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Govardan Hathi Bhai And Company v. Income-Tax Officer, Mattancherry, And Another.
Structured Summary of the Opinion delivered by Vaidialingam, J.
Factual and Procedural Background
The writ petitioner challenged certain income-tax orders: reassessment orders and the levying of penalty by income-tax authorities. The petitioner (represented by Mr. C.K. Viswanatha Iyer) principally contended that, because the Cochin Income-tax Act (VI of 1117) had been repealed by the Finance Act of 1950, section 38 of the Cochin Act (the provision under which penalty was sought to be levied) was no longer available to the assessing officer to levy penalty. The petition was filed under article 226 of the Constitution.
The Court noted that this particular contention was concluded against the petitioner by a recent decision of the Supreme Court in Commissioner of Income-tax v. Bhikaji Dadabhai & Co. and accordingly that aspect of the petition could not succeed. The Court considered other contentions on the merits because, in the circumstances, referring the petitioner to the statutory appellate forum after a long lapse would cause hardship.
The petitioner raised two principal factual/contention points: (1) that the Hindu joint family had been disrupted by a regular partition deed executed on December 10, 1947, and therefore the assessing officer could not levy penalty on family members after the disruption under section 34 of the Cochin Act (corresponding to section 25A of the Indian Income-tax Act); and (2) that the suppression, which led to penalty, was committed by the deceased (Popatlal), and therefore the succeeding karta/manager (the petitioner, Amrithlal) could not be visited with a penalty.
On the factual record, the Appellate Assistant Commissioner (in Exhibit M) had considered the claim of partition and recorded findings that (a) no order under section 34(1) of the Cochin Act had been passed recognizing partition and (b) no clear claim under section 25A(1) had been shown to have been made; the Assistant Commissioner concluded that the original undivided family should be deemed to continue for assessment purposes. The petitioner did not challenge those findings before the statutory Tribunal.
Legal Issues Presented
- Whether, after repeal of the Cochin Income-tax Act by the Finance Act of 1950, section 38 of the Cochin Act could no longer be relied upon by the assessing officer to levy penalty (i.e., validity of penalty powers post-repeal).
- Whether, where a Hindu joint family had executed a partition deed (dated December 10, 1947), the assessing officer could levy penalty on members after the family had ceased to be joint — specifically the application of section 34 of the Cochin Act (and its correspondence to section 25A of the Indian Income-tax Act).
- Whether a succeeding karta/manager (here, the petitioner Amrithlal) could be subjected to penalty for suppressions allegedly committed by the deceased karta (Popatlal).
- Whether the reassessment order itself warranted interference (the opinion notes incidental attacks to reassessment but finds no merit in them).
Arguments of the Parties
Petitioner's (Appellant's) Arguments — Mr. C.K. Viswanatha Iyer
- Main contention: after repeal by the Finance Act of 1950, the Cochin Income-tax Act (specifically section 38) could not be used by the officer to levy penalty.
- Primary factual/constructive contention: the joint family had been dissolved by a regular partition deed dated December 10, 1947; therefore, on reassessment and penalty in later proceedings the family no longer existed as a joint family and penalty could not be levied on its members under section 34 of the Cochin Act (corresponding to section 25A of the Indian Income-tax Act).
- Alternate contention: the person guilty of suppression was the deceased (Popatlal); consequently, the succeeding karta/manager (the petitioner, Amrithlal) could not be penalised for acts of the deceased.
- Also invoked authorities suggesting that High Court interference under article 226 can be appropriate in some circumstances rather than resorting to statutory appellate remedies.
Respondent's (Revenue's) Arguments — Mr. G. Rama Iyer
- Submitted that no order as contemplated by section 34(1) of the Cochin Act (i.e., recognition of partition by the assessing authority after inquiry) had ever been passed and the department had not recognised the partition in the assessment proceedings.
