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1942 (9) TMI 6

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..... e assessment that he should be assessed as an individual and not as joint Hindu family. This contention does not appear to have been clearly raised before the Income-tax Officer but was allowed to be raised in the appeal before the Appellate Assistant Commissioner who overruled the contention and held that the status of the assessee was that of a Hindu undivided family. In the assessable income the Income-tax Officer included a sum of ₹ 12,000 as director's fees received by Sirdar Indra Singh on behalf of the joint Hindu family in circumstances to be described fully hereinafter. The assessee's objection that this was his own private income and not the income of the joint Hindu family was overruled both by the Income-tax Officer and by the Assistant Commissioner who dismissed the appeal on the 29th December, 1939. It may be observed here that the assessee had objected to the inclusion of two other items, (1) ₹ 185-6-6 received from the Indian Steel and Wire Products, Ltd., and (2) ₹ 5,000 which was said to belong to one A.N. Biswas. The assesssee failed in getting these two items excluded from his assessable income and the questions now framed do not cover .....

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..... e 25th June, 1925, (printed at page 8) while disposing of this application for revision of the assessment held that the assessment will be made on ₹ 60,000, but with regard to the claim that no super-tax should be levied because the business was that of a joint Hindu family he observed that as it was impossible to disprove the statement of the assessee, which I have summarised just now, although the only evidence was the assessee's statement, no super-tax should be charged. The effect of this order was that the assessee was assessed for the first time in 1924-25 under the status of a Hindu undivided family. In the subsequent years the assessee continued to be assessed on the same status as a Hindu undivided family and indeed he filed returns, which are required to be submitted each year, on the same basis. It may be stated here that since 26th June, 1925, nothing further has been heard of Sirdar Hira Singh. He appears to have dropped out completely from the assessment records of the Income-tax department. As years rolled on, the business of the assessee grew still further and in 1935 he or the family owned the Indian Steel and Wire Products Works. Towards the end of that .....

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..... ry to have it on the record). On the 2nd of December, 1935, Sirdar Indra Singh and his son Sirdar Baldev Singh became the first two subscribers of a memorandum of association to form a private company. This company was styled Indra Singh and Sons Limited the memorandum and articles of association are on the record. Although the subscribers were Sirdar Indra Singh and Sirdar Baldev Singh it is common ground that Sirdar Indra Singh and his two sons, the third son was dead by this time, were the shareholders of this private limited company which was duly registered under the Indian Companies Act of 1913. The capital of this private company was Es, 30,00,000 divided into 3,000 shares of ₹ 1,000 each and this company was to act as the managing agents of the Indian Wire and Steel Products Company, Limited, hereinafter to be referred to as the Public Company . Sirdar Indra Singh nominated Indra Singh and Sons Limited as his nominee to receive ₹ 30,00,000 from the public company as per agreement dated the 8th February, 1936. This sum was divided by the vendor into three parts of ₹ 10,00,000 each between himself and his two sons who, as stated just now, were the only t .....

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..... er of a joint Hindu family. Such in brief is a survey of the facts which have been relied upon by the Commissioner in the statement of the case to come to the conclusion that Sirdar Indra Singh and his two sons constitute a Hindu undivided family for the purpose of the Indian Income-tax Act, 1922, and therefore, 'he invites that the answer to the first two questions should be in favour of the department. The assessee on the other hand contends that the Commissioner's finding, apparently a finding of fact, is vitiated by errors of law in that the Commissioner has thrown the onus upon the assessee to prove that the property or business which produced the assessable income in the year of assessment is his private property and has misconstrued the legal effect of the admissions of Sirdar Indra Singh before the Commissioner in 1925 and in the subsequent years It is also contended that the admission made before the Commissioner in 1925 was due to a misapprehension of the legal position or it might have been an incorrect statement deliberately made to avoid payment of super-tax and that the subsequent declarations which were made in the several years of assessment were similarl .....

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..... annot complain that his own statement has been accepted as correct and has been acted upon to his advantage and to the detriment of the revenue since 1925. It is pointed out that there could not have been any mistake or inadvertence in making the assertions in 1925, because the assessee repeatedly relied upon the same statement in the subsequent years of assessment and indeed in the very year of assessment now under consideration. In all these years the returns which had to be filed as provided by the Act were duly verified either by or on behalf of the assessee. With regard to the alternative argument advanced on behalf of the assessee the answer put forward is that the provisions of Section 25A(3) of the Indian Income-tax Act are a bar to its being held that the status of the assessee is other than that of a Hindu undivided family. It must be observed at the outset that the principle of estoppel or res judicata has no application in income-tax cases. This has been well settled both in England and in India and reference need only be made to the well known case of Broken Hill Co., Ltd. v. Municipal Council of Broken Hill [1926] AC 94 where Lord Carson in delivering the judgment .....

