9911796707
TMI Blog1987 (10) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ; } (4) Master Sanjeev Kumar } Minors (5) Master Dinesh Kumar } (6) Master Bharat Bhushan } 3. The asssessee family was a partner in the firm of M/s Ladu Mal Kewal Chand, Shamli, Dist. Muzfarnagar. It effected a partial partition of its capital in the said firm and its right to share in the profits of the firm w.e.f.20-10-1979. It made a claim before the ITO for recognition of this partial partition under sec. 171. 4. The ITO refused to record a finding of partial partition. According to him, no partial partition could be recognized after18-6-80in view of the amendment intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n prior to18-6-80] in the hands of Manik Chand, individual. He failed to see that the assessments were made in the case of Manik Chand, the individual, and not in Manik Chand & Sons, HUF. The two are different entities. One cannot be mistaken for the other. The assessments made in the case of Manik Chand, the individual, could not be treated or considered as the assessments made on the assessee family M/s. Manik Chand & Sons. This was so, notwithstanding the fact that the subject matter of assessment in the case of Manik Chand, individual, rightly pretended to Manik Chand & Sons, HUF. Merely from this circumstance, the revenue cannot claim that the assessee HUF had been assessee. (iii) In fact, the assessee family had explained why the assessments were made in the above manner in the affidavit of Ashok Kumar dated20-10-1979forming part of the record. According to this affidavit, the mistake are so in the following manner : "That my father, Shri Manik Chand was being assessed to in one tax at Jaipur, on whose sudden death the entire responsibility devolved on me. I met Shri C. P. Chhabra, Advocate of Muzaffarnagar in August 1979 for seeking his guidance and assistance in Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see-HUF continued in the books of the firm, as before, even after the partial partition. This was not a valid reason for refusing to accepted the assessee's claim. The factotum of partial partition was recorded in the memorandum book started by the assessee HUF w.e.f.19-10-1979, wherein the separate accounts of the members of the family were maintained. Partition does not require to be effected by a registered documents. In the instant case, there was not only the intention expressed by the coparcenery to separate but a memorandum dated 21-10-79 was also executed bearing the signatures of all the members effete by the partition. The assessee's claim was, therefore, to be accepted. 7. On the above facts and circumstances, the Commissioner has raised the following four questions for reference : "1. Whether the Tribunal was justified in holding that the assessee was 'not hitherto assessed to tax' and provisions of sub-sec. (9) of section 171 were not applicable in this case ? 2. Whether the ITAT erred on facts and in law to hold until the A. Ys. 1980-81 and 1981-82 property and assets held by M/s Manik Chand, & Sons were being assessed in the hands of Sri Manik Chand, Individual, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner, is relevant for the assessment year 1981-82. Nothing turns on this. Section 171(9) has to be applied as it stands. There is no room roe modifying or adoption the language of this provision in any manner to suit either the revenue or the assessee. The words" hitherto assessed" found in section 171(9) were liked into by the Tribunal in the light of the material on record. It then recorded its finding of fact that the assessee-HUF had not been hitherto assessed as a HUF so as to attract section 171(9). No Question of law arises out of this finding of fact. 10. Question No. 4 again wrongly assumes that the language of sec. 171(9) could be adopted or modified to reach a particular result in view. It is true that the individual was assessee up to the assessment year 1979-80 on the income from the assets of the assessee-HUF. But this does not convert the assessment into an assessment on the HUF itself. The two entities are different, as observed by the Tribunal in its order and there is also the clear finding that no assessment had been made on the assessee-HUF, as a HUF prior to20-10-1979. There is no getting away from this basic finding or fact. Question No. 4 is also, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The dispute was regarding the assessment of Rs. 14,374 representing 1/5the share of profit received by the assessee from the partnership of M/s Ladu Lal Kewal Chand. Proceeding on the basis of the basis of validity of the partial partition of20-10-1979. The assessee returned Rs. 14,374 as his income derived from the share of profit of the said firm. The ITO having rejected the claim of partial partition supra, made an assessment of Rs. 14,374 as a protective measure. The AAC upheld this. The Tribunal allowed the assessee's appeal with the following