TMI Blog1982 (6) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the asst. yr. 1972-73, the assessee had disclosed the income of Rs. 12,200 out of which Rs. 200 was shown as income from self-occupied property whereas the balance of Rs. 12,000 was estimated business income. The assessment was made on an income of Rs.15,000 2. The CIT found that the ITO had not made the required investigations and had made a hurried assessment which was prejudicial to the interest of revenue. He, therefore, set-aside the order of the ITO and directed him to look into the investments made by Shri Gurbachan Singh and Shri Mohinder Singh in the relevant year. He noted investments to the extent of Rs. 39,000 in various deposits and there was a loan also given to Shri Bahdur Singh as the explanations given before the Commr. were not satisfactory. The CIT was of the view that the order of the ITO was erroneous and prejudicial to the interest of Revenue. He found that there was no evidence whatsoever either for the cash savings or for the sale of household goods by Shri Gurcharan Singh. He, therefore, set-aside the order of the ITO and directed him to reframe the assessment for the asst. yrs. 1972-73 and 1973-74 where also similar assessments had been made, afre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO came to conclusion that these investments were not belonging to the HUF which had no income during this period, except the annual letting value of the self-occupied ancestral house. Considering the joint ownership of the investment by Shri Gurubachan Singh and Shri Mohinder Singh the ITO took the status as Association of Persons. He assessed the business income of Rs. 12,000 as shown by the assessee. He considered a part of the business income towards this investment and added Rs. 43,000 as assessee's income from undisclosed sources. Thus the total income was computed at Rs. 55,000 in the asst. yr. 1972-73. 5. In the asst. yr. 1973-74, similar proceedings were taken and the ITO found that there was an investment of Rs. 80,000 in the shape of various FDRs. For the reasons given in the earlier years, he included the business income as well as the total investment of Rs. 80,000 in the income of the assessee, in the status of Association of Persons. While doing so, the ITO disregarded the assessee's plea that he had sold the household goods brought from England and invested that in these FDRs. 6. Before the AAC the counsel for the assessee appeared as the notice had been ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accepted by the ITO in the first assessment. It was further pointed out that the income disclosed included income from the ancestral self-occupied property, which admittedly belonged to the HUF of which Shri Gurubachan Singh and Shri Mohinder Singh were the co-parceners in the relevant years. The other income was the estimated business income. It was contended that the assessee having filed return in the status of HUF the ITO called upon to determine the income of the HUF and he could not proceed to determine the income of any other person or entity without serving proper notice on that entity. It was submitted if the ITO was of the view that any income which had not been disclosed belonged to any other entity like an Association of Persons he should have first validly initiated proceedings against that entity, obtained a return and then proceeded to make an assessment. It was contended that the present proceedings were in respect of the HUF and, therefore, the ITO should have made assessment in respect of the HUF alone including therein the incomes which according to him belonged to the HUF. He contended that the assessment of an Association of Persons was illegal as there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gurubachan Singh was quite old by that time. As he was bachelor, he had no family of his own. In view of this, the joint investments were taken in the names of the two persons for either or the survivor. He contended that in such circumstances there could be no Association of Persons and if any question was to be asked about these investments which could be done from the individuals who had brought in the resources. He further contended that the explanation given regarding the savings by Shri Gurbachan Singh as well as Shri Mohinder Singh should have been accepted and it has been rejected for no good reasons. 11. The Deptl. Rep., on the other hand, submitted that the assessee had not been able to establish either continuance of HUF or of the deposits belonging to the joint family. He pointed out that even according to Shri Gurbachan Singh and Mohinder Singh the investment had not been made from the joint family funds and in view of this, there was no question of making the assessment in the status of HUF. He pointed out that the Commr. in his order under s. 263 had directed the status to be ascertained and after ascertaining the status the ITO had rightly adopted the status of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the return by the HUF. As the ITO was of the view that only the property income belonged to the HUF and no other income belonged to that entity, the proper course for him was to make assessment in respect of property income alone and take separate action for assessing the other income shown or the income represented by unexplained investment in the proper hands. The ITO should have first initiated a valid proceeding before making an assessment on an Association of Persons. He could not do so in the proceedings of the HUF. When the Commr. directed the ITO to consider the question of status it did not mean that the status should be changed in this manner. All what was expected was to proceed in accordance with law and make assessment in respect of the unexplained investment in the proper hands in a proper status. The ITO had issued notice to the assessee who was HUF and in the affidavits both the members also denied that the investment belonged to the HUF. In these circumstances, the ITO should not have proceeded to have made the assessment in respect of the unexplained investment in the hands of the present assessee in the status of Association of Persons. An assessment is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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