Judgment:
1. The Revenue has filed these appeals that arise out of the common order of the CIT(A) for short, dated 8th July, 1971, for the assessment years that are under appeal before us. In these appeals, the Revenue has taken a common issue that is that the CIT(A) had erred in holding that the assessments as made under the provisions of the IT Act, 1961, (hereinafter referred to as the Act) for these assessment years are invalid.
2. The learned Senior Departmental Representative Mr. Choudhary and the learned counsel for the assessee Mr. Venkatesan had addressed us at length and referred to various decisions in support of their respective contentions. We have taken into consideration the arguments that were so advanced by both parties, the paper book that was filed during the hearing that was referred to during the hearing and the case laws that were referred to.
3. The only issue that arises in all these three appeals whether the assessment that has been framed on the HUF was valid or not because on 28th March, 1989, the date on which the assessment order was passed the HUF did not exist because the Karta Mr. Nanjappa who died on 24th September, 1986, leaving behind his wife, a female member of the erstwhile HUF. In support of the invalidity of the assessment on the HUF reliance was made on the Karnataka High Court in CWT vs. G. E.Narayana (1992) 193 ITR 41 (Kar).
4. The facts as admitted by both parties is that the assessment was framed on the HUF for and up to the asst. yr. 1981-82 and this has become final. The member of the HUF were Mr. Nanjappa, Karta, Mr.
Basavaraj, son of Karta and member and the wife of Mr. Nanjappa. Mr.
Basavaraj renounced the family along with all its assets and liabilities by putting it in writing to the Karta of the HUF vide his letter of intention dated 14th December, 1982. He further carried the matter to a civil Court by means of a suit No. 3857 of 1987. Mr.
Basavaraj in his plaint before the civil Court had made various persons as respondents and they were Government of India, Ministry of Finance; CIT-Karnataka; WTO & ITO Cen. Cir. Revenue Building, Queens Road, Bangalore. The civil Court passed its decree on 25th February, 1988, declaring that for and from 14th December, 1982, Mr. Basavaraj is not the member of M/s Nanjappa (HUF) Mr. Basavaraj had sent letters to ITO Cen. Cir. 4, Bangalore dated 9th May, 1984 and 7th December, 1987, informing him that he ceases to be the member of Nanjappa (HUF) w.e.f.
14th December, 1982, and that he also has nothing to do with any of the business of other activities of the HUF.5. The SDR insisted that the renunciation by Mr. Basavaraj requires the consideration of the AO under the provisions of s. 171 of the Act. He insisted that the HUF would be deemed to continue under the Act so long as the AO does not recognize the partition of the HUF. He further pleaded that the information sent by Mr. Basavaraj to the AO was not so provided in the course of assessment of the HUF and, therefore, AO not acting on it would not in any way affect the assessment framed on the HUF. Senior Departmental Representative submitted that for the asst.
yr. 1984-85 the assessment on the HUF was framed treating Mr. Basavaraj as the Karta and the Tribunal had held that he could not have been named as Karta and the Tribunal had held that he could not have been named as Karta because of his renunciation having been recognized by the civil Court. This decision did not consider the provisions of s.
171 of the Act and the decisions that have clearly held that AO if has not recognised the partition of the HUF it shall be deemed to continue.
6. Tribunal vide order, dated 29th May, 1998, in the case of assessee-HUF for the asst. yr. 1984-85 in ITA No. 1811/Bang/1988 (copy at pp. 87 to 89 of the paper book) has observed, "the facts narrated above are not in dispute. Therefore, we hold that the AO is not justified in treating the assessee herein as the Karta of the HUF. From the facts of this case, it is clear that he ceased to be the member of the HUF of late Nanjappa from 14th December, 1982. Hence, the asst. yr.
1984-85 he may not the treated as the Karta of the HUF of Nanjappa." It appears that the Revenue did not prefer any reference against the said order of the Tribunal.
7. Sec. 171 of the Act comes into operation where an existing HUF claims that its members have agreed to a partition of the HUF either in full or partially and seek him to recognise the partition. In the instant case the action of Mr. Basavaraj is one of renouncing the family along with its assets and liabilities and this he had informed the AO. Consequent upon this information furnished to the AO, the non-action of AO would not change the situation of Mr. Basavaraj not being a member of HUF from 14th December, 1982. In fact on action of the AO is called because, the renunciation by Mr. Basavaraj did not involve any partition of the assets of the HUF and it remained intact.
The claim by senior Departmental Representative that because there was no order under s. 171 of the Act, Mr. Basavaraj should be treated as member of the HUF and from the death of his father as Karta of the HUF is without any merit because of the accepted fact that the renunciation by Mr. Basavaraj did not result in any partition of the assets of the HUF.8. Because, the issue in the present appeals have to decide with reference to the effect of renunciation of the family along with its properties, etc., we have given our vary consideration and observe as under. The word 'renounced' (verb of renunciation) [as contained in Aiyar's Law Terms and Phrases] means, 'to give up a right'. Cambridge International Dictionary of English gives the meaning as 'to declare formally or publicly by a person that he is no longer owns, supports, believes in or have a connection with (something)'. Someone may renounce his claim to the family house. Renunciation also amounts to giving up a right and interests in the family property including the assets and liabilities. Oxford Advanced Learner's Dictionary of Current English gives the meaning as, 'declare formally that one will no longer have anything to do with that one no longer recogzines claim to one's care; formally to give up a claim, right, possession." 9. Mulla's Hindu Law (15th Edition) had dealt with 'renunciation or relinquishment of his share' at p. 367. "A coparcener may renounce his interest in the coparcenary in favour of the other coparceners as body and not in favour of one or more of them. If he renounces in favour of one or more of them renunciation enures for the benefit of all other coparceners and not for the sole benefit of the coparcener or coparceners in whose favour the renunciation is made. The renunciation or relinquishment must, of course be genuine". The effect of renunciation or relinquishment has been further elaborated at p. 458 to mean that the interest of the remaining family members on the family property continues to remain united to joint as before. It reads, "a renunciation or relinquishment by a member of his interest in the family property stands on a different footing altogether from the case where one member receives his share in the property and separates from the other members. In the former case, the other members continue joint as before. The effect of renunciation is to reduce the number of persons to whom shares would be allotted if and when a division of the estate takes place".
