Gujarat High Court
Commissioner Of Income-Tax vs Maganlal Mohanlal Panchal (Huf) on 1 September, 1993
Equivalent citations: [1994]210ITR580(GUJ)
JUDGMENT G.T. Nanavati, J.
1. At the instance of the Revenue, he Income-tax Appellate Tribunal has referred the following question to this court under section 256(1) of the Income-tax Act, 1961 :
"Whether the Appellate Tribunal is right in law in setting aside the order made by the Appellate Assistant Commissioner and restoring the matter back to the file of the Income-tax Officer and directing him to pass an order under section 143(3) of the Income-tax Act pursuant to the order under section 171 of the Income-tax Act ?"
2. The bigger-Hindu undivided family of Maganlal Mohanlal Panchal filed a return of its income on April 14, 1981. The accounting period ended on March 31, 1980 and, therefore, the relevant assessment year is 1980-81. In the return of income, the assessee had made a note that during the year under consideration partial partition of the bigger-Hindu undivided family had taken place on March 30, 1979, and as per the said partial partition, Rs. 50,000 standing to the credit of the Hindu undivided family with the Ahmedabad District Co-operative Bank, Shahpur Branch, Ahmedabad, had been divided between the coparceners as under :
(Rs.)
1. Shri Maganbhai M. Panchal 30,000
2. Shri Kacharabhai M. Panchal 10,000
3. Shri Revabhai M. Panchal 10,000
3. It was further stated in the return that the income arising as a result of the said partial partition was not included in the total income of the bigger-Hindu undivided family as the same after the partition did not belong to the bigger-Hindu undivided family. The Income-tax Officer did not accept the claim of the assessee in view of sub-section (9) of section 171 of the Act.
4. The Appellate Assistant Commissioner confirmed the said action of the Income-tax Officer in appeal.
5. In further appeal to the Tribunal, it was brought to the notice of the Tribunal that the Madras High Court in Valliappan (M. V) v. ITO [1988 170 ITR 238 has declared section 171(9) ultra vires. The Tribunal feeling bound by the said judgment set aside the order passed by the Appellate Assistant Commissioner and directed the Income-tax Officer to pass an order under section 171 in respect of the assessee's claim for partial partition, after recording his findings on the merits of the case. The Revenue then moved the Tribunal to refer the above-stated question to this court.
6. What is contended by learned counsel for the Revenue is that the Karnataka High Court in Ugarmal Nemichand v. Second ITO [1987] 163 ITR 630 has held that section 171 is not violative of article 14 of the Constitution. Therefore, before the Madras High Court declared section 171(9) ultra vires, the decision of the Karnataka High Court was already in the field and, therefore, the Tribunal ought to have considered both the decisions and should not, following the Madras decision, have directed the Income-tax Officer to pass an order under section 171 with respect to the partial partition. In our opinion, there is no substance in this contention. The Karnataka High Court was not concerned with section 171(9) and, therefore, it was not called upon to decide whether sub-section (9) of section 171 was invalid or not. The only question, which had arisen before the Karnataka High Court was, whether the classification made between the Hindu undivided family which was taxed and the Hindu undivided family which was not taxed was valid or not, and the Karnataka High Court held that it was a valid classification and, therefore, the challenge to section 171 on that ground was not sustainable. Before the Madras High Court, the validity of sub-section (9) of section 171 was challenged and the Madras High Court has held that the said sub-section is invalid. At the time when the Tribunal decided the appeal, that was the only decision in the field and, therefore, in view of what the Bombay High Court has held in CIT v. Godavaridevi Saraf (Smt.) [1978] 113 ITR 589 and CIT v. Smt. Nirmalabai K. Darekar [1990] 186 ITR 242 (Bom), the Tribunal was bound to follow the said judgment of the Madras High Court. It, therefore, cannot be said that the Tribunal committed an error in following the said judgment of the Madras High Court. In view of the said decision of the Madras High Court, the only course which the Tribunal could have followed was to direct the Income-tax Officer to consider the partial partition on the merits and pass an order under section 171 first and then under section 143(3) of the Act. We, therefore, answer the question in the affirmative, that is, against the Revenue and in favour of the assessee. No order as to costs.