Mobile View
Main Search Advanced Search Disclaimer
Cites 11 docs - [View All]
The Income- Tax Act, 1995
Article 216 in The Constitution Of India 1949
Income Tax Officer, Callcut vs Smt. N.K. Sarada Thampatty on 14 September, 1990
State Of Maharashtra vs Narayan Rao Sham Rao Deshmukh & Ors on 19 March, 1985
Sidheshwar Mukherjee vs Bhubneshwar Prasad Narainsingh ... on 5 October, 1953

User Queries
Rajasthan High Court
Prakash Chand Lunia vs Tax Recovery Officer on 3 August, 1999
Equivalent citations: 2000 107 TAXMAN 181 Raj


1. The petitioner has filed the present writ petition as a karta of an HUF, i.e., HUF against the certificate issued by the Tax Recovery Officer (hereinafter referred to as TRO) under section 222 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The petitioner submits that for an individual liability of the petitioner, the property of the H UF neither can be attached nor auctioned for recovery of the arrears of income-tax due from the petitioner Prakash Chand Lunia in individual capacity. Copy of the notice has been attached, Annexure A, to the writ petition, wherein it is mentioned that Prakash Chand Lunia (defaulter) had failed to pay the sum of Rs. 3,00,61,927 payable by him in respect of certificate No. 99/120 dated 27-7-1992, as forwarded by the Income Tax Officer, Ward-2, Ajmer, and the interest payable under section 220(2) of the Act and, therefore, the TRO had certified under section 223(2) of the Act that the amount mentioned above is to be recovered from said Prakash Chand Lunia. Notice contained the specification of the property being House No. 10/265, situated at Niti Marg, Ajmer, belonging to the HUF property and one shop situated in Naya Bazar. It is mentioned in Annexure A that the notice is being issued under the said provisions of the Act for the said HUF so far as the share of Prakash Chand Lunia is concerned. On receipt of the notice Annexure A, the TRO, Ajmer, issued an order for sale of the property aforesaid details of which have been mentioned in Annexure B, i.e., a bungalow at Niti Marg, Ajmer, and shop HUF property at Naya Bazar, Ajmer, presently let out to N.K. Jewellers, and three others. Annexure 'B' was issued on 14-2-1995. The petitioner is also aggrieved against the issuance of Notice Annexure `B'. Annexure 'B' stated that for the amount mentioned in Certificate No. 99/120, the amount now to be recovered was Rs. 6,00,09,341 after adding the tax, etc. It was mentioned in Annexure B that public auction would be held on 27-3-1995. Details of property as mentioned in auction notice were given as under:

"1. Prakash Chand Lunia, HUF property Bungalow at Niti Marg, Ajmer.

2 Prakash Chand Lunia, HUF's property building (shop) at Naya Bavar, Ajmer, presently let out to the following: 1. NK. Jewellers (Ground floor), 2 Rishab Saree Centre (First Floor), 3. Shri Sunil Kumar (First Floor), 4. Shri Chiranjilal Pandya (2nd floor)."

2. The petitioner submited that he had been made liable for payment of tax in the individual capacity in regard to his business and against the assessment even though the appeals are pending but there is no authority with the respondents to issue notice under section 222 or any other provisions of law for auction of the property belonging to HUF of which the petitioner is only a coparcener. Even in the Annexures `A' and 'B' as reproduced above, the respondents had stated in the notice of auction that the property belongs to an HUF.

3. The facts stated in the petition are not denied. The petitioner, as an individual, was assessed to wealth-tax from time to time and proper return of wealth was filed for the assessment year 1991-92 declaring the net wealth of the petitioner at Rs. 3,39,620 and net income of the petitioner was Rs. 24,633 for which the return was filed relevant for the assessment year 1993-94. The income of Rs. 16,600 was declared being the rent from the two properties. Prakash Chand Lunia is also an assessee as an individual. He too filed his return of the income-tax declaring Rs. 96,980 as his income in respect of the accounting period from 1987 to 31-3-1989. For the year 1989-90, he was assessed for a total sum of Rs. 3,09,88,585 on 25-3-1992. He preferred an appeal and ultimately the Tribunal, Jaipur Bench, vide its order dated 29-12-1993 in IT Appeal No. 1442 (Jp) of 1992 allowed the appeal in part. The reference application against the order of the Tribunal was still pending at the time of filing of the appeal.

