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TMI Blog2019 (1) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) confirmed the additions in the hands of the smaller HUF but the proper credit of the agricultural income was not given. We therefore are of the view that the entire investment in FDRs should be apportioned amongst all the smaller HUF. Similarly, the total agricultural income earned from the agricultural holdings and the business income should also be apportioned amongst all the smaller HUFs for its adjustment against the investment in FDRs in different assessment years. We therefore set aside the order of CIT(A) and restore the matter to AO with the direction to recompute the investment in FDRs in all the smaller HUFs E. Krishna Murthy, E. Vidyaranya, E. Thrivikrama, E Manohara and E. Sudharshan by making equal distribution and for computing the unexplained investment in each and every small HUFs, the adjustment of agricultural income estimated by the CIT(A) and business income earned by the individual smaller HUF should be given while computing the unexplained investment in FDRs in different assessment years. - Decided against revenue. - I.T.A. Nos. 974, 975, 976, 977, 978, 979, 980, 981, 982, 983, 987, 988, 991, 992, 994, 995, 996 and 1024, 1025, 1026, 1027, 1028, 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different years in the hands of the bigger HUF as well as the different minor HUFs. Against the additions, the appeals were preferred before the CIT(A) and the CIT(A) held that there was a larger HUF which was dissolved and minor HUFs were formed. The CIT(A) has taken the cognizance of memorandum dated 22.03.2002 and registered deed of partition of immovable property dated 26.04.2002 seized during the course of search and concluded that there was a complete and total partition in the joint family of Shri. Ramesh Upadhyay in terms of memorandum dated 22.03.2002 which is followed by a registered partition deed for immovable property dated 26.04.2002 in the case of Shri. Ramesh Upadhyay, HUF. The CIT(A) has further held that since there is a complete and total partition of joint family, therefore no order of assessment could be passed on the joint family after its disruption, relying upon the various judicial pronouncements referred to by the assessees. The CIT(A) accordingly deleted the additions made on account of unexplained deposits of FDRs on protective basis in the hands of Shri. E. Ramesh Upadhyay, HUF. In the case of Shri. E. Krishna Murthy and the minor HUFs, the CIT(A) has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that investment was made out of agricultural incomes in FDRs. Therefore, credit of the same should be given while working out the unexplained investment. It was further contended that E. Krishna Murthy was cooperative with the Revenue authorities and had admitted that the FDRs belong to him and his family members. He has also made certain declarations. During the course of recording the statement, the breakup of investments year wise was also given. For the sake of reference, same is extracted hereunder: Ans. I have bifurcated the FDs made out of my business income and agricultural income of the family. I am submitting herewith the details of fixed deposits made out of agricultural income by the family members which are as under :- F.Y. 1999-2000 ₹ 10,46,000/- F.Y. 2000-01 ₹ 6,04,800/- F.Y. 2001-02 ₹ 32,47,911/- F.Y. 2002-03 ₹ 4,49,612/- F.Y. 2003-04 ₹ 4,77,193/- F.Y. 2004-05 ₹ 13, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs were acquired out of business income and the agricultural income of the family. But later on, he has retracted from his statement within a short period. It was further contended that during the course of assessment proceedings and thereafter it was specifically asserted by the learned Counsel for the assessee that these FDRs belongs to the family members of the assessee. Therefore, it can only be examined in the hands of the HUF and not the individuals. 7. With regard to Ramesh Upadhyay, HUF, it was contended that Ramesh Upadhyay is a bigger HUF comprising of Shri. Ramesh Upadhyay as Kartha and his son E. Krishna Murthy, E. Vidyaranya Vidhya, E. Thrivikrama Trivikram, E Manohara Manohar and E. Sudharshan are the co- parceners. The said HUF was never assessed to tax and it was partitioned as per the memorandum dated 22.03.2002 and later registered vide partition deed dated 24.04.2002. Therefore, Shri. Ramesh Upadhyay, HUF was disrupted. 