity of the assessment proceedings. By the judgment of the sub-court dated April 9, 1977, the petitioner's family was awarded Rs. 60,92,196.01 as the value of the forest lands taken over by the Government. It was found that the family consisting of 106 members was liable to wealth-tax for the assessment year 1970-71 onwards. The award of the court was to the family as such. There was no evidence of a partition. The wealth-tax proceedings were hence initiated adopting the status of an HUF for the year 1970-71. As the first member of the family, as per the sub-court judgment, was no more, a notice under s. 17 of the Act for the assessment year 1970-71 was issued to the petitioner, who had been shown as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of claimants. In regard to the alleged disruption of the family, in the absence of any clear evidence of partition, the assessment proceedings had to be commenced on the HUF. The notice under s. 17 of the Act had been correctly served on the petitioner, according to the counter-affidavit, and it is also submitted that the Kerala joint Hindu Family System (Abolition) Act had no application to the years in respect of which the proceedings for escaped assessment were initiated. In contending that the attachment has been taken out for the entire amount to protect the interest of the revenue, the counter-affidavit gives the following figures about the alleged liability of the petitioner's family : Assessment year Wealth-tax Penalty Rs. Rs. 1970-71 1,49,770 15,23,654 1971-72 2,33,450 15,31,757 1972-73 3,39,600 14,46,150 1973-74 3,14,400 10,50,830 1974-75 3,28,700 7,15,986 1976-77 3,53,800 4,47,180 1977-78 1,38,124 65,288 1978-79 1,33,452 32,028 --------------------- ----------------------- 23,29,296 70,61,533 ------------------- ----------------------- By an application for an amendment, the petitioner has sought to take further grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Officer or the Appellate Tribunal or in the High Court under section 66(2) of the Indian Income-tax Act. The existence of such alternative remedy is not however always a sufficient reason for refusing a partly quick relief by writ or order Prohibiting an authority acting without jurisdiction from continuing such action." The petitioner has taken up the position, as noticed earlier, that the petitioner's tarwad, even before its disruption, cannot be considered to be an HUF coming within the ambit of s. 3 of the Act. I would here extract the charging provision in the Act: " 3. Charge of wealth-tax.-Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I." According to Mr. Gopalakrishna Warrier, learned counsel for the petitioner, the expression " Hindu undivided family " in s. 3 of the Act is not indicative of the religion of the members of the family. It only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution. No doubt, in that case, the question of a Mappila Marumakkattayam tarwad was being considered. According to the learned judges, the karnavan of the tarwad is obliged to maintain a true and correct inventory of all the movable and immovable properties belonging to the tarwad and has also to keep true and correct accounts of the income and expenditure of the tarwad. The karnavan of the tarwad was liable to be assessed as an " individual ". It might be noted in this connection that in the well-known Mammad Keyi's case [1966] 60 ITR 737, the Full Bench of the Kerala High Court had taken the view that the Hindu Marumakkattayam family will be taken within the ambit of the word " Hindu undivided family ". In fact, there was no serious controversy with regard to that in that case. The question raised there was [the matter was finally concluded by a Full Bench decision of this court in Mammad Keyi v. WTO [1966] 60 ITR 737] whether the Act contravened art. 14 of the Constitution and was void on the ground that it was discriminatory in so far as it made a distinction between Mappilla Marumakkattayam family and Hindu undivided Marumakkattayam family. Velu Pillai J., in this jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint families into Hindu undivided families and Moplah tarwads had no reasonable relation to the object of the Act. On appeal, the Supreme Court remanded the cases observing that it is for the party who comes forward with the allegation, that equality before the law or the equal protection of the laws is being denied to him, to adduce facts to prove such denial. Accordingly, the burden of establishing the plea has been cast on the petitioners and has been rightly undertaken by them." Nambiar J., as he then was, pointed out in his judgment (p. 765) " To sum UP, my conclusions are: (1) that on a construction of section 3 of the Act, a Moplah Marumakkattayam tarwad is included in the terms 'individual' occurring therein. (2) That its inclusion in the term 'individual' in the said section and the differential treatment accorded to it by the Schedule to the Act as compared to Hindu Marumakkattayam tarwads are violative of article 14 of the Constitution. (3) As a result of the above discrimination, neither the entire Act nor section 3 thereof is liable to be struck down; but only the scope and content of the term 'individual' is liable to be narrowed down so as to exclude Mopla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z., the descent is through females and children both males and females have equal rights to property these families are still Hindu undivided families." There also the question was distinguished as between Mappila families governed by the Marumakkattayam law and Hindu undivided families. The learned judge further said there (p. 56): " Under the taxing Acts the scheme of treating a Hindu undivided family as a distinct