Case: Gauri Shankar Chandrabhan Vs. Commissioner of Income Tax, U.P., Lucknow

his order dated March 26, 1962, passed under section 25A of the Act and the Act did not provide any machinery for imposition of the penalty on the Hindu family after its disruption, the imposition of penalty on March 20, 1958, was bad in law and could not be sustained. Counsel appearing on behalf of the revenue has, on the other hand, urged that imposition of the impugned penalty cannot be challenged as, in view of section 25A(3) of the Act, a Hindu undivided family must be deemed to have continued in existence till the date of the passing of the order under section 25A(1) of the Act. 4. For a proper determination of the question, it is necessary to refer to section 25A of the Act which at the relevant time stood as under:"25A. (1) Where, at the time of making an assessment under section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income-tax Officer shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions, he shall record an order to that effectrovided that no such order shall be recorded until notices of the inquiry have, been served on all the members of the family. (2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family, whose joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income-tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members shall, in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in sub-section (1) of section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Income-tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23. Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such (3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family." 5. It will be noticed that sub-section (3) of the above-quoted section embodies a legal fiction according to which a Hindu family which has been previously assessed as "undivided" is to be continued to be treated as "undivided" till the passing of the order under sub-section (1) of the, section. This view gains strength from two decisions of this court in Additional Income-tax Officer, Cuddappah v. A. Thimmayya and joint Family of Udayan Chinubhai, etc. v. Commissioer of Income-tax, where it was held that so long as no order under Section 25A(1) of the Act is recorded, the jurisdiction of the Income-tax Officer to continue to assess as undivided despite partition under personal law a Hindu family which has hitherto been assessed in that status remains unaffected. It will be profitable in this connection to refer to the following observations made in A. Thimmayyas case"The section makes two substantive provisions--(i) that a Hindu undivided family which has been assessed to tax shall be deemed, for the purposes of the Act, to continue to be treated as undivided and, therefore, liable to be taxed in that status unless an order is passed in respect of that family recording partition of its property as contemplated by sub-section (1); and (ii) if at the time of making an assessment it is claimed by or on behalf of the members of the family that the property of the joint family has been partitioned among the members or groups of members in definite portions, i.e., a complete partition of the entire estate is made, resulting in such physical division of the estate as it is capable of being made, the Income-tax Officer shall hold an inquiry, and if he is satisfied that the partition had taken place, he shall record an order to that effect ...... 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." 6. In the face of the aforesaid decisions of this court, it is not necessary to burden the record by discussing the decisions cited by counsel for the appellant. 7. In the present case, there was not a whisper of the application under section 25A(1) of the Act by the appellant on March 15, 1957, when the penalty proceedings were initiated against it. Even on March 25, 1958, when the penalty was imposed, there was no order under section 25A(1) of the Act. It was only on March 26, 1962, that the partition was recognised and order under section 25A(1) of the Act was passed. There was thus no bar to the imposition of the impugned penalty.

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

Explanation:
0[ds]It will be noticed that sub-section (3) of the above-quoted section embodies a legal fiction according to which a Hindu family which has been previously assessed as "undivided" is to be continued to be treated as "undivided" till the passing of the order under sub-section (1) of the, section. This view gains strength from two decisions of this court in Additional Income-tax Officer, Cuddappah v. A. Thimmayya and joint Family of Udayan Chinubhai, etc. v. Commissioer of Income-tax, where it was held that so long as no order under Section 25A(1) of the Act is recorded, the jurisdiction of the Income-tax Officer to continue to assess as undivided despite partition under personal law a Hindu family which has hitherto been assessed in that status remains unaffected. It will be profitable in this connection to refer to the following observations made in A. Thimmayyas case"The section makes two substantive provisions--(i) that a Hindu undivided family which has been assessed to tax shall be deemed, for the purposes of the Act, to continue to be treated as undivided and, therefore, liable to be taxed in that status unless an order is passed in respect of that family recording partition of its property as contemplated by sub-section (1); and (ii) if at the time of making an assessment it is claimed by or on behalf of the members of the family that the property of the joint family has been partitioned among the members or groups of members in definite portions, i.e., a complete partition of the entire estate is made, resulting in such physical division of the estate as it is capable of being made, the Income-tax Officer shall hold an inquiry, and if he is satisfied that the partition had taken place, he shall record an order to that effect ...... 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."In the face of the aforesaid decisions of this court, it is not necessary to burden the record by discussing the decisions cited by counsel for the appellantIn the present case, there was not a whisper of the application under section 25A(1) of the Act by the appellant on March 15, 1957, when the penalty proceedings were initiated against it. Even on March 25, 1958, when the penalty was imposed, there was no order under section 25A(1) of the Act. It was only on March 26, 1962, that the partition was recognised and order under section 25A(1) of the Act was passed. There was thus no bar to the imposition of the impugned penalty.