KAILASH NATH BHARGAVA Vs. COMMISSIONER OF INCOME TAX
LAWS(ALL)-1961-5-20
HIGH COURT OF ALLAHABAD
Decided on May 25,1961

KAILASH NATH BHARGAVA Appellant
VERSUS
COMMISSIONER OF INCOME-TAX, U.P. V.P. Respondents


Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. KAPOOR CHAND SRIMAL [LAWS(APH)-1971-6-22] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. KAPOORCHAND SHRIMAL [LAWS(APH)-1972-6-3] [REFERRED TO]


JUDGEMENT

B.UPADHYA, J. - (1.)I have had the advantage of reading the order proposed by my learned brother, but I regret I am unable to agree with him.
(2.)THE facts of the case have been clearly set out by my learned brother and it is unnecessary to repeat them. THE answer to both the questions referred to depends, to my mind, on the single question as to whether the Income-tax Officer must necessarily make an assessment under section 23 after passing an order under section 25A(1) of the Income-tax Act. THE contention raised by learned counsel for the assessee relating to the apportionment of the tax on the income of the erstwhile family between the two separated groups does not appear to have any force and I agree with my learned brother when he says that having regard to the language of the statute the apportionment has to be made according to the portion of the joint family property allotted to each separated member. I agree that there is nothing in the statute to support the argument that in deciding the value of the portion the income yielding capacity of that portion should be determined by the Income-at Officer. In a partition the value of the different assets are often estimated not only having regard to the capital invested in acquiring them, but due consideration is given to their income or profit yielding capacity, but this is done before the allotment of the various assets of the family to the shares of the members entitled to partition. If four persons are entitled to equal shares, the portion which each would get on partition would be one-fourth portion of the entire family assets. THE word portion in section 25A(2) is used in this sense and I agree with my learned brother that the Income-tax Officer is not expected to embark upon and duty of determining a fresh the value of the assets that fell to the lot of the separating members in order to determine what portion of the joint family property fell to the share of each member.But this argument does not appear to have any bearing on the questions referred to us.
The real question is as to whether, after having passes an order under section 25A(1), there has been a partition among the members of the Hindu undivided family and the joint family property has been partitioned among the members in undivided portions and after having made an assessment of the total income received by the family up to the date of partition, it is necessary for the Income-tax Officer to make an assessment on the separated members under section 25A(2) of the Act. Section 25A has been quoted by my learned brother. Sub-section (1) shows that the claim that a partition has taken place amongst the members of the family, till then assessed as undivided, must be made at the time of making an assessment under section 23. Once the assessment of the family is completed under section 23, no such claim may be made. If a claim is made at the proper time, the Income-tax Officer is required by the statute to make such enquiry thereinto as he may think fit and if he is satisfied that the joint family property has been partitioned in definite portions he has to record an order to that effect. From an order made under section 25A(1), the assessee has a right of appeal under section 30(1) of the Income-tax Act, if he objects to any order passed under section 25A of the Act. Section 30(2) of the Act, which mentions the period during which an appeal may be presented, states that the intimation of the refusal to pass an order under sub-section (1) of section 25A furnishes the starting point for the period of thirty days during which the appeal has to be presented. Section 31(2)(e) of the Act says that in the case of an order under sub-section (1) of section 25A an Appellate Assistant Commissioner may confirm such an order or direct further enquiry and the passing of a fresh order or direct the Income-tax officer to make an assessment in the manner laid down in sub-section (2) of section 25A. Reading the provisions of sections 30 and 31 together it appears that in case a claim is made as mentioned under section 25A(1) and the Income-tax Officer passes an order which is objected to by the assessee, he may prefer an appeal and the Appellate Assistant Commissioner may either confirm that order or cancel it and direct further enquiry with a direction to pass a fresh order or he may direct the Income-tax Officer to make an assessment in the manner laid down under sub-secion (2) of section 25A. In section 25A the main thing to be done by the Income-tax Officer is to pass an order relating to the claim of partition and to see whether there has been a partition of the joint family property in definite portions among the various members. It is clear that he has to find if the Hindu undivided family in whose assessment proceedings the claim was made does not, in fact, exist any more as such. The Income-tax Officer, in levying the tax, has to levy it on a person in existence so that the tax may be recovered and the other proceedings under the Act may be enforced. The legislature appears to have proceeded on the view that the Hindu undivided family having ceased to exist, the income which was earned by the erstwhile family should be subjected to tax in the hands of those who have distributed the assets including the profits of the family among themselves. Under section 25(A)(2) the Income-tax Officer is required to make an assessment of the total income received by or on behalf of the joint family as such as if no partition has taken place. This phrase, to my mind, means that he has to ascertain the amount of income earned by the family while it existed during the relevant accounting period. The statute lays down that for the tax which would have been levied on the family if it had continued to exist the liability falls on the divided members in proportion to the share in the family property taken by them. The Income-tax Officer has, therefore, to calculate what the tax on the income of the erstwhile family would have been but he is not to determine the tax payable by the family as such. One may recall the provisions of section 23(30) of the Act. Dealing with an assessment in the normal course, it says :

