JUDGMENT
Somnath Iyer, J.
1. We are concerned in this reference which is made by the Commissioner of Agricultural Income-tax under section 55 of the Mysore Agricultural Income-tax Act, 1957, as it stood before its amendment, with an assessment of agricultural income for the assessment year 1957-58.
2. A notice was issued to the assessee on July 15, 1958, under section 18(2) after the expiry of the relevant financial year, but the assessee did, however, produce his return before the assessment was made. The Agricultural Income-tax Officer made an assessment thereafter under section 19(3). That assessment was affirmed by the Deputy Commissioner in appeal, and under section 55(2), as it then stood, the assessee applied to the Commissioner for a reference to this court of the questions of law arising out of the order made by the Deputy Commissioner, and the Commissioner made a reference accordingly. But, by an order of his court made on July 15, 1963, the Commissioner was directed to make a proper reference, and in obedience to that order we have now before us a statement of the case prepared by the Commissioner.
3. It appears from the statement of the case that, in the year 1956, there was a partition between the assessee, his wife, Indirabai, and his son, and that at that partition there was an allotment of a property to the wife. The assessee who was assessed as an individual contended that the income of that property should be excluded from his income. But the Agricultural Income-tax Officer and the Deputy Commissioner were of the view that the allotment of the property to the wife was a transfer otherwise than for adequate consideration or in connection with an agreement to live apart within the meaning of section 11(2)(a)(iii) of the Agricultural Income-tax Act, and that the income therefrom should be regarded as the income of the assessee.
4. The other ground on which the assessee resisted the assessment was that the notice under section 18(2) issued by the Agricultural Income-tax Officer for the production of the return was served after the expiry of the relevant financial year. Although the Income-tax Officer said nothing about it, the Deputy Commissioner was of the view that the provision for service of notice contained in section 18(2) was an enabling provision and that the service of notice after the expiry of the financial year had therefore no relevance.
5. The two questions referred to us read :
“1. Whether the lands allotted to Smt. Indira Bai, the wife of the assessee, at the time of the partition of the properties between the assessee and his son amounted to a transfer of assets directly or indirectly within the meaning of section 11(2)(iii) of the Act ?
2. Whether the notice issued in this case on July 15, 1958, and served on July 31, 1958, is illegal and as such the assessment based on such notice is liable to be quashed ?”
6. We shall first address ourselves to the first question, which, it should be mentioned, is not accurately framed. The statutory provision mentioned is section 11(2)(iii), which should be 11(2)(a)(iii), which reads :
“In computing the total agricultural income of the an individual, there shall be included –
(a) so much of the agricultural income of a wife or minor child of an individual as arises directly or indirectly – …..
(iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with and agreement to live apart.”
7. The Income-tax Officer was of the view that, although there was an allotment of a property to the assessee’s wife at the partition of the year 1956, the income therefrom was the income of the assessee, since the assesses and his wife resided together.He, therefore, thought that the computation had to be made in the manner provided by section 11(2)(a)(iii). The Deputy Commissioner shared that view, and in the statement of the case, the Commissioner, who made a more elaborate discussion of the matter, states that Indirabai was not under the Hindu law entitled to a share at a partition between her husband and her sons, and that, since, the assessee and his wife lived together without there being any separation between them, it was not difficult to conclude that there was a transfer of the property by the husband to the wife without there being any intention of the income being enjoyed separately.
8. In taking the view that Indirabai was not entitled to a share at the partition between her husband and her son, the Commissioner made an incorrect assumption. The family which made a partition in the year 1956 was governed by the Bombay Mitakshara School of Hindu law, and, as pointed out by the Full Bench of the High Court of Bombay In Parappa Ningappa Khaded v. Mallappa Kallappa, one of the basic principles of that school of Hindu law is that, at a partition between her husband and sons, the wife is entitled to share equal to that of her son. Chagla C.J. said this in that context :
“Although it may be true that a Hindu wife has no interest in joint family property and she has no right to challenge the alienation, it is equally true that on a partition between her husband and her sons she is entitled to a share equal to that of her son.
