Income Tax Appellate Tribunal - Indore
Assistant Commissioner Of Income-Tax vs Dawarkadas Ghasiram Huf on 29 May, 1992
Equivalent citations: [1994]51ITD160(INDORE)
ORDER
S.K. Jain, Judicial Member
1. Aggrieved by the consolidated order dated 14-1-1991 of the CIT(A) relating to the assessment years 1978-79, 1979-80, 1980-81, 1982-83 and 1983-84, the department is in appeal. Aggrieved by the orders dated 4-10-1989 and 27-3-1990 of another CIT(A) relating to the assessment year 1986-87, the assessee is in appeal. The relevant facts are these-
2.1 A complaint was received by the department alongwith a diary, written from 22-6-1977 to 15-9-1977 to the effect that the assessee (HUF) had huge income from business of coal ash and transportation and had huge household expenses. Search and seizure operations were carried on at the place in occupation of the members of the assessee HUF during the period from 21st to 24th January '86. During the said operations a document running into 10 pages and containing the movable and immovable properties in the names of various family members found in the locker of a bank which was in the name of Shri Ajaykumar - vide pages 16 to 25 of the departmental paper book for the assessment year 1978-79. The first two pages of the said document bears the date 1-7-1983. They are said to be in the hand-writing of Shri Shankarlal, father of Shri Ajaykumar. The other pages of the said documents in the handwriting of Shri Ajay Kumar. That document is the pivot of the assessments framed in these assessment years.
2.2 The geneology of the family is as under:
Dwarkadas (died in 1981) Smt. Chaltibai (died on 4-5-1988)
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Shankarlal Bholaram Sambhudayal Kailashchandra
Smt. Bada- Smt. Kris- Smt. Vimlabai Smt. Kiran
mibal hnabai Devi
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Vijay Ajay Prakash Manoj Kumar
Kumar Kumar
Smt. Nainbala
Smt. Pramilata
Ku Sunita Ku. Sumita Ku. Bavita Ku. Kavita Ku. Sarita
Ku. Nikita Rajkurnar
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Ku. Sweati Ku. Vineeta Gudiya
2.3 There was a partial partition of the cash balance of the assessee HUF on 30-3-1957, Rs. 1,02,000 were divided amongst Dwarkadas, his wife, Smt. Chaltibai and his four Sons, Shankarlal, Bholaram, Shambhudayal and Kailashchandra. Each member of the family got Rs. 17,000. Bholaram, Shambhudayal and Kailashchandra were then minors. They were represented by their father, Shri Dwarkadas. The said partial partition was. evidenced by a deed dated 9th April, 1957. The BUF was then not assessed to income-tax. Voluntary disclosure petitions in the name of Shri Dwarkadas, Shankarlal, Bholaram and Shambhudayal were made on 28-5-1965. It was contended in those petitions that after the partial partition, the major members of the family desired on their business independently and a share capital of Srnt. Chaltibai and the minors remained in possession of Shri Dwarkadas who looked after the money lending business carried on in their names. In those voluntary disclosure petitions total income of Rs. 1,00,000, Rs. 80,509, Rs. 67,500 and Rs. 62,000 was assessed in the hands of Shri Dwarkadas, Shri Shankarlal, Shri Bholaram and Shri Shambhudayal, respectively. Under the voluntary disclosure scheme it was spread over from the assessment year 1958-66. Such proposal of assessment was sent by the ITO to the CIT, MP and Nagpur, by letter dated 16-2-1966 - In the said letter it was also mentioned that the bigger HUF did not seem to be taxable as the only source of income left with the HUF was properly and income therefrom was stated to be at Rs. 480 per month. The said proposal was accepted by the CIT vide letters dated 15th March, 1966. Assessment orders were separately passed in the cases of these four persons in accordance with the acceptance of the proposal by the Commissioner of Income-tax.