23. (3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment.

Under section 25A(2) the Income-tax Officer is required to assess the total income of the erstwhile family but he is not required to determine the sum payable by the family on the basis of such assessment. The simple reason for this is that the family is no more in existence. The law, therefore, provides that the liability for the tax that would have been payable by the erstwhile family if it had not ceased should devolve proportionately on the divided members and in order to crystallise this liability the statute says, and the Income-tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23. The proviso makes it further clear that the divided members 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. the liability for the entire tax remains joint and several. But the Income-tax Officer has got to make assessments on the divided members in accordance with the provisions of section 23.

(3.)THE Income-tax Act does not provide for two assessments being made on the same person. THE tax is to be levied according to the Income-tax Act read with the Finance Act passed every year and it is levied on the total income earned by the units of assessment mentioned in section 3 of the Act during the previous year. Every member of a Hindu undivided family is capable of having his own separate property and his own separate income. It is also possible that he may be a person separately assessed to income-tax. THE liability that falls on him as a divided member of his erstwhile family in accordance with section 25A has to be included by the Income-tax Officer in the assessment that has to be made against that person. When the statute says that the Income-tax Officer shall make assessments in accordance with the provisions of section 23, it is difficult to assume that all the provisions of section 23 required to be complied with in making an assessment are not to be complied with in making the assessment under section 25A(2) on the divided members. Section 23(1) says how the Income-tax Officer may make an assessment if he feels that the return made under section 22 is correct and complete. Section 23(2) requires the Income-tax Officer to give an opportunity to the assessee to produce evidence in support of his return. THE next sub-section enables the Income-tax Officer to call for evidence on specified points if he so desires and then to assess the total income of the assessee and determine the sum payable by him on the basis of such assessment. After considering the language of the statute, I am of opinion, that when the statute requires an assessment to be made in accordance with section 23, it confers on the assessee the right of availing of the opportunities mentioned in section 23 and to take part in his assessment to tax. I find on justification for taking the view that, in spite of the express language of the statute requiring the assessments on the various divided members being made in accordance with the provisions of section 23, all that the Income-tax Officer may do is to calculate the tax liability and issue a notice of demand. It is possible that the divided members may have no other income and the Income-tax Officer may find it ultimately that they are liable to pay only their respective shares of the tax that would have been levied on the income of the erstwhile family. But it is in the interests of revenue to probe into the matter and to ascertain that the divided members or groups of members have in fact no other income on which tax may be demanded from them. It is also possible that these divided members or some of them may have assessable income and may be separately liable to tax without reference to their liability for the tax recoverable from under section 25A(2). But only one assessment can be made under the Income-tax Act unless an assessment on income that has escaped assessment is made under section 34 of the Act. It is true that the word assessment has not been used in the same sense everywhere in the Income-tax Act, but when the statute requires the Income-tax Officer to make an assessment in accordance with the provisions of section 23, I am of opinion that the procedure under section 23 cannot be ignored.
In the instant case it is admitted that no assessment in accordance with the provisions of section 23 of the Income-tax Act was made on the separated groups of members. I am, therefore, of opinion that question No. 1 should be answered in the affirmative.



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