Case: Additional Income-Tax Officer, Cuddapah Vs. A. Thimmayyaand Others

the Hindu family hitherto assessed as undivided notwithstanding partition, if no claim in that behalf has been made to him, or if he is not satisfied about the truth of the claim that the joint family property has been partitioned in definite portions, or if on account of some error or inadvertence he fails to dispose of the claim. In all these cases his jurisdiction to assess the income of the family hitherto assessed as undivided remains unaffected, for the procedure for making assessment of tax is statutory. Any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, and the assessment is not liable to be challenged collaterally.10. In the present case claim was undoubtedly made at the time of making an assessment, that the property of the family was partitioned. The claim was not disposed of before making the assessment, and the Income-tax Officer proceeded to assess the income of the family as if the property of the family had not been partitioned. It is true that by order dated June 30, 1952 the Income-tax Officer held that the property of the family was partitioned on November 2, 1946. But the Act contains no machinery authorising an Income-tax Officer to re-open an assessment of a Hindu undivided family, relying upon an order made by him under S. 25-A(1) after the order of assessment is made. In the present case appeals were filed and it is common ground that no objection was raised as to the regularity or legality of the procedure followed by the Income-tax Officer. The assessment proceedings were taken to the Income-tax Appellate Tribunal and the orders of assessment were confirmed. Thereafter it was not open to the Income-tax Officer to re-open the orders of assessment, relying upon the order recording the partition, and to seek to subvert orders which had become final under the seal of the Income-tax Appellate Tribunal. The High Court was, in our judgment, in error in holding that an order of assessment which has become final is liable to be re-opened under S. 25-A(2) by the Income-tax Officer, when an order under Sec. 25-A(1) is passed by him subsequent to the order of assessment :11. But the appeals filed by the Income-tax Officer must still fail. Order recording the partition subsequent to the date on which the order of assessment was made must for reasons aforementioned be ignored and tax levied as if no such order was made. The effect of that step, however, is that in the absence of an order under S. 25-A(1) and the consequential proceedings under sub-section (2) liability to pay tax must rest upon the property of the Hindu undivided family: it cannot be enforced against the members of the family personally. The Income-tax Officer has sought by resorting to S. 46(5) to attach the remuneration earned by Thimmayya and Venkatanarsu as employee of Krishnappa Asbestos and Barytes (Private) Ltd. : this he was incompetent to do. So long as the assessment is made of income of the Hindu undivided family, liability to satisfy the tax must be restricted to the estate of the family: after an order of partition is recorded and assessment is made under sub-section (2) of S. 25-A but not till then, the proviso to that sub-section will operate.12. The Solicitor-General contended that the second paragraph of sub-section (2) which is in the form of a proviso, is in substance a substantive provision imposing joint and several liability for tax assessed on the total income received by or on behalf of the joint family against all members of the family. The contention is that by the proviso the Legislature intended that in respect of the income of a Hindu undivided family, once partition is effected, whether the partition is recorded or not under sub-section (1), all members of the family will be jointly and severally liable for the tax assessed on the total income received by or on behalf of the family. But however read the proviso yields no such meaning. The scheme of the section is that so long as there is an assessment of the Hindu undivided family, the liability for payment of the tax is on the property of the family and not personally on the members. Where an order that the property of the family has been partitioned is recorded, the liability of the members has to be apportioned in the manner set out in sub-section, but one of the incidents of assessment after apportionment of tax liability is that the members of the family stand jointly and severally liable for the entire amount of tax assessed against the family.13. In the present case no orders were recorded by the Income-tax Officer at the time of making assessments in respect of the five years, and therefore no personal liability of the members of the family arose under the proviso to sub-section (2). The Income-tax Officer does not seek to reach in the hands of Thimmayya and Venkatanarsu the property which was once the property of the Hindu undivided family : he seeks to reach the personal income of the two respondents. That the Income-tax Officer could do only if by virtue of the proviso to sub-section (2) a personal liability has arisen against them. In the absence of an order under sub-section (1), however, such a liability does not arise against the members of the Hindu undivided family, even if the family is disrupted.14. We are therefore of the view, but not for the reasons mentioned by the High Court, that because there has been before the orders of assessment no order recording that the property of the family has been partitioned among the members, the two respondents are not personally liable to satisfy tax due by the joint family. The remedy of the Income-tax authorities in the circumstances of the case, was to proceed against the property, if any, of the Hindu undivided family. That admittedly they have not done.