1981 (10) TMI 98 - AT - Wealth-tax

Tribunal upholds Wealth-tax reassessments for Hindu Undivided Family despite partition

C. Chenni Chettiar. Versus Wealth-Tax Officer.

C. Chenni Chettiar. Versus Wealth-Tax Officer. - ITD 001, 232, TTJ 014, 540, Issues Involved:1. Whether section 20 of the Wealth-tax Act, 1957, is in pari materia with section 171 of the Income-tax Act, 1961.2. Validity of reassessment proceedings under section 17 of the Wealth-tax Act for a disrupted Hindu Undivided Family (HUF).3. Applicability of section 20 of the Wealth-tax Act to reassessments made under section 17.4. Legitimacy of initiating proceedings under section 17 for a disrupted HUF.Issue-wise Detailed Analysis:1. Whether section 20 of the Wealth-tax Act, 1957, is in pari materia with section 171 of the Income-tax Act, 1961:The question arose due to conflicting decisions by the Calcutta High Court in Srilal Bagri v. CWT and the Gujarat High Court in Goswami Brijratanlalji Maharaj v. CWT. The Tribunal found that section 20 of the Wealth-tax Act does not contain the qualifying words 'hitherto assessed' present in section 171 of the Income-tax Act. This absence indicates that section 20 can be applied to any HUF, whether it has been assessed earlier or not. The Tribunal concluded that the machinery for assessing a joint family after its disruption should not be confined to those joint families which have been assessed before.2. Validity of reassessment proceedings under section 17 of the Wealth-tax Act for a disrupted HUF:The Tribunal noted that the HUF in question had a total partition on 31-3-1973, and notices under section 17 were issued on 27-12-1974 for assessment years 1966-67 to 1974-75. The Tribunal held that the reassessment proceedings under section 17 were valid despite the partition, as the assessments were for periods before the partition. The Tribunal emphasized that section 20 provides a mechanism for assessing the wealth of a disrupted HUF for years prior to its partition.3. Applicability of section 20 of the Wealth-tax Act to reassessments made under section 17:The Tribunal rejected the contention that section 20, being a machinery section, cannot apply to reassessments made under section 17. It was clarified that section 20 applies to any assessment, including reassessments under section 17, as the term 'assessment' includes reassessment. The Tribunal reasoned that the machinery provided for the Wealth-tax Officer (WTO) to determine the liability of the family is available at the time of making assessments under section 17.4. Legitimacy of initiating proceedings under section 17 for a disrupted HUF:The Tribunal dismissed the argument that initiating proceedings under section 17 for a disrupted HUF is equivalent to assessing a dead person. It was reasoned that, similar to assessing the wealth of a deceased person for years before their death, the wealth of a disrupted HUF can be assessed for years before its partition. The Tribunal emphasized that the WTO must be satisfied that the property has been partitioned in definite portions. Until such satisfaction is achieved, the HUF continues to exist for assessment purposes. The Tribunal concluded that the notices issued to the karta of the HUF were valid, as the WTO is entitled to issue such notices until satisfied about the partition.Conclusion:The Tribunal upheld the reassessments made under section 17 of the Wealth-tax Act for the assessment years 1966-67 to 1971-72, confirming the validity of the proceedings initiated against the HUF despite its partition. The appeals were dismissed, affirming the assessments made by the WTO.