KANIRAM HAZARIMAL Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) In this reference under Section 27(1) of the Wealth-tax Act, 1957, the following question has been referred to this court :

(2.) The reference arises out of the assessment made on the assessee in the status of Hindu undivided family for the assessment year 1957-58, for which the relevant valuation date is 2nd of November, 1956. The Hindu undivided family known as M/s. Kaniram Hazarimal was assessed to income-tax in such status up to the assessment year 19.57-58. Under Section 25A of the Indian Income-tax Act, 1922, the Income-tax Officer had recorded an order recognising the disruption in the family on 2nd of November, 1956, which was the last day of the accounting period relevant to such assessment. The case of the assessee before the Wealth-tax Officer, however, was that in respect of the instant assessment the Hindu undivided family had been disrupted on 31st of January, 1956, when one of the members of the Hindu undivided family, Sri Vijoy Kumar Kejriwal had filed a suit for partition in the High Court. The argument was that there was no Hindu undivided family in existence on the relevant valuation date, namely, on the 2nd of November, 1956, for the purpose of wealth-tax assessment. The Wealth-tax Officer did not accept this contention. The Wealth-tax Officer relied on the order under Section 25A of the Indian Income-tax Act, 1922, and stated that the Hindu undivided family did exist until 2nd of November, 1956. The assessee then preferred an appeal before the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner the contention of the assessee was that as a suit for partition had been filed on 3Ist of January, 1956, the Hindu undivided family had ceased to exist on that date according to Hindu law. Secondly, it was urged that even according to the order of the High Court the Hindu undivided family properties had actually been partitioned on the 2nd of November, 1956, being the said valuation date. Hence, there was no Hindu undivided family on the said valuation date. The Appellate Assistant Commissioner rejected both these contentions. It may be mentioned that the second contention urged before the Appellate Assistant Commissioner was not pressed before us at the hearing of this reference. It appears that there was an award by an arbitrator in the partition suit referred to hereinbefore and the said award had been accepted by the High Court and a decree was passed in accordance with the said award. The award of the arbitrator mentions, inter alia, as follows :

(3.) The award is dated 4th January, 1960. Relying upon this aforesaid finding in the said award the Appellate Assistant Commissioner determined the date of disruption as 3rd of November, 1956. Since on the valuation date according to the Appellate Assistant Commissioner the Hindu undivided family was in existence he rejected the assessee's appeal. The asses-see, thereafter, preferred an appeal before the Tribunal. It was contended that although the property held by the Hindu undivided family might not have been divided by metes and bounds amongst the various members of the Hindu undivided family on the 2nd of November, 1956, the Hindu undivided family actually ceased to exist on its disruption according to Hindu law on 31st of January, 1956. It was argued that this was long before the Wealth-tax Act came into operation and on the relevant valuation date as there was no Hindu undivided family in existence the assessee was not liable to be assessed to wealth-tax, inasmuch as the assessee had never been assessed to wealth-tax before. The Tribunal did not accept this argument. The Tribunal held that though disruption of the family for the purpose of Hindu law was on the 31st of January, 1956, the date of the suit for partition, yet the Tribunal was of the opinion that there was an arbitration in the suit proceeding and the award had been accepted by the High Court and the decree was passed in accordance thereof. The date mentioned in the decree was 2nd of November, 1956. Therefore, according to the Tribunal it was not open to the assessee to contend contrary to the decree passed against it. The Tribunal also referred to the provisions of Section 20 of the Wealth-tax Act, 1957, and held that the assessment had been properly made.