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..... lic transactions of a solemn nature, are presumed to be faithfully recorded. Every judgment is, therefore, conclusive evidence, for or against all persons whether parties, privies, or strangers, of its own existence, date and legal effect, as distinguished from the accuracy of the decision rendered; in other words, the law attributes unerring variety to the substantive as opposed to the judicial portions of the record . Attention may also be drawn to the remarks made by Lord S haw of Dunfermline when delivering the judgment of the Board in the case of Ram Parkash Das v. Anand Das 43 IA 73. In that case one of the disqualifications relied upon to invalidate the right of the mahant was that he had entered into a tie of marriage, but this fact was in dispute. In order to prove this fact reliance was sought to be placed upon the statement in a judgment in a criminal case in the course of trial whereof it was alleged that a person who knew the circumstances made a statement on oath that defendant No. 2 was a married man. The Magistrate who tried the case stated in his judgment that an admission of the marriage was made in the course of it. Their Lordships held that the note of the ad .....

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..... n the meaning of Hindu law because such an expression of intention should have been made to other members of the joint Hindu family. He submitted that there is no dispositive document in this case by which Sirdar Indra Singh transferred the property-his own property -to the joint Hindu family. I agree with this contention. The property of an individual cannot become the property of a joint Hindu family by mere expression of intention unless the property is transferred to the joint Hindu family by some means recognised by law, for instance if it is movable property then it should be handed over to the joint family and its subsequent possession or enjoyment should be shown to be on behalf of the joint Hindu family, or if it is immovable then it must be transferred by a registered document if its value is more than ₹ 100. The subsequent declarations made by Sirdar Indra Singh from time to time cannot have a higher value than the original declaration of 1925 because it is not the case of the Income-tax department that anything further was done by Sirdar Indra Singh after he made the statement before Mr. Middleton in 1925 beyond mere declarations in the subsequent assessment proce .....

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..... Board of Referees we have admitted this upon the record of this case with the consent of both parties and have marked it as exhibit 2. The Commissioner appears to have fallen into a serious error in treating the shareholders of the company as equivalent to the company itself. The Commissioner has nowhere considered that the public company was specifically formed to acquire the assets of the Indian Steel and Wire Products Company nor has he considered the recitals in the deed of agreement of February, 1936, nor has he considered that the two sons of Sirdar Indra Singh along with the other members of the public in different walks of life were the subscribers to the formation of the public company and that the two sons were subscribers of the private company. It is inconceivable that a public company which was floated in Calcutta with such publicity on such a large scale and acting through well-known solicitors would have entered into this transaction of the purchase of the properties of the value of about 39 lakhs of rupees without investigating the title of the vendor that he was the sole owner of the business and the property hereinbefore carried in the name of Indian Steel a .....

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..... as been offered on one side or the other; but the question whether the fact has been proved, when evidence for and against has been properly admitted, is necessarily a pure question of fact . In Ramgopal v. Shamskhaton [1892] ILR 20 Cal. 93, Sir Richard Couch in delivering the judgment of the Board referred with approval to the dictum of the judicial Committee in Ramratan Sukal v. Nandu [1892] 19 IA 1 where it was said: It has now been conclusively settled that the third Court, which was in this case the Court of the Judicial Commissioner, cannot entertain an appeal upon any question as to the soundness of findings of fact by the second Court; if there is evidence to be considered, the decision of the second Court, however unsatisfactory it might be if examined, must stand final and observed at page 99 : The present case does not come within that rule. The facts found need not be questioned. It is the soundness of the conclusions from them that is in question, and this is a matter of law . This is exactly the case here where the question for determination is the question of the status of an individual. Moreover when the Commissioner has committed so many errors of law and misund .....

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..... nnecessary to consider the alternative argument advanced on behalf of the assessee by Mr. Isaacs. But it is proper that I should express my views on this aspect of the case also. Section 25A, sub-clause (1), clearly provides that where, at the time of making an assessment under Section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income-tax Officer shall make such enquiry thereinto as he may think fit, and, if he is satisfied that a separation of the members of the family has taken place and that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect . By the third sub-clause it is provided that where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of the Act, to continue to be a Hindu undivided family.'' The argument of Mr. Isaacs was that by the transactions so often referred to above in 1935-36 there was a disruption in the family because by the division o .....

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