N. Kumar, J.@mdashSri M.V. Sheshachala, learned Counsel takes notice for respondents in Cross Appeals.
2. As these appeals and cross appeals arises out of the very same order passed by the Tribunal and the assessees are all members of the erstwhile joint family and therefore they are all taken up for consideration together and disposed of by this common order.
3. One Sri Anjana Murthy was the karta of Hindu Joint Family. He was the sole surviving coparcener. The family owned agricultural lands. They were also rearing cattle and carrying on milk vending business. After his death, his sons continued the coparcenary. Out of his wedlock with Komala, his first wife, he had four daughters, namely, Parmila, Latha, Anita and Manjula, After the death of Komala, Anjana Murthy married Smt. Subbalaksnmi and he had two sons and one daughter, viz, Ashok Kumar, Arvind Kumar and Ramya. He had performed marriage of his four daughters during his life time. Anjana Murthy died on 21.02.1994. After his death, the marriage of his daughter Ramya was performed on 16.02.2004. Ramya was given her share in the property of the family by a registered gift deed of about 5 acres of land in Devanahalli. After the death of Anjana Murthy, as his two sons were minors, his second wife Subbalakshmi continued to manage the affairs of the family, till the final partition on 01-11-2005. The case of the assessee is that there was a oral partition on 10.02.1996, in which, the daughters of Anjana Murthy through his first wife were given share equal to l/8th share in about two acres of land belonging to joint family. On 01.02.1999 there was a second partition in the family and 33 dwelling units were partitioned among the assessee and her two sons. They have been receiving rental income as co-owners and tenants in common with l/3rd share each. However, a final partition took place on 01-11-2005. Thereafter no property exist, which may be construed as Hindu Undivided Family property.
4. A search u/s 132 of the Act took place in the case of the assessee and her two sons on 30.09.2005. Certain incriminating documents were found and seized. Thereafter, a notice u/s 153A of the Act was issued on 02.02.2006 requesting the assessee to file the return of income for the assessment year 2004-05 within 30 days from the date of service of notice. Notice u/s 142(1) was issued on 18.04.2007 calling upon them to produce cash books, ledger books as on 01.04.2000 to 31.03.2001. The notice was served on 18.04.2007. There was no compliance. Again a notice u/s 142 was issued on 01.05.2007 posting the case for hearing on 08.05.2007 and to produce the cash book, ledger, bank pass book for the period 01.04.2003 to 31.03.2004. There was no compliance. However, the assessee filed return of income on 21.05.2007 declaring income of Rs. 99,237.00 being l/3rd share of rent in respect of the co-owner of about 33 dwelling units situated in Sy. No. 2/1 and Sy. No. 2 /2, Lottegollahalli Village, Bangalore. Thereafter the Assessing Authority proceeded to pass the impugned order.
5. Aggrieved by the same, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). It came to be dismissed. Aggrieved by the same, the assessee preferred an appeal to the Tribunal,
6. The case of the assessee through out was that the search conducted u/s 132 of the Income Tax Act, 1961 is not a valid search. It was not preceded by a valid authorisation issued u/s 132 of the Act. Moreover, the authority who issued authorisation had not recorded his satisfaction as required under law. The authorisation has been issued in favour of three persons and others, which is totally impermissible in law. Therefore, it was contended that the assessment order passed u/s 153A is one without jurisdiction and is liable to be set aside, as a valid search is sine qua non for block assessment proceedings. On merits, it was contended that the Hindu Undivided Family was not assessed to tax at all. Therefore, Section 171 is not attracted. Oral partition is well recognized under Hindu Law. There was an oral partition on 01-11-2005, which is reduced into writing. The properties that fell to the members of the joint family in the aforesaid partition, belong to them exclusively and in the return filed, they have shown those properties. Therefore, those properties have to be assessed only in the hands of those assessees to whose share the properties has fallen in the partition and it cannot be assessed as a Hindu Undivided Family. Therefore the Assessing Authority as well as the appellate authority committed serious error in assessing the said properties contrary to the contents of the return filed by those persons.
7. The Tribunal relying on the judgment rendered by it in Ramaiah Reddy''s case, declined to go into the validity of the satisfaction, authorisation and search u/s 132 of the Act. On merits, it held that the Assessing Authority has to re-look into the matter and find out what are the properties which had fell to the share of these members in pursuance of the oral partition and then find out when those properties are sold and then find out on the date, the properties were sold, whether it was an individual property belonging to Hindu Undivided Family and thereafter pass appropriate assessment orders.
8. Aggrieved by the finding of the Tribunal that it has no jurisdiction to go into the validity of the search, the assessees have preferred cross appeals.
9. The Revenue has preferred these appeals on the ground that if the registered sale deeds recites that the property which are sold are the absolute properties of the seller, the same can be acted upon and there is no necessity to remand the matter back to the Assessing Authority for reconsideration. Therefore, according to the Revenue, the order of remand is bad in law.
10. We have heard the learned Counsel for the parties.
11. This Court had an occasion to consider the correctness of the judgment rendered by the Tribunal in Ramaiah Reddy ''s case. This Court, by its judgment delivered on 08.09.2010 in ITA No. 503/03 preferred by Ramaiah Reddy, has set aside the judgment of the Tribunal and held that the Tribunal has got powers to look into all aspects of search and a valid search is sine qua non for initiating block assessment. Therefore, in the light of the aforesaid judgment, the refusal on the part of the Tribunal to go into the validity of search which is sine qua non, is illegal and therefore requires to be set aside.
12. Insofar as the case on merits is concerned, it is an undisputed fact that, all these properties were joint family properties, at a particular point of time. However, the joint family itself was not assessed to tax and as rightly held by the authorities. Section 171 is not attracted. The law recognises oral partition.
Therefore, if, in a oral partition dated 10.02.1996 and 01-12-1999, if the properties have fallen to the share of members of the family, from the date of such partition, it becomes their absolute property and if they have sold that property thereafter, it is they who had to pay capital gains. The said properties cannot be treated as Hindu Undivided Family. It is on record that the said partition is also the subject-matter of civil litigation, as all the authorities have not accepted the same. Under these circumstances, what is to be seen is, on the dates of oral partition which are not in dispute, what are the properties which has fallen to the share of the members, how that properties has been held by them subsequent to the partition and after such partition, whether any properties remained in Hindu Undivided Family and before the final partition which is reduced into writing on 01-11-2005, whether those properties are sold or those properties are sold after the final partition and in the final partition, who are the persons who get properties, are the matters which has to be ascertained by looking into the sale deeds and other documents on which the parties rely on. If the Tribunal can look into those documents and pass orders on merits, that would be the best thing to do. But if for any reason, the Tribunal is unable to take up that exercise for want of sufficient material, then it may have to remand the matter to the Assessing Authority. It is not proper for the Tribunal to remand the matter without attempting to settle the matter at the stage of Tribunal. In that view of the matter, we pass the following order:
(i) Appeals are partly allowed.
(ii) The Cross Appeals are allowed in full.
(iii) The order passed by the Tribunal in all these cases is hereby set aside.
(iv) The entire matter is remanded back to the Tribunal for fresh consideration.
(v) All the contentions that are urged both on the ground of jurisdiction as well as on merits, are kept open to be agitated before the Tribunal.
(vi) Parties to bear their own costs.
Sri M.V. Sheshachala, learned Counsel is permitted to file memo of appearance in Cross Appeals, within four weeks.
