Holding

Assessments made without complying with the inquiry provision of section 25A are void and must be set aside, and the Tribunal must direct fresh assessments.

Summary

The Hindu undivided family of Kapurchand Shrimal claimed that its joint family property had been partitioned, sending letters to the Income‑Tax Officer on 10 Oct 1960, 16 Jun 1961 and 11 Mar 1962. Despite these timely claims, assessment orders for the years 1955‑56 to 1958‑59 were completed without the inquiry mandated by section 25A of the Income‑Tax Act, 1922. The Officer later refused to record the partition; the Appellate Assistant Commissioner set aside that refusal and directed the partition to be recorded as of 10 Jul 1960. The assessee appealed the assessment orders; the Income‑Tax Appellate Tribunal cancelled the assessments but gave no direction for fresh assessment. The Andhra Pradesh High Court reversed, holding the assessments valid with modification. The Supreme Court held that an assessment made without a section 25A inquiry is void, that the Tribunal was correct to set aside the assessments, and that it must also direct the assessing authority to make fresh assessments. Consequently, the High Court’s order was set aside and the appeals were allowed, directing fresh assessments in accordance with law.

Issues considered

Whether an assessment of a Hindu undivided family made without holding an inquiry under section 25A, despite a timely claim of partition, is valid.
Whether the Income‑Tax Appellate Tribunal, after cancelling such assessments, is required to direct the assessing authority to make fresh assessments or may merely cancel them.
Whether the High Court was correct in directing modification of the assessments rather than ordering fresh assessments.

Legislation cited

Income Tax Act, 1922s. 14(1), s. 18A(1), s. 25A, s. 30, s. 66(1)

Subjects

Hindu undivided familyPartitionSection 25AIncome tax assessmentAppellate TribunalFresh assessmentProcedural compliance

Judgment

505

KAPURCHAND SHRIMAL A
v.
COMMISSIONER OF INCOME TAX,
ANDHRAPRADESH,HYDERABAD

August 28, 1981 B

[P.N. BHAGWATI AND E.S. VENKATARAM!AH, JJ.)

Income Tax Act, 1922, section 25A, scope of-Whether an order of assessment
passed under the Indian Income Tax Act, 1922 by the Income Tax Officer in the
case of a Hi'ndu undivi'ded family without holding an inquiry into the validity of the
claim made within a reasonable time by a mem'ier of the Hindu undivided family
c
that a partition had taken place among the n1embers of the family is liable to be
merely cancelled in appeal by the lncome--tax Appellate Tribunal without a further
direction to the asres-;ing authority either to modify the assessmeilt suitably or to
pass a fresh order of assess1nent in accordance with law.

The assessee is a Hindu undivided family and the assessment years are D
1955-56 and 1957-58 to 1961-62. The assessee addressed on October 10, 1960 to
the Income-tax Officer in connection with a notice received under section 18A(l)
of the Act in respect of the assessment year 1961-62 stating that all the movable
and immovable properties of the assessee had been partitioned by metes and
bounds under partition deeds and that the Hindu undivided family was no
longer receiving any income as such and there was therefore no que~tion of
'payment of any advance tax by it. A specific request to record the factum of the E
partition for that purpose of the Act effective from July 10, 1960 was also prayed
for. This was followed by another letter on June !6, 1961 by M/s. S.G. Dastagir
and Co. on behalf of the assessee in connection with advance tax demanded for
the assessment year 1962-63 with a similar request. Before fresh assessments
were completed for the years 1955-56, 1957-58 and 1958-59 as per the orders of
the Appellate Assistant Commissioner dated February 24, 1962 a third letter
dated March 11, 1962 was addressed to the same Income-tax Officer with a similar F
request for recording the factum of partition. A.nother letter dated March 21,
1962 was addressed by M/s. S.G. Dastagir & Co. reminding the Income-tax
Officer of the earlier letters of October 10, 1960 and June 16, 1961.

