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PETITIONER: INSPECTING  ASSISTANT COMMISSIONER AGRICULTURAL  INCOME  TAX

       Vs.

RESPONDENT: POOMUILLI MANAKKAL PARAMESWARAN NAMBOODRIPAD

DATE OF JUDGMENT18/08/1971

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N.

CITATION:  1972 AIR  294            1972 SCR  (1) 298  1971 SCC  (3) 744  CITATOR INFO :  RF         1991 SC2035  (6)

ACT: Travancore-Cochin  Agricultural  Income-tax  Act,  1950,  as amended by Act 12 of 1964, s. 29-Scope of.

HEADNOTE: In  1958,  there  was  a partition  in  the  family  of  the respondent by a registered partition deed.  In January 1960, it  was  conceded on behalf of the  Agricultural  Income-tax Officer,  before  the High Court, that  the  respondent  was liable to be taxed only as an ’individual’, that is, it  was conceded that the respondent’s family was a divided  family. Various  attempts  made  by the  Department  thereafter,  to assess the respondent as Karta of his family were set  aside by  the High Court, and the respondent and other members  of his quondam family were assessed as ’individuals’ till 1964. In  1965,  notice was again issued to  the  respondent  with respect to the assessment year 1961-62 for assessing him  as the  karta  of his family, and the respondent filed  a  writ petition  in the High Court.  The Department contended  that in  view of the amendment of s. 29 of the  Travancore-Cochin Agricultural Income-tax Act, 1950, by Act 12 of 1964, it was permissible for the Department to reassess the respondent as the Karta of the family as no decision that the  respondents family  was  a  divided  family had  been  rendered  by  the Agricultural Income-tax Officer and the family must hence be deemed  to be an undivided family.  The High Court  held  in favour of the assessee. Dismissing the appeal to this Court, HELD:     (1)  The  amended s. 29  was  given  retrospective effect  from  April  1, 1958; but it  is  only  a  machinery section.   It is attracted to an assessment proceeding  only if  one of the two conditions prescribed in sub. s.  (1)  is established, namely, either the family in question was being assessed  as an undivided family in the previous  assessment year,  or, that the family was being assessed for the  first time.  The deeming provision contained in s. 29(3) can  have application only in cases where one or the other  conditions prescribed  by  s.  29(1) is satisfied  and  not  otherwise. [303F-G; 307F-H] In  the  present case, every attempt made by  the  assessing

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authority to assess the quondam family of the respondent was set aside by the High Court and the department had not  only not  assessed  that family as an undivided family,  but  had assessed  the  individual members of the family  as  divided members.   That  is,  the question whether  the  family  was divided  or not had been gone into and decided.   It  cannot also  be  said that the family was ’hitherto assessed  as  a Hindu undivided family’. [307H; 308A-B]  299 (2)  The   expression  ’which  (meaning  family)  is   being assessed  for  the first time as a Hindu  undivided  family’ presupposes the existence of the family.  Section 29(1) does not permit the assessing authority to create a family by re- joining the divided parties or otherwise.  If the family has ceased  to  exist  even  before  the  assessment  proceeding started then there can be no family which is being, assessed to tax for the first time. [308-F] In the present case, the family sought to be taxed was ’non- existing’  in the concerned previous years and  hence  could not  be  considered  as  a  Hindu  undivided  family  ’being assessed  for  the first time’.  Therefore,’  the  ’deeming’ provision in s. 29(3) could not be applied. [308G-H] Additional  Income-tax Officer, Cuddapah v. A. Thimmarya  55 I.T.R. 666(S.C.), referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 62 and  63 of 1969. Appeals from the judgment and order dated November 21,  1967 of the Kerala High Court in O. P. Nos. 2979 of 1965 and 1395 of 1966. V.   A.  Seyid  Muhammad,  P. K. Pillai for  M.  R.  Krishna Pillai, for the appellant (in both the appeals). S.   T. Desai and A. S. Namblar, for the respondent (in both the appeals). The Judgment of the Court was delivered by Hegde,  J. In these appeals by certificates brought  by  the Department,  we have to decide as to what is the true  scope of s. 29 of the Kerala Agricultural Income-tax Act, 1950  as amended in 1964 (to be hereinafter referred to as the Act) ? This  case  has  a  long  history  which  by  no  means   is complimentary  to the Department.  The common respondent  in both these appeals moved the High Court of Kerala under Art. 226  of the Constitution praying that the  appellant  herein may  be  prohibited  from  taking  further  proceedings  for assessing him as the karta of Poomulli Mana to  agricultural income-tax for the assessment year 1961-62. The respondent was the karta of a Namboodri family known  as Poomulli  Mana till March 30, 1958.  The Namboodr is in  the Malabar  District  of  the  Kerala  State  were   previously governed  by  the Madras Nambudri Act, 1932.  Now  they  are governed by the Kerala Nambudri 300 Act,  1958.  The respondent’s family owned large  tracts  of lands  both  in  Malabar District which was a  part  of  the Madras  State till November 1, 1956 as well as in the  erst- while  Travancore  and  Cochin  State.   Under  the   States Reorganization Act, 1954, the new State of Kerala was formed consisting  of the former Malabar District of the  State  of Madras  as well as the former Travancore-Cochin State.   The new  State  of Kerala came into being on November  1,  1956. Thereafter  the  Travancore-Cochin  Agricultural  Income-tax Act,  1950 was extended to the former Malabar District  with

