Judgment:
Prakash Krishna, J.
1. The Income Tax Appellate Tribunal, New Delhi has referred the following two questions of law under Section 256(1) of the Income Tax Act, 1961 ( here in alter referred to as the Act) for opinion to this Court:-
'(1) Whether Sub- section (9) of Section 171 of the Income Tax Act applied to the facts of, the present case.?
(2) Whether the Tribunal was justified in holding that the aforesaid section will not apply because assessments were made after 31-12-1978.'
2. Briefly stated the facts giving rise to the present case are as follows:-
The reference relates to the assessment years 1981-82 and 1982- 83. The respondent assessee, a joint Hindu family consisting of Karta ,Sri Gian Chand, his wife and four sons. The H.U.F. was partner in a firm M/s Ladulal Kewalchand, Shamli having half share in the profits and the capital of the firm.
3. A partial oral partition was claimed on 20-10-1979, which was reduced in writing on 21 10-1979 between the members as regards the share income and withdrawal from banks, capital as standing to the credit of the family in the books of the firm. The immovable properties however continued to be the joint Hindu family property. The claim for partition was not accepted by the Income Tax Officer on the ground that since the partition was affected after 31-12-1978 and it would be hit by Section 171(9) of the Act. The said order was affirmed in appeal by the Appellate Assistant Commissioner, who recorded the following finding:
(a) The assessments for the preceding years by the Income Tax Officer, Jaipur, was in relation to assets which belonged to the HUF. Thus, the real character of income was that of HUF and not individual.
(b) The assessee had known even while the assessments were being made on individual, that the income belongs to the HUF. In the Wealth tax assessments, the status has been taken as HUF.'
4. He held that the assessee cannot plead that it was not hitherto assessed as undivided. The Appellate Assistant Commissioner found that although one of the members of HUF was assessed at Jaipur and in the assessment column the status was mentioned as individual. But, as a matter of fact, the income of HUF was assessed. He was of the view that it was a case of mistake on the part of the assessing authority and, as such, no advantage can be derived out from this mistake by the assessee. The Tribunal in Second appeal allowed the claim of partial partition as set up by the assessee on the ground that conditions of Section 171(9) of the Act having not been fulfilled, the Income Tax Officer can not refuse the claim of partial partition. It took the view that no assessment was , made in the status of HUF the assessee is out of the reach of Section 171(9) of the Act. Further it took a view that the word ' assessed' used in Section 171(9) of the Act means passing of the assessment order prior to the date of partial partition.
5. Heard learned standing counsel for the department and perused the statement of the case and its annexures. None appeared on behalf of the assessee Section 171 of the Act deals with the assessment after partition of Hindu undivided family. It is a machinery section. It basically provides two things Firstly a Hindu undivided family hitherto assessed as undivided shall be deemed for the purposes of the Act to continue to be Hindu undivided family except where a finding of partition has been given by the assessing authority as defined in Explanation to the Section. Secondly, a duty has been cast on the assessing authority while framing assessment under Section 143 or 144 of the Act to adjudicate a claim if raised by any member of the Hindu undivided family that partition, whether oral or total , has taken place amongst the members of such family. By the Finance Act No. 2 of 1980 Sub section (9) has been inserted. This section provides that partial partition which has taken place whether before or after 31-12-1978 amongst the members of Hindu undivided family hitherto assessed as undivided, shall be treated as nul and void. The controversy in the present case centers round the meaning to the word ' hitherto assessed as undivided'. The assessing authority as well as first appellate authority were of the view that meaning of the word assessed in sub section (9) of Section 171 would be as 'as assessable'. Not agreeing with this view, the Tribunal took a view that actual assessment order should have been passed before the date of partial partition otherwise of sub section (9) of Section 171 would not be attracted.
6. From the statement of the case it is clear that assessments for earlier assessment years were made for the assessment year 1978-79 and 1979-80 in the status of HUF. But these assessments were completed in October, 1982 i.e. much later from the date of partial partition. The date of partial partition is 20-10-1979. The Tribunal has accepted, as a fact, that no assessment has been made on the joint family as such prior to 31-12-1978.
7. We have given thoughtful consideration to the reasoning of the Tribunal but find it difficult to agree with the Tribunal. The Scheme of Section 171 of the Act is that a Hindu undivided family provisionally assessed as Hindu undivided family shall be deemed for the purposes of Income Tax Act to be the Hindu undivided family unless a partition as claimed by any member of the family is recognized which is within four corners of the partition as defined in the Act. Supreme Court in Kalloo Mal Tapeshwari Prasad (HUF) v. CIT : [1982]133ITR690(SC) has held that Section 171 of the Act applies to all partition, total and partial- and unless a finding is recorded under Section 171, the income from the properties shall be included in the total income of the family by virtue of Section 171(1) of the Act. Sub- section (9) was inserted in Section 171 with a view to curb this practice of creating multiple Hindu undivided Family by making partial partition. Section 171 is not charging Section but is a machinery provision to assess and realize tax. Treating the object to be achieved by insertion of sub section (9) we are of the view that the word 'assessed' should not be given literal meaning to mean completed assessment. From a joint reading of sub section (1) and (9) of Section- 171 the intention of the legislature appears to be that once a Hindu undivided family has been assessed as Hindu undivided family, shall continue to be assessed so unless this order recognizing the partition is passed by the authority concerned. The assessment order passed is relatable to the assessment year involved therein and it Will be treated to have been passed on the last date of assessment year, for the purposes of Section- 171 of the Act. The Tribunal was not correct to hold that although assessment for the assessment years 1978-79 and 1979- 80 Were made in the status of HUF will not be treated as hitherto assessed as undivided as assessments were completed in October 1982 i.e. after the date of partial partition ( 20-10-1979). The view of the Tribunal does not fit with the Scheme of Section 171 of the Act. The Scheme, as pointed but appears to be continuance of the status of Hindu undivided family, once assessed for subsequent years except where finding of the partition has been given by the assessing authority under this section for any subsequent years.
8. In view of the above discussions we answer the question No. 1 referred to us in affirmative i.e. in favour of the department and against the assessee and question No. 2 in negative i.e. in favour of the department and against the assessee.