NARENDRAKUMAR J. MODI vs. COMMISSIONER OF INCOME TAX, GUJARAT II, AHMEDABAD

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CIVIL APPEAL No. 156/1971Supreme Court[1977] 1 S.C.R. 11204 August 1976Bench: 3 JudgesAuthor: HANS RAJ KHANNA, V.R. KRISHNA IYER, N.L. UNTWALIA B6 pages

AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the Income Tax Authorities were not bound by the subsequent partition decree of the civil court. The judgment noted that the preliminary partition decree came much later than the disallowance of the claim under Section 25A, and no reference was taken under the Income Tax Act to challenge the Tribunal's order dismissing the appeal. Therefore, the Income Tax Officers had their own view to take and were not bound by the decree. Regarding the second issue, the Court held that a junior member of the family can act as a karta with the consent of all other members if the senior member gives up his right of management. The Court found that Gulabchand appeared to have acted as karta with the consent of other members, especially considering the age of his elder brother and the death of his father. The Court also found no substance in the argument that notices were issued to a dead person, stating that notices were issued in the name of the family business and returns were filed by the managing member. The assessee was bound by the assessment made in respect of the income of his family, which continued to be joint in the eyes of the law.

What were the facts?

The assessee, Narendra Kumar Modi, a junior member of a Hindu Undivided Family (HUF), challenged various income tax orders and attachment orders. The HUF, initially headed by Bapalal Purshottamdas Modi, claimed partition on October 24, 1954, after Bapalal relinquished his rights. The Income Tax Officer (ITO) disallowed the claim under Section 25A of the Income Tax Act, 1922, by an order dated January 28, 1960. Despite a civil court preliminary decree for partition obtained on June 30, 1965, appeals to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal were dismissed in 1965 and 1969, respectively. The assessee did not pursue a reference to the High Court. Subsequently, the ITO attached the assessee's savings bank account for tax liability. The assessee filed a writ petition, which was dismissed in limine by the High Court, leading to this appeal.

What were the issues?

1. Whether the Income Tax Authorities are bound by a subsequent partition decree of the civil court when they had already disallowed a claim for partition under Section 25A of the Income Tax Act, 1922, and no reference was taken to challenge the Tribunal's order. 2. Whether a junior member of a Hindu Undivided Family can act as karta with the consent of all other members if the senior member relinquishes his right. Assessee's arguments: 1. The orders of the income tax authorities rejecting the partition claim under Section 25A were without jurisdiction and legally infirm. 2. After Bapalal relinquished his rights and ceased to be karta, there was no karta, and Gulabchand, a junior member, could not act as such. 3. Notices issued in the name of the deceased Bapalal Purshottamdas Modi rendered the proceedings and assessment orders nullities. 4. The assessee had no opportunity to participate in the proceedings, and his property should not be liable for the determined dues. Revenue's arguments: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 25A

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Cause title — parties, addresses and appearances

