1986 PLP 690 (PTD)

P. RAMACHANDRA RAJU, J.--At the instance of the assessee, the Income-tax Appellate Tribunal referred the following questions for the opinion of the High Court: (1) "Whether in the circumstances and on the facts of the case the order, dated 28-3-1973 of the income-tax Officer allowing the assessee's claim of partial partition, dated 5-8-1971 is in accordance with the provisions of section 171 of the Income-tax Act, 1961. (2) Whether in the circumstances and on the facts of the case the Additional Commissioner of Income-tax is justified in holding that there could not be a partial partition in a Hindu joint family consisting of only the Karta, his wife and a minor daughter. (3) Whether in the circumstances and on the facts of the case the Additional Commissioner of Income-tax is justified in cancelling the order under section 143(3) of the Income-tax Officer consequent on allowing the claim of partial partition under section 171 of the Income-tax Act, 1961."

2. The assessee Dandoo Madanmohan Rao is the second of three sons of late. Dandoo Pentiah, the assessee was allotted some joint family properties towards his share in the family partition which took place from time to time between himself, his brothers and his father. The assessee's wife is one Padmavathi. As the assessee had no children, he adopted one Narsamma, the daughter of one of his brothers by a registered deed of adoption, dated 4-8-1971. The joint family thereafter consisted of the assessee, his wife Pandmavathi and his adopted daughter Narsamma. The assessee was being assessed in the status of a Hindu undivided family up to and inclusive of the a sessment year 1971-72 the accounting period ending with 19th of October of the previous year. The year of assessment in question is 1972-73, the accounting period being the year ending with 19-10-1971. An oral partition of the family properties as between the assessee, his wife and adopted daughter was made on 5-8--1971 and a record of lists of properties, partitioned or kept joint was prepared on 16-8-1971. The 'A', 'H' and 'C' schedule properties were respectively allotted to the assessed, his wife and adopted daughter. The 'D' schedule properties were, however, kept joint. There was no physical partition made of premises No. 5-2-174/2, Rashtrapathi Road, Secunderabad in which the assessee and his wife were each allotted a half share. Likewise, the adopted daughter was allotted the 1/6th share belonging to the H.U.F. of the assessee, the remaining 5/6th share, however, belonging to the divided members of the bigger. H. U. F For the assessment year 1972-73, the assessee claimed that a partial partition took place among the members of H.U.F. on 5-8--1971. The I.-T.O. by his order, dated 28-3-1973 accepted the claim made under section 171(3) of the Act. He accordingly finalised the assessment for that year by his assessment order, dated 28-3-1973. The Additional Commissioner of Income-tax, in exercise of his powers under section 263 of the Act, issued a notice, dated 14-2-1974 calling upon the assessee to show-cause as to why the order, dated 28-3-1973 should not be cancelled with a direction to the I.-T.O. to re-do the assessment in accordance with law. The assessee showed cause after considering which, the Additional Commissioner of Income-tax set aside the two orders passed by the I.-T.O. as being prejudicial to the interests of Revenue and directed the I.-T.O. to redo the assessment in accordance with law. The Additional Commissioner of Income-tax held that neither Padmavathi nor Narasamma could be considered as coparceners entitled to claim a share in the family properties. The assessee then preferred two appeals before the Income-tax Appellate Tribunal one against the order cancelling the acceptance by the Income-tax Officer of the claim made under section 171(3) of the Act and the other against the direction of the Additional Commissioner to re-do the assessment in accordance with law. The Tribunal dismissed both the appeals. The assessee, in his reference application made to the Tribunal under section 256(1) of the Act, required the Tribunal to refer the first two questions set out above for the opinion of the High Court. In making the reference, however, the Tribunal also framed the third of the questions referred to above for the opinion of the High Court.,

