1987 (1) TMI 62 - HC - Income Tax

Summary

Issues Involved:
1. Validity of action u/s 147.
2. Justification of Tribunal's conclusion regarding the business ownership.
3. Justification of penalty imposition u/s 271(1)(c) and u/s 273(1)(a).

Summary:

Issue 1: Validity of action u/s 147
The court examined whether the action u/s 147 was validly commenced. The Income-tax Officer issued notices u/s 147 and 148 for reopening the assessment on the grounds that the income of M/s. Radhey Shyam Hari Narain and M/s. Temani Trading Co. should have been clubbed with the income of the assessee-Hindu undivided family. The Tribunal rejected the assessee's contention, stating there was abundant evidence that the businesses belonged to the Hindu undivided family. However, the court found that the Tribunal's conclusion was based on presumptions and surmises without any material evidence. The court held that the Department failed to discharge the onus of proving that the assessee omitted or failed to disclose material facts necessary for assessment, leading to escaped income. Thus, the action u/s 147 was not validly commenced.

Issue 2: Justification of Tribunal's conclusion regarding the business ownership
The Tribunal concluded that the businesses of M/s. Radhey Shyam Hari Narain and M/s. Temani Trading Co. belonged to the assessee-Hindu undivided family based on the inability of the partners to explain their investments satisfactorily. The court, however, found no evidence to support this conclusion. The court emphasized that there is no presumption under Hindu law that a business standing in the name of any member is a joint family business unless it is shown that the business grew with the assistance of joint family property or funds. The court cited several precedents, including Mangi Lal Rungta v. CIT and G. Narayana Raju v. Chamaraju, to support its view. Consequently, the court held that the Tribunal was not justified in its conclusion.

Issue 3: Justification of penalty imposition u/s 271(1)(c) and u/s 273(1)(a)
The Tribunal had imposed penalties on the assessee u/s 271(1)(c) for the assessment years 1955-56 to 1966-67 and u/s 273(1)(a) for the assessment year 1968-69, holding that the assessee deliberately concealed particulars of its income. However, given the court's findings on issues 1 and 2, it concluded that the question of imposition of penalty does not arise. The court decided in favor of the assessee, negating the justification for penalties.

Conclusion:
The court answered all the questions in the negative and against the Department, deciding in favor of the assessee. The references were decided accordingly.