TMI Blog2021 (6) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... f of member of such Hindu Undivided Family which was assessed as a Hindu Undivided Family that there was a partition whether total or partial among the members of such family, such assessing officer shall make an enquiry thereto after giving notice of enquiry of all members. Where no such claim is made, question of making such enquiry by an Assessing Officer does not arise. It is only in the above circumstances, the definition of partition in Explanation to Section 171 of the Income Tax Act, 1961 is attracted. The above definition cannot be read in isolation. Where a Hindu family was never assessed as a HUF, Section 171 of the Income Tax Act, 1961 will not apply even when there is a division or partition of property which does not answer to the above definition. Therefore,we are inclined to interfere with impugned notice dated 31.3.2015 and the impugned communication dated 16.11.2016 overruling the objection of the petitioner against the petitioner - Writ petition stands allowed - W.P.No.41642 of 2016 And W.M.P.No.35629 of 2016 - - - Dated:- 2-6-2021 - Honourable Mr.Justice C.Saravanan For the Petitioner : Mr.R.Sivaraman For the Respondent : Mr.Prabhu Muk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2008-09 under Section 143 (3) of Income Tax Act, 1961. It is submitted that against the said assessment order dated 15.12.2010 passed the case of the petitioner s brother Shri.A.P.Began, a notice dated 12.3.2013 was issued by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 to revise the aforesaid assessment order dated 15.12.2020. 6. Aforesaid notice dated 12.03.2013under section 263 of the Income Tax Act, 1961 was issued primarily on the ground that there was no physical division of the property and therefore the exemption under Section 54 F on sale appeared to be contrary to section 171 of the Income Tax Act, 1961. 7.Under these circumstances, the Commissioner of Income Tax had passed order dated 26.3.2013 under section 263 of the Income Tax Act, 1961. By the aforesaid order, the long-term capital gains claimed under Section 54F of the Income Tax Act, 1961. The assessment order dated 15.12.2010 was disallowed in the light of Section 171 of the Income Tax Act, 1961. It was held that the division of income without physical division of property did not amount to partition under Section 171 of the Income Tax Act, 1961 and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of claim for deduction under Section 54F and capital gains reported by the assessee HUF and accepted the exemption claimed under Section 54F of the Act on the sale proceeds reported by the assessee HUF. 8. The Hon'ble Andhra Pradesh High Court in the case of Addl.CIT vs. P.Durgamma (166 ITR 776) considered the scope of Section 171 of the Act deeming HUF to be undivided. The Hon'ble High court held that provisions of Section 171 will apply only to a HUF which has been assessed earlier. While holding so, the High Court observed as under:- The fiction that a joint family shall be deemed to continue, enunciated in Section 171(1) of the Income Tax Act, 1961, is for the limited purpose of roping in cases of joint families which had hitherto been assessed. It is not possible to extend that fiction beyond the field legitimately intended by the statute. The fiction in section 171(1) must necessarily be confined to the purpose for which it was specified in that section and for no other purpose. The expression hitherto assessed occurring in Section 171(1) is significant. It makes it clear that only a Hindu undivided family which had suffered tax assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a HUF during his life time. It is submitted that the oral partition on 23.08.2017 was recorded in the memorandum of oral partition on the same day. Therefore, there is no legal basis on which, the assessment can be re-opened to deny the benefit of Section 54 F of the Income Tax Act, 1961. It is further submitted that notice issued to the Estate of Shri.A.R.Pandurangan is on an assumption that HUF of Shri.A.R.Pandurangan was an assessee under the Income Tax Act, 1961 and a HUF was a mere figment inasmuch as late Shri.A.R.Pandurangan was never assessed to income tax assessee as a HUF during his life time. 14.It is further submitted that it is not clear on what basis PAN.AAOHA9825R was assigned to the HUF on Estate of Shri.A.R.Pandurangan as Shri.A.R.Pandurangan was never an income tax assesse as a HUF during the life time. 15.Defending the impugned notice dated 18.07.2016, the learned counsel for the respondent Income Tax Department submits that the impugned notice was issued to the Estate of late Shri.A.R.Pandurangan in accordance with law. It is further submitted that the PAN.AAOHA9825R was assigned as per the Rules. He refer to para 19 of the counter affidavit file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three brothers and the sister, i.e., the four children of late Shri.A.R.Pandurangan were shown as coparceners. 22.The deponent who has filed the affidavit in support of the present writ petition Shri.A.P.Oree is the eldest son of late A.R Pandurangan. He has questioned the basis of the notice. The respondents have thereafter issued subsequent notice to the deponent namely, Shri.A.P.Oree as the Kartha of a Estate of Shri.A.R.Pandurangan(HUF) with others as coparceners. The impugned order is also issued in the same name. 23.I have also perused the assessment orders passed by the Income Tax Officers in the case of the petitioner s sister and brothers. An assessment order dated 31.3.2016 for the assessment year 2008-09 for the petitioner s other brother Shri.A.P.Nambi. There it has been categorically stated that Shri.A.R.Pandurangan was never assessed in the status of HUF. Thus, Section 54F deduction was allowed. 