3. The provisions of section 171 of the Income-tax Act prior to Finance (No. 2) Act, 1980 became material, in terms of the material provisions of that section: "171.-- (2) where, at the time of making an assessment under section 143 or section 144, it is claimed by or on .behalf of any member of a Hindu family assessed as undivided that a partition, whether total or partial, has taken place among the members of such family, the income-tax Officer shall make an inquiry there into after giving notice of the inquiry to all the members of the family. 171(3) On the completion of the inquiry, the I.-T.O. shall record a finding as to whether there has been a total or partial partition of the joint family property, and, if there has been such a partition, the date on which it has taken place. 171(4). Where a finding of total or partial partition has been recorded by the I.-T.O. under this section, and the partition took place during the previous year:- (a) the total income of joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and (b) each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything stained in Cl. (2) of section 10, be jointly and severally liable for the tax on the income so assessed. 171(7). For the purposes of this section, the several liability of any member or group members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial. The partial partition was orally made on 5-8-1971 during the accounting period 1971-72, the year of assessment being 1972-73. It was on such a claim made by the assessee that the I.-T.O. recorded a finding that the partition in fact took place on 5-8-1971, after giving notice of the enquiry to all the members of the family and after making the enquiry in terms of section 171(2) of the -act. Consequent on the acceptance of such claim made by the assessee, the assessee, his wife and daughter became jointly and severally liable to pay the income-tax on the total income of the joint family in respect of the period till 5-8-1971 and thereafter severally in respect of the income arising to each of them from the properties allotted to their respective shares. Consequent on the acceptance of such claim for partial partition, the I.-T.O. finalised the assessment of the assessee for the assessment year 1972-73 under section 143(3) of the Income-tax, Act. The Additional Commissioner as also the Tribunal took the view that the assessee was the only member of the family, entitled to the status of a coparcener and that neither his wife nor the adopted daughter could be coparceners, entitled to claim partition and that, therefore, the oral partition, dated 5-8-1971 is an initio void and illegal. Mr. Dasaratha Rama Reddy has fairly stated that there cannot be any valid partition as such between the assessee, his wife, and adopted daughter. He has, however, tried to persuade us to uphold the validity of the partition on the basis of a family settlement. In support of his submission he placed reliance on C.I.-T. v. Narain Dass Wadhwa, (1980) 123 I.-T.O. 281 (Punj & Har). The facts in that case were that Narain Dass Wadhwa constituted an H.U.F. alongwith his son Krishan Lal Wadhwa, his wife Sita Devi and two unmarried daughters Veena and Chandrika. On the death of Narain Dass Wadhwa on 19th January, 1964, the H.U.F. constituted by Krishna Lai, his mother and two sisters, was a partner in the firm known as "Messrs Paxit Containers". On, 15-5-1969, there was a partial partition in respect of the amount of Rs.60,000 which stood invested by the assessee H.U.F. in the said firm. Necessary entries were made in the books of Messrs Paxit Containers showing the division of the aforesaid amount of Rs.60,

000. Consequent upon this partial partition Sita Devi, Veena and Chandrika withdrew the amounts from Messrs Paxit containers and invested the same somewhere else. Krishna Lal thereafter joined the firm Messrs Paxit Containers as representative of the smaller H.U.F. consisting of himself, his wife and a minor child. On 10th July, 1970, the assessee H.U.F. filed an application under section 171 of the I.-T. Act requesting the I.-T.O. to record a finding as to the partial partition of the joint family property as on 15th May, 1969. That claim was supported by an affidavit filed by each member of the assessee H.U.F. The claim was in fact pressed that there was nothing in law to compel the Karta of the family to remain joint with his mother and sisters and as such, the partial partition in question, which in fact, was tantamount to a family arrangement, was valid in the eye of law. The I.-T.O., refused to accept the claim of partial partition on the ground that there must be at least two coparceners for the purpose of effecting a partition of the joint family property, but there was only Krishan Lal, one male coparcener. The I.-T.O. thereafter proceeded to add the interest on the total amount of Rs.60,000 in computing the income of the assessee H.U.F. On appeal, the Appellate Assistant Commissioner accepted the claim of the assessee and the order of the Appellate Assistant Commissioner was confirmed by the Tribunal. The facts disclosed beyond doubt that Sita Devi, Veena and Chandrica became the legal representatives alongwith Krishan Lal, son of Narain Dass Wadhwa who died in 1964 subsequent to the Hindu Succession Act, 1956. Each of them had, therefore, a right to claim a share in the assets belonging to Narain Dass Wadhwa. The learned Judges of the Punjab and Haryana High Court accepted the partial partition both as of fact and on the alternative basis that it represents a family arrangement arrived at fairly between the members belonging to the family of Narain Dass Wadhwa. Mr. Dasaratharama Reddy cannot, therefore, rely upon this decision in view of the facts which arose for decision in that case.

