9911796707
TMI Blog1982 (11) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a notice under section 139(2) dated 4-5-1977 to Shri Bhagat Singh which was served on him on 28-5-1977. However, the assessee on 30-9-1977 had filed his return with another ITO being the ITO, Distt. II(4), who completed the assessment under section 143(3) of the Act on 20-11-1977. Shri Bhagat Singh filed another return in the status of HUF with the ITO, central circle VI, who forwarded the same to the ITO, Distt. I(iii), who held territorial jurisdiction over the assessee-HUF. The assessee as individual filed a return with the ITO central circle VI, on 25-3-1980 and marked the same as duplicate. The ITO completed the assessment under section 143(3) in which he made the following additions-- Rs. (i) dividend from Gurmukh Singh & Sons Auto-parts (P.) Ltd., Ludhiana. 52,000 (ii) interest from banks Rs. on FDR dated 14-12-1976 840 on FDR dated 18-12-1975 4,120 on Savings Bank account 33 ---------- 4,903 4,903 (iii) Annuity 1,546 3. The assessee had not offered the above three figures as it was stated by him that a partial partition had taken place in the family on 1-4-1971 in respect of share capital invested in the firm of Gurmukh Singh & Sons. Though the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking into consideration the rival submissions, we are in agreement with the finding of the Commissioner (Appeals) that the distinction between want of inherent jurisdiction, which is inherent competency, on the one hand, and irregular exercise or remission of jurisdiction on the other hand, is well settled. A party may waive objection to irregular exercise or remission of jurisdiction but there can be no question of waiver where there is a want of inherent jurisdiction because in such a case the order must be treated as a nullity. The Commissioner (Appeals) has rightly observed that the assessment completed by the ITO, Distt. II(4) under section 143(1) on 20-11-1977 was without inherent jurisdiction over the assessee. Once that order is treated as a nullity, it becomes non est and order passed by the ITO, central circle VI was the valid order as the jurisdiction of assessee as individual vested with him. 8. As above stated, the learned counsel for the assessee was unable to assist the Bench with any authority in respect of his contention, the same as such is rejected and the action of the Commissioner (Appeals) in respect of his finding pertaining to jurisdiction is confirmed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the same stand in course of the 1977-78 assessment proceedings, he failed for that year as well both before the ITO and the Commissioner (Appeals). 10. The learned authorised representative for the assessee after stating the above noted facts relied on the Supreme Court judgment in the case of C. Krishna Prasad v. CIT [1974] 97 ITR 493 and the Tribunal's decision in the case of Keshav Shukla v. ITO [1982] 1 ITD 556 (All.) He submitted that ground No. 5 raised by the assessee is just repetition of ground No. 4 in other words. The learned departmental representative, on the other hand, relied on C. Krishna Prasad's case itself and the judgment of the Madras High Court in the case of Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523 (FB). He submitted that the distinction between the Tribunal's decision in the case of Keshav Shukla and the instant case is that in that case the unmarried daughter existed whereas in the instant case the daughter did not exist at the time of partition but was subsequently born. Besides relying mainly on the order of the Commissioner (Appeals), he submitted at length in the light of P.L. Karuppan Chettiar's case, action of the Commissioner (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in it by birth, whether they are in existence at the time of partition or are born subsequently. Such share, however, is ancestral property only as regards his male issue. As regards other relations, it is separate property, and if the coparcener dies without leaving male issue, it passes to his heirs by succession." 14. In the instant case, Shri Bhagat Singh has his wife who is included in the joint Hindu family and though the present one son has been separated, the possibility of sons born subsequently cannot be ignored. The assessee has subsequent to the partition been blessed with another daughter on 23-11-1971. Even regarding the shares obtained by wife on partition in the instant case if we look to article 315 of Mulla's Principles of Hindu Law, we find that "Wife.-- (1) A wife cannot herself demand a partition, but if a partition does take place between her husband and his sons, she is entitled to receive a share equal to that of a son and to hold and enjoy that share separately even from her husband. Where at a partition between a father and his three sons, the wife was not allotted a share, it was held that she was entitled to reopen the partition, there being n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired property with the character of joint family property of the smaller family, in that case, it was observed by their Lordships : "that the smaller family was an assessable unit capable of holding property as belonging to it and the circumstance that it was also a branch of another larger assessable unit did not in any way affect it from being an assessable unit itself. It was not necessary in order that the smaller family could be an assessable unit that the larger family should have been completely disrupted by a partition ;" 18. If we look to the Andhra Pradesh High Court's decision in the case of A. Hanumantha Rao v. CWT [1967] 65 ITR 586 which also deals with the throwing of a separate property into a common hotch-potch under the Wealth-tax Act, 1957, but the observation of their Lordships in that case as well helps the contention of the assessee which is, viz. : "there can be a smaller Hindu undivided family within a larger Hindu undivided family, which can hold property as a unit to the exclusion of the larger family . . . ." 