Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the ITO was competent to allocate and determine the tax liability in the hands of the members of the erstwhile HUF by his order dated July 8, 1974, is perverse and unsustainable in law ?

H.S. Shrivastava, for the Assessee : B.K. Rawat, for the Revenue

N.D. OJHA, C.J.:

This application has been made by the assessee under s. 256(2) of the IT Act, 1961 (hereinafter referred to as ” the Act “), with a prayer that the Tribunal, Jabalpur Bench, Jabalpur, may be directed to draw up a statement of the case and refer the following two questions to this Court for its opinion:

” 1. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the ITO was competent to allocate and determine the tax liability in the hands of the members of the erstwhile HUF by his order dated July 8, 1974, is perverse and unsustainable in law ?

2. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the two gift deeds dated December 5, 1955, and December 27, 1955, made by the Karta of the HUF in favour of his own family members for legal necessity and for the benefit of the estate were void ab initio or they were fully valid and acted only as a scheme to partition the HUF properties ? “

The relevant assessment year in the instant case is 1958-59. The assessee was an HUF and an order of assessment was passed on March 22, 1963. Against that order, the assessee preferred an appeal which was allowed by the AAC, Gwalior, on February 27, 1967, and the matter was remanded. The AAC pointed out that, in between, there had been a partition in the family on November 10, 1958, and that since the ITO had failed to follow the correct procedure inasmuch as he had not apportioned the amount payable by the members of the joint family in proportion to the joint family property allotted to each of them on partition, a fresh order of assessment deserved to be passed. He accordingly directed the ITO to make a fresh assessment after following the correct procedure as laid down under s. 25A(2) of the Indian IT Act, 1922. In pursuance of the aforesaid order, the ITO passed a fresh order of assessment on July 8, 1974. In this order, he made a direction that the demand raised against the HUF will be recovered from the members of the partitioned family in proportion to the assets received by each member on the partition which took place on November 10, 1958. This order of the ITO, in so far as the apportionment of liabilities is concerned, was reversed by the AAC, but on second appeal by the Department, was restored by the Tribunal. The application made by the assessee under s. 256(1) of the Act was dismissed by the Tribunal and it is thereafter that the present application has been filed in this Court.

At this place, it may also be mentioned that prior to the passing of the order of assessment, two gift deeds had been executed by the karta of the HUF in favour of his sons and daughters on December 5, 1955, and December 27, 1955, and it was thereafter that the partition took place on November 10, 1958.

As regards the two gift deeds, they were held to be invalid by the Tribunal, ” B ” Bench, Bombay, in ITA No. 11292 of 1963-64 by order dated July 7, 1964, and it appears that the said order became final. The partition which had taken place on November 10, 1958, was, however, recognized by the ITO in the assessment proceedings for the asst. yr. 1959-60 on January 11, 1967, as contemplated by s. 25A(1) of the Indian IT Act, 1922. In making a direction about the apportionment of tax liability in the order of assessment dated July 8, 1974, the ITO placed reliance on this partition dated November 10, 1958, as recognized by order dated January 11, 1967, and required the tax liability to be recovered from the members of the family in accordance with the shares allotted to them in the aforesaid partition. The Tribunal, in its order passed in the second appeal on January 11, 1983, has, with regard to the gift deeds and partition, pointed out that the two gift deeds have already been held to be invalid by the ” B ” Bench of the Tribunal, Bombay, on July 7, 1964, as already indicated above. What is of greater significance is the fact that the Tribunal has recorded a further finding that even the HUF thought the gift deeds to be invalid and accordingly ” in the partition deed, it purported to partition the property under the gift deeds also as per the partition deed, though in the same proportion “. The gifts were said to be part of the scheme for partition of the family. As already indicated, this partition was recognized in proceedings for assessment for the asst. yr. 1959- 60 on January 11, 1967. The validity of this partition has not been challenged by learned counsel for the assessee before us and as seen above, the apportionment of tax liability has been made by the ITO in his order of assessment dated July 8, 1974, on the basis of this partition. Apparently, therefore, no exception can be taken to the apportionment made of the tax liability. It cannot be said that on this score, any question of law arises from the appellate order of the Tribunal.

As regards the question as to whether the two gift deeds were void or voidable, suffice it to say that even this question does not arise from the appellate order of the Tribunal not only because these two gift deeds had already been held to be invalid by the Bombay Tribunal by its order dated July 7, 1964, but also because the HUF itself treated these gift deeds to be invalid and in the partition deed, it purported to partition the property under the gift deeds as per the partition deed, as indicated above. Apportionment in the instant case having been made not on the basis of the gift deeds but on the basis of the partition, the question whether the gift deeds were void or voidable is at best only of academic interest.

In the result, we find no merit in this application. It is accordingly dismissed. There shall be no order as to costs.

[Citation : 172 ITR 691]