An order of assessment which has become final is not liable to be re-opened under S. 25-A(2) by the Income-tax Officer, when an order under Sec. 25-A(1) is passed by him subsequent to the order of assessment.

Headnote:
INCOME TAX - Hindu undivided family - Partition - Assessment of tax - Liability of members - S. 25-A, Indian Income-tax Act, 1922.
Fact of the Case:

A Hindu undivided family was disrupted in 1946, and all its properties were divided among the members of the family. The business of the family was taken over by a private limited company. Proceedings for assessment of tax due by the Hindu undivided family for the years 1941-42 to 1946-47 were pending at the time when the Hindu undivided family was disrupted. On May 20, 1946, one of the members of the family claimed before the Income-tax Officer that the property of the Hindu undivided family had been partitioned among the members in definite portions. This claim was not disposed of till June 30, 1952. In the meanwhile, assessments for the five years in question were made by the Income-tax Officer on diverse dates between September 30, 1948 and November 30, 1950, resulting in a tax liability of Rs. 65,750 in the aggregate for the five years. Appeals preferred against the orders of assessment to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal proved unsuccessful. On June 30, 1952, the Income-tax Officer made an order under S. 25-A recording that the property of the Hindu undivided family was partitioned on November 2, 1946. As the tax due was not paid, the Income-tax officer made an order under S.46(5) of the Indian Income-tax Act, 1922 on June 25, 1958 calling upon the Managing Director to withhold the amount of tax due from the salaries payable to the defaulters and to show the same to the credit of the Government of India.
Finding of the Court:

The High Court held that the order on the claim made under S. 25-A(1) on June 30, 1952 was given "a clear retrospective operation", and the Income-tax Officer 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. 25-A(2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub-section (2) of S. 25-A.
Issues: Whether an order of assessment which has become final is liable to be re-opened under S. 25-A(2) by the Income-tax Officer, when an order under Sec. 25-A(1) is passed by him subsequent to the order of assessment.
Ratio Decidendi: The scheme of S. 25-A is that so long as there is an assessment of the Hindu undivided family, the liability for payment of the tax is on the property of the family and not personally on the members. Where an order that the property of the family has been partitioned is recorded, the liability of the members has to be apportioned in the manner set out in sub-section, but one of the incidents of assessment after apportionment of tax liability is that the members of the family stand jointly and severally liable for the entire amount of tax assessed against the family.
Final Decision: The order of the High Court must, therefore, be confirmed and the appeals dismissed with costs.

Judgment

SHAH, J. : Krishnappa and his two sons -Thimmayya and Venkatanarsu - constituted a Hindu undivided family. They carried on business in mining in the name and style of Krishnapa and Sons. The family was disrupted in 1946, and all its properties were divided among the members of the family. The business of Krishnappa and Sons was taken over by a firm of which the partners were Krishnappa and his two sons. A private limited Company styled "Krishnappa Asbestos and Barytes (Private) Ltd." took over the business of the firm on May 21, 1947 for Rs. 2,04,000. Thimmayya obtained employment under the Company as Mines Superintendent at a monthly salary of Rs. 400 and Venkatanarsu as General Manager at a monthly salary of Rs. 500.

2. Proceedings for assessment of tax due by the Hindu undivided family for the years 1941-42, 1942-43, 1944-45, 1945-46 and 1946-47 were pending at the time when the Hindu undivided family was disrupted. On May 20, 1946, Venkatanarsu claimed before the Additional Income-tax Officer, Cuddapah that the property of the Hindu undivided family had been partitioned among the members in definite portions. For reasons which do not appear from the record, this claim was not disposed of till June 30, 1952. In the meanwhile assessments for the five years in question were made by the Income-tax Officer on diverse dates between September 30, 1948 and November 30, 1950, resulting in a tax liability of Rupees 65,750 in the aggregate for the five years. Appeals preferred against the orders of assessment to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal proved unsuccessful. It is common ground that it was not contended in the appeals that in making the orders of assessment without disposing of the claim that the family was disrupted in 1946, the Income-tax Officer had acted illegally.

3. On June 30, 1952 the Income-tax Officer, Special Circle, Madras, made an order under S. 25-A recording that the property of the Hindu undivided family of Krishnappa and his sons was partitioned on November 2, 1946. As the tax due was not paid, the Income-tax officer made an order under S.46(5) of the Indian Income-tax Act, 1922 on June 25, 1958 calling upon the Managing Director to withhold the amount of tax due from the salaries payable to the defaulters Thimmayya and Venkatanarsu and to show the same to the credit of the Government of India.

4. Thimmayya and Venkatanarsu then lodged petitions under Art. 226 of the Constitution in the High Court of Andhra Pradesh at Hyderabad, praying that writs of certiorari or other appropriate writs be issued quashing the order dated June 25, 1958 of the Income-tax Officer under S.46(5). They founded their petitions on two grounds - (i) that after the Income-tax Officer recorded an order on June 30, 1952 under S. 25-A(1) that the family had disrupted "with effect from November 2, 1946", steps taken for recovery of the amount of tax assessed without an appropriate order under S. 25-A(2) were invalid, and (ii) arrears of tax due by the erstwhile Hindu undivided family could not be recovered from remuneration earned by them as employees of the Company. The petition were decided by Seshachelapati J., in favour of the two petitions, and the decision was confirmed in appeal by a Division Bench of the High Court of Andhra Pradesh. The High Court held that the order on the claim made under S. 25-A(1) on June 30, 1952 was given "a clear retrospective operation", and the Income-tax Officer 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. 25-A(2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub-section (2) of S. 25-A. Against the order of the High Court with certificate of fitness, these two appeals have been preferred by the

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