TMI Blog2003 (6) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983-84, 1984-85 1985-86 1. "For that the Commissioner of Income-tax (Appeals) had erred in law and in facts holding that there is valid HUF in existences assessable to tax and cancelling the protective assessment. 2. For that the Commissioner of Income-tax (Appeals) had erred in law and in facts in holding that the FDRs in the balance sheet and its income will be considered in the hands of the said HUF on a substantive basis." 2. The assessee filed its return of income claiming the status of HUF. In the assessment year 1988-89 while completing the assessment on 6-3-1992 the Assessing Officer held that the HUF is non-existence and he has taken the status of the assessee as AOP and assessed the income shown on protective basis. The Assessing Officer also held that the same income is assessable on a substantive manner in the hands of Ajit Barkataky and Krishna Kanta Barkataky. The assessment for the assessment years 198384 to 1985-86 have also been completed on 17-3-94 with similar observations and findings in the status of AOP. 3. The Assessing Officer has recorded that Gauri Kanta Barkataky died sometime in 1947 leaving behind his four sons, out of which two sons, namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire funds of the said HUF. It was held that there is a valid HUF in existence assessable to tax and determined the status of the assessee as that of an HUF. The protective measure of the assessment was cancelled and it was held that the FDRs of the said HUF and its income will be assessed in the hands of the said HUF on substantive basis and not in the hands of Krishna Kanta Barkataky and Ajit Barkataky. 5. We have considered the rival submissions at length and perused the orders of the lower authorities in light of the materials available on record. We have duly considered the various papers placed before us in the paper book. We have also considered the various case laws relied upon by the learned A.R. of the assessee but we are of the considered opinion that the said case laws do not conclusively establish the contention of the respondent. It is observed that the point of time at which Sri B.K Barkataky and Sri K.K. Barkataky exercised their claimed volition to form HUF is netiher spelt out nor established. The state of facts during the period 1947 to 1970 are not on records. However, a scrutiny of the financial statements of the assessee shows that the source of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders of the first appellate authorities to the extent it cancelled the protective description of the assessment. The appeal of the Revenue in respect of this issue is dismissed. 9. In the result, the appeals of the Revenue is partly allowed. Per B.R. Mittal, J.M.-- The order proposed by Learned Brother A.M. has been gone through by me carefully. I have agreed with Learned Brother in respect of the issue involved in these appeals that the claim of the status by the assessee as HUF is not conclusively proved but have not been able to persuade myself to agree with his conclusion arrived at. Therefore, I proceed to express my dissenting views. 2. The question for our consideration in these appeals is, whether there was a valid HUF in existence assessable to tax or not. For the sake of clarity, I consider it necessary to state the grounds on which the department has filed these appeals and the same are as under: ITA Nos. 11, 12 13 (Gau.) of 1996 (Assessment Years: 1983-84, 1984-85 1985-86) "1. For that the Commissioner of Income-tax (Appeals) had erred in law and in facts holding that there is valid HUF in existence assessable to tax and cancelling the protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated order dated 18-6-1992 set aside the assessments to the file of the Assessing Officer. 6. Presently, these appeals arise out of the assessment orders made for the assessment years 1983-84, 1984-85 and 1985-86 under section 143(3)/251/144A all dated 17-3-1994. The Assessing Officer in the assessment orders after considering the facts and the requirements of legal position under Dayabhaga Hindu Law, has held that there is no HUF assessable to tax as the status of HUF has not been accepted by the department from assessment year 1980-81 onwards. Since the returns were filed, the Assessing Officer completed the assessment as a protective measure in the status of AOP. Assessing Officer, further held that the FDRs as shown in the balance sheet and the income would be assessed in the hands of the person(s) in whose name the FDRs were found viz., K.K. Barkataky and Ajit Barkataky on a substantive basis. 7. Similarly, in respect of assessment year 1988-89, the Assessing Officer completed the assessment under section 143(3) by order dated 30-3-1992 by denying the existence of HUF and assessing the returned income on protective basis in the status of AOP but on substantive basis in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer made a protective assessment in the status of AOP, as the Assessing Officer did not find HUF as an entity assessable to tax but to complete the assessment. On the other hand, the Learned CIT(A) accepted the existence of the HUF and accordingly, held to assess the income shown by the assessee on substantive basis and consequently cancelled the protective assessment and also cancelled the order of the Assessing Officer to make the substantive assessment of the income in the hands of the other persons namely K.K. Barkataky and Ajit Barkataky. I am of the considered view that in the facts and circumstances of the case, the order of the Assessing Officer that there is no existence of valid HUF is to be confirmed but the protective assessment made in the hand of AOP without making any investigation by him is to be cancelled and consequently the returned income is to be assessed in the hands of the other persons namely KK Barkataky and Ajit Barkataky on a substantive basis. 14. In view of the above, I allow both the grounds of appeal for the assessment years 1983-84, 1984-85 and 1985-86 and also allow the only ground of appeal for the assessment year 1988-89 on the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble President, as Third Member, for deciding the points of difference in these appeals. 