(a) Income-tax---

----Assessment---Status---Return filed in status of H.U.F.---Assessment in status of individual without notice and without giving reasonable opportunity of being heard---Not permissible.

(b) Income-tax---

----Assessment---Minor---Income of minor child included in income of mother---Cannot, thereafter, be included in income of father---Indian Income Tax Act, 1961, S. 64.

In 1973, there was a partial partition of a Hindu undivided family of which S was the Karta. Thereafter, S started his own business separate from other members of his family and admitted his minor son, P, to the benefits of partnership. For the assessment years 1979-80 to 1981-82, S was assessed in the status of Hindu undivided family and the income of the minor son was included in the income of the mother. The Commissioner of Income-tax set aside the assessment orders under section 263 of the Income Tax Act. 1961, and directed the income-tax Officer to make fresh assessments in the status of individual and also include the share of income of the minor son in the assessment of S as individual, The Income-tax Officer passed orders assessing S in the status of individual including the share income of the minor son in the income of S. The Tribunal allowed the assessee's appeals against these orders. On a reference:

Held, affirming the orders of the Tribunal, (i) that as the return of income was filed in the status of the Hindu undivided family, there could not be any valid assessment in the status of individual without notice and without giving reasonable opportunity of being heard.

(ii) That, after including the income of the minor son in the income of the mother, there was no justification to reverse the position.

CIT v. K. Adinarayana Murthy (1967) 65 ITR 607 (SC); CIT v. Associated Cement and Steel Agencies (1984) 147 ITR 776 (Bom.) and CWT v. J.K. Srivastava & Sons, (1983) 142 ITR 183 (All.) applied.

Sasikumar (P.N.) v. CIT (1988) 170 ITR 80 (Ker.) ref.

D.D. Vyas for the Commissioner.

Nazir Singh for the Assessee.

JUDGMENT

A.R. TIWARI, J.---At the instance of the Department (Commissioner of Income-tax, Bhopal), the Tribunal has referred the under noted questions of law under section 256(1) of the Income Tax Act, 1961 (for short "the Act"), relating to the assessment years 1979-80, 1980-81 and 1981-82 arising out of the orders passed by the Tribunal in I.T.As. Nos. 72 to 74/Ind of 1987, on the applications registered as R. A. Nos. 198 to 200/Ind of 1990, for our opinion:

"(1) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that there could not be valid assessment in the status of an individual when return of income was filed in the status of the Hindu undivided family?

(2) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the Income-tax Officer having exercised the option to include in the income of the mother the income of a minor child from the admission of the minor to the benefits of the partnership in a firm, could not include the same income in the income of the father?"

Briefly stated, the facts of the case are that the years of assessment are 1979-80, 1980-81 and 1981-82 for the previous years ending Diwali, 1978-79 and 1980, respectively. There was partial partition in the Hindu undivided family on October 26, 1973, that is to say on the last day of the previous year relevant to the assessment year 1974-75 and certain funds of he Hindu undivided family were allotted to the members thereof. The family consisted of Shri Sobhagmal as Karta, his wife, Smt. Tarabai, four sons and a daughter. One of the sons, Paras, was a minor at that time. After the said partition, Shri Sobhagmal started his own business separate from other members of the family and his minor son, Paras, was admitted to the benefits of the partnership firm bearing name and style as "Chopra Brothers". The assessments of income of Shri Sobhagmal for the assessment years 1975-76 to 1977-78 were completed in the status of individual. However, the assessments of his income for the subsequent years 1978-79 to 1980-81 were completed in the status of the Hindu undivided family under section 143(1) of the Act. Shri Sobhagmal was since assessed in the status of the Hindu undivided family in the later four years (1978-79 to

1981-82). The share income received, by his minor son Paras. from Chopra Brothers, was not included in his income under section 64 of the Act. Instead the income was included in the income of the mother, Smt. Tarabai. Assessments for the years 1979-80 to 1981-82 in the status of the Hindu undivided family were considered erroneous and prejudicial to the interests of the Revenue by the Commissioner of Income-tax. He, therefore, by order dated December 17, 1982, passed under section 263 of the Act set aside the assessments for all these three years with a direction to frame fresh assessments in the status of individual and to include the share income of the minor to his income. The order was appealed before the Tribunal. The Tribunal dismissed the appeals. The Income-tax Officer, on the basis of the same data, framed a consolidated assessment order for all the three years on March 30, 1985, in the status of individual. He also included the share income of the minor in the income of the assessee which was earlier included in the income of the mother. The assessee felt aggrieved and filed appeals before the Appellate Assistant Commissioner who upheld the fresh assessment made by the Income-tax Officer and dismissed the appeals. The assessee then filed second appeals before the Tribunal, which were allowed. On application, the Tribunal has referred the aforesaid questions for our opinion.

We have heard Shri D.D. Vyas, learned counsel for the applicant ?Department, and Shri Nazir Singh, learned counsel for the non-applicant assessee.

Indisputably the return of income was filed in the status of the Hindu undivided family. That being so, there could not be any valid assessment in the status of individual without noticing the assessee and affording him reasonable opportunity of hearing in that regard. The Tribunal, thus, does not seem to have committed any error. As regards the income of the minor child, it was admittedly included in the income of the mother. After exercising this option, there was no justification to reverse the position and include the same in the income of the father on fresh assessments.

The position of law is laid down in CWT v. J.K. Srivastava & Sons (1983) 142 ITR 183 (All.) and CIT v. Associated Cement and Steel Agencies (1984) 147 ITR 776 (Bom.).

Counsel for the non-applicant has also placed reliance on CIT v. K. Adinarayana Murthy (1967) 65 ITR 607 (SC) and P.N. Sasikumar v. CIT (1988) 170 ITR 80 (Ker.).

In CIT v. K. Adinarayana Murthy (1967) 65 ITR 607 (SC), it is laid down as under (head note):

"Held, that since the correct status of the respondent, was that of a Hindu undivided family' the first notice issued in the status of individual was illegal and without jurisdiction and the Income-tax Officer could not have validly acted on the return filed by the respondent pursuant to that notice, notwithstanding that it was made in the status of a Hindu undivided family, and any assessment made on such a return would have been invalid. "

It is, thus, clear that the Tribunal passed the order sustainable in law.

Accordingly, we answer both the questions in the affirmative, i.e., in favour of the assessee and against the Department.

This miscellaneous civil case is thus decided in terms indicated above, but without any order as to costs. Counsel fee for each side is, however, fixed at Rs.750, if certified.

Transmit a copy of this order to the Tribunal.

M.B.A./1630/FC???????????????????????????????????????????????????????????????????????????????? Order accordingly.