1972 (8) TMI 7 - SC - Income Tax

Reopening of assessment - notice for filing return - after the complete partition of the family - Excess Profits Tax Officer cannot initiate proceedings under s. 13 and 15 of Excess Profits Tax Act 1940 - revenue appeal is dismissed

Summary

Issues:
1. Validity of notices issued under section 13(1) of the Excess Profits Tax Act, 1940.
2. Interpretation of provisions under the Excess Profits Tax Act regarding assessment of tax on a person.
3. Applicability of section 44 of the Indian Income-tax Act, 1922 to Hindu undivided families.

Detailed Analysis:

Issue 1: The validity of notices issued under section 13(1) of the Excess Profits Tax Act, 1940 was challenged in this case. The appellant, the Income-tax Officer, issued notices to the respondent under section 13(1) for chargeable accounting periods ending on specific dates. The respondent filed writ petitions challenging the validity of these notices. The High Court held that the appellant was not competent to proceed under the Act for a Hindu undivided family that had undergone partition. The Division Bench of the Allahabad High Court upheld this decision, leading to the appeals in the Supreme Court.

Issue 2: The interpretation of provisions under the Excess Profits Tax Act regarding the assessment of tax on a person was a crucial aspect of this judgment. The appellant contended that the tax is levied on the business and not on an individual, emphasizing the continuation of the business over the identity of the assessee. However, the Court referred to relevant sections of the Act, including section 14, which clearly indicated that the assessment of tax is on the person carrying on the business during the chargeable accounting period. The Court agreed with the observations of the High Court of Madras, emphasizing that the assessment of tax is on the person, even if the business continues but with a change in the person carrying on the business.

Issue 3: The applicability of section 44 of the Indian Income-tax Act, 1922 to Hindu undivided families was discussed in this judgment. Section 44 deals with the assessment of firms or associations of persons after discontinuance or dissolution. The Court noted that Hindu undivided families are distinct entities and not classified under firms or associations of persons. The absence of a similar provision in the Excess Profits Tax Act, like section 25A of the Indian Income-tax Act, further supported the conclusion that the impugned notices were invalid. Previous decisions by the Madras and Allahabad High Courts were cited to reinforce this interpretation.

In conclusion, the Supreme Court dismissed the appeals, upholding the decisions of the High Court regarding the invalidity of the notices issued under the Excess Profits Tax Act. The judgment provided a detailed analysis of the legal provisions and their application to the specific circumstances of the case, emphasizing the assessment of tax on the person carrying on the business and the distinct classification of Hindu undivided families under tax laws.