9911796707
TMI Blog1988 (6) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were filed voluntarily on20th Aug., 1983and assessment for all the three years were made on29th Aug., 1983. Identical orders of assessment have been passed for all the three years. The only difference being in the amount of income. We reproduce below the relevant portion from asst. yr. 1981-82: "Return filed declaring income of Rs. 56,130. In response to notice under s. 143(2) Shri D.K.Agarwal,CAattended., Case discussed. This is a case of specific trust in which share of beneficiaries are specified. Therefore, income in the hands of trust is exempt. The trust was created for the benefit of Smt. Sarala Goyal, Anand Goyal, Karuna Goyal, Vandana Goyal, Anjana Goyal. The trust derives income from handloom cloth. After scrutiny income retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, profit and loss account and the balance sheet were filed but the ITO did not make any investigation on the following points: (1) Whether the so called trust carried on business at all and, if so, in what manner and with what capital (according to the CIT it was improbable that a trust fund of Rs. 500 only could result in such huge income). (2) The ITO did not care to examine whether the incomes shown to have been earned by the trust really belong to it or to some other person and the trust is merely being used as a voucher to escape the incidence of taxation. (3) The ITO has not even bothered to find whether the trustee is having any bank account and what is the trade name under which the trust is carrying on business. 4. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside. As is evident in the case before us, the assessment were completed within 9 days of the filing of the returns. Therefore, undue baste is writ large on the very face of the assessment proceedings. Within such a short time it was not possible for he ITO to make proper enquiries. It was not a case of salaried assessee who had filed his returns of income declaring income from salary which was supported by certificate of salary and tax deduction at source issued by the employer. The returns were, on the other hand, by an assessee who was carrying on business allegedly in handloom cloth and should have been processed in the same manner in which returns of similar businessmen fare processed. These returns were filed voluntarily for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the ITO to look into the history of this trust right from the beginning and find out whether it was a genuine trust or it was merely a name created for booking the income of someone else as having been earned by the trustee on behalf of the beneficiaries. 7. It was necessary for the ITO to find out as to whether the trustee had been is business from before and whether he continued to carry on his personal business even after the creation of this trust and with what result. He must have enquired whether the business was being carried on by the trustee personally or it was mainly carried on with the help of the employees. A perusal of the order sheet and the assessment order would indicate that the unusual facts of this case did not arous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not bother to find out whether the beneficiaries are genuine existing persons, whether the trust fund has ever been utilised for their benefit. He says that the income in the hands of the trust is exempt. We do not know how and on what basis he holds the income in the hands of the trust to be exempt and what he actually means by saying so. In the case of a trust the income is taxable in the hands of the trustee in terms of s. 161 of the IT Act and to say that the income in the hands of the trust is exempt shows that the ITO had a thoroughly erroneous impression of the law. No doubt under s. 166 it is permissible to make a direct assessment on the beneficiaries. The ITO in the orders under consideration does not say that out of the two proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had to be enquired into by the ITO before passing the assessment orders in question. He has patently not looked into this aspect of the matter and for this reason also, the assessment orders are erroneous and pre judicial to the Revenue. 11. This was a case in which income was derived from business and, therefore, as usual the ITO should have examined the case as is usually done in the case of business. The ITO does not appeal to have made any attempt whatsoever to verify whether the income declared was correct and he has accepted the returned income meaning thereby that only portions thereof would be assessed in the hands of the respective trustees. It was his duty to look into the trading results and find out if the profit declar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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