http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11  

PETITIONER: KAPURCHAND SHRIMAL

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX, ANDHRA PRADESH, HYDERABAD

DATE OF JUDGMENT28/08/1981

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) BHAGWATI, P.N.

CITATION:  1981 AIR 1965            1982 SCR  (1) 505  1981 SCC  (4) 317        1981 SCALE  (3)1330

ACT:      Income Tax  Act, 1922, section 25A, scope of-Whether an order of  assessment passed under the Indian Income Tax Act, 1922 by  the Income  Tax Officer  in the  case  of  a  Hindu undivided  family   without  holding  an  inquiry  into  the validity of  the claim  made within  a reasonable  time by a member of  the Hindu  undivided family  that a partition had taken place  among the members of the family is liable to be merely cancelled  in  appeal  by  the  Income-tax  Appellate Tribunal  without  a  further  direction  to  the  assessing authority either  to modify  the assessment  suitably or  to pass a fresh order of assessment in accordance with law.

HEADNOTE:      The assessee  is  a  Hindu  undivided  family  and  the assessment years  are 1955-56  and 1957-58  to 1961-62.  The assessee addressed  on October  10, 1960  to the  Income-tax Officer in  connection with  a notice received under section 18A(1) of  the Act in respect of the assessment year 1961-62 stating that all the movable and immovable properties of the assessee had  been partitioned  by metes  and  bounds  under partition deeds  and that  the Hindu undivided family was no longer receiving  any income as such and there was therefore no question  of payment of any advance tax by it. A specific request to  record the  factum of  the  partition  for  that purpose of  the Act  effective from  July 10,  1960 was also prayed for.  This was followed by another letter on June 16, 1961 by M/s. S.G. Dastagir and Co. On behalf of the assessee in connection  with advance  tax demanded for the assessment year  1962-63   with  a   similar  request.   Before   fresh assessments were  completed for  the years  1955-56, 1957-58 and 1958-59  as per  the orders  of the  Appellate Assistant Commissioner dated  February 24,  1962 a  third letter dated March 11,  1962 was addressed to the same Income-tax Officer with  a   similar  request   for  recording  the  factum  of partition. Another letter dated March 21, 1962 was addressed by M/s. S.G. Dastagir & Co. reminding the Income-tax Officer of the  earlier letters  of October  10, 1960  and June  16, 1961.      The assessment  for the  years 1955-56 to 1958-59 were, however, completed  between August  21, 1962  and March  27, 1963 without  holding any inquiry as contemplated by section

