ASHOK KUMAR RATANCHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The petitioner was a member of a Hindu undivided family consisting of his father and brothers. He had received two gifts of rupees five thousand each from his grandparents in May, 1965. He invested those amounts as deposits in the joint family business and was receiving interest on those deposits. On 9/11/1969, there was a partial partition of the Hindu undivided family resulting in each one of the coparceners being allotted Rs. 17,352. The petitioner deposited that amount also in the family business. He was receiving interest on that deposit as well. In addition thereto, he was also receiving salaries from the above business. These three items of income were subject to assessment as the individual income of the petitioner. He married on 30/04/1980. According to him, a Hindu undivided family consisting of himself as karta and his wife as member came into being on that day. For the assessment years 1981 -82, 1982 -83 and 1983 -84, he filed two sets of returns initially. The first set claimed the status as an individual in respect of his salary income and interest on the gift amount which he had deposited in the firm and the other claimed the status of a Hindu undivided family in respect of the interest income from the share which he obtained in partial partition. During the course of assessment, he filed revised returns on 25/10/1982, claiming the status of individual in respect of all the three items of income as mentioned above. He appeared before the Income -tax Officer on 16/08/1983 and filed a letter consenting to be assessed in the status of an individual, in respect of the income earned on the three items. The income -tax Officer assessed the petitioner in the status of an individual in respect of the above three items for three years in his order dated 14/11/1983. The petitioner had second thoughts and claimed the status of a Hindu undivided family consisting of himself and his wife in so far as interest income from the firm was concerned. He, therefore, filed an application under Section 154 of the Income -tax Act on 3/05/1984, requesting for cancellation of the assessment order made on 14/11/1983 and to pass two separate orders of assessment for each of the three years - one in the status of an "individual" and the other in the status of a "Hindu undivided family". The second respondent rejected the application. On 21/03/1985, he filed an application under Section 264 of the Income -tax Act, 1961, before the first respondent -commissioner seeking cancellation of the orders of assessment in respect of the three assessment years and a direction to the second respondent -Income -tax Officer to make two sets of orders of assessment in accordance with the returns which he had initially filed. The Commissioner of Income -tax rejected that application and affirmed the assessments which were made on the basis of the consent letters which the petitioner had filed before the second respondent during the course of the assessment. The Commissioner also found that the petitioner could not claim the status of a Hindu undivided family in respect of his divided share in the larger Hindu undivided family because what he got at the time of partition when he was unmarried as his separate property could not transform itself into Hindu undivided family property merely by reason of his subsequent marriage. The Commissioner of Income -tax referred to the decision in CIT v. Vishnukumar Bhaiya [1983] 142 ITR 357 (MP) in preference to the decision of the Allahabad High Court in Prem Kumar v. CIT [1980] 121 ITR 347. The commissioner also relied on a decision of the Gujarat High Court in Anilkumar B. Laskari v. CIT [1983] 142 ITR 831 and CIT v. Admiralty Flats Motel [1982] 133 ITR 895 of the Madras High Court. Those three orders of the Commissioner are under challenge in these three writ petitions.

(2.) Sri Man Mohan, counsel for the petitioner, submitted that, for the period relevant to the assessment years in question, the petitioner and his wife constituted a Hindu undivided family, that his partitioned share in the larger Hindu undivided family was its property, and that the income arising therefrom could not but be treated as income of that unit of assessment. He also submitted that as long as the petitioner continued to be a bachelor, the property which he obtained on partial partition was his separate property as owner thereof with the right to dispose of the property as he wished. But when he married, a Hindu undivided family came into being and the joint family character of the property revived. He relied on a decision of this court in Prem Chand v. CIT [1984] 148 ITR 440 and decisions of the Supreme court in Gowli Buddanna v. CIT [1966] 60 ITR 293, N. V. Narendranath v. CWT [1969] 74 ITR 190, C. Krishna Prasad v. CIT [1974] 97 ITR 493 and Surjit Lal Chhabda v. CIT [1975] 101 ITR 776.

(3.) According to counsel, these decisions clearly lay down that the property of a Hindu undivided family in the hands of a sole coparcener will not shed its character as joint family property and will revive the moment a Hindu undivided family comes into being by marriage or a coparcener comes into existence by birth or adoption. He submits that the same principle applies to the share which a coparcener obtains on partition and that that is what has happened in this case. Counsel also sought to distinguish the decision in Seth Tulsidas Bolumal v. CIT [1988] 170 ITR 1 of this court.