1985 (10) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Status of the assessee for the purpose of gift-tax assessment.
2. Tribunal's authority to cancel or set aside assessments.

Issue-Wise Detailed Analysis:

1. Status of the Assessee for the Purpose of Gift-Tax Assessment:

The primary issue was whether the assessments made in the status of an individual were tenable in law. The assessee, Maharaja Kumar Kamal Singh, filed returns for the assessment years 1964-65 and 1965-66 in the status of a Hindu undivided family (HUF). However, the Gift-tax Officer assessed him in the status of an individual without discussing the reasons for this status in the assessment orders. The Tribunal admitted an additional ground that the assessee should have been assessed in the status of an HUF, as the gifts and transfers were made by the assessee in his capacity as the karta (manager) of the joint Hindu family, not as an individual. The Tribunal accepted this argument, holding that the properties gifted belonged to the HUF and the assessee made those gifts in his capacity as the karta of the HUF. The Tribunal further clarified that the legal fiction created by sections 27(ii) of the Income-tax Act, 1961, and section 4(6) of the Wealth-tax Act, 1957, was limited to those specific Acts and did not apply to the Gift-tax Act. Consequently, the Tribunal concluded that the assessments made in the status of an individual were not justified.

2. Tribunal's Authority to Cancel or Set Aside Assessments:

The Tribunal, after determining that the assessee should be assessed in the status of an HUF, cancelled the assessments made by the Gift-tax Officer. However, the court noted that the Tribunal should have directed the Gift-tax Officer to make the assessments in the correct status (HUF) instead of outright cancelling them. The court referred to various precedents, including CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC), which affirmed that the Appellate Tribunal has ample power to set aside an assessment and direct the Income-tax Officer to reassess in the correct status. The court also cited Mangat Ram Hazari Mal v. CIT [1968] 67 ITR 788 (P&H), which supported the Tribunal's authority to change the status of an assessee if justified by the material on record. The court concluded that the Tribunal should have set aside the assessments and directed the Gift-tax Officer to reassess the income in the status of an HUF.

Conclusion:

The court held that while the Tribunal was correct in determining that the assessments made in the status of an individual were not tenable, it was not justified in cancelling the assessments outright. Instead, the Tribunal should have set aside the assessments and directed the Gift-tax Officer to reassess the income in the status of an HUF. The question was answered partly in favor of the assessee and partly in favor of the Revenue. The court ordered that a copy of the judgment be sent to the Income-tax Appellate Tribunal, Patna, for necessary action in conformity with the judgment.