COMMISSIONER OF INCOME TAX ANDHRA PRADESH Vs. PABBATI SHANKARAIAH

JUDGEMENT

(1.) The question of law raised at the instance of the Revenue, in this consolidated reference, pertaining to the common assessee in respect of the assessment years 1966-67 to 1971-72 is :

(2.) The format of the case, as set out in the statement of case, is that Shankaraiah is the karta of the HUF consisting of himself, his major son, Rajanna alias Raja Veeraiah and his two minor sons, Samba Murthy and Ravinder and his wife. He was a partner in a firm known as M/s. Thota Lingaiah Gari Jagannadham Son, having 30% share. Admittedly, the share income belonged to the HUF, as he was representing the family being the karta of it. The share income from the firm was being assessed in the hands of the HUF up to and including the assessment year 1964-65. On 26/10/1963, there was a partial partition in the family, which was reduced to writing by a memorandum. This partial partition was only in respect of the interest of the family in the aforesaid firm. The division was effected by allotting 12% to Shankaraiah and 6% to each of his sons. The capital standing in the name of Shankaraiah in the firm, which admittedly belonged to the joint family, was divided into four equal shares and necessary entries were also made in the books of the firm as an 26/10/1963. Respective accounts were opened in the books of the firm crediting the amounts divided. It was further agreed that Shankaraiah should continue to remain as a partner vis-a-vis the partnership firm and the profit derived by him will be divided between himself (12%) and the three sons at 6% each. Some movables as well as immovable assets were not divided. On 26/10/1963, another agreement was brought into existence. This agreement, having recognised the partial partition between Shankaraiah and his sons, further mentioned that Shankaraiah will continue as a partner but he will receive shares of profit not only for himself but for his sons who have acquired their rights at 6% each by virtue of the partial partition. It was made clear in the agreement that the sons have no rights in the assets of the firm. They have only right to claim for the profits of 6% each from Shankaraiah. It was further mentioned that the sons had agreed to keep Rs. 12,000 either with their father or with the firm towards the share of 6% already held by each of the parties. Shankaraiahs major son, Veeraiah, was taken as a partner in the firm of M/s. T. L. Jagannadham Son and by virtue of his right he was receiving his share income at 6%.

(3.) Assessments were made for the assessment years 1966-67, 1967-68, 1968-69 and 1969-70 on Sankaraiah on the basis of partial partition and 12% share income received by him from the firm was included. The share income of the minor sons which they were entitled to as per the partial partition and the agreement dated 26/10/1963, was not included in there was a "body of individuals" consisting of Shankaraiah and his two minor sons, which had to be assessed in respect of 24% shares of profit from M/s. T. L. Jagannadham Son. Consequently, he issued a notice under s. 148 on the alleged "body of individuals" represented by Shankaraiah for the assessment years 1966-67, 1967-68, 1968-69 and 1969-70. For the assessment years 1970-71 and 1971-72 notices under s. 139(2) were issued on the said "body of individuals". The assessee filed disposed of on 7/11/1972. The assessee, being unsuccessful, preferred writ appeals which were also dismissed on 3/07/1974. The learned singled judge, while dismissing the writ petitions, observed :