TMI Blog2008 (5) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... n the outcome of the other appeals, all these appeals have been heard together and are being disposed of by this common judgment and order. 2. The appeals have been admitted on the following questions of law: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal, ignoring the relevant materials before it, was justified and did not err in holding that there was no existence of valid Hindu undivided family and thus pass a perverse order? (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the returned income is to be assessed in the hands of Krishna Kanta Barkataky and Ajit Barkataky in the absence of a finding that the funds invested in FDRs emanated from the individual income of K. K. Barkataky and/or Ajit Barkataky or that the income of the Hindu undivided family was enjoyed by K. K. Barkataky and Ajit Barkataky? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in the appeal filed by the Revenue in reversing the decision of the Assessing Officer adopting/determining the status of AOP and the cancelling the protective assessment completely when the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on March 17, 1994, under section 143(3)/251/144A of the Act, as a protective measure, in the status of AOP. The Assessing Officer further held that the FDRs. as shown in the balance-sheet, and the interest income would be assessed in the hands of the persons in whose name the FDRs. were found, namely, Krishna Kanta Barkataky and Ajit Barkataky (sons of the deceased Krishna Kanta Barkataky) on a substantive basis. (iv) On appeal by the appellant, the Commissioner of Income-tax (Appeals), vide his consolidated order, dated September 25, 1995, for the assessment years 1983-84, 1984-85, 1985-86, accepted the contention of the appellant that there was a valid Hindu undivided family in existence assessable to tax. The Commissioner of Income-tax (Appeals) accordingly determined the status of the appellant as that of the Hindu undivided family and cancelled the protective nature of the assessments. The Commissioner of Income-tax (Appeals) further directed that the FDRs. mentioned in the balance-sheet of the said Hindu undivided family, and the income derived therefrom shall be assessed in the hands of the said Hindu undivided family on a substantive basis and not in the hands of Krish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant could not prove formation and existence of Hindu undivided family is completely perverse inasmuch as even the findings, which the learned Tribunal has itself recorded, go to show, on a close scrutiny, that the essential facts, leading to the formation of Hindu undivided family, had been noted by the learned Tribunal, but the eventual finding, rendered by it, is to the effect that the appellant could not prove that there was formation of Hindu undivided family. The finding so reached, by the learned Tribunal is, reiterated by Mr. Agarwalla, completely perverse, and cannot withstand the test of law. The submission, so made, on behalf of the appellant, is resisted by Mr. U. Bhuyan, learned counsel for the respondents, who contends that the learned Tribunal's finding, on facts as well as law, and particularly, on the question as to whether the appellant could prove that it ought to have been assessed, in the status of Hindu undivided family, is correct and, hence, needs no interference. 6. For the purpose of correctly appreciating the rival submissions, made before us on behalf of the parties, it needs to be pointed out that the appellant had submitted its returns of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily decided to constitute a Hindu undivided family amongst themselves. 8. The appellant had filed appeals against the assessment orders for the assessment years 1983-84, 1984-85 and 1985-86 before the Commissioner of Income-tax (Appeals) and for the assessment year 1988-89 before the Deputy Commissioner of Income-tax (Appeals). The appeal for the assessment years 1983-84, 1984-85 and 1985-86 were disposed of by the Commissioner of Income-tax (Appeals) by his order dated September 25, 1995. The appeal for the assessment year 1988-89 was disposed of earlier by the Deputy Commissioner of Income-tax (Appeals) by his order dated October 29, 1992. 9. Relying upon the decisions in Autoways ( India ) v. CIT [1976] 102 ITR 761 (Orissa) and Thakur Hari Singh v. CIT [1967] 65 ITR 267 (Raj), the Deputy Commissioner of Income-tax. (Appeals), in his order dated October 29, 1992, passed for the assessment year 1988-89, accepted the contention of the appellant to the effect that the declaration furnished in the income-tax return, the explanation, dated September 6, 1982, filed in the course of the assessment proceedings for the assessment year 1979-80, and the two affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, however, held that the claim of the status of the appellant as that of the Hindu undivided family was not conclusively proved. The learned Tribunal also held that the protective assessments, made in the hands of AOP, were to be cancelled and the returned income was to be assessed in the hands of Krishna Kanta Barkataky and Ajit Barkataky on substantive basis in their assessments. 13. It is, at this stage, worth pointing out that the learned Accountant Member of the Tribunal, in his order, at paragraphs 5 and 6 (at pages 41 and 42 of the appeal petition), held as follows (pages 41 and 42 of 267 ITR (AT)) "We have considered the rival submissions at length and perused the orders of the lower authorities in the light of the materials available on record. We have duly considered the various papers placed before us in the paper book. We have also considered the various case law relied upon by the learned authorised representative of the assessee but we are of the considered opinion that the said case law do not conclusively establish the contention of the respondent. It is observed that the point of time at which Shri B. K. Barkataky and Shri K. K. Barkataky exercised their cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there was no finding by the Assessing Officer to the effect that the funds, invested in the FDRs. had emanated from the individual incomes of Krishna Kanta Barkataky and Ajit Barkataky or that the income of the appellant Hindu undivided family was enjoyed by Krishna Kanta Barkataky and Ajit Barkataky. 