1970 (3) TMI 39 - HC - Income Tax

Agricultural income in Pakistan was assessed as belonging to Hindu Undivided Family - exclusion of such income from the assessable income of the family - applicability of section 25A of Indian Income Tax Act, 1922

Summary

Issues Involved:
1. Burden of proof on the department.
2. Application of section 25A of the Indian Income-tax Act, 1922.
3. Ownership and assessability of agricultural income from Pakistan.
4. The Tribunal's handling of facts and evidence.

Detailed Analysis:

1. Burden of Proof on the Department:
The primary issue was whether the Tribunal was justified in placing the burden of proof upon the department and excluding the income from Pakistan agricultural properties from the assessee's income. The Tribunal incorrectly assumed that the Income-tax Officer (ITO) failed to discharge the onus of proof, despite the fact that the point of separate ownership of the agricultural income was never raised before the ITO. The Tribunal's decision was based on a fundamental misconception of facts, as the assessee never contended that the income from Pakistan belonged to them individually rather than to the Hindu Undivided Family (HUF).

2. Application of Section 25A of the Indian Income-tax Act, 1922:
The Tribunal dismissed the applicability of section 25A, which deals with the assessment after the partition of a Hindu undivided family. The Tribunal misunderstood the nature of the assessee's case, which was never about partition but about individual ownership of the income. The Tribunal's interpretation was flawed because the assessee never claimed partition before the ITO. The Supreme Court's decision in Kalwa Devadattam v. Union of India was cited, which clarified that if no order under section 25A(1) is recorded, the family is deemed to continue as a Hindu undivided family for tax purposes.

3. Ownership and Assessability of Agricultural Income from Pakistan:
The assessee argued that the income from agricultural activities in Pakistan should not be included in the HUF's income, as it belonged to the individual members. However, the evidence from Pakistan's tax authorities showed conflicting statuses: the Pakistan Agricultural Income-tax Officer treated the income as belonging to individuals for convenience, while the Pakistan Income-tax Officer treated it as belonging to the HUF. The Indian ITO included the income in the HUF's assessment, considering the joint management of the properties and the lack of evidence for individual ownership. The Tribunal's conclusion that the income belonged to individuals was unsupported by facts and evidence.

4. The Tribunal's Handling of Facts and Evidence:
The Tribunal failed to consider the relevant facts and circumstances, including the evidence from Pakistan's tax authorities and the assessee's own submissions. The Tribunal's inference that the properties belonged to the assessees individually was baseless and unjustified. The Tribunal also overlooked the fact that the assessee did not raise the issue of separate ownership before the ITO or in the grounds of appeal.

Conclusion:
The High Court answered all questions in favor of the revenue. The Tribunal was not justified in placing the burden of proof on the department and excluding the agricultural income from the assessee's income. Section 25A was applicable, and the income from Pakistan belonged to the HUF. The Tribunal's conclusions were based on a fundamental misconception of facts and a failure to consider the relevant evidence. The High Court emphasized the presumption in Hindu law that a family is joint unless proven otherwise. No order as to costs was made.