2015 (11) TMI 406 - HC - Income Tax

Undisclosed income - to be assessed in the hands of the Hindu undivided family in so far as the lottery business is concerned as per ITAT - Held that - The sales tax registration was done on August 2, 1999, and within two months, the father died. Therefore, the question of the father maintaining the books of account would not arise. After the death of the father, the son is carrying on with the said business. If he had maintained the accounts and if he had disclosed all the amounts in the accounts, it seems that it would not have been treated as undisclosed income. It is because books were not maintained and returns were not filed, the authorities laid their hands on the undisclosed income. Therefore, the Tribunal was justified in the facts of the case in holding that the said amount is to be assessed in the hands of the Hindu undivided family in the aforesaid circumstances and not in the hands of the assessee in his individual capacity. In fact during such proceedings, the assessee had requested the authorities to adjust this undisclosed income and seized cash as advance tax for Hindu undivided family and, therefore, we do not find any infirmity in the order passed by the Tribunal, which calls for interference. Hence, we answer the first substantial question of law in favour of the assessee and against the Revenue. As the finance business is concerned, it is to be assessed as an association of persons under the name Easy Finance and not under the name of the assessee in his individual capacity as per ITAT - Held that - In so far as the second substantial question of law is concerned, it is not in dispute that the seized materials disclose the names of the three persons, namely, Manish, Jagadish and Rajesh. They were carrying on the finance business under the name and style of Easy Finance as an association of persons.In fact the notice under section 158BC of the Act was issued in the capacity as an association of persons only on November 8, 2002. Even before issue of that notice, returns had been filed in the status of an association of persons and the tax had been paid. The returns filed by the assessee on August 24, 2001, for all the three years from 1999-2000, 2000-01 and 2001-02 shows undisclosed income as nil. In the light of the aforesaid evidence on record the undisclosed income relatable to the finance business is to be assessed in the hands of the association of persons and not as an individual. Thus, second substantial question of law is answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Assessment of undisclosed income in lottery business - individual vs. Hindu undivided family.
2. Assessment of undisclosed income in finance business - individual vs. association of persons.

Analysis:
1. The case involved a dispute regarding the assessment of undisclosed income from lottery and finance businesses. The Tribunal found that the lottery business was initially registered under a Hindu undivided family, but after the father's death, the son continued the business as the karta. The assessing authority insisted on assessing the income in the individual's name due to lack of maintained accounts by the family. However, the Tribunal disagreed, stating that the income should be assessed in the hands of the Hindu undivided family considering the circumstances. The Tribunal's decision was based on the fact that the father had intended to operate the lottery business under the family's name, and the lack of maintained accounts was due to the sudden demise of the father. The Tribunal also noted that the son had offered to adjust the undisclosed income as advance tax for the family. Consequently, the Court upheld the Tribunal's decision, ruling in favor of assessing the income in the hands of the Hindu undivided family.

2. Regarding the finance business, the seized materials indicated the involvement of three individuals operating as an association of persons under the name Easy Finance. The Tribunal observed that the returns were filed in the status of an association of persons, and taxes were paid accordingly. The undisclosed income related to the finance business was assessed to be in the hands of the association of persons rather than the individual. The Court concurred with the Tribunal's findings, emphasizing that the evidence supported the assessment of income in the hands of the association of persons. Consequently, the Court ruled in favor of the assessee for this issue as well.

In conclusion, the Court dismissed the Revenue's appeal, upholding the Tribunal's decisions on both issues. The Court found no merit in the appeal and ruled in favor of assessing the undisclosed income from the lottery business in the hands of the Hindu undivided family and the finance business in the hands of the association of persons.