9911796707
TMI Blog1973 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... vance tax for the assessment year 1957-58, before 15th March, 1957, though its total income for the account year relevant to that assessment year was clearly likely to exceed the maximum amount not chargeable to tax in its case by two thousand five hundred rupees. The Income-tax Officer, therefore, while making an order dated 15th March, 1958, assessing the assessee to income-tax for the assessment year 1957-58, issued a notice of the same date calling upon the assessee to show cause why penalty should not be imposed on it under section 28(1)(a) read with section 18A(9) for having failed without reasonable cause to comply with the provisions of section 18A(3). The assessee submitted its reply dated 5th September, 1959, showing cause against the penalty proposed to be imposed by the Income-tax Officer but for some inexplicable reasons, there was no progress for about six years and it was only on 20th November, 1965, that an order was made by the Income-tax Officer imposing penalty on the assessee. However, in the meantime, Madhusudan died on 29th January, 1962, and after the death of Madhusadan, a total partition of the properties of the Hindu undivided family by metes and bounds wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was concerned, the Tribunal found itself in agreement with the view taken by the Appellate Assistant Commissioner and held that since the Income-tax Officer had by his order dated 21st June, 1966, recognised the partition of the Hindu undivided family with effect from 12th February, 1962, there was no Hindu undivided family in existence at the date when the order of penalty was made and the order of penalty having been made on a non-existent entity was invalid. The Tribunal accordingly upheld the decision of the Appellate Assistant Commissioner. The revenue, thereupon, applied for a reference and on the application the Tribunal referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, it was competent for the Income-tax Officer to impose penalty on the assessee under section 18A(9)(b) of the Indian Income-tax Act. 1922?" The question as framed is wide enough to take in both aspects of the controversy between the parties and we shall now proceed to consider the arguments which have been advanced before us in regard to both these aspects. We may first dispose of the contention of the assessee relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessed" so as to attract the applicability of section 18A(3). The assessee was accordingly liable to file an estimate of advance tax before 15th March, 1957, and since it admittedly did not do so, and, on the finding reached by the Tribunal, there was no reasonable cause which prevented it, the assessee must be held to have failed without reasonable cause to comply with the provisions of section 18A(3) and rendered itself liable to penalty under section 28(1)(a) read with section 18A(9)(b). That takes us to a consideration of the first aspect of the controversy between the parties, The question which arises for consideration under this head of controversy is whether the Income-tax Officer was competent to make the order of penalty on 20th November, 1965, when, according to the order dated 21st June, 1966, made under section 171(3) of the new Act, there was a total partition of the properties of the Hindu undivided family with effect from 12th February, 1962, and the Hindu undivided family had ceased to exist from that date. The determination of this question depends on the true interpretation of certain provisions of the old Act as well as the new Act. The new Act came into f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding for imposition of penalty in respect of this completed stage could be initiated and such penalty could be imposed only under the old Act as if the new Act had not been passed. It may be pointed out that, even apart from this decision which places a wide interpretation on the language of section 297(2)(f), it is apparent that what section 18A(3) requires the assessee to do is to pay in advance the tax which may be found due on assessment and, therefore, penalty for failure to comply with the provisions of section 18A(3) would be penalty in respect of the assessment for the assessment year in question and if the assessment is completed before 1st April, 1962, section 297(2)(f) would be attracted. The proceeding for imposition of penalty for failure to comply with the provisions of section 18A(3) which was initiated, on 15th March, 1958, was, therefore, liable to be continued and the penalty liable to be imposed according to the provisions of the old Act as if the new Act had not been passed. The income-tax authorities were required to ignore the new Act as if it were not on the statute book and to continue the proceeding for imposition of penalty having regard to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue to be a Hindu undivided family." Section 25A was enacted to meet the difficulty which arose when a Hindu undivided family had received income in the year of account but was no longer in existence as such at the time of the assessment. The difficulty was more acute by reason of the provision-an important principle of the Act-contained in section 14(1) : "The tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family. . . ." Section 25A, therefore, provided a machinery for assessment and recovery of the tax, where after the income was earned by the Hindu undivided family, the property of the joint family had been partitioned in definite portions and the Hindu undivided family had ceased to exist. The machinery for assessment and recovery of the tax, however, differed according as an order recording partition was made or not made. If, at the time of making an assessment under section 23, a claim was made by a member of the Hindu undivided family that a partition had taken place amongst the members of the family and the Income-tax Officer was satisfied that the joint family property had been partitioned amongst the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile members of the Hindu undivided family at the time of the assessment for the assessment year 1963-64 which was governed by the new Act. It is true that an order dated 21st June, 1966, was made by the Income-tax Officer recognising the partition of the Hindu undivided family with effect from 12th February, 1962, but that was an order under section 171(3) of the new Act. That was not an order under section 25A, sub-section (1). There is no provision in the new Act which says that an order recognising partition made under section 171(3) of the new Act shall be deemed to be an order under section 25A, sub-section (1), of the old Act. The assessee when faced with this difficulty tried to extricate himself out of it by contending that the words used in section 25A, sub-section (3), were "where such an order has not been passed" and not "where an order under sub-section (1) of this section has not been passed". The words "such an order", according to the assessee, had reference only to the kind of order, namely, an order recognising that the joint family property has been partitioned amongst various members or groups of members in definite portions and they did not require that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age. Moreover, if we turn to section 171 of the new Act, it is clear that section provides a machinery for the purpose of the new Act. Subsection (1) of section 171 provides that a Hindu family hitherto assessed as undivided shall be deemed for the Purposes of the new Act to be a Hindu undivided family, except where and in so far as a finding of partition has been given under this section in respect of the Hindu undivided family. The legal fiction of continuance of the Hindu undivided family is created for the purposes of the new Act and its displacement is also provided for the purposes of the new Act. What sub-section (1) of section 171 says is that a Hindu undivided family shall be deemed to continue as such for the purposes of the new Act but where and in so far as a finding in respect of partition has been given under the section, it shall not be deemed to continue to be a Hindu undivided family and shall be regarded as partitioned for the purposes of the new Act. Then sub-section (2) of section 171 says 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 assessed as undivided that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already pointed out that section 297(2)(f) requires the income-tax authorities to ignore the new Act while proceeding to impose penalty on the assessee and that by itself would be sufficient to exclude the operation and effect of an order under section 171, sub-section (3), of the new Act, unless, of course, there is anything in the new Act which directly and in so many terms provides that an order under section 171, sub-section (3), shall have effect in relation to assessment of tax or levy of penalty under the old Act. But, far from there being any such provision in the new Act, we find that section 171 clearly and explicitly says that an order under section 171, subsection (3), shall have effect only in relation to assessment of tax and levy of penalty under the new Act. The governing consideration denoted by the words "for the purposes of this Act" runs through the entirety of the provisions of section 171. We are, therefore, of the view that the order recognising partition made by the Income-tax Officer under section 171, sub-section (3), could not be invoked by the assessee for the purpose of demolishing the legal fiction in section 25A, sub-section (3). Since no order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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