2. The points of difference are as under: As per Accountant Member-- (1) Whether, in view of the facts and circumstances of the case, when the Assessing Officer himself after rejecting the status of the assessee as HUF assessed the assessee in the status of an AOP, on second appeal, finding that the status claimed as HUF is not proved, was there any error in accepting the status of the assessee as an AOP? (2) Whether, in view of the facts and circumstances of the case and also in view of the finding recorded in para 5 of the order in respect of the sources of the funds invested in FDRs the income in question can be held to be the individual income of Shri K.K. Barkataky and Shri Ajit Barkataky? As per Judicial Member-- Whether, on the facts and in the circumstances of the case, is it in order to confirm the returned income as AOP on substantive basis when the said issue is not a ground of appeal filed before us? 3. In my considered view, the question framed by the learned Judicial Member brings out the real difference of opinion between the Members insofar as the Members have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existence of HUF. The Assessing Officer pointed out that Biswakanta Barkataky had always stayed at village Jammuguri, Naogaon District, and was basically a cultivator. Two of his sons were cultivators and others were Government servants (now retired) one being a Supervisor, the other a Junior Engineer. It was further pointed out that Krishnakanta Barkataky was a Government servant and he alongwith his sons were based in Guwahati. One of his sons was in business, while the other two were doctors. The Assessing Officer, accordingly, held that the so-called coparceners were not residing together or sharing a common kitchen. The assessee had also produced evidence regarding ownership of lands. On perusal of evidences produced, the Assessing Officer found that lands on Patta Nos.243, 212,74 and 4 were in the names of Biswakanta, Krishnakanta and about eight other names. 6. The Assessing Officer further observed that the law was clear on the formation of a Dayabhaga HUF. The heirs of a Dayabhaga deceased do not spontaneously, by operation of law, become members of HUF. They remain co-owners with definite and ascertained shares and were to be assessed individually unless there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the CIT(A) against the orders of the Assessing Officer, and CIT(A), vide consolidated order for the assessment years 1983-84, 1984-85 1985-86 dated 18-11-88, dismissed the appeals of the assessee by holding as under: "In view of all these facts I am of the opinion that the existence of HUF has not been proved, the business of the HUF has not been proved, the cash credits have not been proved to be genuine and therefore I hold that there is no question of making protective assessment because there was no HUF in existence and thus I cancell the assessment." 9. The assessee appealed to the Tribunal against the above decision of the CIT(A). The Tribunal observed that in the cases of Ajit Barkataky in ITA No. 98/Gau/87 and Krishnakanta Barkataky in ITA Nos. 89to 95/Gau/89 vide order dated 22-6-90 the Tribunal had restored the issue regarding assessment of income to the file of the Assessing Officer for fresh decision after bringing the necessary materials on record, as discussed by the Tribunal, in those respective orders and after giving the assessee reasonable opportunity of being heard. It was felt by the Tribunal that since the facts of the present case were linked with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording a finding that no HUF existed, held that the returns of income filed in the name of Gaurikanta Barkataky others, the assessments are completed, as protective measures, in the status of AOP. It is also held that the FDRs, in the balance sheets and the income assessed on protective basis will be considered in the hands of Krishnakanta Barkataky and Ajit Barkataky on substantive basis. The finding of the Assessing Officer, being necessary for appreciating the difference of opinion, assumes importance. The said finding has already been quoted in para 6 above. It is evident from the relevant order of the Assessing Officer that after recording the finding that no HUF was assessable to tax, there is no enquiry or finding that an AOP existed for the purpose of assessment. In fact, in the normal course, once the return of income is filed in the name of an HUF and the same is not accepted on substantive basis, the only course open to the Assessing Officer is to make the assessment on the basis of the return in the same status in which the return is filed. This has been done in the assessment year 1985-86 and I think this is the correct procedure which ought to have been followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, the Tribunal having recorded a finding that HUF was not in existence at all, the returns filed in the status of HUF have got to be cancelled on assessments in the cases of actual owner of investment/income on substantive basis becoming final. I, therefore, concur with the view expressed by the learned Judicial Member that there is no scope or justification for declaring the assessments made by the Assessing Officer on protective basis to be on substantive basis in the hands of the AOP. 15. Let the matter be placed before the regular Bench for passing a consequential order in accordance with the majority view. ORDER Per B.R. Mittal J.M.-- The department has filed these four appeals on the following grounds: ITA No. 188 (Gau.) of 1993 Assessment Year: 1988-89 "For that the Deputy Commissioner of Income-tax (Appeals) erred in cancelling the protective assessment and holding that no part of the income of the appellant is assessable in the hands of Sri Ajit Barkataky and Shri Krishna Kanta Barkataky." ITA Nos.11 to 13 (Gau.) of 1996 Assessment years 1983-84 to 1985-86 "1. For that the Commissioner of Income-tax (Appeals) had erred in law and in facts hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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