The assessment for the years 1955-56 to 1958-59 were, however, completed
between August 21, L962 and March 27, 1963 without holding any jnquiry as
contemplated by section 25A of the 1922 Act regarding the factum of partition. G
The Income-tax Officer thereafter started an inquiry under section 25A and by
his order dated March 30, 1965 refused to record the partition. On appeal
against the refusal the Appellate Assistant Commissioner by his order dated
November 8, 1967 set aside the said order and directed the Income-tax Officer
to record the partition under section 25A as on July 10, 1960. That order became
final as an appeal was filed against it by the Revenue. In the appeals filed H
b:fore the Assistant Appellate Com1nissioner again5t the assessment orders for
the years in question, that is, 1955-56 and 1957-58 to 1961-62. the assessee con-
506 SUPREME COURT REPORTS [1982] I S.C.R.
./~

A tended that the assessments were liable to be set aside on the ground that the
inquiry into the claim of partition which was a condition precedent for making
an order of assessment on the Hindu undivided family had not been made as
required by section 25A of the Act. The Appellate Assistant Commissioner
rejected the said contention, but the appeals preferred before the Tribunal were
allowed. The Tribunal cancelled the assessments without any directions to make
fresh assessments. At the instance of the Revenue a reference was n1ade by the
B Tribunal to the High Court of Andhra Pradesh under section 66(1) of the Act.
The High Court answered the reference in favour of the Revenue and hence the
appeals.

Allowing the appeals, the Court

IIELD: (1) Under section 25A of the 1922 Act the Income-tax Officer was
C bound to hold an inquiry into the claim of partition if it is made by or on behalf
of any member of the Hindu undivided family which is being assessed hitherto
as such and record a finding thereon. If no such finding is recorded sub-section
(3) of section 25A of the Act becomes clearly attracted. When a claim is made
in time and the assessment is made on the Hindu undivided family without
holding an inquiry as contemplated by section 25A(1), the assessment is liable to
be set aside in appeal as it is in clear violation of the procedure prescribed for
D that purpose. [517 A-CJ

Kalwa Devadattam and two Ors. v. The Uuion of India and Ors., [19641
3 S.C.R. 191; Additional Income-tax Officer, Cuddapah v, A. Thimmayya & Anr.,
(1965) 55 I.T.R. 666 and Karri Ramkrishna Reddy v. Tax Recovery Officer,
Vijayawada, (1973) 87 J.T.R. 86, discussed and distinguished.

E (2) The:duty of the Tribunal does not end with making declaration that
the assessments are illegal and it is duty bound to issue further directions. The
appellate authority has the jurisdiction as well as the duty to correct all errors in
the proceedings under appeal and to issue, if necessary, appropriate directions to
the authority against whose decision the appeal is preferred to dispose of the
whole or any part of the matter afresh unless forbidden from doing so by the
statute. ·The statute does not say that such a direction cannot be issued by the
F appellate authority in a case of this nature. [517 D-E]

In the instant case, however, since it is not established that the claim was a
belated one the proper order to be passed is to set aside the assessments and to
direct the Income-tax Officer to make fresh assessments in accordance with the
procedure prescribed by law. The Tribunal, therefore, erred in merely cancelling
the assessment orders and in not issuing further directions. [517 G-H]
G
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1286-1291
of 1973.

Appeals by certificate from the judgment and order dated the
H 30th June, 1972 of the Andhra Pradesh Hig4 Court at Hyderabad
in Referred Case No. 5 of 1971.
. . KAPURCHAND v. C.J.T. (Venkataramiah, J.)

A. Subba Rao for the Appellant.
507

A
S.C. Manchanda, andcMiss A. Subhashini, for the Respondent.

