When a person has a dual capacity, as an individual as well as karta of HUF, and notice under section 148 is intended to be addressed to HUF, it is necessary to specifically mention that notice was/is being addressed to him in his capacity as karta of HUF. Even if the two tax entities have the same name, it is imperative for the Assessing Officer to specify in the notice that it was addressed to the HUF and not to individual, particularly when the petitioner was the existing assessee and the alleged HUF was not – Gokul Chand v. ITO  77 Taxman 320 (All.).
HIGH COURT OF ALLAHABAD
A.P. MISRA AND M.C. AGARWAL, JJ.
JULY 25, 1994
Agarwal, J.—These two petitions under article 226 of the Constitution of India have been filed challenging the issue of notices under section 148 of the Income-tax Act, 1961 (‘the Act’) for the assessment years 1971-72 and 1975-76, whereby the ITO, Gonda, required the petitioner to file returns of income for these years as he had reason to believe that the petitioner’s income for these years had escaped assessment and he wanted to reassess the same.
2. The petitioner’s case is that he is a member of a HUF of which Umrao Lal, the petitioner’s father is a karta. On 15-10-1964, a partial partition took place in the said HUF whereby another HUF consisting of the petitioner Gokul Chand as karta, his wife, sons and daughter as members, received an amount which constituted the nucleus of this HUF of which the petitioner became the karta. On 16-10-1964, this smaller HUF became a partner in Ram Deo Onkar Mal through the petitioner and the amount received in the partial partition held on 15-10-1964 was invested as the share of the smaller HUF. The income so earned by the smaller HUF was assessed through the petitioner as karta of this branch of HUF. On 1-10-1968, the smaller HUF headed by the petitioner was subjected to a partition so that the amount of Rs. 88,353.78 paise standing to the credit of this smaller HUF in the account books of Ram Deo Onkar Mal was partitioned amongst the karta, his wife and sons after making a provision of Rs. 15,000 for the marriage expenses of the karta’s daughter. This partition was evidenced by a memorandum of partition executed on 5-10-1968. This partition was recognised by the ITO, Gonda, through an order dated 27-11-1971. For the assessment year 1970-71 the share income of the various members of the erstwhile family of the petitioner was determined at Rs. 30,464 and bifurcated between the various members and as a result the income of the petitioner Gokul Chand was determined at Rs. 6,093 only vide assessment order dated 27-11-1971. According to the petitioner, since then all the members of the said HUF were being separately assessed. The petitioner’s contention is that all the primary facts relating to the aforesaid partition were disclosed before the ITO passed the order on 27-11-1971 recognising the partition. On 30-3-1980, the ITO issued a notice in the name of the petitioner under section 148. The petitioner’s contention is that the notice is invalid as it does not disclose the income that was considered to have escaped assessment. It is further contended that the said notice was served on Umrao Lal, the father of the petitioner, who had no authority to accept the same on his behalf. It is contended that the said notice seemed to have been issued on the assumption that the partition that had taken place on 1-10-1968 has not been acted upon. This assumption is controverted by the petitioner contending that the said partition was duly acted upon. It is further stated that if the partition had not been acted upon then the entire income arising from Ram Deo Onkar Mal in respect of the share of this family would be assessable in the hands of the family and not in the hands of the petitioner in his individual capacity and the notice issued to the petitioner under section 148 is improper.
3. In a counter-affidavit filed in Writ Petition No. 223 of 1980 relating to assessment year 1971-72, Shri S.R. Tripathi, the then ITO set up the respondent’s case. It has been contended that it is incorrect that the family share in the partnership firm Ram Deo Onkar Mal was partitioned. According to him, the alleged partition and the memorandum of partition was a made up affair which was never intended to be acted upon. It is contended that the amount standing to the credit of the family in the books of partnership firm Ram Deo Onkar Mal was never partitioned amongst the members of the family and the entire capital continued as a credit balance in the name of Gokul Chand. The profits arising from the said firm were also credited to the account of said Gokul Chand. It is stated that in a statement dated 25-2-1980 before the ITO, Gokul Chand admitted that he is a partner in the firm in his capacity as a karta of the family. The order under section 171 of the Act recognising the claim of partition is claimed to have been passed on insufficient facts and believing the case of the petitioner which were subsequently found to be wholly untrue. It is also claimed that the sons of Gokul Chand were minors at the relevant time and were incapable of giving consent to the partition and, therefore, Gokul Chand could not have legally effected the partition. It is alleged that the family of which Gokul Chand was the karta did not keep any books of account prior to 1-10-1968 and the books of account commenced on 1-10-1968 were intended to create evidence only for the alleged partition. It is alleged that the assessments were made under section 143(1) without any enquiry by the concerned Assessing Officer. In reply to paragraph 19 of the writ petition, in which the petitioner contended that the notice could have been issued to the HUF headed by him and not to him in his individual capacity, it has been stated that it needs no reply except that the notice under section 148 was validly issued in the name of Gokul Chand which is also the name of the family.