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effect  from April 1, 1957 by Kerala Act 8 of 1957.  In  the assessment year 1957-58, the assessing authorities  assessed Poomulli  Mana  as  an undivided  family.   That  order  was quashed  by the High Court.  On March 30, 1958, the  members of the family entered into a registered partition deed under which the family became divided.  Thereafter the  respondent ceased  to  be the karta of the  family.   Nevertheless  the authorities  under the Act issued notices to the  respondent under S. 17 (2) and S. 39 of the Act proposing to assess him as the manager of his H.U.F. for the assessment years  1957- 58  and 1958-59.  The respondent challenged the validity  of those  notices  before the High Court of Kerala.   When  the case came up for hearing before a Division Bench of the High Court,  the  learned Counsel appearing  for  the  Department informed  the Court that the Department was going to  assess the respondent only as an "individual" and not as the  karta of  his  family.  On the basis of that  representation,  the Court passed the following order : "The learned Government Pleader submits, quite categorically that  the  assessment proposed is of the  petitioner  as  an ’individual’, and not in any other capacity. In view of the submission we do not consider it necessary to proceed further with the petition.  We record the fact  that the  Department  does not propose to assess  the  petitioner except  as an individual and leave him to seek his  remedies under  the Act or the Constitution in case he feels  himself aggrieved by any subsequent action of the Department." Despite  this  assurance, the Department  issued  ’a  notice under S. 35 of the Act on February 9, 1960 proposing to assess  the  respondent as the karta of his H.U.F.  for  the assessment  year  1959-60.  The respondent again  moved  the High  Court  to  quash that notice.   The  said  notice  was quashed  by  a  learned single judge of the  High  Court  on January 3, 1961 on the ground that it is against the  under- taking  given by the Government in the  earlier  proceedings That  decision was affirmed in appeal.  Yet  another  notice dated November 8, 1961 was issued by the Department under s. 35  to  the respondent to show cause why he  should  not  be taxed  as  the karta of his H.U.F. for the  assessment  year 1958-59.  This notice was again quashed by the High Court by its judgment dated December 17, 1963. Section  29  of the Agricultural Income-tax  Act,  1950  was amended  by  the Kerala legislature by Act 12 of  1964.   We shall now set out s. 29 as it stood before its amendment  in 1964 as well as the amended section. Section  29  of the Act (before the amendment by Act  12  of 1964) read thus :               "29.  (1)  Where  at the  time  of  making  an               assessment under Section 18, it is claimed  by               or  on  behalf  of  any  member  of  a   Hindu               undivided  family,  (Aliyasanthana  family  or               branch  or  Marumakkathayam  tarwad)  hitherto               assessed  as  undivided that a  partition  has               taken  place  among the members or  groups  of               members  of  such family or tarwad  the  Agri-               cultural  Income-tax Officer shall  make  such               inquiry there into 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 notice of the inquiry has been served on               all the adult members of the family or  tarwad               entitled  to  the property as far  as  may  be