2.4 After receiving the complaint and coming into possession of the salary for the period from 22-6-1977 to 15-9-1977 and finding the consolidated list of all immovable and movable assets in the names of several members, in the locker of Shri Ajay Kumar, the department was of the view that there was no partition in the HUF and the income shown by the various members of the HUF either in the capacity of their smaller HUFs or in the up country as Individuals all belonged to the bigger HUF, namely, the assessee in these appeals. The assessments for the assessment years 1978-79, 1979-80 and 1980-81, were already completed under Section 143(1). They were reopened under Section 148. Returns of income for the assessment years 1982-83 and 1983-84 were filed voluntarily and they were later validated by issue of notice under Section 148. Despite resistance of the assessee, income assessed in the hands of all the family members including wives of four sons of Shri Dwarkaprasad, was clubbed with the income of the assessee in all these assessment years. The assessments for the assessment years 1984-85 and 1985-86 were then pending. Same course was adopted in framing the assessments for those two years (which are now not in appeal). Similarly, for the assessment year 1986-87, the income in the hands of these family members was assessed on protective basis and was clubbed with the income of the assessee-HUF on substantive basis.
3. The assessee went in appeal before the CIT(A). The appeal for the assessment years 1978-79 to 1983-84 (except for the assessment year 1981-82) were heard by the CIT(A)-I and that for the assessment year 1986-87 was heard by the CIT(A)-II. The CIT(A) took the view that reopening of the assessment under Section 148 was invalid. He held that there was no basis for holding the diary as belonging to the HUF. He also deleted the addition made in these years. The department is, therefore, in appeal.
4. The CIT(A) heard the appeal for the assessment year 1986-87. He was of the opinion that further inquiry was necessary in this case. Following excerpt at paras 2.5 and 2.6 of his order may perhaps clarify his opinion as under:
However, for the subsequent assessment year 1986-87 for the whole group, which is now under appeal, without undertaking the necessary logical investigations as warranted by discovery/detection of this Document containing the aggregate assets worth Rs. 1.12 crores and of fact by liabilities of Rs. 29.56 lakhs the same modus operandi was repeated by the Assessing Officer making a kind of quick assessment, in each case. This resulted into an awful dilemas created at this appellate level, forcing this office to seek a systematic Remand Report on the following lines, vide letter, dated 6-10-1989 :
1. To determine as to why there occurred an inclusion of the assets ostensibly owned by each member, though the HUF had been claimed to be partitioned vide document of February 1957 amongst 4 branches headed by S/Shri Shankarlal Shambhudayal, Bholaram and Kailashchand respectively.
2. How was it that correct valuations could be recorded on the material date 1st July, 1983 and how there could be such a comprehensive enlistment of cash and every asset ostensibly owned by each.
3. That liabilities also were properly enlisted.
4. Motivation for such a serious exercise culminating into this rigorous enlistment of the assets of the 4 branches.
There is no doubt that such consolidation was a grand exercise done probably for the first time, after a gap of 25 years since the first alleged (Partial) partition was made in February 1957, comprehensive in its reach both ways (a) Memberwise and (b) As twice. Letters were written repeatedly to the learned counsel Shri R.L. Rawka to assist the A.C., Cir. 1, Indore, by offering of 21/25 members of the family for interrogation by him, to assist this office to come to a proper conclusion in accordance with law. A lot of time was spent away in seeking adjournments for one or the other reasons, which on scrutiny were found to be frivolous. A personal request was made to be the learned counsel, also the dates on which all these adjournments were given have been enlisted by the Assessing Officer while submitting his Remand Report, which is annexed to this order, as Annexure 'A'.
5. For seeking a remand report from the Assessing Officer, the learned CIT-II without passing any independent order wrote a letter dated 4-10-1989 to the Assessing Officer. The Assessing Officer issued summons to certain members of the assessee-HUF for appearing on 19-12-1989. The counsel for the assessee, Shri R.L. Rawka, took a short adjournment and on the next date requested for copy of remand order. It appears that the Assessing Officer could furnish the copy of letter dated 4-10-1989 to the assessee on 23-1-1990.
6. The CIT(A)-II was of the view that the partial partition dated 30th March, 1957, acted upon by the members of the HUF. He was also of the view that a recognition was to be given to the alleged partial partition under Section 171 of the Income-tax Act, 1961 and in absence of such recognition, it could not be treated as valid partition. Further, according to him, the document containing of movable and immovable properties in the names of various family members was the strongest evidence of showing that there was no disruption in the family. Aggrieved by this order of the CIT(A), the assessee is in appeal. The assessee is also in appeal against the remand order contained in the letter dated 4-10-1989 addressed to the Assessing Officer.
