# [1965] 2 S.C.R. 91

- **Citation:** [1965] 2 S.C.R. 91
- **Court:** Supreme Court of India
- **Decided:** 1964-11-09
- **Bench:** K. Subba R\O, J. c. SHAH ANDS. M. S!KRI
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1965-2-s-c-r-91-3372
- **Pages:** 9

## Headnote

Income-tax Act (XI of 1922), s. 25-A (I) and (2)-&~pe of.
While proceedings for assessment of the income-iax of a Hindu uodivided family, of which the respondents were members, were pending,
there was a partition in the family and a consequent ~!aim for re<:<>gnising
the partition under s. 25-A(l) of the Income-tax Act (XI of 1922) was
made before the Income-tax Officer. The officer however proceeded to
assess the tax as if there was no partition and after the order of as>essmcnt
was made, passed an order recognising the partition. The amount of tax
determined by the officer was questioned on appeal and before the TribUMI
but without success.
As the tax due was in arrear, the officer sought lo
attach the remuneration earned by the respondents as employees of a firm,
by resorting to s. 46(5) of the Act. The respondents challenged the order
of the Income-tax Officer under s. 46(5), by a writ petition which w"'
allowed by the High Court on the ground that the Income-tax Officer could
not proceed to collect the tax without apportioning the tax liability under
>. 25-A(2). In appeal to the Supreme Court,
HELD : Though the High Court was in error in holding that an order
of assessment which had become final was liable to be reopened under
s. 25-A(2) by the Income-tax Officer when the order under s. 25-A(I) was
passed by him subsequent to the order of assessment, the appeal should
be dismissed becaur.;e, so long as there was an assessment of the Hindu
undivided family, the liability for payment of the tax was on the property
of the family and there was
no personal liability on the
members.
[97 E-F, HJ
The sche1ne of the section is that a Hindu undivided family assessed in
respect of its income, would continue to be assessed in that status notwith 4
standing a partition of the property among its members.
If a claim is
raised at the time of making an assessment that a paitition had been
effected, the Income-tax Officer must make an inquiry after notice to all
the members of the family and make an order that the family property
had been partitioned in definite portions if he is so satisfied. He is however, by law required to make the assessment on the income of the undivided family, as if no partition had taken place and then to apportion
to each member or group of members the tax-liability according to the
portion of the family property allotted.
In such a case the members of
the family stand jointly and severally liable for the entire amount of tax.
under the proviso to sub--s. (2) of section.
It no claim for recording
partition is made, or if a claim is made and it is disallowed, or the claim
is not considered by the officer, the assessment will continue as if there has
been no partition, and so long as the assessment is made on the income
of the undivided family, the liability to satisfy the tax must be restricted
to the estate of the family.
[96 B-F]
CIVIL APPELLATE JURISDICION: Civil Appeals Nos. 10191020 of 1963.
Appeals from the judgment and orders dated August 3, 1961
of the Andhra Pradesh High Court in Writ Appeals Nos. 49 and
50 of 1960.
92
SUPREME COURT REPORTS
[1965] 2 S.C.R.
S. V. Gupte, Solicitor-General, N. D. Karkhanis and R. N.
A
Sachthey, for the appellant (in both the appeals).
K. N. Rajagopala Sastri, A. Ramachandran for R. Gopalakrishnan, for the respondent (in both the appeals).

## Text

A
ADDITIONAL INCOME-TAX OFFICER, CUDDAPAH
B
c
D
E
F
G
H
v.
A. THIMMA YY A AND OTHERS
November 9, 1964
[K. SUBBA R\O, J. c. SHAH ANDS. M. S!KRI, JJ.]
Income-tax Act (XI of 1922), s. 25-A (I) and (2)-&~pe of.
While proceedings for assessment of the income-iax of a Hindu uodivided family, of which the respondents were members, were pending,
there was a partition in the family and a consequent ~!aim for re<:<>gnising
the partition under s. 25-A(l) of the Income-tax Act (XI of 1922) was
made before the Income-tax Officer. The officer however proceeded to
assess the tax as if there was no partition and after the order of as>essmcnt
was made, passed an order recognising the partition. The amount of tax
determined by the officer was questioned on appeal and before the TribUMI
but without success.
