9911796707
TMI Blog1987 (10) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... wal Chand, Shamli, Dist. Muzfarnagar. It effected a partial partition of its capital in the said firm and its right to share in the profits of the firm w.e.f.20-10-1979. It made a claim before the ITO for recognition of this partial partition under sec. 171. 4. The ITO refused to record a finding of partial partition. According to him, no partial partition could be recognized after18-6-80in view of the amendment introduced by way of sec. 171(9) by the Finance Bill 1980. (The Bill was introduced on18-6-80). The assessee's case before the ITO was that sec. 171(9) applied only to such case of joint families which had been assessed as Hindu Undivided Family "hitherto" but that the provisions did not apply to case of Hindu Undivided Families which have not been assessed as such till the date of the partial partition. The assessee did accept that an assessment had been in fact, made by the WTO, Jaipur, for the assessment year 1978-79, but the assessment was under the Wealth-tax Act. According to the assessee, for the purpose of sec. 171(9) assessment should have been made on the assessee as a HUF prior to the date of partial partition (20-10-1979) under the Income-tax Act, 1961. This no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve manner in the affidavit of Ashok Kumar dated20-10-1979forming part of the record. According to this affidavit, the mistake are so in the following manner : "That my father, Shri Manik Chand was being assessed to in one tax at Jaipur, on whose sudden death the entire responsibility devolved on me. I met Shri C. P. Chhabra, Advocate of Muzaffarnagar in August 1979 for seeking his guidance and assistance in Income-tax and Wealth-tax matters. After studying the relevant papers, Shri C. P. Chhabra, Advocate, told me that my father had been showing in his individual status the income from the firm, M/s Ladu Mal Kewal Chand, which actually belonged to the joint Hindu family, of which my father was the Karta till his death and I became the Karta after his death." (iv) Accordingly, the first return under the Income-tax Act, was submitted for the assessment years 1980-81 and 1981-82 by the assessee - HUF. These assessments were completed on7-10-1983and27-12-1983. These facts show that the ITO had not doubted the existence of the assessee-HUF which he had the opportunity to assessee for the first time when the return for the assessment year 1980-81 was files on5-11-1982. On these facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions for reference : "1. Whether the Tribunal was justified in holding that the assessee was 'not hitherto assessed to tax' and provisions of sub-sec. (9) of section 171 were not applicable in this case ? 2. Whether the ITAT erred on facts and in law to hold until the A. Ys. 1980-81 and 1981-82 property and assets held by M/s Manik Chand, & Sons were being assessed in the hands of Sri Manik Chand, Individual, when the corrected fact noticed by ITAT (at page 6) were that for A. Ys. 1980-81 and 1981-82 assessments.had been made in the hands of HUF on7-10-83and27-12-83respectively ? 3. Whether the ITAT was corrected to hold that the appellant HUF was not hitherto assessed as undivided prior to the date of partition on 20-10-1979 when it overlooked the facts that this date fell in the previous year relevant to assessment year 1981-82 and the assessment for the preceding A. Y. 1980-81 had been completed in the status of HUF ? 4. Whether the ITAT was wrong on facts and in law to ignore the factual existence of HUF, even though wrongly assessed as Indl. until A. Y. 1979-80 on te basis of such claim put up before the ITO ? 8. After hearing the parties, we find that none of the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 979-80 on the income from the assets of the assessee-HUF. But this does not convert the assessment into an assessment on the HUF itself. The two entities are different, as observed by the Tribunal in its order and there is also the clear finding that no assessment had been made on the assessee-HUF, as a HUF prior to20-10-1979. There is no getting away from this basic finding or fact. Question No. 4 is also, therefore not referred. R. A. No. 584/87, A. Y. 1981-82 11. In this Reference Application, the Commissioner has raised the following question : "Whether the Tribunal was justified in deleting the share income of Rs. 71,869from the income of the present assessee ?" 12. The Tribunal disposed of the above dispute in para. 4 & 5 of its consolidated order dated31-12-86as under : 4. We now take up for consideration ITA No 1757/Del/85. which relates to the assessment made by the ITO for assessment year 1981-82. The only issue which has been raised in this appeal relates to the inclusion of a sum of Rs. 71,869 representing the share from the profits of the firm. M/s Ladu Lal Kewal Chand, Shamli. The assessee proceeding on the basis of partial partition having been effected on20-12- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the profits of M/s Ladu Lal Kewal Chand is includible in the assessment of the assessee for the year 1981-82. Accordingly, the finding of both the authorities below are vacated and the ITO is directed to include the sum as a part of the total income of the assessee for the year. In the result, appeal is partly allowed." (One other ground had been taken by the assessee before the Tribunal which was rejected. That is why the Tribunal described the appeal as partly allowed.) 