taxable entity has been adopted for a long time, e.g., the Indian Income-tax Act, 1869 (IX of 1869), the Indian Income-tax Act, 1870 (IX of 1870) the Indian Income-tax Act, 1871 (XII of 1871), Act No. VIII of 1872, Act No. If of 1886, Act No. VII of 1918, Act No. XI of 1922, Act No. 43 of 1961, have treated a. Hindu undivided, family as a distinct taxable entity. Similarly, under the Wealth-tax Act, 1957 (27 of 1957), and the Gift-tax Act, 1958 (18 of 1958), the Hindu undivided family is made a unit of taxation. Under the Business Profits Tax Act, 1947 (21 of I 947), and the Excess Profits Tax Act, 1940, also the Hindu undivided family was made a unit of taxation. For the purposes of these Acts Mappila tarwads governed by the Marumakkattayam law have been regarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reassessment relates to an assessment year in respect of which an assessment or reassessment could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any provision limiting the time within which any action for assessment or reassessment may be taken." The return of wealth under the Act is provided under s. 14 of the Act which states that every person, if his net wealth or the net wealth of any other person in respect of which is assessable under the Act on the valuation date was of such an amount as to render him liable to wealth-tax under the Act shall, before the 30th day of June of the corresponding assessment year, furnish to the WTO, a return in the prescribed form and verified in the prescribed manner, setting forth the net wealth as on that valuation date. If any person has not furnished a return within the time allowed under s. 14, or having furnished a return under the section, discovers any omission or a wrong statement therein, under s. 15 of the Act, he has to furnish a return or a revised return, as the case may be, at any time before the assessment is made. By whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anthana Act 1949; (3) an illom governed by the Kerala Nambudiri Act, 1958; and (4) an undivided Hindu family governed by the Mitakshara Law." Under s. 3 of the above Act, on and after the commencement of that Act, no right to claim any interest in any property of an ancestor during his or her lifetime which is founded on the mere fact that the claimant was born in the family of the ancestor shall be recognised in any court. Under s. 4 of the Act, all the members of an undivided Hindu family governed by the Mitakshara law holding any coparcenary property on the day the Act came into force shall, with effect from that day, be deemed to hold it as tenants-in-common as if a partition had taken place among all the members of that undivided Hindu family as respects such property and as if each one of them was holding his or her share separately as full owner thereof. Under s. 6 of that Act, where a debt binding on a joint Hindu family has been contracted before the commencement of the Act, by the karnavan, yejaman, manager or karta, as the case may be, of the family, nothing contained in s. 6 shall affect the liability of any member of the family to discharge any such debt and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partial partition has been recorded by the Income-tax Officer under this section, and the partition took place during the previous year, (a) the total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition, had taken place ; and (b) each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed. (5) Where a finding of total or partial partition has been, recorded by the Income-tax Officer under this section, and the partition took place after the expiry of the previous year, the total income of the previous year of the joint family shall be assessed as if no partition had taken place ; and the provisions of clause (b) of sub-section (4) shall, so, far as may be, apply to the case. (6) Not withstanding anything contained in this section, if the Income-tax Officer finds after completion of the assessment of a Hindu undivided family that the family has already effected a partition, whether total or partial, the Income-tax Officer shall p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by metes and bounds, even though there has been a severance of the status, the family shall be deemed for the purposes of the W.T.: Act to continue to be an HUF In that case, it might be noted that the partition had, taken, place after the initiation of the proceedings. In our case, it was after a statutory disruption that proceedings are first initiated under s. 17. In this connection, it will be useful to refer to the following" passages in Sampath Iyengar's Commentaries on Wealth-tax at p. 551-Vol. I: "Where a family was disrupted and was not previously assessed to wealth-tax and no return had been filed in respect of the net wealth supposed to be its, under section 14, the question can arise Whether the Wealth-tax Officer can assume jurisdiction to act under section 17(1)(a) for the allegedly escaped net wealth of the HUF ? This question arose for the assessment year 4957-58 (the very first year under the Act) in Goswami Brijratanlalji v. CWT [1971] 79 ITR 373 (Guj) which was answered by the court in the affirmative. The contention on behalf of the assessee was that the notice issued by the Wealth-tax Officer under section 17(1)(a) being invalid, there was no valid asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings are before the WTO either on a suo motu return under s. 14(1) or in compliance with the WTO's notice under s . 