1981 (1) TMI 18 - HC - Income Tax

Summary

Issues:
1. Whether the income from the oil extraction and cotton business could be included in the hands of the HUFRs.
2. Whether the penalty for concealment of income was exigibleRs.

Analysis:
Issue 1:
The case involved an HUF consisting of the assessee, his brother, and their mother, engaged in various businesses. The brothers started a new business of cotton oil extraction without a partnership deed initially, later executing one. The income from this new business was added to the HUF's income by the assessing officer. The Tribunal found that the business was financed by the HUF, not the individual coparceners, and thus the income belonged to the HUF. The registration under the Sales Tax Act in the firm's name did not alter this conclusion. The Tribunal upheld the additions made by the assessing officer and AAC, confirming that the income belonged to the HUF as it was funded by the joint family funds. Therefore, the income from the new business was rightly included in the HUF's hands.

Issue 2:
Regarding the penalty for concealment of income, the Tribunal found that since the income belonged to the HUF and not the individual coparceners, there was a failure to disclose the income in the HUF's books. The penalty was imposed based on the Explanation to section 271(1)(c) of the Income Tax Act. The argument that the income was disclosed in the individual brothers' returns was rejected as the penalty proceedings were against the HUF. The conduct of attempting to pass off the income as that of a non-existent partnership firm was seen as an evasion of tax liability by the HUF. The Tribunal and IAC correctly inferred concealment based on the facts presented. The subsequent formation and registration of a genuine partnership did not negate the concealment in the relevant assessment year. Ultimately, both questions were answered against the assessee, upholding the penalty for concealment of income and the inclusion of the new business income in the HUF's hands.