1957 (4) TMI 80 - HC - Income Tax

Summary

Issues Involved:
1. Whether the investments in the name of a junior member of the Hindu undivided family can be presumed to be investments of the assessee Hindu undivided family.
2. Whether the unexplained amount of Rs. 29,000 was an income of the Hindu undivided family from an undisclosed source.

Detailed Analysis:

Issue 1: Presumption of Investments as Joint Family Property
The primary issue revolves around whether the investments made in the name of Punu Lal, a junior member of the Hindu undivided family (HUF), can be presumed to be investments of the HUF itself. The Tribunal initially held that the onus was on Punu Lal to establish that the house was purchased from his individual funds. Since Punu Lal's explanation was found to be false, the Tribunal inferred that the house was purchased from the HUF's funds, deeming the amount of Rs. 29,500 as the secreted profits of the HUF from the gold and silver business.

The Tribunal's view was challenged by the assessee, citing precedents such as Sir Paaampat Singhania v. Commissioner of Income-tax, U.P., which stated there is no presumption that a business carried on by a member of a joint Hindu family is joint family business. However, the court clarified that this principle does not apply here as it was not alleged that Punu Lal was carrying on any separate business. Instead, it is well-settled law that if a nucleus of joint family property is proved or admitted, a presumption arises that the whole property is joint, including any acquisition by a member of the joint family. This principle was summarized from Mulla's Hindu Law.

Issue 2: Unexplained Amount as Income of HUF
The second issue concerns whether the unexplained amount of Rs. 29,000 should be taxed as the secreted income of the HUF for the assessment years 1949-50 and 1950-51. The Tribunal found that the HUF was carrying on the business of gold and silver in the disputed house for over twenty years, and Punu Lal had no independent source of income. Additionally, Punu Lal provided a false explanation regarding the source of the money, which further supported the inference that the funds were from the HUF.

The Tribunal remarked that it was implausible for Punu Lal to invest Rs. 29,500 to earn a mere Rs. 24 per month as rent. Considering all these factors, the Tribunal concluded that the investments were made from the HUF's funds, not from Punu Lal's private funds. The High Court agreed with this conclusion, stating that there was adequate material to support the inference that the amount represented the secreted profits of the HUF.

Conclusion:
The High Court held that the Tribunal's finding was based on proper material and did not involve any misdirection in law. The court emphasized that it has no jurisdiction to interfere with the Tribunal's conclusion merely because it might take a different view on the question of fact. The question referred to the High Court was answered against the assessee and in favor of the Income-tax Department, with the assessee required to pay the costs of the reference.