# Additional lnconte Tax Officer, Quddapah v. A. Thim1nayya & Anr. SS I.T.R

- **Citation:** [1976] Supp. 1 S.C.R. 505
- **Court:** Supreme Court of India
- **Decided:** 1976-05-03
- **Bench:** A. C. Gupta, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/additional-lnconte-tax-officer-quddapah-v-a-thim1nayya-anr-ss-i-t-r-7158
- **Pages:** 5

## Headnote

505
AsseJ.rn1ent jurisdiction of Income Tax Officer~urisdiction to continue to
assess u undivided, despite partition under personal law. a HindU family whicll
has hitherto been assessed in that status-Interpretation and scope of s. 25A(3)
r<ad 1>ith s. 25A(I) of the Income Tax Act-Penalty imposed under s. 28(l)(c)
of the Act for concealment of income by the Hindu Undivided Family prior to
the actual date of recording of an order accepting the disruption of the Hindu
Vfldivided Family is proper.
In response to a show cause notice dated March 15, 1957, under s. 28(l)(c)
of the Income Tax Act, before imposing a penalty for deliberate concealment
of its income, the appellant, through ;ts authorised representni·.:e, voluntarily
agreed to a sum of Rs. 15,000/- being treated as income of I-Iindu Un<li,·iJed
Family. The Income Tax Officer, by his order dated March 20, 1958, ·added
a sum of Rs. 68,550/ ... to the income of the appellant and imposed on it a
penalty of R.. 26,000/- which on appeal was reduced to Rs. 15,000/-. Mean
while, on March 19, 19157, the appellant filed an application under s. 25A of
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.iie Act for an order recording partition of joint family property
in definite
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portions from June 22, 1956, claimin~ that date to be the date of partition. The
Income Tax Officer, after due enquiries., accepted the disruption of the Hindu
Un&vided Family as claimed by his order dated March 26, 1962. This led the
appellaat to contend that, in view or the orders dated March 26, 1962, of the
Incooie Tax Officer, the imposition of the penalty by him on March 20, 1958,
was bad in law and could not be sustained.
T1le Tribunal upheld the contentions of the appellant resulting jn a reference under s. 66( 1) of the Act to
the Hi~ Court of Allahabad (Lucknow Bench), which reversed the decision of
the· Tribnna1.
Ho"WCver, the High Court granted a
certificat~ of Atne"s for
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appeal to this Court.
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Dismissing the appeals the Court,
HELD: Sub--section (3) of s. 25A of the Income Tax Act en1bodies a legal
fiction according to which a Hindu family which has been previously assessed
as ''undivided" is to be continued to be treated as "undivided'' till the passing
of the order under sub-s. (I) of s. 25A. So long as no order under s. 2S(A)(l)
of the Act is recorded, the jurisdiction of .the Income Tax Officer to continue to
as~ess as undivided desplte a partition under personal law, a Hindu family which
has hitherto been asses.sed in that status, remain unaffected.
[5080-H]
Additional lnconte Tax Officer, Quddapah v. A. Thim1nayya & Anr. SS I.T.R.
666; /dint Family of Udayan Chinubhai etc. v. Co1nmissioner of Income Tax,
Gujarat (1967) 63 I.T.R. 416, applied.
CommiMioner of Income Tax v. Sl>l11char Snh Bhim Salt (1957) 27 I.T.R.
G
307; S. A. Raiu Chattiar & Ors. v. Collector of Madras & Anr. (1956) 29 I.T.R.
241; Mahankali Subba Rao Mahankllli Naeeswara.i Rao & Anr. v. Commissioner
of Income Tax., Hyderabad (1957) 31 I.T.R. 867 and Comn1issioner of Incom~
Tax, Punjab v. Mathu Ram Prem Chand (1967) 66 I.T.R. 638, not applicable.
HELD FURTIIER: In the instant case, there was not a whisper of the application under s. 25A (I) of the Act by the appellant on March 15, 1957, when
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the penalty proceedings ""re initiated against it.
EV<n ·on March 20, 1958,
when the penalty was imposed, there was no order under s. 25A(l) of the
Act. It was on1y on March 26, 1962, that the partition was recognised and order
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506
SUPREME COURT REPORTS (1976] SUPI'LliMENTARY
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under s. 27A(l) of the Act was passed.
There was, thus, no bar to lhe imposiw
tion of the impugned penalty.
