TMI Blog1991 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as the one involved in all these cases. In respect of the assessment years 1977-78 and 1978-79, wealth-tax returns were filed by G. E. Narayana on August 25, 1977, and September 12, 1978, respectively as karta of the Hindu undivided family. The Hindu undivided family consisted of himself and his minor son. On June 26, 1982, G. E. Narayana died. Thereafter, assessment orders were made on February 14, 1983, and March 28, 1983, respectively, in respect of the two assessment years, assessing the Hindu undivided family. In other references also, the situation was the same. The same karta of the Hindu undivided family, G. E. Narayana, had filed the wealth-tax returns for the various years before his death. But, in all those cases also, the assessment orders were made after his death. Consequent on the death of G. E. Narayana, the Hindu undivided family ceased to exist because his only minor son was left by him who was earlier a member of the Hindu undivided family. Therefore, it was contended that, on the extinction of the Hindu undivided family, there was no Hindu undivided family on which an assessment order could have been made and there is no provision in the Act providing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, so long as such assets are available, the crystallised tax can be assessed and collected. Before proceeding further, the nature of the charge under the Act has to be clarified. The charging provision is section 3. It states that there shall be charged for every assessment year a tax in respect of the net wealth on the valuation date, of every individual, Hindu undivided family and company at the rate specified in the Schedule. Thus, this language is substantially similar in its structure to section 4 of the Income-tax Act whereunder income-tax shall be charged in respect of the total income of the previous year of every person. Under the Income-tax Act, the tax is connected with and related to the total income of every person. Similarly, under the Wealth-tax Act the tax is in respect of the net wealth which means the tax is related to and connected with the net wealth of the three kinds of assessees, referred therein. Construing a similar provision of the Indian Income-tax Act, 1922, the Bombay High Court held in Patiala State Bank, In re., [1941] 9 ITR 95, that the tax is not made a charge on the income upon which it is levied and that broadly speaking it was accurate to say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is related to the net wealth of the person concerned. Under the Income-tax Act also, the Hindu undivided family is a person assessable to tax. There were almost similar situations which arose under the provisions of the Indian Income-tax Act, 1922, as well as under the present Income-tax Act, 1961, in connection with the assessment of the Hindu undivided family. One such situation resulted in the enactment of section 25A in the earlier Income-tax Act, 1922. The said provision was enacted to get over the difficulty caused when a Hindu undivided family had received income in the year of account but was no longer existing as such, at the time of assessment. The Privy Council, in the case of Sir Sundar Singh Majithia v. CIT [1942] 10 ITR 457, observed at page 465, thus: " Section 25A deals with the difficulty in two ways, which are explained by the rule, applicable to families governed by the Mitakshara, that by a mere claim of partition a division of interest may be effected among coparceners so as to disrupt the family and put an end to all right of succession by survivorship. It is trite law that the filing of a suit for partition may have this effect though it may take years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where a Hindu undivided family had received income in the year of account but was, no longer in existence as such at the time of assessment. This difficulty was the more acute by reason of the provision contained in section 14(1) which said that tax shall not be payable by an assessee in respect of any sum which he received as a member of a Hindu undivided family. The result was that the income of a Hindu undivided family could not be assessed and the tax could not be collected from the members of the family, if at the time of making the assessment the family was divided. This was obviously a lacuna and the Legislature, therefore, introduced section 25A in the old Act for assessment of the income of a Hindu undivided family and enforcement of the liability to tax, where the Hindu undivided family was no longer in existence at the date of assessment." The above observation once again points out that a lacuna in the taxing law cannot be filled up by any judicial exercise and the difficulty caused by the lacuna will have to be removed by the Legislature. The forerunner to this principle is found in the decision of the Bombay High Court in Ellis C. Reid v. CIT, AIR 1931 Bom 333; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of them died ; consequently, the Hindu undivided family ceased to exist. The question was whether section 171 (1) of the Incometax Act could be applied to make an order of assessment assessing the erstwhile Hindu undivided family. The Madras High Court pointed out that there was no provision at all to make the assessment on the Hindu undivided family, even though the income was earned during the accounting year when there was a Hindu undivided family. Section 171 of the Incometax Act did not make any provision to meet such a contingency. It is thus clear that a specific provision is necessary to make an order of assessment against a taxable entity which does not exist on the date of the assessment, even though the said entity was in existence when the liability to tax arose. The Hindu undivided family is an assessable entity; without the presence of the assessee, it is not possible to make an order of assessment, unless the law provides a machinery to assess the erstwhile Hindu undivided family by enabling the assessment proceedings to be initiated or continued against a proper successor. Section 19 is one such provision which enables the initiation of proceedings against the ..... 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