The Judgment of the Court was delivered by

VENKATARAMIAH, J. The only question which arises for consi- B
deration in these six appeals by certificate is whether an order of
assessment passed under the Indian Income-tax Act, 1922 (herein-
after referred to as 'the Act') by the Income-tax Officer in the case
of a Hindu undivided family without holding an inquiry into
the validity of the claim made within a reasonable time by a member
of the Hindu family that a partition had taken place among the c
family is liable to be merely cancelled in appeal by the Inccme-tax
Appellate Tribunal (for short, 'the Tribunal') without a further
direction to the assessing authority either to modify the assessment
suitably or to pass a fresh order of assessment in accordance
with law,
D
The assessee is a Hindu undivided family and the assessment
years are 1955-56 and 1957-58 to 1961-62. An assessment order
made on May 30, 1959 in respect of the assessment year 1955-56 had
been set aside by the Appellate Assistant Commissioner on February
24, 1962 with a direction to make a fresh assessment. When fresh
assessment proceedings were commenced pursuant to the above said E
direction in respect of the assessment year 1955-56,, the assessment
proceedings for the assessment years 1957-58 and 1158-59 were also
taken up. Earlier a letter had been addressed on October, 10, 1960
by Kapurchand Shrimal to the Income-tax Officer in connection with
a notice received by the assessee under section ISA 1(1) of the Act
F
in respect of the assessment year 1961-62 stating that all the movable
and immovable properties of the assessee had been partitioned by
metes and bounds under partition deeds and that the Hindu undivided
family (the assessee) was no longer receiving any income as such and
there was therefore no question of payment of any advance tax by it.
The second para of that letter contained a specific request to record
G
the factum of the partition for the purpose of the Act. Again on June
16, 1961 M/s S.G. Dastagir and Co. addressed a letter on behalf of
the assessee in connection with advance tax demanded for the
assessment year 1962-63, the second para of which contained a
similar request for recording the factum of partition. Before the H
fresh assessments were completed for the three years referred to
above a third letter dated March l l, l 962 was addressed to the same
508 SUPREME COURT REPORTS [1982] ] S.C.R.

A officer who received it on the next day itself in which again there was
a claim made regarding the partition. But this letter however was
written specifically in respect of the assessment year 1957-58. On
March 21, 1962, M/s S.G. Dastagir too addressed a further letter
to the Income-tax Officer reminding him of the earlier letters of
October IO, 1960 and June 16, 1961 and that letter stated:
B
"Apart from these letters the matter has been discussed
with you on a number of occasions personally during the
course of the assessment proceedings of the year 1957-58
and your attention has already been drawn to the facts that
an order under section 25A has to be passed before the
c completion of the assessment for the year 1957-58. The
letter dated 11th March, 1962 was addressed to you by the
assessee only when it was gathered that you were going to
pass the aasesssment order for the year 1957-58 without
making the contemplated enquiry under section 25A."

D The assessments for the years 1955-56 to 1958-59 were however
completed between August 31, 1962 and March 27, 1963 without
holding an inquiry as contemplated by section 25A of the Act regar-
ding the factum of partition. The Income-tax Officer, thereafter
started an inquiry under section 25A and by his order dated March
30, 1965 refused to record the partition. On appeal the Appellate
E Assistant Commissioner by his order dated November 8, 1967 set
aside the said order and directed the Income-tax Officer to record
the partition under section 25A as on July IO, 1960. That order
became final as no appeal was filed against it by the Department.
It should be stated here that the Income-tax Officer passed
F assessment orders against the assessee for the assessment years
1959-60, 1960-61 and 1961-62 on March 26, 1964, March 30, 1965
and March 26, 1966 respectively before the Appellate Assistant
Commissioner held that the partition had taken place on July 10, 1960.
In the appeals filed before the Appellate Assistant Commis-
G sioner against the assessment orders for the years in question i.e.
1955-56 and 1957-58 to 1961-62 it was contended that the assessments
were liable to be set aside on the ground that the inquiry into the
claim of partition which was a condition precedent for making an
order of assessment on the Hindu undivided family had not been
made as required by section 25A of the Act. The Appellate Assistant
H Commissioner rejected the above contention. The assessee there-
upon filed appeals before the Tribunal against the orders of the
KAPUR CHAND v. C.I.T. (Venkataramiah, J.) 509