[509E·f'J
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## Text

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M/S. GAURI SHANKAR, CHANDRABHAN
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C.I.T., U.P., LUCKNOW
May 3, 1976
[A. C. GUPTA AND JASWANT SINGH, JJ.J
505
AsseJ.rn1ent jurisdiction of Income Tax Officer~urisdiction to continue to
assess u undivided, despite partition under personal law. a HindU family whicll
has hitherto been assessed in that status-Interpretation and scope of s. 25A(3)
r<ad 1>ith s. 25A(I) of the Income Tax Act-Penalty imposed under s. 28(l)(c)
of the Act for concealment of income by the Hindu Undivided Family prior to
the actual date of recording of an order accepting the disruption of the Hindu
Vfldivided Family is proper.
In response to a show cause notice dated March 15, 1957, under s. 28(l)(c)
of the Income Tax Act, before imposing a penalty for deliberate concealment
of its income, the appellant, through ;ts authorised representni·.:e, voluntarily
agreed to a sum of Rs. 15,000/- being treated as income of I-Iindu Un<li,·iJed
Family. The Income Tax Officer, by his order dated March 20, 1958, ·added
a sum of Rs. 68,550/ ... to the income of the appellant and imposed on it a
penalty of R.. 26,000/- which on appeal was reduced to Rs. 15,000/-. Mean
while, on March 19, 19157, the appellant filed an application under s. 25A of
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.iie Act for an order recording partition of joint family property
in definite
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portions from June 22, 1956, claimin~ that date to be the date of partition. The
Income Tax Officer, after due enquiries., accepted the disruption of the Hindu
Un&vided Family as claimed by his order dated March 26, 1962. This led the
appellaat to contend that, in view or the orders dated March 26, 1962, of the
Incooie Tax Officer, the imposition of the penalty by him on March 20, 1958,
was bad in law and could not be sustained.
T1le Tribunal upheld the contentions of the appellant resulting jn a reference under s. 66( 1) of the Act to
the Hi~ Court of Allahabad (Lucknow Bench), which reversed the decision of
the· Tribnna1.
Ho"WCver, the High Court granted a
certificat~ of Atne"s for
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appeal to this Court.
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Dismissing the appeals the Court,
HELD: Sub--section (3) of s. 25A of the Income Tax Act en1bodies a legal
fiction according to which a Hindu family which has been previously assessed
as ''undivided" is to be continued to be treated as "undivided'' till the passing
of the order under sub-s. (I) of s. 25A. So long as no order under s. 2S(A)(l)
of the Act is recorded, the jurisdiction of .the Income Tax Officer to continue to
as~ess as undivided desplte a partition under personal law, a Hindu family which
has hitherto been asses.sed in that status, remain unaffected.
[5080-H]
Additional lnconte Tax Officer, Quddapah v. A. Thim1nayya & Anr. SS I.T.R.
666; /dint Family of Udayan Chinubhai etc. v. Co1nmissioner of Income Tax,
Gujarat (1967) 63 I.T.R. 416, applied.
CommiMioner of Income Tax v. Sl>l11char Snh Bhim Salt (1957) 27 I.T.R.
G
307; S. A. Raiu Chattiar & Ors. v. Collector of Madras & Anr. (1956) 29 I.T.R.
241; Mahankali Subba Rao Mahankllli Naeeswara.i Rao & Anr. v. Commissioner
of Income Tax., Hyderabad (1957) 31 I.T.R. 867 and Comn1issioner of Incom~
Tax, Punjab v. Mathu Ram Prem Chand (1967) 66 I.T.R. 638, not applicable.
HELD FURTIIER: In the instant case, there was not a whisper of the application under s. 25A (I) of the Act by the appellant on March 15, 1957, when
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the penalty proceedings ""re initiated against it.
EV<n ·on March 20, 1958,
when the penalty was imposed, there was no order under s. 25A(l) of the
Act. It was on1y on March 26, 1962, that the partition was recognised and order
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506
SUPREME COURT REPORTS (1976] SUPI'LliMENTARY
A
under s. 27A(l) of the Act was passed.
There was, thus, no bar to lhe imposiw
tion of the impugned penalty.
[509E·f'J
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 886 of 197.1.
(From the judgment and order dated the 18.9.1969 of the Allahabad High Court in L T. R. Misc. Case No. 836 of 1963.)
G. C. Sharma, V. N. Ganpule, D. K. Jain, Anup Shanna and P. C.
Kapur, for the appellant.
B. Sen and S. P. Nayar, for the respondent
The Judgment of the Court was delivered by
JASWA)IT SINGH, J. This is an appeal by certificate of fitness granted by the High Court of Judicature at Allahabad under section 66A(2) of the Indian Income-tax Act, 1922 (hereinafter referred to as
'the Act') from its judgment dated September 18, 1969 in I.T.R. Misc.