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11  

25A of  the 1922  Act regarding the factum of partition. The Income-tax  Officer  thereafter  started  an  inquiry  under section 25A and by his order dated March 30, 1965 refused to record the  partition. On  appeal against  the  refusal  the Appellate Assistant Commissioner by his order dated November 8, 1967 set aside the said order and directed the Income-tax Officer to record the partition under section 25A as on July 10, 1960.  That order  became final  as an  appeal was filed against it  by the  Revenue. In the appeals filed before the Assistant  Appellate  Commissioner  against  the  assessment orders for the years in question, that is, 1955-56 and 1957- 58 to 1961-62 the assessee con- 506 tended that  the assessments  were liable to be set aside on the ground  that the  inquiry into  the claim  of  partition which was  a condition  precedent for  making  an  order  of assessment on  the Hindu  undivided family had not been made as required  by  section  25A  of  the  Act.  The  Appellate Assistant Commissioner rejected the said contention, but the appeals preferred  before the  Tribunal  were  allowed.  The Tribunal cancelled the assessments without any directions to make fresh  assessments. At  the instance  of the  Revenue a reference was  made by  the Tribunal  to the  High Court  of Andhra Pradesh  under section  66(1) of  the Act.  The  High Court answered  the reference  in favour  of the Revenue and hence the appeals.      Allowing the appeals, the Court ^      HELD: (1) Under section 25A of the 1922 Act the Income- tax Officer  was bound  to hold an inquiry into the claim of partition if it is made by or on behalf of any member of the Hindu undivided  family which  is being assessed hitherto as such and  record a  finding thereon.  If no  such finding is recorded sub-section  (3) of  section 25A of the Act becomes clearly attracted.  When a  claim is  made in  time and  the assessment is  made on  the Hindu  undivided family  without holding an  inquiry as  contemplated by  section 25A(1), the assessment is  liable to  be set aside in appeal as it is in clear  violation   of  the  procedure  prescribed  for  that purpose, [517 A-C]      Kalwa Devadattam and two Ors. v. The Union of India and Ors., [1964]  3 S.C.R.  191; Additional  Income-tax Officer, Cuddapah v.  A. Thimmayya  & Anr.,  (1965) 55 I.T.R. 666 and Karri Ramkrishna  Reddy v. Tax Recovery Officer, Vijayawada, (1973) 87 I.T.R. 86, discussed and distinguished.      (2) The  duty of  the Tribunal does not end with making declaration that  the assessments are illegal and it is duty bound to  issue further  directions. The appellate authority has the  jurisdiction as  well as  the duty  to correct  all errors in  the proceedings  under appeal  and to  issue,  if necessary, appropriate  directions to  the authority against whose decision  the appeal  is preferred  to dispose  of the whole or any part of the matter afresh unless forbidden from doing so  by the statute. The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. [517 D-E]      In  the   instant  case,   however,  since  it  is  not established that  the claim  was a  belated one  the  proper order to  be passed  is to  set aside the assessments and to direct the  Income-tax Officer  to make fresh assessments in accordance  with   the  procedure  prescribed  by  law.  The Tribunal,  therefore,   erred  in   merely  cancelling   the assessment orders  and in  not issuing  further  directions. [517 G-H]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11  

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal Nos. 1286- 1291 of 1973.      Appeals by  certificate from  the  judgment  and  order dated the  30th June,  1972 of the Andhra Pradesh High Court at Hyderabad in Referred Case No. 5 of 1971. 507      A. Subba Rao for the Appellant.      S.C.  Manchanda,   and  Miss  A.  Subhashini,  for  the Respondent.      The Judgment of the Court was delivered by      VENKATARAMIAH, J.  The only  question which  arises for consideration in these six appeals by certificate is whether an order  of assessment  passed under  the Indian Income-tax Act, 1922  (hereinafter referred  to as  ’the Act’)  by  the Income-tax Officer  in the  case of a Hindu undivided family without holding  an inquiry  into the  validity of the claim made within  a reasonable  time by  a member  of  the  Hindu family that  a partition had taken place among the family is liable to  be merely  cancelled in  appeal by the Income-tax Appellate Tribunal  (for short,  ’the Tribunal’)  without  a further direction  to  the  assessing  authority  either  to modify the  assessment suitably  or to pass a fresh order of assessment in accordance with law.      The assessee  is  a  Hindu  undivided  family  and  the assessment years  are 1955-56  and 1957-58  to  1961-62.  An assessment order  made on  May 30,  1959 in  respect of  the assessment year  1955-56 had been set aside by the Appellate Assistant Commissioner on February 24, 1962 with a direction to  make   a  fresh   assessment.  When   fresh   assessment proceedings  were  commenced  pursuant  to  the  above  said direction in  respect of  the assessment  year 1955-56,, the assessment proceedings  for the assessment years 1957-58 and 1958-59 were  also taken  up.  Earlier  a  letter  had  been addressed on  October, 10, 1960 by Kapurchand Shrimal to the Income-tax Officer  in connection  with a notice received by the assessee  under section 18A (1) of the Act in respect of the assessment year 1961-62 stating that all the movable and immovable properties of the assessee had been partitioned by metes and  bounds under  partition deeds  and that the Hindu undivided family  (the assessee) was no longer receiving any income as  such and  there  was  therefore  no  question  of payment of  any advance  tax by  it. The second para of that letter contained  a specific request to record the factum of the partition  for the purpose of the Act. Again on June 16, 1961 M/s  S.G. Dastagir and Co. addressed a letter on behalf of the  assessee in connection with advance tax demanded for the assessment  year  1962-63,  the  second  para  of  which contained a  similar request  for recording  the  factum  of partition. Before  the fresh  assessments were completed for the three years referred to above a third letter dated March 11, 1962 was addressed to the same 508 officer who  received it  on the  next day  itself in  which again there  was a  claim made  regarding the partition. But this letter  however was  written specifically in respect of the assessment  year 1957-58.  On March  21, 1962,  M/s S.G. Dastagir too  addressed a  further letter  to the Income-tax Officer reminding  him of the earlier letters of October 10, 1960 and June 16, 1961 and that letter stated:           "Apart from  these letters  the  matter  has  been      discussed with  you on a number of occasions personally      during the  course of the assessment proceedings of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11  