observations : "8. Since we have already upheld the claim of the assessee for recording the partial partition we are of the view that the assessment of the sum of Rs. 14,374 representing 1/5the of share income derived from the profits of M/s Ladu Lal Kewal Chand is includible in the assessment of the assessee for the year 1981-82. Accordingly, the finding of both the authorities below are vacated and the ITO is directed to include the sum as a part of the total income of the assessee for the year. In the result, appeal is partly allowed." (One other ground had been taken by the assessee before the Tribunal which was rejected. That i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch finding on two separate counts, independent of each other and to protect this aspect, the ITO'S short order under section 171 is noticed below : "The assessee has made a claim of partial partition and filed copy of memorandum of partial partition alleged to be executed on21-10-1979. Through this deed do partition it is claimed by the assessee that partial partition took place in the family styled as M/s Manik Chand & Sons on 20-10-1979 in respect of the following persons : Smt. Shanti Devi W/o Late Sri Manik Chand, Sri Ashok Kumar S/o Late Sri Manik Chand, Smt. Shanti Devi, mother and natural guardian of Master Arun Kumar, Master Dinesh Kumar, Master Bharat Bhushan. It is claim of the assessee that Shri Manik Chand, who was being assessed in the status of individual, was actually Karta of the HUF styled as M/s Manik Chand & Sons. He had received certain properties on partition of the bigger HUF of Shri Chhoga Las. It was, therefore, claimed by the assessee that correct status of the assessee as HUF and not individual. In view of the evidence filed, status of the assessee was accepted as that of HUF. Now the assessee has claimed that a partial partition has taken place in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect whether before or after the 18the day of June, 1980, being the date of introduction of the Finance (No. 2) Bill, 1980, shall be null and void : (b) Such family shall continue to be liable to assessed under this Act as if no such partial partition had taken place;" 5. In the first appeal, the learned AAC vide his order dated 7-1-1985 observed that the assessments in the preceding years in the case of the respondent-HUF were being framed by the ITO, Jaipur in the status of Individual in respect of income actually belonging to the HUF and such an irregularity had neither caused the assessment orders passed to be null and void nor it had gone to change the real character of the income. 6. The assessee succeeded in its second appeal and the necessary basis and reasons are record in para 6 of the proposed draft order of the learned Vice-President, which is not being repeated. It may be noted as a fact and which is borne out on record that though in relation to share income the respondent was being assessed in individual status, vis-a-vis, in respect of total asset in wealth-tax assessments including share interest in the firm M/s Ladumal Kewal Chand, the claimed status, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision that the claim of partial partition in. the case of M/s Manik Chand & Sons should have been allowed and gave directions accordingly. 12. Though the learned Vice-President (WZ) has rejected the reference request with regard to such finding, I have given my reasons for accepting the Commissioner's request. The present reference being consequential in nature, I propose reference of the following question : "Whether the Tribunal was justified in directing to include the sum of Rs. 14,374 as a part of the total income on substantive basis in view of its finding recorded inI.T. A. No, 1591 (Del) / 85 ?" R. A. No. 584(del) / 87 13. In view of my approach in R. A. No. 583 I propose to accept the Commissioner's request for reference in the present case also. The related facts being as under : 14. The Income-tax Officer added the share income from the firm M/s Ladu Lal Kewal Chand, Shamli, on the ground that the partial partition claimed by the assessee had been rejected. The AAC confirmed the same. 15. The Tribunal vide order dated31-12-1986deleted the share income of Rs. 71,869 from the assessment of the HUF by observing that the partial partition claim was allowable. 16. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Shri Ashok Kumar S/o Late Manik Chand (iii) Master Arun } (iv) Master Sanjeev Kumar } Minors (v) Master Dinesh Kumar } (vi) Master Bharat Bhushan } This family was a partner in the firm Ladu Mal Kewal Chand, Muzaffarnagar. The capital invested by this family in the said firm was divided in the books of the said firm as on20-10-1979. The share that the assessee HUF had in the said firm was also decided with effect from the said date. The claim made by the assessee before the ITO for the recognition of this par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definite status is to be given to each assessee and the status of individual given to assessee cannot be deemed or considered to be the status of HUF either on the ground of mistake or on the ground that the properties belonged to joint family though mistakenly assessed in the status of individual. 