Prakash Chand Lunia as an individual was also levied penalty of Rs. 1,60,93,257 on 30-9-1994. First appeal was dismissed on 26-12-1994. Second appeal is pending before the Tribunal as stated in the petition. The petitioner submits that so far as the family HUF as assessed above is concerned, that amount has since been paid but for the amount assessed against the petitioner Lunia in his individual capacity, the notice, Annexures `A' and 'B', had been issued for sale of the property of the HUF family. It is submitted that a prohibitory order was passed in relation to the HUF property wherein the petitioner was only a karta, ie., HUF Property No. 10/265, Niti Marg, Ajmer, in regard to his share. It is the submission of the petitioner that so far the shop situated in Naya Bazar is concerned, a total amount of Rs. 1,275 per month is being paid by the tenants and as for the property at Niti Marg, Ajmer, is concerned, that also is rented out. It is submitted that the HUF is still in existence and has not been partitioned as yet and unless and until a partition is taken place, the share of its members or coparceners cannot be known or ascertained. The HUF property of the coparcener even official cannot be sold or attached for the reason that there is no specific share of any coparcener.

4. The petitioner is challenging the impugned order only on the abovesaid submissions. In reply filed by the respondents, it is admitted that Prakash Chand was defaulter in individual capacity and according to the proclamation made vide Annexure 2, it is submitted in the written statement that undivided share of said Prakash Chand Lunia is to be auctioned out of the coparcenary HUF property. What is left to be determined in the present writ petition is that for a default of an individual assessee, whether property of the coparcenary, undivided and partitioned, irrespective of the fact of the member or coparcener, holding the coparcenary property, can be sold, attached or auctioned for recovery of an amount from a member who happens to be coparcener but is liable for his individual assessment.

5. What is the nature of the coparcenary property before partition and what is the procedure of partition as per provisions of Hindu Law by Mulla 15th edn. ? Article 216 and Article 235, undivided coparcenary property in Mitakshara law define as unity ownership which is vested in the whole body of the coparcener. Is the interest of the coparcener fluctuating, capable of being enlarged by deaths in the family, liable to the diminished by births in the family and it is only on partition that such coparcener is entitled to a definite share ? The right of each coparcener until a partition takes place consists in a common possession and common enjoyment of the coparcenary property. There is a community of interest and unity of possession between all the members of the family and upon the death of any one of them the others may well take by survivorship.

6. The rights of coparcener as per article 235-It is stated that no coparcener is entitled to any special interest in the coparcenary property, nor is he entitled to exclusive possession of any part of the property. There is community of interest and unity of possession as has been held in Naranbhai v. Ranchod [1902] 26 Bombay 141,144 and in Katama Natchiar v. Rajah of Shivagunga [1863] 9 M. L.A. 5 3 9,543, 615. Article 216 and article 235 read as under:

'216. Undivided coparcenary interest-The essence of a coparcenary under the Mitakshara law is unity of ownership. The ownership of the coparcenary property is in the whole body of coparceners. According to the true notion of an undivided family governed by the Mitakshara law, no individual member of that family, whilst it remains undivided, can predicate, of the joint and undivided property, that he, that particular member, has a definite share, one-third or one-fourth. His interest is a fluctuating interest, capable of being enlarged by deaths in the family, and liable to be diminished by births in the family. It is only on a partition that he becomes entitled to a definite share. The most appropriate term to describe the interest of a coparcener in coparcenary property is 'undivided coparcenary interest'. The nature and extent of that interest is defined in article 235. The rights of each coparcener until a partition takes place consist in a common possession and common enjoyment of the coparcenary property.

235. Rights of coparceners.-(1) Community of interest and unity of possession.- No coparcener is entitled to any special interest in the coparcenary property, nor is he entitled to exclusive possession of any part of the property. As observed by their Lordships of the Privy Council, 'there is community of interest and unity of possession between all the members of the family. 'This has been reiterated by the Supreme Court in numerous decisions.

(2) Share of income.-A member of a joint Mitakshara family cannot predicate at any given moment what his share in the joint family property is. His share becomes defined only when a partition takes place. As no member, while the family continues joint, is entitled to any definite share of the joint property, it follows that no member is entitled to any definite share of the income of the property. The whole income of the joint family property must be brought, according to the theory of an undivided family, to the common chest or purse, and there dealt with according to the modes of enjoyment by the members of an undivided family.