    year 1957-58  and your attention has already been drawn      to the  facts that an order under section 25A has to be      passed before  the completion of the assessment for the      year 1957-58.  The letter  dated 11th  March, 1962  was      addressed to  you by  the assessee  only  when  it  was      gathered that  you were  going to  pass the  assessment      order  for   the  year   1957-58  without   making  the      contemplated enquiry under section 25A."      The assessments  for the  years 1955-56 to 1958-59 were however completed between August 31, 1962 and March 27, 1963 without holding an inquiry as contemplated by section 25A of the Act  regarding the  factum of  partition. The Income-tax Officer, thereafter started an inquiry under section 25A and by his  order dated  March 30,  1965 refused  to record  the partition. On appeal the Appellate Assistant Commissioner by his order  dated November  8, 1967  set aside the said order and directed  the Income-tax Officer to record the partition under section  25A as  on July  10, 1960.  That order became final as no appeal was filed against it by the Department.      It should  be stated  here that  the Income-tax Officer passed  assessment  orders  against  the  assessee  for  the assessment years  1959-60, 1960-61  and 1961-62 on March 26, 1964, March  30, 1965 and March 26, 1966 respectively before the Appellate Assistant Commissioner held that the partition had taken place on July 10, 1960.      In the  appeals filed  before the  Appellate  Assistant Commissioner against  the assessment orders for the years in question  i.e.   1955-56  and  1957-58  to  1961-62  it  was contended that  the assessments  were liable to be set aside on the  ground that  the inquiry into the claim of partition which was  a condition  precedent for  making  an  order  of assessment on  the Hindu  undivided family had not been made as required  by  section  25A  of  the  Act.  The  Appellate Assistant Commissioner  rejected the  above contention.  The assessee  there  upon  filed  appeals  before  the  Tribunal against the orders of the 509 Appellate Assistant  Commissioner and one question which was A common  to all  the appeals  that  was  urged  before  the Tribunal was  about the  validity  of  the  assessment  made against  the   assessee  (Hindu  undivided  family)  without holding an  inquiry regarding  the claim of partition before the  assessment   proceedings  were   completed.  While  the assessee contended  that the  assessments were  liable to be cancelled  on   account  of   the  non-compliance  with  the mandatory provisions  of section 25A of the Act it was urged on behalf  of the  Department that  in  fact  there  was  no violation at all of section 25A and even if it was held that there was  any such  violation the proper order to be passed was either  to direct  the Income-tax officer to give effect to section  25A  (2)  of  the  Act  without  cancelling  the assessments made  on  the  assessee  or  to  set  aside  the assessments with  a direction  to the  Income-tax Officer to pass fresh  orders of  assessment. On a consideration of the submissions made  by the  parties, the  Tribunal came to the conclusion that  the assessments which had been made without holding an  inquiry into  the claim of partition as required by section  25A of the Act were illegal and void Accordingly it cancelled  the assessments  and added ’We do not consider it necessary  to direct  fresh assessments. It would be open to the  Income-tax Officer  to do so if the law otherwise so permits.’      Thereafter at  the instance  of the Revenue a reference was made by the Tribunal to the High Court of Andhra Pradesh under section  66(1) of  the Act  in all  the  cases  for  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11  

