TMI Blog1981 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... time by a member of the Hindu family that a partition had taken place among the members of the family is liable to be merely cancelled in appeal by the Income-tax Appellate Tribunal (for short, " the Tribunal ") without a further direction to the assessing authority either to modify the assessment suitably or to pass a fresh order, of assessment in accordance with law. The assessee is an HUF and the assessment years are 1955-56 and 1957-58 to 1961-62. An assessment order made on May 30,1959, in respect of the assessment year 1955-56 had been set aside by the AAC on February 24, 1962, with a direction to make a fresh assessment. When fresh assessment proceedings were commenced pursuant to the above said direction in respect of the assessment year 1955-56, the assessment proceedings for the assessment years 1957-58 and 1958-59 were also taken up. Earlier, a letter had been addressed on October 10, 1960, by Kapurchand Shrimal to the ITO in connection with a notice received by the assessee under s. 18A(1) of the Act in respect of the assessment year 1961-62, stating that all the movable and immovable properties of the assessee had been partitioned by metes and bounds under partition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and March 26, 1966, respectively, before the AAC held that the partition had taken place on July 13, 1960. In the appeals filed before the AAC against the assessment orders for the years in question, i.e., 1955-56 and 1957-58 to 1961-62, it was contended that the assessments were liable to be set aside on the ground that the inquiry into the claim of partition, which was a condition precedent for making an order of assessment on the HUF, had not been made as required by s. 25A of the Act. The AAC rejected the above contention. The assessee thereupon filed appeals before the Tribunal against the orders of the AAC and one question, which was common to all the appeals, that was urged before the Tribunal was about the validity of the assessments made against the assessee (HUF) without holding an inquiry regarding the claim of partition before the assessment proceedings were completed. While the assessee contended that the assessments were liable to be cancelled on account of the non-compliance with the mandatory provisions of s. 25A of the Act, it was urged on behalf of the department that in fact there was no violation at all of s. 25A, and, even if it was held that there was any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various members or groups of members in definite portions he shall record an order to the effect: Provided 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 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 Incometax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or where any person has succeeded to a business, profession or vocation formerly carried on by an HUF where joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the ITO 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-s. (1) of s. 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. The ITO is further authorised to make assessments accordingly on the various members and groups of members in accordance with s. 23 of the Act. By virtue of the proviso to sub-s. (2) of s. 25A of the Act the liability, which so long as an order was not recorded under sub-s. (1) of s. 25A was restricted to the assets of the HUF, is transformed, when such an order is recorded, into the personal liability of the members for the amount of tax due by the family. In these appeals there is a finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumed that by this statement within the meaning of section 25A it was claimed 'by or on behalf of any member of a Hindu family hitherto assessed as undivided' that a partition had taken place among the members of his family and that the Income-tax Officer was bound, to make an inquiry contemplated by section 25A. But no inquiry was in fact made and no order was recorded by the Income-tax Officer about the partition; by virtue of sub-section (3) the Hindu family originally assessed as undivided had to be deemed, for the purposes of the Act, to continue to be a Hindu undivided family. If by the assessment of the family on the footing that it continued to remain undivided, Nagappa or his sons were aggrieved, their remedy was to take an appropriate appeal under section 30 of the Indian Income-tax Act, 1922, and not a suit challenging the assessment. The method of assessment and the procedure to be followed in that behalf are statutory, and any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, for, section 67 of the Indian Income-tax Act bars a suit in any civil court to set aside or modify any assessment of tax under the Act. The Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private limited company which had taken over the business of Krishnappa and his two sons not to pay the salaries payable to Thimmayya and Venkatanarasu by the company and to, pay it to the credit of the Govt. of India towards the payment of arrears of income-tax referred to above. Then Thimmayya and Venkatanarasu questioned that order before the High Court under art. 226 of the Constitution. The High Court held that the order on the claim made under s. 25A(1) on June 30, 1952, was given " a clear retrospective operation ", and the ITO was bound " to give effect to that order recognising the partition and to follow up the consequences which flowed from the order ". In the view of the High Court, the petitioners were entitled to insist upon an order for apportionment under s. 25A(2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub-s. (2) of s.25A. On appeal, this court held that because prior to the orders of assessment there was no order recording that the property of the family had been partitioned among the members of the family no personal liability of the members arose under the proviso to s. 25A(2) to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an HUF questioned in a proceeding under art. 226 of the Constitution an assessment made against the HUF after it had been partitioned without holding an inquiry as required by s. 171(2) of the I.T. Act, 1961, even when a claim of partition had been made by his father in the assessment proceedings. The petitioner therein contended that such an order would not be binding upon the other members of the family. The High Court accepted the contention of the petitioner therein and held that the assessment order could not be enforced against him. This again is a case where the validity of the assessment order had been questioned not in an appeal filed against it but in a separate proceeding. The observations made therein may not, therefore, be of much assistance to the assessee because we are concerned in these appeals with the powers of the appellate authority where appeals are filed; against the assessment orders themselves contending that there has been non-compliance with s. 25A(1). Moreover, it appears that certain observations made in that case in respect of the decision of this court in Addl. ITO v. A. Thimmayya [1965] 55 ITR 666 and of the Full Bench decision of the Andhra Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, since it is not established that the claim was a belated one the proper order to be passed is to set aside the assessments and to direct the ITO to make fresh assessments in accordance with the procedure prescribed by law. The Tribunal, therefore, erred in merely cancelling the assessment orders and in not issuing further directions as stated above. We do not, however, agree with the orders made by the High Court by which it upheld the assessments and directed the ITO to make appropriate modifications. Such an order is clearly unwarranted in the circumstances of this case. The order of the High Court is, therefore, set aside. The question referred by the Tribunal to the High Court does not appear to be comprehensive enough to decide the matter satisfactorily. The question may have to be read as including a further question regarding the nature of the orders to be passed by the Tribunal if the orders of assessments are held to be contrary to law. In the light of the above, we hold that the orders of assessments are liable to, be set aside but the Tribunal should direct the ITO to make fresh assessments in accordance with law. The appeals are accordingly disposed of. There sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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