1993 (6) TMI 129 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement of heads of branches of a bigger H.U.F. to receive gifts.
2. Status of branches receiving gifts as H.U.F. or A.O.P.
3. Validity of assessments under section 143(1) and revision under section 263 of the Income-tax Act.
4. Determination of correct status for tax purposes.
5. Applicability of the Amnesty Scheme to the status of the assessee.

Detailed Analysis:

1. Entitlement of Heads of Branches of a Bigger H.U.F. to Receive Gifts:
The primary issue was whether the heads of branches of a bigger Hindu Undivided Family (H.U.F.) are entitled to receive gifts and if such branches can be considered H.U.F.s for assessment purposes. The family tree of the bigger H.U.F. was provided, showing four H.U.F.s within the larger H.U.F., each headed by Shri Chunnilal Agarwal and his three sons. The assessee argued that gifts received by these branches should be treated as H.U.F. property. The Tribunal agreed with the assessee, citing several legal precedents that support the notion that branches within a larger H.U.F. can hold property as H.U.F.s.

2. Status of Branches Receiving Gifts as H.U.F. or A.O.P.:
The Commissioner of Income-tax argued that the assessment orders were erroneous because the status of the assessee was wrongly determined as H.U.F. instead of Association of Persons (A.O.P.). The Commissioner believed that a H.U.F. can only be created by law and not by individual acts, and that mere receipt of a gift does not form a H.U.F. The Tribunal, however, disagreed, stating that the intention of the donor is crucial in determining whether the gift is for the H.U.F. or individual members. The Tribunal cited multiple cases, including CIT v. M.M. Khanna and A. Hanumantha Rao v. CWT, to support the argument that smaller H.U.F.s can exist within a larger H.U.F.

3. Validity of Assessments Under Section 143(1) and Revision Under Section 263:
The assessments for the years 1978-79 to 1986-87 were completed under section 143(1) and the incomes were accepted. The Commissioner of Income-tax revised these assessments under section 263, arguing that the assessments were erroneous and prejudicial to the interests of the Revenue. The Tribunal found that the Assessing Officer's determination of the status as H.U.F. was correct and that the assessments were neither erroneous nor prejudicial to the interests of the Revenue. The Tribunal held that the revisionary order was not justified.

4. Determination of Correct Status for Tax Purposes:
The Commissioner contended that the correct status of the assessee should be A.O.P. and not H.U.F., based on the Supreme Court's decision in G. Murugesan & Bros. v. CIT. The Tribunal, however, held that the status of the assessee as H.U.F. was justified based on the intention of the donor and the legal precedents supporting the existence of multiple H.U.F.s within a larger H.U.F.

5. Applicability of the Amnesty Scheme to the Status of the Assessee:
The assessee argued that since the returns were filed under the Amnesty Scheme, there was no need for further enquiries regarding the status. The Commissioner rejected this argument, stating that the Amnesty Scheme does not prevent the determination of the correct status. The Tribunal agreed with the Commissioner on this point but still found that the status as H.U.F. was correct.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that the Assessing Officer correctly treated the status of the assessee as H.U.F. in the original assessments. The revisionary order of the Commissioner of Income-tax was cancelled, and it was held that the original assessments were neither erroneous nor prejudicial to the interests of the Revenue.