9911796707
TMI Blog1983 (1) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... s Lakshmi Medical Hall and M/s Laxmi Medical Traders of Ambala Cantt whereas in the other two concerns styled as M/s Laxmi Medical Agencies and M/s Laxmi Cosmetics, the assessee-HUF had deposits and earned interest therefrom. On March 31 of all the six years 1971 to 1977. All the profits, interest and salary earned from the two firms in which the assessee-HUF was a partner, were credited in the HUF capital accounts and similarly interest from the firms in which the HUF had deposits were credited in the HUF deposit account. Some of the amounts in respect of profit and interest afterwards were divided amongst Jai Deo, Rajni Kant and Nalini Kant equally, It will not be out of place to mention that for the accounting years ending on 31st March, 1971 to 31st March, 1977, all such incomes in respect of profit from the registered firms, interest and salary therefrom and interest from the firms in which the assessee-HUF had deposits were offered for taxation. Since the assessee had effected partial partition in respect of certain amounts, as above said, on 31st Mar, 1971 to 31st Mar, 1977, in the returns of the HUF filed thereafter the assessee did not show the interest earned by the copar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not divisible by mete and bounds. There might have been a partition acceptable under the Hindu law but in the absence of an order u/s 171 the divided property or any income therefrom was necessarily assessable as the HUF property income and there can be no escape. Holding that the cited Allahabad High Court judgment does not come to the assessee's rescue, we are inclined to dismiss this assessee's appeal. Shri Gupta also cited another judgment of the Madras High Court in the case of 1937 AIR Mad. 571 (Mad) but such judgment is not made available to us and whatever submission was made by Shri. Gupta based on the said Madras High Court judgment, cannot have the effect of taking the assessee out of the ambit of taxation in respect of the interest earned from the divided HUF property in the absence of an order u/s 171". 3. On the basis of this decision from the Tribunal, the assessee's case for asst. yrs. 1972-73 to 1976-77 were reopened u/s 147 and notices u/s 148 were issued. The assessee moved an application dt. 7th February, 1978 u/s 171 claiming partial partition of the amounts partitioned between Jai Deo, Rajni Kant and Nalini Kant as on 31st Mar, 1971 to 31st Mar, 1975 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rview of this section. Neither the enquiry can be withheld and the assessment completed nor proceedings u/s 171 can be treated as separate proceedings. Both are part and parcel of the same proceedings and have to be treated as joint because the assessment completed depends upon the nature of the findings given in r/o the claim of partition. The conclusion of the partition proceedings is also necessary because the several liability of a member or a group of members shall be computed according to the portion of the joint family property allotted to him or it, whether total or partial. 5. As the very basis for the addition to the income of the HUF in all the years stands challenged. I consider it worthwhile to set aside all the assessments. The ITO is directed to reframe the assessments after complying with the mandatory provision of section 171 in respect of the assessee's application claiming partition". 4. It will not be out of place to mention that the above said order of the AAC was accepted by the revenue and when as a consequence of the said order the assessments were being reframed, the assessed also succeeded in obtaining directions u/s 144A from the IAC dt.4th Dec,1979 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief in the course of reassessment proceedings u/s 147 can be claimed by the assessee which is not claimed in the course of original assessment. He summarised that partial partition is ungenuine as wife was not given a share, one of the two coparceners who was in the States was not consulted and the members were staying together and the funds, even after the partial partition, remained where they were and, at last, he relied on every word of the ITO's order. 7. The ld. Counsel for the assessee Mr. D.S. Gupta, on the other hand first, of all drew our attention to pages 10 to 12 of the paperbook which contains the order of the AAC and submitted that as per the said order the ITO was directed to comply with the mandatory provisions of s. 171 and the said order having become final, as the same was not contested by the revenue, the revenue cannot agitate now at this stage. He also drew our attention to the IAC's instructions u/s 144A which finds place in the form of his order dt. 4th Dec, 1979 giving directions on page 13 of assessee's compilation. He submitted that partition claim can be raised in the course of reassessment proceedings and in that connection he placed his reliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compilation at pages 10 to 12. We also peruse page 13 of the assessee's which contains the compilation directions u/s 144A from the IAC. There is no controversy about the fact that the revenue kept quite after the said order of the AAC. The Tribunal's decision for 1972-73 which finds place at pages 6 to 9 of the assessee's compilation, cannot be of any assistance to the case of the revenue because from the finding from the said decision, extracted and placed by us above, it is clear that since at that stage there was no claim of the partition made by the assessee u/s 171, the Tribunal held that the income in respect of such partitioned properties could not be excluded from hands of the HUF. The fact that subsequently original deposits belonging to the HUF remained invested in the same concern or coparceners were living together or one of the coparceners was out of India who had though filed an affidavit confirming the partition, also cannot strengthen the case of the revenue. The entire confusion, according to us, which has been caused is because the assessee in the course of putting its claim of partial partition mentioned that 'partial partition took place in respect of income e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 34 "in terms says that once the ITO decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice u/s 22(2) and may proceed to assess or re-assess such income, profits or gains. Therefore, once assessment is reopened by issuing a notice under sub-sec. (2) of sec, 22, the previous under assessment is set aside and the whole assessment proceeding start afresh. Once valid proceedings are started u/s 34(1) (b), the ITO not only had the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year: and that dislodges the contention of the ld. Departmental representative that partial partition could not be claimed in the course of reassessment proceedings. 11. We are not intentionally repeating the details of amounts partitioned on respective details of amounts partitioned on respective dates as the same shall be mere repetition, the same having been detailed by the ld. AAC in para 2 of her order. Looking to the facts, it is a clear case of partial partition and, therefore, Cl. (b) of Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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