decision on the following question:           "Whether on  the facts and in the circumstances of      the  case,  the  assessments  made  by  the  Income-tax      Officer  on   the  Hindu   undivided  family   of  Shri      Kapurchand  Shrimal   for  the  years  under  reference      without   passing   an   order under  section 25A  were      valid ?"       We  are not  concerned in  these appeals  with another question arising  out of  the assessment  order made for the year 1958-59  which was  also referred  alongwith the  above common question.      The High  Court after  hearing the  learned counsel for the parties  answered the common question which arose in all the appeals  stating that the assessment made by the Income- tax Officer  without passing  the order under section 25A on the  claim   of  partition  were  valid  but  only  required modification and  directed the  Tribunal while giving effect to the  order of  the High  Court to  direct the  Income-tax Officer to  modify the  assessments in  the light of section 25A (2) of 510 the Act.  Aggrieved by  the decision  of the  High Court the assessee has filed these appeals.      Section 25A  of the  Act which arises for consideration in these cases reads thus:           "25A.  Assessment   after  partition  of  a  Hindu      undivided family-(1)  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      notwithstanding anything  contained in  sub-section (1)      of section  14, 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. 511           (3) Where  such an  order has  not been  passed in      respect A  of  a  Hindu  family  hitherto  assessed  as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11  

    undivided,  such   family  shall  be  deemed,  for  the      purposes of  this  Act,  to  continue  to  be  a  Hindu      undivided family.      A Hindu  undivided family is an entity which is treated as an assessee for the purposes of the Act. In the Act as it was originally  passed there  was no  effective machinery to assess the  income which  was received  by a Hindu undivided family during  an accounting  year  but  was  no  longer  in existence as  such at  the time  of assessment. By reason of section 14(1) of the Act which provided that no tax would be payable by  an assessee  in respect  of  any  sum  which  he received as  a member of a Hindu undivided family, there was further difficulty  in subjecting  such income  tax. Section 25A was,  therefore, enacted  to get over these difficulties by providing  for a  special procedure  to be  followed in a case where  a claim was made that there has been a partition satisfying the  tests laid down in that section. Sub-section (3) of  section  25A  of  the  Act  provides  that  a  Hindu undivided family  which is  being assessed  as such shall be deemed for the purposes of the Act to continue to be a Hindu undivided family  until an order is passed under sub-section (1) of  section 25A  that a  partition has taken place among the members of the family as stated therein. Sub-section (1) of section  25A provides  that if  at the  time of making as assessment a  claim is made by or on behalf of any member of a Hindu  undivided family  which is being assessed till then as undivided  that a  partition has  taken place  among  the members of  such family,  the 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 groups of members in definite portions  he shall  record an order to that effect. Such order  can however  be made  only after  notices of the inquiry have  been served  on all the members of the family. It may be noted that sub-section (I) of section 25A does not actually prescribe  the form  in which  such a  claim can be made. It  does not  also state  the specific  stage  of  the assessment proceedings  when such claim should be made. Sub- section (2) of section 25A of the Act provides that where an order is  passed under sub-section (1) thereof recording the partition or  where any  person has succeeded to a business, profession or  vocation  formerly  carried  on  by  a  Hindu undivided  family  where  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 512 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 any  thing contained in sub-section (section 14, 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.  The Income-tax officer is further  authorised   to  make  assessments  accordingly  on various members  and groups  of members  in accordance  with section 23  of the  Act. By  virtue of  the proviso  to sub- section (2) of section 25A of the Act the liability which so long as  an order  was not recorded under sub-section (I) of section 25A  was restricted  to the  assets of  ., the Hindu undivided family  is  transformed  when  such  an  order  is recorded into  the personal liability of the members for the amount of tax due by the family.      In these appeals there is a finding of fact recorded by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11  