Appellate Assistant Commissioner and one question which was A
common to all the appeals that was urged before the Tribunal was
about the validity of the assessment made against the assessee
(Hindu undivided family) without holding an inquiry regarding the
claim of partition before the assessment proceedings were completed.
While the assessee contended that the assessments were liable to be
cancelled on account of the non-compliance with the mandatory B
provisions of section 25A of the Act it was urged on behalf of the
Department that in fact there was no violation at all of section 25A and
even if it was held that there was any such violation the proper order
to be passed was either to direct the Income-tax Officer to give effect
to section 25A (2) of the Act without cancelling the assessments made
on the assessee or to set aside the assessments with a direction to c
the Income-tax Officer to pass fresh orders of assessment. On a
consideration of the submissions made by the parties, the Tribunal
came to the conclusion that the assessments which had been made
without holding an inquiry into the claim of partition as required
by section 25A of the Act were illegal and void. Accordingly it
cancelled the assessments and added 'We do not consider it necessary D
•
to direct fresh assessments. It would be open to the Income-tax
Officer to do so if the Jaw otherwise so permits.'

Thereafter at the instance of the Revenue a reference was made
by the Tribunal to the High Court of Andhra Pradesh under section
66(1) of the Act in all the cases for a decision on the following E
question:
"W,1ether on the facts and in the circumstances of the
case, the assessments made by the Income-tax Officer on
the Hindu undivided family of Shri Kapurchand Shrimal
for the years under reference without passing an order F
under section 25A were valid ?"

' We are not concerned in these appeals with another question
arising out of the assessment order made for the year 1958-59 which
was also referred alongwith the above common question.

The High Court after hearing the learned counsel for the
G
parties answered the common question which arose in all the appeals
stating that the assessment made by the Income-tax Officer without
passing the order under section 25A on the claim of partition were

r' valid but only required modification and directed the Tribunal while
giving effect to the order of the High Court to direct the Income-tax
H
Officer to modify the assessments in the light of section 25A (2) of
510 SUPRBMB COURT REPORTS [ 1982] I S.C.R.

A the Act. Aggrieved by the decision of the High Court the assessee
has filed these appeals.

Section 25A of the Act which arises for consideration in these
cases reads thus :

8 "25A. Assessment after partition of a Hindu undivi-
ded family-(!) Where, at the time of making an assessment
under section 23, it is claimed by or on behalf of any
member of a Hindu family hitherto assessed as undivided
that a partition has taken place among the members of
such family, the Income-tax Officer shall make such inquiry
c thereinto as he may think fit, and, if he is satisfied that the
joint family property has been partitioned among the
various members or groups of members in definite portions
he shall record an order to that effect :

Provided that no such order shall be recorded until
D notices of the inquiry have been served on all the members
of the family.

(2) Where such an order has been passed, or where any
person has succeeded to a business, profession or vocation
formerly carried on by a Hindu undivided family whose
E joint family property has beeen partitioned on or after the
last day on which it carried on such business, profession
or vocation, the Income-tax Officer shall make an assess-
ment of the total income received by or on behalf of the
joint family as such, as if no partition had taken place, and
each member or group of members, shall in addition to any
F income-tax for which he or it may be separately liable. and
notwithstanding anything contained in sub-section (1) of
section 14, be liable for a share of the tax on the income so
assessed according to the portion of the joint family pro-
perty allotted to him or it; and the Income-tax Officer shall
make assessments accordingly on the various members and
G groups of members in accordance with the provisions of
section 23;

Provided that all the members and groups of members
whose joint family property has been partitioned shall be
H liable jointly and severally for the tax assessed on the total
income received by or on behalf of the joint family as such.
l
KAPURCHAND v. C.I.T. (Venkataramiah, J.) 511

(3) Where such an order has not been passed in respect A
of a Hindu family hitherto assessed as undivided, such
family shall be deemed, for the purposes of this Act, to
continne to be a Hindu undivided family.

