The family divided the properties and every member has been returning his own share since, but the officer has refused to enquire into the partition and has assessed the whole income on the HUF - what is actually open to me?
The client is a Hindu undivided family assessed at a ward in Kanpur and on the rolls as undivided since AY 1998-99. The members are the karta, his wife, and three sons, one of them unmarried. A memorandum of partial partition dated 14 May 2021 divided two shops and a portfolio of fixed deposits between the karta and the two married sons, the family staying joint as to the residential house and the agricultural land. A second memorandum dated 9 August 2023 records a total partition of everything remaining, the residential house being divided by a recital that each member holds a one-fifth share in it. Nothing was registered and the house has not been physically divided. From FY 2023-24 each member has shown his own share of rent and interest in his own return. The family also holds a shop the karta impressed with the character of family property in 2016, and fixed deposits of Rs 18,00,000 the karta's wife declared in 2017 that she was throwing into the common stock. For AY 2024-25 the HUF filed a nil return. The order under s.143(3) dated 27 February 2026 records under s.171(3) that no partition has taken place, assesses the family on rent and interest of Rs 62,40,000, and raises a demand of Rs 21,90,000. The appeal was filed on 24 March 2026.
Put the two memoranda side by side and sort each of them into total or partial before drafting a line of reply, because s.171(9) decides whether the officer is even permitted to look at the 2021 division. The 2021 memorandum is a partial partition made long after 31 December 1978 and is outside his enquiry by statute; the 2023 memorandum is a claim of total partition he was bound to enquire into and did not. Arguing both together is what produced a single dismissive finding covering the lot.
Section 171(9) provides that where a partial partition has taken place after 31 December 1978 among the members of a family hitherto assessed as undivided, no claim that it took place shall be enquired into under s.171(2), no finding shall be recorded under s.171(3), and the family continues to be assessed as though no partial partition had happened. The library's statement of the sub-section puts it in those terms and is marked good law. There is no constitutional attack left either: the Supreme Court, sitting as a Constitution Bench, allowed the Revenue's appeals and set aside the two High Court judgments that had struck the sub-section down. Every rupee of shop rent and deposit interest covered by the 2021 memorandum therefore stays with the family for tax whatever Hindu law says about it.
The Explanation gives partition a meaning of its own: where the property admits of a physical division there must be a physical division, and where it does not there must be such division as it admits of. The Supreme Court has held that a partition by agreement followed by a civil court decree does not bind the department unless the property was actually divided, because a mere severance of status is not enough. It has also held that dividing the income while leaving the property undivided is not a partition for these purposes and that the family is deemed to continue until a finding is recorded. A recital that each member holds a one-fifth share in an undivided house is exactly the severance of status those decisions say is insufficient.
Section 171(1) creates a fiction: a family hitherto assessed as undivided is deemed for the purposes of the Act to continue to be undivided except where and in so far as a finding of partition has been recorded under s.171. Until that finding exists, nothing the members do among themselves changes who is assessed. The claim is made at the time of the assessment, the officer must enquire, and s.171(3) requires him to record a finding as to whether there has been a total partition and the date of it. The reply must therefore carry the evidence of what physically moved - transfer of the deposits into individual names, mutation of the shops, the bank records - and not the memorandum alone.
Each member has already returned his share and the family has now been assessed on the whole. The Supreme Court has held that the 1961 Act gives the officer no option of the kind s.3 of the 1922 Act gave: s.4 read with s.2(31) requires the right person to be taxed, and taxing the wrong one is not cured by the fact that somebody paid. That is the frame for the ground, rather than a complaint about double taxation at large. Where the partition fails, the corollary is that the members' own returns carry income that was never theirs and the excess has to be worked out of those assessments, not left where it lies.
Section 64(2) applies where an individual who is a member of a family converts his separate property into family property, and the income from that property continues to be included in his own total income; where the converted property is later partitioned, the provision continues to reach the income from the portion that goes to his spouse. The shop the karta impressed in 2016 is squarely inside it, and a finding of partition will not release the rent. The wife's declaration stands on a different footing: the Supreme Court has held that the right to blend separate property with family property belongs to a coparcener alone and is not available to a female member, so the blending failed; but the Court treated the declaration as a gift to the family and directed the income to be taxed on that footing, so this does not simply return the interest to her.
A partition recognised under s.171 leaves four units and they are not all families. The Supreme Court has held that what the Act makes an assessable entity is a Hindu undivided family and not a coparcenary, so a family may consist of a single male member together with widows and other female members and continues to be assessed as a family. It has also held that there is no warrant for requiring two male members, and that a man with his wife and two minor daughters is a family for these purposes. But it has equally held that a single person does not constitute a family, and that the status of a family can be taken only where there are two or more members.
Where the officer refuses to recognise the partition, the assets in the members' hands are assets the family transferred for nothing, and the next officer down the line will look at s.56(2)(x). Two entries mark out the ground. A Tribunal Bench has held that a family is not a body of individuals but a group of relatives, so that a receipt by a member from his own family comes from relatives and falls outside the charge, and held in the alternative on the same facts that the member was entitled to the receipt as a member. Against that, another Bench has held that for a family the Explanation makes only a member a relative, so a gift to the family from the karta's mother was chargeable.
The officer recorded a finding without holding the enquiry s.171 requires, and that is the cleanest ground on the file. But the relief that follows is limited. The Supreme Court has held that although an assessment made on a family without the enquiry the statute requires into a partition claim made in time must be set aside, the appellate authority's duty does not end with declaring the assessment illegal; it has the jurisdiction to give the directions the case calls for, and the enquiry is then made. Ask for that in terms, with a schedule of the evidence that will be produced, so that the first appellate authority has something to send back with.
The partial partition head is lost and is not worth arguing. The deposits and the shops divided in specie are the part most often recognised, though usually one stage up and usually only after the bank and mutation records are produced. The house, divided by a recital alone, is usually held not to be partitioned, which means the family continues for that asset and the members' own returns of its rent have to be unwound. A remand with a direction to hold the enquiry is the commonest disposal by some distance; annulment of the assessment is rare. Expect the recognition, when it comes, to be dated from the physical division rather than from the memorandum, which can move the whole dispute into a later year.