It is competent to the manager to allot to any individual member a portion of the family property to enable him to maintain himself out of its income. Any savings out of the income and investments of such savings will be the separate property of the members.

(2A) Joint possession and enjoyment.-Each coparcener is entitled to joint possession and enjoyment of the family property. If any coparcener is excluded from joint possession or enjoyment, he is entitled to enforce his right by a suit. He is not bound to sue for partition.'

7. In CGT v. N.S. Getti Chettiar [1971] 82 ITR 599, the Supreme Court observed as under:

"Before proceeding to examine the relevant provisions of the Act, it is necessary to mention that according to the true notion of an undivided Hindu family, no individual member of that family, whilst it remains undivided, can predicate of the joint and undivided property, that he, a particular member, has a certain definite share, namely, a third or a fourth. All the coparceners in a Hindu joint family are the joint owners of the properties of the family. So long as the family remains joint, no coparcener can predicate what his share in the joint family is. His share gets determined only when there is a division of status or a division by metes and bounds. Therefore, it is not correct to assume that a coparcener in Hindu joint family has any definite share in the family property, before its division . . .." (p. 603)

8. Similar was effect in State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1987] 163 ITR 31 (SC), wherein it was observed as under:

"A Hindu coparcenary is, however a narrower body than the joint family. Only males who acquire by birth an interest in the joint or coparcenary property can be members of the coparcenary or coparceners. A male member of a joint family and his sons, grandsons and great grandsons constitute a coparcenary. A coparcener acquires right in the coparcenary property by birth but his right can be definitely ascertained only when a partition takes place. When the family is joint, the extent of the share of a coparcener cannot be definitely predicated since it is always capable of fluctuating. It increases by the death of a coparcener and decreases on the birth of a coparcener ............" (p. 36)

9. As regard as to how the HUF property is to be partitioned, the Supreme Court in Income Tax Officer v. Smt. N.K. Sarada Thampatty [1991] 187 ITR 696 (SC) had held that the definition of 'partition' in the Explanation to section 171 of the Act, does not recognise the partition of a HUF even if it is effected by a decree of court unless there is a physical division of the property of the family and if the property is not capable of being physically divided, then at least there is division of the property to the extent it is possible; otherwise, the severance of status will not amount to partition. The Supreme Court observed as under:

"The above definition of 'partition' does not recognise a partition even if it is effected by a decree of court unless there is a physical division of the property and if the property is not capable of being physically divided, then there should be division of the property to the extent it is possible; otherwise, the severance of status will not amount to a partition. In considering the factum of partition for the purposes of assessment, it is not permissible to ignore the special meaning assigned to partition .... partition is effected through a decree of court. Ordinarily, a decree of a civil court in a partition suit is good evidence in proof of partition but, under section 171, a legal fiction has been introduced according to which a preliminary decree of partition is not enough; instead, there should be actual physical division of the property pursuant to a final decree, by metes and bounds. The legislature has assigned a special meaning to 'partition' under the aforesaid Explanation with a view to safeguard the interest of the revenue. Any assessee claiming partition of the Hindu undivided family must prove the disruption of the status of a Hindu undivided family in accordance with the provisions of section 171, having special regard to the Explanation. The assessee must prove that a partition effected by agreement or through a court's decree was followed by actual physical division of the property. In the absence of such proof, partition is not sufficient to disrupt the status of Hindu undivided family for the purpose of assessment of tax. Under the Hindu law, members of a joint family may agree to partition of the joint family property by a private settlement agreement, arbitration or through court's decree. Members of the family may also agree to share the income from the property according to their respective shares. In all such eventualities, the joint status of the family may be disrupted but such disruption of family status is not recognised by the legislature for purposes of income-tax. Section 171 of the Act and the Explanation to it, prescribe a special meaning to partition which is different from the general principles of Hindu law. It contains a deeming provision under which partition of the property of the Hindu undivided family is accepted only if there has been actual physical division of the property; in the absence of any such proof, the Hindu undivided family shall be deemed to continue for the purpose of assessment of tax. Any agreement between the members of the joint family effecting partition or a decree of the court, for partition cannot terminate the status of a Hindu undivided family unless it is shown that the joint family property was physically divided in accordance with the agreement or decree of the court.' (p. 700)

