K. ISHWARA BHAT v. CAIT — 1967 DIGILAW 178 (KER)

Judgment :- 1. A Hindu undivided Family, of which one Sri. K. Ganapathy Bhat was the manager, was assessed under the Agricultural Income Tax Act, 1950 (hereinafter referred to as the Act) for the assessment years 1958-59 to 1960-61, both inclusive. In 1960 Ganapathi Bhat claimed that there had been severance in status of his joint family, and that the properties of the family were divided among its members by a registered agreement dated 26 61960.On the basis of this partition, Ganapathy Bhat moved the Income Tax Officer for recording an order that the family properties had been partitioned as required by S.29 of the Act. The Income Tax Officer, after making some enquiries, passed an order on 3112 1960 purporting to be under S.29 of the Act. In this order, he found that a severance of the joint status of the family bad taken place as a result of the registered partition agreement. It appears from this order that Ganapathy Bhat had no case that the family properties had been partitioned among the various members or groups of members in definite portions. At any rate the Income Tax Officer has not recorded an order to that effect. By this order, he directed that the registered agreement would be given effect to, and the assessments for the years relating to the accounting year commencing on the 1st July 1960 would be made under S.3(5) of the Act, which means with effect from the assessment year 1962-63. Apparently relying on the above order, the Income Tax Officer assessed the members of this Hindu Undivided Family for the year 1961-62 as tenants-in-common. It is seen from the order of assessment that Ganapathy Bhat had made a return of the income of the whole family properties, and claimed that the assessment should be made under S.3 (5) on the income of each member. This claim was accepted; and the order of assessment was made accordingly. On 9121964 the Commissioner for Agricultural Income Tax, who is the respondent in this case, issued a notice, copy of which is marked as Ext. P-1 in this case, to Ganapathy Bhat and the other members of the family under S.34 of the Act. Ext. This claim was accepted; and the order of assessment was made accordingly. On 9121964 the Commissioner for Agricultural Income Tax, who is the respondent in this case, issued a notice, copy of which is marked as Ext. P-1 in this case, to Ganapathy Bhat and the other members of the family under S.34 of the Act. Ext. P-1 states that, as under the partition agreement, the family properties had not been divided by metes and bounds among its members, S.29 of the Act had no application to the case, that the assessment of the members of the family as tenants-in-common was wrong, and that he proposed to cancel the proceedings of the Income Tax Officer. Accordingly, Ganapathy Bhat and other members of the family were required to show cause why action proposed by this notice should not be taken. Ganapathy Bhat filed objection to Ext. P-1 in December 1964, copy of which is marked as Ext. P-2 in this case. Before the matter was decided Ganapathy Bhat died on 27121965. Thereupon, the respondent issued fresh notices to the petitioner herein, who is a son of Ganapathy Bhat and one of the members of the family, and also to the other members of the family under S.34 of the Act in terms similar to Ext. P-1. Ext. P-3 dated 9 31966 is a copy of this notice. This Original Petition has been filed to quash Ext. P-3 and to prohibit the respondent from taking any proceedings pursuant thereto. 2. The learned counsel appearing for the petitioner raised three points: (i) The proceedings proposed to be taken by Ext. P-3 are barred by limitation; (ii) The petitioner is liable to be assessed only as a tenant-in-common by virtue of the partition agreement of 1960; and (iii) The order passed by the Income Tax Officer under S.29 of the Act cannot be reopened without issuing notice to all the members of the family. It is stated in the counter-affidavit filed on behalf of the respondent that notices similar to Ext. P-3 had been issued to and served on all the members of the family. In view of this statement, point No. (iii) cannot be sustained. 3. Point No. (i). It is stated in the counter-affidavit filed on behalf of the respondent that notices similar to Ext. P-3 had been issued to and served on all the members of the family. In view of this statement, point No. (iii) cannot be sustained. 3. Point No. (i). The petitioner's learned counsel relied on S.35 of the Act in support of the contention that no action can be taken by the respondent under S.34 of the Act, after the expiry of three years from the end of the year, to which the assessment relates. In this case, Ext. P-3 was issued only after the said period. He relied on a decision of this court reported in Suppan Chettiar v. Commissioner of Agrl. Income-tax 1958 KLJ. 834. In that case the income of a father from his own property and that of his minor children from property which the father had given to them were assessed separately, whereas under the Act, the income of both the properties had to be treated as income of the father and the assessment had to be made on the father in respect of the total income. After expiry of three years from the close of the assessment year, the Commissioner of Income Tax issued a notice under S.34 of the Act. The validity of this notice and the assessment made pursuant thereto came up for decision in the above case in a tax reference. Their Lordships held that, even though the income of the minor children was assessed against them, it escaped assessment as regards the father was concerned, and that, as such an income could be assessed under S.35 of the Act only within 3 years of the close of the assessment year, the Commissioner of Income Tax cannot assess the same or direct the Income Tax Officer to assess it by taking action under S.34 of the Act; because the Commissioner can assess such an income only in accordance