A B 112 NARENDRAKUMARJ.MODI v. COMMISSIONER OF INCOME TAX, GUJARAT II, AHMED ABAD August 4, 1976 [H. R. KHANNA, V. R. KRISHNA IYER AND N. L. UNTWALIA, JJ.j Income Tax A ct. 1922-Section 25-A (3 )-Claims for partition and disrup- tion of the Hindu Undivided Family disallowed by /.T.0.-Appeal under ther Act filed againsl the orders of I.T.O. also dismissed-No referorce 1111der the Act clzal/e11gi11g the Tribu11c./'s order di.lmissinl!' the appeal was taken, but .rnbse• que111ly got a preliminary decree for partition, passed by the civil court duri11g the pe11dc11cy of the appeal-Whether the Income Tax Awhorities are bou11d by C Liie s1d>.,eq11.c111 partition decree of the civil court. D E F G H Right of ma11agement-Hi11du Law-Joi11t Hindu U11divided Whether a juliior member of the family can act m a karta ivit/1 tf1,, all the other members, if the senior member gives up his riplzt. Fami/y- co11se11t of Bapalal Purshottamdas Modi was the karta and head of a Hindu Undivided Family posse,sing many immovable properties and carrying on. business of various types including money lending. Bapalal had five sons, viz. Vadilal Ramanlal, Jayantilal, Gulabchand and Kanti!al; out of whom Ramanlal and Jayantilal predeceased him in 1933 and 1956 respectivelv and the app·~llant was one of the sons of Jayantilal. As per the general power of attorney dated 5.10-1948, executed by Bapalal in his favour, Gulabchand, the third son was acii'ng as a karta and wa~ filin0 the various tax returns without any objection what;oever by the other members of the Hindu Undivided Family. Bapalal relinquished all his rights in the joint family property on 22-lG-54 1~.aving the corpus of the joint family properties to his four surviving sons and Rajnikant, son of Ramanlal. All of them executed on 24-10-54, a memo of partition disrupting the Hindu Undivided Family and partitioning the properties. Irr the course of the proceeding' of' the income-tax af.sessment for the assessment year 1955-56 against the H.U.F. of Bapalal Purshottamlal Modi, an applica- tioh under s. 25A of the Income Tax. Act, 1922 claiming partition was made. The claim was disallowed by the I.T.O. by his order dat•ed 28-1-1960. Dur'ng the pendency of the appeal, a suit for partition was filed in 1961 and a decree for partition was obtained on June 30, 1965. The appeal to the Appellate Assistant Commissioner wa' dismissed on September 30, 1965 and the second appeal 10 the Income Tax Appellate Tribunal was also dismissed on March. 28. 1969. The appellants d'd not ask for a reference to the High Court, as provided under the Act, but went on filing the returns in respect of the· subs·equent assessment years. When the Income Tax Officer got attach·d 1h' entire amount i'n the Savings Bank A/c towards the tax liability bv an order dated May 12. 1970, the appellant filed a writ P'dition challenQ!ing the various orders passed in the proceedings under s. 25A for the assessment years 195$.66 to 1965-66 and the several attachment orders. Th·~ High Court dic1m'ssed the writ in /i111i11e, but granted a certificate under Art. 133(1)(b) of the Co'nstitu" ti on. Dismissing the appeal, the Court, HELD: (l) Sub section (3) of s. 25A provides that where an order accept· ing partition had not been passed in respect of a H'ndu Undivided Family assess- ed a<; undivided, such familv shall be deemed for the purpos-es of the Act to continue to be Hindu Undivided Family. The Income Tax Officers who had their own view to take, were not bound by the d1ecree, since in the instant case ihe partit'on preliminary decree came much later and there, wa~ no rPference under the Income Tax Act challenging the order of the Tribunal. [116 C-DJ (2) A junior member of the family can, with the consent of all the other members, act as a karta, if the senior' member give~ up his right. [116 El NARENDRA v. COMMR. INCOME TAX (Untwalia, .f.) 113 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 156 of 1971. From the Judgment and Order dated 19-10-1970 of the Gujarat High Court in Special Civil Appln. No. 1177 /70. B. R. L. Iyengar, S. K. Dholakia and R. C. Bhatia, for the appe!lant. B. B. Ahuja, for respondent No. 1. The Judgment of the Court was delivered by UNTWALIA, J. The appellant's writ petition filed in the High Court of Gujarat was dismissed in limine by a Bench of the High Court on October 19, 1970. The Commissioner of Income tax, Gujarat II, respondent no. 1 was the authority against whom several reliefs had been claimed in the writ petition. Subsequently were added the other members of the family of the appellant as respondents to the writ petition. The appellant obtained a certified from the High Court for appeal to this Court under sub-clause (b) of clau:;e (1) of Article 133 of the Constitution of India as it stood before the 30th Constitution Amendment Act. Hence this appeal to this Court. Having beard Mr. B. R. L. Iyengar, Senior Advocate for the appel- lant at some length we found that the appellant was ill-advised to file the writ petition and to pursue the matter upto this Court. The appeal being devoid of any substance must fail. We proceed to state the facts and discuss the points urged before us very briefly. . One Bapalal Purshottamdas Modi was the head of a Hindu Un- divided family. The joint family possessed many immovable proper- ties and carried on business of various types such as money-lending etc. Bapalal had five sons namely Vadila·l, Ramanlal, Jayantilal, Gulabchand and Kantilal. Ramanlal died long ago in or about the year 1933. Jayantilal died in 1956. The appellant is one of the sons of Jayantilal. . The appellant's case in the writ petition was that Bapalal was the karta of the Hindu Undivided family. He executed a general power of attorney on October 5, 1948 in favour of his third son Gulabchand to manage his (Bapalal's) separate