TMI Blog1993 (6) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Pratibha Devi Agarwal (wife) | -------------------------------------------------------------------------------------- | | | Sri C. Prakash Agarwal Sri C.Vinay Agarwal Sri C. Ajay Agarwal | | | Smt. Leela Devi Agarwal Smt. Manjari Agarwal Smt. Ranjani Agarwal (wife) (wife) (wife) | | | (1) Master Arun Agarwal (1) Master Shivendra Agarwal Master Nitin Agarwal (son) (son) (son) (2) Master Amit Agarwal (2) Baby Abha (son) (daughter) (3) Baby Anuradha (daughter) Each of the four heads of the respective branches constitutes a H. U. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted without making proper enquiries regarding the source of initial capital and the status adopted was wrong and it was determined without any legal basis. The learned Commissioner of Income-tax was of the strong opinion that a H. U. F. can be created only by operation of law and not by Act of individual. By mere receipt of the gift from a third party, two or more individuals who are recipients of gift would not form an entity called H. U. F. as between themselves. A gift can certainly be made to an existing joint family. But a gift cannot by itself create a joint family for the first time. He felt that in the facts and circumstances of this case, the assessee should have been assessed in the status of AOP as there was a combination of persons formed to produce income, profits or gains, in view of the decision in CIT v. Pushpa Devi [1987] 164 ITR 639 (Pat.). He felt that the order of assessment by the Income-tax Officer gives rise for a revision under section 263 of the Income-tax Act. He, therefore, sent notice dated 2-2-1990 to show cause why the assessment order for the above years should not be revised under section 263 and why status of the assessee should not be determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax found ample justification for holding that the impugned assessment order made under section 143(1) were erroneous insofar as they are prejudicial to the interests of the revenue. The learned Commissioner of Income-tax had rejected the arguments of the assessee that because the income-tax returns filed by the assessee were under Amnesty Scheme, the assessing officer would be completely restrained from making any enquiries. He held after quoting CBDT Circular No. 451 dated 17-2-1986 especially Question No. 9 as well as 31 under that circular held that Amnesty Scheme was designed in order to attract returns declaring higher incomes or wealth and it does not refer to the status in which the assessee is to be assessed. He further held that there was no bar imposed under the Amnesty Scheme for adopting the correct status of the assessee in place of the status declared in the income-tax return filed under Amnesty Scheme. 7. Next he took up for consideration the nature of the joint family, whether it is a creature of law or created by a contract. He held that it is only a creature of law and cannot be brought about by any act of parties. In support of this proposition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or more of the members of the A.O.P. is/are assessed by some other assessing officer, the information regarding the respective share income/incomes of these persons in the concerned H.U.Fs., should be communicated to the concerned assessing officer, for necessary action at his end. 8. Aggrieved against the above orders passed by the Commissioner of Income-tax, A.P.II, Hyderabad dated 8-3-1990, the assessee camp up in second appeal before this Tribunal. The question involved is whether property can be held by some of the branches comprised in the bigger H.U.F. and whether some of the branches of such bigger H.U.F. can be recipients of gifts. In such cases, with regard to the income derived from these gifted properties, whether the recipient or donee branches of the bigger H.U.F. only can be considered to be H.U.Fs. for the purposes of assessment. Here in this case the bigger H.U.F. comprising of the branches of Chunnilal and his three sons, namely, Prakash, Vinay and Ajay are being separately assessed in the status of specified H.U.Fs. by the assessing officer, Ward No. 3(3) under G.I.R. Nos. C-203, P-216, V-209 and A-207. Shri Chunnilal, Shri Vinay and Shri Prakash were partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletely disrupted by a partition. Therefore in that case, the property thrown into the common hotchpotch of the smaller family could not be assessed as income of the bigger H.U.F. (the assessee in that case). Shri K. V. S. Bhaskara Rao, learned counsel for the assessee argued that in the Bombay case a member of the bigger H.U.F. throwing the self-acquired property into the common hotchpotch is concerned. He submits that even if a stranger gives a gift of property to such a smaller H. U. F. comprising of any one branch or two branches of a bigger H.U.F., consisting of many other branches, the position would remain the same. He commends this argument of his for the acceptance of this Tribunal. At pages 239 and 240 of the reported judgment, the Bombay High Court had laid down the concept of Hindu joint family as follows: "It is true that a Hindu undivided