As the tax due was in arrear, the officer sought lo
attach the remuneration earned by the respondents as employees of a firm,
by resorting to s. 46(5) of the Act. The respondents challenged the order
of the Income-tax Officer under s. 46(5), by a writ petition which w"'
allowed by the High Court on the ground that the Income-tax Officer could
not proceed to collect the tax without apportioning the tax liability under
>. 25-A(2). In appeal to the Supreme Court,
HELD : Though the High Court was in error in holding that an order
of assessment which had become final was liable to be reopened under
s. 25-A(2) by the Income-tax Officer when the order under s. 25-A(I) was
passed by him subsequent to the order of assessment, the appeal should
be dismissed becaur.;e, so long as there was an assessment of the Hindu
undivided family, the liability for payment of the tax was on the property
of the family and there was
no personal liability on the
members.
[97 E-F, HJ
The sche1ne of the section is that a Hindu undivided family assessed in
respect of its income, would continue to be assessed in that status notwith 4
standing a partition of the property among its members.
If a claim is
raised at the time of making an assessment that a paitition had been
effected, the Income-tax Officer must make an inquiry after notice to all
the members of the family and make an order that the family property
had been partitioned in definite portions if he is so satisfied. He is however, by law required to make the assessment on the income of the undivided family, as if no partition had taken place and then to apportion
to each member or group of members the tax-liability according to the
portion of the family property allotted.
In such a case the members of
the family stand jointly and severally liable for the entire amount of tax.
under the proviso to sub--s. (2) of section.
It no claim for recording
partition is made, or if a claim is made and it is disallowed, or the claim
is not considered by the officer, the assessment will continue as if there has
been no partition, and so long as the assessment is made on the income
of the undivided family, the liability to satisfy the tax must be restricted
to the estate of the family.
[96 B-F]
CIVIL APPELLATE JURISDICION: Civil Appeals Nos. 10191020 of 1963.
Appeals from the judgment and orders dated August 3, 1961
of the Andhra Pradesh High Court in Writ Appeals Nos. 49 and
50 of 1960.
92
SUPREME COURT REPORTS
[1965] 2 S.C.R.
S. V. Gupte, Solicitor-General, N. D. Karkhanis and R. N.
A
Sachthey, for the appellant (in both the appeals).
K. N. Rajagopala Sastri, A. Ramachandran for R. Gopalakrishnan, for the respondent (in both the appeals).
The Judgment of the Court was delivered by
Shah, J.
Krishnappa and his two
sons--Thimmayya and
Venkatanarsu-constituted a Hindu undivided family. They
carried on business in mining in the name and style of Krishnappa
and Sons. The family was disrupted in 1946, and all its properties
B
· were divided among the members of the family.
The business of
Krishnappa and Sons was taken over by a firm of which the partc
ners were Krishnappa and his two sons.
A private limited Company styled "Krishnappa Asbestos and Barytes (Private)
Ltd."
took over the business of the firm on May 21, 194 7 for
Rs. 2,04,000.
Thimmayya obtained employment under the Company as Mines Superintendent at a monthly salary of Rs. 400 and
Venkatanarsu as General Manager at a monthly salary of Rs. 500.
D
Proceedings for assessment of tax due by the Hindu undivided
family for the years 1941-42, 1942-43, 1944-45, 1945-46 and
1946-4 7 were pending at the time when the Hindu 1mdivided
family was disrupted. On May 20, i 946, Venkatanarsu claimed
before the Additional Income-tax Officer, Cuddapah that the proi:
perty of the Hindu undivided family had been partitioned among
the members in definite portions. For reasons which do not appear
from the record, this claim was not disposed of till June 30, 1952.
In the meanwhile assessments for the five years in question were
made by the Income-tax Officer on diverse dates between September 30, 1948 and November 30, 1950, resulting in a tax liability
F
of Rs. 65, 750 in the aggregate for the five years.
Appeals preferred against the orders of assessment to the Appellate Assistant
Commissioner and the Income-tax Appellate Tribunal proved unsuccessful.
It is common ground that it was not contended in
the appeals that in making the orders of assessment, without disposing of the claim that the family was disrupted in 1946, the
G
Tncome-tax Officer had acted illegally.
On June 30, 1952 the Income-tax Officer, Special Circle,
Madras, made an order under s. 25-A recording that the property
of the Hindu undivided family of Krishnappa and his sons was
partitioned on November 2, 1946. As the tax due was not paid
the Income-tax Officer made an order under s. ·46(5) of the Indian
H
Income-tax Act, 1922 on June 25, 1958 calling upon the Managing Director to withhold the amount of tax due from the salaries
I. T. O. v. THIMMAYYA (Shah, /.)
93
A payable to the defaulters Thimmayya and Venkatanarsu and to
lihow the same to the credit of the Government of India.