A Hindu undivided family is an entity which is treated as an
assessee for the purposes of the Act. In the Act as it was originally B
passed there was no effective machinery to assess the income which
was received by a Hindu undivided family during an accounting year
but was no longer in existence as such at the time of assessment.
By reason of section 14(1) of the Act which provided that no tax
would b~ payable by an assessee in respect of any sum which he
received as a member of a Hindu undivided family, there was further c
difficulty in subjecting such income tax. Section 25A was, therefore,
enacted to get over these difficulties by providing for a special
procedure to be followed in a case where a claim was made that
there bas been a partition satisfying the tests laid down in that
section. Sub-section (3) of section 25A of the Act provides that
a Hindu undivided family which is being assessed as such shall be D
deemed for the purposes of the Act to continue to be a Hindu
undivided family until an order is passed under sub-section (I) of
section 25A that a partition has taken place among the members of
the family as stated therein. Sub-section (I) of section 25 \ provi-
des that if at the time of making as assessment a claim is made by or
on behalf of any member of a Hindu undivided family which is E
being assessed till then as undivided that a partition has taken place
among the members of such family, the Income-tax Officer shall
make such inquiry there into as he may think fit and if he is satisfied
that the joint family property has been partitioned among the
various members groups of members in definite portions he shall
record an order to that effect. Such order can however be made H
only after notices of the inquiry have been served on all the members
of the family. It may be noted that sub.section(!) of section 25A
does not actually prescribe the form in which such a claim can be
made. It does not also state the specific stage of the assessment
proceedings when sueh claim should be made. Sub-section (2) of
G
section 25A of the Act provides that where an order is passed under
sub-section (I) thereof recording the partition or where any person
has succeeded to a business, profession or vocation formerly carried
on by a Hindu undivided family where joint family property has
r been partitioned on or after the last day on wh!ch it carried on such
business, profession or vocation the Income-tax Officer shall make
H
an assessment of the total income received by or on behalf of the
512 SUPREME CoUR.T REPORTS [1982] l S.C.R.

A joint family as such as if no partition had taken place and each
member or group of members shall, in addition to any income-tax
for which he or it may be separately liable and notwithstanding any-
thing contained in sub-section (section 14, be liable for a share of
the tax on the income so assessed according to the portion of the
joint family property allotted to him or it. The Income-tax Officer
B is further authorised to make assessments accordingly on various
members and groups of members in accordance. with section 23 of
the Act. By virtue of the proviso to sub-section (2) of section 25A
of the Act the liability which so long as an order was not recorded
under sub-section (I} of section 25A was restricted to the assets of
the Hindu undivided family is transformed when such an order is
c recorded into the personal liability of the members for the amount
of tax due by the family.

In these appeals there is a finding of fact recorded by the
Tribunal that a proper and valid request for recording a partition
had been made as far back as October 10, 1960. The first of the
D assessment orders impugned in these appeals was passed on August
31, 1962 by the Income-tax Officer and the other assessment orders
were passed subsequently. It is not shown that the Income-tax Offi-
cer before whom the claim of partition had been made on October 1O,
1960 had not got reasonable time to inquire into the claim and then
to make the asoessment orders on the basis of the finding on the
E question of partition. Admittedly all the orders of assessment were
passed against the assessee (Hindu undivided family) before holding
an inquiry as required by section 25A (I) of the Act into the claim
of partition. In fact the Income-tax Officer refused to record the
partition only on March 30, 1965 but in appeal the Appellate
Assistant Commissioner held that a partition had taken place as on
F July IO, 1960 by his order dated November 8, 1967 and that order
bad become final. The questions for consideration are whether
nnder these circumstances the orders of assessment can be treated '
as valid orders and if they are not whether the Income-tax Officer
can be directed by the appellate authority to pass fresh orders of
assessment,In accordance with law.
G
The first[ decision relied on by the assessee is Kalwa Devadattam
and two Ors. v. The Union of India and Ors.(') That was a case
arising out of a suit in which the validity of certain assessment