Case No. 836 of 1963.
The facts giving rise to this appeal are : The appellant, a Hindu
undivided family consisted of Gauri Shankar, the father, and his three
sons viz. Chandrabhan, Bengali Lal ai,1d Brij Kishan.
Gauri Shankar,
the karta of the family who was incharge of the affairs of the family
during the relevant year which extended from April 13, 1945 to April
12, 1946, the assessment year being 1946-47, died on April 2, 1946.
He was succeeded by his son, Chandrabhan as Karla of the family.
The appellant had, in the first instance, filed a retur,1 showing an income ot Rs. 9,701/-. On scrutiny of the relevant material, the Income
Tax Oflicer found a number of discrcpencies in the accounts of the
appellant and also noted the existence of cash credits to the appellant's
accmmt in the books of another firm viz. M/s. Tilyani Glass Works and
a certain sum deposited in an account styled as Abdul Wahid Khan &
Suns.
He thereupon issued a notice dated March 15, 1957, calling
upon the appellant to explain the discrepencies in the accounts as also
in the cash credits and to show cause why a penalty under section 28-
( l ) ( c) of the Act be not imposed upon it. In response to the notice,
a representative of the appellant appeared before the Income Tax
Officer and volontarily agreed to a sum of Rs. 15,000/- being treated
as its income. After hearing the Appellant's representative, the J>,1come
Tax Officer felt satisfied that the nppella'.lt had deliberately concealed
its income and furnished an inaccurate return. Accordingly, by his
order d·ated March 20, 1958, he added a sum of Rs. 68,550/- to the
income of the appellant and imposed on it a penalty of Rs. 26,000/-.
Mea,awhilc, on March 19, 1957; an application under section 25-A of
the Act was made to the Income Tax Officer for an order recording
partition of joint family property in definite portions, which according
to the application had taken place amongst the members of the Hindu
undivided family on June 22, 1956. The Income Tax Officer on bei'ng
satisfied after making enquiries that a complete partition of the joint
family property has taken place, recorded an order under section 25A ( 1) of the Act on March 26, 1962, acc~pting the partition with effect
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GAURI SHANKAR v. c. I. T. (Jaswant Singh, !.)
507
!rum June 22, 1956, as claimed. Against the pe.ialty of Rs. 26,000/-
imposed by the Income Tax Oflicer by his order dated March 20, 1958,
the appellant preferred an appeal to the Appellate Assistant Commissiouer, who reduced the penalty to Rs. 15,000/-. Not satisfied with
this reduction, the appellant went up in further appeal to the Inc<;>metax Appellate Tribunal and raised before it a number of con~nt1cms.
Among.;t other things, it was urged before the Tnbunal that smce the
Hindu undivided family hact disrupted on June 22, 1956, as accepted
bv the Income Tex Officer in his aforesaid order dated March 26,
1962, passed under section 25-A(l) of the Act, the imposition of the
pe«rnlty by the Income-Tax Officer on March 20, 1958, after the disruption of the family was bad in law and could not be sustained. While
rejecting the other contentions raised on behalf of the appellant, the
Tribunal upheld this contcnti011 by its order dated March 6,
1963.
Thereupon the Commissioner of Income-tax, U.P. made a',1 application
before the Income-tax Appellate Tribunal under section 66( 1) of the
Act reqaesting that the following question of law arising from its decisi<'l1 be referred to the High Court:-
"Whether in the facts und circumstances of the case the
imposition of penalty under sectida 2E (1) ( c) on the Hindu
undivided family after it had disrupted within the meaning of
section 25-A is bad in law''.
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Acceding to the request of the Commissioner of Income Tax, the
Tribunal referred the above mentioned question to the High Court
which answered the same in the ·aegative.
The appellant thereupon
applied to the High Court and obtained the aforesaid certificate of fitness for appeal to thLs Court. This is how the matter is before us.
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Relying on Co1nniissioner of lnconie Tax v. Sanichar Salz Bhi111
Sah('), S. A. Raju Chattiar & Ors. v. Collector of Madras & Anr.(")
Malwnkali Subba Rao, Mahankali Nageswara Rao & Anr. v. Comnnssioner of Income-tax, Hyderabad(') and Commissioner of Incometax, Punjab v. Mothu Ram Prem Chand(') counsel for the appellant
has reiterated before us that since the Hindu undivided family had disF
solved on June 22, 1956 as accepted by the Income Tax Officer vide
his order dated March 26, 1962 passed under section 25-A of the Act
and the Act did not provide any machinery for imposition of the
penalty on the Hindu family after its disruption, the imposition of
penalty on March 20, 1958 was had in law and could no~ be sustained .