10. The Karnataka High Court in S.N. Santhalingam v. ITO (1980) 121 ITR 868 (Kar), and another had held that the recovery proceedings could not be enforced against a person who was not named in the certificate as the defaulter merely on the ground that he was a partner of the firm. The court held that the term 'defaulter' means the assessee mentioned in the certificate. Section 220 provides that when any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 is not paid within the time prescribed, the person to whom the notice of demand is issued shall be the assessee in default, and, thus, it is clear that the assessee who becomes a defaulter is the person to whom a notice of demand in the prescribed form is issued. So far as the case of the Allahabad High Court in ManoharLal v. CIT [1988] 171 ITR 241 (All), wherein the view taken by the Karnataka High Court was affirmed. It was also held by the Kerala High Court in P.K. Kunjamma v. TRO (1997) 227 ITR 852 (Ker), affirming the aforesaid view.

11. On the other hand, the counsel for the respondents relies on the Hindu Law by Mayne's 14th edn., paras 402, 403, 405, wherein it has been firmly established that an alienation by a coparcener made without the consent of other coparcener has been held to be only voidable at the option of the other coparceners, the alienating coparcener himself not being competent to impeach it. In all the States in India, the undivided interest of a coparcener in joint family property may, during his lifetime, be seized and sold in execution of a decree against him for his own debt, provided the attachment was made before his death. It was observed that it would be natural step to extend this principle to all coparceners, so far as to allow creditor to seize the interest of any one in the joint property as a satisfaction of his separate debt. It has been finally established that since the decision of the Judicial Committee in 1873 in Deen Dayal v. Jugdip Narain, that the purchase of an undivided property at an execution sale during the life of the debtor for his separate debt does not acquire his share in such property with the power of ascertaining and realising it by a partition. The Privy Council in Suraj Bunsi v. Sheo Persaud [1879] 6 IA 88, held that there can be little doubt that all such alienations, whether voluntary or compulsory, are inconsistent with the strict theory of a joint and HUF; upon the equity which a purchaser for value has, to be allowed to stand in his vendor's shoes, and to work out his rights by means of a partition. In Sidheshwar Mukherjee v. Bhubeshwar Prasad Narain Singh AIR 1953 SC 487 in a case of decree of personal debt against a coparcener execution sale-purchase of undivided interest of coparcener, it was held that the purchaser did not acquire title to any defined share in property and was not entitled to joint possession from date of his purchase and he could work out his rights only by a suit for partition.

12. In Dropdi Devi v. Jagdish Chandra RLR 1988 (2) 468, the Hon'ble Bench of this court held that attachment of undivided interest of a coparcener in execution of a decree against him for his personal debts is permitted under the law.

From the above discussion, it is very clear that so far as the undivided HUF property is concerned, there is no defined share of a coparcener until and unless the property is divided or partitioned. If a decree is obtained against an individual coparcener, his property is liable to be sold in execution proceedings but the purchaser can have his share only by way of effecting partition.

13. In the present case, notice under section 222 is to be given to an assessee in default and the authorities can proceed to recover from such assessee the amount specified by one or more modes mentioned, ie., attachment or sale of the assessee's movable or immovable properties and arrest or detention of the assessee, by appointment of a receiver for the management of the assessee's movable property. No doubt in the present case, the assessee is Mr. Prakash Chand Lunia in his individual capacity. Notice given in the present case is not to any other coparcener or member of the HUF property but it is to Prakash Chand Lunia for recovery of the amount for which he was individually liable from the property in which he has got a share in HUF. If the decree can be executed against the share .of a coparcener in HUF property, on the same anology the share of a defaulter in the HUF property is also to be attached.

14. In view of the facts and discussions, it is not denied that the petitioner had a share in the HUF property and a notice for recovery of tax has also been issued to the petitioner in his individual capacity by the Tax department subject to the final decision of appeal, etc. The respondent has issued a notice for auction of the property of the share of the petitioner as it existed at the time of issuing the notice in the HUF property specified in the notice. It cannot be said that by attaching the share of the petitioner in HUF property, the respondent has committed any illegality. Of course, if and when such property is ultimately sold in pursuance of the impugned notice, the purchaser shall have only a right of purchase of the share of the petitioner and shall be inducted as one of the shareholders in the HUF property which is permitted by law. Such purchaser would be placed in the shoes of the petitioner and can enforce his right later on by seeking a partition of the property in accordance with law. But so far as the issuing of the notice under the relevant provisions of the income-tax to the petitioner is concerned, no illegality can be found and writ petition is likely to be dismissed and is dismissed.

15. No order as to costs.