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             practicable or in such other manner as may  be               prescribed.               (2)   Where such an order has been passed, the               Agricultural Income-tax Officer shall make  an               assessment  of the total  agricultural  income               received  by  or on behalf of  the  family  or               tarwad as such, as if no partition. had  taken               place, and each member               30 2               or group of members shall, in addition to  any               agricultural income-tax for which he or it may               be  separately  liable,  and   notwithstanding               anything  contained in clause (a)  of  Section               10,  be liable for a share of the tax  on  the               incomes  so assessed according to the  portion               of  the family or tarwad property allotted  to               him  or  it and  the  Agricultural  Income-tax               Officer shall make assessments accordingly  on               the  various members and groups of members  in               accordance with the provisions of Section 18 :               Provided  that all the members and  groups  of               members  whose family or tarwad  property  has               been  partitioned shall be liable jointly  and               severally   for   the   tax   on   the   total               agricultural  income received by or on  behalf               of the family or tarwad as such up to the date               of the partition.               (3)   Where such an order has not been  passed               in  respect of a Hindu family,  (Aliyasanthana               family  or branch or  Marumakkathayam  tarwad)                             hitherto assessed as undivided, such f amily  or               tarwad  shall  be deemed for the  purposes  of               this Act to continue to be an undivided family               or tarwad."               Section  29 after its amendment by Act  12  of               1964 reads               "(1)  Assessment  after partition of  a  Hindu               undivided family.-                Where  at  the time of making  an  assessment               under  section  18,  it is claimed  by  or  on               behalf  of  any member of  a  family  hitherto               assessed as a Hindu undivided family or  which               is  being  assessed for the first  time  as  a               Hindu  undivided family that a  partition  has               taken  place  among the members or  groups  of               members  of  such  family,  the   Agricultural               Income-tax  Officer  shall make  such  inquiry               there  into 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 notice of the inquiry has been serve  on               a the adult members of the family entitled  to               the pro-                303               perty as far as may. be practicable or in such               other manner as may be prescribed.               (2)   Where  such order has been  passed,  the               Agricultural Income-tax Officer shall make  an               assessment  of the total  agricultural  income               received  by  or on behalf of  the  family  as               such, as if no partition had taken place,  and

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             each  member  or group of  members  shall,  in               addition to any agricultural income-tax  for               which he or it may be separately liable, and    notw ithstanding               anything contained in clause (a)    of    sub-               section  (1)  of section 10, be liable  for  a               share  of the tax on the incomes  so  assessed               according   to  the  portion  of  the   family               property  allotted  to  him  or  it  and   the               Agricultural  Income-tax  Officer  shall  make               assessments accordingly on the various members               and  groups of members in accordance with  the               provisions of section 18 :               Provided  that all the members and  groups  of               members whose family property has been  parti-               tioned  shall be liable jointly and  severally               for  the tax on the total agricultural  income               received by or on behalf of the family as such               upto the date of the partition.               (3)   Where such an order has not been  passed               in respect of a family hitherto assessed as  a               Hindu  undivided  family  or  which  is  being               assessed  for  the  first  time  as  a   Hindu               undivided family, such family shall be deemed,               for the purpose of this Act, to continue to be               a Hindu undivided family." The  amended provision was given retrospective  effect  with effect  from  April  1,  1958.   Taking  advantage  of   the amendment of s. 29, the Department again issued a notice  to the  respondent  on  June 1, 1964 under s.  35  of  the  Act calling upon him to show cause why he should not be assessed as  the karta of his H.U.F. for the period from November  1, 1956  to March 31, 1958.  It may be noted that  uphill  that date  the respondent and other members of his former  family were  being assessed as ’individuals’ and the tax so  levied had  been paid.  In other words for the  earlier  assessment years,  the Department had proceeded on the basis  that  the family was a divided family. 304 On receipt of the notice dated June 1, 1964, the  respondent again  moved the High Court of Kerala to quash the  same  on various  grounds.   One of the grounds taken  was  that  the family  of  the respondent having been  treated  as  divided family  in  the earlier assessment proceedings, it  was  not open to the Department to proceed to assess him as the karta of a non-existing family.  When that proceeding was  pending before  the  High Court, the  assessing  authorities  passed orders  assessing the respondent as karta of his family.   A Division Bench of the Kerala High Court quashed the impugned notice as well as the assessment made. During  the pendency of the last mentioned  proceeding,  the Department  issued two more notices to the assessee  (marked Ex.   P-1  and  P-3 before the High  Court).   The  relevant notice  for our present purpose is Ex.  P-1 and it is  dated March 10, 1965.  ’In that notice the assessing authority, in the purported exercise of its powers under S. 35 of the  Act required the respondent to file a return of the agricultural income  of his family in the previous years  beginning  from April  1, 1961 and ending on March 3 1, 1961, chargeable  to tax  for the assessment year 1961-62 within 35 days  of  the receipt  of that notice.  The notice further mentioned  that the  action proposed therein was permissible in view of  the amendment  of  the Act, by Act 12 of 1964.   The  respondent replied  that  in view of the partition in  his  family,  he could not be assessed as the karta of his family and further