2. The assessee family explained why the assessments were made kin the status of individual in an affidavit sworn to by one Shri Ashok Kumar S/o Late Manik Chand dated 20-10-1979 which formed part of the record. It was stated in this affidavit that Late Manik Chand was being assessed to income-tax at Jaipur and on his sudden death the entire responsibility of managing the affairs of joint family fell on him (Ashok Kumar), that he met one Shri Chabbra, an Advocate of Muzaffarnagar in August 1979 for seeking his guidance and assistance in income-tax and wealth-tax matters and that the said Shri Chabbra had advised him, after going through the papers, that his father had been mistakingly showing the income from the properties and the share income from the firm of Ladu Mal Kewal Chand in the status of individual whereas it actually belonged to the joint family and that after the death ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be a joint family hitherto assessed to tax. The fact of the matter was that this assessee HUF was never assessed to tax as joint family and the recording by the Tribunal of that fact, was a pure finding of fact. This finding of fact does not five rise to any question of law. It is no doubt true that then expression 'hitherto assessed as undivided' was used in sub-section (9) of section 171 as a guideline to ascertain the position from material on record and the Tribunal had to find out whether the assessments made on the joint family would be covered by this expression. From the dates of assessments made on the assessee-HUF, the Tribunal came to the conclusion that no assessment on this joint family had taken place. That was a pure finding of fact and it did not involve the interpretation of sub-section (9) of section 171. 7. The second question is also a pure finding of fact. The assessments on the assessee HUF for the assessment years 1980-81 and 1981-82 were made in the hands of joint family on7-10-83and27-12-1983respectively. Earlier to that the assessments were made in the case of Shri Manik Chand, individual. The contention raised on behalf of the Revenue was that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made in the status of individual as assessments made in the status of HUF by raising the plea that the properties belonged to the HUF and the status was taken wrongly as individual. This change in status without coming about according to the procedure established by law, could not be recognized. These findings of the Tribunal could not therefore give rise to any question of law. 10. For these reasons I am unable to agree with the view that the order of the Tribunal gave rise to any question of law. 11. The learned Judicial Member took note of the situation that for wealth tax assessments the properties as well as the share of interested in the firm of Ladu Mal Kewal Chand the status claimed was that of HUF and that was accepted and once that was so, the status accepted for wealth-tax purposes should be construed perhaps as having been the status adopted for income-tax assessments also and even though for the purpose of assessment to income-tax, the benefit of status was given to the assessee, this peculiar situation of making assessments in two different status gave rise to a question of law. In my earnest opinion this situation by itself does not create a question of law much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt itself was made on7-10-83."Assessed" means actually assessed to tax on a particular day and that is purely factual. The object of section 171(9) is to be recognize partial partitions that have taken place after the 31st day of December, 1978 as the Legislature thought that the devises of partial partition was being increasingly used to evade payment of legitimate income-tax. Therefore the first requisite for section 171(9) to apply is to a joint family, which was assessed to income-tax as joint family prior to18-6-90. This has therefore nothing to do with the previous years coinciding with the assessment years except that this relates to the fact of assessment being made prior to18-6-90. Since the object of clause (a) of subsection (9) of section 171 is to nullify the effect of recognition of partitions made before 18-6-90 in respect of partitions taking place after 31-12-78, the importance of making an assessment in the status of HUF prior to 18-6-90 assumes significance. It is for this reason I am unable to agree with the learned Judicial Member when he proposed that a question of a law dies arise out of the order of the Tribunal because the previous year for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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