Shah, J. - (1.) These appeals by special leave are filed against the judgments and orders passed by the High Court of Madras dated 13-1-1988 in Writ Petition Nos. 992 and 993 of 1981, 162 and 6036 of 1983, 904-905, 994, 995, 5430,6162 and 9283 of 1984 (reported in 1988 Tax LR 773) by the High Court of Karnataka dated 9-11-1993 in Writ Petition Nos. 12312 to 12317 of 1987 and dated 25-11-1992 in W.P. No. 23708 of 1992, and by the High Court of Gujarat dated 29-6-1993 in Income-tax Application Nos. 164 and 165 of 1993.
(2.) By a common judgment and order passed in various writ petitions filed before the Madras High Court (M. V. Valliappan v. Income-tax Officer, (1988) 170 ITR 238 the High Court struck down the provisions of Section 171(9) of the Income-tax Act, 1961 as violative of Article 14 of the Constitution of India and that it suffers from the vice of legislative incompetence. In the High Court, number of writ petitions were filed involving questions relating to the validity, scope and interpretation of the provisions of Section 171(9). For our purpose, it would suffice to mention facts of Writ Petition No. 994 of 1984 for deciding the question involved in these appeals. In the said petition, it was the case of the petitioner that he was a Karta of a Hindu undivided family consisting of himself, his wife, his minor son and minor daughter. It was his contention that the Hindu undivided family was a partner in a partnership firm in which its funds were invested. On 13th April, 1979, a partial partition of certain assets belonging to the Hindu undivided family was effected with effect from that date by executing a deed of partition. An application under Section 171(2) of the Income-tax Act, 1961 for recognition of the said partial partition came to be filed before the Income-tax Officer. The Income-tax Officer passed an order dated 28th December, 1979 recognizsing the partial partition. Thereafter for the assessment year 1980-81, a return was submitted on behalf of the Hindu undivided family on April 12, 1980 which did not include the income from the property which was the subject-matter of partial partition. The income derived from the assets that were the subject-matter of partial partition were declared by the respective individuals in their respective returns. In accordance with the said return, assessment was finalised. Similarly, wealth-tax return for the assessment year 1980-81 was also filed and accepted by the Income-tax Officer. Thereafter, a notice dated March 4, 1983 under Section 148 of the Act was received by the petitioner stating that income of the petitioner had escaped assessment and the Income-tax Officer proposed to reopen the completed assessment for the year 1980-81. The assessee objected to the reopening of the assessment on the ground that order under Section 171 of the Act recognising the partition not having been cancelled or revoked, continued to be effective and, thereafter, no income from the partitioned properties could be assessed in the hands of the Hindu undivided family. These objections were rejected by the I.T.O. by order dated 30th November, 1983. Fresh assessment order for H.U.F. was made by including the income relating to the assets which were partially partitioned and allotted to the individual members of the Hindu undivided family. That re-assessment order was challenged by filing writ petition. Facts in the other writ petitions were also similar to the facts as stated above.
(3.) The High Court after considering the various contentions and decisions relied upon by the parties arrived at and summarised its conclusion as under:- "(1) Section 171(9) of the Income-tax Act, 1961, cannot be sustained on the ground that it is a measure to counteract the tendency of tax avoidance and it suffers from the vice of legislative incompetence. (2) Section 171(9) of the Income-tax Act, 1961, is also void on the ground of violation of Article 14 of the Constitution of India. (3) Section 171(9) of the Income-tax Act, 1961, entrenches upon the charging provisions in Section 4 of the Income-tax Act, 1961, and purports to bring to charge the income which does not belong to the Hindu undivided family to be assessed in the hands of the Hindu undivided family. The provision thus enlarges the scope of Sections 4 and 5 of the Act and is, therefore, invalid. (4) Section 171(9) of the Income-tax Act, 1961 has the effect of fastening a penal liability on the Hindu undivided family when in fact, in the case of a partial partition, the liability for concealment of income is that of the member of the Hindu undivided family who earned the income in his own right and not of the Hindu undivided family. (5) The effect of Section 171(9) of the Income-tax Act, 1961 is that it virtually negatives the right of partition under the personal law only in certain cases of partition after December 31, 1978, and there is no valid basis of justification for treating Hindu undivided families separately in a hostile manner with reference to the date December 31, 1978, the choice of the date being clearly arbitrary. (6) The operation of Section 171(9) of the Income-tax Act, 1961, is restricted only to cases where a claim in respect of a partial partition which is effected after December 31,1978, is made for the first time in the assessment year 1980-81. (7) The provisions of Section 171(9) of the Income-tax Act, 1961, will not fasten any liability in respect of a partial partition which has already been recognised in the assessment year 1979-80 and a finding recorded in respect of such a claim for the assessment year 1979-80 will not be affected by the invalidating provision in clause (a) of sub-section (9) of Section 171 of the Act." ;