JUDGMENT
1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench "B", New Delhi, referred the following questions for the opinion of this court :
''1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the order of the Commissioner of Income-tax under Section 265 was bad in law and was without jurisdiction, as no notices were served on the other members of the family ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the partial partition between the two groups effected on January 1, 1971, was valid under the Hindu law ?"
2. The facts recorded in the statement of facts by the Appellate Tribunal are that the assessee is a Hindu undivided family, headed by Shri Shrawan Kumar Swarup as its karta. Smt. Asha Kumari Swarup is the wife of the karta and they had two minor children, namely, Harish Kumar Swarup and Nandita Swarup. The karta by virtue of powers and rights vested in him, voluntarily and with the consent of other members of the family, effected a partial partition in respect of the share capital and rights in the profits and in the reserve of the firm. Sharwan Cold Storage and General Mills in two groups on January 1, 1971. The two groups consisted of Shri Sharwan Kumar Swarup and his minor daughter, Km. Nandita Swarup, on the one hand, and Smt. Asha Kumari Swarup and minor son, Harish Kumar Swarup, on the other. The total share capital invested by the assessee family through us karta in the said firm was Rs. 50,000. It was divided into two equal shares between the two groups. The shares of the two groups were specified in detail in the memorandum of partition.
3. The Income-tax Officer accepting the claim of partial partition under Section 171 of the Income-tax Act, 1961 (briefly, "the Act"), held as follows;
"I am satisfied that a partial partition in the bigger Hindu undivided family in respect of the share capital and share profit ratio in the firm Sharwan Cold Storage, which were hitherto held by the bigger Hindu undivided family has been effected with effect from January 1, 1971."
4. Exercising the powers under Section 263 of the Act, the Commissioner of Income-tax held as under :
"During the proceedings for the assessment year 1972-73, the assessee put forward his claim for partial partition and the Income-tax Officer vide his order dated February 5, 1975, accepted the same under Section 171 of the Income-tax Act. Consequently, the Income-tax Officer did not include in the total income of the assessee the share from the registered firm, Sharwan Cold Storage and General Mills ... On a perusal of the assessment records I found that the partial partition made by the assessee by dividing the interest of the Hindu undivided family in the firm of Sharwan Cold Storage and General Mills and the capital invested therein was not according to law. Not that the Hindu undivided family was not entitled to make a partial partition, but the partial partition should have been made defining the share of each and every person entitled to get the share. Instead of doing that, the share in the firm has been divided in two groups, viz., one consisting of Sharwan Kumar Swarup and his minor daughter, Kumari Nandita Swarup, and the second group consisting of Smt. Asha Kumari Swarup and her minor son, Harish Kumar Swarup. The shares of the members in each group were never defined and as such the partial partition could not be said to be valid .. . Thus, the acceptance of partial partition by the Income-tax Officer under Section 171, vide his order dated February 5, 1975, was not only incorrect and erroneous but also prejudicial to the interests of the Revenue inasmuch as the share income from Sharwan Cold Storage and General Mills was not assessed in the hands of the assessee-Hindu undivided family ..."
5. The Commissioner of Income-tax further held in para. 4 of his order as under :
"As already stated above, the partial partition has not been validly effected because shares have not been defined for each and every member. On the other hand, shares have been given to two separate groups of members, which is not in accordance with the Hindu law and so is invalid . . ."
6. This is how the Commissioner of Income-tax held that the partial partition as claimed by the assessee qua the property as well as qua the members of the family was not valid.
7. On appeal, the Appellate Tribunal accepting the preliminary objections raised on behalf of the assessee held (para. 4) :
"After hearing the parties, we are of the opinion that the order of the Commissioner deserves to be cancelled on the short ground that the notice under Section 263(1) was not served on all the members of the assessee-Hindu undivided family and thus, the rules of natural justice were not complied with ... In the present case, the notice was served only on Shri Brahm Swaroop and no notices were served on other members of the family before initiating proceedings under Section 263(1) of the Act of 1961. Therefore, ... we hold that the order of the Commissioner of Income-tax under appeal is bad in law and is without jurisdiction, as no notice was served on the other members of the family."