15. On the above facts, the Commissioner has raised the following question : "Whether the Tribunal was justified in direction to include the sum a as par of the total income on substantive basis in view of its findings recorded in ITA No. 1591 /Del. / 1985 ?" 16. It is apparent that the question raised by the Commissioner is a purely consequential one to that raised in RA No. 583/87. Following our order in para. 10 supra, we find that the above question dies not call for reference. 17. The Reference Applications rejected. Per Shri S. Grover, Judicial Member - I have closely perused the proposed common draft order dated 23-6-87 of the learned Vice president (WZ) rejecting the CIT request for making referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual, was actually Karta of the HUF styled as M/s Manik Chand & Sons. He had received certain properties on partition of the bigger HUF of Shri Chhoga Las. It was, therefore, claimed by the assessee that correct status of the assessee as HUF and not individual. In view of the evidence filed, status of the assessee was accepted as that of HUF. Now the assessee has claimed that a partial partition has taken place in the HUF on20-10-79. Claim of partial partition alleged to have taken place on20-10-79is not admissible in law because it is not the case of HUF which has not been assessed to tax. Assessee has perhaps tried to take shelter from clause 9 of section 171 on the ground that assessment in the status of HUF was not made in respect of the actually assessed to income tax but in the wrong status i.e. Individual. I am unable to concede to the request of the assessee. It is a case where HUF was assessee to tax a correct status was HUF which has been regularly assessed to income tad since long and therefore, it cannot be said that it is the case of HUF not hitherto assessed. Assessee has also filed copy of wealth tax assessment for the assessment year 1978-79 which shows that assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons are record in para 6 of the proposed draft order of the learned Vice-President, which is not being repeated. It may be noted as a fact and which is borne out on record that though in relation to share income the respondent was being assessed in individual status, vis-a-vis, in respect of total asset in wealth-tax assessments including share interest in the firm M/s Ladumal Kewal Chand, the claimed status, which was accepted, much before 18-6-1980 was that of Hindu undivided family, and this is an important factor. Since as per the assessee's own assertion the Individual status was being wrongly offered but for wealth-tax purposes correct status was being claimed and which being accepted, it certain create a peculiar situation and though the Tribunal has given the benefit of such situation to the assessee but to say that no question of law arises and that reference should not be granted to the Revenue, in my considered view, would not be correct. 7. With regard to the claimed contemporary memorandum book in which the entries of partial partition were recorded, it was not produced either at the time of assessment or before the first appellate authority. It is also and accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed facts being as under : 14. The Income-tax Officer added the share income from the firm M/s Ladu Lal Kewal Chand, Shamli, on the ground that the partial partition claimed by the assessee had been rejected. The AAC confirmed the same. 15. The Tribunal vide order dated31-12-1986deleted the share income of Rs. 71,869 from the assessment of the HUF by observing that the partial partition claim was allowable. 16. Though the learned Vice - President (WZ) gas rejected the reference requests with regard to such finding I have given my reasons for accepting the Commissioner's request. The present reference being consequential in nature, I propose reference of the following question : "Whether the Tribunal I was justified in deleting the share income of Rs. 71,869 from the income of the present assessee ?" ORDER UNDER SECTION 255(4) OF INCOME-TAX ACT, 1961 As there is a difference of opinion between us the following question is referred to the President, Income-tax Appellant Tribunal under section 255(4) of the Income-tax Act, 1961. "Whether on the facts and in the circumstances of the case the proposed view of the Vice-President (WZ) that no question of law arises out of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amilies, which