ORDER
1. This appeal by the assessee is directed against the order of the CIT, Nasik under section 263 of the Income-tax Act, 1961.
2. For the assessment year 1992-93, the ITO, Ward 2(6), Jalgaon, completed the assessment of the assessee under section 143(3) of the Act by accepting the claim of the assessee as “HUF (smaller)”. Later on, the CIT, Nasik, called for the records and noted that the assessment order passed by the Assessing Officer was erroneous, insofar as it was prejudicial to the interests of Revenue for the following reasons :
“The assessee has claimed status as HUF. Record indicates that there was complete partition of HUF as on 30-9-1991. Partition has also been recognised by the Assessing Officer, ITO, Ward 2(5), Jalgaon, on 17-1-1995 as per provisions of section 171 of the Income-tax Act, 1961. Although partition has been recognised by the Assessing Officer, still assessee claimed his status as HUF consisting of the assessee himself, Shri Ravindra V. Patil and three unmarried daughters. The assessee’s claim of HUF is not in accordance with law because the total partition has already been taken
place, and the relevant share was given to Mrs. Shailaja R. Patil, assessee’s wife, therefore, the Assessing Officer’s action of accepting assessee’s claim of HUF is erroneous in so far as, it is prejudicial to the interest of the revenue.’
He accordingly issued a notice under section 263, in response to which the assessee submitted that the status has been rightly claimed as ‘HUF’ and in support of the claim, the assessee relied upon the judgment of the Gujarat High Court in the case of CIT v. Harshvadan Mangaldas [1992] 194 ITR 136. The CIT was not satisfied with the explanation furnished and set aside the order of the Assessing Officer. Aggrieved by the order of the CIT, the assessee is in appeal before this Tribunal.
3. Shri K.A. Sathe, the learned counsel for the assessee, submitted that it appears from the order of the CIT that he is of the opinion that once a complete partition of the HUF has taken place, no member can claim the status of HUF. This is because, partition was claimed to be as a complete partition of the HUF. He submitted that a complete partition has to be accepted in the sense that all the properties belonging to the HUF are subject-matter of partition and all the Members entitled to a share have been allotted a share in such a partition. Both these conditions have been satisfied in this case. The entire property has been subjected to partition and all the three members, namely, the assessee, his wife and his son who were entitled to share in partition have been allotted shares. As required under the Hindu law, provision has also been made in respect of maintenance and marriage expenses of the unmarried daughters by providing that these expenses will be incurred by the Karta out of the share given to him. Thus, there is no doubt that there is a total partition in the family and this has been rightly accepted by the Assessing Officer under section 171 of the Act, and after such partition, there existed a smaller HUF with the assessee as Karta, his wife and three unmarried daughters as members of the HUF. So, the assessee had rightly claimed the status of HUF. In support of his contentions, he relied upon the following decisions :
(i) N.V. Narendranath v. CWT [1969] 74 ITR 190 (SC);
(ii) Prem Chand v. CIT [1984] 148 ITR 440/17 Taxman 90 (AP);
(iii) Harshvadan Mangaldas case (supra).
4. Shri Adhir Jha, the learned D.R. relied upon the order of the CIT.
5. I have considered the rival submissions and perused the facts on record. In this case, I am concerned with the status of Karta who received a share on partition of the HUF. The question regarding the character of the property received by a member on partition is entirely a different question and has no reflection of the total partition of the HUF. Once total partition of the bigger HUF has been effected that HUF has come to an end. It is nobody’s case that such an HUF should be assessed. In the present case, the assessee’s case is that on receipt of the share on partition of the HUF, what would be the status of such member. Since the family
of the Karta consists of himself, his wife and three unmarried daughters, such a family has to be regarded as HUF which is a natural state of an Hindu society. As regards the property of such an HUF, the decision of the Hon’ble Supreme Court in N.V. Narendranath’s case (supra) is a clear authority for holding that it does not lose its character as joint family property. Thus, there is not only a Hindu family, but the property held by it also bears the character of joint family property. In this situation, the status of the assessee has to be taken as that of HUF. This has been clearly laid down by the decisions of the Andhra Pradesh High Court in Prem Chand’s case (supra) as also by the Gujarat High Court in Harshvadan Mangaldas’ case (supra), relied upon the learned counsel. The latter decision is more relevant in the context of the assessee’s case. The Hon’ble Gujarat High Court has stated that the expression ‘Hindu undivided family’ is used in the same sense in which a Hindu joint family is understood in the personal law of Hindus. A Hindu undivided family can consist of male as well as female members and in some cases even of females. The fact that there is only one male member in the family does not mean that such a family cannot be considered as Hindu undivided family. Consistently the Courts have been holding that a distinction must be made of coparcenary and Hindu undivided family. The former connotes a narrower body, while the latter connotes a larger body, which in fact is what the Income-tax Act contemplates.
6. It might be contended that in Gujarat case there was a partial partition. But this has no relevance to the ratio of the decision, because the character of the property received by a member, whether on partial partition or total partition, remains the same. In the case before the Andhra Pradesh High Court, it was held that inspite of the partition and inspite of a specific share being given to wife the marital bond between the husband and the wife continued and was not snapped inspite of the share given to the wife. Unlike the son who goes out of the family after partition, or the daughter on marriage, the wife continues to be a member of the HUF of her husband as long as the marital tie lasts, inspite of taking a share in the partition. The High Court accordingly held that the Karta and his wife were assessable as an HUF. In the present case, the claim of the assessee that the status as HUF is not only because of wife in his family, but also because he has taken responsibility of maintenance and marriage expenses of his unmarried daughters. The share allotted to him on partion cannot, therefore, be said to be owned by him absolutely in his individual capacity and, accordingly, I hold that the status was rightly claimed to be that of HUF.
7. Further, it is not clear from the order of the CIT as to why he considered the adoption of the status of HUF caused any prejudice to the Revenue in the year under consideration. It is the basic requirement for assuming jurisdiction under section 263 that the CIT must point out how the adoption of the status of HUF has caused any prejudice to the interest of Revenue. In the absence of such a finding, the order under section 263
gets vitiated. If one goes by the rates applicable to the status of HUF in the assessment year 1992-93 and it is seen that the rates of individual and HUF were the same and in case any member had any taxable income in his individual capacity, the rates applicable to the HUF were higher than those of an individual. In this view of the matter, it was particularly necessary for the CIT to state how adoption of status of HUF has caused any prejudice to the interests of Revenue. On this ground also, the order of the CIT under section 263 deserves to be cancelled. Even assuming that there might be a contrary view possible will not affect the case of the asscssee as long as the order of the Assessing Officer is prima facie supported by two decisions of two High Courts, as stated above and such an order cannot be branded as erroneous only because some other view is also possible. This view gets support from the decision of the Gujarat High Court in the case of Garden Silk Mills Ltd. v. CIT [1996] 221 ITR 861. This also is one more reason that I hold that no interference on the part of the CIT was called under section 263 of the Act.
8. In the light of the above discussion, I quash the order of the CIT passed under section 263 of the Act.
9. In the result, the appeal is allowed.