4. In Writ Petition No. 224 of 1980, the case of the respondent is that a notice under section 148 was issued because the return of income filed by Gokul Chand was found to be invalid. According to the respondent, Gokul Chand had filed a return of income for the assessment year 1975-76 which was not signed by him and, therefore, on 29-3-1978 the order as below was passed :
“Return invalid because the same has not been signed. The same being invalid. The return is filed. Notice under section 148 will be issued.”
It was for the reason as stated in the above order that a notice under section 148 was issued.
5. We have heard the learned counsel for the petitioner and Shri Rajesh Kumar Agarwal, the learned standing counsel for the Income-tax Department.
6. As regards the assessment year 1975-76, it has not been controverted on behalf of the petitioner that the return filed by Gokul Chand for that year did not bear his signatures and was, therefore, invalid. The contents of paragraph 14 of the counter-affidavit in which the respondent had quoted the aforesaid order dated 29-3-1978 were not controverted in the rejoinder affidavit of Gokul Chand. Patently the return of income having not been signed, it was an invalid return on the basis of which no assessment could have been made. Therefore, by virtue of section 147(a), the ITO could have issued a notice under section 148 requiring the assessee to file a return and, hence, the notice issued for the assessment year 1975-76 was, in our view, a valid notice and writ petition No. 224 of 1980 deserves to be dismissed.
7. As regards the assessment year 1971-72 which is the subject of Writ Petition No. 223 of 1980, we are of the view that this writ petition must succeed.
8. As already stated, one of the contentions of the petitioner is that the impugned notice has been issued to him in his individual capacity, whereas if the partition dated 1-10-1968 was to be ignored by the department, the notice under section 148 should have been issued to the HUF whose income alone could be deemed to have escaped assessment. A copy of the impugned notice is Annexure-8 to the writ petition. This notice is addressed to ‘Sri Gokul Chand C/o Ram Deo Onkar Mal, Baragaon, Gonda’. This notice does not mention that it was being issued to Gokul Chand in his capacity as the karta of HUF. Gokul Chand was being assessed in his individual capacity from the year 1970-71 onwards. As is evident from the copy of the assessment order for the assessment year 1970-71 annexed at serial No. 5 to the writ petition, it was during the course of this assessment that the order recognising the partition was passed under section 171 on 27-11-1971. The HUF that came into existence on the partition held on 15-10-1964 in the bigger HUF, is not shown to have ever been assessed to tax. The assessment order (Annexure-5 to the writ petition) and the order under section 171 (Annexure-6 to the writ petition) mention the general index register number as G-707 which is GTR number of Gokul Chand individual. The impugned notice (Annexure-6 to the writ petition), as alleged by the petitioner and as admitted by the respondent, did not indicate anything about the cause of the issue of the notice and, according to the respondent, it was not necessary to mention which income had escaped assessment. But where in circumstances like this, a person had a dual capacity as an individual as well as the karta of a HUF, it was necessary, in case the notice was intended to be addressed to the HUF, to specifically mention that the notice was being addressed to Gokul Chand in his capacity as a karta of a HUF. This has not been done and on the face of it the notice has been addressed to Gokul Chand individual, who was an existing assessee and about whom, there is no allegation of escapement of income even in the counter-affidavit filed on behalf of the respondent. The petitioner Gokul Chand has filed this writ petition as an individual and the respondent has not set up any plea that this writ petition is not maintainable because the notice was not addressed to him. We have already mentioned the manner in which paragraph 19 of the writ petition was replied to by the respondent in which it was stated that the notice was validly issued in the name of Gokul Chand which is also the name of the family. Even if the two tax identities had the same name, it was imperative for the Assessing Officer to specify in the notice that it was addressed to the HUF and not to individual Gokul Chand, particularly when Gokul Chand was the existing assessee and the alleged HUF was not. In our view, therefore, the impugned notice that was issued to Gokul Chand is invalid as on the department’s own showing no income earned by Gokul Chand had escaped assessment.