- Relied on the Appellate Assistant Commissioner’s factual findings (Exhibit M) that no claim under the relevant statutory provision had been made and that the original undivided family should be deemed to continue for assessment purposes.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner of Income-tax v. Bhikaji Dadabhai & Co. [1961] 42 I.T.R. 123 | Establishment that the officer retains powers and jurisdiction to levy penalty despite repeal arguments. | The court treated this Supreme Court decision as concluding the petitioner's main repeal contention; accordingly the court held that the officer had power and jurisdiction to levy penalty and that the repeal argument could not succeed. |
| C.A. Abraham v. Income-Tax Officer, Kottayam [1961] 41 I.T.R. 435 | The Income-tax Act provides a complete machinery for assessment, imposition of penalty, and obtaining relief; a party with an adequate appellate remedy cannot abandon it and invoke article 226. | The court noted this authority as a clear exposition that ordinarily the petitioner should resort to the statutory appellate forum (the Tribunal) and that article 226 would not normally be invoked where an adequate remedy by appeal exists. Nevertheless, due to hardship and delay, the court considered the merits. |
| Mahankali Subba Rao v. Commissioner of Income-tax (Andhra Pradesh High Court) | Held that there is a lacuna in section 25A of the Indian Income-tax Act and no provision expressly gives power to Income-tax authorities to levy penalty on divided members after the family ceased to be joint. | The court acknowledged this decision and its conclusion; considered it in light of the statutory provisions but observed that in the present case the factual prerequisite (recognition under the statute) had not been established on the record before this court. |
| Commissioner of Income-tax v. Sanichar Sah Bhim Sah [1955] 27 I.T.R. 307 | Supporting decisions on the point that align with the Andhra Pradesh decision regarding penalty and family division. | Referred to as being in accordance with the Andhra Pradesh decision; cited as background authority but not applied to overturn the factual findings of the Appellate Assistant Commissioner in the present case. |
| Raju Chettiar v. Collector of Madras [1956] 29 I.T.R. 241 | Another decision consistent with the Andhra Pradesh decision on related statutory construction issues. | Referred to alongside other authorities; used to show that some courts have taken the view that penalty cannot be imposed once family status has ceased, but the present court declined to decide that question on the facts before it. |
| Hariram Suit v. Commissioner of Income-tax (Madras High Court) | Authority relied on by petitioner-counsel in support of the proposition that succeeding manager/karta may not be liable for suppression by predecessor. | The court noted the citation but rejected the petitioner’s contention on the available facts, given the Appellate Assistant Commissioner's finding of suppression and admissions in the petitioner’s affidavit. |
Court's Reasoning and Analysis
The Court's reasoning proceeded in a sequence of discrete steps, grounded in the authorities and the factual record before it:
- Repeal Argument: The Court first addressed the petitioner's primary contention concerning repeal of the Cochin Act and the availability of section 38 for levying penalty. Relying on the Supreme Court's decision in Commissioner of Income-tax v. Bhikaji Dadabhai & Co., the Court concluded that the repeal-based objection was no longer open to the petitioner. Consequently that head of attack failed.
- Jurisdictional Threshold and Article 226: The Court referenced C.A. Abraham to emphasise that the Income-tax legislation provides a full remedy machinery and that ordinarily the petitioner should not bypass statutory appeals in favour of seeking relief under article 226. Nonetheless, owing to the particular circumstances (hardship and delay that would result from referral to the Appellate Tribunal), the Court elected to consider the merits of the other contentions.
- Constructional Question on Partition (section 34): The Court analysed the statutory text of section 34 of the Cochin Act (notably subsection (3)), which deems a family to continue as an undivided Hindu family for the purposes of the Act when no order recognising division under subsection (1) has been passed by the Income-tax Officer after necessary inquiry. The Court observed that subsections (1) and (2) prescribe the mechanism for bringing division to the officer’s notice and for the officer's action on assessment.
- Factual Foundation — Appellate Finding: Applying section 34(3) to the facts, the Court noted that the Appellate Assistant Commissioner (Exhibit M) had considered the materials and expressly found that (a) no order under section 34(1) had been passed, (b) no proper claim under the corresponding statutory provision had been made, and (c) even the claim implicit in correspondence (the letter dated August 30, 1951) did not mention the partition deed. Those are findings of fact unchallenged before the statutory Tribunal.
- Effect of the Appellate Finding: Because the Appellate Assistant Commissioner’s factual findings were not contested before the appropriate Tribunal, the Court proceeded on the basis that those findings were correct. On that factual basis, section 34(3) operates so that the family must be deemed to continue as undivided for assessment purposes; hence the levy of penalty on the joint family was sustainable.
