Physical partition test under Wealth-tax law governs HUF assessment despite mere severance of status.

Section 17 of the Wealth-tax Act permits reassessment where wealth has escaped assessment because no return was made, and a claim of disruption under Hindu law does not by itself defeat jurisdiction if the tax authority must still determine whether the Hindu undivided family remains assessable. Section 20 requires enquiry into whether the joint family property has been partitioned as a whole in definite portions by physical division by metes and bounds; mere severance of status is insufficient. If such physical partition is not proved, the family continues to be treated as a Hindu undivided family for wealth-tax purposes, and reassessment may proceed under section 20(2).

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Issues: (i) Whether the notice issued under section 17 read with section 14(2) of the Wealth-tax Act, 1957, and the assessment made pursuant thereto were valid. (ii) Whether section 20 of the Wealth-tax Act, 1957, was rightly attracted and the direction to reassess was in accordance with section 20(2).

Issue (i): Whether the notice issued under section 17 read with section 14(2) of the Wealth-tax Act, 1957, and the assessment made pursuant thereto were valid.

Analysis: The charging scheme of the Wealth-tax Act proceeds on the net wealth of an assessee on the relevant valuation date, and section 17 authorises reassessment where wealth has escaped assessment by reason of failure to make a return. The existence of a claim of disruption under Hindu law did not by itself negate the Officer's jurisdiction, because the statutory enquiry had still to determine whether a Hindu undivided family continued to be assessable for the purposes of the Act.

Conclusion: The notice and the assessment made in pursuance of it were valid.

Issue (ii): Whether section 20 of the Wealth-tax Act, 1957, was rightly attracted and the direction to reassess was in accordance with section 20(2).

Analysis: Section 20 was construed as requiring the Wealth-tax Officer to enquire whether the joint family property had been partitioned as a whole in definite portions, that is, by a physical partition by metes and bounds. Mere severance of status under Hindu law was held insufficient. If such physical partition was not established, the family was to be deemed to continue as a Hindu undivided family for the purposes of the Act, and the reassessment direction under section 20(2) followed.

Conclusion: Section 20 was rightly attracted and the direction to reassess was in accordance with section 20(2).

Final Conclusion: The reference was answered in favour of the Revenue, with the statutory fiction under section 20 operating unless a physical partition of the joint family property by metes and bounds was established.

Ratio Decidendi: For the purposes of section 20 of the Wealth-tax Act, a Hindu undivided family is not excluded from assessment merely because there has been severance of status under Hindu law; the test is whether the joint family property has been physically partitioned by metes and bounds.

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