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1994 Supreme(All) 459
IN THE HIGH COURT OF ALLAHABAD
A. P. Misra and M. C. Agarwal, JJ.
GOKUL CHAND - Appellant
Versus
INCOME-TAX OFFICER - Respondents
Civil Miscellaneous Writ Petition 224 Of 1980
Decided On : 07/25/1994
BHARATJI AGARWAL, R.K.AGARWAL, Shambhu Chopra
An order passed under Section 171 of the Income-tax Act, 1961, recognizing the partition of a Hindu undivided family is binding on the Income-tax Officer and cannot be ignored without being set aside.
Headnote:
INCOME TAX - SECTION 148 - NOTICE - VALIDITY - PARTITION OF HINDU UNDIVIDED FAMILY - RECOGNITION BY INCOME-TAX OFFICER - SUBSEQUENT IGNORING OF PARTITION - INVALIDITY OF NOTICE - SECTION 171 - ORDER RECOGNIZING PARTITION - BINDING EFFECT - CANNOT BE IGNORED WITHOUT BEING SET ASIDE.
Fact of the Case:
The petitioner, Gokul Chand, challenged the validity of notices issued under Section 148 of the Income-tax Act, 1961, for the assessment years 1971-72 and 1975-76, claiming that the notices were invalid as they did not disclose the income that was considered to have escaped assessment and that the partition of the Hindu undivided family had been recognized by the Income-tax Officer.
Finding of the Court:
The Court held that the notice issued for the assessment year 1975-76 was valid as the return filed by Gokul Chand was invalid due to lack of signature. However, the notice issued for the assessment year 1971-72 was invalid as it was addressed to Gokul Chand in his individual capacity and not as the karta of the Hindu undivided family, which was the assessee whose income was alleged to have escaped assessment. The Court also held that the order passed under Section 171 of the Act recognizing the partition was binding on the Income-tax Officer and could not be ignored without being set aside.
Issues: 1. Whether the notice issued under Section 148 for the assessment year 1971-72 was valid? 2. Whether the order passed under Section 171 of the Act recognizing the partition was binding on the Income-tax Officer?
Ratio Decidendi: 1. The Court held that the notice issued for the assessment year 1971-72 was invalid as it was addressed to Gokul Chand in his individual capacity and not as the karta of the Hindu undivided family, which was the assessee whose income was alleged to have escaped assessment. The Court observed that the notice did not indicate anything about the cause of the issue of the notice and that it was necessary, in case the notice was intended to be addressed to the Hindu undivided family, to specifically mention that the notice was being addressed to Gokul Chand in his capacity as a karta of a Hindu undivided family. 2. The Court held that the order passed under Section 171 of the Act recognizing the partition was binding on the Income-tax Officer and could not be ignored without being set aside. The Court observed that an order under Section 171 is a judicial order to be passed after full and detailed enquiry and is to be binding between the parties till the same is set aside in accordance with law.
Final Decision: The Court allowed Writ Petition No. 223 of 1980 and quashed the impugned notice dated March 30, 1980 issued to the petitioner by the respondent under Section 148 of the Income-tax Act, 1961, for the assessment year 1971-72. The Court dismissed Writ Petition No. 224 of 1980.
( 1 ) THESE two petitions under Article 226 of the Constitution of India have been filed challenging the issue of notices under Section 148 of the Income-tax Act, 1961, for the assessment years 1971-72 and 1975-76, whereby the Income-tax Officer, Gonda, required the petitioner to file returns of income for these years as he had reason to believe that the petitioners income for these years had escaped assessment and he wanted to reassess the same.
( 2 ) THE petitioners case is that he is a member of a Hindu undivided family of which Umrao Lal, the petitioners father is the karta. On October 15, 1964, a partial partition took place in the said hindu undivided family, whereby another Hindu undivided family consisting of the petitioner, gokul Chand, as karta, his wife, sons and daughter as members, received an amount which constituted the nucleus of this Hindu undivided family of which the petitioner became the karta. On October 16, 1964, this smaller Hindu undivided family became a partner in Messrs. Ram Deo onkar Mal through the petitioner and the amount received in the partial partition held on october 15, 1964, was invested as the share of the smaller Hindu undivided family. The income so earned by the smaller Hindu undivided family was assessed through the petitioner as karta of this branch of a Hindu undivided family. On October 1, 1968, the smaller Hindu undivided family headed by the petitioner was subjected to a partition so that the amount of Rs. 88,353. 78 standing to the credit of this smaller Hindu undivided family in the account books of Messrs. Ram Deo Onkar Mal was partitioned amongst the karta, his wife and sons after making a provision of Rs. 15,000, for the marriage expenses of the kartas daughter. This partition was evidenced by a memorandum of partition executed on October 5, 1968. This partition was recognised by the Income-tax Officer, Gonda, through an order dated November 27, 1971. For the assessment year 1970-71, the share income of the various members of the erstwhile family of the petitioner was determined at Rs. 30,464 and bifurcated between the various members and as a result the income of the petitioner, Gokul Chand, was determined at Rs. 6,093 only, vide assessment order dated November 27, 1971. According to the petitioner, since then all the members of the said Hindu undivided family were being separately assessed. The petitioners contention is that all the primary facts relating to the aforesaid partition were disclosed before the Income-tax Officer passed the order on November 27, 1971, recognising the partition. On march 30, 1980, the Income-tax Officer issued a notice in the name of the petitioner under section 148 of the Income-tax Act, 1961, The petitioners contention is that the notice is invalid as it does not disclose the income that was considered to have escaped assessment. It is further contended that the said notice was served on Umrao Lal, the father of the petitioner, who had no authority to accept the same on his behalf. It is contended that the said notice seemed to have been issued on the assumption that the partition that had taken place on October 1, 1968, has not been acted upon. This assumption is controverted by the petitioner contending that the said partition was duly acted upon. It is further stated that if the partition had not been acted upon then the entire income arising from Ram Deo Onkar Mal in respect of the share of this family would be assessable in the hands of the family and not in the hands of the petitioner in his individual capacity and the notice issued to the petitioner under Section 148 is improper.
( 3 ) IN a counter-affidavit filed in Writ Petition No. 223 of 1980 relating to the assessment year 1971-72, Sri S. R. Tripathi, the then Income-tax Officer set up the respondents case. It has been contended that it is incorrect that the family share in the partnership firm, Ram Deo Onkar Mal, was partitioned. According to him, the alleged par
