The assessing officer ignored my partition claim and assessed the family anyway. If the Tribunal finds that illegal, can it simply cancel the assessment and stop there?
No. The Supreme Court held that although an assessment made on a Hindu undivided family without the enquiry the statute requires into a partition claim made in time must be set aside, the Tribunal's duty does not end with declaring the assessment illegal. An appellate authority has the jurisdiction and the duty to correct all errors in the proceedings under appeal and to issue appropriate directions to the authority below to dispose of the matter afresh, unless the statute forbids it. The Tribunal erred in cancelling the assessments without directing fresh ones, and the High Court erred in upholding them.
Decided by the Supreme Court (Supreme Court of India - P.N. Bhagwati and E.S. Venkataramiah, JJ (judgment by Venkataramiah, J)) on 1981-08-28, reported as AIR 1981 SC 1965; (1981) 4 SCC 317; (1981) 131 ITR 451; 1982 SCR (1) 505. It bears on section 254, section 171, section 251 of the Income Tax Act 1961, in Appeals and Assessment & Scrutiny matters.
This is the authority for the width of appellate power in tax appeals, and it cuts both ways. On the taxpayer's side it confirms that failure to hold the enquiry into a partition claim is a clear violation of the prescribed procedure and the assessment cannot stand. On the department's side it establishes that setting aside is not the end: the appellate authority must, where appropriate, send the matter back to be done properly, so a procedural win does not by itself extinguish the assessment. The Court expressly kept open what should happen where a partition claim is made so late that the enquiry cannot be completed before the assessment becomes time-barred.
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The assessee was a Hindu undivided family and the years in question were 1955-56 and 1957-58 to 1961-62. An assessment for 1955-56 had been set aside by the Appellate Assistant Commissioner in February 1962 with a direction to reassess, and when those proceedings began the years 1957-58 and 1958-59 were taken up too. By then the family had written to the Income-tax Officer on 10 October 1960 saying that all its movable and immovable properties had been partitioned by metes and bounds under partition deeds, that it was no longer receiving income as a family, and asking that the partition be recorded as effective from 10 July 1960. Similar letters followed on 16 June 1961, 11 March 1962 and 21 March 1962. The assessments were nevertheless completed between August 1962 and March 1963 without any enquiry under section 25A of the 1922 Act. The officer began that enquiry afterwards and refused to record the partition in March 1965; the Appellate Assistant Commissioner set that refusal aside in November 1967 and directed the partition to be recorded as on 10 July 1960, and that order became final. The Tribunal cancelled the assessments without directing fresh ones; the Andhra Pradesh High Court answered the reference for the Revenue.
The appeals were allowed and disposed of with no order as to costs. On a fair reading of section 25A of the 1922 Act the Income-tax Officer is bound to hold an enquiry into a claim of partition made by or on behalf of any member of a family hitherto assessed as a Hindu undivided family, and to record a finding on it; if no finding is recorded, sub-section (3) is attracted. Where the claim is made in time and the assessment is made on the family without that enquiry, the assessment is liable to be set aside in appeal as being in clear violation of the prescribed procedure, and the Tribunal was right so to hold. But the Tribunal's duty did not end with declaring the assessments illegal. It erred in merely cancelling them without further direction; since it was not established that the claim was belated, the proper order was to set the assessments aside and direct the officer to make fresh assessments according to law. The High Court's order upholding the assessments and directing the officer to make modifications was unwarranted and was set aside.
The Court dealt first with the assessment and then with the remedy. On the first, section 25A is mandatory in terms: on a claim of partition by a member of a family being assessed as such, the officer must enquire and record a finding, and the statute itself provides for the consequence where no finding is recorded. An assessment made in disregard of that procedure is not merely irregular but made in clear violation of what the statute prescribes, and the appellate authority must set it aside. On the second, the Court applied the general principle of appellate jurisdiction: an appellate authority has both the power and the duty to correct all errors in the proceedings before it and to give the authority below such directions as are needed to dispose of the whole or part of the matter afresh, unless the statute forbids it - and this statute did not. Cancelling the assessment and saying nothing more would leave the error uncorrected rather than corrected. The Court distinguished Kalwa Devadattam, Thimmayya and Karri Ramakrishna Reddy as cases where the validity of an assessment was attacked in separate proceedings rather than on appeal against the assessment itself, and declined to express any opinion on the correctness of Karri Ramakrishna Reddy, which had not even been cited below. It also noted, without deciding, the difficulty that arises where a partition claim is made so near the end of the period for completing the assessment that the enquiry cannot be held, and confined its order to a case where the claim was not shown to be belated.
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.
