1986 (9) TMI 59 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was correct in holding that the disputed property belonged to the Hindu undivided family (HUF) consisting of the assessee, his wife, and daughter.
2. Whether the Tribunal was correct in law in admitting fresh evidence without giving the Department an opportunity to examine the same.

Issue-Wise Detailed Analysis:

1. Ownership of Disputed Property:
The primary issue was whether the Tribunal correctly assessed the disputed property as belonging to the Hindu undivided family (HUF) consisting of the assessee, his wife, and daughter. The assessee, a practicing advocate, initially treated the house property as his individual asset until the assessment year 1967-68. In the accounting year 1967-68, he claimed that the house had been thrown into the hotch-pot of his HUF, thus changing its status to HUF property.

The Income-tax Officer and the Appellate Assistant Commissioner rejected this claim, but the Tribunal accepted it based on the assessee's declaration dated November 16, 1967. The Tribunal's decision was influenced by the precedents set in Dr. A. R. Shukla v. CGT [1969] 74 ITR 167 (Guj) [FB] and Goli-Eswariah v. CGT [1970] 76 ITR 675 (SC).

However, the High Court found that the facts of the case aligned more closely with the Supreme Court decision in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, rather than N. V. Narendranath v. CWT [1969] 74 ITR 190 (SC). In Surjit Lal Chhabda, the Supreme Court held that merely throwing a separate property into the family hotch-pot does not convert it into HUF property in the eyes of Hindu law. The High Court emphasized that the property would only change its legal status upon the birth of a son, which had not occurred in this case. Therefore, the property remained the individual asset of the assessee, and its income should be treated as individual income.

The High Court concluded that the Tribunal was incorrect in holding that the disputed property belonged to the HUF. Consequently, the income from the property should be assessed as the individual income of the assessee.

2. Admission of Fresh Evidence:
The second issue concerned whether the Tribunal was correct in admitting fresh evidence without giving the Department an opportunity to examine it. Given the High Court's decision on the first issue, this second question became academic and did not require an answer. The High Court refused to address this question.

Conclusion:
1. The Tribunal was incorrect in holding that the disputed property belonged to the Hindu undivided family consisting of the assessee, his wife, and daughter. The property should be treated as the individual asset of the assessee, and the income therefrom should be assessed as individual income.
2. The second issue regarding the admission of fresh evidence was deemed academic and was not answered.

The references were answered in favor of the Revenue and against the assessee, with no costs awarded due to the death of the assessee. A copy of the judgment was directed to be transmitted to the Income-tax Appellate Tribunal, Patna.