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the   partition  in  question  had  been  accepted  by   the Department and that the assessments were made on the members of  the  family as "individuals" from  1959-60  to  1964-65. Thereafter  the  respondent again moved the  High  Court  to quash  those  notices on various  grounds.   The  Department contended that in view of the amendment of S. 29 of the  Act by Act 12 of 1964, it was permissible for it to reassess the respondent  as the karta of the family as no  decision  that the  respondent’s  family  is  a  divided  family  had  been rendered   by  the  Agricultural  Income-tax   Officer   and therefore  the  family  must be deemed to  be  an  undivided family. The  Writ  Petition  wag heard by a bench  of  three  judges consisting  of Mathew, Krishnamoorthy lyer  and  Balakrishna Eradi, JJ.  By a majority (Krishnamoorthy lyer  305 and  Eradi, JJ.) the Writ Petition was allowed and  the  im- pugned notices were quashed.  Mathew, J. was of the  opinion that  the  action taken by the Department  was,  permissible under s. 29 of the Act as amended. Now  turning to s. 29 of the Act before its  amendment,.  it corresponded  with  s. 25-A of the  Indian  Income-tax  Act, 1922.   The scope of s. 25-A of the Indian  Income-tax  Act, 1922  came  up for consideration both  before  the  Judicial Committee as well as before this Court in various cases.  It is  sufficient if we refer to the decision of this Court  in Additional  Income-tax Officer Cuddapah v. A. Thimmayya  and another (1).  Therein this court considered the object  with which  that  provision  was enacted as well  as  its  scope. Delivering  judgment of the Court Shah, J. (as he then  was) observed :               "Under the Indian Income-tax Act, 1922, as  it               originally stood, a Hindu undivided family was               regarded by section 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  machinery was more acutely felt  because               of  section  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.  To rectify               what was obviously a lacunas, the  legislature               in. corporated section 25A for assessment  and               enforcement   of  liability  to   tax   income               received  by a Hindu undivided  family,  which               was  no  longer in existence at  the  date  of               assessment.   But  the new section  went  very               much  beyond  rectifying  the  defect  in  the               statute which necessitated the amendment               The  section makes two substantive  provisions               (i)   that a Hindu undivided family which  has               been               (1) 55 I.T.R. 666.               30 6               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

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             its  property as contemplated -by  sub-section               (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 members 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  enquiry  and if he is satisfied  that  the               partition had taken place, he shall record  an               order to that effect." Before  proceeding  to examine the scope of S.  29,  let  us recapitulate  the events that had taken place.-(i)  As  long back as March 30, 1958, there was a partition in the  family ,of the respondent; that partition is evidenced by a  regis- tered deed.  The genuineness as well as the validity of  the -deed is not in dispute; (ii) On January 18, 1960 on  behalf of  the  Agricultural Income-tax Officer,  it  was  conceded before  the High Court that the respondent was liable to  be taxed  only  as an "individual".  The  implication  of  this concession  was that the respondent’s family was  a  divided ,family;  (iii) Various attempts made by the  Department  to assess the respondent as extra of his family even after  the decision  of  the  High  Court  on  January  18,  1960  were frustrated  by  the  orders of the High  Court  referred  to ,earlier  and; (iv) The respondent and the other members  of his quondam family were assessed as "individuals" from 1958- 1964.  Those assessments had become final and tax levied  on them had been paid. Section  3(1)  is  the charging section in  the  Act.   That -section reads :               "Agricultural Income-tax at the rate or  rates               specified in the Schedule to this Act shall be               charged for each financial year in  accordance               with  and  subject to the provisions  of  this               Act,  on the total agricultural income of  the               previous year of every person."               30 7               "Person" is defined in s. 2 (in) as follows :               " person" means any individual or  association               of individuals, owning or holding property for               himself  or for any other, or partly  for  his               own benefit and partly for another, either  as               owner   trustee,  receiver,   common   manager               administrator, or executor or in any  capacity               recognised  by law and includes, a firm, or  a               company,   an  association   of   individuals,                             whether   incorporated   or   not,   a nd    any               institution capable of holding property." Hindu  Undivided Family as defined in s. 2 (kk)  includes  a family governed by Madras Nambudiri Act, 1932. Under  the Act what is brought to tax in an assessment  year is  the  income of the assessee in the previous  year.   The scheme  of taxation under the Act is similar to that.  under the  Indian Income-tax Act, 1922.  The liability to pay  tax under  the Act in respect of any income is incurred  as  and when the income is earned and the total income on which  the tax is payable in any particular previous. year gets settled at  the  end  of the previous year.  Section 29  is  only  a machinery  section.  This Court has held that s. 25A of  the Indian  Income-tax  Act, 1922 is only a  machinery  section. The same must be the position in regard to s. 29 of the Act.