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court held that although an assessment made on a Hindu undivided family without the enquiry the statute requires into a partition claim made in time must be set aside, the Tribunal's duty does not end with declaring the assessment illegal. An appellate authority has the jurisdiction and the duty to correct all errors in the proceedings under appeal and to issue appropriate directions to the authority below to dispose of the matter afresh, unless the statute forbids it. The Tribunal erred in cancelling the assessments without directing fresh ones, and the High Court erred in upholding them. This was decided by the Supreme Court (Supreme Court of India - P.N. Bhagwati and E.S. Venkataramiah, JJ (judgment by Venkataramiah, J)) and bears on section 254, section 171, section 251 of the Income Tax Act 1961. It is reported as AIR 1981 SC 1965; (1981) 4 SCC 317; (1981) 131 ITR 451; 1982 SCR (1) 505. This is the authority for the width of appellate power in tax appeals, and it cuts both ways. On the taxpayer's side it confirms that failure to hold the enquiry into a partition claim is a clear violation of the prescribed procedure and the assessment cannot stand. On the department's side it establishes that setting aside is not the end: the appellate authority must, where appropriate, send the matter back to be done properly, so a procedural win does not by itself extinguish the assessment. The Court expressly kept open what should happen where a partition claim is made so late that the enquiry cannot be completed before the assessment becomes time-barred. If it applies to you, the first step is this: Make the partition claim early and in writing, and press for the enquiry and a recorded finding before the assessment is completed; the timing of the claim was decisive here.
The assessee was a Hindu undivided family and the years in question were 1955-56 and 1957-58 to 1961-62. An assessment for 1955-56 had been set aside by the Appellate Assistant Commissioner in February 1962 with a direction to reassess, and when those proceedings began the years 1957-58 and 1958-59 were taken up too. By then the family had written to the Income-tax Officer on 10 October 1960 saying that all its movable and immovable properties had been partitioned by metes and bounds under partition deeds, that it was no longer receiving income as a family, and asking that the partition be recorded as effective from 10 July 1960. Similar letters followed on 16 June 1961, 11 March 1962 and 21 March 1962. The assessments were nevertheless completed between August 1962 and March 1963 without any enquiry under section 25A of the 1922 Act. The officer began that enquiry afterwards and refused to record the partition in March 1965; the Appellate Assistant Commissioner set that refusal aside in November 1967 and directed the partition to be recorded as on 10 July 1960, and that order became final. The Tribunal cancelled the assessments without directing fresh ones; the Andhra Pradesh High Court answered the reference for the Revenue. The matter was decided on 1981-08-28 by the Supreme Court (Supreme Court of India - P.N. Bhagwati and E.S. Venkataramiah, JJ (judgment by Venkataramiah, J)). On those facts the Supreme Court held as follows. The appeals were allowed and disposed of with no order as to costs. On a fair reading of section 25A of the 1922 Act the Income-tax Officer is bound to hold an enquiry into a claim of partition made by or on behalf of any member of a family hitherto assessed as a Hindu undivided family, and to record a finding on it; if no finding is recorded, sub-section (3) is attracted. Where the claim is made in time and the assessment is made on the family without that enquiry, the assessment is liable to be set aside in appeal as being in clear violation of the prescribed procedure, and the Tribunal was right so to hold. But the Tribunal's duty did not end with declaring the assessments illegal. It erred in merely cancelling them without further direction; since it was not established that the claim was belated, the proper order was to set the assessments aside and direct the officer to make fresh assessments according to law. The High Court's order upholding the assessments and directing the officer to make modifications was unwarranted and was set aside.
The Court dealt first with the assessment and then with the remedy. On the first, section 25A is mandatory in terms: on a claim of partition by a member of a family being assessed as such, the officer must enquire and record a finding, and the statute itself provides for the consequence where no finding is recorded. An assessment made in disregard of that procedure is not merely irregular but made in clear violation of what the statute prescribes, and the appellate authority must set it aside. On the second, the Court applied the general principle of appellate jurisdiction: an appellate authority has both the power and the duty to correct all errors in the proceedings before it and to give the authority below such directions as are needed to dispose of the whole or part of the matter afresh, unless the statute forbids it - and this statute did not. Cancelling the assessment and saying nothing more would leave the error uncorrected rather than corrected. The Court distinguished Kalwa Devadattam, Thimmayya and Karri Ramakrishna Reddy as cases where the validity of an assessment was attacked in separate proceedings rather than on appeal against the assessment itself, and declined to express any opinion on the correctness of Karri Ramakrishna Reddy, which had not even been cited below. It also noted, without deciding, the difficulty that arises where a partition claim is made so near the end of the period for completing the assessment that the enquiry cannot be held, and confined its order to a case where the claim was not shown to be belated. In the words reproduced by the source cited on this page: "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."