19. In the case of Bharat Kumar Chinubhai v. CIT [1969] 71 ITR 1, the Gujarat High Court held : " . . . even where an assessee has only a wif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited the property on the death of the grandfather or received it, by partition, made by the grandfather himself during the lifetime. On both these occasions, the grandfather's property would devolve on the father by virtue of the latter's legal right as son or descendant of the former and would consequently be an ancestral property in his hands. In CIT v. Beni Prasad Tandon [1969] 71 ITR 322, a Division Bench of the Allahabad High Court reviewed the entire case law on the subject. In that case the assessee constituted a Hindu undivided family with his father. The family property was completely partitioned and the assessee was for several years assessed as an individual. In the assessment for the year 1958-59 the income assessed in the hands of the assessee included income from property allotted to the assessee on partition. The assessee contended that the income from such property was the income of the Hindu undivided family consisting of his wife and unmarried daughters. It was held that the assessee constituted a Hindu undivided family with his wife and unmarried daughters in respect of the property devolving to him on partition even in the absence of male issue. It was observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld continue the original joint family. It is true that in the Orissa case Rukmini Bai Rathor v. CWT [1964] 54 ITR 430, it was pointed out that when she becomes the full owner of the property by virtue of the Hindu Succession Act, the aforesaid potentiality disappears and the property in her hands must be assessed as that of an 'individual'. Here, however, the assessee is male, and whether he adopts a son or begets a son a coparcenary is established between him and his son. The property cannot be treated for all purposes as equivalent to his self-acquired property, in which alone his status can be said to be that of an 'individual'.' Again in CWT v. Lt. Col. D.C. Basappa [1964] 51 ITR 790, the same view was taken. In Mulla's Hindu Law, 13th Edition, p. 249, it is said : 'The share which a coparcener obtains on partition of ancestral property is ancestral property as regards his male issue. They take an interest in it by birth, whether they are in existence at the time of partition or are born subsequently." 22. The Supreme Court's decision in the case of N.V. Narendranath v. CWT [1969] 74 ITR 190 lends support to the contention of the assessee in which their Lordships held : "T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance upon it' : [see Arunachalam's (No. 2) case]. It is evident that these are the incidents which arise because the properties have been and have not ceased to be joint family properties. It is no doubt true that there was a partition between the assessee, his wife and minor daughters on the one hand and his father and brothers on the other hand. But the effect of partition did not affect the character of these properties which did not cease to be joint family properties in the hands of the appellant.'" With this observation their Lordships held that : "the law on the question was not settled. Therefore, following an earlier Bench decision regarding the same assessee, the assessment had to be made on the assessee in the status of a Hindu undivided family." 25. The contention of the assessee in the instant case is also supported by the Allahabad High Court's decisions in the case of Bajrang Lal v. CIT [1977] 108 ITR 245. In that case, there was a partial partition effected in the HUF of Mr. B amongst him, his wife and four sons. In respect of the share fallen to Mr. B, the assessee claimed his status as that of HUF. The ITO assigned the status of individual to him, but on second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der : "A joint Hindu family under the Dayabhaga is, like a Mitakshara family, normally joint in food, worship and estate. In both systems, the property of joint family may consist of ancestral property, joint acquisitions and of self-acquisitions thrown into the common stock. In fact whatever be the school of Hindu law by which a person is governed, the basic concept of a Hindu undivided family in the sense of who can be its members is just the same. Generally speaking, the normal state of every Hindu family is joint and in the absence of proof of division, such is the legal presumption. The joint Hindu family, with all its incidents, is a creature of law and cannot be created by act of parties, except to the extent to which a stranger may be affiliated to the family by adoption." 