1992 (5) TMI 75 - AT - Income Tax

Summary

Issues Involved:

1. Validity of reopening assessments under section 148.
2. Legitimacy of partial partition dated 30-3-1957.
3. Clubbing of income of family members with the assessee-HUF.
4. Procedural correctness of the remand order by CIT(A)-II.

Detailed Analysis:

1. Validity of Reopening Assessments Under Section 148:

The CIT(A) invalidated the reopening of assessments under section 148, holding that there was no basis for considering the diary as belonging to the HUF. The department's appeal against this decision was based on the argument that the consolidated list of assets found in the locker indicated the family was joint, thereby justifying the reopening of assessments.

2. Legitimacy of Partial Partition Dated 30-3-1957:

The partial partition on 30-3-1957 was evidenced by a deed dated 9-4-1957 and was acted upon by the family members. The CIT(A)-II opined that the partition required recognition under section 171 of the Income-tax Act, 1961, which was not done, thus rendering it invalid. However, the tribunal noted that the partition had been accepted by the Commissioner of Income-tax during voluntary disclosure petitions, and assessments were made individually for family members since 1958-59. The tribunal concluded that sections 25-A of the 1922 Act or 171 of the 1961 Act were inapplicable as the family was never assessed as a joint family before.

3. Clubbing of Income of Family Members with the Assessee-HUF:

The department clubbed the income of all family members, including the wives of the four sons of late Dwarkadas, with the assessee-HUF. The tribunal found this unwarranted, citing that the family members had been assessed independently for many years. The tribunal emphasized that the document listing all family assets found in Ajay Kumar's locker did not conclusively prove the family was joint. The tribunal also criticized the lack of inquiry into the sources of income for the wives of the family members.

4. Procedural Correctness of the Remand Order by CIT(A)-II:

The tribunal found the procedure followed by CIT(A)-II for obtaining a remand report to be faulty. It emphasized that the CIT(A) should have issued a formal remand order, not just a letter. The tribunal noted that the letter was vague and did not clearly state the inquiries to be made. The tribunal criticized the distressing manner in which Ajay Kumar was interrogated and found no justification for the observations made by CIT(A)-II regarding the need for a psychiatric examination of Ajay Kumar.

Conclusion:

The tribunal sustained the order of CIT(A)-I, invalidating the reopening of assessments and rejecting the clubbing of income. The tribunal vacated the order of CIT(A)-II and the assessment order for the assessment year 1986-87. Consequently, the department's appeals were dismissed, and the assessee's appeals were allowed.