HIRDAY NARAIN vs. INCOME-TAX OFFICER, BAREILLY

CIVIL APPEAL No. 193/1970Supreme Court[1971] 1 S.C.R. 68321 July 1970Bench: 2 JudgesAuthor: J.C. SHAH, K.S. HEGDE B7 pages
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What did the Supreme Court hold?

The Supreme Court held that Section 16(3)(a)(ii) of the Income Tax Act, 1922, plainly did not apply to the income assessed as that of a Hindu Undivided Family consisting of the appellant, his wife, and a new minor son from November 19, 1949, onwards. Therefore, writs must issue for the rectification of the appellant's assessments. The Court found the High Court was in error in assuming that the exercise of power under Section 35 to rectify an error apparent from the record was discretionary. The Court stated that if a statute invests a public officer with authority to act in specific circumstances, it is imperative for him to exercise that authority when a party with a right to apply moves in that behalf and the circumstances for exercise are shown to exist. Even if the words are enabling, courts will infer a duty to exercise power invested for the enforcement of a citizen's right. The Court also noted that the ITO's rejection of the rectification application was procedurally infirm as it involved changing the assessee's status without due notice and investigation. The appeals were allowed, and the High Court's order was set aside, with directions for rectification of assessments for the years 1951-52 and 1952-53 by deleting the income of minor sons included under Section 16(3)(a)(ii).

What were the facts?

The appellant, Hirday Narain, constituted a Hindu Undivided Family (HUF) with his five sons. Until the assessment year 1950-51, his income was assessed as HUF income. The joint family property was partitioned on November 19, 1949. For the assessment year 1951-52, the Income Tax Officer (ITO) assessed the appellant's income as HUF income. The Appellate Assistant Commissioner directed that income earned between October 1, 1949, and November 18, 1949, be treated as HUF income and excluded from the assessment. The ITO then issued two assessment orders: one for Rs. 18,520 as income of the old HUF up to November 18, 1949, and another for the balance, assessing it as HUF income liable to tax in the appellant's hands under Section 16(3)(a)(ii) of the Income Tax Act, 1922. The appellant applied for rectification of the second order, arguing Section 16(3)(a)(ii) did not apply to HUFs. The ITO accepted that Section 16(3)(a)(ii) did not apply to HUFs but declined relief, stating the appellant should have been assessed as an individual for the period November 19, 1949, to September 30, 1950. A High Court petition was dismissed, and an appeal against that dismissal was also dismissed by a Division Bench.

What were the issues?

1. Whether Section 16(3)(a)(ii) of the Income Tax Act, 1922, is applicable in the assessment of HUF income? The assessee argued that Section 16(3)(a)(ii) applies only to individuals and not to Hindu Undivided Families, and therefore, the inclusion of his minor son's income in his assessment as HUF income under this section was a mistake apparent from the record, warranting rectification. The revenue contended that the High Court was correct in dismissing the writ petition, suggesting that rectification under Section 35 was discretionary and that the assessee had not pursued alternative remedies like revision under Section 33-A. The High Court also questioned whether a HUF existed after November 19, 1949, to support the assessment in that status. 2. Whether the power of rectification under Section 35 of the Income Tax Act, 1922, is discretionary? The assessee argued that the ITO was bound to rectify the error as it was apparent from the record. The revenue, through the High Court's stance, suggested the power was discretionary. The Supreme Court had to determine if the ITO could refuse rectification even if conditions were met.

Which sections of the Income-tax Act were involved?

Section 16(3)(a)(ii),Section 35,Section 33-A

AI-generated summary — verify with the full judgment below

A B c D E F HIRDA Y NARAIN V. INCOME-TAX OFFICER, RAREILLY July 21, 1970 [J. C. SHAH AND K. S. HEGDE, JJ.] Income-ta.~ Act 1922, Ss. 16(3) (a)(ii)-/f applicable in case of as.~·essnu•nt of H.U.F. incon1e. S. 35-Nature of power of rectification- lj discmionary The appellant with his five sons constituted' a Hindu undivided family and up to the .assessment year 1950-5 l the income received by the appellant was as·iessed to tax as the income of the H. U.F.

The previous year of the Hindµ Undivided Family for each assessment year was from October 1 to September 30 of the following year.

The property of the Joint Family was partitioned on November 19, 1949. For the assessment year 1951-52 the income tax Officer assessed the appellant's income as that of the H.U.F. In appeal, the Appellate Assistant Commissioner direct- ed that the income earned between October I and November 18, 1949 should he treated as that of the H. U.F. and excluded from the assessment.

The l.T.O. thereafter made two orders of assessment, assessing Rs. 18,52.00 earn£d upto November 18 as the, income of the old H.U.F. and assessin~ the balance also as income of a" Hindu undivided fami

The order continues below.

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