the Tribunal that a proper and valid request for recording a partition had been made as far back as October 10, 1960. The first of the assessment orders impugned in these appeals was passed on  August 31, 1962 by the Income-tax officer and the other assessment  orders were passed subsequently. It is not shown that  the Income-tax  officer before whom the claim of partition had  been made  on October  10, 1960  had not  got reasonable time  to inquire  into the claim and then to make the assessment  orders on  the basis  of the  finding on the question  of   partition.  Admittedly   all  the  orders  of assessment were passed against the assessee (Hindu undivided family) before holding an inquiry as required by section 25A (I) of  the Act  into the  claim of  partition. In  fact the Income-tax officer  refused to  record the partition only on March  30,  1965  but  in  appeal  the  Appellate  Assistant Commissioner held  that a  partition had  taken place  as on July 10,  1960 by  his order dated November 8, 1967 and that order had  become final. The questions for consideration are whether under  these circumstances  the orders of assessment can be  treated as  valid orders and if they are not whether the Income-tax  officer can  be directed  by  the  appellate authority to  pass fresh  orders of assessment in accordance with law.      The first  decision relied  on by the assessee is Kalwa Devadattam and  two ors.  v. The Union of. India and ors.(l) That was  a case arising out of a suit in which the validity of certain assessment 513 Orders passed against a Hindu undivided family under the Act and A  the proceedings  instituted to  recover  the  amounts payable under  these assessment  orders by  sale of  certain properties had  been questioned. The plaintiffs in that suit were the sons of one Nagappa. Nagappa and the plaintiffs who formed a  Hindu joint family had carried on business and the said family  had been  assessed to  tax under  the Act. When proceedings were  instituted to  recover the  dues under the assessment orders  for the  sale  of  some  properties,  the plaintiffs filed  the  suit  contending  that  some  of  the properties could  not be  sold as  they were  their separate properties and the remaining properties could not be sold as they had  been allotted  to them  on partition  of the joint family estate  on  March  14,  1947  before  the  orders  of assessment were  made by  the  income-tax  authorities.  The claim  of  the  plaintiffs  based  on  the  ground  of  non- compliance with  section 25A of the Act was rejected by this Court with these observations:-           "It may  be assumed  that by this statement within      the meaning  of section  25A it  was claimed  "by or on      behalf  of  any  member  of  a  Hindu  family  hitherto      assessed as undivided" that a partition had taken place      among the members of his family and that the Income-tax      officer was  bound to  make an  inquiry contemplated by      section 25A.  But no  inquiry was  in fact  made and no      order was  recorded by the Income-tax officer about the      partition: by  virtue of  sub-s. (3)  the Hindu  family      originally assessed  as undivided  had to be deemed for      the purposes  of the  Act to  continue to  be  a  Hindu      undivided family. If by the assessment of the family on      the footing  that  it  continued  to  remain  undivided      Nagappa or  his sons were aggrieved their remedy was to      take an  appropriate appeal  under s.  30 of the Indian      Income-tax  Act   and  not   a  suit   challenging  the      assessment. The  method of assessment and the procedure      to be  followed in  that behalf  are statutory, and any      error  or   irregularity  in   the  assessment  may  be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11  

