TMI Blog1956 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... me within the meaning of section 28(1)(c) of the Indian Income-tax Act. 2. The assessee, a Hindu undivided family, carries on business in cotton and adat at Khamgaon under the name and style of Jayanarayan Nandlal. The genealogical tree of the family is as under: Balabakas (deceased) Jayanarayan (deceased) Nandlal Madanlal Mohanlal (21 years) Shriram (14) Radheshyam (8) Purshottam (1) Madanlal, the younger brother, is the present karta of the Hindu undivided family of which he and Nandlal are the adult members. Nandlal has also a separate business as an insurance agent. 3. The assessment year is 1946-47, the relevant accounting year being S. Y. 2001. For this assessment year the assessee returned an income of ₹ 9,166. In the course of the examination of the accounts of the assessee the Income-tax Officer noticed that the assessee had effected two transactions for future delivery of Jarila cotton, each transaction being of 200 bales. The contracts were made in the names of Nandlal and Madanlal in Bombay t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the profit of ₹ 5,870 did pass through the family's books and a charge of ₹ 100 is found to have been made by the assessee family for rendering the essential service in the transaction. It was also stated before the Appellate Assistant Commissioner that Madanlal and Nandlal enjoyed personally full confidence of the Bombay party and such transactions done in the past were accepted by the Income-tax Officer as their personal in their separate assessments. The Appellate Assistant Commissioner held that no evidence was laid before the Income- tax Officer to show that these two transactions were entered into by Nandlal and Madanlal in their individual capacity and not indirectly on behalf of the Hindu undivided family. A copy of the order of the Appellate Assistant Commissioner, dated 19th November, 1948, is annexure B and forms part of the case. 5. When the matter came up before the Appellate Tribunal the Tribunal upheld the views of the lower authorities and maintained the additions to the assessee's income. A copy of the Tribunal's order dated 12th October, 1949, in I.T.A. No. 3625 of 1948-49 is annexure C and forms part of the case. In the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample material on which the Income-tax authorities are justified in holding that the assessee deliberately furnished inaccurate particulars of its income. We see no justification for reducing the amount of the penalty. The order under section 28(1)(c) must be upheld. A copy of the Appellate Assistant Commissioner's order is annexure E and forms part of the case. A copy of the Tribunal's order in I.T.A. No. 3624 is annexure F and forms part of the case. 7. As directed by the High Court, we refer the following two questions: R.A. No. 556 Whether there was any legal evidence to hold that the profits of ₹ 6,484 and ₹ 5,970 were earned by the assessee family and not by Nandlal and Venilal respectively. R.A. No. 555 Whether in the circumstances of the case there was evidence to hold that there has been concealment and deliberate furnishing of inaccurate particulars of income within the meaning of section 28(1)(c) of the Indian Income-tax Act. J. M. Thakkar, for the assessee. R. M. Hazarnavis, for the Commissioner. JUDGMENT This case has been stated by the Income-tax Appellate Tribunal as directed by this Court. The rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into by Nandlal and Madanlal in their individual capacity and not indirectly on behalf of the Hindu undivided family, and dismissed the appeal. His order was upheld by the Appellate Tribunal. The findings of the Appellate Tribunal are summarized by it as follows in paragraph 5 of the statement of the case: In the opinion of the Tribunal, the assessee had not proved by satisfactory evidence that the transactions effected were separate and personal transactions of Nandlal and Venilal and the profits therefrom belonged to them. The Tribunal held that, having regard to the nature of the transactions and the circumstances in which they were effected, it appeared that they were effected by the family but were indirectly shown to be those of Nandlal and Madanlal. 6. As a result of the Income-tax Officer treating the above two items of profit as the income of the assessee family, a penalty of ₹ 4,375 was levied on the assessee. The grounds for imposing the penalty are stated thus by the Income-tax Officer in his order dated 26th November, 1947: The plea of the assessee that a similar profit earned by Nandlal was separately taxed last year is no reason for not coming to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to this Court. 9. What is first to be seen is whether the statement of the case discloses any legal evidence for holding that the two items of profit were earned by the assessee family or not. No evidence whatsoever is referred to by the Tribunal in the statement of the case in support of its conclusion. However, it has given its reasons, which we have already quoted in paragraph 5 above. The first reason given by the Tribunal that the assessee had not proved by satisfactory evidence that the transactions effected were separate and personal transactions of Nandlal and Venilal is unsound in law. There is no presumption that a business carried on by a member of a joint Hindu family is a joint family business, nor is there any presumption that a business started even by a karta is joint family business: see Jitumal Chamanlal v. Commissioner of Income-tax (1944] 12 I.T.R. 296), Sardar Singar Singh Sons v. Commissioner of Income-tax([1942] 10 I.T.R. 441). It is for those who allege that it is so, to prove it. This is the substance of the decision of their Lordships of the Privy Council in Annamalai Chetty v. Subramanian Chetty and Others(A.I.R. 1929 P.C. 1). In that case a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablish that they are not the earnings of the individual members of the family. 10. It is however argued that since the joint family admittedly owned considerable property, the onus would lie on the person asserting that the property claimed by him as his self-acquired property was acquired by him independently and not with the aid of the funds of the joint family. In support of this contention reliance is placed on Sher Muhammad Khan v. Ramratan, and Raghbir Singh v. Ram Rathan. 11. In the first mentioned case, Stone, C.J., who delivered the judgment of the Court observed: A business, a house, and a site being shown here to have belonged to the family, in my opinion, the burden shifted to the plaintiff to show how he came by self-acquisitions or moneys of his own out of which he was able to acquire the suit houses. Of course, had he established that the sites were acquired and the houses built out of his own self-acquisitions, the resulting acquisitions would have been self-acquisitions. It may be mentioned that in that case the person who claimed the property to be his self-acquired property was not shown to have got any property from any other source than his mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h ever acquired any shares for himself. It is true that there is nothing to show how the holding came to be 860 shares at Sultan Singh's death. There may well have been other transactions with the family funds in the company's shares which would have been shown in the company's share and transfer registers had they been searched. (Underlining* is by me). It will thus be seen that the real ground for raising the inference that the disputed shares also belonged to the family was the possibility of the family funds being used for acquiring them. This possibility was regarded by their Lordships as a good enough ground as there was no evidence to show that Sultan Singh had ever acquired these shares for himself. 14. In the instant case, as already pointed out, the family funds have admittedly not been used at all and there is nothing to indicate that the family credit (apart from the credit of an individual member of the family) was at all used. Further, there are the definite statements of the two members to the effect that the respective transactions were not of the family and that one was of Nandlal and the other of Venilal. There was thus no scope here to raise an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Madanlal, in putting it through, acted for the family but then he purported to constitute the family only as an agent of Venilal. The advantage earned for the family in the shape of the commission was duly included in the return of its profits or income for the year of assessment. That apart, this fact is not relied upon by the Tribunal in its statement of the case. It follows from the decision of the Supreme Court in Sohan Pathak Sons v. Commissioner of Income-tax, that the High Court in dealing with a reference under section 66 of the Income-tax Act must confine itself to the facts stated in the statement submitted by the Tribunal and cannot travel beyond it. 18. The possession by the family of a share in the firm Bhaidas Karsondas has hardly any relevance to the matter under consideration. It cannot, by any stretch of reasoning, lead to the conclusion that the transactions were family transactions in the sense that the profits earned from them became those of the family. 19. As already pointed out, there is no material to show that the members utilized the credit of the family-as apart from their individual credit-with the firm Bhaidas Karsondas for putting through th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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