Case: Inspecting Assistant Commissioner Agricultural Income Tax Vs. Poomuilli Manakkal Parameswaran Namboodripad

a registered deed. The genuineness as well as the validity of the deed is not in dispute. (ii) On January 18, 1960 on behalf of the Agricultural Income-tax Officer, it was conceded before the High Court that the respondent was liable to be taxed only as an "individual". The implication of this concession was that the respondents family was a divided family, (iii) Various attempts made by the Department to assess the respondent as karta of his family even after the decision of the High Court on January 18, 1960 were frustrated by the orders of the High Court referred to earlier and (iv) The respondent and the other members of his quondam family were assessed as "individuals" from 1958-1964. Those assessments had become final and tax levied on them had been paid. 14. Section 3 (1) is the charging section in the Act. That section reads:"Agricultural Income-tax at the rate or rates specified in the Schedule of this Act shall be charged for each financial year in accordance with and subject to the provisions of this Act on the total agricultural income of the previous year of every person." 15. "Person" is defined in Section 2 (m) as follows:-""person" means any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for another, either as owner trustee, receiver, common manager, administrator, or executor or in any capacity recognised by law and includes, a firm, or a company, an association of individuals, whether incorporated or not, and any institution capable of holding property." 16. Hindu undivided family as defined in Section 2 (kk) includes a family governed by Madras Nambudiri Act. 1932. 17. Under the Act what is brought to tax in an assessment year is the income of the assessee in the previous year. The scheme of taxation under the Act is similar to that under the Indian Income-tax Act, 1922. The liability to pay tax under the Act in respect of any income is incurred as and when the income is earned and the total income on which the tax is payable in any particular previous year gets settled at the end of the previous year. Section 29 is only a machinery section. This Court has held that Section 25-A of the Indian Income-tax Act, 1922 is only a machinery section. The same must be the position in regard to Section 29 of the Act. 18. Section 29 is attracted to an assessment proceedings only if one of the two conditions prescribed in Section 29 (1) is established. Either the family in question was being assessed as an undivided family in the previous assessment year or that family is being assessed for the first time. If neither of these conditions exist, Section 29 has no application whatsoever. The deeming provision contained in Section 29 (3) can have application only in cases where one or the other condition prescribed in S. 29(1) is satisfied and not otherwise. As seen earlier, every attempt made by the assessing authority to assess the quondam family of the respondent was set aside by the High Court. The High Court has repeatedly held that, that family is a divided family. Again the assessing authority itself in the previous years had proceeded on the basis that the family in question is a divided family. It had not only not assessed that family as an undivided family but had assessed the individual members of that family as divided members of that family. Hence the question whether that family was divided or undivided had been gone into in the earlier years and decided. That being so, it cannot be said that the family was "hitherto assessed as a Hindu undivided family." Nor can it be said that the family was "being assessed for the first time as a Hindu undivided family". As seen earlier that family was sought to be assessed as Hindu undivided family earlier but ultimately the assessing authority had to assess the members of that family as members of a divided family. In other words it had held the family to be divided one. Such a family cannot be considered as being "assessed for the first time as a Hindu undivided family". The expression "which (meaning family) is being assessed for the first time as a Hindu undivided family" presupposes the existence of the family. That is a condition precedent. Section 29 (1) does not permit the assessing authority to create a family by rejoining the divided parts or otherwise. If that is not so, families which had been divided years back can be again resurrected by the assessing authorities for the purpose of the Act. The family referred to in Section 29 (1) is a family known to law and not a deemed family. The amendment of Section 29 has introduced considerable confusion into that section. At the time of the assessment either there is a family or there is no family. If there is a family its liability has to be judged on the basis of the Act. If the family has ceased to exist even before the assessment proceedings started then there can be no family which is being assessed to tax for the first time. Possibly the intention of the legislature was to bring in the cases of undivided families not taxed in the previous years which were in existence during the whole or part of the previous year but were divided before the assessment proceedings commenced. It is not necessary for us in this case to decide whether that intention has been expressed with sufficient clarity so as to make it enforceable. Suffice it to say that in this case, the family sought to be taxed was non-existing in the concerned previous years and hence cannot be considered as a Hindu undivided family "being assessed for the first time". That being so there is no room for application of the "deeming" provision in Section 29 (3).