H
(I) [1964] 3 S.C.R. 191.
KAPURCHAND v. C.I.T. (Venkataramiah, J.) 513

-- orders passed against a Hindu undivided family under the Act and
the proceedings instituted to recover the amounts payable under
A
these assessment orders by sale of certain properties had been
questioned. The plaintiffs in that suit were the sons of one
Nagappa. Nagappa and the plaintiffs who formed a Hindu joint
family had carried on business and the said family had been assessed
to tax under the Act. When proceedings were instituted to recover 8
the dues under the assessment orders for the sale of some pro-
perties, the plaintiffs filed the suit contending that some of the
properties could not be sold as they were their separate properties

- and the remaining properties could not be sold as they had been
allotted to them on partition of the joint family estate on March 14,
1947 before the orders of assessment were made by the income-tax c
authorities. The claim of the plaintiffs based on the ground of
non-compliance with section 25 A of the Act was rejected by this
Court with these observations :-
"It may be assumed that by this statement within the
meaning of section 25A it was claimed "by or on behalf of
any member of a Hindu family hitherto assessed as un-
D
divided" that a partition had taken place among the
members of his family and that the Income-tax ()fficer
was bound to make an inquiry contemplated by section
25A. But no inquiry was in fact made and no order
was recorded by the Income-tax Officer about the partition :
by virtue of sub-s. (3) the Hindu family originally assessed
E
as undivided had to be deemed for the purposes of the Act
to continue to be a Hindu undivided family. If by the
assessment of the family on the footing that it continued
to remain undivided Nagappa or his sons were aggrieved
their remedy was to take an appropriate appeal under s. 30
of the Indian Income-tax Act and not a suit challenging
F
the assessment. The method of assessment and the pro-
cedure to be followed in that behalf are statutory, and any
error or irregularity in the assessment may be rectified in
the manner provided by the statute alone, for s. 67 of the
Indian Income-tu Act bars a suit in any Civil Court to
G
set aside or modify any assessment made undo r the Act.
The Income-tax Officer made the assessment of tax under
the Act. Granting that he committed an error in making
the assessment without holding an inqniry into the partition
alleged by Nagappa, the error could be rectified by resort
to the machinery provided under the Act and not by a
H
suit in a Civil Court."
514 SUPREME COURT REPORTS [1982] 1 S.C.R.

A This Court dismissed the suit against the Revenue on three
inderendent grounds : (1) the suit which was in substance one for
setting aside an assessment was in law not maintainable because of
s. 67 of the Act; (2) that in the absence of an order under s. 25A (I)
assessment of the Hindu joint family was properly made; and
(3) even if an order recording partition was made the liability of
B the plaintiffs to pay income tax assessed on the family could still be
enforced against them jointly and severally under s. 25A (2) proviso.
The above case was not obviously one in which an order of assess-
ment which had been passed contrary to section 25A of the Act had
been~challenged in an appeal under the Act.

c The next case relied on by the assessee is Additional !ncome-
tax 'Officer, Cuddapah v. A. Thimmayya & Anr.(1) There again
the; question raised was a different one although some of the material
facts were similar to the facts in these appeals. The facts there
D were those : Krishnappa and his two sons Thimmayya and
Venkatanarsu constituted a Hindu undivided family which had
carried ou some business during the previous years corresponding
to assessment years 1941-42 to 1946-47. When the assessment
proceedings for these years were pending, on May 20, 1946
Venkatanarsu claimed before the 'Income-tax Officer that the pro-
E perty of the family had been partitioned ,among the members of the
family in definite portions. The said claim was not disposed of till
June 30, 1952. In the meanwhile assessments for the five years in
question were completed between September 30, 1948 and November
30, 1950 resulting in a tax liability of Rs. 67,750/- in the aggregate
for the five years. Appeals were preferred against the said orders
F of assessment but in the appeals it was not contended that the
orders were illegal as no inquiry had been made as contemplated in
section 25A (I). The appeals were unsuccessful. On June 30, 1952,
the Income-tax Officer made an order under section 25A recording ,
that a partition had taken place on November 2, 1946. As the tax
due was not paid the Income-tax Officer made the order under
section 46(5) of the Act on June 25, 1958 calling upon the managing
G director of a private limited company which had taken over the
business of Krishnappa and his two sons not to pay the salaries
payable to Thimmayya and Venkatanarsu by the company and to
pay it to the credit of Government of India towards the payment
of arrears of income-tax referred to above. Tbimmayya and
H
(I) [1965] 55 l.T.R. 666.
KAPURCHAND v. C.I.T. (Venkataramiah, J.) 515