It is the basic principle of Hindu law that a Hindu wife is protected and safeguarded on a partition taking place between her husband and her sons, and although she is not recognised as a coparcener on a partition taking place, she is given almost the same right as that of a coparcener because she receives a share equal to that of her son.”
9. So, it becomes clear that the postulate upon which the Commissioner depended falls to the ground.
10. But the more material question is whether the allotment of a share to the assessee’s wife amounted to a direct or indirect transfer of an asset of the assessee to his wife. If we could say that there was such transfer, then alone could we say that the income from the property allotted would become, for the purpose of the assessment, the income of the assessee.
11. There are two enunciations made by the Supreme Court in Commissioner of Income-tax v. Keshavlal Lallubhai Patel and Sarin v. Ajit Kumar which negative the view that a partition of property belonging to a Hindu joint family results in a transfer of the property so partitioned, to any one. It was explained in those two cases that the partition really means that the initial subsisting title to the totality of the property becomes transformed by partition to several titles of the individual coparceners, and that being the true nature of a partition there is no transfer of the property to the individual coparceners.
12. Mr. Narayana Rao, the learned Government Pleader, however, asked us to say that the rule so enunciated becomes inapplicable to a case where the partition is not exclusively amongst the coparceners but makes an allotment to a female member of the family who is not really a coparcener. We do not agree. If under the Bombay Mitakshara School of Hindu law the wife is entitled to claim a share at a partition between her husband and her sons, what follows is that the property which is allotted to her at such partition is property which she acqires in the exercise of her right to claim a partition in the property partitioned and it would not therefore be correct to take that partition outside the rule propounded by the Supreme Court. The High Court of Bombay in Parappa Ningappa Khaded v. Mallappa Kallappa made it clear that it could be said that the wife has an inchoate right in the joint family property and that that inchoate right materialises when the partition is made and she becomes entitled to a share equal to that to her son. So, even in case where a wife is allotted a share at a partition between her husband and her sons, such allotment results in a transformation of the initial title to the totality of the property into separate titles of the individuals between whom the partition is made within the meaning of the decision in Sarin v. Ajit Kumar.
13. That being the true position, it could not be said that there was any transfer of any property to Indirabai on the occasion of the partition between her husband and her son. Moreover, a case falls within section 11(2)(a)(iii) of the Act only when an asset is transferred by the husband to his wife and such transfer is made for no adequate consideration and without there being an agreement to live apart. There could be no such transfer by the husband to the wife when at a partition, to which the husband, the wife the son are parties, a property is allotted to the wife. The transaction which results in such allotment is one to which the son is also a party and it could not, therefore, be right to think that that transaction involves any transfer of any property by the husband to the wife.
14. The discussion made so far demonstrates that our answer to the first question referred to us should be in favour of the assessee if nothing else could be said about it.
15. But Mr. Narayana Rao, the learned Government Pleader, urges that we should decline to answer the question on the ground that there are no sufficient material on the basis of which we could answer it. He asked attention to section 30 of the Agricultural Income-tax Act under the provisions of which an Agricultural Income-tax Officer has the power to record a finding that there was partition between members of a Hindu joint family finding by metes and bounds. He also depends upon sub-section (3) of that section which provides that, where no such finding is recorded, the family shall be deemed for the purpose of the Act to continue to be an undivided family. Mr. Narayana Rao suggested that no finding was recorded by the Agricultural Income-tax Officer at any stage that there was any partition by metes and bounds amongst the members of the family and that, therefore, the Income-tax Officer should have proceeded upon the basis that the family was an undivided family.
16. Although the assessee contended that there was a partition by metes and bounds, the Commissioner says nothing about it in the statement of the case. On the contrary, the question referred to us proceeds upon the assumption that there was a partition such as the one to which we have referred, and that at such partition there was an allotment of the property to the wife. We were asked by Mr. Government Pleader to say that in this situation the income from the property allotted to the wife has to be assessed as the income of a Hindu joint family and not as the income of an individual.