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

Explanation:
0[ds]13. Before proceeding to examine the scope of Section 29, let us recapitulate the events that had taken place.-(i) As long back as March 30, 1958, there was a partition in the family of the respondent; that partition is evidenced by a registered deed. The genuineness as well as the validity of the deed is not in dispute. (ii) On January 18, 1960 on behalf of the Agricultural Income-tax Officer, it was conceded before the High Court that the respondent was liable to be taxed only as an "individual". The implication of this concession was that the respondents family was a divided family, (iii) Various attempts made by the Department to assess the respondent as karta of his family even after the decision of the High Court on January 18, 1960 were frustrated by the orders of the High Court referred to earlier and (iv) The respondent and the other members of his quondam family were assessed as "individuals" from 1958-1964. Those assessments had become final and tax levied on them had been paid17. Under the Act what is brought to tax in an assessment year is the income of the assessee in the previous year. The scheme of taxation under the Act is similar to that under the Indian Income-tax Act, 1922. The liability to pay tax under the Act in respect of any income is incurred as and when the income is earned and the total income on which the tax is payable in any particular previous year gets settled at the end of the previous year. Section 29 is only a machinery section. This Court has held that Section 25-A of the Indian Income-tax Act, 1922 is only a machinery section. The same must be the position in regard to Section 29 of the Act18. Section 29 is attracted to an assessment proceedings only if one of the two conditions prescribed in Section 29 (1) is established. Either the family in question was being assessed as an undivided family in the previous assessment year or that family is being assessed for the first time. If neither of these conditions exist, Section 29 has no application whatsoever. The deeming provision contained in Section 29 (3) can have application only in cases where one or the other condition prescribed in S. 29(1) is satisfied and not otherwise. As seen earlier, every attempt made by the assessing authority to assess the quondam family of the respondent was set aside by the High Court. The High Court has repeatedly held that, that family is a divided family. Again the assessing authority itself in the previous years had proceeded on the basis that the family in question is a divided family. It had not only not assessed that family as an undivided family but had assessed the individual members of that family as divided members of that family. Hence the question whether that family was divided or undivided had been gone into in the earlier years and decided. That being so, it cannot be said that the family was "hitherto assessed as a Hindu undivided family." Nor can it be said that the family was "being assessed for the first time as a Hindu undivided family". As seen earlier that family was sought to be assessed as Hindu undivided family earlier but ultimately the assessing authority had to assess the members of that family as members of a divided family. In other words it had held the family to be divided one. Such a family cannot be considered as being "assessed for the first time as a Hindu undivided family". The expression "which (meaning family) is being assessed for the first time as a Hindu undivided family" presupposes the existence of the family. That is a condition precedent. Section 29 (1) does not permit the assessing authority to create a family by rejoining the divided parts or otherwise. If that is not so, families which had been divided years back can be again resurrected by the assessing authorities for the purpose of the Act. The family referred to in Section 29 (1) is a family known to law and not a deemed family. The amendment of Section 29 has introduced considerable confusion into that section. At the time of the assessment either there is a family or there is no family. If there is a family its liability has to be judged on the basis of the Act. If the family has ceased to exist even before the assessment proceedings started then there can be no family which is being assessed to tax for the first time. Possibly the intention of the legislature was to bring in the cases of undivided families not taxed in the previous years which were in existence during the whole or part of the previous year but were divided before the assessment proceedings commenced. It is not necessary for us in this case to decide whether that intention has been expressed with sufficient clarity so as to make it enforceable. Suffice it to say that in this case, the family sought to be taxed was non-existing in the concerned previous years and hence cannot be considered as a Hindu undivided family "being assessed for the first time". That being so there is no room for application of the "deeming" provision in Section 29 (3)8. The amended provision was given retrospective effect with effect from April 1, 1958. Taking advantage of the amendment of Section 29, the Department again issued a notice to the respondent on June 1, 1964 under Section 35 of the Act calling upon him to show cause why he should not be assessed as the karta of his H. U. F. for the period from November 1, 1956 to March 31, 1958. It may be noted thatl that date the respondent and other members of his former family were being assessed as "individuals" and the tax so levied had been paid. In other words for the earlier assessment years, the Department had proceeded on the basis that the family was a divided family.