16. In the face of the above findings of facts, which the learned Tribunal itself had arrived at, it becomes clear that there is considerable force, in the submissions made on behalf of the appellant, that having reached the conclusion that the agricultural lands, in question, were acquired by the late Gauri Kanta Barkataky, during his life time, and that the same were jointly owned by his two sons, namely, Krishna Kanta Barkataky and Biswa Kanta Barkataky, that sources of income of the appellant have had been from agricultural income as well as interest, the source of funds, invested in the FDRs, were from agricultural income as well as borrowings made by the appellant and that there was no material that the funds, invested in the FDRs, came from the individual incomes of Krishna Kanta Barkataky and Ajit Barkataky, the learned Tribunal's finding that the appellant's claim of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "We are aware that the Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusion of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it Act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee did not bargain for interest nor had calculated interest. In such a situation, the Division Bench held that the addition of notional interest as due could not form part of the income. The ratio available from the above judgment would show that in a case where the findings of fact, by the Tribunal are perverse and contrary to materials on record and based on surmises and conjectures, the High Court under section 260A would be competent to interfere." 22. This court's decision in Pyare Lal Mittal [2007] 291 ITR 214 (Gauhati) leave no room for doubt that though the High Court would not ordinarily interfere with a Tribunal's finding of fact, it would be justified if the High Court interferes with such a finding of fact, which is contrary to materials on record and/or based on surmises and conjectures, for, such a finding would be nothing but perverse. 23. In the face of the authorities discussed above, there can be no two opinions that where the finding of facts, reached by a Tribunal, is perverse and/or wholly contrary to the materials on record, the High Court, in exercise of its power under section 260A of the Act, would be competent to interfere with such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Thakur Hari Singh v. CIT [1967] 65 ITR 267 (Raj), a Bench of the Rajasthan High Court has taken that view. Similarly, in the case of G. Mohan Rao v. G. Satyanarayana [1972] 84 ITR 685 (AP), a Bench of the Andhra Pradesh High Court has accepted the same position in law. By unilateral declaration Sardar Santokh Singh was thus capable of putting his own separate property into a common stock." 25. It is also noteworthy that the learned Tribunal has observed that the state of facts the period from 1947 to 1970 is not on records. In this regard, it is submitted, on behalf of the appellant, that as the appellant's income was not taxable under the Act, no returns were filed during this period. In view of the fact that there is nothing on the record to indicate that the appellant had derived such an income between 1947 and 1970, which were taxable, the fact that no assessment had been made in the status of Hindu undivided family, when Krishna Kanta Barkataky and Biswa Kanta Barkataky were alive, is of no material consequence. 26. Above all, what is extremely important to note is that the appellant was assessed, in the status of a Hindu undivided family in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of the assessment of, a Hindu undivided family that the family has already effected a partition, whether total or partial, the Assessing Officer shall proceed to recover the tax from every person who was a member of the family before the partition, and every such person shall be jointly and severally liable for the tax on the income so assessed. (7) For the purposes of this section, the several liability of any member or group of members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial. (8) The provisions of this section shall, so far as may be, apply in relation to the levy and collection of any penalty, interest, fine or other sum in respect of any period up to date of the partition, whether total or partial, of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of any such period. (9) Notwithstanding anything contained in the foregoing provisions of this section, where a partial partition has taken place after the 31st day of December, 1978, among the members of a Hindu undivided family hitherto assessed as undivided,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally contains a deeming provision, for, a Hindu family, hitherto assessed as undivided, shall be deemed, for the purposes of the Act, to have continued as Hindu undivided family, except, where and in so far as a finding of partition has been recorded in the Hindu undivided family. In Kalloomal Tapeswari Prasad (HUF) [1982] 133 ITR 690, the Supreme Court has also pointed out that where there is no claim made that a partition, total or partial, had taken place, a Hindu family, which is hitherto assessed as Hindu undivided family, shall be continued to be assessed as a Hindu undivided family, even if a partition of the properties of the Hindu undivided family has, according to the Hindu law, taken place, for, a partition, in terms of the Hindu law, has no bearing on the assessment of income under the Act inasmuch as the Act deems that a Hindu family, "hitherto assessed as undivided" has continued to remain as Hindu undivided family except where partition in terms of the provisions of section 171 of the Act has been recorded. In other words, even if, according to the Hindu law, the properties of a Hindu undivided family came to be partitioned, yet the Hindu undivided family would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patty [1991] 187 ITR 696 (SC), when the question once again came up as regards the interpretation of sub-section (1) of section 171, the apex court, following the decision in Kalloomal Tapeswari Prasad (HUF) [1982] 133 ITR 690, observed thus (page 702 of 187 ITR): "We do not consider it necessary to discuss those decisions, as the purpose and object of section 171 and the extent of the legal fiction introduced by it has already been considered by this court in Kalloomal's case [1982] 133 ITR 690." 