7. Learned Standing Counsel for the department strenuously argued that the alleged partial partition though took place in March 1987, but the deed having been produced for the first time in 1965 before the Commissioner of Income-tax was subject to the provisions of Section 171 and the same having not been recorded, cannot be acted upon. He strongly relied upon ITO, Calicut v. N.K. Sarada Thampatty AIR 1991 SC 2035. He fully supported the order of the CIT(A)-II and contended that there is irresistible inference from the consolidated list of the assets in the names of various family members that the family was joint. It is also his contention that the alleged partial partition was merely colourable for the purpose of making voluntary disclosure of concealed income in the names of various members of the family obviously with intent to reduce the tax burden. He commented upon the order of the CIT(A)-I as not valid in view of these arguments.
8. Learned counsel for the assessee, on the other, strenuously contended that the tax authorities had no jurisdiction to test the validity of the partial partition which had taken place and acted upon long long ago and which was pleaded during the voluntary disclosure petitions in as much as that on the basis of which the petitions were accepted by the Commissioner of Income-tax. It is also his contention that the said deed of partial partition was with the department itself and is still with the department. It is urged by him that it was idiosynerasy of Shri Ajaykumar that he prepared such a consolidated list to find out the total assets of the family had there not been any partition and to find out what he would have got in partition had the partition taken place then. It is also his contention that there was voluntary disclouse of income by the members of the family separately and since then they are being assessed separately. It is pointed out by him that the HUF had no taxable income or wealth till before the assessment year 1967-68 and the assessment in its case was made for the first time on 30-3-1977 for the assessment year 1967-68. The business of each branch of the family was independent and separate in as much as that the sales tax licence was taken separately and independently and the income was being assessed separately for the last many years. In support of the appeal against the remand order, the learned counsel contended that it is no order in the eyes of law except that it exhibits the ever zealous of the learned CIT(A)-II to confirm the assessment on any ground whatsoever and to condemn the Assessing Officer.
9. We have minutely persued the evidence produced before us and considered the submissions of the learned counsel for the parties. It appears that there is a fundamental mistake in invoking either Section 25-A of the 1922 Act or Section 171 of the 1961 Act. These Sections have no application to the case of Hindu family which has never been before a joint family. In this connection reference may be made to CIT v. Kanttial Ambalal [1992] 192 ITR 376 (Guj.), Additional CIT v. Durgamma [1977] 166 ITR 776 (AP), IAC of Agricultural Income-tax & Sales Tax Special v. Poomulli Manekkal Parmeswaran Namboodiripad [1972] 83 ITR 108 (SC). These observations of the Hon'ble Supreme Court in the case of P.M.P. Namboodiripad (supra) are pertinent-
Again the assessing authority itself in the previous years had proceeded on the basis that the family in question is a divided family. It had not only not assessed that family as an undivided family but had assessed the individual members of that family as divided members of that family. Hence, the question whether that family was divided or undivided had been gone into in the earlier years and decided. That being so, it cannot be said that the family was 'hitherto assessed as a Hindu undivided family'. Nor can it be said that the family was 'being assessed for the first time as a Hindu undivided family'. As seen earlier that the family was sought to be assessed as a Hindu undivided family earlier but ultimately the assessing authority had to assess the members of that family as members of a divided family. In other words, it had held the family to be a divided one. Such a family cannot be considered as being "assessed for the first time as a Hindu undivided family". The expression "which (meaning family) is being assessed for the first time as a Hindu undivided family" presupposes the existence of the family. That is a condition precedent. Section 29(1) does not permit the assessing authority to create a family by rejoining the divided parts or otherwise. If that is not so, families which had been divided years back can be again resurrected by the assessing authorities for the purpose of the Act.