4. The record of lists of oral partition prepared on 16-8-1971 proceeds on the basis that the assessee, his wife and daughter chose to have an oral partial partition of their undivided family properties. Pandmavathi, the wife of the assessee would have had a claim for maintenance, if she could make out the grounds entitling her to claim separate maintenance from her husband. Narasamma, the adopted daughter of the assessee, would have had a right to claim maintenance and a provision made for her marriage expenses on the existence of ground enabling her to make such a claim. No reference is made to the existence of such claims in the oral partition deed. The document itself does not give any indication that the oral partition was brought about to record a bona fide family arrangement. Such a claim based on bona fide family arrangement was not put forward either before the Additional Commissioner or before the Tribunal, and not even, in the statement of case filed by the assessee under section 256 (1) of the Act. No such question of law as to whether the partial partition could be upheld as a family settlement has been referred to the High Court. The said question does not, therefore, arise out of the order of the Tribunal.

5. A further submission made by Mr. Dasaratharama Reddy as arising out of question No. 2 remains to be considered. The Additional Commissioner revised the order of the Income-tax Officer made under section 171(3) of the Act in purported exercise of his revisional powers under section 263 of the Act. The Additional Commissioner could exercise such power, if he considers that any order passed by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, but in such cases it is incumbent on him to give the assessee an opportunity of being heard. The submission of Mr. Dasaratharama Reddy is that the Additional Commissioner revised the order only after giving notice to Madanmohan Rao, the assessee, but he did not give any such notice to either Padmavathi or Narasamma and for such defect in the procedure followed by the Additional Commissioner the order passed by him in revision cannot be sustained. He placed reliance on T.G. Sulakhe v. Commissioner, of income--tax 1960 (39) I T R

394. The facts in that case are that a Hind=a joint family consisted of T.G. Sulakhe K.G. Sulakhe and B.G. Sulakhe. All the three brothers were being assessed under that status for 1950- 5 11 for which period the accounting year ended on September 21, 1949. In the course of the assessment proceedings for 1950-51, the members of the family claimed that there was a division in status between them and the joint family properties were divided among the three members of the family on October 22, 1949. The I.-T.O. accepted the division in status and partition and passed an order under section 25-A to the effect that there was a separation in the family on October 22, 1949. It was also claimed before the I.-T.O. that after such partition the three brothers carried the businesses in partnership of the same date as the partition deed. The I.-T.O. on an application being made by the assesses firm and having regard to the recognition by him of the division in status and partition in the family on October, 22, 1949, by his order, dated 31-3-1952 recognised the partnership with effect from the date and registered the firm under section 26-A of the Act. The assessment for the year 1951-52 was completed. For the year 1952-53, registration of the firm was renewed by the order of the Income-tax Officer, dated i2-6-1953, but the assessment was not completed. The Commissioner issued a notice under section 33-B on T.G. Sulakhe for the cancellation of the orders made by the l.-T.O. (1) under section 25-A, dated 22-3-1952, (2) under section 26-A. dated 31-3-1952, and 12-6-1953 in respect of 1951-52 and 1952-53 assessments, and (3) the order of assessment made on the farm for the year 1951-s2 The question then arose, whether the revisional order passed by the Commissioner after giving notice to only one of the members of the joint family was valid. Jaganmohan Reddy, J. (as he then was) speaking for the Bench observed:- "The necessary requisition for an order being made under subsection (1) of section 25-A is, firstly, that the family which is seeking to obtain an order that a partition has taken place among the members of its family, should have been hitherto assessed as undivided; secondly, that at the time of making the assessment under section 23, a claim must have been put forward by or on behalf of any member of the family, and thirdly, that on such claim being put forward, the I.-T.O. is required to make an inquiry into the matter and, before doing so, is bound to serve a notice of enquiry on all the members of the family. An order, therefore, made under this section would be binding on all the members of the joint family, because once a declaration that a partition has been effected is made, no member of the family can be said to be a member of the Hindu Undivided Family. The severance of the joint family and a partition between the members, of the assets of the joint family has the effect of vesting each member with an absolute right in the property allotted to him or which has fallen to his share. This is the legal effect of a partition by metes and bounds and declaration under section 25-A, by the I.-T.O. would constitute the members of the disrupted family into assessable entities. In the circumstances, is the Commissioner authorised under section 33-B to revise and cancel an order affecting the status and assessable entity of each of the members of the joint family without giving a notice to every member who is affected by that order? In other words, what is the true scope and extent of the words "after giving the assessee an opportunity of being heard," occurring in section 33-B? Section 33-B has been added alongwith section 33-A by the Income-tax and Business Profits Tax (Amendment) Act, 1948 conferring a general revisional power on the Commissioner to revise any order passed by the Income-tax Officer, if he considers it to be erroneous in so far as it is prejudicial to the interests of the revenue, and to cancel an assessment or order directing a fresh assessment to be made. or make any other order which is to the determent of the assessee. Before the Commissioner can exercise jurisdiction under this section, it is one of the conditions precedent that the assessee must be given an opportunity to be heard. The word "assessee" is a comprehensive one and has been defined under section 2(2) to mean a person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him. The assessee who is to be given an opportunity of being heard under section 33-B is that person in relation to whom an order has been passed in any proceedings, an examination of which has revealed that it is prejudicial to the interests of revenue.....It is the elementary principle of jurisprudence accepted in this country that an order made without hearing the party affected is contrary to the principles of natural justice, and is bad. If section 25-A makes it obligatory that each member of the joint family is to be given a notice before a declaration that there is a partition in the family, an order reversing that order should equally be made after due notice to all the members. If the issue of notices to all the three members giving them an opportunity of being heard is a condition precedent to the cancellation of the order under section' 25-A then the Commissioner, not having fulfilled the requirement of that provision, has no jurisdiction to exercise the powers specified in section 33-B For these reasons, we think that the order of the Commissioner of Income-tax bad in so far as it relates to cancellation of the order under section 25-A as it is passed without notice to all the members adversely affected. " This judgment, in our view, is plainly distinguishable.

