Law:

Section:

Section 171, read with section 297(2) of the Income-tax Act, 1961 - Hindu Undivided Family - Assessment after partition - Assessment years 1961-62 and 1962-63 - Whether in view of section 297(2)(g) provisions of section 171(8) are attracted to a case where there was disruption of HUF before 1961 Act came into force but assessment was completed after the Act came into force - Held, yes FACTS One N and his three sons, SR, R and S constituted a HUF. In 1947, SR died leaving behind him a widow, RS. N died in 1950. RS filed a suit for partition and separate possession of her share of the family properties. The suit was decreed. There was considerable controversy whether for purposes of section 25A of the Indian Income-tax Act, 1922, there was a disruption of the HUF in June, 1955, when RS was put in possession of certain properties tentatively, or on 16-03-1961, when a final decree was passed in the suit allotting the very properties to her finally, or on 9-03-1962, when the rest of the properties were divided between the remaining members of the family. The controversy was set at rest by the Tribunal in the assessment proceedings where it was held that there was a disruption of the HUF on 16-03-1961. That finding was also confirmed by the High Court. The three penalty proceedings which were the subject-matter before this court were initiated on the basis that the HUF was the assessee. The Tribunal was of the view that the penalties were not leviable as the family had become disrupted on 15-03-1961. On reference: HELD The Tribunal was patently right in regard to the alleged default in payment of tax for the assessment year 1962-63. The family had become disrupted before the commencement of the year of account and there could, therefore, be no question of assessing the non-existent HUF or treating it as a defaulter. As regards the question whether the provision of section 171(8) are attracted to a case where there was disruption of the family before the 1961 Act came into force but where the assessment was completed after the Act came into force, section 297(2)(g) puts the matter beyond doubt by enacting that any proceeding for the imposition of a penalty in respect…

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