High Court quashes assessment order, emphasizes detailed inquiry and notices for partition assessment

The High Court allowed the petition, quashed the assessment order and the Commissioner's order, remanding the matter back to the Assessing Officer to conduct a proper inquiry into the partition as required by section 171 of the Income Tax Act, 1961. The court emphasized the necessity of a detailed inquiry and notices to family members before making any assessment, citing the Supreme Court's ruling in Kapurchand Shrimal vs. Commissioner of Income Tax.

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Issues:
Assessment under section 143(3) without conducting inquiry and deciding application under section 171.

Analysis:
The petitioner's grievance was that the Assessing Officer passed an assessment order under section 143(3) without conducting any inquiry into the application under section 171 filed by the assessee. The facts revealed that the petitioner had requested consideration of a partial partition of family property under section 171 during assessment proceedings. Despite the Appellate Tribunal remanding the matter back to the Assessing Officer for fresh consideration, the subsequent assessment order was passed without conducting the necessary inquiry. The petitioner argued that such failure to conduct an inquiry into the partition was an error on the face of the record, citing the Supreme Court's judgment in Kapurchand Shrimal vs. Commissioner of Income Tax-(1981) 24 CTR (SC) 345.

The Supreme Court's ruling in Kapurchand's case emphasized that when an application is made under section 171, the Assessing Officer must conduct a detailed inquiry into the claimed partition before proceeding with the assessment. The provisions of section 171 required the Assessing Officer to issue notices to all family members and conduct a thorough inquiry before making any assessment. The assessment order in question did not comply with these requirements as it lacked a detailed inquiry and notice to family members, as mandated by sub-section (2) of section 171. The court noted that the Commissioner also failed to consider these aspects in the order dated 27.03.2008.

Consequently, the High Court allowed the petition, quashed the assessment order dated 28.12.2006, and the Commissioner's order dated 27.03.2008. The matter was remanded back to the Assessing Officer to conduct a proper inquiry into the partition as required by sub-section (2) of section 171 of the Income Tax Act, 1961, and proceed with the assessment in accordance with the law. The court's decision was based on the failure to adhere to the statutory provisions regarding inquiries into claimed partitions under section 171.

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