Venkatanarsu questioned that order before the High Court under A
Article 226 of the Constitution. The Higd Court held that the order
on the claim made under section 25A(I) on June 30, 1952, was
given "a clear retrospective operation", and the Income-tax Officer
was bound "to give effect to that order recognising the partition
and to follow up the consequences which flowed from the order".
In the view of the High Court, the petitioners were entitled to B
insist upon an order for apportionment under section 25A (2) and
without such an order, proceedings for collection of tax could not
be commenced against them under the proviso to sub-section (2) of

- section 25A. On appeal this Court held that because prior to the
orders of assessment there was no order recording that the property
of the family had been partitioned among the members of the family c
no personal liability of the members arose under the proviso to
section 25A (2) to pay the tax assessed thereunder and the remedy
of income-tax authorities was to proceed against the property, if any,
of the Hindu undivided family. It was therefore held that the
Income-tax Officer was not competent to make the order under
section 46 (5) directing the company to withhold the tax from the D
salaries payable to Thimmayya and Venkatanarasu. The relevant
observations of this Court are these :-

"In the present case no orders were recorded by the
Income·tax Officer at the time of making assessments in
respect of the five years, and therefore no personal liability E
of the members of the family arose under the proviso to
sub-section (2). The Income-tax Officer does not seek to
reach in the hands of Thimmayya and Venkatanarsu the
property which was once the property of the Hindu un-
divided family : he seeks to reach the personal income of
the two respondents. That the Income-tax Officer could F
do only if by virtue of the proviso to sub-section (2) a
personal liability has arisen against them. In the absence
of an order under sub-section (!), however, such a liability
does not arise against the members of the Hindu undivided
family, even if the family is disrupted.
G
We are therefore of the view, but not for the reasons
mentioned by the High Court, that because there has been
before the orders of assessment no order recording that
the property of the family has been partitioned among the
members, the two respondents are not personally liable to H
satisfy the tax due by the joint family. The remedy of
the income-tax authorities, in the circumstances of the case,
516 SUPREME COURT REPORTS [1982] 1 S.C.R.

A was to proceed against the property, if any, of the Hindu
undivided family. That admittedly they have not done."
-
It will be seen that in this case no question was raised as
to whether the assessment orders were void as they were passed
without holding an inquiry as required by section 25A (!) of the
B Act. The only question was whether in the absence of an order
under section 25A (l), any personal liability can be enforced against
the members of the joint family.

Strong reliance is, however, placed on behalf of the assessee
on the decision of the Andhra Pradesh High Court in Karri
c Ramakrishna Reddy v. Tax Recovery Officer, Vijayawada(') which in-
volved the interpretation of section 171 of the Income-tax Act, 1961,
which, in so far as the question involved in these appeals is con-
cerned, contains similar provisions. In that case a person who was
a member of a Hindu undivided family questioned in a proceeding
under Article 226 of the Constitution an assessment made against
D the Hindu undivided family after it had been partitioned without
holding an inquiry as required by section 171 (2) of the Income-tax
Act, 1961 even when a claim of partition had been made by his
father in the assessment proceedings. The petitioner therein con-
tended that such an order would not be binding upon the other
members of the family. The High Court accepted the contention of
E the petitioner therein and held that the assessment order could not
be enforced against him. This again is a case where the validity of
the assessment order had been questioned not in an appeal filed
against it but in a separate proceeding. The observations made
therein may not, therefore, be of much assistance to the assessee
F because we are concerned in these appeals with the powers of the
appellate authority where appeals are filed against the assessment
orders themselves contending that there has been non-compliance
with section 25A(I). Moreover it appears that certain observations
made in that case in respect of the decision of this Court in
Additional Income-tax Officer, Cuddapah v. A. Thimmayya & Anr.(2 )
and the Full Bench decision of the Andhra Pradesh High Court in
G
Commissioner of Income-tax v. Tatavarthy Narayanamurthy(') need
further examination. We refrain from expressing any opinion on