Thimmayya and Venkatanarsu then lodged petitions under Art.
226 of the Constitution in the High Court of Andhra Pradesh at
Hyderabad, praying that writs of certiorari or other appropriate
B writs be issued quashing the order dated June 25, 1958 of the
Income-tax Officer under s. 46 ( 5). They founded their petitions
on two grounds-(i) that after the Income-tax Officer recorded an
order on June 30, 1952 under s. 25-A(I) that the family had disrupted "with effect from November 2, 1946", steps taken for
recovery of the amount of tax assessed without an appropriate
C order. undc;r s. 25-A(2) were invalid, and (ii) arrears of tax due
by the erstwhile Hindu undivided family could not be recovered
from remuneration earned by them as employees of the Company.
The petitions were decided by Seshachelapati J., in favour of the
two petitioners, and the decision was confirmed in appeal by a
D Division Bench of the High Court of Andhra Pradesh. The High
Court held that the order on the claim made under s. 25-A( I) on
June 30, 1952 was given "a clear retrospective operation'', and the
Income-tax Officer was bound "to give effect to that order recognising the partition and to follow up the consequences which !lowed
from the order". In the view of the High Court the petitioners
E were entitled to insist upon an order for apportionment under
s. 25-A(2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub-s. (2) of s. 25-A.
Against' the order of the High
Court, with certificate of fitness, these two appeals have been
F
preferred by the Income-tax Officer, Cuddapah.
Under the Indian Income-tax Act, 1922, as it originally stood,
a Hindu undivided family was regarded by s. 3 as a unit of assessment, but no machinery was set up for levying tax or for enforcing
liability to tax on the members of the family, if before the order
of assessment the family was divided.
Absence of this machiG nery was more acutely felt because of s. 14 ( 1 ) , which provided
that tax shall not be payable by an assessee in respect of any sum
which he received as a member of a Hindu undivided family.
Income received by a Hindu undivided family could not therefore be assessed and collected from the members of the family,
if at the time of making the assessment the family was divided.
H To rectify what was obviously a lacuna, the ~gislature incorporated s. 25-A for assessment and enforcement of liability to tax
income received by a Hindu undivided family, which was no
94
SUPREME COURT REPORTS
fil 965) 2 S.C.R.
longer in existence at the date of assessment.
But the new secA
tion went very much beyond rectifying the defect in the statute
which necessitated the amendment.
Section 25-A incorporated
by the Indian Income-tax Amendment Act 3 of 1928 at the material time read as follows :
" (I) Where, at the time of making an assessment
under section 23, it is claimed by or on behalf of any
member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members
of such family, the Income-tax Officer shall make such
inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned
among the various members or groups of members in
definite portions he shall record an order to that effect.
Provided that no such order shall be recorded until
notices of the inquiry have been served on all the
members of the family.
( 2) Where such an order has been passed, or where
any person has succeeded to a business, profession or
vocation formerly carried on by a Hindu undivided
family whose joint family property has been partitioned on or after the last day on which it carried on such
· business, profession or vocation, the Income-tax Officer shall make an assessment of the total income received
by or on behalf of the joint family as such, as if no
partition had taken place, and each member or group of
members shall, in addition to any income-tax for
which he or it may be separately liable and notwittstanding anything contained in sub-section (I) of section 15, be liable for a share of the tax on the income so
assessed according to the portion of the joint family
property allotted to him or it; and the Income-tax
Officer shall make assessments accordingly on the various members and groups of members in accordance with
the provisions of section 23 :
Provided that all the members and groups of members whose joint family property has been partitioned
shall be liable jointly and severally for the tax assessed
on the total income received by or on behalf of the
joint family as such.
( 3) Where such an order has not been passed in
respect of a Hindu family hitherto assessed as undivided,
B
c
D
E
F
G
H
A
I. T. O. v. IlUMMAYYA (Shah, J,)
such family shall be deemed, for the purposes of this
Act, to continue to be a Hindu undivided family."
