TMI Blog1987 (1) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... f law for its opinion for the assessment year 1968-69 (Reference Case No. 18 of 1978). The Income-tax Appellate Tribunal (hereinafter referred to as " the Tribunal ") by its order referred the following three identical questions of law for the assessment years 1955-56 to 1963-64: " (1) Whether, on the facts and in the circumstances of the case, action under section 147 was validly commenced ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in the conclusion that the business of M/s. Radhey Shyam Hari Narain and M/s. Temani Trading Company belonged to the assessee-Hindu undivided family without finding any evidence that the funds invested in that business flowed from Hindu undivided family on the mere ground that the partners were not able to explain their investment satisfactorily and the Tribunal based its conclusion on mere presumption and in disregard of the dictum that 'apparent is real unless otherwise proved differently ' ? (3) Whether, on the facts and in the circumstances of the cage, the Tribunal was justified in holding that the assessee has deliberately concealed particulars of its income and thus the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is that it is a Hindu undivided family and has been assessed as such to income-tax from the assessment year 1950-51. The geneological table of the assessee's-Hindu undivided family, as given by the assessee, is as follows: Prahlad Smt. Ram Rakhi Kishori Sharan alias Marilam II Radhey Shyam Hari Narain Ramgopal Noratanmal Kunj Behari Nand Kishore Jugal Kishore It was stated by the assessee that Prahlad had another son who was known as Maliram, but he had separated from his father during his lifetime. The assessee also submitted that the business of the assessee was in cloth. The submission of the assessee-firm was that the Income-tax Officer committed an illegality in reopening the already completed assessment of income-tax under the provisions of sections 147 and 148 of the Act and clubbing the income of the assessee-firm with the business carried on in partnership in the name and style of M/s. Radhey Shyam Hari Narain and, later on, in the name of M/s. Temani Trading Co. It was the submission of the assessee that the proceedings for reassessment could not be commenced under section 147 of the Act in the absence of any reason to believe that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the assessee was rejected by the Tribunal. The following reasons were given by the Tribunal in its order: " (a) Business of the applicant-assessee was in cloth which the firm, Radhey Shyam Hari Narain, embarked upon in 1952 or the business Temani Trading Co. carried on was also in cloth. (b) The premises used by the firm, Radhey Shyam Hari Narain, were also of the applicant-assessee and there was nothing to show that any rent was paid. Subsequently, of course, the firm, Radhey Shyam Hari Narain Temani Trading Co., obtained independent premises on rent but this circumstance need not be given undue significance as a branch of the applicant-assessee could as well have business in independent premises. (c) Whatever investments were made in the new venture, their only source could be from the funds of the applicant-assessee as Hari Narain had absolutely no money of his own. (d) The lamentable manner in which Hari Narain and Radhey Shyam (coparceners partners in the new venture of Radhey Shyam Hari Narain/Temani Trading Co.) made conflicting versions shows that they had little regard for truth and this led to the natural inference under the circumstances that the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and separate. Shri Agrawal, learned counsel for the assessee, placed reliance on CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349, in which the Supreme Court observed that (headnote) : "There should be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which that conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of fact because it is difficult to predicate as to what extent the extraneous and irrelevant material has influenced the authority in arriving at the conclusion of fact. " In the same authority, the Supreme Court observed that a person could still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money was found to be not correct. The said observations are as follows (headnote): " A person could still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money was found to be not correct. From the simple fact that the explanation regarding the source of money furnished by X, in whose name the money was lyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence to prove that the funds invested in that business of the said firm came from the Hindu undivided family. On the simple ground that the partners were not able to explain their investment satisfactorily, the Tribunal should not have based its conclusion on a mere presumption as a heavy burden lay upon the Department in view of the authorities cited by the assessee and referred to above. Thus, there was no material on record to come to the conclusion that investment and cash credits in the alleged two branches were includible in the income of the family. Having considered all the aspects of the matter, we are of the opinion that the action under section 147 was not validly commenced. We are also of the opinion that the Tribunal was not justified in its conclusion that the business of M/s. Radhey Shyam Harinarain and M/s. Temani Trading Co. belonged to the Hindu undivided family. Our answer to the reference with regard to question No. 1 is in the negative and against the Department. With regard to question No. 2 also, our answer is in the negative and against the Department. In view of our answer to the questions Nos. 1 and 2, as we have decided in favour of the assessee, the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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