THE HON'BLE SRI JUSTICE P.S.NARAYANA A.S.No.1410 of 1988 Date : 18-6-2010 Between : The Income Tax Officer, A.Ward, Visakhapatnam .. Appellant And Tippala China Appa Rao and others .. Respondents THE HON'BLE SRI JUSTICE P.S.NARAYANA A.S.No.1410 of 1988 ORDER: 1. This Appeal is filed as against the Decree and Judgment made in O.S.No.163/81 on the file of learned Principal Subordinate Judge, Visakhapatnam whereby the suit filed by the Income Tax Officer, Visakhapatnam – the appellant herein/plaintiff, was dismissed. The said suit was filed to set aside the claim order made by the Tax Recovery Officer in O.P.No.136/79-80 dated 29-4-1980. The learned Principal Subordinate Judge, Visakhapatnam in the light of the respective pleadings of the parties, having settled the Issues, ultimately came to the conclusion that the order under challenge does not suffer from any illegality and accordingly the suit was dismissed directing the parties to bear their own costs. Aggrieved by the same, the present Appeal had been preferred. 2. The learned Standing Counsel representing the appellant had taken this Court through the respective pleadings of the parties and the evidence available on record in proper perspective. The learned Standing Counsel also would maintain that in the facts and circumstances of the case, inasmuch as the 5th respondent was a partner representing the joint family as such, the respondents 1 to 4 being the sons of the 5th respondent are liable under the theory of pious obligation. The learned Standing Counsel had strongly relied upon the decisions in Commissioner of Income Tax, Patiala Vs. Piara [1] and J.Devaraja Rao and others Vs. Income Tax officer, Anantapur [2] and made elaborate submissions on the aspect of the applicability of the doctrine of pious obligation and also on the aspect of the illegality of the contract as such hence the findings are to be set aside and the Appeal to be allowed. 3. Per contra, the learned Counsel representing the respondents had taken this Court through the findings recorded by the learned Principal Subordinate Judge, Visakhapatnam and would m that in the light of the convincing findings recorded by the trial Court, this is not a fit matter to be interfered with and the Appeal to be dismissed. 4. Heard the Counsel on record. 5. Before taking up further discussion on the Points for consideration which would arise in this Appeal, it may be appropriate to have a glance at the respective pleadings of the parties, the evidence available on record and the findings recorded by the trial Court in nutshell. 6. The parties hereinafter would be referred to as ‘plaintiff’ and ‘defendants’ as shown in O.S.No.163/81 aforesaid. 7. Pleadings of the parties : Averments made in the plaint : It was pleaded that the 5th defendant is the father of defendants 1 to 4 and he is the kartha and father-manager of the joint family consisting of himself and his sons – defendants 1 to 4, his wife Tippala Veerayamma and his two daughters. The 5th defendant had inherited from his father considerable properties, movable and immovable including Acs.12-00 of agricultural land, a house at Venkannapalem and considerable cash, all having fallen to his share in the partition with his brothers. Besides the above mentioned ancestral properties, the 5th defendant, as kartha of the Hindu joint family further made certain acquisitions, including the suit schedule properties with the aid of the joint family nucleus and from the income of the joint family properties and its assets. Besides the joint family properties acquired and the ancestral properties referred to above he had no personal properties and he never possessed any movable or immovable properties in his personal capacity. Apart from the above mentioned properties, the family was running arrack business since 1963-64 onwards. The 5th defendant was also not employed and was only managing the arrack business of the Hindu Undivided Family as its kartha and had been maintaining himself and his family from out of the income of the joint family properties which he is managing as the kartha and the father-manager of the Hindu joint family consisting of himself and his family. While so, in the year 1971 in his capacity as a joint family manager it had entered into a partnership with 18 others known others known as M/s.Visakha Gowda Association which carried on business in Abkari contracts by investing in joint family funds. The firm M/s. Visakha Gowda Association, now a dissolved firm, initially filed a return on 28-8- 1971 disclosing a loss of Rs.12,185/- for the Assessment Year 1971- 72. A revised return of income was filed by the said firm on 26-11- 1971 finally disclosing an income of Rs.88,890/-. Similarly a return was filed on 19-12-1972 for 1972-73 disclosing an