Counsel appearing on behalf of the Revenue has, on the other ha!nd,
urged that imposition of impugned penalty cannot be challenge& as in
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view of section 25-A(3) of the Act, a Hindu undivided family must be
deemed to have continued in existe'nce till the date of the passing of
th~ order under section 25-A( 1) of the Act.
Po: a proper determinati~n of the question, it is necessary to refer
to secuon 25-A of the Act which at the relevant time stood as under :-
"25-A. ( 1) Where, at the time of making an assessment
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under section 23, it is claimed by or on behalf of a'ny member
0). (1957) 27 ( T. -R.J~
(2) (1956) 29 I.T. R. 241.
(1) (1957) 3t l.T R. 867.
(4) (1967) 66 l.T. R. GJR.
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SUPREME COURT REPORTS [J976j SUPPLE!>!E1'iT"1lY
d a llindu family hitherto usscssed as undivided that a partition l1as 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 defr.1ite portions, he shall record an
llrdcr to that effect :
Provided that no such. order shall be recorded until
notices of the inqu'ry have been served on all the members of
the fa111iJy.
(2) Where such an order has been passcd 1 or where any
per.sun 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 Incomc··tax Officer shall make an assessment of
i!ic 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 notwithstanding
<1ny!hing contained in sub-section (I) of section 14, be liable
for a share of tile tax on the income so assessed according to
the portion of the joint family property allotted to !1im or it;
"ml the Income-tax Officer shall make assessments accordi1wly 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 a.n order has not been passed in respect
of a Hindu family hitherto assessed as u'adividcd, such family
shall be deemed, for the purposes of this Act, to continue to
be a Hindu undivided family."
It will be noticed that sub-section (3) of the above quoted section
embodies a legal fiction according to which a Hindu family which has
been previously assessed as 'undivided' is to be continued to be treated
as 'undivided' till the passing of the order under sub-scctida (I) of the
section. This view gains strength from two decisions of this Court in
Additional Income-tax Officer, Quddapah v. A. Thimmayya & Anr(')
and Joillt Family of Udayan Chinubhai etc.
v.
Commissioner of
Income-tax, Gujarat(') where it was held that so long as
110 order
under section 25-A (I) of the Act is recorded, the jurisdiction of the
Income Tax Officer to continue to assess as undivided despite partition
under personal law a Hindu family which has hitherto been asseesed in
that status remains unaffected. It will be profitable in this co,1nection
(I) (1955) 55 I T. R. 666.
12) (1957) 6J I. T. R. 4!6.
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GAURI SHANKAR v. c. I. T. (Jaswant Singh, J.)
50U
to rckr to the following observation made in
A. Thimmavya's case
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(supra) :-·
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"The section makes two substantive provisions (i) that a
Hiudu undivided family which has been assessed to tax shall
b~ deemed, for the pmposes of the Act, to continue to be
treated as undivided and therefore liable to be taxed in that
statu> unless an order is passed in respect of that family recording partition of its property as contemplated by subsection (I); •and (ii) if at the time of mak:i.1g 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 groups of members in definite portions, i.e. a complete partition of the entire estate is made
resulting in such physical division cf the estate as it is capabk of being made, the In,cmne-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. . . . . . . The Incometax Oftlccr may assess the income of the Hindu family hitherto asoesscd as undivided notwithsta,1ding partition, if no claim
in that behalf has been made to him or if he is not satisfied
about the truth of tho 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 the income of the family
hitherto assessed as undivided rem11in unaffected, for the proL'Cdtirc for n1aking asscssn1cnt of tax is statutory."
In face or the aforesaid decisions of this Court, it is not necessary
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to hurden the record hy discussing the decisions cited by counsel for
the uppL'liant.
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Jn the present case, there was not a whisper of the application
under section 25-A(l) of the Act by the appellant ci.:t March 15, 1957
whei; the penalty proceedings were initiated against it. Even on March
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2v, 1958, when the penalty was imposed, there was no order under
section 25-A(l) of the Act. It was only on March 26, 1962, that the
partition was recog;aised and order under section 25-A ( 1) of the Act
was passed. There was thus no bar to the imposition of the impugned
penalty. Accordingly, we find no force in the contention of counsel for
the appellant and are of the opinion that the question was rightly
a.1swercd in the negative by the High Court.
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The appeal, therefore, fails and is dismissed but in the circumst1nccs of the case without any order as to costs.
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Appeal dismissed.