10. Coming to the facts of the instant case, it is crystal clear that there was a partial partition on 30-3-1987 evidenced by the deed dated 9-4-1957. The original deed was in possession of the department itself and is still in its possession. It was filed along with the voluntary disclosure petitions on 28-5-1965. There was no question of making application of recording partition either under Section 25A of 1912 Act or under Section 171 of the 1961 Act since till then the assessee was not assessed. The said partition was found genuine inasmuch as that the voluntary disclosure petitions were accepted by the CIT of Income-tax, Nagpur and as, stated above, assessments were framed in the individual hands of Shri Dwarkadas, Shri Shankarlal, Shri Bholaram and Shrl Shambhudayal, for the assessment years 1958-59 to 1965-66. Even thereafter till the assessment year 1983-84 these members of the family were assessed independently of the assessee HUF. Thus, they have been assessed independently of the assessee for the last 26 years. No doubt, the rule of res judicata is not applicable to income-tax proceedings but there should be finality and certainty in revenue proceedings. If no fresh facts are there, the earlier decision should be followed. In this connection, the following observations in Full Bench decision of Madras High Court in T.M.M. Sankaraltnga Nadar and Brothers v. CIT AIR 1930 Mad. 209 reproduced with approval by the Bombay High Court in H.A. Shah & Co. v. CIT [1956] 30 ITR 618 (628) need attention-
It seems to us that where income-tax officials have, after enquiry, proceeded to assets the assessee on a certain basis, though they may be entitled to reopen the enquiry, they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with the preceding offer's finding. The position is just like the position of any two parties who have proceeded on a certain basis in their relation. It may be open to one party to reopen the matter. But if he wants to do so, there should be fact which would entitle him to do it. If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor we think he is entitled to reopen the question. But if there are no fresh facts it is difficult to see how he can arbitrarily go behind the finding of his predecessor. The same principles of natural justice or judicial dealing, which courts impose upon Income-tax Officers, would prevent them capriciously setting aside the orders of their predecessors based on enquiry.
In this connection reference be made to CWT v. N.R. Sirkar [1989] 178 ITR 311 (Gauhati). Following excerpt from the said judgment is pertinent-
The Privy Council held very numerous authorities were referred to. In the opinion of their Lordships, it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started with a view to obtaining another judgment upon different assumption of fact, second, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be the proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to case where a point fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. The same principle of setting parties' mights to rest applies and estoppel occurs.
11. It is to be noticed that the assessee was assessed for the first time and that too after the partial partition for the assessment year 1967-68. The tax authorities had, therefore, no jurisdiction to apply Section 25A of 1922 Act or Section 171 of 1961 Act. The case of N.K. Sharda Thampatty's case (supra) relied on by the learned Standing Counsel has no application to the facts of the instant case since Section 171 is not applicable.
12. The only solitary evidence adopted by the department as sheet-anchor for reopening the assessments upto the assessment year 1983-84 and thereby to make additions of income of all the members of the family to the income of the assessee, is a document found in the locker of Ajaykumar in which assets of all the members of the family have been listed. The inference of the department thereby is that had the family not been joint, there was no purpose of making such a consolidated list of all the assets of all the members of the family. No doubt, Shri Ajaykumar and his father, Shri Shankarlal, must have had made much labour in preparing such list, but the inference of the department that the family was joint is far-fetched particularly in view of the fact that there was a partial partition in the family and the members of the family were assessed independent of the income of the family right from 1958-59. There could be a thousand and one reason for preparing such document, but no inference of jointness or reunion can be drawn therefrom.
13. We have minutely gone through the diary written for the period from 22-6-1977. In the said diary personal expenses and so also the business income and expenditure has been entered but that is of no probative value for establishing the case of the department that the income of the individual members of the HUF was that of HUF.
14. In view of above discussion, the addition of income of different members of the family to that of the assessee-HUF is unwarranted. It is significant to note that the Assessing Officer made no exception to the income of any of the members of the HUF in as much as that he made addition of income of wives of four sons of late Dwarkadas to the income of the HUF without any inquiry as to the source of those incomes of the ladies.