The Section makes two substantive provislons-(i) that a
Hindu undivided family which has been assessed to tax shall be
deemed for the purposes of the Act, to continue to be treated as
undivided and therefore liable to be taxed in that status unless
an order is passed in respect of that family recording partition of
its property as contemplated by sub-s. ( 1); and (ii) if at the
time of making an assessment it is claimed by or on behalf of
the members of the family that the property of the joint family
has been partitioned among the members or Jilroups of members
c
in definite portions, i.e. a complete partition of the entire estate
is made, resulting in such physical division of the estate as it is
capable of being made, , the Income-tax Officer shall hold an
inquiry, and if he is satisfied that the partition had taken place,
he shall record an order to that effect.
Where an order has
been passed, the Income-tax Officer must still make an assessD ment of the total income received by or on behalf of the undivided family as if no partition had taken place, and shall thereafter
apportion the income-tax assessed on the total inco~e received
by the family and assess each member or group of members in
accorda!_lce with the provisions of s. 23 by adding to the incometax for which such member or group of members may be sepaE rately liable, tax proportionate to the portion of the undivided
family property allotted to him or to the group.
This apportiorunent and fresh assessment operate notwithstanding anything
tontained in sub-s. (I) of s. 14.
The proviso to sub-s. (2)
makes a departure of a vital character.
Whereas in the case of
F an assessment of the income of the joint family, the tax liability
is charged upon the assets of the family, when upon a partition
an order under sub-s. ( 1) has been recorded all members and
groups of members are expressly declared by the proviso to be
jointly and severally liable for the tax assessed on the total
income received by or on behalf of the joint family.
Liability
(;
which so long as an order was not recorded under s. 25-A (1)
was restricted to the assets of the Hindu undivided family is by
virtue of the proviso to sub-s. (2) transformed when the order
is recorded, into personal liability of the members for the amount
of tax due by the family.
H
An order under sub-s. ( I) can only be made if certain conditions co-exist-the family in question has been hitherto assessed
as undivided and a claim is made at the time of making an assessment that partition of the family property has been ma<fe between
96
SUPREME COURT REPORTS
[l 965] 2 S.C.R.
the members or groups in definite portions.
Sub-section ( 2) of
A
s. 25-A becomes effective only if an order under s. 25-A( 1) is
made and not otherwise.
In terms the sub-section enacts that
the Income-tax Officer shall assess the total income received by
or on behalf of the joint family and apportion it in the manner
provided by sub-s. ( 2) where an order is passed under sub-s.
(1).
The scheme of s. 25-A is therefore clear : a Hindu undivided
family hitherto assessed in respect of its income will continue to
B
be assessed in that statlli notwithstanding partition of the property
among its members. If a claim is raised at the time of making an c
asses&ment that a partition has been effected., the Income-tax
Officer must make an inquiry after notice to all the members of
the family and make an order that the family property has been
partitioned in definite portions, if he is satisfied in that behalf.
The Income-tax Officer is by law required still to make the assessment of the income of the Hindu undiVided family, as if no partiD
tion had taken place, and then to apportion the total tax liability
and to add to the tax on the separate income of the members or
groups of members the tax proportionate to the portion of the
joint family property allotted to such members or groups of mern-
.. bers and to make under s. 23 assessment on the members accordingly. If no claim for recording partition is made, or if a claim
E
is made and it is disallowed or the claim is not considered by
the Income-tax Officer, the assessment of the Hindu undivided
family which has hitherto been assessed as undivided will continue
to be made as if the Hindu undivided family has received the
income and is liable to be assessed.
Failure to make an order on the claim made does not a!Iect
the jurisdiction of the Income-tax Officer to make an assessment
of the Hindu family which had hitherto be.en assessed as undividF
ed.
The Income-tax Officer may assess the income of the Hindu
family hitherto assessed as undivided notwithstanding partition,
G
,;f no claim in that behalf has been made to him or if he is not
satisfied about the truth of the claim that the joint family property has been partitioned in definite portions, or if on account of
some error or inadvertence he fails to dispose of the claim. In
all these cases his jurisdiction to assess tht; income of the family
H
hitherto assessed as undivided remains unaffected, for the procedure for making assessment of tax is statutory.
Any error or
irregularity in the assessment may be rectified in the manner pro4
•
•
I. T. o. v. THIMM.AYYA .cs~qh, J.)
97
' ... !
[A vided by the statute alone, and the 'assess'ro~nt is not liable to be
challenged collaterally.
In the present case claim was undoubtedly ·made at the time
of making an assessment, that the property of the family was
B partitioned. The claim was not disposed of before making the
assessment, and the Income-tax Officer proceeded to assess the
income of the family as if the property of the family had not been
partitioned. Jt is true that by order dated June 30, 1952 the
Income-tax Officer held that the property of the. family was
partitioned on November 2, 1946. But the Act contains no
. c
machinery authorising an Income-tax Officer to re-open an assess-··
men! of a Hindu undivided family, relying upon an order made'
by him under s. 25-A(l) after the order of assessment is made.
