M V VALLIAPPAN Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) ALL the above-mentioned writ petitions which involve questions relating to the validity, scope and interpretation of the provisions of section 171(9) of the Income-tax Act, 1961 (hereinafter referred to as the Act), which was introduced by the Finance (No. 2) Act, 1980, are disposed of by this common judgment. In order to appreciate the contentions raised by the several counsel appearing in these petitions, it would be enough to refer to the admitted facts in W.Ps. Nos. 994 and 995 of 1984 The petitioner in W.P. No. 994 of 1984 was the karta of a Hindu undivided family consisting of himself, his wife, his minor son and his minor daughter, and has filed the petition on behalf of the Hindu undivided family which was assessed as such. The Hindu undivided family was a partner in some partnership firms in which the funds of the Hindu undivided family were invested. On April 13, 1979, a partial partition of certain assets belonging to the Hindu undivided family was effected with effect from that date. A deed of partition evidencing the said partial partition was also executed. An application under section 171(2) of the Act for recognition of the said partial partition came to be filed before the Income-tax Officer. The Income-tax Officer made an order recognising the said partial partition on December 28, 1979, in the assessment proceeding for the assessment year 1979-80. The order read "During the course of assessment proceedings, it is claimed that partial partition in the family in respect of the credit balance in the three firms (sic). Account copies were filed. Necessary questionnaire have also been filed. These were verified and found correct. The claim of partial partition is, therefore, accepted." *

(2.) A return came to be filed for the assessment year 1980-81 on behalf of the Hindu undivided, family on April 12, 1980, in respect of the income of the Hindu undivided family. This income did not include the income from the property which was the subject-matter of the partial partition. The incomes derived from the assets which were the subject of partial partition were declared by the respective individuals in their respective returns. The assessment of the petitioner-assessee was taken up and finalised by the Income-tax Officer having regard to the order recognising the partial partition made earlier on December 28, 1979. The assessment took into account the income from the assets retained by the Hindu undivided family. The taxable income was determined at Rs. 26, 8urn for wealth-tax for the assessment year 1980-81 was also filee -tax OfficerHowever, a notice dated March 4, 1983, purporting to be one under section 148 of the Act was received by the petitioner stating that the income of the petitioner had escaped assessment and the Income-tax Officer proposed to reopen the completed assessment for the year 1980-81 The assessee objected to the reopening of the assessment on the ground that the order under section 171 of the Act recognising the partition not having been cancelled or revoked, continued to be effective and that as long as that order stood, no income from the partitioned properties subsequent to the date of partition could be assessed in the hands of the Hindu undivided family. These objections were rejected by the Incometax Officer and the Income-tax Officer, by an order dated November 30, 1983, reopened the assessment and made a fresh assessment including the income relating to the assets which were partitioned and allotted to the individual members, in the hands of the Hindu undivided family. The total income was determined at Rs. 94, 172 and tax of Rs. 44, 954 was levied. This reassessment is challenged by the petitioner in the writ petition

(3.) WHILE W.Ps. Nos. 994 and 995 of 1984 arise out of the assessment orders for the assessment year 1980-81, the two petitioners have also filed two more petitions, viz., W.Ps. Nos. 6162 of 1984 and 5430 of 1984, to similarly quash the assessment orders for the assessment year 1981-82 The action of the Income-tax Officer in invoking the provisions of section 171(9) of the Act in cases where partial partition has already been recognised before section 171(9) of the Act has come into force is challenged on the ground that the income of the property which is the subject matter of partial partition cannot be treated as the income of the Hindu undivided family because if the income in fact does not belong to the Hindu undivided family, it cannot be taxed in the hands of the Hindu undivided family. If section 171(9) of the Act is to be so construed as to permit inclusion of income received by or accrued or arising to the individual members of the Hindu undivided family from the properties allotted to them in a partial partition in the hands of the Hindu undivided family, which does not receive the said income, such action will be without authority of law and hence violative of article 2, 65 of the Constitution of India. The validity of section 171(9) of the Act is also challenged on the ground that the date December 31, 1978, has been arbitrarily fixed and even genuine partial partitions effected long prior to the coming into force of section 171(9) were being affected retrospectively by the construction placed on section 171(9) by the Revenue. Section 171(9) was, therefore, violative of the provisions of article 14 of the Constitution of India. It is then argued that if the challenge to the validity of section. 171(9) is not accepted, then the provisions of section 171(9) will take effect only for the assessments for and after the assessment year 1980-81 and since a claim for recognition of partial partition under section 171 can be made only once and if such claim is recognised already in respect of the previous assessment year 1979-80, then, notwithstanding that the partition has taken place after December 31, 1978, it must be treated as valid for all subsequent assessment years. It is argued that if the partitioned properties have been excluded from the assessment of the Hindu undivided family in the assessment year 1979-80, that income cannot then be included in the income of the Hindu undivided family for the assessment year 1980-81. Therefore, it is argued that having regard to the fact that section 171(9) of the Act came into force only with effect from April 1, 1980, the provisions thereof should at best be so construed as to render ineffective any partial partitions made after December 31, 1978, only if the claim under section 171 of the Act is made for the first time in the assessment year 1980-81. Such construction alone, according to learned counsel, would fit in with the scheme of section 171 of the ActSeveral counsel have advanced arguments in their respective writ petitions which have been heard along with W.Ps. Nos. 994 and 995 of 1984