INCOME-TAX OFFICER, GORAKHPUR vs. RAM PRASAD AND ORS.

CIVIL APPEAL No. 257/1969Supreme Court[1973] 1 S.C.R. 104328 August 1972Bench: 3 JudgesAuthor: K.S. HEGDE, P. JAGANMOHAN REDDY, HANS RAJ KHANNA7 pages
AI SummaryDismissed

What were the facts?

The assessee, Ram Prasad, was the Karta of a Hindu Undivided Family (HUF) business named "Ram Nath Ram Prasad". Assessments for income tax (AY 1944-45) and excess profits tax (EPT) for the period ending October 28, 1943, were set aside by the Income-Tax Appellate Tribunal for fresh assessment. Subsequently, under a voluntary disclosure scheme, Rs. 2,08,450 was disclosed. On October 1, 1951, the HUF was partitioned. Fresh income tax assessments for AY 1944-45 to 1947-48 were made considering the disclosure. Later, notices under Section 13(1) of the Excess Profits Tax Act, 1940, were issued for certain chargeable accounting periods in the name of the first respondent. The respondent challenged these notices via writ petitions, which were allowed by a single judge and upheld by a Division Bench, holding that proceedings under the Act were not competent against a divided HUF.

What did the Supreme Court hold?

The Supreme Court held that the appeals filed by the Income-Tax Officer were dismissed. Regarding the first issue, the Court affirmed that the assessment of excess profits tax is on the person, similar to the Income-tax Act, and the change of the person carrying on the business is material. Section 14 of the Excess Profits Tax Act, 1940, which deals with assessment on persons jointly or on legal representatives, supports this. The Court agreed with the Madras High Court's observation in Commissioner of Excess Profits Tax, Madras v. Jivraj Topun and Sons, Madras, that the assessment is on the person. Regarding the second issue, the Court held that Section 44 of the Indian Income-tax Act, 1922, applies only to firms and associations of persons, and not to Hindu Undivided Families, which are separate entities. Therefore, Section 44 has no application, and the impugned notices were invalid. The Court noted that Section 25-A of the Indian Income-tax Act, 1922, which deals with partition of HUFs, was not included in Section 21 of the Excess Profits Tax Act, 1940, nor was a similar provision made in the Act itself.

What were the issues?

1. Whether the Excess Profits Tax Act, 1940, permits assessment proceedings against a Hindu Undivided Family (HUF) after its partition, considering the business continues, under Section 14 of the Act? 2. Whether Section 44 of the Indian Income-tax Act, 1922, which deals with discontinuance or dissolution of a firm or association of persons, is applicable to a Hindu Undivided Family for the purpose of excess profits tax assessment? Assessee's contentions: - The learned single judge and Division Bench correctly held that the appellant was not competent to take proceedings under the Act in respect of a divided HUF. Revenue's contentions: - Under the Excess Profits Tax Act, tax is levied on the business, not the individual, making the continuation of the business, not the identity of the assessee, relevant. - Under Section 44 of the Indian Income Tax Act, 1922, a firm or association of persons is jointly and severally liable for assessment and tax payable.

Which sections of the Income-tax Act were involved?

Section 14,Section 44,Section 13(1),Section 21,Section 3,Section 25-A,Section 4

AI-generated summary — verify with the full judgment below

8 c D E F G H 1043 INCOME-TAX OFFICER, GORAKHPUR v. RAM PRASAD AND ORS.

Augusl 28, 1972 · IK. s. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ,] Indian Income-tax Act 1922-S. 14 and 44-The Excess Profits Tax Act 1940-S, 13(1)-Whether a H.U.F. ca11 be assessed for the purpose of 1xcess profi;s tax even after petition.

Respondent l, the Karta, c:i.rrietl on the family business in the nan1c and •tyle of "Pam Nath Ram Prasad". The Income-Tax assessments for the aseCiSment year 1944-45 and the cxces profits tax aosess:'!1ent for the cor- responding chargeable nccounting period ending on October 28, 1943 were •et aside by the Income-Tax Appellate Tribunal with the direction that fresh orders of assessment be made in accordance with the directions given hy tho Tribunal.

On September 25, 1951, under a scheme for voluntary disclosure, the first responde~t disclosed by means of an application, a sum of Rs. 2,08,450/. and offered the same for taxation.

On October !, 1951, the Hindu undivided family was disrupted and . there was a complete partition. Thereafter, fresh assessments to Income Tax were made ior the assessment years 1944-45 to 1947-48 taking into

The order continues below.

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