17. We do not think that we can do so. The assessee was assessed as an individual and there was no assessment of any joint family income in the case before us. It is seen from the statement of the case that the income of the assessee which was assessed was the income which he derived from the property which was allotted to him at the partition and that from the property which allotted to the wife. It is undisputed that the income from the property which fell to the share of the son was not assessed as the income of the assessee. In a case like this where the assessee was assessed as an individual and the Income-tax Officer assessed the income from the property allotted to his wife as his own income under section 11(2)(a)(iii) of the Act, the only question which can arise and which indeed has been referred to us, is, whether the property allotted to the wife could be said to have been transferred by the husband to her within the meaning of section 11(2)(a)(iii). No other question such as the one suggested by Mr. Government Pleader can properly arise or be answered.
18. So we should answer the first question in favour of the assessee.
19. The second question consists of the two parts. The first part concerns itself with the legality of the notice issued under section 18(2) of the Act on July 15, 1958. That sub-section provides that in the case to which it refers the Agricultural Income-tax Officer may serve, in the relevant financial year, a notice requiring the production of a return. It reads :
“In the case of any person whose total agricultural income is, in the opinion of the Agricultural Income-tax Officer, of such amount as to render such person liable to payment of agricultural income-tax for any financial year, he may serve in that year a notice in the prescribed form requiring such person to furnish within such period not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total agricultural income during the previous year.”
20. The previous year in this case was the year ending on March, 31, 1957, and the financial year in which the Agricultural Income-tax Officer could have served a notice under the provisions of this sub-section was the year commencing on April 1, 1957, and ending on March, 31, 1958. The clear meaning of section 18(2) is that the Agricultural Income-tax Officer, if he thought that the total agricultural income of the assessee was liable to payment of agricultural income-tax, had the power to serve during that financial year a notice requiring the production of a return. So, what the Income-tax Officer could have done was to serve before the expiry of the financial year which expired on March, 31, 1958, that notice on the assessee. But that notice was issued to the assessee only on July, 15, 1958, and served on him on July 31, 1958. While the Income-tax Officer said nothing about the legality of this notice, the Deputy Commissioner was of the view that the word “may” occurring in section 18(2) demonstrated that the issue of the notice was optional and not obligatory, and so no question of the legality of the services of the noticed beyond the financial year could arise. The Commissioner of Agricultural Income-tax, however, thought that the notice issued under section 18(2) could be understood as a notice under section 36 which provides for the assessment of escaped income, and that, so understood, it could be held to have been issued within the time prescribed.
21. It is of course impossible to regard the notice as one served under section 36 since it was not proposed by that notice to assessee any escaped income. By that notice, the assessee was called upon to furnish a return under section 18(2), and that notice could have been issued only during the relevant financial year. The words “in that year” occurring after the words “he may serve” in section 18(2) made it clear that the notice has to be served in the financial year to which that sub-section refers earlier. Since that was not done and the notice was served beyond that year, our answer to the first part of the second question should be in favour of the assessee.
22. The second part of the second question is somewhat awkwardly worded. It asks us to decide whether the assessment “based” on the notice, which was issued late, is liable to be quashed. It was suggested that if the notice, as decided by us, is an illegal notice, since it was not issued within the time allowed, the assessment made consequent on the issue of such notice must necessarily be pronounced illegal. The question is whether we should say so.
