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2008 DIGILAW 611 (PAT)

Bengali Singh v. Commissioner Of Income Tax

2008-04-16

BARIN GHOSH, C.M.PRASAD

body2008
Judgment 1. Both these cases have arisen out of the same judgment of the Income-tax Appellate Tribunal and, hence they have been heard together and disposed of by this common judgment. 2. "Sumitra Sadan", a large building, situated in the city of Patna has a large rental income. The said rental income is shared by eight persons. Each of them, used to submit his income-tax returns showing himself as part owner of the said building and in relation to his share in such rental income. One of those eight owners, Sumitra Devi, filed such returns which were accepted without scrutiny for the assessment years 1991-92 to 1996-97. The return of Sumitra Devi for the assessment year 1997-98 was scrutinized, when it was accepted that the part rental income of the said building is of Sumitra Devi. Subsequent thereto, for the assessment year 1998-99, the return of Sumitra Devi on being scrutinized, it was opined that she is not a part owner of the building in question and that the true owner of the building in question is the appellant-Hindu undivided family. On the basis of such opinion, a notice under Section 147 of the Income-tax Act, 1961, was issued to the appellant (HUF). Thereupon, under Section 143, assessment of the income of the said property for the relevant years was assessed in the hands of the appellant citing him as the owner of the building in question and the appeals preferred against the orders of assessment having been rejected, the appellant approached the Tribunal and after losing before Tribunal, the assessee (HUF) is before us in the present appeal. 3. There is no dispute that the land upon which the said building was constructed belongs to the appellant-assessee. It is the contention of the assessee that he had no income, when he was the owner of the land, and accordingly, he never became an assessee under the Income-tax Act. This contention is not in dispute. The assessee contended before the Assessing Officer, the Appellate Commissioner and the Tribunal as well as before us that the joint Hindu family stood disrupted by reason of a family arrangement entered in the first week of April, 1989, which was recorded subsequently in a deed of arrangement dated April 21,1989. This contention is not in dispute. The assessee contended before the Assessing Officer, the Appellate Commissioner and the Tribunal as well as before us that the joint Hindu family stood disrupted by reason of a family arrangement entered in the first week of April, 1989, which was recorded subsequently in a deed of arrangement dated April 21,1989. It is the contention of the assessee that by reason of disruption of undivided Hindu family, the members of the family obtained specific share in the properties belonging to the joint family and those had been specified in the said deed of family arrangement. It is the contention of the appellant that the Assessing Officer, the Appellate Commissioner as well as the Tribunal incorrectly applied the provisions of Section 171 of the Income-tax Act while holding that there has not been a complete partition. Section 171 of the Income-tax Act makes it clear that the provisions of the said section would apply only when a Hindu undivided family is already an assessee. Unless it is an assessee, the provisions of Section 171 of the Income-tax Act will not apply to a Hindu undivided family even for the purpose of Income-tax Act. In other words, by taking recourse to Section 171 of the Act, it cannot be contended that though the Hindu family has not been disrupted completely by physical division of properties, income in its hands will be deemed to be income of the Hindu family, unless of course, such income is taxable income of the Hindu undivided family earned before its disruption by a physical division of all its properties. 4. In the instant case, however, admittedly, at the time when the building had not been constructed, the Hindu undivided family had no taxable income and, accordingly, was not an assessee under the Income-tax Act. According to the assessee, the Hindu family stood disrupted by the family arrangement entered in the first week of April, 1989. Therefore, before the building was constructed the family stood disrupted and its properties were divided amongst its members. Although, division was not by metes and bounds, i.e., physical division, non-acceptance of such division on the basis of Section 171 of the Income-tax Act by the Assessing Officer was incompetent. However, the question is whether in fact a family arrangement was arrived at in 1989. Although, division was not by metes and bounds, i.e., physical division, non-acceptance of such division on the basis of Section 171 of the Income-tax Act by the Assessing Officer was incompetent. However, the question is whether in fact a family arrangement was arrived at in 1989. It has come on record that subsequent to April 21, 1989, i.e., the date of the deed of family arrangement, Shri Bengali Singh, his wife and their sons granted a lease of a part of the building constructed on the said land in favour of Tata Iron and Steel Co. Ltd. and for that purpose got a lease deed dated December 28,1989, registered. In that Shri Singh described himself as the father of his sons and karta of joint family, comprising of himself, his wife and his major sons. His minor sons also had been represented by Sri Bengali Singh as their father and natural guardian in the said deed. 5. It is the contention of the learned Counsel for the appellant that under the partition of April, 1989, some of the sons of Shri Bengali Singh obtained exclusive share in properties situated at Danapur, but not anything in "Sumitra Sadan". It was contended that in such situation, citation of Bengali Singh as karta of the joint family of himself, his wife and his major sons in the said deed will not establish that the partition of April 1989 did not take effect. Fact remains that those sons who did not obtain any share in the said building or in the land upon which the said building had been constructed, also joined the said lease. The said state of affairs demonstrates that the partition pursuant to family arrangement of April, 1989, did not take effect. The matter has been decided by the Assessing Officer, The Appellate Commissioner and the Tribunal by appreciating the deed of family arrangement as well as the deed of lease. 6. Even the lease deed did not say a word about the family arrangement. 7. Hence, we do not find any scope for interference. Accordingly, this appeal fails and the same is dismissed. Consequentially, the writ petition is also dismissed.