1972 (4) TMI 22 - HC - Income Tax

Whether reassessment made on the assessee-family u/s 34(1)(a) of the Indian Income-tax Act, 1922, are valid - Whether inclusion and assessment to tax of the share income from Kaloogala Estate in Ceylon in the hands of the assessee-family are justified - Whether, inclusion and assessment of the interest income is justified in law - Whether inclusion and assessment to wealth-tax, the value of the share in Kaloogala Estate in the net wealth of the assessee s family, is valid in law - Whether inclusion of the share from the Kaloogala Estate with that of the assessee-family in the assessment of 1950-51 was not justified

Summary

Issues Involved:
1. Validity of reassessment under section 34(1)(a) of the Indian Income-tax Act, 1922.
2. Inclusion and assessment of share income from Kaloogala Estate for assessment years 1951-52 to 1953-54.
3. Inclusion and assessment of interest income for assessment years 1959-60 to 1961-62.
4. Inclusion and assessment to wealth-tax of the value of the share in Kaloogala Estate for assessment years 1958-59 to 1960-61.
5. Inclusion of the share from Kaloogala Estate in the assessment year 1950-51.

Detailed Analysis:

1. Validity of Reassessment under Section 34(1)(a):
The court examined whether the reassessment for the assessment years 1951-52 to 1953-54 was valid under section 34(1)(a). The Income-tax Officer (ITO) had reopened the assessments based on new evidence and statements indicating that the funds for the Kaloogala Estate share came from the Hindu undivided family (HUF) and not from Meenakshi Achi. The court held that the ITO was justified in reopening the assessments as the assessee did not disclose fully and truly all material facts necessary for the original assessment. The court cited precedents to support that the adequacy of the grounds for reopening is not justiciable, only the existence of the belief can be challenged.

2. Inclusion and Assessment of Share Income from Kaloogala Estate:
The court upheld the Tribunal's finding that the share income from Kaloogala Estate for the assessment years 1951-52 to 1953-54 should be included in the hands of the assessee-family. The Tribunal found that the funds for the purchase of the share came from the HUF, corroborated by the entries in the account books of Nagappan Chettiar and the statements of Karuppan Chettiar. The court agreed with the Tribunal's conclusion that the funds used were from the HUF and not from Meenakshi Achi.

3. Inclusion and Assessment of Interest Income:
The interest income from the fixed deposits, which represented the sale proceeds of the Kaloogala Estate, for the assessment years 1959-60 to 1961-62, was also included in the hands of the assessee-family. The court found that since the original funds were from the HUF, the interest income derived from those funds should also be assessed in the hands of the HUF.

4. Inclusion and Assessment to Wealth-tax:
The value of the share in Kaloogala Estate was included in the net wealth of the assessee-family for the assessment years 1958-59 to 1960-61. The court upheld the Tribunal's decision that the funds used to purchase the share were from the HUF, and thus, the value of the share should be included in the net wealth of the HUF for the relevant assessment years.

5. Inclusion of the Share from Kaloogala Estate in the Assessment Year 1950-51:
The court agreed with the Tribunal that the inclusion of the share income from Kaloogala Estate in the assessment year 1950-51 was not justified. The Tribunal noted that the crucial evidence, i.e., the account books of Nagappan Chettiar, was not available at the time of the reassessment for 1950-51. Therefore, the share income could not be included in the assessment for that year.

Conclusion:
The court answered the first four questions in the affirmative and in favor of the revenue, holding that the reassessment and inclusion of income and wealth were justified. However, the court answered the fifth question against the revenue, ruling that the inclusion of the share income for the assessment year 1950-51 was not justified. The Commissioner of Income-tax was entitled to costs in T.C. 212/66, and the assessee was entitled to costs in T.C. 213/66, with counsel's fee fixed at Rs. 250 in each case.