TaxTMI 
TaxTMI 
1981 (8) TMI 2
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....ssessment order made on May 30,1959, in respect of the assessment year 1955-56 had been set aside by the AAC on February 24, 1962, with a direction to make a fresh assessment. When fresh assessment proceedings were commenced pursuant to the above said direction in respect of the assessment year 1955-56, the assessment proceedings for the assessment years 1957-58 and 1958-59 were also taken up. Earlier, a letter had been addressed on October 10, 1960, by Kapurchand Shrimal to the ITO in connection with a notice received by the assessee under s. 18A(1) of the Act in respect of the assessment year 1961-62, stating that all the movable and immovable properties of the assessee had been partitioned by metes and bounds under partition deeds and that the HUF (the assessee) was no longer receiving any income as such and there was, therefore, no question of payment of any advance tax by it. The second para of that letter contained a specific request to record the factum of the partition for the purpose of the Act. Again, on June 16, 1961, M/s. S. G. Dastagir & Co. addressed a letter on behalf of the assessee in connection with the advance tax demanded for the assessment year 1962-63, the sec....
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....equired by s. 25A of the Act. The AAC rejected the above contention. The assessee thereupon filed appeals before the Tribunal against the orders of the AAC and one question, which was common to all the appeals, that was urged before the Tribunal was about the validity of the assessments made against the assessee (HUF) without holding an inquiry regarding the claim of partition before the assessment proceedings were completed. While the assessee contended that the assessments were liable to be cancelled on account of the non-compliance with the mandatory provisions of s. 25A of the Act, it was urged on behalf of the department that in fact there was no violation at all of s. 25A, and, even if it was held that there was any such violation the proper order to be passed was either to direct the ITO to give effect to s. 25A(2) of the Act without cancelling the assessments made on the assessee or to set aside the assessments with a direction to the ITO to pass fresh orders of assessment. On a consideration of the admissions made by the parties, the Tribunal came to the conclusion that the assessments, which had been made without holding an inquiry into the claim of partition as required ....
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....rried on such business, profession or vocation, the Income-tax Officer shall make, an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members shall, in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in sub-section (1) of section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Incometax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23 : Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such. (3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family. " An HUF is an entity which is treated as an assessee for the purp....
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....be separately liable and notwithstanding anything contained in sub-s. (1) of s. 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it. The ITO is further authorised to make assessments accordingly on the various members and groups of members in accordance with s. 23 of the Act. By virtue of the proviso to sub-s. (2) of s. 25A of the Act the liability, which so long as an order was not recorded under sub-s. (1) of s. 25A was restricted to the assets of the HUF, is transformed, when such an order is recorded, into the personal liability of the members for the amount of tax due by the family. In these appeals there is a finding of fact recorded by the Tribunal that a proper and valid request for recording a partition had been made as far back as October 10, 1960. The first of the assessment orders impugned in these appeals was passed on August 31, 1962, by the ITO and the other assessment orders were passed subsequently. It is not shown that the ITO before whom the claim of partition had been made on October 10, 1960, had not got reasonable time to inquire into the claim and then to make the assessme....
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....ssed as undivided had to be deemed, for the purposes of the Act, to continue to be a Hindu undivided family. If by the assessment of the family on the footing that it continued to remain undivided, Nagappa or his sons were aggrieved, their remedy was to take an appropriate appeal under section 30 of the Indian Income-tax Act, 1922, and not a suit challenging the assessment. The method of assessment and the procedure to be followed in that behalf are statutory, and any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, for, section 67 of the Indian Income-tax Act bars a suit in any civil court to set aside or modify any assessment of tax under the Act. The Income-tax Officer made the assessment of tax under the Act granting that he committed an error in making the assessment without holding an inquiry into the partition alleged by Nagappa, the error could be rectified by resort to the machinery provided under the Act and not by a suit in civil court. This court dismissed the suit against the revenue on three independent grounds: (1) the suit which was in substance one for setting aside an assessment was in law not maintainable beca....
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...., was given " a clear retrospective operation ", and the ITO was bound " to give effect to that order recognising the partition and to follow up the consequences which flowed from the order ". In the view of the High Court, the petitioners were entitled to insist upon an order for apportionment under s. 25A(2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub-s. (2) of s.25A. On appeal, this court held that because prior to the orders of assessment there was no order recording that the property of the family had been partitioned among the members of the family no personal liability of the members arose under the proviso to s. 25A(2) to pay the tax assessed thereunder and the remedy of the I.T. authorities, was to proceed against the property, if any, of the HUF. It was, therefore, held that the ITO was not competent to make the order under s. 46(5) directing the company to withhold the tax from the salaries payable to Thimmayya and Venkatanarasu. The relevant observations of this court are these (pp. 673, 674): " In the present case no orders were recorded by the Income-tax Officer at the time of making assess....
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....at the assessment order could not be enforced against him. This again is a case where the validity of the assessment order had been questioned not in an appeal filed against it but in a separate proceeding. The observations made therein may not, therefore, be of much assistance to the assessee because we are concerned in these appeals with the powers of the appellate authority where appeals are filed; against the assessment orders themselves contending that there has been non-compliance with s. 25A(1). Moreover, it appears that certain observations made in that case in respect of the decision of this court in Addl. ITO v. A. Thimmayya [1965] 55 ITR 666 and of the Full Bench decision of the Andhra Pradesh High Court in CIT v. Tatavarthy Narayanamurthy [1972] 83 ITR 58, need further examination. We refrain from expressing any opinion on the correctness of this decision which does not even appear to have been cited before the High Court when the reference out of which these appeal arise was argued. From a fair reading of s. 25A of the Act it appears that the ITO is bound to hold an inquiry into the claim of partition if it is made by or on behalf of any member of the HUF which is bei....