10. In the same book there is deliberation on the partition by decree or Court from the point of view of that the filing of the suit for partition itself operates as a partition for which no decree is necessary. It reads at p. 458, "the view that where a suit is brought for partition, there is no partition or severance of the joint family status until a decree is passed is no longer tenable for, as held by the Judicial Committee the very institution of a suit operates as a partition ....., though a decree may be necessary for working out the results of the severance and for allotting definite shares".
11. Senior Departmental Representative has claimed that the renouncing act by Mr. Basavaraj was no doubt decreed by the Civil Court but is not effective as far as the IT Act is concerned because no order under s.
171 of the Act was passed for it amounted to partition of the joint family. In this context the observation in the book by Mulla on Hindu Law at p. 458 would make it clear as to nature of the decree passed by the Court from the point of its evidentiary value showing the separation of the plaintiff from his coparceners or was a separation of all the members of the joint family from each other. It reads, "where a decree for partition is passed the decree is evidence to show whether the separation was only a separation of the plaintiff from his coparceners or was a separation of all the members of the joint family from each other. It is the decree, alone which can be a evidence of what was decreed. Although a suit does not in terms seek a partition, yet if it indicates a distinct intention to obtain a separate in estate, and the decree gives effect of that intention such decree effects a partition as regards the joint title".
12. The above goes to show that the act of renouncing by Mr. Basavaraj that has been decreed by the Civil Court is an evidence indicating that he had separated himself from the other members of the joint family of Nanjappa and that he has renounced his interest in the family property too to the other members of the family and the remaining members continued to remain joint. The renouncing act has in effect reduced the number of members from three to two who may receive shares if and when partition takes place. Because the suit of renunciation was specifically for separation from the family and its property that did not result in any partition of the property, the civil Court had decreed that Mr. Basavaraj has separated himself from the family and from then onwards would not be treated as a member of the HUF and thus is not entitled to claim any share in the property of the HUF. This decree is an admissible piece of evidence and on that basis Mr.
Basavaraj is not a member of the HUF of Nanjappa from 14th December, 1982. Because he is not a member of the HUF of Nanjappa from 14th December, 1982, it is not open to the Department to treat him as the Karta of the HUF of Nanjappa because Nanjappa had died in 1986.
13. It is apparently clear that when Mr. Basavaraj is not a member and could not therefore, be treated as the Karta, any notice calling upon him to respond as the Karta of the HUF of Nanjappa would be clearly invalid. Further, because, Mr. Basavaraj had separated from the family leaving all its property joint as before with Mr. Nanjappa as the Karta and his mother as the only female member, consequent upon the death of Mr. Nanjappa in 1986, the HUF ceases to exist, for, it is left with only a female member, who is the wife of Nanjappa and the mother of Mr.
Basavaraj. The HUF had earned income for the previous year for which the assessment are proposed but, when the assessment was framed in 1989, there was no HUF in existence in the eye of law and the assessee had protested to the assessment as made on a non-existent person and therefore, invalid. It is to this plea of the assessee that senior Departmental Representative had resisted by claiming that partition was not recognized by AO and that by renouncing Mr. Basavaraj could not just walk away from his role as Karta of HUF and supported the order as made on the HUF as validly made.
14. We may observe that when an individual dies, though, he might have filed a valid return of income, but, when the assessment is framed, if the person is not alive, assessment could not be made on a dead person.
IT Act has the provision by which the legal heirs of the deceased could be substituted and the assessment could be framed on the legal representative. If the deceased has left a will with an executor, the executor is assessed for the estate. In the case of discontinued firm there is provision for framing the assessment on the firm deeming it to be in existence. However, in so far as the HUF is concerned the IT Act contains no provision for a situation like in the present case where the HUF ceases to exist as is available when an individual dies. We are therefore of the opinion that the assessment made on the Nanjappa HUF for the assessment years from 1983-84 are invalid and accordingly are set aside.
15. One point that was raised was with reference to the asst. yr.
1982-83 and this was that Mr. Basavaraj had renounced the family from 14th December, 1982 and this is effectively prospectively and on that basis the assessment for the asst. yr. 1982-83 framed on the HUF treating Mr. Basavaraj was valid. This contention is based on the proposition that at the time when the income was earned Mr. Basavaraj was a member and that his renunciation could not take away what could be his right for the period up to his renunciation. The fallacy on this argument is that during the relevant previous year ending on 31st March, 1982 Mr. Nanjappa was alive and during his life time Mr.
Basavaraj could not have treated as Karta. This position could not change even after the death because, Mr. Basvaraj had separated himself from the family and its property from 14th December, 1982. At the point of time when the assessment is being framed, Mr. Basavaraj is not connected with the family and its property matters, and therefore, such unconnected person could not be treated as the Karta for framing of the assessment on the HUF for the sole reason that he is the natural son of the Karta.
16. For the foregoing reasons, we are of the opinion that the CIT(A) is correct in cancelling the assessments under appeal. In the result the Revenue fails and the appeals are dismissed.