family, which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters, and the Hindu coparcenary, which is narrower body within the joint family consisting of persons, who acquire by birth an interest in the joint or coparcenary property, are creatures of law and cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... combination of one or two such branches can by themselves hold the property and with regard to the income of that property, the interested branches can constitute smaller HUFs and can be assessed as such. The following other authorities were cited in support of this proposition: (1) A. Hanumantha Rao's case, (2) CIT v. Shantikumar Jagabhai [1976] 105 ITR 795 (Guj.), (3) CIT v. Budhalal Amulakhdas [1981] 129 ITR 97 (Guj.), (4) Satyendra Kumar v. CIT [1983] 140 ITR 840 (Mad.), (5) CIT v. Radhambal Ammal [1985] 153 ITR 440 (Mad.) and (6) CIT/CWT v. M. Balasubramanian [1990] 182 ITR 117 (Mad.)(FB). 10. In A. Hanumantha Rao's case, the bigger H.U.F. consisted of the assessee, his father and his two sons. The maternal grand father of the assessee had gifted a sum of money to the assessee in 1943. The assessee threw it into the joint stock of the smaller joint family consisting of himself and his sons. In earlier years the existence of smaller H. U. F. was accepted but later for assessment year 1957-58 the Department refused to recognise the smaller H.U.F. within a larger H.U.F. which can hold property as a unit to the exclusion of the larger H. U. F. and that separate property of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the status as that of H.U.F. with regard to the income arising out of the said properties bequeathed to him. Justifying the refusal of reference by the Tribunal, the High Court held that the intention of the testator was clear especially, when he had stated that in respect of the properties given to the wife, she should take them absolutely with full powers of alienation but in respect of bequest in favour of the assessee, it was stated that it should be taken for the assessee and for the benefit of a son, if any, born to the testator before his death. Consequently, the testator had not given the power of alienation to the assessee. Therefore, the refusal to give reference was held justified. 13. In M. Balasubramanian's case the facts as well as the decision in that case were succinctly given in the headnote of the decision at page 118 and they are as follows: "In June 1966, the assessee's father gave him a cheque for Rs. 10,000 and cash of Rs. 100. Contemporaneously, he gave him a letter stating that the benefit of these sums should go to his wife and children when he got married and that he should enjoy it as a Hindu undivided family. The gift was accepted by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes, constituting a H. U. F. and in support of this proposition, he brought to our attention para 228A of Mulla's Hindu Law (15th Edition) which is as follows: " 228A. Joint acquisition by some members.--- So long as a family remains an undivided family, two or more members of it, whether they are members of different branches or of one and the same branch of the family can have no legal existence as a separate independent unit; but all the members of a branch of a sub-branch can form a distinct and separate corporate unit within the larger corporate family and hold property as such. But the law does not recognize some of the members of a joint family belonging to different branches or even to a single branch, as a corporate unit. Any acquisition of property by some such persons could be held by them only as co-sharers or co-tenants and the property would pass by inheritance and not by survivorship." This proposition was stated to have been laid down into the Supreme Court's decision in the case of Bhagwan Dayal v. Reoti Devi AIR 1962 SC 287. It is contended on the basis of the above authority that all the authorities cited by Shri K.V. S. Bhaskara Rao do not support the propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty which constitutes the joint family property of that branch alone and in which other branches or the main Hindu family as such have no right or interest. This proposition is also supported by the Madras High Court's decision in Sudarsanam Maistri's case. The intention of the donor while making the gift or settlement would decide whether the gift is for the individual or for the family. Here in this case recitals of the settlement deed as well as the statement made at the time of making the gift would clearly reveal that the gift or settlement was made in favour of all the members comprised in two branches of a Hindu joint family to the exclusion of all other branches in that family. Even in such an instance, the gift or settled property should be taken to be the H. U. F. property of the two branches. Therefore, agreeing with the arguments advanced by Shri K.V. S. Bhaskara Rao this Tribunal holds that the Assessing Officer is quite correct while treating the status of the assessee as H.U.F. in each of the original assessments framed under section 143(1) of the I.T. Act. This Tribunal holds that the revisionary order passed by the learned Commissioner is not all correct. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
