TaxTMI 
TaxTMI 
1981 (3) TMI 97
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....in the family of the assessee on 30-6-1976 which is supported by the entries in the books of the assessee. Thus, he recognised the partition with effect from 30-6-1976. Prior to the assessment year 1975-76, now under consideration, no assessment was made on the HUF. It was contended that since the assessment has to be made on partitioned HUF which was not in existence at the time of the assessment, it can be made only having recourse to the provisions of section 171. The procedure laid down under section 171 would be available in respect of HUF which was hitherto assessed as undivided. It is the case of the assessee that the necessary pre-condition for invoking section 171 is that a prior assessment in the status of HUF must have been made and if it is so made for the purpose of the Act, the family will continue to be undivided. If no assessment has been made in the status of HUF, then the procedure laid down under section 171 cannot be applied for making the assessment on the HUF which is not in existence. The ITO held that the status of the assessee is that of HUF. Accordingly, he completed the assessment in the status of HUF on a total income of Rs. 1,69,650. The assessee prefer....
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.... v. CIT [1968] 68 ITR 177 (SC), Rameswar Sirkar v. ITO [1973] 88 ITR 374 (Cal.), Shyam Sundar Bajaj v. ITO [1973] 89 ITR 317 (Cal.) and the case in 17 STC 326. 4. The learned departmental representative strongly urged that the assessment has been rightly made in the status of HUF. He submitted that the declaration dated 8-12-1976 clearly shows that there was a HUF on that date. In view of that, the plea that there was disruption of the HUF on 30-6-1976 cannot be accepted. Since there was a HUF in existence, the liability to submit a return had arisen. Hence, the assessment has been rightly made in the status of HUF. He submitted that if, by the subsequent order, partition had been recognised, it does not nullify the assessment made earlier. Thus, he urged that the assessment in the status of HUF has been validly made. He distinguished the cases relied on by the assessee's counsel. He placed reliance on the decisions in Govinddas v. ITO [1976] 103 ITR 123 (SC) and Gauri Shankar Chandrabhan v. CIT [1976] 103 ITR 772 (SC). 5. In reply, the learned counsel for the assessee submitted that the declaration dated 8-12-1976 only stated what was the position of the family in the assessment....
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....constituted HUF but that cannot be construed as if that family was in existence on 8-12-1976 when the declaration was made. That was filed only to show the position that existed during the period for the assessment year 1975-76. On the basis of the above letter, the Commissioner (Appeals) was not justified in holding that the family was in existence. 7. On 25-9-1978, when the assessment was made, the assessee-family was not in existence. It had disrupted on 30-6-1976 which has been accepted by the ITO by his order dated 13-3-1979 made under section 171. The procedure prescribed under section 171 would apply to a Hindu family hitherto assessed as undivided. Section 171(1) reads as under : " (1) A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family except where and insofar as a finding of partition has been given under this section in respect of the Hindu undivided family. " The words 'hitherto assessed as undivided' are very important while considering the section. If the family has already been assessed as a Hindu family, then, under the above provision, it shall be deemed to continue to be undivided....
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....mily before disruption... " Again, it was observed as under : " ...Unfortunately, the machinery provisions of section 171 and the corresponding provisions in section 25A are limited in scope to tax only the Hindu undivided family, which has been 'hitherto assessed'. Undoubtedly, after 1958, this Hindu undivided family had disrupted and in the view of the fact that proceedings were taken in 1964, it must be held, therefore, that the proceedings were irregular and without jurisdiction. The notice under section 148 on the undivided Hindu family must, therefore, be quashed. " This decision was again followed by the same High Court in Shyam Sundar Bajaj's case. It was held therein that if the HUF which has not at all been assessed, had been disrupted, the assessment on the said family could not be reopened after disruption for the period when it was joint. In Roshan Di Hatti's case the Supreme Court had occasion to consider the expression 'hitherto assessed as undivided' in section 25A of the Indian Income-tax Act, 1922 ('the 1922 Act') but the Supreme Court did not express any opinion as it was a case of an appeal from the High Court, refusing to direct the Tribunal to refer a quest....