23. Although the notice was issued beyond the relevant financial year, the assessee, nevertheless, produced a return. On the production of that return, the Income-tax Officer proceeded to make an assessment under section 19(3) of the Act. Mr. Narayana Rao, the Government Pleader, urged that the production of the return by the assessee was made under section 18(3), and that if the assessment was based upon the production of the return made in that way, the assessment could not be called in question notwithstanding the delay in issuing the notice under section 18(2). He depended upon section 18(1) which imposes a statutory duty upon every person, upon whose total agricultural income during the previous year agricultural income-tax is charged, to produce return before the concerned Agricultural Income-tax Officer which should reach him before 1st of June of every year. Mr. Rao made the further submission that the power to issue a notice under section 18(2) was an independent power which did not affect to any extent the statutory duty imposed by sectoin 18(1). Our attention was next asked to sub-section (3) which authorises the production of a return by an assessee even beyond the period prescribed by section 18(1) or allowed by section 18(2), provided the return is furnished before the assessment is made.
24. The argument constructed was that although the assessee could have ignored the notice issued under section 18(2) as a notice beyond the competence of the Agricultural Income-tax Officer who issued it after the expiry of the relevant financial year, the assessee did not do so, but produced a return nevertheless. That return, it was contended, has to be regarded as return produced under section 18(3) after the expiry of the period prescribed by section 18(1). It was further maintained that, since that return was produced before the assessment was made, the Income-tax Officer had the competence under section 19(3) to make an assessment on a consideration of the material which he had before him.
25. Sub-sections (1), (2) and (3) of section 18 read :
“18. (1) Every person whose total agricultural income during the previous year exceeded the maximum amount which is not chargeable to agricultural income-tax shall furnish to the Agricultural Income-tax Officer so as to reach him before the 1st June every year a return in the prescribed form and verified in the prescribed manner, setting forth his total agricultural income during the previous year.
(2) In the case of any person whose total agricultural income is, in the opinion of the Agricultural Income-tax Officer, of such amount as to render such person liable to payment of agricultural income-tax for any financial year, he may serve in that year a notice in the prescribed form requiring such person to furnish within such period not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) has total agricultural income during the previous year.
(3) If any person has not furnished a return within the time allowed by or under sub-section (1) or sub-section (2), or, having furnished a return under any of those sub-sections discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made.”
26. Section 19 prescribes the procedure for the assessment of income. Sub-section (1) provides for an assessment on the basis of a return which the Income-tax Officer accepts. Sub-section (2) empowers the Agricultural Income-tax Officer, if he is not satisfied that the return is complete or correct, to require the assessee to produce evidence in support of the return. Sub-section (3) reads :
“19. (3) On the day specified in the notice under sub-section (2) or as soon afterwards as may be, the Agricultural Income-tax Officer, after considering such evidence as such person may produce and such other evidence as that officer may require on specified points, shall, by an order in writing, assess the total agricultural income of the assessee and determine the sum payable by him on the basis of such assessment.”
27. It is undisputed that the assessment which is called in question in the matter before us is an assessment made under section 19(3) after the service of a notice under section 19(2) on the assessee for the production of the evidence in support of the return.
28. But it was suggested on behalf of the assessee that if the return was produced in response to the illegal notice issued under section 18(2), that return could not be the basis of an assessment under section 19(3) and it was said that no assessment could be made under section 19 unless there was a return properly furnished to the Income-tax Officer.
29. We lean to the view suggested by Mr. Narayana Rao, the learned Government Pleader, that we should exclude from consideration the late notice issued under section 18(2) in deciding the legality of the assessment made in this case. Under section 18(1), the assessee was under a duty to produce his return before June 1, 1957. But, nevertheless, under section 18(3), it was open to him to produce his return even thereafter. If he did produce one after June 1, 1957, there is no reason why we should think that that return produced by him is no return at all by reason of the fact that, in the meanwhile, the Income-tax Officer had issued a notice under section 18(2) after the expiry of the financial year to which it refers. There can be no doubt that the assessee intended to produce it after June 1, 1957. It may be that what prompted him to produce the return was the notice issued under section 18(2). But even so, what cannot be overlooked is the fact that he did produce a return after June 1, 1957, and that it was permissible of him to do so under section 18(3). So, the return produced by the assessee has to be regarded as one produced under section 18(3), whatever might have been the antecedent circumstances surrounding the production of the return. That is the true position even if the production of the return was a sequel to the service of notice under section 18(2).
