AI Drafter 
TaxTMI 
TaxTMI 
1984 (9) TMI 119
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....ssessee claimed partial partition in business capital with effect from 31-3-1979 between the assessee and his two sons. In a case where a partial partition of HUF has taken place after 31-12-1978, no claim that such partial partition had actually taken place will be enquired into under sub-section (2) of section 171 and the ITO shall not record a finding as to whether there has been a total partition of the joint family property under sub-section (3) of that section. Hence, the partial partition effected after 31-12-1978 will not be recognised for tax purposes and such family continues to be assessed as if no such partial partition has taken place and the assessee shall be deemed to continue as belonging to the HUF and no member will be dee....
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....and the entire business income will be assessed in the hands of the assessee-HUF for the accounting year ended on 31-3-1980. He so completed the assessment on 19-3-1981. 3. The assessee appealed to the AAC and pleaded for exclusion of the income from the movable assets, which are the subject of partial partition on 31-3-1979. The AAC stated that in the total partition, assets which were the subject of partial partition had also been included and when the ITO has accepted the full partition in respect of movable and immovable properties, the question of including the income from properties, of which the partition was effected on 31-3-1979, could not arise since the partial partition got merged with the total partition which took place on ....
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...., income from the partially partitioned assets would stand excluded from the date of partial partition. 6. We have considered the rival submissions. On 31-3-1979, the assessee claimed that there was a partial partition by which the movables were partitioned. Section 171(9), introduced with effect from 1-4-1980, states that where a partial partition has taken place after 31-12-1978, no claim that such a partial partition has taken place shall be inquired into and no finding shall be recorded under section 171(3) and further that such family shall continue to be liable to be assessed as if no such partial partition has taken place. Therefore, when the assessee had made a claim that there was a partial partition on 31-3-1979, the ITO by vir....
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....xplanation to section 171. . . ." It is, therefore, clear that since there was no order under section 171, the HUF had to be assessed as such. Before the Supreme Court, the argument was expressly taken on behalf of the assessee that the fiction contained in section 171(1) did not apply to an undivided family which continued to be in fact an undivided family even after a partial partition as regards some of the properties. This argument has been referred to at pages 704 and 705. In particular, it was contended that after a partial partition of some properties had taken place, the undivided family is liable to be assessed as such only in respect of the income derived by it from the remaining items of properties owned by it and the income d....
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....s 709 that once it was held that the assessee was not entitled to claim partial partition, the income from the properties which were the subject-matter of the partial partition had to be included in the total income of the assessee. The Supreme Court, specifically, observed as under : ". . . We have already held that section 171 of the Act applies to all partitions---total and partial---and that unless a finding is recorded under section 171 that a partial partition has taken place the income from the properties should be included in the total income of the family by virtue of sub-section (1) of section 171 of the Act. To put it in other words, what would have been the position of an HUF, which had claimed in assessment proceedings under....