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TMI Blog1987 (3) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... l to show that the assessee had filed details of such transfer in the wealth-tax proceedings; but the wealth-tax miscellaneous record is in different parts for the year and the order-sheet entries are not complete and hence the assertion of the assessee that such disclosure was made in the wealth-tax return has to be accepted. 2. In the income-tax return no mention was made of the transfer. The ITO in completing the original assessment on 23-5-1978 did not also bring to tax any capital gains from such transfer. However, on 31-3-1982, the ITO recorded the following note: "Note : On 14-1-1976 the assessee had transferred the following properties to the firm M/s Naidu's Continental Packers. Rs. (i) Land at Saidapet 1,50,000 (ii) Land at Adyar 15,000 (iii) Land and Building at 192, Triplicane High Road 13,530 This transfer attracts the provisions of capital gains tax. The assessee had not disclosed the above information. On account of his failure to disclose the above fact, the income assessable under the head capital gains had escaped assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of his individual assets to the firm. But his submission was that if regard is had to the decision of the Supreme Court in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509, delivered on 27-9-1985, it was clear that the Supreme Court held that there was a transfer when a partner brought in his personal assets into the firm's books. He submitted that the Supreme Court only declared the law as it always stood and, therefore, it was clear that there was always a transfer when the transaction took place. He also referred to the decision of the Madras High Court in Madras Auto Service v. ITO [1975] 101 ITR 589 where the Madras High Court at page 591 had stated that a decision of the Court though it was not available when proceedings were taken under section 147(b), but was only rendered later, declared the law as it always stood, even at the time the notice was issued. The learned departmental representative then went on to submit that in March 1982 the ITO in recording his reasons had only mentioned that the transfer attracted capital gains and since in view of the Supreme Court judgment, there was a transfer, whether eventually capital gains could be levied or not had to be determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. Even so, since there was no mention of the same in the income-tax proceedings and even though it was the same ITO who was assessing the assessee as well as the firm, looking to the ratio of the judgment of the Supreme Court in Kantamani Venkata Narayana Son's case and in particular that the wealth-tax assessment was not being processed simultaneously with the Income-tax assessment - the income-tax assessment having been completed on 23-5-1978 and the wealth-tax assessment having been completed only on 24-3-1979, we cannot hold that in the income-tax case there was no omission on the part of the assessee to furnish the particulars. 8. However, a larger issue arises. If an assessee was not bound to furnish any particulars, certainly there cannot be any omission on the part of the assessee to furnish particulars which he was not bound to. Undisputedly, according to the decision of the Madras High Court reported in D. Kanniah Pillai's case, which was binding on both the assessee and the revenue at the material time when the assessee filed the income-tax return in August 1976, an assessee individual who transferred his assets to a firm in which he was a partner was not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of initiation: "... The learned counsel for the revenue submitted that at the time when the notice was issued under section 147(b) our decision was not given and that it cannot be said that the Income-tax Officer had no reason to believe that the income has been made the subject of excessive relief. It is true that our decision was given long subsequent to the notice under section 147(b) but our decision only declares the law as it stood even at the time when the notice was issued. Therefore, he could not have entertained any reasonable belief that the income chargeable to tax has escaped assessed...." In the present case, the decision of the Supreme Court in Sunil Siddharthbhai's case is declaratory, though rendered on 27-9-1985, of the law as it always stood. Following the majority view of the Members of the Tribunal in the case in First Leasing Co. of India Ltd., to which we have adverted, the subsequent declaration of the law would be material of the law as it stood even at the time when the notice was issued. That being the case, we have to come to the conclusion that as on 31-3-1982, when the notice was issued, the position of law was, because of the subsequent declaratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttempt to contribute to the share capital of the partnership firm for the purpose of carrying on the partnership business or is nothing but a device or ruse to convert the personal asset into money substantially for the benefit of the assessee while evading tax on a capital gain. The Income-tax Officer will be entitled to consider all the relevant indicia in this regard, whether the partnership is formed between the assessee and his wife and children or substantially limited to them, whether the personal asset is sold by the partnership firm soon after it is transferred by the assessee to it, whether the partnership firm has no substantial or real business or the record shows that there was no real need for the partnership firm for such capital contribution from the assessee. All these and other pertinent considerations may be taken into regard when the Income-tax Officer enters upon a scrutiny of the transaction, for in the task of determining whether a transaction is a sham or illusory transaction or a device or ruse, he is entitled to penetrate the veil covering it and ascertain the truth. In the result, the question which arise in these appeals are answered as follows: 1.Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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