with the provisions of the Act, and the period of limitation prescribed under S.35 applies to the case. The same view has been taken by a learned judge of this Court in the decision in O. P. No. 877 of 1964. This decision has also been relied upon by the learned counsel. The same view has been taken by a learned judge of this Court in the decision in O. P. No. 877 of 1964. This decision has also been relied upon by the learned counsel. These cases would not help the petitioner, in view of the fact that S.35 if the Act was amended by Act 12 of 1964 with retrospective effect from 141958. S.35 as it stands today reads as follows: "35. Income escaping assessment. (1) If for any reason agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate, the Agricultural Income-tax Officer may, at any time within three years, of that end of that year serve on the person liable to pay the tax or in the case of a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of S.17 and may proceed to assess or re-assess such income and the provisions of this Act shall so far as may be, apply accordingly as if the notice were a notice issued under the sub-section: Provided that the tax shall be charged at the rate at which it would have been charged if such income bad not escaped assessment of full assessment, as the case may be. Provided further that the Agricultural Income Tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so. 2. Provided further that the Agricultural Income Tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so. 2. No order of assessment under S.18 of assessment or reassessment under sub-section (1) of this section shall be made after the expiry of three years from the end of the year in which the agricultural income was first assessable: Provided that where a notice under sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if at the time of the assessment or re-assessment the three years aforesaid have already elapsed:' Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made shall apply to a re-assessment made under S.19 or to an assessment or reassessment made in consequence of, or to give effect to any finding or direction contained in, an order under S.31, S.32, S.34 or S.60. 3. In computing the period of limitation for the purposes of this section, any period during which the assessment proceeding is stayed by an order or injunction of any court or other competent authority shall be excluded;" From the second proviso to sub-section (2), it is clear that the limitation prescribed by this sub-section would not apply to re-assessment made under S.19 or to an assessment or re-assessment made in consequence of, or to give effect to any finding or direction contained in an order under S.31, 32, 34 or 60. This shows that the power of the Commissioner under S.34 is not subject to the period of limitation prescribed in sub-section (2), and that the Income Tax Officer also can make a reassessment pursuant to a direction made by the Commissioner under S.34 of the Act irrespective of any period of limitation. The cases relied on by the petitioner's learned counsel were decided before Act 12 of 1964 was enacted. The plea of limitation cannot, therefore, succeed. 4. Point No. (ii). The petitioner's contention that the assessment made against the members of his family, as tenants-in-common is correct, is unsustainable on the admitted facts of the case. The cases relied on by the petitioner's learned counsel were decided before Act 12 of 1964 was enacted. The plea of limitation cannot, therefore, succeed. 4. Point No. (ii). The petitioner's contention that the assessment made against the members of his family, as tenants-in-common is correct, is unsustainable on the admitted facts of the case. As the petitioner's family had been assessed under the Act as a Hindu undivided family, the only way by which the family can cease to be assessed in that status is to effect a partition by metes and bounds of the family property, and get an order as required by S.29 of the Act from the Income Tax Officer recording that such a partition had taken place. Subsection (3) of S.29 provides that when such an order has not been passed in respect of a family hitherto assessed as a Hindu undivided family, such family shall be deemed to continue to be Hindu undivided family. If partition as contemplated by S.29 had taken place and an order thereunder has been made by the Income Tax Officer, there is no question of application of S.3(5) of the Act and treating the members of the family as tenants-in-common. Thereafter each member of the family or group of members of the family according to the tenor of the partition will be assessed separately. The learned counsel relied on the decision of this Court in Moopil Nayar v. Agrl. I. T. Officer 1964 KLT.121. The learned judge states that it was a case to which S.29 does not apply. Therefore this decision has no assistance to the petitioner. The order of assessment made by the Income Tax Officer for the year 196162 treating the members of the petitioner's family as tenants-in-common was, therefore, clearly contrary to the provisions of the Act, and that the action taken by the respondent under S.34 of the Act is legal and valid. 5. In the circumstances of this case, it is only just and proper that the petitioner is given an opportunity to submit his objections, if any, before the respondent to the notice Ext. P-3. I, therefore, give the petitioner an opportunity to file his objections, if any, within one month from date hereof; and the respondent is directed to dispose of the same according to law. In the result this Original Petition is dismissed subject to the above direction. P-3. I, therefore, give the petitioner an opportunity to file his objections, if any, within one month from date hereof; and the respondent is directed to dispose of the same according to law. In the result this Original Petition is dismissed subject to the above direction. There will be no order as to costs.