TMI Blog1933 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... cing a claim, and therefore is no contest on this point, and we accept that view. On the first question the facts as stated are as follows :- The assessees are a joint Hindu family carrying on business in the name of Kanwalnen Hamir Singh. The business is managed by Rai Bahadur Seth Biradh Mal Lodha, the karta of the joint family. Their head-quarters are in Ajmere, but money-lending and other transactions are carried on in other parts of British India and Indian States. The joint family submitted a return for the income for the year 1927, to November 1928, on 10th September, 1929 for the year 1929-30. The return was not accepted as correct by the Income Tax Officer because the extracts from the accounts showed that losses incurred outside British India had been deducted and income derived from dividends on shares of Edward Mills, Beawar, had not been included. The assessees were therefore directed by notices under Sections 22 (4) and 23 (2), Income Tax Act, to produce account books or any other evidence on which they relied to substantiate their return. The assessees did appear before the Income Tax Officer and proceedings before the Income Tax Officer went on for over a year, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from dividends of the Edward Mills will be treated as joint income. This was done for that year and for the two subsequent years and no objection was made by the assessees. As we have seen, in the year of which the assessment is in question, the return omitted this income, and the Income Tax Officer issued notices to the assessees to substantiate their return by the production of account books and other evidence. The order of the Income Tax officer dated 31st October, 1930, making the assessment mentions : Income shown less and detected on examination ₹ 35,918-10-8. This income apparently includes ₹ 24,906-9-1. But there does not appear to have been any claim advanced before the Income Tax Officer in regard to the dividends from the Edward Mills on this occasion, and there is no mention in his order that any such claim was made. The order is a long and detailed one and deals in detail with various items claimed by the assesses. There is no allegation in any affidavit of the assessees that the point was raised before the Income Tax Officer. The point was raised before the Assistant Commissioner of Income Tax on the appeal of the assessees, and he deals with the poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of law raised thereby. This shows that it is open to this Court when hearing the case on the statement of the Commissioner to decide what are the questions of law which arise, and in fact that has been held in the ruling reported in. In the present case when the first question was framed there was nothing to show that the objection had not been taken by the assessees before the Income Tax Officer. The additional question which I have noted as arising was read out by me to learned counsel for the assessees at the time of his argument, and he had an opportunity of meeting that question. No further statement of the case appears necessary on this point as the facts appear to be clear. Much argument was made by learned counsel that the Assistant Commissioner had based his rejection of the objection solely on the ground of Section 25-A. But Section 25-A is not the only point to which his order refers, and he has definitely stated : It was improper for the assessees to raise this question for the first time in appeal. All that Section 25-A provides is that a claim which comes under section should be made at the time of making an assessment. Although the present claim does not come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has issued a notice under Section 23 (2) calling on the assesses to prove the correctness of their return which has omitted the dividends from these shares. The allegation should be followed up with evidence to prove it. But the order of the Assistant Commissioner on page 17 states that the question was raised by the assessees for the first time on appeal. I consider that this question (1-A) arises because when this Court has decided the Assistant Commissioner was not correct in holding that Section 25-A barred the question being raised before him in the appeal, the question remains whether the question should or should not be raised before him in the appeal. I do not consider that the Assistant Commissioner should be left to decide this for himself without guidance on the point of law by this Court. It is the questions of law raised by the case which this Court decides under Section 66 (5), and not the questions of law raised by the statement of the case. This is especially so in cases like the present where the statement was applied on the direction of this Court which tentatively framed certain questions. In other words, the questions did not arise on the statement, but the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d I consider that the stage for enquiry was passed when the question was raised. My answer to question (1-A) is that under the circumstances of this case the claim could not be raised for the first time in appeal. The third and fourth question are as follows : (3) Whether there was any evidence before the Income Tax department for the conclusion that the sum of ₹ 36,000 and odd represents profits derived by the assessees from transaction in British India ? (4) If the profits mentioned in question No. (3) be regarded as profits received from transactions that took place in British India, whether the losses incurred in respect of the business at Tonk, Saronj, Jodhpur and Shahpura shops should not also be regarded, as a matter of law, as losses incurred in transaction that took place in British India ? In regard to these questions the statement of the case is that the firm of the joint family has numerous branches in various Indian States. In four of these branches, Jaipur, Alwar, Nimbhera and Kotah, the Income Tax Officer assessed an income of ₹ 36,055-12-9. The statement proceeds that the Jaipur and Kotah branches alone had from transactions in British India receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very similar to the question which I have raised in 1-A. There is a branch of the main family business carrying on business at Ajmere styled Hamir Singh Samir Mal. The assessees made a claim to the Assistant Commissioner on appeal that certain members of the joint family acting in their individual capacity and also some relatives had deposited their private money with this firm, and that the amount of interest paid on these deposits should be allowed as a deduction from the income derived by the joint family from this branch of their business. The return filed by the assessees for this shop Hamir Singh Samir Mal showed ₹ 84,709-2-0 on the credit side and on the debit side ₹ 4,656-1-0. This latter figure included six items of interest paid to various ladies. These particular deductions were allowed by the Income Tax Officer. Under Section 22 (3), Income Tax Act, a person who has furnished a return and subsequently discovers any omission in it can furnish a revised return at any time before the assessment is made. The assessees had sent their return on 10th September, 1929, and the assessment was not made till more than a year later, on 31st October, 1931, but