It was decided by the Supreme Court on 1981-08-28 and is reported as AIR 1981 SC 1965; (1981) 4 SCC 317; (1981) 131 ITR 451; 1982 SCR (1) 505. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 254, section 171, section 251, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The appeals were allowed and disposed of with no order as to costs. On a fair reading of section 25A of the 1922 Act the Income-tax Officer is bound to hold an enquiry into a claim of partition made by or on behalf of any member of a family hitherto assessed as a Hindu undivided family, and to record a finding on it; if no finding is recorded, sub-section (3) is attracted. Where the claim is made in time and the assessment is made on the family without that enquiry, the assessment is liable to be set aside in appeal as being in clear violation of the prescribed procedure, and the Tribunal was right so to hold. But the Tribunal's duty did not end with declaring the assessments illegal. It erred in merely cancelling them without further direction; since it was not established that the claim was belated, the proper order was to set the assessments aside and direct the officer to make fresh assessments according to law. The High Court's order upholding the assessments and directing the officer to make modifications was unwarranted and was set aside. It arises in Appeals and Assessment & Scrutiny matters, on section 254, section 171, section 251 of the Income Tax Act 1961, and was decided by Supreme Court of India - P.N. Bhagwati and E.S. Venkataramiah, JJ (judgment by Venkataramiah, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. When you win on a procedural defect, expect a direction to reassess rather than an outright cancellation, and plan the merits accordingly. If you want the assessment simply annulled, be ready to show why a fresh assessment would not be open - for example that the period for completing it has run out. Frame the question referred, or the ground of appeal, widely enough to cover the relief you want; the Court remarked that the question referred here was not comprehensive enough to dispose of the matter.
Still good law. A citator search returns 274 later decisions citing this judgment. The Madras High Court applied it in Shriram Transport Finance Co. Ltd v ACIT (31 July 1998), holding that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal, and the Lucknow Tribunal applied the same proposition in Dy. CIT v Rohtas Projects Limited (6 July and 9 August 2005). The Delhi Tribunal applied it in Shri Shahid Atiq v ITO (30 June 2005) for the legal obligation on the Tribunal to rectify errors committed by the authorities below even if neither party objects, and the Jaipur Tribunal relied on it in Mannalal Nirmal Kumar Soorana v ITO (13 May 1996). A second search by case name coupled with the word overruled returned 14 decisions, none of which states that this judgment has been overruled or doubted. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment construes section 25A of the Indian Income-tax Act, 1922; the Court notes that section 171 of the 1961 Act is similar for the purpose in hand, and I have listed the 1961 Act sections that correspond to what it decides, but the words construed are those of the older Act. The batch line listed sections 250 and 251. The Court expressly left open what follows where a partition claim is made so late that the enquiry cannot be completed within the time for making the assessment, and it declined to rule on the correctness of the Andhra Pradesh decision in Karri Ramakrishna Reddy. The harvested page carries a reporter's headnote above the judgment, which I have not used. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were allowed and disposed of with no order as to costs. On a fair reading of section 25A of the 1922 Act the Income-tax Officer is bound to hold an enquiry into a claim of partition made by or on behalf of any member of a family hitherto assessed as a Hindu undivided family, and to record a finding on it; if no finding is recorded, sub-section (3) is attracted. Where the claim is made in time and the assessment is made on the family without that enquiry, the assessment is liable to be set aside in appeal as being in clear violation of the prescribed procedure, and the Tribunal was right so to hold. But the Tribunal's duty did not end with declaring the assessments illegal. It erred in merely cancelling them without further direction; since it was not established that the claim was belated, the proper order was to set the assessments aside and direct the officer to make fresh assessments according to law. The High Court's order upholding the assessments and directing the officer to make modifications was unwarranted and was set aside.
TaxSphere, “Kapurchand Shrimal v CIT”, https://taxnotice.vittsphere.com/caselaw/case/kapurchand-shrimal-v-cit/ (validity last checked 2026-08-29)
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As karta and father I divided some family shares between myself and my minor sons. Can the officer refuse to record the partial partition because the shares are unequal?
The family's only income-producing right is the karta's share in a managing agency, which cannot be split among the members. They divided the commission between themselves. Is that a partition the department must accept?
My father died and I am now the only male member of our family, with my mother and unmarried sisters. Must the family income be assessed on me as an individual?
Our family partitioned by agreement and a civil court passed a partition decree. Can the department still assess us as a Hindu undivided family?