property. On October 22, 1954 Bapalal relinquished his right, title and interest in the joint family pro- perties on taking a sum of Rs. 75,000/- leaving the corpus and management of the joint family properties to his four surviving sons and Rajnikant, son of late Ramanlal. These five members also executed a memo of partition on October 24, 1954 disrupting the erstwhile Hindu Undivided family and partitioning the properties. In course of the proceedings for assessment of the income-tax for the assessment year 1955-56 against the Hindu Undivided family of Bapalal Pursbottamlal Modi, an application under Section 25A of the Income-tax Act, 1922 was made claiming partition w.e.f. October 24, 1954. Notices of the enquiry under section 25A were served on all the members of the family. At the enquiry the statements of various persons including the appellant were recorded by the Income- tax Officer. He, by his order, dated January 28, 1960 disallowed the B. c D E F G H .B ·C lE IF H I 14 SUPREME COURT REPORTS (1977] 1 S.C.R. claim under section 25A of the Income-tax Act, 1922. It is asserted that in the year 1961 a suit for partition had also been filed and the City Civil Court Ahmedabad passed a decree for partition on June 30, 1965. In an appeal filed before the Appellate Assistant Commissioner from the order of the Income-tax Officer dated January 28, 1960 reliance was placed on the Civil Court partition decree also. The Appellate Assistant Commissioner, however, dismissed the appeal by· his order dated September 30, 1965: . A second appeal to the Income- tax Appellate Tribunal was dismissed on March 28, 1969. Income- tax assessment was made against the Hindu Undivided family for the year 1955-56. Assessments were also made against the Hindu Un- divided family, sometimes treating it as Association of Persons or Un- registered .Partnership Firm as per returns filed from time to time, for the subsequent years upto the assessment year 1965-66. Copies of all the assessment orders were enclosed with the writ petition as Anncxurc 'I' collectively. Appeals taken to the Tribunal from some of the assessment orders were also dismissed. Notices were being issued and served under sections 22 and 23 of the Income tax Act, 1922 for the assessment years which were governed by the said Act: In respect qf the assessment years 1962-63 onwards notices were issued and served under sections 142 and 143 of the Income tax Act, 1961: A large sulm of tax and penalty became due as the demands from time to time were partly paid. The Income-tax authorities took steps for realization of the income tax dues against the appellant's family and got attached various properties. In Civil Suit No. 806 of 1961 in which the preliminary partition decree was passed on June 30, 1965, respondent Kantilal had been appointed as a receiver Later on one Mr. Bhatt was appointed Receiver. A Savings Bank Account No. 412002 was being operated by the Receiver. The Income-tax Officer attached the entire amount of Rs. 56,294.43 in the said account by his orders dated May 12, 1970. Thereupl)n, the appellant filed -the writ petition challenging the various orders passed in the proceeding under section 25A of the Income tax Act, 1922; the assessments made for the years 1955-56 to 1965-66 and the attachment orders qn various grounds. In a: single writ petition rambling allegations were made challenging the multifarious proceed- ings and the orders on various grounds and the following prayers were made : " (a) declaring void and illegal and quashing the proceed- ings of the income tax authorities making assessments on Hindu Undivided Family, Association of persons and unregistered partnership firm aforesaid for the years beginning from the assessment year 1955-56 and also the proceedings for the recovery of the taxes so assessed, and (b) quashing the orders of the income-tax Authorities re- fusing to record partition and directing the Respon- dent and his Subordinates to record under Section 25A of the Act that the erstwhile joint family pro- perty bas been divided or .Partitioned in definite por- tions, each member getting an equal share, on October, 1954; .. }- NARENDRA v. COMMR. INCOME TAX (Untwalia, J.) 115 ( c) directing the respondent and his subordinates to cancel or withdraw the imgugned orders and all steps taken for tho recovery of. the amounts so assessed; ( d) directing the respondent and his subordinates. not to take any further steps for the recovery of the tax so assessed; ( e) quashing all the penalty orders and such other orders passed in pursuance of the assessment proceedings aforesaid; (f) quashing an the orders of attachment or in the nature of attachment passed by the Income tax Authorities in these proceedings for the assessment year 1955-56 onwards, and · ( g) to pass such other and further orders as your Lord- ships deem just and expedient in the circumstances of the case." A B c It seems to us that the High Court rightly dismissed the appellant's petition in limine. Since the ·valuation under Article 133 ( 1 )(b) was beyond Rs. 20,000/-, the appellant was granted a certificate as a D matter of course. It was pointed out to the appellant's counsel that so many pro- ceedings and orders could not be challenged in one writ petition and he was asked to make his submissions in the appeal confining the writ .petition to one matter only. Counsel chose to confine it to the attack on the attachment order 0£ the Income tax Officer in respect of the money lying in the Savings Bank Account. While doing so, he traversed the entire a/legations in the petition by adopting an inge- nious method. Counsel submitted that the attachment had been made for realization of the income tax dues based upon various orders which were void and ultra vires.. All those orders could be attacked colla-