8. The learned Counsel for the assessee further invited our attention that consequent to the search under section 132 of the Act, the AO issued a notice under section 153A of the Act for the assessment years 1999-2000 to 2006-07 for making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of memorandum of partition dated 22.03.2002 which was claimed to have been registered on 26.04.2002. Since the larger HUF has not been dissolved, the AO has rightly assessed the entire investment in FDRs in the hands of Ramesh Upadhyay, HUF and also in the hands of E. Krishna Murthy who has admitted during the course of statement recorded by the Revenue authorities that the FDRs belongs to him. It was further contended that AO has made the protective assessment on the said investments in the hands of smaller HUFs in order to protect the interest of the Revenue. 10. We have carefully perused the orders of authorities below in the light of rival submissions and we find that there are 7 sets of appeals arising out of search conducted under section 132 upon Ramesh Upadhyay and his family members on 29.07.2004. 11. One set of appeal is preferred in the case of Ramesh Upadhyay, HUF through ITA Nos. 987, 991, 992, 994, 995 and 996/Bang/2012 for the assessment years 1999-2000, 2003- 04, 2004-05, 2006-07, 2007-08 and 2008-09 respectively. These appeals are preferred by the Revenue as the CIT(A) has held that in the hands of larger HUF, which was disrupted/partitioned as per memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various family members as well as pseudo names were found and seized. The AO issued notice under section 153A of the Act for the assessment years 1999-2000 to 2006-07 upon the larger HUF Ramesh Upadhyay for completing the assessment. Besides regular assessment was also framed for the assessment year 2007-08 and 2008-09 upon the larger HUF Ramesh Upadhyay. Though the assessee took a stand before the AO that Ramesh Upadhyay, HUF, was no longer in existence since it was partitioned on 23.02.2002 itself, no assessment could be made on the non-existent assessee HUF. But these contentions were not accepted by the AO and he framed the assessment in the hands of Ramesh Upadhyay, HUF and made the additions on account of unexplained investment in FDRs without realising the fact that assessee had agricultural income in all respective years for which he has placed sufficient evidence on record. Besides, AO has also framed assessment in the hands of E. Krishna Murthy, individual, for the assessment years 2000-01 to 2005-06 and 2009-10. He has completed the assessment in the hands of E. Krishna Murthy heavily relying upon the statement of E. Krishna Murthy during the course of search or ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 174 Taxman 466 [Karl 15. Undisputedly, except the oral admission of E. Krishna Murthy during the course of search that no other evidence was found through which it can be demonstrated that the entire FDRs belongs to E. Krishna Murthy. Undisputedly, E. Krishna Murthy was pursuing all tax litigations before lower authorities and he was authorised to make the statement on behalf of his family members. In his statement he has reposed at a number of places that the FDRs belonged to the family members of the assessee and the investment was made out of the business and agricultural income. Moreover, the admission of E. Krishna Murthy was also retracted within a period of short span and it is a settled position of law that once the admission of the assessee is withdrawn and specifically retracted within a short period, the Revenue authorities are required to bring some independent evidence to make addition on the basis of the admission. In the instant case, except the oral statement of E. Krishna Murthy, there is nothing on record which can suggest that the investment was made in the FDRs by E. Krishna Murthy alone and it belongs to him. We have carefully examined the statement of E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 171 cannot be invoked for partition of the HUF. In this regard, our attention was invited to judgment of the Apex Court in the case of Kalloomal Tapeswari Prasad vs Commissioner Of Income Tax 133 ITR 690 (SC) in which it has been held that Hindu law does not require that this property must in every case be partitioned by metes and bounds or physically into different portions to complete the partition. Disruption of status can be brought about by any mode and it is open to the parties to enjoy their share of property and in any manner known to law according to their desire. It was also observed by the Apex Court in that case that section 171 of the Act applies to a case where there is a HUF which had been assessed as such under the Act until claim is made under section 171(2) that there has been total partition or partial in it. Meaning thereby if the HUF is duly assessed under the Income Tax Act and if it is partitioned, the order is required to be passed by the AO under section 171 of the Act and while passing order under section 171 of the Act, the AO has to make a necessary enquiry but, in the case, where HUF has not been assessed to tax provision of section 171 cannot be inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the mere inclusion of the property belonging to Smt. Yashoda does not mean