IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
ITA No. 444 of 2008
Date of decision: 18.8.2009
Commissioner of Income-Tax, Faridabad
......Appellant
Vs.
Shri Khacheru (HUF), Ward-2, Ahirwara,Ballabgarh.
...Respondent
CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL
HON'BLE MRS.JUSTICE DAYA CHAUDHARY
PRESENT: Mr.Rajesh Katoch, Standing Counsel for revenue.
Mr.Sanjay Bansal, Sr. Advocate, assisted by
Mr. Parshant Bansal, Advocate, for assessee
****
ADARSH KUMAR GOEL, J. (Oral)
1. The revenue has preferred this appeal under Section 260A of the
Income-Tax Act, 1961 (for short, “the Act”) against the order dated
12.10.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench “A”
New Delhi in ITA No. 2908/Del/2003 for assessment year 1999-2000,
proposing to raise the following substantial questions of law:
a. “Whether on the facts and in the
circumstances of the case, the Hon’ble
Tribunal has erred in law in holding that
provisions of Section 171(9) are not attracted
in this case despite the fact that assessments
for Assessment Years 1994-95 to 1998-99
ITA No. 444 of 2008 [2]had already been completed on 28.9.2000
whereas assessment for the year under
consideration was completed much later on
23.3.2001.”
b. ” As provided in Section 171(9) of the
Income Tax Act, 1961 and the decision of
Hon’ble Supreme Court in the case of
M.V.Valliappan and others (238 ITR 1027),
partial partition is not recognized under the
provisions of Income Tax Act and can not
be treated as a valid partition of HUF.”
c. ” Although tax involved is Rs.2,04,549/-
which is less than the limits laid down by
the CBDT in this regard, the appeal is filed
as the substantial question of law of wider
ramification is involved.”
2. During the assessment proceedings, the assessee pleaded
partial partition of HUF dated 18.6.1998 which was not recognized in view
of provisions of Section 171(9) of the Act. On appeal, the CIT(A) partly
upheld the claim of the assessee, which was affirmed by the Tribunal. The
Tribunal observed:
“One more aspect of the matter to be
noticed is that even in the ground taken
before us the department does not seem to
ITA No. 444 of 2008 [3]question the proposition of law that Section
171(9) does not apply to a joint Hindu
family which has never been assessed as
undivided, but seems to take the point that
by the time the assessment was made on the
assessee for the assessment year under
appeal on 23.3.2001, assessments for the
assessment years 1994-95 to 1998-99 had
already been completed on 28.9.2000 and
thus the assessee fell under the category of a
HUF “hitherto assessed”. But the cut-off
point for ascertaining whether the HUF has
been “hitherto assessed” cannot, in our
opinion, be the date on which the
assessment is made for the assessment years
1994-95 to 1998-99, but the date on which
the partial partition had taken place. If
before 18.6.1998, the date of partial
partition, an assessment had been made on
the assessee-HUF then of course it cannot
be contended that the assessee is not a HUF
which has not been hitherto assessed. But
once the partial partition had been effected,
and before that date no assessment had been
ITA No. 444 of 2008 [4]made upon the assessee-HUF, then it must
follow that the HUF falls under the category
of a family not hitherto assessed and
consequently it must be held that the section
has no application. If the point of time at
which it has to be determined whether the
HUF has been hitherto assessed or not is to
be taken with reference to any other date,
for instance the date on which assessments
were made for the earlier years as in this
case, it would be open to the Assessing
Officer to keep the assessment proceedings
for the year under appeal (in which the issue
arises) pending, issue notices of assessment
or reassessment for earlier assessment years
and complete them either under Section 143
(3) or Section 144 and then take the stand
that since the HUF has already been
assessed, the provisions of Section 171 are
applicable to the assessment for the year
under consideration. It would thus be
possible to defeat the claim of the assessee
in every case. Since such a situation cannot
be countenanced, it must follow that in
ITA No. 444 of 2008 [5]order that Section 171 is invoked an
assessment upon the HUF ought to have
been made before the date of partial
partition.”
3. We have heard learned counsel for the parties.
4. At the outset, learned counsel for the assessee brought to our
notice a judgment of Division Bench of this Court dated 20.1.2009 in ITA
No. 30 of 2006 (M/s Tarlochan Singh v. Commissioner of Income Tax
and another) holding that the expression “hitherto” occurring in Section
171(9) of the Act would mean that assessment should not have taken place
as HUF before the date of partial partition. He submitted that in the
present case no assessment had taken place prior to the date of partial
partition.
5. Learned counsel for the revenue submitted that the judgment
relied upon is distinguishable in its application to the present case. In the
present case, as is clear from the order of assessment, the status of the
assessee was HUF for the earlier years from assessment years 1994-95 to
1998-99. The assessment of the said years was completed on 28.9.2000.
Though the said date was after partial partition, the same related to period
prior to partial partition. Once assessee was assessed as HUF, the said
status continued. In M/s Tarlochan Singh (supra) the assessee had not
been assessed for any period prior to partial partition.