(I) [1973] 87 l.T.R. 86.
(2) [1965] 55 I. T.R. 666.
H (3) [1972] ~3 l.T.R. 58 (F.B,).
KAPURCHAND v. C.I.T. ( Venkataramiah, J.) 517

the correctness of this decision which does not even appear to have A
been cited before the High Court when the reference out of which
these appeals arise was argued.

From a fair reading of section 25A of the Act it appea s that
the Income-tax Officer is bound to bold an inquiry into the claim of
partition if it is made by or on heh alf of any member of the Hindu 8
undivided family which is being assessed hitherto as such and
record a finding thereon. If no such finding is recorded, sub-section
(3) of section 25A of the Act becomes clearly attracted. When a
claim is made in time and the assessment is made on the Hindu
undivided family without holding an inquiry as contemplated by
section 25A (1 ), the assessment is liable to be set aside in appeal as
c
it is in clear violation of the procedure prescribed for that purpose.
The Tribunal was, therefore, right in holding that the assessments
in question were liable to be set aside as there was no compliance
with section 25A (I) of the Act. It is, however, difficult to agree
with the rnbmission made on behalf of the assessee that the duty of
the Tribunal ends with making a declaration that the assessments
D
are illegal and it has no duty to issue any further direction. It is
well known that an appellate authority has the jurisdiction as well
as the duty to correct all errors in the proceedings under appeal and
to issue, if necessary, appropriate directions to the authority against
whose decision the appeal is preferred to dispose of the whole or
E
any part of the matter afresh unless forbidden from doing so by
the statute. The statute does not say that such a direction cannot
be issued by the appellate authority in a case of this nature. In
interpreting section 25A (I) we cannot also be oblivious to cases
where there is a possibility of claims of partition being made almost
at the end of the period within which assessments can be completed
making it impossible for the Income-tax Officer to hold an inquiry H
as required by section 25A (1) of the Act by following the procedure
prescribed therefor. We, however, do not propose to express any
opinion on the consequence that may ensue in a case where the
claim of partition is made at a very late stage where it may not be
reasonably possible at all to complete the inquiry before the last
G
date before which the assessment must be completed. In the instant
case, however, since it is not established tbat the claim was a
belated one the proper order to be passed is to set aside the assess-
ments and to direct the Income-tax Officer to make fresh assessments

r in accordance with the procedure prescribed by law. The Tribunal,
therefore, erred in merely cancelling the assessment orders and in
H
not issuing further directions as stated above.
518 SUPREME COURT REPORTS [1982] 1 S.C.R.

A We do not, however, agree with the orders made by the
High Court by which it upheld the assessments and directed the
Income-tax Officer to make appropriate modifications. Such an
order is clearly unwarranted in the circumstances of this case. The
order of the High Court is, therefore, set aside. The question
referred by the Tribunal to the High Court does not appear to be
B comprehensive enough to decide the matter satisfactorily. The
question may have to be read as including a further ·question
regarding the nature of the orders to be passed by the Tribunal if
the orders of assessments are held to be contrary to law. In the
light of the above, we hold that the orders of assessments are liable
to be set ~side but the Tribunal should direct the Income-tax Officer
C to make fresh assessments in accordance with law.

The appeals are accordingly disposed of. There shall be no
order as to costs.

S.R. Appeals allowed.

,

l