the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and find myself in agreement with him unreservedly in answering question No. 3 in the affirmative and No. 4 in the negative. Questions Nos. 1 and 2 relate to the same matter and should be disposed of together. The facts bearing on those questions are as follows : The assessees form a joint Hindu family with its principal place of business at Ajmere. Among other properties it owned 392 shares in the Edward Mills, Beawar, standing in the names of the various members of the family and its munim. It is not disputed by the assessees that the shares formed part of the joint family property in 20th October, 1922, when, it is alleged by them, they were transferred by the joint family to some individual members, each of whom was to hold a number of shares as a separate property. In spite of this alleged arrangement, the income derived from these shares was included as part of the income of joint family property for the purpose of assessment of Income Tax. No objection was raised by the assessees or any individual member thereof till 1926, when the karta of the family objected to the inclusion of the dividend as part of the income derived from the family property. Notices were issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y application? and (2) whether in failure on the part of the assessees to substantiate their claim on this point, in an earlier year of assessment, precludes them from raising the point in a subsequent year of assessment? The Commissioner has conceded, in the statement of the case, that question No. 2 should be answered in the negative. He is rightly of opinion that the assessees are not precluded from raising a question which has so far not been decided on the merits. It is not necessary, in these circumstances, to take any further notice on question No. 2. The first question appears to be based on the assumption that the assessees objection amounted to an averment that a partial partition had taken place in the family of the assessees. To avoid possible confusion arising from the use of that expression, it should be mentioned that what the assessees alleged in substance was the shares originally belonging to the joint family had been transferred to individual members thereof, each of whom was to hold the shares allotted to him as his separate or self-acquired property without introducing any change in the constitution of the family which continues to be a coparcenary body. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artition contemplated by Section 25A is not necessarily a partition by metes and bounds. This view finds further support from the proviso to sub-section 2, which runs as follows : Provided that all the separated members and groups of members shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such. In cases in which members of a joint Hindu family agreed to divide among themselves a particular family property, leaving their status and the rest of the family property as before, they cannot be considered to be separated members. In spite of a partial partition of the kind assumed, they continue to remain members of the same joint family possessed of joint family property left after the disposition of a part. For these reasons I am of opinion that Section 25A was not applicable to the circumstances disclosed by the assessees objection taken before the Assistant Commissioner, and I answer the first question in the negative. My learned brother, who has answered question No. 1 in the manner I have done, proposes to frame an additional question, which he has called 1-A, and which runs as follows : Sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er may accept it or call for proof (Section 23). In the present case, it is not disputed that the assessees had not shown the income derived from the shares as part of the income of the joint family property. In any case, their return clearly indicated that they did not regard the income derived from the shares as part of the joint family property. The Income Tax Officer understood as much. Under Section 23 (2), Income Tax Act, it was the duty of the Income Tax Officer, if he thought, as he apparently did, that the return was incorrect in that respect, to call for proof of the fact that the shares had ceased to be part of the joint family property. He issued a notice under Section 23 (2), but it does not appear that he called for proof on the specific question whether the shares had ceased to be part of the family property. He however ascertained from the company the amount of dividend paid and added it to the income shown in the return. The company's register showed that the shares belonged to certain individuals and not to a joint family. The assessees do not appear to have produced any evidence other than their own account books and what appeared from the company's regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty, though in respect of the remainder of its property the joint status was retained. Now the procedure to be followed when a Hindu undivided family becomes divided (whether in respect of part of its property or all its property is immaterial) is laid down in Section 25A, Income Tax Act. Under that section the claim that a partition has taken place must be made before the Income Tax officer while he is making his assessment under Section 23 of the Act, and any order of the Income Tax Officer under Section 25A is appealable to the Assistant Commissioner of Income Tax under Section 30. In present case no application under Section 25A was made to the Income Tax Officer by the assessees and no order under Section 25A was passed by the Income Tax Officer. It was improper for the assessees to raise this question for the first time in appeal, and as an appellate Court I am not competent to decide the question raised by them now. I may however observe that in my opinion the Income Tax Officer was correct, in the absence of any application under Section 25A, in regarding the dividends of the Edward Mills shares as a part of the income of the joint family. He would only be justified in reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquire in the exercise of his power under Section 31 (2). In this case the Assistant Commissioner has not considered the question on the merits nor did he refuse to enquire into it under Section 31 (2). He would have recorded a finding on the evidence already produced and could have called for more. I may note that no analogy can be drawn from Order 41, Rule 27, Civil Procedure Code, to determine the powers of the Assistant Commissioner hearing an appeal under the Income Tax Act, Section 31 (2), as the latter gives unrestricted direction to the Assistant Commissioner to make further enquiry that is, to obtain more evidence throwing light on the question which he is called upon to decide; while Order 41 Rule 27 confers very limited powers upon a Court of appeal in the matter of admitting fresh evidence. The only question that remains to be considered is question No. 5. The facts are that the assessees had shown in their return a sum of ₹ 4,000 odd as interest paid by the joint family. The Income Tax Officer made an allowance to that extent. In appeal before the Assistant Commissioner a deduction on Income Tax claimed on no less than ₹ 80,000 odd alleged to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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