GOSWAMI BRIJRATANLALJI MAHARAJ Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) IN this reference under the WT Act, 1957 (hereinafter referred to as "the Act"), the following two questions have been referred to this High Court at the instance of the assessee :

(2.) THE short facts leading to this reference are that the assessee was assessed for wealth-tax in the status of HUF for the asst. yr. 1957-58, the relevant valuation date being 2nd Nov., 1956. Before the enactment of the Act, which came into force from 1st April, 1957, the assessee was being assessed to tax under the Indian IT Act, 1922, in the status of an HUF. For the asst. yr. 1955-56, the assessee had claimed that there was disruption of the family, but this claim was rejected by the ITO under s. 25A of the Indian IT Act, 1922. A similar application was made in the IT proceedings in respect of the asst. yr. 1957-58, but again that application was rejected by the ITO. For the asst. yr. 1957-58, the assessee had filed a return of income in the status of "HUF" under s. 3 of the WT Act, 1957 ; the Act was made applicable from asst. yr. 1957-58. THE assessee did not file any return of net wealth under s. 14(1) of the Act ; and, thereafter, the WTO started proceedings under s. 14(2) r/w s. 17 of the Act. THE assessee filed a return of net wealth returning the net wealth as "nil" and the contention on behalf of the assessee was that there was no HUF on the relevant valuation date and, therefore, there was no net wealth to be assessed in the hands of such HUF. It was urged in this connection that the severance of status amongst the members of the HUF had taken place on Aso Vad 30 of S. Y. 2010, i.e., two years prior to the valuation date of 2nd Nov., 1956. On the same ground the notice issued under s. 17 r/w s. 14(2) was also challenged. THE WTO rejected both the contentions and he computed the net wealth of the assessee at Rs. 28,09,291 and raised a demand against the assessee. Against this decision of the WTO, there was an appeal to the AAC, and it was contended that the notice under s. 17 was defective and invalid. It was further contended that a complete partition of the HUF had taken place at the end of S. Y. 2010 and since that was a valid partition under Hindu law, irrespective of the provisions of the IT Act, no assessment proceedings could be taken against the HUF which had ceased to exist when the notice under s. 17 was issued in the name of the family. It was further contended before the AAC that s. 20 of the Act applies only to a case where partition takes place after 1st April, 1957, the date on which the WT Act came into operation. It was further contended before the AAC that when the assessee had mentioned in the return that the HUF had been disrupted at the end of S. Y. 2010, the WTO was precluded from passing any order under s. 16(3) unless he made a separate order under s. 20(2) refusing the claim of partition. THE AAC rejected the first three contentions of the assessee and came to the conclusion that in the light of the provisions of Hindu law, there was a severance of joint status amongst the members of the family on Aso Vad 30, S.Y. 2010, i.e., on 2nd Oct., 1954. THE provisions of s. 20, according to the AAC, would automatically come into operation and that the WTO had validly started proceedings under s. 17 r/w s. 14(2) of the Act. THE AAC, however, held that it was obligatory on the WTO to pass an order under s. 20(2) before proceeding with the assessment against the assessee ; and he, therefore, set aside the entire assessment and directed the WTO to pass an order under s. 20(2) and then compute the net wealth for levy of tax under s. 16(3) of the Act.

(3.) THE material words on which there is departure between the two sections is that s. 25A of the Indian IT Act, 1922, contemplated that a claim should be made by or on behalf of any member of the HUF "hitherto assessed as undivided" that a separation had taken place among the members and then the inquiry contemplated by s. 25A(1) was to be made by the ITO and what he was required to be satisfied about under the Indian IT Act, 1922, was that the joint family property had been partitioned among the various members or groups of members in definite portions ; whereas under the WT Act, on the other hand, the words "hitherto assessed as undivided" qualifying the words "an HUF" are omitted by Parliament and, further, the words "as a whole" have been introduced in the WT Act while dealing with the concept of partition of the property in definite portions. THEse are the main differences between the wordings of s. 25A of the Indian IT Act, 1922, and s. 20(1) of the WT Act, 1957.