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TMI Blog1933 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessees are not precluded from advancing a claim, and therefore is no contest on this point, and we accept that view. On the first question the facts as stated are as follows :- The assessees are a joint Hindu family carrying on business in the name of Kanwalnen Hamir Singh. The business is managed by Rai Bahadur Seth Biradh Mal Lodha, the karta of the joint family. Their head-quarters are in Ajmere, but money-lending and other transactions are carried on in other parts of British India and Indian States. The joint family submitted a return for the income for the year 1927, to November 1928, on 10th September, 1929 for the year 1929-30. The return was not accepted as correct by the Income Tax Officer because the extracts from the accounts showed that losses incurred outside British India had been deducted and income derived from dividends on shares of Edward Mills, Beawar, had not been included. The assessees were therefore directed by notices under Sections 22 (4) and 23 (2), Income Tax Act, to produce account books or any other evidence on which they relied to substantiate their return. The assessees did appear before the Income Tax Officer and proceedings before the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment mentions : "Income shown less and detected on examination ₹ 35,918-10-8. "This income apparently includes ₹ 24,906-9-1. But there does not appear to have been any claim advanced before the Income Tax Officer in regard to the dividends from the Edward Mills on this occasion, and there is no mention in his order that any such claim was made. The order is a long and detailed one and deals in detail with various items claimed by the assesses. There is no allegation in any affidavit of the assessees that the point was raised before the Income Tax Officer. The point was raised before the Assistant Commissioner of Income Tax on the appeal of the assessees, and he deals with the point and considers an affidavit which was produced by the assessees. He states that he was not satisfied with the evidence produced before him by the assessees, and he then adds that as the law of Income Tax stands he believes that he is not competent to make a decision. He refers to Section 25-A, Income Tax Act and says : "Under that section the claim that a partition has taken place must be made before the Income Tax Officer while he is making his assessment under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as read out by me to learned counsel for the assessees at the time of his argument, and he had an opportunity of meeting that question. No further statement of the case appears necessary on this point as the facts appear to be clear. Much argument was made by learned counsel that the Assistant Commissioner had based his rejection of the objection solely on the ground of Section 25-A. But Section 25-A is not the only point to which his order refers, and he has definitely stated : "It was improper for the assessees to raise this question for the first time in appeal." All that Section 25-A provides is that a claim which comes under section should be made at the time of making an assessment. Although the present claim does not come under Section 25-A it appears to me that it is also a claim which must be made at the time of making an assessment. Under the Civil Procedure Code it is not open to a party on appeal to advance a claim for relief on a ground which he has not taken in his plaint, and even as regards the production of new evidence it is laid down by 0.41, R. 27 that additional evidence can only be admitted in appeal where such evidence is required by the appellate C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner was not correct in holding that Section 25-A barred the question being raised before him in the appeal, the question remains whether the question should or should not be raised before him in the appeal. I do not consider that the Assistant Commissioner should be left to decide this for himself without guidance on the point of law by this Court. It is the questions of law raised by the case which this Court decides under Section 66 (5), and not the questions of law raised by the statement of the case. This is especially so in cases like the present where the statement was applied on the direction of this Court which tentatively framed certain questions. In other words, the questions did not arise on the statement, but the statement arose on the questions. The fundamental question of law on this part of the case is whether the plea raised by the assessees for the first time on appeal can or should be entertained on appeal and the question cannot be fully decided by the mere finding that the particular reason given by the Assistant Commissioner was not correct. It is true that section 31 (3) (b) does give the Assistant Commissioner hearing an appeal power to or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction in British India ? (4) If the profits mentioned in question No. (3) be regarded as profits received from transactions that took place in British India, whether the losses incurred in respect of the business at Tonk, Saronj, Jodhpur and Shahpura shops should not also be regarded, as a matter of law, as losses incurred in transaction that took place in British India ? In regard to these questions the statement of the case is that the firm of the joint family has numerous branches in various Indian States. In four of these branches, Jaipur, Alwar, Nimbhera and Kotah, the Income Tax Officer assessed an income of ₹ 36,055-12-9. The statement proceeds that the Jaipur and Kotah branches alone had from transactions in British India received more than this total sum. The question No. (3) was "Whether there was any evidence before the Income Tax department for this conclusion ?" The statement of the Commissioner refers to the account books of the Jaipur Branch and those of the assesses Calcutta, Bombay and Ajmere branches. He states that some years ago certain amounts were transferred from the headquarters branch at Ajmere to Kotah and Jaipur branches. Afterwards i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be allowed as a deduction from the income derived by the joint family from this branch of their business. The return filed by the assessees for this shop Hamir Singh Samir Mal showed ₹ 84,709-2-0 on the credit side and on the debit side ₹ 4,656-1-0. This latter figure included six items of interest paid to various ladies. These particular deductions were allowed by the Income Tax Officer. Under Section 22 (3), Income Tax Act, a person who has furnished a return and subsequently discovers any omission in it can furnish a revised return at any time before the assessment is made. The assessees had sent their return on 10th September, 1929, and the assessment was not made till more than a year later, on 31st October, 1931, but the assessees did not apply at any time before the Income Tax Officer to correct their return. It was not until the case came on appeal before the Assistant Commissioner that the assessees put forward this claim to the large amount of ₹ 84,216-15-6 as interest paid by the firm which should be allowed as a deduction. Now under Section 31 (2) the Assistant Commissioner may before the disposal of any appeal make such further enquiry as he thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the names of the various members of the family and its munim. It is not disputed by the assessees that the shares formed part of the joint family property in 20th October, 1922, when, it is alleged by them, they were transferred by the joint family to some individual members, each of whom was to hold a number of shares as a separate property. In spite of this alleged arrangement, the income derived from these shares was included as part of the income of joint family property for the purpose of assessment of Income Tax. No objection was raised by the assessees or any individual member thereof till 1926, when the "karta" of the family objected to the inclusion of the dividend as part of the income derived from the family property. Notices were issued to certain members of the family demanding their presence before the Income Tax Officer for the purpose of an enquiry into the correctness or otherwise of the objections preferred by the "karta". No appearance was however entered by any of them, but the "karta" undertook to satisfy the Income Tax Officer on the point. He however took no further steps. The income derived from the shares was treated for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om raising a question which has so far not been decided on the merits. It is not necessary, in these circumstances, to take any further notice on question No. 2. The first question appears to be based on the assumption that the assessees objection amounted to an averment that a "partial partition" had taken place in the family of the assessees. To avoid possible confusion arising from the use of that expression, it should be mentioned that what the assessees alleged in substance was the shares originally belonging to the joint family had been transferred to individual members thereof, each of whom was to hold the shares allotted to him as his separate or self-acquired property without introducing any change in the constitution of the family which continues to be a coparcenary body. In one sense, it may be considered to be partial partition in so far as that part of the family property has been divided among the members of the joint family, apparently not in equal shares-a point which is quite immaterial. In another sense, the transaction, if in fact it took place, amounted to no more than a transfer by the joint Hindu Family of the shares to certain persons, who were to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as such." In cases in which members of a joint Hindu family agreed to divide among themselves a particular family property, leaving their status and the rest of the family property as before, they cannot be considered to be "separated members." In spite of a partial partition of the kind assumed, they continue to remain members of the same joint family possessed of joint family property left after the disposition of a part. For these reasons I am of opinion that Section 25A was not applicable to the circumstances disclosed by the assessees objection taken before the Assistant Commissioner, and I answer the first question in the negative. My learned brother, who has answered question No. 1 in the manner I have done, proposes to frame an additional question, which he has called 1-A, and which runs as follows : "Should the plea that certain shares have been divided between the members of a joint Hindu family be raised at the time of making an assessment under Section 23 or can be raised for the first time on an appeal against that assessment." I do not dispute proposition that the High Court should decide questions of law raised by the statement of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the joint family property. The Income Tax Officer understood as much. Under Section 23 (2), Income Tax Act, it was the duty of the Income Tax Officer, if he thought, as he apparently did, that the return was incorrect in that respect, to call for proof of the fact that the shares had ceased to be part of the joint family property. He issued a notice under Section 23 (2), but it does not appear that he called for proof on the specific question whether the shares had ceased to be part of the family property. He however ascertained from the company the amount of dividend paid and added it to the income shown in the return. The company's register showed that the shares belonged to certain individuals and not to a joint family. The assessees do not appear to have produced any evidence other than their own account books and what appeared from the company's register showing that the shares did not stand in the name of the joint family. The Income Tax Officer should be deemed to have found that the shares still belonged to the joint family as he included the dividend as part of the income of the family. The question was pointedly raised before the Assistant Commissioner, who refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a partition has taken place must be made before the Income Tax officer while he is making his assessment under Section 23 of the Act, and any order of the Income Tax Officer under Section 25A is appealable to the Assistant Commissioner of Income Tax under Section 30. In present case no application under Section 25A was made to the Income Tax Officer by the assessees and no order under Section 25A was passed by the Income Tax Officer. It was improper for the assessees to raise this question for the first time in appeal, and as an appellate Court I am not competent to decide the question raised by them now. I may however observe that in my opinion the Income Tax Officer was correct, in the absence of any application under Section 25A, in regarding the dividends of the Edward Mills shares as a part of the income of the joint family. He would only be justified in regarding the dividends of the Edward Mills shares as part of the income of the members of the family in their individual capacity if he had satisfied himself, after inquiry into a claim under Section 25A, that the alleged partition had, in fact taken place." I have quoted practically the whole of the order of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that no analogy can be drawn from Order 41, Rule 27, Civil Procedure Code, to determine the powers of the Assistant Commissioner hearing an appeal under the Income Tax Act, Section 31 (2), as the latter gives unrestricted direction to the Assistant Commissioner to make further enquiry that is, to obtain more evidence throwing light on the question which he is called upon to decide; while Order 41 Rule 27 confers very limited powers upon a Court of appeal in the matter of admitting fresh evidence. The only question that remains to be considered is question No. 5. The facts are that the assessees had shown in their return a sum of ₹ 4,000 odd as interest paid by the joint family. The Income Tax Officer made an allowance to that extent. In appeal before the Assistant Commissioner a deduction on Income Tax claimed on no less than ₹ 80,000 odd alleged to have been paid to individual members of the joint family as interest on sums deposited by them. In other words the correctness of their return was repudiated. The Assistant Commissioner refused, in case these circumstances, to investigate this belated and inconsistent claim. He had a discretion to do so; and no error of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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