In the present case appeals were filed and it is common ground •
that no objection was raised as to the regularity or legality of the
procedure followed· by the Income-tax Officer.
The assessment
!J
proceedings were taken to the Income-tax Appellate Tribunal and
the orders of assessment were confirmed.
Thereafter it was not
open to the Income-tax Officer to re-open the orders of assessment,
relying upon the order recording the partition, :ind to seek to subvert orders which had become final under the seal of the Incometax Appellate Tribunal.
The High Court was, in our judgment,
· E
in error in holding that an order of assessment which has become
final is liable to be re-opened under s. 25-A(2) by the Incometax Officer, when an order under s. 25-A(l) is pa,sed by him
subsequent to the order of assessment.
F
But the appeals filed by the Income:tax Officer must still fail.
Order reeorcting the partition subsequent to the date on which
the order of assessment was made must for reasons afo1ementioned
be irnored and tax levied as if no such order was made. The effect .
· of ihat steo however is that in the absence of an order under
s. 25-A(l) and the consequential proceedings under subs. {2)
G liability to pay tax must rest upon the pr<?perty of the Hindu undivided family : it cannot be enforced against the members of
the. family personally.
The Income-tax Officer has sought ·by
resorting to s. 46(5) to attach the remuneration earned by
Thimmayya and. Venkatanarsu as employees of Krishr,appa
Asbestos & Barytes (Private) Ltd. this he was incompetent to
H
do.
So long as the assessment is made of income of the Hindu •
undivided family, liability to satisfy the tax must be. restricted to
·the estate of the family : after an order of partitfon is recorded
·~·' ',.--- -...
'
\ . \
SUPREME COURT REPORTS __ _ _ [1965J 2 S,C.R.
98
and '3ssessment is made under sub-s. _(2) of s. 25-A but not till
A
then, the proviso to that sub-section will operate.
The Solicitor-General contended that the second paragraph
of sub-s. (2) which is in the form of a proviso, is in substance
a substantive provision imposing joint and several liability for
tax assessed on the total inoome received by or on behalf of the
B
joint family against all members of the family.
The contention
. is that by- the proviso the Legislature intended that in respect of
the income pf a Hindu undivided family, once partition i3 effected, whether the partition is recorded or not under sub-s. (1), all
members of the family will be jointly and severally liable for the
C
tax asses.sed on the total income received by or on behalf of the
family. But howsoever read the proviso yields no i:uch meanini.
The scheme of the section is that so long as there is an ass=cnt ·
-- of the Hindu undivided family, the liability for payment of the
tax is on the property of the family and not personally on the
members.
Where an order that the property of the family has D
been partitioned is recorded, the liability of the members has to
be apportioned in the manner set out in sub-section, but one of
the incidents of assessment after apportionment of tax liability is
that the members of the family stand jointly and severally liable
for the entire amount of tax assessed against the family.
In the present case no orders were recorded by the JnCOD»tax E
Officer at the time of making assessments in respect of the five
years, and therefore no personal liability of the members cf the
family arose under the proviso to sub-s. (2). The Jncomo-tax
Officer does not seek to reach in the hands of TIJmmayya and
Venkatanarsu the property which was once the property of the F
Hindu undivided family; he seeks to reach the personal income of
the two respondents. That the Income-tax Officer could do only
if by .virtue of the proviso to sub-section (2) a personal liability
has arisen against them. In the absence of an order under sub-s.
( 1), however, such a liability docs not arise against the members
of the Hindu undivided family, even if the family is disrupted.
G
we· are, therefore of the view, but not for the reasons mentioned by the High Court, that because there has been before the
orders of assessment no order recording that the property of the
family has been partitioned among the members, the two R:!pOll·
• dents arc not personally liable to satisfy tax due by the joiit
H
family. The remedy of the Jncomo-tax authorities in the
circumstances of the case, was to proceed against the property,
•
I. T. 0. v. THIMMAYYA (Shah, J.)
99•
A if any, of the Hindu undivided family.
That admittedly they
have not done.
B
•
The order of the High Court must, therefore, be confirmed:
and the appeals dismissed with costs.
There will be one hearing·
fee.
Appeals dismissed .