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IN THE HIGH COURT OF JUDICATURE AT MADRAS
C. SARAVANAN, J.
Sri. A.P. Oree - Petitioner
Versus
The Income Tax Officer, Non-Corporate Ward 1 (1), Chennai - Respondent
W.P. No. 41642 of 2016 and W.M.P. No. 35629 of 2016
Decided On : 02-06-2021
Income Tax Act, 1962 - Section 54, 143 (3), 171 and 263 - Hindu Undivided Family property -Oral partition - Agricultural lands - Notice - Challenged - Exemption from payment of long term capital gain - Assessment order - Petitioner's father was the absolute owner of agricultural lands he died leaving behind him, his wife, three sons and a daughter as legal heirs. wife later died leaving behind their three sons and a daughter as sole surviving legal heirs. At time of death of father and mother, an agricultural land and a house on a 8 ground of lands was available for being partitioned - Held, Where there is a prior assessment as a Hindu Undivided Family(HUF) and during course of assessment under section 143 or 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 - Definition of “partition” in Explanation to Section 171 of 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 Act, 1961 will not apply even when there is a division or partition of property which does not answer to above definition - Court inclined to interfere with impugned notice - Writ petition allowed
ORDER :
The petitioner has challenged the impugned notice dated 31.03.2015 issued to the estate of A.R. Pandurangan (HUF) Co-parceners viz., A.P. Oree, A.P. Began, A.P. Nambi and A.P. Nangai and the consequential speaking order dated 16.11.2016. The 2nd mentioned order has been issued to A.P. Oree as the kartha, estate of A.R. Pandurangan Co-parceners viz., Shree Oree, Shri A.P. began, Shri A.P. Nambi and Smt. N. Nangai.
2. The brief facts of the case are as follows:
The petitioner's father Late Shri A.R. Pandurangan was the absolute owner of the agricultural lands at Ayanambakkam Village, Saidapet Taluk measuring about 6.28 acres of lands in 9 survey number. Shri Pandurangan died on 24.10.2003 leaving behind him, his wife, three sons and a daughter as the legal heirs. Shri A.R. Pandurangan's wife later died on 08.02.2006 leaving behind their three sons and a daughter as the sole surviving legal heirs. At the time of death of the father and mother, an agricultural land measuring an extent of 6.28 acres in Ayanambakkam village and a house on a 8 ground of lands situated at Ayanambakkam village was available for being partitioned.
3. It is the case of the petitioner that the brothers and sisters entered into oral partition and recorded the same in a Memorandum on 23.08.2007 recording the aforesaid oral partition. Share in the agricultural property was divided in certain proportion and that land to an extent of 3 acres out of 6.28 acres was sold and the sale proceeds was shared by each of the legal heirs of the Late Shri. P.R. Pandurangan. They also filed their respective Income Tax returns and claimed exemption under Section 54 F of the Income Tax Act, 1962 i.e. Exemption from payment of long term capital gain.
4. It is further submitted that each of the legal heirs of late Shri. A.R. Pandurangan filed their respective Income Tax Returns in their own capacity as individual and not as members of any HUF, pursuant to the memorandum recording the aforesaid oral partition on 23.08.2007. It is submitted that the income tax returns filed by Smt. A.P. Nangai, the sister and one of the brother Shri. A.P. Began came to be accepted by Income Tax Department.
5. It is submitted that for Shri. Mr. A.P. Began one of the petitioner’s brother assessment was also completed vide assessment order dated 15.12.2010 for the 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 therefore capital gains should have been assessed in the hands of the Estate of Shri. A.P. Pandurangan (HUF).
8. Against the said order dated 26.3.2013 passed under section 263 of the Income Tax Act, 1961, the petitioner’s brother Shri. A.P. Began had also filed an appeal before the Income Tax Appellate Tribunal in ITANo.1006/Mds/2013 Assessment Year 2008 – 09. The appeal was allowed by way of remand.
9. Thereafter, fresh order dated 22.8.2014 came to be passed by the Commissio
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