9. Another contention raised on behalf of the petitioner is that an order under section 171 having been passed by the ITO recognising the partition, it was not permissible for the ITO to ignore the same subsequently and assess the family as undivided without setting aside that order. In this case, admittedly, an order under section 171 was passed by the ITO on 27-11-1971 (Annexure-6 to the writ petition); the department’s contention is that this order was passed on insufficient grounds and the correct facts were not disclosed. The only important fact relied upon by the respondent is that in the account books of the firm M/s Ram Deo Onkar Mal the capital continued to stand in the name of Gokul Chand and no partition was effected in the books of that firm. This fact is alleged to have since been brought to the notice of the ITO concerned. This contention does not appear to be true. The order dated 27-11-1971 mentions the manner of partition stating that this has been effected by dividing the amount in the personal set of account books of HUF, meaning thereby that the ITO knew that in the books of the firm the capital remained as it was of he could have with reasonable efforts found out the same. The order was passed in the assessment proceedings of Gokul Chand individual and the partition was recognised year after year till the impugned notice was issued.
10. Sub-sections (2), (3) and (4) of section 171 read as under:
“(2) Where, at the time of making an assessment under section 143 or section 144, it is claimed by or on behalf of any member of a Hindu family assessed as undivided that a partition, whether total or partial, has taken place among the members of such family, the Assessing Officer shall make an inquiry therein to after giving notice of the inquiry to all the members of the family.
(3) On the completion of the inquiry, the Assessing Officer shall record a finding as to whether there has been a total or partial partition of the joint family property, and, if there has been such a partition, the date on which it has taken place.
(4) Where a finding of total or partial partition has been recorded by the Assessing Officer under this section, and the partition took place during the previous year:
(a )the total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and
(b)each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed.”
11. The aforesaid provisions indicate that an order under section 171 is a judicial order to be passed after full and detailed enquiry and is to be binding between the parties till the same is set aside in accordance with law.
12. In CIT v. Ganeshi Lal Sham Lal  61 ITR 408 , the Hon’ble Punjab High Court, while dealing with an identical provision in section 25A of the Indian Income-tax Act, 1922 held that the reassessment under section 34 of the 1922 Act could not be made ignoring the earlier order under section 25A on the ground that the ITO had received information that the order under section 25A was obtained by misrepresentation. The Hon’ble High Court held that the proper course for the ITO to adopt in such a case is to move the Commissioner to take action under section 33B of the Act to set aside the order under section 25A. The Court further held that an order under section 25A has to be passed only once and remains effective for subsequent years unless set aside in accordance with law. This Court also took a similar view in CIT v. Jagdish Lal & Sons  157 ITR 620 (All.). This Court held that ordinarily, there is no bar against the investigation by the ITO of the same facts in respect of which a decision was arrived at in an earlier year. But this rule does not apply when dealing with an order recognising partition in a HUF. This Court held that a family cannot be assessed in the status of a HUF unless that order is set aside by a competent authority.
13. Admittedly, in the present case, the order dated 27-11-1971 has not been set aside and, therefore, as long as that order is effective, the ITO cannot take any steps to assess the erstwhile HUF by ignoring the said order.
The learned counsel for the respondent referred to a statement made by Gokul Chand on 25-2-1980 before the ITO from which it was inferred that the partition was a made-up affair and in fact no such partition had taken place. The statement if read as a whole may not sustain such a conclusion but we need not express any opinion on this account because it is not necessary for us to do so. It was for the Assessing Officer to take steps to get the order under section 171 set aside, if the Assessing Officer felt that was not a correct order. That has not been done.
14. One of the reasons set up in the counter-affidavit for challenging the validity of the partition is that the sons of Gokul Chand were minors and, therefore, he could not effect a partition. This contention is no more tenable because the Hon’ble Supreme Court in Apoorva Shantilal Shah v. CIT  141 ITR 558 has upheld the authority of a father to effect even partial partition of some of the family properties and consent of the sons was not held to be necessary. In the case before us, however, the partition effected by Gokul Chand of the property received on the partition of the bigger HUF was a complete partition and not a partial one and the same cannot be challenged on the ground of lack of authority of the karta.
15. For the above reasons, the Writ Petition No. 223 of 1980 is allowed and the impugned notice dated 30-3-1980 issued to the petitioner by the respondent under section 148 for the assessment year 1971-72 is hereby quashed.
16. Writ Petition No. 224 of 1980 is dismissed. The interim order dated 23-7-1980 is vacated.
17. In view of the aforesaid circumstances, the parties are ordered to bear their own costs.