that there was no total partition of the joint family. This is because a partition of the joint family basically means the severance of status amongst the co-parceners of the joint family. What is important to be seen in a case where a claim of partition is made is whether there is a complete severance of status. From a perusal of the Translation of the Kutumbadalagina Vivadagalonu Rajinda Muqusi Madide Teermanagala mattu palugala Vivara (Memorandum] dated 22.03.2002, it is seen that in paras (19) (20), the following is recorded :- 19. The respective parties have already taken separate possession of the immoral* property and other assets now itself as an' allotted to them in partition made as stated above. Thus, the family is disrupted. The family is no more joint. None of the parties I to 11 shall have any rights to say that the shares made by the Grahasthas are not correct or that there should be a .fresh partition in the family. 20.That, if apart from the assets divided as stated above there is any immovable or movable properties or other assets stands in the name of any of the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be done in several ways and there is no requirement that the allotment of properties should be done with regard to each co-parcener separately. Infact, if there is a severance of status amongst the members of the joint family in such a way that the bonds of coparcenery stand dissolved that would be sufficient for inferring a partition in the joint family. Hence, nothing turns much on this observation of the A.O. The next objection of the A.O. is that the deed of partition does not reflect the names of all the co-parceners especially, the minor children of Sri E.Vidyaranya, E.Thrivikrama and E.Manohara. I find that this objection of the A.O. is not relevant and tenable. The partition has teen effected between Sri Ramesh Upadhaya and his sons. There is no partition in the joint family of each of the sons of Sri Ramesh Upadhaya. Since the partition has been effected in the joint family of Sri Ramesh Upadhaya and his sons, the non-inclusions of the minor children of the sons of Sri Ramesh Upadhaya is understandable. Although the A.O. is correct in observing that the minor children would also be co-parceners, they are co-parceners of the joint family of their parents and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I am of the view that there has been a complete and total partition in the joint family of Sri Ramesh Upadhaya in terms of the Memorandum dated 22.03.2+002,' which is followed by a registered partition deed for immovable properties dated 26.04.2002. There is also some dispute about whether the Memorandum dated 22.03.2002 was seized at the time of search or not. It is claimed by the t appellant that the said documents have been seized. But, however, the A.O. denies the seizure of the said document. This aspect of the matter however, is not very material. This is because, the Memorandum dated 1.2.03.2002 has been furnished in course of the assessment proceedings and li-,e genuineness of the document stands proved. The A.O. has not disputed tire veracity of the said document although, he holds that the said document is only a family arrangement and not a deed of partition. I have already that there is a complete and total partition of the joint family and therefore, no order of assessment could be passed on the said joint family er its disruption having regard to the judgements relied upon by the appellant. Hence, the impugned order is hereby cancelled. 18. We accordingly co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amongst all the smaller HUF. Similarly, the total agricultural income earned from the agricultural holdings and the business income should also be apportioned amongst all the smaller HUFs for its adjustment against the investment in FDRs in different assessment years. We therefore set aside the order of CIT(A) and restore the matter to AO with the direction to recompute the investment in FDRs in all the smaller HUFs E. Krishna Murthy, E. Vidyaranya, E. Thrivikrama, E Manohara and E. Sudharshan by making equal distribution and for computing the unexplained investment in each and every small HUFs, the adjustment of agricultural income estimated by the CIT(A) and business income earned by the individual smaller HUF should be given while computing the unexplained investment in FDRs in different assessment years. 21. In the result, appeals of the Revenue in the case of Ramesh Upadhyay in ITA Nos. 987, 991, 992, 994 to 996/Bang/2012 and C.O. of the assessee are dismissed. Appeals of the assessee in the case of E. Krishna Murthy, individual is allowed and the appeals of the smaller HUFs in the case of E. Vidyaranya Vidhya, E. Thrivikrama Trivikram, E Manohara Manohar and E. Sudharshan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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