24.Similarly, the assessment was completed for one of petitioner s other brother, Mr.A.P.Began HUF for the 2008-09vide assessment order dated 15.12.2010 with PAN No.AAGHB9504G. 25.Though, the said assessment order was made in the name of Sri N. Began, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons stated in the impugned communication dated 16.11.2016 over-ruling the objection of the petitioner. 33.The surviving legal heirs of late A.R.Pandurangan have inherited about 6.28 acres of agricultural land and a parcel of the land from 6.28 acres was sold without physical division. Share was orally divided between and proceeds from the sale of parcel of the land were distributed in proportion with their respective shares in the land and the balance parcel continued in their name without physical division. 34.It is the contention of the Income Tax Department that the income was taxable in the hands of a Estate of late A.R.Pandurangan as HUF in the light of Explanation to section 171 of theIncome Tax Act, 1961. 35.On the other hand, it is the contention of the petitioner on merits, not only the issue is squarely covered against Income Tax Department vide Income Tax Appellate Tribunal order dated 27.11.2015 of in ITA No. 2702/Mds//2014in the case of the petitioner s brother, namely Shri.A.P.Began but also in view of the language of section 171 of the Income Tax Act, 1961. 36.The Explanation to Section 171 of the Income Tax Act, 1961, defines the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also the position under Section 25-A of the old Act with this difference that under that section the only partition which could be recorded was total partition and not partial partition. The legislature, while enacting Section 171 in the new Act, decided to introduce another radical departure from the old Act by providing in sub-section (6) that even where no claim of total or partial partition is made at the time of making assessment under Section 143 or Section 144 and hence no order recording partition is made in the course of assessment as contemplated under sub-sections (2) to (5), if it is found, after the completion of the assessment, that the family has already effected a partition, total or partial, all the members shall be jointly and severally liable for the tax assessed as payable by the joint family and the tax liability shall be apportioned among the members according to the portion of the joint family property allotted to each of them. Sub-section (6) of Section 171 thus for the first time imposed, in cases of this kind, joint and several liability on the members for the tax assessed on the Hindu undivided family and this was a personal liability as distinct from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint family property received on partition. 38A.Under the Hindu law, members of a joint family may agree to partition of the joint family property by private settlement, agreement, arbitration or through court's decree. Members of the family may also agree to share the income from the property according to their respective share. In all such eventualities joint status of family may be disrupted but such disruption of family status is not recognised by the legislature for purposes of income tax. Section 171 of the Act and the Explanation to it, prescribes a special meaning to partition which is different from the general principles of Hindu law. It contains a deeming provision under which partition of the property of HUF is accepted only if there has been actual physical division of the property, in the absence of any such proof, the HUF shall be deemed to continue for the purpose of assessment of tax. Any agreement between the members of the joint family effecting partition, or a decree of the court for partition cannot terminate the status of HUF unless it is shown that the joint family property was physically divided in accordance with the agreement or decree of the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment under section 143 or section 144 it is claimed by or on behalf of member of such Hindu Undivided Family which was assessed as a Hindu Undivided Family that there was a partition whether total or partial among the members of such family, such assessing officer shall make an enquiry thereto after giving notice of enquiry of all members. Where no such claim is made, question of making such enquiry by an Assessing Officer does not arise. 42.It is only in the above circumstances, the definition of partition in Explanation to Section 171 of the Income Tax Act, 1961 is attracted. The above definition cannot be read in isolation. Where a Hindu family was never assessed as a HUF, Section 171 of the Income Tax Act, 1961 will not apply even when there is a division or partition of property which does not answer to the above definition. 43.Therefore, I am inclined to interfere with impugned notice dated 31.3.2015 and the impugned communication dated 16.11.2016 overruling the objection of the petitioner against the petitioner. 44.In the result, the writ petition stands allowed. No cost. Consequently, connected Miscellaneous Petition is closed. - - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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