    rectified in  the manner provided by the statute alone,      for s.  67 of  the Indian Income-tax Act bars a suit in      any Civil  Court to  set aside or modify any assessment      made under  the Act.  The Income-tax  officer made  the      assessment of  tax under  the  Act.  Granting  that  he      committed an  error in  making the  assessment  without      holding  an  inquiry  into  the  partition  alleged  by      Nagappa, the  error could be rectified by resort to the      machinery provided under the Act and not by a suit in a      Civil Court." 514      This Court  dismissed the  suit against  the Revenue on three  independent  grounds:  (1)  the  suit  which  was  in substance one for setting aside an assessment was in law not maintainable because  of s.  67 of  the Act; (2) that in the absence of  an order under s. 25A (1 assessment of the Hindu joint family  was properly  made; and  (3) even  if an order recording partition was made the liability of the plaintiffs to pay  income tax  assessed on  the family  could still  be enforced against them jointly and severally under s. 25A (2) proviso. The  above case  was not  obviously one in which an order of  assessment  which  had  been  passed  contrary  to section 25A  of the  Act had  been challenged  in an  appeal under the Act.      The next  case relied  on by the assessee is Additional Income tax officer, Cuddapah v. A. Thimmayya & Anr.(l) There again the  question raised was a different one although some of the  material facts  were similar  to the  facts in these appeals. The  facts there were those: Krishnappa and his two sons  Thimmayya   and  Venkatanarsu   constituted  a   Hindu undivided family  which had  carried on some business during the previous years corresponding to assessment years 1941-42 to 1946-47.  When the assessment proceedings for these years were pending,  on May  20, 1946  Venkatanarsu claimed before the ’Income-tax  officer that the property of the family had been partitioned among the members of the family in definite portions. The  said claim  was not disposed of till June 30, 1952. In  the meanwhile  assessments for  the five  years in question were  completed  between  September  30,  1948  and November 30,  1950 resulting  in  a  tax  liability  of  Rs. 67,750/- in  the aggregate  for the five years. Appeals were preferred against  the said  orders of assessment but in the appeals it was not contended that the orders were illegal as no inquiry had been made as contemplated in section 25A (1). The appeals were unsuccessful. On June 30, 1952, the Income- tax officer made an order under section 25A recording that a partition had  taken place  on November  2, 1946. As the tax due was not paid the Income-tax officer made the order under section 46(S)  of the  Act on June 25, 1958 calling upon the managing director  of a  private limited  company which  had taken over  the business  of Krishnappa and his two sons not to pay the salaries payable to Thimmayya and Venkatanarsu by the company  and to  pay it  to the  credit of Government of India towards  the payment of arrears of income-tax referred to above. Thimmayya and 515 Venkatanarsu questioned  that order  before the  High  Court under A Article 226 of the Constitution. The High Court held that the  order on  the claim  made under  section 25A(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  flowed from  the order".  In the view of the High Court, the petitioners were entitled to insist upon an order for apportionment under section 25A (2) and without

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11  

such an  order, proceedings  for collection of tax could not be commenced  against them  under the proviso to sub-section (2) of  section 25A.  On appeal this Court held that because prior to  the  orders  of  assessment  there  was  no  order recording  that   the  property   of  the  family  had  been partitioned among  the members  of the  family  no  personal liability of  the members arose under the proviso to section 25A (2) to pay the tax assessed thereunder and the remedy of income-tax authorities  was to proceed against the property, if any, of the Hindu undivided family. It was therefore held that the  Income-tax officer  was not  competent to make the order under section 46 (5) directing the company to withhold the  tax   from  the   salaries  payable  to  Thimmayya  and Venkatanarasu. The  relevant observations  of this Court are these:-           "In the  present case  no orders  were recorded by      the  lncome-tax   officer  at   the  time   of   making      assessments in respect of the five years, and therefore      no personal  liability of  the members  of  the  family      arose under the proviso to sub-section (2). The Income-      tax officer  does not  seek to  reach in  the hands  of      Thimmayya and  Venkatanarsu the property which was once      the property of the 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-section (1),  however, such  a liability  does  not      arise  against  the  members  of  the  Hindu  undivided      family, even if the family is disrupted.           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 respondents are      not personally  liable to  satisfy the  tax due  by the      joint family. The remedy of the income-tax authorities,      in the circumstances of the case, 516      was to  proceed against  the property,  if any,  of the      Hindu undivided  family. That  admittedly they have not      done."      It will  be seen  that in  this case  no  question  was raised as to whether the assessment orders were void as they were passed  without  holding  an  inquiry  as  required  by section 25A (I) of the Act. The only question was whether in the absence  of an order under section 25A (1), any personal liability can  be enforced  against the members of the joint family.      Strong reliance  is, however,  placed on  behalf of the assessee on the decision of the Andhra Pradesh High Court in Karri   Ramakrishna   Reddy   v.   Tax   Recovery   officer, Vijayawada(’) which  involved the  interpretation of section 171 of  the Income-tax  Act, 1961,  which, in  so far as the question involved  in these  appeals is  concerned, contains similar provisions.  In that  case a person who was a member of a Hindu undivided family questioned in a proceeding under Article 226  of the  Constitution an assessment made against the Hindu  undivided family  after it  had been  partitioned without holding  an inquiry  as required by section 1.71 (2) of the  Income-tax Act,  1961 even when a claim of partition had been  made by  his father in the assessment proceedings. The petitioner  therein con  tended that such an order would not be  binding upon  the other  members of  the family. The High Court accepted the contention of the petitioner therein