30. The law on the above aspect has been made more explicit by the apex court in its decision in R. B. Tunki Sah Baidyanath Prasad v. CIT [1995] 212 ITR 632 (SC), wherein, having referred to both its earlier decisions, namely, Kalloomal Tapeswari Prasad (HUF) [1982] 133 ITR 690 and Smt. T. K. Sarada Thampatty [1991] 187 ITR 696, the apex court firmly held that a Hindu undivided family would be liable to be taxed as Hindu undivided family if it had been until before the assessment sought to be made, assessed as an undivided family under the Act, even if there is partition of properties in terms of the Hindu Succession Act, unless a finding with regard to partition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it had taken place. That being so, in view of the language of section 171(1), the Hindu undivided family would be liable to be taxed as undivided notwithstanding the effect of section 14(1) of the Hindu Succession Act." 33. What can also not be ignored is that when a property is acquired with the aid or assistance of joint family, the property, so acquired, becomes and remains the assets or properties of the Hindu undivided family unless a partition, subsequent to such acquisition, takes place. In the present case, there is a clear finding of the learned Tribunal that the sources of investment in FDRs. were from the agricultural income as well as loans borrowed in the name of the appellant. In these circumstances, the said FDRs. ought to have been treated as the property of the appellant-Hindu undivided family and the interest income derived from such FDRs were assessable in the hands of the appellant-Hindu undivided family. Reference made, in this regard, to the case of V. D. Dhanwatey v. CIT reported in [1968] 68 ITR 365 (SC), by Mr. Agarwalla, is also not misplaced inasmuch as in V. D. Dhanwatey [1968] 68 ITR 365, the apex court observed and held as follows (page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid provisions." 35. We see no reason to take a view different from what the Allahabad High Court has taken in Ambika Prasad Sonar [1987] 168 ITR 444. 36. Mr. Bhuyan, learned standing counsel for the Revenue, in support of his contention that the deeming provisions of section 171 of the Act apply only to the Mitakshara school of Hindu law and not to the Dayabhaga school of Hindu law, has referred to CIT v. Balai Chandra Paul [1976] 105 ITR 666 (Cal). Yet another decision, which he has referred to is the case of CWT v. Gauri Shankar Bhar [1972] 84 ITR 699 (SC). 37. While considering the case of Balai Chandra Paul [1976] 105 ITR 666 (Cal), what needs to be noted is that the Calcutta High Court did not have the benefit of the apex court's decision in Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690, wherein the deeming provisions of sub-section (1) of section 171 of the Act have been succinctly explained. This apart, as far as the case of Gauri Shankar Bhar [1972] 84 ITR 699 (SC) is concerned, suffice it to point out that a cautious reading of this decision shows that the court was concerned with the individual property of the deceased Prafull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant cannot be a Hindu undivided family. The primary difference between the Dayabhaga school of Hindu law and the Mitakshara school of Hindu law is that while, in Mitak shara school of Hindu law, a person, from the inception, acquires a right in the family property in the Dayabhaga school of Hindu law, the property devolves on the death of a Hindu on his heirs and successors. In the Mitakshara school of Hindu law, though a coparcener acquires interest, in the ancestral property, on his conception, his interest, in the joint family, does not remain fixed and keeps fluctuating inasmuch as his interest expands, when the family property expands, and when his family loses property or part of the property, his interest, in the family property, automatically, reduces. As against this, in the Dayabhaga school of Hindu law, a Hindu, on the death of his father, succeeds to a definite share in the property left by his father. Whereas a Hindu, under the Mitakshara school, becomes a coparcener, by operation of law, a Hindu, governed by the Dayabhaga school, becomes a coparcener by an act of volition. What is, however, important to bear in mind is that even a joint Hindu family, governe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t help the case of the respondents at all inasmuch as in Manji Dana [1966] 60 ITR 582 (SC), the assessee wanted to raise a new plea, for the first time, regarding the status in which the income should be assessed. As this plea had not been raised by the assessee before the Assessing Officer and the first appellate authority, the Tribunal did not allow the assessee to raise such a plea. The High Court too decided against the assessee. On further appeal, the Supreme Court has held as follows (page 586): "Manji Dana submitted a return in the status of an individual pursuant to a notice issued under section 34(1)(a). It was open to the Income-tax Officer to accept the admission made by Manji Dana that the income belonged to the assessee and not to the Hindu undivided family. If, thereafter, it was contended that assessment could not be made pursuant to a notice under section 34(1) (a), it was necessary to investigate the question whether the income was of a Hindu undivided family or of the appellant individually and that unquestionably demand enquiry into facts. We are, therefore, unable to accept the argument of Mr. Pathak that the new plea sought to be raised did not necessitat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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