8. On the merits, the Tribunal held that after partition, members of each group held the property as tenants-in-common. "The shares were obviously 1/4th each and no further defining thereof was necessary ... In the present case, the partial partition was both in respect of persons constituting the Hindu undivided family and the properties belonging to the Hindu undivided family ... it is absolutely clear from the above that each group inter se had equal shares and thus, the share of each member was 1/4th . . ."
9. The first question for consideration is whether the Tribunal rightly held that the order of the Commissioner of Income-tax passed under Section 263(1) cancelling the order of the Assessing Officer accepting the case of partial partition of the assessee, was vitiated on the ground of notice not being given to each member of the family. Section 171, subsection (2), of the Act mandates that where it is claimed by or on behalf of any member of a Hindu family assessed as undivided that a partition, whether total or partial, has taken place among the members of such family, the Assessing Officer shall make an inquiry thereinto after giving notice of the inquiry to all the members of the family. There is no case that the Assessing Officer made inquiry into the claim of partial partition without giving notice to each member of the family. Therefore, it is to be assumed that the Assessing Officer while making inquiry into the case of partial partition of the assessee, caused the notices to be given to all the members of the family. When the case of partial partition was accepted by the Assessing Officer after giving notice of the inquiry to all the members of the family, it follows that the said order could be reversed or cancelled by the Commissioner of Income-tax under Section 263(1) only after giving notice to all the members of the family.
10. It is a cardinal principle of law that an order from which civil consequences flow, cannot be cancelled, unless due opportunity of being heard is given to the persons affected by cancellation. The order under Section 171 was passed by the Assessing Officer qua the members of the family as well. Cancellation of that order will affect such members of the family and, therefore, service of notice on each such member of the family was essential.
11. After disruption of the Hindu undivided family, though partially, each member of the family was entitled to notice before the order passed under Section 171, is interfered with by the Commissioner of Income-tax.
12. A similar view was taken by the Andhra Pradesh High Court in the case of T.G. Sulakhe v. CIT [1960] 39 ITR 394, while considering the provisions relating to partition under the Indian Income-tax Act, 1922.
13. Another issue for consideration is whether the Commissioner of Income-tax was right in cancelling the order passed by the Income-tax Officer under Section 171 on the ground that the interest of the Hindu undivided family in the firm was divided in two groups without defining the shares of the members inter se falling in each group. The Appellate Tribunal has found that the partition was qua the property as well as qua the parties. The question is when partial partition was made qua the parties, meaning thereby when the property stood divided in two or more groups, whether to make a legal partial partition it is necessary to define the share of each member of each group.
14. In Daya Shanker Vijay Kumar v. CIT [1980] 124 ITR 691, this court held that no particular method is required to effect a partition, and all that is necessary is that there should be a definite unequivocal indication of the intention of a member of a joint family to effect the partition. The factum of partial partition is not in dispute before us. The only exception taken by the Commissioner to the order of the Income-tax Officer recording the fact of partition is that in the memorandum of partition, the share of each member of each group has not been defined and, therefore, no valid partial partition could be said to have come into existence. The question is whether to effect a valid partial partition it is necessary to define the share of each member of each group. No law has been shown in this regard by the standing counsel. When partial partition qua the persons is permissible under the law, the members of the Hindu undivided family can divide themselves groupwise and it is not necessary to define the share of each member of each group. When a property is held by two groups and if the share of each group is well defined, the requirement of partial partition will stand fulfilled. From the memorandum of partition, it is manifest that the share of each group of the two is well defined and thus the legal requirement is fully satisfied.
15. For the above reasons, the view taken by the Commissioner in his order under Section 263(1) of the Act does not commend to be accepted. We agree with the Appellate Tribunal that a valid partial partition had been made between the members of the Hindu undivided family, who divided themselves in two groups defining the share of each group in regard to the Hindu undivided family's interest in the firm.
16. Both the questions, abovestated, are therefore, answered in the affirmative, that is, in favour of the assessee and against the Revenue.