15. Now remain the appeals of the assessee against the letter dated 4-10-1989 of the CIT(A)-II calling upon the Assessing Officer to make further inquiries and to submit remand report, at the outset it may be stated that the procedure followed by the ld. CIT(A)-II for obtaining remand report, is ex facie faulty. It is needless to emphasis that the function of the CIT(A) is judicial. He is not supposed to write a letter in the manner he did for obtaining a remand report. He must pass a remand order and a copy of which should be delivered to the assessee. A remand order is none-the-less a judicial order under Section 250 and is an appealable order. Furthermore, what we find is that the letter leads nowhere. It is not at all clear as to what inquiries precisely the ld. CIT(A)-II wanted the Assessing Officer to do and what was the relevance of that inquiry. The ld. CIT(A)-II observed in paras 2.2 and 2.3 as under :
2.2 In this probe, I find serious flaws, which have rendered this interrogation ineffective and non-functional. The witness had raised the issue of mental tensions on 9-4-1986, when the Assessing Officer recorded his statement for the first time, whereas the search had occurred on 21st January, 1986. This prolonged continuance of the alleged tension, over 2 1/2 months. Leading to denial of the written authorship was required to be exploded by calling for medical evidence of a respectable Medical Specialist, particularly a psychiatrist. He could have been established a liar and the value of his witness downgraded. The issue was allowed to hang, without conclusion.
2.3 Secondly, mental tension can arise and continue over such a long time, only if there is an amount of guilt like to withhold from a Lawful Authority. This was not probed further.
It is not clear if he wanted the Assessing Officer to get Shri Ajay Kumar medically examined after lapse of nearly three years. The number in which Shri Ajaykumar has been examined was really distressing. In this connection, his statement recorded on 24-1-1986 may be referred to.
16. On the basis of the consolidated list of all immovable and movable assets in the names of several family members found in the locker of Shri Ajay Kumar, it was presumed by the ITO that the family was joint and the entire assets belonged to the joint family. He further, presumed that there was partition of all those assets valued at Rs. 28 lakhs into four shares and one of such shares was allotted to Shri Ajay Kumar. On the foundation of such baseless presumption a question was put to Shri Ajay Kumar that in the family partition, he was allotted assets worth Rs. 22 lakhs. He, when replied that he did not know of such partition, again a question was put to him as to whom it was known. The ITO did not stop there. Again a question was put to Shri Ajay Kumar as to how it could be that he did not know of such partition. On the face of such questions, one is bound to get mentally disturbed. Again a question was put to him that under the pretence of illness, he was avoiding to answer. Further, a question was put to him that what was the illness and since when. He plainly replied that so much pressure was put on his mind that he was unable to understand as to what all that was going on. Without appreciating the distressing nature of the questions put to Shri Ajaykumar, the ld. CIT(A)-II expressed that Shri Ajaykumar should have been got examined by a psychiatric. It is not only that the question based on baseless presumption were put to the witness, but even the witness were sought to be confronted not with their own statement, but with the statements of others. Shri Bholaram was referred to the statements of Shri Ajaykumar and Shri Shambhudayal and on that basis a reply was attempted to be extracted out as in whose handwriting the seized papers were. Such type of examination is bound to make a healthy person mentally disturbed, particularly in the atmosphere of search and seizure. We, therefore, find no justification in the observations of the ld. CIT(A)-II reproduced above. Para 2.6 of the letter dated 4-10-1969 of the CIT(A)-II addressed to the Asstt. Commissioner of Income-tax for the purpose of making further inquiry reads as under :
In law and in fact correct implications have to be drawn with a view to arrive at the truth of the matter. This derivation is possible through application of rigorous logic only. Your predecessors abstained from doing this needful, resulting into a week assault upon the contention raised. He (a) artificially extracted its scope from a comprehensive inquiry to interrogation only and (b) interrogation of the person only, in place of many.
17. We fail to understand what precisely the ld. CIT(A)-II wanted the Asstt. Commissioner of Income-tax to do in the course of further inquiry. On the whole, we find no merit in such type of observations for calling a remand report. However, the appeal of the assessee against the order of the CIT(A)-II calling for a remand report is infructuous, since the order of the CIT(A)-II is not being sustained.
18. In the light of foregoing discussion, the order of the CIT(A)-I is sustained and that of the CIT(A)-II and so also the assessment order for the assessment year 1986-87 are vacated.
19. In the result the Income-tax Appeal Nos. 350 to 354/Ind/1991 are dismissed and ITA Nos. 313 and are allowed.