14(2). How else, can come the " time of making assessment when alone he can get jurisdiction to make an Enquiry " and reach the " satisfaction " under s. 20(1) or pass the order of declaration under sub-s. (2) of this s. 7 (when) in view of the Kerala joint Hindu Family System (Abolition) Act, 1975, the Kanakatbidam family had been disrupted and the property had come into the individual ownership of the members. To such non-existent and and non-owning families, the provisions of the Act cannot reasonably be made applicable. I might in this connection refer to the decision of the Calcutta High Court in Srilal Bagri v. CWT [1970] 77 ITR 901, wherein it was said after referring to many decisions on the question (p. 909): " From the aforesaid judicial decisions it is manifest, therefore, that section 20 of the Wealth-tax Act, if it is in pari materia with section 25A of the Indian Income-tax Act, 1922, then it is only a machinery section and not a charging section. In that case, section 20 of the Wealth-tax Act will only have application in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 of the Wealth-tax Act has been necessitated due to the scheme of the Wealth-tax Act as well as the fact that this section was introduced in the main Act itself and was not introduced by the Amending Act as was done in the case of section 25A of the Indian Income-tax Act, 1922. In that view of the matter, we must hold that section 20 of the Wealth-tax Act is a machinery section directed towards assessment, where at the time the liability to pay wealth-tax arose, the family was joint, but has disrupted at the time of the assessment. The section does not empower assessment of a Hindu undivided family which has ceased to be a Hindu undivided family prior to the relevant valuation date according to Hindu law." If there has been no prior assessment of the family concerned I do not think any proceedings could be initiated against the family under s. 17 of the Act, after the family had become disrupted. Where is the karta of the family on whom notice could be served? It is his default which empowers the WTO to act. Therefore, in the absence, of a similar provision like s 171(1) of the I.T. Act (s. 20 does not contain such; a provisions), I do not think the WTO could make the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu undivided family in relation to a particular property or source of income except where and in so far as a finding of partial partition is given under this section, would be to put an undue strain on the words which are in the sub-section and to introduce other words which are not there. As regards cases of complete partition, the position is clear ; once Hindu undivided family is assessed as such, it would continue to be so assessed even after it has disrupted and has ceased to exist unless a finding is given under this section recording the total partition. But, no finding of partition can be given unless there has been a physical division of the property or, where the property does not admit "of a physical division, such division as the property admits of and not a mere severance of status (Explanation). Therefore, where a joint family has come to an end in; law, if a physical division of the family property, though possible has not been effected and, consequently, no finding is given under this section, the family would be deemed, for the purposes of this Act, to continue to be a joint family and would continue to be charged a unit of assessment. Even where there has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deceased cannot form part of his estate but the right to receive compensation therefor at market value on the date of the notification for acquisition which would accrue to the deceased would be property that would pass on his death. The question considered in the case was in respect of the right to receive compensation in the property and what should be its estimated value. Whether the estimated value should be the one that Was given in the Collector's award or the same plus the enhancement finally granted by the land acquisition court in the reference under the Land Acquisition Act. In reversing a judgment of the High Court of Andhra Pradesh, which court had observed that the enhancement of land acquisition compensation awarded by the land acquisition officer was so large that no reasonable person could say that the value adopted by the Asst. Controller of Estate Duty for those lands on the basis of the awards made by the land acquisition officer represented their true and correct market value and no attempt had been made by the accountable person to show that the value adopted by the Asst. Controller of Estate Duty did not represent their true and correct market, value, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he is assessable under the Act for any assessment year or to disclose fully and truly all material facts necessary for a reassessment of his net wealth or the net wealth of such other person for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise, or has in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in cl. (a), the net wealth chargeable to tax has escaped assessment for any year, whether by reason of under-assessment or assessment at too low a rate or otherwise, that he could issue a notice to the person and may proceed to reassess such net wealth. If this condition precedent is not satisfied, the notice issued would be without jurisdiction. The formation of the required belief by the ITO before proceedings can be validly initiated under s. 34(1)(a) of the Indian I.T. Act 1922, is a condition precedent the fulfilment of this condition is not a mere formality , it is mandatory and a failure to fulfil that condition would vitiate the entire proceedings and the formation of the belief should be on reasonable grounds. As has been point ..... X X X X Extracts X X X X X X X X Extracts X X X X
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