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TMI Blog1988 (4) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government, were not erroneous so as to enable the Commissioner of Income-tax to assume jurisdiction under section 263(1) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly held that the impugned order of the Commissioner of Income-tax is based upon mere surmises and conjectures and is, therefore, not valid ? 3. Whether, in view of the decision of the Tribunal, Patna, in the case of Rambha Devi v. ITO (Income-tax Appeals Nos. 1713 to 1715 (Pat) of 1974-75), the Tribunal has rightly held that the Commissioner of Income-tax, acting under section 263(1) of the Income-tax Act, 1961, could not legally set aside an order of assessment made under section 143(1) in pursuance of the scheme 'to help the new taxpayers in the small income groups' evolved by the Government? 4. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly held that the Commissioner of Income-tax acted in a mechanical manner in setting aside the assessment order for the assessment year 1973-74 and so his order for that year is invalid ? 5. Whether, on the facts and in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and their Inspecting Assistant Commissioner. The assessees, who had taxable income, were requested and persuaded to file their returns under the scheme which, were accepted by the Income-tax Officers under section 143(1) of the Act. In the implementation of the scheme, a large number of ladies and minors filed returns. The Income-tax Officer assessed the present assessee and all the ladies and minors straightaway under section 143(1) of the Act. The present assessee showed an investment of Rs . 12,000 and returned income of ₹ 5,100 in each of the assessment years. In some cases, a show of inquiry was made by the Income-tax Inspector submitting four sentence stereotype reports. After the assessments had been made, the Commissioner of Income-tax perused some of the assessment records and by perusing some of them, he found that the assessments of ladies and minors should not have been done in terms of the scheme under section 143(1) of the Act. In his view, the assessment orders were irregular, erroneous and prejudicial to the Revenue. He, therefore, set aside the assessments by a consolidated order. After having set aside the assessments, he remanded the matter to the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction No. 289 (F. No. 285132/71-IIB) dated April 30, 1971, as revised by para. 2(ii) of Instruction No. 426 (F. No. 233/1/72-A PAC) dated the 14th June, 1972, stands modified during the operation of this scheme. It will be observed that the scheme spelt out an exception for the Income-tax Officer in assessing minors and ladies. It enjoined that their returns should not be accepted without proper inquiries. The purpose behind this injunction was to test whether the income was really of the minors or ladies or whether they represented someone else's income which should be taxed at a higher rate. That someone could be the spouse or it may be the firm in which the income/capital had been deposited. Section 64(1), so far as relevant, reads as follows : (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly (i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is partner; (ii) to the spouse of such individual by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the income of the assessee of such financial year. On that footing, it was submitted that the assessee having failed to explain the source of its investment-on the assumption that it had not been explained the said sum of ₹ 12,000 should be taken as the income of the assessee. I regret this submission fails to take note of section 64(1) quoted earlier which lays down that the total income of an individual shall include the income which arises directly or indirectly to his/her spouse from the membership of the spouse in a firm carrying on a business in which the individual is a partner. It further lays down that the income shall include also such income as arises to the spouse of that individual by salary, commission, fees or any other form of remuneration in cash or in kind. The proviso thereto is an exception to the rule of clubbing of income of the spouse with the income of an individual. The whole matter seen from this angle emerges like this. A lady shows an investment. No books are maintained. No satisfactory explanation is offered for the investment. One of the inferences possible therefrom would be that it was the income of the husband. I dare say, in law, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and parents. If the idea was to convey that the cash shown had come in cash form at the time of her marriage, a pertinent question to be inquired into would be where was the cash amount kept when she had been married seventeen years earlier ? Does it necessarily follow that the cash amounts received seventeen years earlier were kept locked as a dead asset ? I would be loath to assume that it was so done. In fact, the second sentence of the report indicates that the cash in her possession was being utilised in pawn-broking and money-lending. I would not expect maintenance of any register of money-lending as required by the Bihar Money Lenders Act, 1958, but I would certainly expect in a detailed inquiry of a first assessee, a disclosure of some of the borrowers. The acceptance of a bald statement that the assessee was carrying on pawn-broking business and carrying on money-lending business was not an inquiry contemplated by section 143(3) of the Act. It is true that the assessee was married in a rich family but we do not know the financial condition of the family in which she was born and which gave her in marriage. It does not necessarily follow that if a girl is married in a ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with regard to the incomes that she had received. I cannot improve upon it nor can it be over-emphasised. I would once again repeat the observation of the Supreme Court in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, where it was observed that where an income has not been earned and is riot assessable, merely because the assessee wants it to be assessed in order to assist someone else who would have been assessed to a larger sum, the assessment so made will be erroneous and prejudicial to the Revenue. In that situation, the Commissioner., acting in terms of section 263 of the Income-tax Act, would have jurisdiction to cancel the assessment and proceedings for assessment may be initiated under the provisions of the Act against some other assessee, who according to the income-tax authorities, might have earned the income. In my considered opinion, there were materials or circumstances before the Commissioner to support the view he adopted or setting aside the order of the Income-tax Officer. Mr. K. N. Jain, learned counsel for the assessee, contended that an Income-tax Officer has the jurisdiction to assess in terms of section 143(1) or in terms of section 143(3). The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been paid by the assessee. He had not been let off and that the Revenue had in fact gained is fallacious. If the income was of someone else who could be taxed at higher rate, the Revenue gathering would be greater than certain amount escaping taxation through spouse or anyone else. Where the Revenue could get rupees hundred, it may have got only rupees ten. If that be the case, the assessment would obviously be prejudicial to the Revenue. I have already referred to the decision of Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC), which supports my proposition that in some situation where an order is erroneous, it will necessarily be prejudicial to the Revenue. The present is one such and I am, therefore, definitely of the view that the order was not only erroneous but was also prejudicial to the Revenue. Learned counsel for the assessee submitted that the order of the Commissioner was based on surmise as he had not found any material to show that the initial capital was of the husband. The Commissioner has not found that the initial capital was of the assessee. He has only held that the matter calls for inquiry and the initial capital may be of the husband. He has only repelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that view of the matter, falls within the ken of the decision of the Supreme Court in Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84, since neither the income from money-lending had been spelt out nor had the assessee disclosed the names of any of the borrowers. Thus, on the facts as well as in law the case of CIT v. Shantilal Agarwalla [1983] 142 ITR 778 (Pat) stands on an entirely different footing. In my view, therefore, the decision of CIT v. Shantilal Agarwalla [1983] 142 ITR 778 (Pat) can be of no avail to the assessee. Reliance placed upon S. N. Ganguli v. CIT [1953] 24 ITR 16 (Pat) is misplaced. True it is that there is no presumption in law that an amount standing in the name of the wife belongs to the husband. That was a case where the husband was the assessee and certain sums standing in the name of the wife were said by the Revenue to be that of the husband. In that situation, it was observed that there was no presumption in law that the property standing in the name of the wife belonged to the husband. The difference between the case of S. N. Ganguli v. CIT [1953] 24 ITR 16 (Pat) and the instant case is that, in that case, findings had been recorded by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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