- Successor Karta Liability and Suppression: The petitioner's argument that the suppression was by the deceased (Popatlal) and that the succeeding karta (Amrithlal) could not be penalised was considered next. The Court observed that the Appellate Assistant Commissioner recorded that the appellant (petitioner) did not dispute that there had been suppression of profits. Moreover, the petitioner’s own affidavit admitted that he had personal dealings and had voluntarily disclosed some incomes under a compounding scheme and that certain personal incomes had not been included in returns. Given these admissions and the Appellate Assistant Commissioner’s findings, the Court found it could not accept the contention that the penalty related solely to acts of the deceased and could not be visited upon the petitioner.
- Incidental Challenge to Reassessment: The Court noted there were incidental attacks on the reassessment order but was not satisfied that those attacks had merit; the Court did not find grounds to interfere with reassessment on the material before it.
- Conclusion from Reasoning: On the combined legal and factual bases—(a) precedent dismissing the repeal contention, (b) statutory construction of section 34(3), and (c) the Appellate Assistant Commissioner’s uncontradicted factual findings and admissions in the affidavit—the Court concluded that the levy of penalty must be upheld and that the petitioner was not entitled to relief.
Holding and Implications
Holding: Petition dismissed.
Implications:
- The direct effect is that the writ petition under article 226 was dismissed and the penalty levied by the Income-tax authorities was upheld on the factual and legal record before this Court.
- The Court treated the Supreme Court authority (Bhikaji Dadabhai & Co.) as dispositive of the repeal argument, removing that head of attack.
- Because the Appellate Assistant Commissioner had recorded unchallenged factual findings that no recognition of partition had been made under the statutory procedure, the Court applied section 34(3) to deem the family to continue undivided for assessment purposes; on that basis penalty was sustainable.
- The Court rejected the contention that a succeeding karta could not be penalised for suppression allegedly by a predecessor, given the factual findings and admissions in the record.
- No broader constitutional or novel legal precedent was announced by the Court in this opinion beyond application of existing authorities and the particular facts; the decision resolves the petitioner's claim but does not purport to establish a new general rule beyond the statutory interpretation and authority citations discussed.
- Parties were directed to bear their own costs in these proceedings.
Note: This summary is based exclusively on the text of the provided opinion and does not add facts or inferences beyond what the opinion sets out.
The Judgment of the Court was delivered by
Vaidialingam, J.:— In this writ proceedings Mr. C.K Viswanatha Iyer, learned counsel for the writ petitioner, challenges certain orders passed by the income-tax authorities by way of reassessment and also levying penalty. So far as the question of penalty is concerned, the larger contention that was raised was to the effect that when once the Cochin Income-tax Act, VI of 1117, has been repealed by the Finance Act of 1950, section 38 of the Cochin Act is no longer available to the officer for exercising his powers of levying penalty.
2. So far as this aspect is concerned, this contention is no longer available to the petitioner as will be seen from the recent decision of their Lordships of the Supreme Court in Commissioner of Income-tax v. Bhikaji Dadabhai & Co. [1961] 42 I.T.R 123 Therefore, so far as this aspect is concerned, the writ petition will have to fail and we have to hold that the officer has powers and jurisdiction which could be exercised for levying penalty in appropriate cases. Probably it is this contention that was taken in the writ petition which related really to the jurisdiction of the officer to levy penalty under the repealed Cochin enactment that gave a chance to the writ petitioner to approach this court under article 226 of the Constitution. But now that question is concluded against the petitioner and the matter to be considered is what are the other points available for adjudication by this court in proceedings under article 226. So far as this is concerned, we have to bear in mind the decision of their Lordships of the Supreme Court in C.A Abraham… v. Income-Tax Officer, Kottayam….. His Lordship, Mr. Justice Shah, speaking for the court, observes at page 428 as follows:
“The Income-tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the income-tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal.”
3. In view of the clear exposition, if we may say so with respect, of the jurisdiction of court in matters arising under article 226 regarding assessment orders passed under the Income-tax Act, we could have dismissed the writ petition notwithstanding the fact that there are other contentions raised to which we will advert immediately. But Mr. Viswanatha Iyer also pressed before us that there are certain other decisions of the Supreme Court which will show that in such circumstances interference can be made by the High Court. But anyhow as we are adverting to the merits also in view of what is stated below it is unnecessary to dilate on this aspect further.
