1966 (1) TMI 9 - HC - Income Tax

Purchase and sale of shares - Whether the ITO had travelled beyond the material existing on the record

Summary

Issues:
Assessment of individual as a Hindu undivided family member post a partition, treatment of business income, reliance on Income-tax Officer's report without giving an opportunity to rebut, inclusion of Rs. 7,000 in assessment on a provisional basis, findings on partial partition and partnership firm existence.

Analysis:

The judgment pertains to the assessment of an individual for the year 1960-61 following a claimed partition in a Hindu undivided family. The petitioner contended that a partial partition occurred in 1957, and he deposited Rs. 4,000 in his separate business. The Income-tax Officer assessed the petitioner as an individual, rejecting the partial partition claim and concluding that no partnership firm existed. The assessment included a loss of Rs. 10,053 and estimated income of Rs. 7,000 for the alleged partnership. The Appellate Assistant Commissioner upheld the assessment, stating the addition of Rs. 7,000 was provisional pending firm accounts examination in the next period.

The petitioner's revision application to the Commissioner of Income-tax was dismissed, affirming the rejection of partial partition and partnership existence. The Commissioner's order included the provisional Rs. 7,000 addition. The petitioner challenged the assessment, appellate, and revision orders through a certiorari petition. The petitioner argued against the reliance on the Income-tax Officer's report without providing an opportunity to rebut. The court analyzed the report and found no new material necessitating additional evidence from the petitioner.

Regarding the provisional inclusion of Rs. 7,000 in the assessment, the court noted that the sum should have been conclusively determined before inclusion. The judgment emphasized that provisional inclusions are exceptions explicitly or implicitly provided by statute, such as for partner profits. Since no partnership was established, the provisional addition was deemed erroneous. The court ruled that the Rs. 7,000 could not be included provisionally and should have been definitively determined before inclusion.

Additionally, the court addressed the findings on partial partition and partnership firm existence. The petitioner challenged these findings, but the court found no manifest illegality or apparent error of law in the conclusions. However, the court partially allowed the petition, quashing the Rs. 7,000 addition in the assessment. The parties were directed to bear their own costs, concluding the judgment in favor of the petitioner on this specific issue.

In summary, the judgment delves into the assessment of an individual post a claimed partition, examining the treatment of business income, reliance on reports, provisional inclusion of sums, and findings on partition and partnership existence, ultimately ruling in favor of the petitioner on the provisional inclusion issue.