30. The view that we take receives support from the decision in Commissioner of Income-tax v. Ranchhoddas Karsondas, in which the Supreme Court pointed out that a return after the expiry of the period specified in the general notice under section 22(1) of the Income-tax Act is a perfectly good return provided it is produced before the assessment is made and that for the production of that return there was no bar of limitation.
31. The same is the position emerging from section 18(3) read with section 18(1). Under section 18(3), a return could be produced at any time before the assessment, even after the time allowed by the notice under section 18(2) has expired.
32. So, an assessee, in whose case no assessment has yet been made, has the option to produce his return, whether or not a notice under section 18(2) has been served, and even if that notice was served after the expiry of the relevant financial year. If he desists from doing so,he invites a best judgment assessment under section 19(4), the provisions of which are not similar to the corresponding provisions of the Indian Income-tax Act, 1922. But, if he does produce a return and even if the production is preceded by a late notice under section 18(2) which could have been ignored, the return has the status of one produced under section 18(3). The act of production, whatever might have prompted it, is what confers that status. The Income-tax Officer had thus the competence to make an assessment under section 19(3). So, the impugned assessment would be entirely above reproach.
33. But we were asked to say that the form of the question referred to us precludes our taking that view and that what that question asks us to decide is whether the assessment “based” on the notice issued under section 18(2) is a good assessment. The argument was that all that we have to decide is whether an assessment which has for its foundation an illegal notice does not also become tainted with illegality and we were asked to say that an assessment based on an illegal notice can never be legal and falls obviously to be quashed.
34. If the question arises in that way, and, if the validity of the assessment depended upon the validity of the notice, the view pressed on us may appear substantial. But we are clearly of the opinion that on the assessment in the case before us, the illegality of the notice has no impact.
35. Now, the question reads :
“Whether the notice issued in this case on July 15, 1958, and served on July 31, 1958, is illegal and as such the assessment based on such notice is liable to be quashed ?
36. The word “based” in the question upon which the argument was based does not involve the assumption that the assessment was founded on the notice. It is obvious that the assessment came into being on the production of a return and on the observance of the procedure prescribed by section 19. That return when produced under section 18(3) becomes the basis of such assessment even in a case in which a notice under section 18(2) is issued during the relevant financial year, and not the notice so issued. In the case before us, that notice constituted a basis in the sense that it was after the service of that notice that the assessee produced his return. So, we should also understand the word “based” occurring in the question referred to us in that way, and, so understood, the question means whether the assessment, if it is otherwise above reproach, is contaminated by the illegality of the notice. There can be no such contamination if the return is one produced properly under section 18(3), and it was so in this case. So, the word “based” in the question has reference only to the sequence in which the assessment was made and so the real question before us is whether, by reason of the fact that an illegal notice was issued before the assessment was made under section 19(3), the assessment has to be quashed. We do not feel justified in attaching any importance in this case to the fact that the service of the notice under section 18(2) was not effected during the relevant financial year, since what infuses the assessment with efficacy and legality is the voluntary production of the return by the assessee under section 18(3) and the observance of the procedure prescribed by section 19.
37. In that view of the matter, our answer to the second part of the second question should be in favour of the Commissioner and against the assessee.
38. So, our answer to the first question is that the allotment of the lands to Smt. Indirabai, the wife of the assessee, at the time of the partition of the properties between the assessee and his son, does not amount to a transfer of an asset directly or indirectly within the meaning of section 11(2)(a)(iii) of the Act.
39. Our answer to the second question is that the notice served on the assessee on July 31, 1958, under section 18(2) is an illegal notice, but that the assessment made under section 19(3) after the issue of such notice is not liable to be quashed on the ground that the notice issued under section 18(2) is an illegal notice.
40. We should however make it clear, although it is not really necessary for us to do so, that by reason of our answer to the first question the income of the property allotted to Smt. Indirabai cannot be assessed as the income of the assessee.
41. No costs.
