1987 (3) TMI 169 - AT - Income Tax

Summary

Issues Involved:

1. Status of the assessee for income tax purposes.
2. Addition of Rs. 30,000 as income in the hands of the assessee.
3. Assessment of income from house property and medical business.

Issue-wise Detailed Analysis:

1. Status of the Assessee for Income Tax Purposes:

The primary issue was whether the assessee should be assessed as an individual or as a Hindu Undivided Family (HUF). The assessee initially filed a return as an individual but later revised it, claiming the income from house property and medical business should be assessed in the hands of the HUF. The Income-tax Officer (ITO) and Appellate Assistant Commissioner (AAC) rejected this claim, arguing that the properties were previously assessed in the individual capacity of the assessee.

The Tribunal examined the sale deeds and other evidence, concluding that the lands sold on 14-5-1958 belonged to the HUF, as the sale deed included the assessee and his brothers as vendors, indicating joint family property. However, the sale deed dated 21-5-1960 was executed solely by the assessee's father, indicating it was his self-acquired property.

The Tribunal found that the minor's share of the sale proceeds from 1958 was likely preserved and used to purchase the medical shop in 1962. Thus, the medical shop was purchased from ancestral funds, supporting the claim that the income should be assessed in the hands of the HUF. The Tribunal rejected the revenue's argument that the assessee was estopped from claiming HUF status due to previous individual assessments, citing that each assessment year is separate and the doctrine of res judicata does not apply to income-tax proceedings.

2. Addition of Rs. 30,000 as Income in the Hands of the Assessee:

The second issue was the addition of Rs. 30,000 found in fixed deposits in the name of the assessee's wife. The ITO and AAC treated this amount as the assessee's income, rejecting the claim that the funds were from the wife's own sources, including money received from her father and subsequent money-lending activities.

The Tribunal reviewed the evidence, including letters and sworn statements from the assessee's father-in-law and wife, and discharged promissory notes indicating money-lending activities. It concluded that the funds belonged to the assessee's wife and not the assessee, as the father-in-law had received Rs. 7,500 from the assessee's father at the time of marriage and Rs. 5,000 in presents, which were lent out and accumulated to Rs. 30,000. The Tribunal found no evidence to suggest that the funds were the assessee's income and deleted the addition.

3. Assessment of Income from House Property and Medical Business:

The third issue involved the proper assessment of income from house property and medical business. The Tribunal noted that the assessee had obtained a 1/4th share in the house and vacant site through a partition list dated 19-4-1968. Consequently, the income from these properties should be assessed in the hands of the HUF, not the individual.

The Tribunal directed the ITO to exclude the income from house property and medical business from the individual assessment and assess it in the hands of the HUF.

Conclusion:

The appeals were allowed, with the Tribunal setting aside the orders of the CIT (Appeals) and directing the ITO to assess the income from house property and medical business in the hands of the HUF and delete the addition of Rs. 30,000 from the individual assessment.