4. But Mr. Viswanatha Iyer, learned counsel, very strenuously urged that he had already come to this court raising not only the power and jurisdiction of the authority to function under the repealed Cochin Act for levying penalty but he had also raised other contentions regarding the matter in which that power has been exercised, in regard to the levy of penalty in these proceedings. Ordinarily we would have referred the petitioner to the appropriate appellate forum which is constituted under the Act itself. But in the particular circumstances of this case to refer the petitioner to the Appellate Tribunal after a long lapse of time would result in hardship and therefore we have considered the other contentions that are raised by Mr. C.K Viswanatha Iyer.
5. The contentions that are raised by Mr. C.K Viswanatha Iyer are mainly two-fold. The first is the joint family in this case has disrupted by a regular partition deed executed on December 10, 1947, and therefore when reassessment proceedings were taken and penalty was levied the joint family as such had ceased to exist and therefore the officer had no power to levy penalty on the members of the joint family after such disruption under section 34 of the Cochin Act corresponding to section 25A of the Indian Income-tax Act.
6. The second contention raised is that in any event the person who was guilty of suppression was the deceased, Popatlal, and, therefore, the officer had no power to levy a penalty on the succeeding karta or the succeeding manager of the joint family, namely, Amrithlal, the petitioner before us.
7. So far as this is concerned, we are again of the view that the question does not relate actually to the jurisdiction of the officer concerned, but really to a proper construction that is to be placed upon, particular sections in the enactment in question.
8. Though some incidental attacks have been made against the order of reassessment also, we are not satisfied that there is any merit in this contention.
9. Now coming to the two contentions, the first contention, as we have already stated, is that after the partition of the family there is no power in the officer to levy penalty as against the members of the family though it may be for an act done during the time when the family was joint.
10. The relevant provision in the Cochin Act that has to be noticed in particular is section 34, sub-section (3), which provides:
“Where such an order has not been passed in respect of a Hindu family or a Marumakkathayam tarwad hitherto assessed as undivided, such family or tarwad shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family or undivided Marumakkathayam tarwad.”
11. The other sub-sections, namely, sub-sections (1) and (2), deal with the manner in which the division of the joint family is to be brought to the notice of the officer and what exactly he has to do when making an assessment under section 28. According to sub-section (3) it will be seen that, when no order recognising the division of the family under the provisions of sub-section (1) of section 34 has been passed by the Income-tax Officer after the necessary inquiry, it shall be deemed to be continuing to be a Hindu joint family.
12. Mr. G. Rama Iyer, learned counsel for the revenue, submitted that no order as contemplated by sub-section (1) of section 34 has ever been passed nor has the partition been recognised by the department in these proceedings.
13. In this connection, Mr. C.K Viswanatha Iyer drew our attention to the analogous provision contained in the Indian Income-tax Act namely, section 25A, and also to the provisions of the Indian Income-tax Act relating to levy of penalty. Learned counsel also invited our attention to a decision of the Andhra Pradesh High Court in Mahankali Subba Rao v. Commissioner of Income-tax, a decision of the learned Chief Justice, Mr. Subba Rao, as he then was, and Mr. Justice Mohammad Ahmad Ansari. The learned judges in that case had to consider section 25A of the Indian Income-tax Act with special reference to the powers of the assessing authority to levy penalty in respect of a family which had ceased to be joint on the date of levying penalty. In that connection, no doubt, the learned judges go into that aspect and come to the conclusion that there is a lacuna in the section and there is no provision in the statute which gives power to the Income-tax Officers to levy penalty on the divided members after the joint family status had ceased to exist. It will also be seen that the learned Chief Justice refers to two other decisions, namely, Commissioner of Income-tax v. Sanichar Sah Bhim Sah [1955] 27 I.T.R 307 and Raju Chettiar v. Collector of Madras [1956] 29 I.T.R 241 which are in accordance with the views expressed by the learned Chief Justice in the decision of the Andhra Pradesh High Court. These decisions were adverted to by their Lordships of the Supreme Court in C.A Abraham… v. Income-Tax Officer, Kottayam…. [1961] 41 I.T.R 435. The learned judges observe at page 431:
“But whether on the dissolution of a Hindu joint family the liability for penalty under section 28 which may be incurred during the subsistence of the family cannot be imposed does not fall for decision in this case;…..”
