KAPURCHAND SHRIMAL vs. TAX RECOVERY OFFICER, HYDERABAD & ORS.

CIVIL APPEAL No. 1319/1966Supreme Court[1969] 1 S.C.R. 69114 August 1968Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER7 pages
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What were the facts?

The assessee, Kapurchand Shrimal, is the Karta of a Hindu undivided family (HUF) that defaulted in paying income tax for assessment years 1955-56 to 1959-60. A certificate for recovery of tax due by the HUF was issued. The Tax Recovery Officer (TRO) directed the arrest and detention of Kapurchand Shrimal in civil prison for fifteen days for non-payment of tax. The Karta challenged his detention in the High Court of Andhra Pradesh, arguing he was not a defaulter. The High Court rejected his petition, partly on the grounds that he had dealt with HUF properties after receiving notice of the tax recovery certificate, and partly due to principles of res judicata from a previous petition. The Karta then filed a petition under Article 32 of the Constitution in the Supreme Court seeking release from custody, having been arrested and imprisoned for six months.

What did the Supreme Court hold?

The Supreme Court held that the Karta of a Hindu undivided family (HUF) cannot be arrested and detained in civil prison for the non-payment of tax due by the HUF. The Court reasoned that the Legislature treats the HUF as a distinct taxable entity. While the Karta is competent to represent the HUF, he cannot be deemed the 'assessee' for the purpose of Section 222 of the Income-tax Act, 1961, when the assessment and recovery certificate are against the HUF itself. The definition of 'assessee' under Section 2(7) and the provisions for 'defaulter' in the Second Schedule imply that proceedings must be lawfully taken against the person to deem them an assessee. There is no provision in the Act that deems the manager of an HUF as the assessee in default for tax due by the HUF, nor is there a provision for recovery by resort to the manager's personal property or his arrest and detention for the family's default. The Court found that Sections 276, 276A, 277, and 278, relied upon by the Revenue, pertain to penalties for specific offences and do not extend to deeming the Karta as personally liable for the HUF's tax default. The appeals were allowed, and the order of detention was declared unauthorized. The High Court's view in declining to allow the contention and treating it as res judicata was considered technical.

What were the issues?

1. Whether the Karta of a Hindu undivided family (HUF), who is not personally assessed to tax, can be arrested and detained in civil prison for the non-payment of tax due by the HUF, when a recovery certificate has been issued against the HUF. This issue turns on the interpretation of Section 222 of the Income-tax Act, 1961, and the definition of 'assessee' and 'defaulter' under the Act and its Schedules. Assessee's contention: The Karta argued that he, as an individual, is not the assessee against whom the recovery certificate was issued, and therefore, he is not liable to be detained for the tax due by the HUF. Revenue's contention: The Revenue argued, citing Sections 140(b) and 282(2) of the Income-tax Act, 1961, that there is no distinction between the representative status of the manager of an HUF and his personal status when tax is assessed against the HUF. They also referred to Sections 276, 276A, 277, and 278 of the Act.

Which sections of the Income-tax Act were involved?

Section 2(7),Section 140(b),Section 160,Section 161,Section 179,Section 220,Section 222,Section 276,Section 276A,Section 277,Section 278,Section 282(2),Section 297(2)(j)

AI-generated summary — verify with the full judgment below

- • 691 A KAPURCHAND SHRIMAL v. TAX RECOVERY OFFICER, HYDERABAD & ORS.

August 14, 1968 B [J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.)

Income-tax Act (11 of 1922)-Hindu undivided family-Defaults in payment of tax-Whether Karta can be detained. A Hindu undivided family committed default in payment of income- tax, and a certificate fdr recovery of tax due to the family was issued by the Income Tax Office in exercise of the power conferred by rule 76 01. C Sch. II of the Income Tax Act, 1961. The Tax Recovery Officer directed the arrest and detention in prison of the karta of the family for non-pay- ment of tax. The Karta then moved a petition in the High Court of Andhra Pradesh challenging his detention on the ground that he was not a defaulter.

The petition was rejected.

The Karta appealed.

He also moved a petition under Art. 3 2 of the Constitution in the Supreme Court for an order for his release from custody. D E F G HELD :-The Legislature having treated a Hindu undivided family as a taxable entity distinct from the individual members constituting it, and proceedings.for assessment and recovery of tax having been taken against the Hindu undivided

The order continues below.

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