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Section  29 is attracted to an assessment proceeding-.  only if  one  of the two conditions prescribed in s.  29  (1)  is established.   Either  the  family in  question  was  being, assessed  as an undivided family in the previous  assessment year  or that family is being assessed for the  first  time. If’   neither  of  these  conditions  exists    29   has   no application whatsoever.  The deeming provision contained  in s.  29, (3) can have application only in cases where one  or the other condition prescribed in s. 29 (1) is satisfied and not otherwise.  As seen earlier, every attempt made by  the, assessing  authority  to assess the quondam  family  of  the respondent  was  set  aside by the High  Court.   The  High. Court  has repeatedly held that family is a divided  family. Again  the assessing authority itself in the previous  years had proceeded on the basis that the family in question is  a divided family.  It had not only not assessed 308 that  family  as an undivided family but  had  assessed  the individual members of that family as divided members of that family.  Hence the question whether that family was  divided or  undivided  had been gone info in the earlier  years  and decided.   That being so, it cannot be said that the  family was  "hitherto assessed as a Hindu undivided  family".   Nor can  it be said that the family was "being assessed for  the first  time as a Hindu undivided family".  As  seen  earlier that  family  was sought to be assessed as  Hindu  undivided family earlier but ultimately the assessing authority had to assess  the members of that family as members of  a  divided family.  In other words it had held the family to be divided one.  Such a family cannot be considered as being  "assessed for  the  first  time as a  Hindu  undivided  family".   The expression "which (meaning family) is being assessed for the first  time  as a Hindu undivided  family"  presupposes  the existence  of  the family.  That is a  condition  precedent. Section  29 (1) does not permit the assessing  authority  to create a family by rejoining the divided parts or otherwise. If  that  is not so, families which had been  divided  years back  can be again resurrected by the assessing  authorities for the purpose of the Act.  The family referred to in S. 29 (1)  is a family known to law and not a deemed family.   The amendment  of  S. 29 has introduced  considerable  confusion into  that  section.  At the time of the  assessment  either there  is  a family or there is no family.  If  there  is  a family  its liability has to be ,judged on the basis of  the Act.   If  the family has ceased to exist  even  before  the assessment  proceedings started then there can be no  family which is being assessed to tax for the first time.  Possibly the  intention of the legislature was to bring in the  cases of undivided families lot taxed in the previous years  which were  in existence during the whole or part of the  previous year  but  were divided before  the  assessment  proceedings commenced.   It  is  not necessary for us in  this  case  to decide  whether  that  intention  has  been  expressed  with sufficient clarity so as to make it enforceable.  Suffice is to say that in this case, the family sought to be taxed  was non-existing  in  the  concerned previous  years  and  hence cannot  be considered as a Hindu undivided  family  ’.’being assessed  for  the first time".  That being so there  is  no room  for application of the "deeming" pro,vision in  S.  29 (3). 309 Looking  at the course of events, one cannot fail to  notice with  regret the persistence with which the  Department  was harassing  the respondent.  To say the least the conduct  of the   concerned  officers  in  this  case   cannot   inspire

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confidence in the functioning of the Department. For  the  reasons mentioned above we see no merit  in  these appeals- They are accordingly dismissed with costs. Appeals dismissed. 31 0