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. The scheme of S. 25-A is therefore clear : a Hindu undivided family hitherto assessed in respect of its income will continue to be assessed in that status notwithstanding partition of the property among its members. If a claim is raised at the time of making an assessment that a partition has been effected, the Income-tax Officer must make an inquiry after notice to all the members of the family and make an order that the family property has been partitioned in definite portions, if he is satisfied in that behalf. The Income-tax Officer is by law required still to make the assessment of the income of the Hindu undivided family, as if no partition had taken place and then to apportion the total tax liability and to add to the separate income of the members or groups of members the tax proportionate to the portion of the joint family property allotted to such members or groups of members and to make under S. 23 assessment on the members accordingly. If no claim for recording partition is made, or if a claim is made and it is disallowed or the claim is not considered by the Income-tax Officer, the assessment of the Hindu undivided family which has hitherto been assessed as undivided will continue to be made as if the Hindu undivided family has received the income and is liable to be assessed.9. Failure to make an order on the claim made does not affect the jurisdiction of the Income-tax Officer to make an assessment of the Hindu family which had hitherto been assessed as undivided. The Income-tax Officer may assess the income of the Hindu family hitherto assessed as undivided notwithstanding partition, if no claim in that behalf has been made to him, or if he is not satisfied about the truth of the claim that the joint family property has been partitioned in definite portions, or if on account of some error or inadvertence he fails to dispose of the claim. In all these cases his jurisdiction to assess the income of the family hitherto assessed as undivided remains unaffected, for the procedure for making assessment of tax is statutory. Any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, and the assessment is not liable to be challenged collaterally.10. In the present case claim was undoubtedly made at the time of making an assessment, that the property of the family was partitioned. The claim was not disposed of before making the assessment, and the Income-tax Officer proceeded to assess the income of the family as if the property of the family had not been partitioned. It is true that by order dated June 30, 1952 the Income-tax Officer held that the property of the family was partitioned on November 2, 1946. But the Act contains no machinery authorising an Income-tax Officer to re-open an assessment of a Hindu undivided family, relying upon an order made by him under S. 25-A(1) after the order of assessment is made. In the present case appeals were filed and it is common ground that no objection was raised as to the regularity or legality of the procedure followed by the Income-tax Officer. The assessment proceedings were taken to the Income-tax Appellate Tribunal and the orders of assessment were confirmed. Thereafter it was not open to the Income-tax Officer to re-open the orders of assessment, relying upon the order recording the partition, and to seek to subvert orders which had become final under the seal of the Income-tax Appellate Tribunal. The High Court was, in our judgment, in error in holding that an order of assessment which has become final is liable to be re-opened under S. 25-A(2) by the Income-tax Officer, when an order under Sec. 25-A(1) is passed by him subsequent to the order of assessment :11. But the appeals filed by the Income-tax Officer must still fail.In the present case no orders were recorded by the Income-tax Officer at the time of making assessments in respect of the five years, and therefore no personal liability of the members of the family arose under the proviso to sub-section (2). The Income-tax Officer does not seek to reach in the hands of Thimmayya and Venkatanarsu the property which was once the property of the Hindu undivided family : he seeks to reach the personal income of the two respondents. That the Income-tax Officer could do only if by virtue of the proviso to sub-section (2) a personal liability has arisen against them. In the absence of an order under sub-section (1), however, such a liability does not arise against the members of the Hindu undivided family, even if the family is disrupted.14. We are therefore of the view, but not for the reasons mentioned by the High Court, that because there has been before the orders of assessment no order recording that the property of the family has been partitioned among the members, the two respondents are not personally liable to satisfy tax due by the joint family. The remedy of the Income-tax authorities in the circumstances of the case, was to proceed against the property, if any, of the Hindu undivided family. That admittedly they have not done.