Sidhu. J, - (1.) THIS is a reference under Section 256(1), Income-tax Act, 1961 (hereinafter called "the new Act"), by the Appellate Tribunal, Delhi Bench A, raising for decision by this court two questions of law which have been formulated by the Tribunal as follows : " 1. Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the assessee was entitled to an order under Section 25A of the Indian Income-tax Act, 1922, recognising its claim for partition with effect from January 3, 1958 ?
(2.) WHETHER, on the facts and in the circumstances of the case, the Appellate Tribunal erred in law in accepting the claim of partition of the family with effect from January 3, 1958, and in consequence thereof in cancelling the assessment made under Section 143(3) of the Income-tax Act, 1961, for the assessment year 1960-61 ? " 2. The facts as stated by the Tribunal in its statement of the case and otherwise appearing on the record may be recapitulated here. M/s. Gopi Chand B. Tholia, Jaipur, was assessed as HUF until and for the assessment year 1959-60 relating to the previous year ending on Diwali 1958. At the time of making the said assessment, the assessee claimed that partition had already taken place with effect from January 3, 1958. The assessee made an application under s, 25A of the Indian I.T. Act, 1922 (hereinafter called " the old Act "), for an order recording the alleged partition. The ITO rejected this application and assessed the family as HUF. In due course, the matter of making the assessment for the assessment year 1960-61, relating to the previous year ending on Diwali, 1959, came up before the ITO. The assessee filed a return showing its income as "nil" with an explanatory note that since there was a total partition under an award, dated December 27, 1957, taking effect from January 3, 1958, there was no question of accrual of any income to the family during the previous year ending on Diwali, 1959. The assessee made two applications, one on August 22, 1964, and the other on September 26, 1964, requesting the ITO to pass an order under Section 25A of the old Act recording total partition with effect from January 3, 1958. After enquiring into the matter, the ITO recorded his findings which may be enumerated as follows : (i) Partition had taken place in respect of the entire property except the Tholia Garden at Jaipur which was subsequently sold on November 17, 1960. (ii) Mutation of names in terms of the partition had not, however, been sanctioned during the previous year ending on Diwali, 1959. It was noticed in this context that the property in Bombay which had been allotted to Kumud Chand had not been mutated in his name till January 5, 1962. (iii) Smt. Rattan Bai, widow of Harak Chand, challenged the partition by way of a suit filed in the Calcutta High Court on July 1, 1958. The suit was partly decreed with a declaration that Smt. Rattan Bai was entitled to a share in the family properties. In view of the said decree, there was a fresh agreement between the members of the family on February 9, 1960, whereby Kumud Chand surrendered the Jaipur property, known as Shanti Bhawan, to Rattan Bai and, in addition, agreed to pay to her Rs. 176 per mensem as maintenance. (iv) In view of these findings, it could not be held that partition by metes and bounds had taken place during the previous year ending on Diwali, 1959. Consequently, the ITO passed an order, dated March 19, 1965, rejecting the assessee's application under Section 25A of the old Act. By a separate order of even date, he assessed the HUF on a total income of Rs. 1,37,600 for the assessment year 1960-61, corresponding to the accounting year ending on Diwali, 1959. The assessee challenged both these orders and filed two separate appeals from them. The appeal from the order under Section 25A of the old Act, which was registered by the AAC as No. 1207/65-66, was decided by him on September 13, 1966. He reversed the order of the ITO holding that: (i) The partition took place with effect from the date (i.e., January 3, 1958) when the partition award was registered with the Sub-Registrar, Jaipur. The fact that mutation of names had not been sanctioned by the municipal authorities concerned during the relevant previous year ending on Diwali, 1959, cannot detract from the fact of partition. (ii) Similarly, the fact that Tholia Garden, Jaipur, was not divided by metes and bounds among the members of the family does not affect the partition. Though Tholia Garden was not divided by metes and bounds, it was notionally divided into six equal shares. It could not be physically divided into six shares, for, as the Appellate Assistant Commissioner put it, "solid and substantial reasons of practicability, convenience and reasonable sentiment not affecting the general bona fide intention of becoming completely separated units for all purposes ". (iii) The agreement among the members of the family whereby Kumud Chand surrendered Shanti Bhawan, Jaipur, to Smt. Rattan Bai and agreed to pay her Rs. 175 per mensem as maintenance did not affect the overall partition among the six branches of the family. (iv) Total partition had thus taken place with effect from January 3, 1958. Thus, the AAC allowed the assessee's appeal directing the ITO to pass an order under Section 25A of the old Act. He also allowed the connected appeal arising out of the assessment order made by the ITO under Section 143(3) of the new Act, Consequently, he cancelled the assessment holding that since there was no HUF in existence throughout the previous year ending on Diwali, 1959, there was no question of accrual of any income to the family and assessment of the family as such.
(3.) THIS time it was the turn of the ITO to challenge these orders. The revenue's appeal irom the order under Section 25A of the old Act was registered by the Appellate Tribunal as I.T.A. No. 13639 of 1966-67. By its order dated May 14, 1968, the Tribunal dismissed this appeal affirming the findings of the AAC, to the effect that the assessee was entitled to an order under Section 25A of the old Act recognizing its claim for partition with effect from January 3, 1958. The other appeal registered as I.T.A. No. 13638 of 1966-67, arising out of the assessment order for the assessment year 1960-61, was also dismissed by the Tribunal by its separate order of even date. The Commissioner, Rajasthan, made an application (No. 118 of 1968-69) under Section 256(1) of the new Act requiring the Appellate Tribunal to refer to this court a question, as one of law, arising out of the Tribunal's order confirming the cancellation of the assessment. The question suggested is as under : " Whether, on the facts and circumstances of the case, the ITAT erred in law in accepting the claim of partition of the family with effect from January 3, 1958, and in consequence thereof in cancelling the assessment made under Section 143(3) of the I.T. Act, 1961, for the assessment year 1960-61?" The Commissioner made another application (No. 119 of 1968-69) relating to the order passed by the Tribunal under Section 25A of the old Act. This application purports to have been made under Section 66(1) of the old Act. It invited the Tribunal to refer to this court another question which was formulated as under : " Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the assessee was entitled to an order Under Section 25A of the Indian I.T. Act, 1922, recognizing its claim for partition with effect from January 3, 1958 ? " ;