14. If the question directly arises and if the petitioner is able to satisfy us that he has been able to obtain an order in the manner indicated in section 34(3) of the Cochin Act the decisions adverted to by the learned counsel and the power of the assessing authority in such circumstances will have to be considered directly by us and an opinion expressed one way or the other. But there is a difficulty for the petitioner created by the findings recorded in these proceedings by the Appellate Assistant Commissioner before whom the order levying penalty was taken up in appeal. Exhibit M is the order of the Appellate Assistant Commissioner. The petitioner appears to have raised the contention that the family has become divided and so far as that is concerned the Appellate Assistant Commissioner considers the materials that were made available before him and ultimately records a finding to the effect that not only has not the petitioner obtained an order under section 34(3) of the Cochin Act but he is even prepared to go further and say that no such claim appears to have been made at any time before the appropriate officers. In fact, the Appellate Assistant Commissioner seems to have directly put a question to the assessee's representative as to whether a claim under section 25A(1) has been made and it is also stated that the appellant's representative stated that such a claim is implied in the appellant's letter. That letter is dated August 30, 1951. The contents of that letter are adverted to by the Appellate Assistant Commissioner and ultimately he is of the view that there is no reference to a partition deed dated December 10, 1947, in that letter nor to an order under section 25A(1) of the Act. There-fore, the Appellate Assistant Commissioner concludes by saying “the original undivided family should therefore be deemed to continue for purposes of assessment proceedings”. In view of the finding recorded by the Appellate Assistant Commissioner on a pure question of fact and inasmuch as it has not been challenged by the petitioner before the appropriate Tribunal constituted under the Act itself, for the purpose of this writ petition we have to proceed on the basis that the findings recorded by the Appellate Assistant Commissioner are correct. Therefore, inasmuch as the petitioner has not been able to establish the essential requisite on which the contention is now sought to be raised it follows that the order of assessment levying a penalty on the joint family as such in the absence of any order having been obtained or any claim having been made on the basis of section 34(3) of the Cochin Act, the levy of penalty will have to be upheld by us. Learned counsel urged another contention, namely, that a succeeding manager or a succeeding karta of a joint family cannot be visited with a levy of penalty. In support of this contention the learned counsel again referred us to a decision of the Madras High Court in Hariram Suit v. Commissioner of Income-tax. A perusal of the order of the Appellate Assistant Commissioner clearly shows that the fact that the Appellant, namely, the petitioner, concealed the income was not disputed in the appeals before him. There is another circumstance to which also it is necessary to advert. Even in the affidavit that has been filed in this court, especially in paragraph 5, it has been stated that apart from suppressions stated to have been made by Poppatlal, the petitioner also was having some sort of personal dealings and that he also voluntarily disclosed the income of his personal ventures before the officer in pursuance of the compounding scheme started by the Government. The petitioner admits that the income voluntarily disclosed from his personal ventures during the years in question was not included also in any of the income-tax returns already submitted before the officers. No doubt, he gives some explanation in respect of these matters. We are only adverting to this to show that the contention of Mr. C.K Viswanatha Iyer, learned counsel for the petitioner, that the levy of penalty in this case is really in consequence of an act of suppression not by the petitioner but by the deceased, Poppatlal, cannot be accepted in full especially because there appears to be considerable doubt in view of the matters mentioned in the affidavit itself. That explains the reason for the statement recorded by the Appellate Assistant Commissioner adverted to earlier that the petitioner did not contest the position that there has been a suppression of the profits. Therefore, this contention of Mr. Viswanatha Iyer also has to be rejected in view of the statements contained in the affidavit filed in support of this application taken along with the findings recorded by the Appellate Assistant Commissioner. Therefore, it follows that the petitioner is not entitled to any relief in these proceedings and the writ petition is dismissed. Parties will bear their own costs in these proceedings.
15. Petition dismissed.
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