6. Learned counsel for the revenue refers to judgment of
ITA No. 444 of 2008 [6]
Allahabad High Court in Commissioner of Income Tax v. Gyan Chand
and Sons [2008] 303 ITR 267 wherein the assessee had been assessed in
the capacity of HUF after the date of partition but for earlier period. Partial
partition in that case had taken place on October 20, 1979 and the
assessment of the assessee in the status of HUF took place in October, 1982
for the earlier assessment year i.e. 1978-79 and 1979-80. It was held that
even though the assessment had taken place after partition, the same could
be relied upon to deny the claim of partial partition, as the assessment will
be relatable of the assessment year for which the assessment was made even
if the assessment was after the date of partition. Relevant observations are
as under:
“From a joint reading of sub-sections (1)
and (9) of Section 171, the intention of the
legislature appears to be that once an HUF
has been assessed as HUF shall continue to
be assessed so unless the order recognizing
the partition is passed by the authority
concerned. The assessment order passed is
relatable to the assessment year involved
therein and it will be treated to have been
passed on the last date of assessment year,
for the purposes of Section 171 of the Act.”
7. Learned counsel for the assessee on the other hand, submitted
ITA No. 444 of 2008 [7]
that the assessment of assessee as HUF must be prior to the date of
partition. In the present case, the assessment of the assessee as HUF took
place for the first time on 28.9.2000 while partition had taken place on
18.6.1998. Thus, the assessment of the assessee was not prior to the date of
partition. The words “hitherto” in Section 171(9) are referable to the
assessment taking place prior to partition. He also submitted that even
notice for assessment for assessment years 1994-95 to 1998-99 was issued
for the first time after the date of partition i.e. in October 1998.
8. We find merit in the contention raised on behalf of revenue.
We are in respectful agreement with the view taken by the Allahabad High
Court in Gyan Chand case (supra). The object of inserting clause (9) in
Section 171 by Finance Act in pursuance of Finance Bill No.2 of 1980 was
to do away with the concept of partial partition after December 31, 1978.
While considering the validity and background of this provision, the
Hon’ble Supreme Court in Union of India and others v. M.V.Valliappan
and others [1999] 238 I.T.R.1027 observed:
“From the aforesaid section, it is clear that
for the purposes of income tax, the concept
of partial partition of the Hindu undivided
family was recognized, but is done away
with by the amendment which specifically
provides that where a partial partition has
taken place after December 31, 1978, no
ITA No. 444 of 2008 [8]claim of such partial partition having taken
place shall be inquired into under sub-
section (2) and no finding shall be recorded
under sub-section (3) that such partial
partition has taken place. If any such finding
is recorded under sub-section (3) whether
before or after June 18, 1980, being the date
of introduction of the Finance (No.2) Bill,
1980, the same shall be null and void . The
effect of the aforesaid sub-section is that for
the purposes of income-tax partial partitions
taking place on or after January 1, 1979, are
not to be recognized. If a partial partition
has taken place after the cut-off date no
inquiry as contemplated under sub-section
(2) by the Income-tax Officer shall be held.
Even if the inquiry is completed and the
finding is given, it would be treated as null
and void. In this view of the matter, the
contention raised in some of the petitions by
learned counsel for the respondents that
partial partition took place on April 13,
1979, and that in the assessment year it was
recognized and benefit was given to the
ITA No. 444 of 2008 [9]
assessee, has no significance in view of the
crystal clear language used in the sub-
section that partial partition taking place
after the cut-off date is not to be inquired
into and if inquired the findings would be
null and void. Such a family is to be
assessed under the Act as if no partial
partition has taken place.”
9. Having regard to the above observation, it is clear that partial
partition taking place after 1.1.1979, cannot be recognized in respect of an
assessee already assessed in the status of HUF, for the period prior to
partition. Mere fact that assessment actually takes place on a date after the
partition will not affect this position.
10. In the present case, the assessee having already been assessed
in HUF status for the period prior to partition, had to be assessed in that
status ignoring partial partition. The judgment of this Court relied upon in
M/s Tirlochan Singh (supra) is distinguishable.
11. Accordingly, the substantial question of law whether partial
partition could be recognized when assessee had already been assessed in
the status of HUF for the period prior to the partition even if date of
assessment was later to the date of partition has to be answered in favour
of the revenue and against the assessee.
ITA No. 444 of 2008 [10]
12. Learned counsel for the assessee submitted that as a result of
protective assessment, the asseee had also been assessed in individual
capacity. We need not go into this question at this stage. Scope of this
appeal is limited to decision of above question. The Tribunal can take care
of other questions in the light of finding recorded above.
13. Accordingly, we allow this appeal, set aside the order of the
Tribunal and remand the matter to the Tribunal for fresh decision in
accordance with law. The parties may appear before the Tribunal on
3.12.2009 for further proceedings.
(ADARSH KUMAR GOEL)
JUDGE
(DAYA CHAUDHARY)
August 18, 2009 JUDGE
raghav
Note: Whether this case is to be referred to the Reporter? ……..Yes/No