RAJMAL PAHARCHAND Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is a reference made by the Income-tax Appellate Tribunal, Allahabad bench, under section 66(1) of the Income-tax Act. The questions referred for decision to the high court are : (1) Whether in the circumstances of the case and in view of the terms of section 25A of the Act, an order under section 25A should have been passed by the Income-tax Officer in respect of the assessment year 1943-44 although the partition the partition on the basis of which the order was claimed took place beyond the year of account, the income from which was the subject-matter of assessment ? (2) Whether a reference to arbitration with a view to have the joint family property partitioned in definite portions legally amounts to a partition of the joint family property amongst the various members or groups of members in definite portions within the terms of sections (1), of the act ?

(2.) The facts so far as material are that the applicant were assessed as Hindu undivided family during the year preceding 1943-44. In the course of the assessment for 1943-44, the applicant made an application under section 25A alleging that a division of the Hindu undivided family assets had taken place on 31 March, 1943. They relied on the deed of reference of 31 March, 1943, which recited that so far as the family business and the partnerships in which the family was a partner were concerned, necessary division in the books of account had been made on 31 March, 1943. The Income-tax Officer, however rejected the application on the ground that the applicants, books of account did not support the alleged division on 31 March, 1943. The appellate assistant commissioner upheld the order of the Income-tax Officer in view of certain admissions of the applicants contained in their previous application to the effect that the accounts were not complete and adjusted up to the date of the alleged partition. An appeal was filed before the tribunal which found that the Income-tax Officer as well as the appellate assistant commissioner had not applied their minds to determine with reference to the accounts of the partnership firms in which the family was a partner whether the alleged partition was given effect to in respect of them or not and if so when, and that the Income-tax Officer and the appellate assistant commissioner had also not attempted to find out as to when the partition came into force between the members of the family in regard to their business and remanded the case to the Income-tax Officer for a report on the following points :- (1) When, if at all, and in what manner was the partition of the business mentioned in the accounts of the firm ? (2) Were any steps taken to give effect to the partition in respect of the partnership in which the family was a partner as mentioned in the deed of reference dated 31 March, 1943 ?

(3.) The Income-tax Officer found after remand that the partition of the business did not take place on 31 March, 1943, and that no steps were taken to give effect to the partition in respect of the partnership in which the family was a partner. No objections to the findings of the Income-tax Officer reached in the remand report were taken. The Tribunal, therefore, confirmed the findings of the Income-tax Officer holding that the alleged division of the business was not made on 31 March, 1943, but on 19 November 1943, when the partition of the family assets took place under the award. The Tribunal further held that the accounting year of the applicants ended on 31 March, 1943, while the partition of the family assets took place under the award made on 19 November, 1943, and so the applicants were not entitled to an order under section 25A in respect of the assessment year in question.