income of Rs.72,903/- which was further revised under a return dated 26-3-1975 disclosing an income of Rs.73,403/-. The assessments for the said years could only be completed by the plaintiff on 28-2-1976 on account of the delaying tactics adopted and on account of the failure of the production of the accounts and required date by the said firm in proper time for the Assessment Years 1971-72 and 1972-73. Finally the firm was assessed to a total amount of Rs.12,61,921/- as tax and penalties for the said two Assessment Years. The properties belonging to the joint family of the 5th defendant and his sons, namely the plaint schedule houses along with their appurtenant sites, the other properties belonging to the joint family were got attached by the plaintiff for realization of the tax arrears of M/s.Visakha Gowda Association of which the 5th defendant was a partner in the capacity as kartha or manager of the joint family of himself and his sons. Defendants 1 to 4 who are the undivided sons of the 5th defendant objected to the attachment of the plaint schedule properties by filing O.P.No.136/79-80 on 3-3-1980 before the Tax Recovery Officer by setting up the right order their mother and their two sisters to the plaint schedule houses on the ground that they were set apart for the security of their mother and for marriage purposes of their sisters. They further contended that the arrack business of M/s.Visakha Gowda Association had nothing to do with the joint family and that is purely individual business of their father, the 5th defendant and that only 1/5th undivided share of the 5th defendant in the joint family properties alone is liable to attachment in any event. The Tax Recovery Officer, while correctly rejecting the contention of the defendants that the house properties were set apart for the security of their mother and sisters as untenable had erroneously allowed the claim of the defendants 1 to 4 to the extent of their 4/5th share on the ground that the 5th defendant had entered into the arrack business as a partner of M/s.Visakha Gowda Association in his individual capacity and that the joint family has got no connection whatsoever in the said business and raised the attachment of the suit schedule properties to the extent of 4/5th undivided share of the defendants 1 to 4; that the arrack business run by the 5th defendant was the joint family business of the defendants and the investment for the said business had flown from the Hindu Undivided Family funds and as such the finding of the Tax Recovery Officer that the 5th defendant had joined into partnership in his individual capacity and not in the representative capacity as kartha of the joint family is not correct and is contrary to the established facts and the various admissions made by the defendants 1 to 4 to the effect that the Hindu Undivided Family funds were invested by the 5th defendant for the said business. The 5th defendant representing the joint family as its kartha, entered into a partnership business by investing the Hindu Undivided Family funds and carried the business on behalf of the family and as such the entire family properties are liable to be proceeded against including the share of the defendants 1 to 4. In any event, the 5th defendant being the father-manager, the debts contracted by him and his liabilities to the plaintiff towards tax dues are to be discharged by the defendants 1 to 4 under Law and the said liability is not an outcome of an illegal or immoral debt or transaction. In that view of the pious obligation theory recognized under the Hindu Law also the share of defendants 1 to 4 in the joint family property is liable to be proceeded against for the recovery of the monies recoverable from the father-manager-5th defendant and as such the orders of the Tax Recovery Officer passed in O.P.No.136/79- 80 dated 29-4-1980 are not proper and valid and are liable to be set aside and hence the suit. Averments made in the written statement filed by the defendants 1 to 4 : It was pleaded that the 1st defendant is already carrying on his separate business and the other defendants are still in college and schools. Whatever investment was made by their father in the arrack business was his share in the family income and therefore the investment in arrack business is his exclusive investment and it cannot be said that the arrack business is the joint family business of the defendants. While carrying on the said business, the 5th defendant never purported to do so as manager of the joint family and merely because these defendants and the 5th defendant lived together and the household expenses were being met by the 5th defendant, it does not mean that the arrack business is the joint family business. The 5th defendant never entered in his