terally while attacking the attachment order. Mr. Iyengar urged the following points in, support of the appeal. ( 1) That the orders of the various au!.horities rejecting the claim of the partition under section 25A of the Income tax Act, 1922 were without juri iction and on their face suffered from many infirmities of law. (2) That after Bapalal relinquished his interest in the .ioint family properties and ceased to be the karta, there was no karta of the family. Gulabchand-a junior member of the family could not act as a karta. Other members of the family did not accept him to be the karta. E F G (3) That eveo after the death of Bapalal in thel year 1958 various notices under the Income tax Act were issu- H ed and served in the name of Bapalal Purshottam- das !Modi-a dead person-and hence the entire pro- ceedings and assessment orders were nullities.

A B c D E F G H 116 SUPREME COURT REPORTS [1977) 1 s.c.R. ( 4) That the appellant had no opportunity of taking any part in the income tax proceedings and his property cannot be made liable for realization of the dues de- termined in such proceedings. None of the points urged on behalf of the appellant merits any detailed discussion. We were taken through the power of attorney executed by Bapalal in favour of Gulabchand, the deed of relinquish- ment executed by him on October 22, 1954 and the alleged memoran~ dum of partition of October 24, 1954; the orders of the Income tax officer, the Appellate Commissioner and the Tribunal in the proceed- ings under section 25A of the Income tax Act, 1922. In our opinion the orders do not suffer from any infirmity of law or any such defect which will make them void. Notice of the enquiry had been given t<> all the members as admitted by the appellant himself. He had been examined in the proceedings. Sub-section (3) of Section 25A provides. that where an order accepting partition had not been passed in respect of a Hindu family assessed as undivided such family shall be deemed for the purposes of the Act to continue to be Hindu undivide family. A partition preliminary decree came much later. The income tax autho- rities had their own view to take. They were not bound by the decree. No reference was taken un.der the income tax Act·challenging the order of the Tribunal dismissing the appeal. It was clear from some of the assessment orders that Gulabchand was acting as a karta even during the life time of Bapalal as he had retired to live in Brindaban. At the relevant time no body disputed his authority to act as karta. His eldest brother Vadilal was an old man of about 70 years of age. His elder brother Jayantilal-father of the appellant died in the year 1956. In these circumstances he appears to have acted as thee karta with consent of all the other members. A junior member of the family could do so. See Mulla's Hindu Law page 296, fourteenth edn. Where occurs the following passage : "So long as the members of a family remaiin undivided, the senior member of the family is entitled to manage the family properties," including even charitable properties (q); and is presumed to be the manager until the contrary is shown(r). But the senior member may give up his right of management, and a junior member may be appointed manager(s)." Notices were being issued in the name of the family which was car- rying on the business in the assumed name of Bapalal Purshottamdas l\Jodi. They were neither issued to nor served on BapaJ,al-the dead person. In response to the notices returns were being filed by the ma- naging member of the family. At nd stage before the income tax au- thorities a contention was raised that the notice was served on a dead person. There is no substance in the third point.

Coming to the fourth and the last point urged on behalf of the appellant we find that the appellant is bound by the assessment made in respect of the income of his family which continued in the eye of law to be joint. The share •

• \ NARENDRA v. COMMR. INCOME TAX ( Vntwalia, !.) 11 7 -Of the appellant's properties received by him from the joint family or A the income thereof is liable for the income tax dues in question. The .appellant, as we have said above, was ill-adv:sed to file a misconceived petition on wholly untenable grounds.

In the result the appeal fails and is dismissed with costs to respon- dent no.

S.R. Appeal dismissed . B

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