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11  

and held  that the  assessment order  could not  be enforced against him.  This again is a case where the validity of the assessment order  had been questioned not in an appeal filed against it  but in  a separate  proceeding. The observations made therein  may not,  therefore, be  of much assistance to the assessee  because we are concerned in these appeals with the powers  of the  appellate authority  where  appeals  are filed against  the assessment  orders themselves  contending that there  has been  non-compliance  with  section  25A(I). Moreover it  appears that  certain observations made in that case in  respect of the decision of this Court in Additional Income-tax officer,  Cuddapah v.  A. Thimmayya & Anr.(2) and the Full  Bench decision of the Andhra Pradesh High Court in Commissioner of  Income-tax v. Tatavarthy Narayanamurthy (3) need further  examination. We  refrain from  expressing  any opinion on 517 the correctness  of this decision which does not even appear to have  been cited before the High Court when the reference out of which these appeals arise was argued.      From a  fair reading  of section  25A  of  the  Act  it appears that  the Income-tax  officer is  bound to  hold  an inquiry into  the claim  of partition if it is made by or on behalf of  any member of the Hindu undivided family which is being assessed hitherto as such and record a finding thereon If no  such finding  is recorded, sub-section (3) of section 2SA of  the Act  becomes clearly  attracted. When a claim is made in  time and  the  assessment  is  made  on  the  Hindu undivided family  without holding an inquiry as contemplated by section 25A (1), the assessment is liable to be set aside in appeal  as it  is in  clear violation  of  the  procedure prescribed for  that purpose.  The Tribunal  was, therefore, right in  holding that  the  assessments  in  question  were liable to  be set  aside as  there was  no  compliance  with section 25A  (l) of  the Act.  It is,  however, difficult to agree with  the submission  made on  behalf of  the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further  direction. It  is well  known that an appellate authority has  the jurisdiction  as  well  as  the  duty  to correct all  errors in  the proceedings  under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole  or any part of the matter afresh unless forbidden from doing  so by the statute. The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. In interpreting section 25A (l) we cannot  also   be  oblivious  to  cases  where  there  is  a possibility of  claims of partition being made almost at the end of  the period within which assessments can be completed making it  impossible for  the Income-tax officer to hold an inquiry as  required by  section  25A  (1)  of  the  Act  by following the procedure prescribed therefor. We, however, do not propose  to express  any opinion on the consequence that may ensue  in a case where the claim of partition is made at a very late stage where it may not be reasonably possible at all to  complete the  inquiry before  the last  date  before which the assessment must be completed. In the instant case, however, since  it is  not established  that the claim was a belated one  the proper  order to  be passed is to set aside the assessments and to direct the Income-tax officer to make fresh  assessments   in  accordance   with   the   procedure prescribed by  law. The Tribunal, therefore, erred in merely cancelling the  assessment orders and in not issuing further directions as stated above.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11  

518      We do  not, however,  agree with the orders made by the High Court  by which  it upheld the assessments and directed the Income-tax  officer to  make appropriate  modifications. Such an order is clearly unwarranted in the circumstances of this case.  The order  of the  High Court is, therefore, set aside. The  question referred  by the  Tribunal to  the High Court does  not appear  to be comprehensive enough to decide the matter  satisfactorily. The question may have to be read as including  a further question regarding the nature of the orders to  be passed  by  the  Tribunal  if  the  orders  of assessments are  held to be contrary to law. In the light of the above, we hold that the orders of assessments are liable to be  set aside  but the Tribunal should direct the Income- tax officer  to make  fresh assessments  in accordance  with law.      The appeals are accordingly disposed of. There shall be no order as to costs. S.R.                                        Appeals allowed. 519