had been assessed till then as joint families and not to those joint families, which were not assessed to tax at all, was not accepted by the ITO. There was an assessment made by the Wealth-tax Officer, Jaipur on the joint family of the assessment year 1978-79 but that assessment was under the Wealth-tax Act. The claim of the assessee before the ITO was that for the amended section introduced with effect from 18-6-1980 to apply assessment should have been made on a joint family prior to the date of partial partition, namely 20-10-1979 under the IT Act 1961 and this assessment under the IT Act not having been done, the amended provisions would have no application. It is this contention that was rejected by the ITO. The assessee appealed to the Appellate Assistant Commissioner but in vain. The Appellate Assistant Commissioner noted that year after year assessments were made in respect of the properties held by the assessee family in the status of individual and that was a mistake and the right status should have been taken as HUF and even though the status was mistakenly taken as individual since the properties belonged to the joint family, the assessee must be taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as never assessed to tax earlier and the first assessment having been completed long after the introduction of the amendment to section 171(9), there was no possibility to say that this joint family was assessed to tax in the status of joint family. In fact even the return for the assessment year 1980-81 was filed in the status of HUF only on5-11-1982and bit earlier. The Tribunal then came to the finding that no assessments having taken place on the joint family at any time prior to 7-10-1983 it could not be said that the assessee joint family could be said to be a joint family "hitherto assessed as undivided" in order that the ban introduced by subsection (9) of section 171 to recognize partial partitions could be applied. 5. It was on these facts that the Commissioner of Income-tax stated that the following four questions of law arise out of the order of the Tribunal : "1. Whether the Tribunal was justified in holding that the a as see was not 'hitherto assessed to tax' and provisions of sub-sec (9) of sec. 171 were not applicable in this case ? 2. Whether the ITAT erred on facts and in law to hold until the A. Y. 1980-81 and 1981-82 property and assets held by M/s Manik Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily. Since the facts found by the Tribunal were correct the question framed by the learned Commissioner of Income tax does not arise out of the order of the Tribunal as a question of law. 8. As regards question No. 3 the learned Vice-President had made the following observations with which I entirely agree : "9. As regards Question No. 3 the case not the Commissioner seems it be that the Tribunal missed the significance of the date (20-10-1979) which according to the Commissioner is relevant for the assessment year 1981-82. Nothing turns on this. Section 171(9) has to be applied as it stands. There is no room for edifying or adopting the language of this provision in any manner to suit either the Revenue or the assessee. The words "hitherto assessed" found in section 171(9) were looked into by the Tribunal in the light of the material on record. It then recorded its finding of fact that the assessee HUF had not been hitherto assessed as an HUF so as to attract section 171(9). No question of law arises out of this finding of fact." 9. As regards question No. 4 it is very difficult to spell out a question of law from the finding given by the Tribunal that the assessment made on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich only can make the assessment made under the Income-tax Act as one made under the Wealth-tax Act and vice versa, such a view is not possible and since such a view is not possible, the statement made by the Tribunal that no assessment was made in the status of HUF on the assessee remains a pure finding of fact, which does not give rise to any question of law. The learned Judicial member made a reference to making of certain entries in the books of the firm and appeared to have drawn a conclusion that the recognition of partial partition dies not seem correct. This is questioning the conclusion arrived at be the Tribunal on appraisal of the evidence, which I think is not within the view of the proceedings contemplated u/s 256 of the Income tax Act particularly by the bench. It is for the parties to question the conclusion arrived at by the Tribunal and not for the Tribunal to reappears the evidence in a proceeding u/s 256 and expressed doubts on the correctness of the conclusion. The learned Judicial Member in the question framed by him sought to equate the previous year with the date of assessment. He seemed to think that since the previous year for the assessment year 1980-81 en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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