The judgment of the Court was delivered by
KANIA, C. J.--This is an appeal from a judgment of the
High Court at Patna. It arises out of an income-tax reference made to the High
Court under section 66(1) of the Indian Income-tax Act.
Briefly stated the facts are that a joint Hindu family, of
which the present appellant was the karta, was assessed to income-tax for the
year 1939-40. In 1944 the Income-tax Officer considered that certain income of
the family taxable in 1939-40 had escaped assessment. In the meanwhile, the
joint family had become divided and necessary steps had been taken by the
members to have an order passed under section 25A(1) of the Income-tax Act. The
Income-tax Officer issued a notice in the name of the joint Hindu family and
served it on the appellant under section 34 read with section 22 of the
Income-tax Act to make a return in respect of the escaped income and the
appellant sent a return in response to that notice. Thereafter, the Income-tax
Officer made an assessment on the escaped income of Rs. 37,098 and issued a
notice of demand on the appellant as the karta and on the two other members of
the joint family. The notice was to require payment of the full amount of tax
due on the escaped income and did not apportion the liability for it amongst the
three members of the family. The assessee contended that the proceedings were
irregular and that he was not liable to pay anything. His contention was
rejected by the Income-tax Officer, the Appellate Assistant Commissioner, and
the Income-tax Appellate Tribunal. He prayed that a question of law may be
referred to the High Court for its opinion. Accordingly the Income-tax Appellate
Tribunal referred the following question for the High Court's opinion :--
" Whether in the circumstances of this case
proceedings under section 34 in respect of the assessment year 1939-40 were
validly initiated and completed against the Hindu undivided family, which had
ceased to exist then, and an order under section 25A(1) accepting the partition
of the Hindu undivided family had already been passed."
The High Court expressed the view that there were
irregularities both in initiating the proceedings and in completing the same but
as there was no prejudice to the appellant, they answered the question in the
affirmative and ordered the assessee to pay the costs of the reference. The
assessee has come in appeal before us.
Mr. Umrigar, on behalf of the appellant, argued only one
point for our consideration. He contended that as the High Court had held that
the proceedings were irregularly initiated and completed they were invalid and
no order for assessment could be made. For this contention he relies on the
wording of section 25A(1). In our opinion, this contention is unsound and the
opinion of the High Court that the proceedings were initiated irregularly is
also unsound. It does not appear necessary, when proceedings are initiated under
section 34 read with section 22 of the Income-tax Act, to issue notice to every
member of the family. The position is as if the Income-tax Officer was
proceedings to assess the income of the Hindu undivided family as in 1939-40. In
our opinion, therefore, that contention must be rejected.
The next contention urged by Mr. Umrigar was that section
25A(2) requires that the assessment should be made against each member of the
joint family for a proportionate share of the tax and it is only after one of
them had failed to pay such share that the Income-tax Officer could proceed to
recover it from the others. The argument so formulated cannot be accepted. On a
true construction of section 25A(1), it appears that the Income-tax Officer in
the first place has to make an assessment of the total income as if no partition
had taken place. That means that he has to find out what the total income was
and calculate the amount of tax payable thereon as if it was payable by one
unit. Having done that, it is the duty of the Income-tax Officer under the
section to apportion the amount payable by the unit amongst the members of the
joint family according to the portion of the joint family property allotted to
each of them. That duty also appears to be imperative having regard to the
concluding words of section 25A(2). In the present case, the Income-tax Officer
has omitted to make any apportionment. That fact is noticed in the judgment of
the High Court and also by the Income-tax Appellate Tribunal. In the judgment of
the High Court it has been stated that this could be put right. In our opinion,
it is necessary that the Income-tax Officer should issue the notice of demand
against each the members of the family in accordance with the concluding words
of section 25A(2) and that should be done.
We are unable to accept the second part of the argument of
Mr. Umrigar that it is only on the failure or default of payment by one of the
members that the Government has the right to recover that portion of the amount
from others. The proviso to section 25A(2) makes the position very clear. In
contrast with that the proviso to section 26 shows that when the Legislature
wanted to give power to the Income-tax authority to recover from others only on
failure of payment by a party, it said so expressly. The absence of similar
words in the proviso to section 25A(2) must result in the rejection of this part
of Mr. Umrigar's argument.
As the appeal has failed substantially the appellant is
ordered to pay the costs of the appeal.
Appeal failed substantially
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