capacity as joint family manager into a partnership with M/s. Visakha Gowda Association. The joint family funds were not invested in the said partnership business to which the 5th defendant was one of the partners. It is only in his capacity as individual that the 5th defendant contributed his separate share from the family income and it was not the joint family funds that were invested. The 5th defendant was partnership in his individual capacity in the said M/s.Visakha Gowda Association. Neither in the partnership deed nor in any document relating to the firm of M/s.Visakha Gowda Association the 5th defendant ever signed or purported to have signed as joint family manager to the best of the information of the defendants. The Tax Recovery Officer had rightly excluded the 4/5th share of the defendants 1 to 4 by holding that the same is not liable for attachment and sale holding that the arrack business carried on in partnership was the individual business of the 5th defendant and that as a partnership of the said firm he was not acting on behalf of the joint family. Items 4 and 5 being ancestral properties these defendants have 4/5th interest in the same. So far as the sites owned on which buildings covered by Items 2 and 3 are constructed are concerned, they belong to the mother of the defendants 1 to 4. In so far as Item-1 is concerned, one half of the building site belongs to their mother and the other half belongs to the joint family and there is no question of any debt here and there and there is no obligation on these defendants to meet the tax liability of their father more so when his 1/5th share is the property available for being proceeded against. No liability whatsoever attaches to these defendants and the theory of pious obligation never be invoked in a case of this nature. The orders passed by the Tax Recovery Officer in O.P.No.136/79-80 does not call for any interference and hence the suit may be dismissed. Averments made in the written statement filed by the 5th defendant: The 5th defendant denied the material allegations in the plaint and had taken a similar stand as that of defendants 1 to 4 in their written statement. Further it was pleaded that besides being an illiterate person he used to contribute his signature whenever and whoever asked him to sign. He never joined as a partner in the arrack business of M/s.Visakha Gowda Association in the capacity as a joint family manager and kartha and that he had joined as a partner in the said firm in his individual capacity. He had never invested the joint family funds in the said business and only his share of income was invested in the said firm and therefore the order passed by the Tax Recovery Officer in O.P.No.136/79-80 does not call for any interference and hence the suit may be dismissed with costs. 8. Issues settled by the trial Court : (a) Whether the 5th defendant was a partner of the arrack business in his individual capacity and not as a kartha of the joint family consisting of himself and his sons ? (b) Whether the share of the defendants 1 to 4 in the joint family properties are not liable to be proceeded against by the plaintiff ? (c) Whether the 4/5th share of the defendants 1 to 4 is not liable for attachment for recovery of tax arrears of the partnership firm ? (d) Whether the orders of the Tax Recovery Officer are proper and valid and are not liable to be set aside ? (e) To what relief ? 9. Evidence available on record : Witnesses examined for plaintiff : PW-1 – Ch.Gopalakrishna Murthy, Income-tax Officer Witnesses examined for defendants : DW-1 – T.Appa Rao (5th defendant) DW-2 – G.Appannareddy DW-3 – G.Satyarao DW-4 – K.Appa Rao DW-5 – P.Bhoolokareddy Documents marked for plaintiff : Ex.A.1 dt.29-4-1980 – Copy of order of Tax Recovery Officer, Visakhapatnam. Ex.A.2 dt.20-11-1976 – Photostat copy of application of 5th defendant to Income Tax Officer, C.Ward, Visakhapatnam. Ex.A.3 dt.12-8-1976 – Photostat copy of Return of Income submitted by 5th defendant for Assessment Year 1963-64 Ex.A.4 dt.12-3-1976 – Photostat copy of Return of Income submitted by 5th defendant for Assessment Year 1971-72 Ex.A.5 dt.12-3-1976 – Photostat copy of Return of Income submitted b 5th defendant for Assessment Year 1972-73 Ex.A.6 dt.30-3-1977 – Photostat copy of Assessment order of Income Tax Officer, C.Ward, Visakhapatnam. Ex.A.7 dt.19-12-1977 - -do- for 1977-78 Ex.A.8 dt.27-7-1979 - -do- for 1978-79 Ex.A.9 dt.20-2-1980 – Photostat copy of notice under Section 148 of Income Tax Officer, D.Ward, Visakhapatnam to the 5th defendant for Assessment Year 1971-72 Ex.A.10 dt.20-2-1980 – Photostat copy of notice under Section 148 of Income Tax Officer, D.Ward, Visakhapatnam to the 5th defendant for the Assessment Year 1971-72 Ex.A.11 dt.20-2-1980 - -do- Ex.A.12 dt.20-2-1980 - -do- for 1972-73 Ex.A.13 dt.20-2-1980 - -do- for 1972-73 Ex.A.14 dt.20-2-1980 - -do- for 1972-73 Ex.A.15 dt.10-6-1981 – Photostat copy of letter of Income Tax Officer, A.Ward, Visakhapatnam to the 5th defendant Ex.A.16 dt.28-2-1985 – Photostat copy of order of Assistant Commissioner of Income Tax, Visakhapatnam Ex.A.17 dt.26-12-1970 – Photostat copy of partnership deed between P.Raghavarao and 18 others Ex.A.18 dt.23-3-1971 – Photostat copy of application for registration of M/s. Visakhapatnam Gowda Association Ex.A.19 dt.30-11-1972 - -do- for declaration under Section 184(7) of Income Tax Act 1961 for continuation of registration Ex.A.20 dt.28-7-1971 – Photostat copy of return of income of M/s.Sree Visakha Gowda Association for Assessment Year 1971-72 Ex.A.21 dt.26-3-1972 - -do- of revised return for 1971-72 Ex.A.22 dt.28-2-1976 – Copy of assessment order for Assessment Year 1971-72 Ex.A.23 dt.19-3-1972 – Photostat copy of returns of income for 1972-73 Ex.A.24 dt.26-3-1972 - -do- of revised return for 1972-73 Ex.A.25 dt.28-2-1976 - -do- for assessment order for 1972-73 Ex.A.26 dt.25-2-1980 – Photostat copy of objection petition of defendants 1 to 4 to Tax Recovery Officer, Visakhapatnam Ex.A.27 dt.12-8-1976 – Photostat copy of Income Tax returns submitted by 5th defendant for 1964-65 Ex.A.28 dt.12-8-1976 – Photostat copy of Income Tax return submitted by 5th defendant for 1965-66 Ex.A.29 dt.12-8-1976 – Photostat copy of Income Tax returns submitted by 5th defendant for 1966-67 Ex.A.30/12-3-1976 – Photostat copy of Income Tax returns submitted by 5th defendant for 1967-68 Ex.A.31/30-3-1977 – Photostat copy of Assessment order of Income Tax Officer, C.Ward, Vizag or Assessment Year 1969-70 Documents marked for defendants: Ex.B.1 dt.21-2-1986 – Copy of order of Assessment Commissioner of Income Tax, Visakhapatnam for 1972-73 Ex.B.2 dt.31-3-1984 – Photostat copy of Assessment order for Assessment Year 1971-72 Ex.B.3 dt.31-3-1984 – Photostat copy of Assessment order for Assessment Year 1972-73 of Income Tax Officer, A.Ward, Visakhapatnam Ex.B.4 dt.19-2-1980 - -do- of Registration Extract of sale deed for Rs.400/- executed by G.Venkayyamma in favour of 1st defendant Ex.B.5 dt.29-1-1964 - -do- for Rs.1500/- executed by Mohammed Saheb in favour of 1st defendant Ex.B.6 dt.24-6-1964 - -do- for Rs.1000/- executed by G.Nagireddi in favour of 1st defendant Ex.B.7 dt.28-2-1976 – Photostat copy of Assessment order for 1971-72 Ex.B.8 dt.28-2-1976 - -do- for 1972-73 10. Findings recorded by the trial court in nutshell : The learned Principal Subordinate Judge after referring to several decisions ultimately came to the conclusion that in the facts and circumstances of the case the 5th defendant was a partner of M/s.Visakha Gowda Association in his individual capacity investing his monies and not on behalf of the Hindu Undivided Family though he is a joint family manager and as such only his 1/5th share in the joint family property alone is liable to be proceeded against for realization of the tax. Further it was held that the 4/5th share of the undivided sons of the 5th defendant i.e., defendants 1 to 4, who are is not liable for auction for recovery of the income tax arrears and ultimately came to the conclusion that the order under challenge does not suffer from any illegality and dismissed the suit. 11. In the light of submissions made by the Counsel on record, the following Points arise for consideration in this Appeal : (a) Whether the findings recorded by the learned Principal Subordinate Judge, Visakhapatnam dismissing the suit are to be confirmed or to be disturbed or set-aside in the facts and circumstances of the case ? (b) If so to what relief the parties would be entitled to ? 12. Point No.1: The 5th defendant is the father of the defendants 1 to 4 and the 5th defendant joined as partner in M/s.Visakha Gowda Association. It is the case of the plaintiff that the 5th defendant joined the said Association as one of the partners of M/s.Visakha Gowda Association representing the Hindu Undivided Family, in short referred to as “HUF" but however specific stand taken by the defendants is that the 5th defendant joined as a partner in the said Association in his individual capacity and not representing the joint family. The learned Judge after appreciating the evidence available on record referred to the undernoted decisions : Chamdrayya Vs. Sambayya [3], V.Padayachi Vs. Sivasoorinam [4], Amritlal Vs. Jayantilal [5], M.R. Radhakrishnam Vs. Union of India [6], Sidramappa Vs. Babajappa [7], P.Murugavva Vs. S.Somasundaram [8], Pichappa Vs. Chokalingam [9], Rama Krishna Transport Vs. Income Tax Commissioner [10], Shanmukeshwararao Vs. Venkatappaiah and sons [11], Benaras Bank Vs. Hari Narayan [12], A.Robini Vs. Akak Sethumadhavan [13], Kanakaratnamala Vs. Logenadha [14], G.Narayana Raju Vs. Chamarju [15], Lakshmi Ammal Vs. Meenakshi Ammal and others[16]. The learned Judge appreciated in elaboration the oral evidence of PW-1 and also the oral evidence of DW-1, DW-2, DW-3, DW-4 and DW-5 as well and also recorded further findings in relation to documentary evidence as well – Exs.A-1 to A-31 and Exs.B-1 to B-8 as well and ultimately came to the conclusion that the order under challenge does not suffer from any illegality whatsoever and accordingly dismissed the suit. 13. The 5th defendant was a partner in M/s.Visakha Gowda Association and his sons i.e., defendants 1 to 4 had chosen to contest the suit with all seriousness. The learned Judge on appreciation of the evidence of PW-1, DW-1, DW-2, DW-3, DW-4 and DW-5 and also Exs.A-1 to A-31 and Exs.B-1 to B-8, recorded findings in detail and ultimately came to the conclusion that the order under challenge does not suffer from any illegality and ultimately dismissed the suit. 14. In the decision referred (2) supra at paras 6, 8, 9 and 17, the Full Bench of this Court observed : “Colebrooke’s translation was also accepted by the Supreme Court in S.M.Jakati Vs. S.M.Borkar, AIR 1959 S.C. 282. They observed that it is the pious duty of the sons to discharge their father’s debts not tainted with immorality or illegality. In Perumal Chetti Vs. Province of Madras, AIR 1952 Madras 382 Chief Justice Rajamannar delivering the judgment of the Division Bench observed : “We have our doubts if that term had a precise and definite meaning even in the days of the Smritis. It is like “just and convenient”, reasonable and prudent, “justice, equity and good conscience”. To give the latest example it is an expression as elastic and indefinite as the expression “reasonable restrictions” in Article 19 of our Constitution. Colebrooke translated the expression “avyavaharika” as “repugnant to good morals”. There have been other translations, like ‘improper’ and ‘not lawful’, usual or customary’. “Vyavahara” is a word which has more than one meaning. But we agree with Mr.Venkata Subramania Aiyar that the word has reference to the ideal of good conduct according to the notions prevailing at the material time. But we are unable to hold that any debt which the father ought not to have strictly contracted is necessarily a debt which is ‘avyavaharika’. There should be an element of moral turpitude involved in the debt. It is only then that it could be called ‘avyavaharika’. Whatever may be the difference in the translations of this expression, it is now clear that the expression ‘avyavaharika’ has been understood as repugnant to good morals or tainted with immorality or illegality or involving some morel turpitude. Even if a wider meaning such as ‘improper’ is given there can be no doubt that the liability in the present case, namely, the liability of the father to pay arrears of income-tax which had accrued in respect of the business which he was carrying on cannot be said to be ‘avyavaharika’. In our opinion it is impossible to argue that the liability to pay taxes legally due to the Government is an ‘avyavaharika’ debt within the meaning of the texts as interpreted by the judicial decisions, some of which have been referred to above. It is stated that the assessment was made on an estimated income but even so the tax so levied would still be tax legitimately due at it has been held that even an estimate cannot be arbitrary and must rest on some rational basis. There would be some scope for argument if a penalty or fine had been levied due to the negligence or laches of the assessee or due to his non- compliance with any provision of law. As that is not the case here we express no opinion on that matter. We may also state that Mr.Rama Rao also did not seriously contend before us that the said liability would be in the nature of an ‘avyavaharika’ debt not binding upon the son. His main argument however, was that the exemption from liability of the son under the doctrine of pious obligation is not only in respect of an ‘avyavaharika’ debt, but in respect of the various classes of debts, mentioned I the several texts referred to earlier. He submitted that one class of debts which is specifically mentioned in the text of Usanas and the other texts is ‘sulka’. According to the dictionary meaning as well as the meaning given by the various recognized translators of the texts from time to time, the expression ‘sulka’ would also include a tax. As the smritis expressly state that the son is not liable to pay the ‘sulka’ which remained unpaid by the father it is argued that the son is not liable for the arrears of income-tax payable by the father in this case. It is very difficult at this distance of time to find out what the ‘smriti’ text