6. There the three brothers were coparceners, each entitled to a share in the family properties in his own right as such coparceners. It became, therefore, necessary for the Commissioner to have issued notice to all the three of them and not to only one of them. In the case on hand, however, the assessee Madanmohan Rao is the only person entitled to the family properties. The income accruing to him on all the family properties is exigible to tax. The partition claimed is held to be invalid. The Additional Commissioner is, therefore, correct in diposing of the revision after giving notice only to Madanmohan Rao, the assessee in question. There is no need for him, in the circumstances, to have issued a notice to Padmavethi and Narsamma as well as no income can be said to have accrued to them on the family properties allotted to them under an invalid partition.

7. The order of the Additional Commissioner itself makes it clear that the notice, dated 14-2-1974 was issued by him only to the assessee Madanmohan Rao and hot to either his wife or adopted daughter. That fact is also apparent from the order of the Tribunal and from the statement of case prepared by the Tribunal in making the reference. This point was not, however, specifically raised before the Additional Commissioner or before the Tribunal. The learned standing counsel contended before us in the alternative that for that reason we should not allow such a plea to be raised for the first time in this Court and more so, when the question of law in that form has not been referred to this Court for its opinion. In Commr. of Income-tax v. Scindia Steam Navigation Co. Ltd. (1961) 42 I T R 589; A I R 1961 S C 1633; Venkatarama Aiyar, J. speaking for the majority, summarised the legal position in the following manner at page 611 of I.-T.R.; at p. 1645 of A I R. "(1) When a question is raised before the Tribunal and it is dealt with by it, it is clearly arising out of its order. (2) When a question of law is raised before the tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the finding given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order."

8. The question of law now sought to be canvassed by Mr. Dasaratha Rami Reddi falls under the fourth category. It is not, therefore, permissible for us to allow the assessee to question the legality of the order passed by the Additional Commissioner. We cannot, give effect to the minority opinion expressed Shah, J. following the view expressed by Chagla, C.J. in Madanlal Dharnidharka v. Commr. of income-tax (1948) 16 I T R 227; A I R 1949 Bom.

24. The majority opinion did not approve the legal position stated by Chagla, C.J. in Madanlal Dharnidharka's case (supra). We accordingly hold that the validity or otherwise of the orders of the Additional Commissioner passed without giving a notice to either Padmavathi or Narsamma is not a question of law which arises out of the order of the Tribunal.

9. It is now well-settled that the High Court may decline to answer such questions that do not arise out of the order of the Tribunal. Vide, Commr. of Income-tax v. Anusuya Devi, 1968 (68) 1 T R 750; A I R 1968 S C

779. We accordingly decline to answer the Reference. There shall be no order as to costs in this reference. M. B. A. Reference not answered.