29. In the course of the aforesaid decision, his Lordship, the Chief Justice has observed as under and discussed several cases on the issue, the majority ratio of the same support the contention of the assessee : "For our limited purpose, fundamentals do not any more require a study of Sastric texts, digests and commentaries because judicial decisions rendered over the last century and more have given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt cannot constitute a joint Hindu family with his wife and unmarried daughter. The lack of such history was never before pleaded and not only does it find no support from the record but such an assumption ignores the plain truth that the joint and undivided family is the normal condition of Hindu society. The presumption, therefore, is that the members of a joint Hindu family are living in a state of union, unless the contrary is established (Mayne's Hindu Law and Usage, eleventh edition, page 323 ; Mulla's Hindu Law, fourteenth edition page 284). The strength of the presumption may vary from case to case depending upon the degree of relationship of the members and the farther one goes from the founder of the family, the weaker may be the presumption. But, generally speaking, the normal state of every Hindu family is joint and the absence of proof of division, such is the legal presumption. Thus, a man who separates from his father or brothers may, nevertheless, continue to be joint with the members of his own branch. He becomes the head of a new joint family, if he has a family, and if he obtains property on partition with his father and brothers that property becomes the ancestr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 416 (PC)--In this case, the decision of Bombay High Court in Gomedalli Laksminarayan's case (Sl. No. 1) was reversed by the Privy Council following some of the observations in Kalyanji Vithaldas's case (Sl. No. 2) without noticing the difference in the facts of both the cases. The Supreme Court in Gowli Buddanna's case considered the facts of the case at Sl. Nos. 1 and 2 and observed that the distinction which had a vital hearing on the issues to be determined was not given effect to by the Judicial Committee in this case. Similar has been the observation of the Supreme Court in the case of N.V. Narendranath at page 194. Therefore, the Privy Council's decision in Kalyanji Vithaldas's case is not good law and the principles laid down by the Bombay High Court in the case of Gomedalli Lakshminarayan's was good law. 4. N.V. Narendranath's case--The family originally consisted of the appellant, his father and his brothers and the properties were joint family property. Partition took place between the appellant, his father and brothers. At the time of partition, the family of the assessee consisted of self, wife, two minor daughters and no son. The point arose, whether the properties re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual capacity, but as the karta of the family consisting of himself and his unmarried daughters. The correct position in law of the property received on partition by a member of the family been considered and pronounced by their Lordships of the Privy Council in Attorney-General of Ceylon v. AR. Arunachalam Chettiar [1958] 34 ITR (ED) 42. The above decision of the Privy Council has been approvingly quoted and relied upon by the Hon'ble Supreme Court while disposing of the appeal in the case of N.V. Narendranath v. CWT [1969] 74 ITR 190. At page 197, this is what their Lordships have stated with regard to the nature of property received on partition by a member of the HUF : " . . . As pointed out by the Judicial Committee in Arunachalam's case [1958] 34 ITR (ED) 42 it is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as 'joint property of the undivided family'. Applying this test, it is clear, though in the absence of male issue, the dividing coparcener may be properly described in a sense as the owner of the properties, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as individual. The facts of the present case are materially different insofar as the divided father still has unmarried daughters to support and maintain and the responsibility of those daughters cannot be foisted by him on his divided son or for that matter on the divided wife. The obligation to maintain the unmarried daughters and marry them is fastened on the family of which, at the relevant time, the assessee is the karta. The Commissioner was, therefore, in our opinion, in error in presuming that the facts of the present case were governed by the ratio of the case of Purshottam Das Rais. In view of this, we quash the order of the Commissioner under section 263 and allow the appeal." 32. The decision in the case of C. Krishna Prasad was relied upon by both the sides. The reliance of the departmental representative on the said case in its support is misplaced because of difference of facts. The observations of their Lordships of the Hon'ble Supreme Court find place supporting the contention of the assessee as follows : " . . . In view of the above it cannot be denied that the appellant at present is the absolute owner of the property which fell to his share as a result o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
