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TMI Blog2008 (5) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case, the Tribunal erred in law in holding that the returned income is to be assessed in the hands of Krishna Kanta Barkataky and Ajit Barkataky in the absence of a finding that the funds invested in FDRs emanated from the individual income of K. K. Barkataky and/or Ajit Barkataky or that the income of the Hindu undivided family was enjoyed by K. K. Barkataky and Ajit Barkataky? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in the appeal filed by the Revenue in reversing the decision of the Assessing Officer adopting/determining the status of AOP and the cancelling the protective assessment completely when the Commissioner of Income-tax has no right of appeal against the order of the Assessing Officer ?. (4) Whether, on the facts and in the circumstances of the case, the order dated June 10, 2003, purportedly pronouncing the majority opinion of the three separate orders has not failed to do so and is it in accordance with section 255(4) of the Act?" 3. The material facts, which are not in dispute and which have given rise to the present appeals, may, in brief, be set out as follows: (i) The appellant claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated order, dated September 25, 1995, for the assessment years 1983-84, 1984-85, 1985-86, accepted the contention of the appellant that there was a valid Hindu undivided family in existence assessable to tax. The Commissioner of Income-tax (Appeals) accordingly determined the status of the appellant as that of the Hindu undivided family and cancelled the protective nature of the assessments. The Commissioner of Income-tax (Appeals) further directed that the FDRs. mentioned in the balance-sheet of the said Hindu undivided family, and the income derived therefrom shall be assessed in the hands of the said Hindu undivided family on a substantive basis and not in the hands of Krishna Kanta Barkataky and Ajit Barkataky. (v) For the assessment year 1988-89, the return of income was filed, in the status of Hindu undivided family, showing income of Rs. 12,290. On the basis of assessments made in the earlier years, the assessment was completed, on March 6, 1992, under section 143(3) of the Act, in the status of Hindu undivided family, as a protective measure. On appeal by the appellant, the Commissioner of Income-tax Appeals), vide his order dated October 29, 1992, held that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal is, reiterated by Mr. Agarwalla, completely perverse, and cannot withstand the test of law. The submission, so made, on behalf of the appellant, is resisted by Mr. U. Bhuyan, learned counsel for the respondents, who contends that the learned Tribunal's finding, on facts as well as law, and particularly, on the question as to whether the appellant could prove that it ought to have been assessed, in the status of Hindu undivided family, is correct and, hence, needs no interference. 6. For the purpose of correctly appreciating the rival submissions, made before us on behalf of the parties, it needs to be pointed out that the appellant had submitted its returns of income claiming the status of Hindu undivided family. The appellant claimed that Gauri Kanta Barkataky had expired, in the year 1947, leaving behind four successors, namely, Paras, Biswakanta Manik and Krishna Kanta. The appellant also claimed that the late Gauri Kanta Barkataky had acquired agricultural lands during his lifetime, which, upon his death, devolved upon his successors and they became co-owners of these agricultural lands. The appellant's further case was that Biswakanta Barkataky and Krishna Kanta Barkataky ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1988-89 was disposed of earlier by the Deputy Commissioner of Income-tax (Appeals) by his order dated October 29, 1992. 9. Relying upon the decisions in Autoways (India) v. CIT [1976] 102 ITR 761 (Orissa) and Thakur Hari Singh v. CIT [1967] 65 ITR 267 (Raj), the Deputy Commissioner of Income-tax. (Appeals), in his order dated October 29, 1992, passed for the assessment year 1988-89, accepted the contention of the appellant to the effect that the declaration furnished in the income-tax return, the explanation, dated September 6, 1982, filed in the course of the assessment proceedings for the assessment year 1979-80, and the two affidavits dated October 31, 1989, and February 15, 1992, sworn by Biswa Kanta Barkataky and Krishna Kanta Barkataky respectively, constitute unequivocal declaration of the intention sufficient to establish blending and formation of the Hindu undivided family. 10. The Deputy Commissioner of Income-tax (Appeals) also accepted the contention of the appellant that having been assessed as a Hindu undivided family in the assessment year 1979-80, the appellant became an assessee "hitherto assessed" as a Hindu undivided family within the meaning of section 171(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), held as follows (pages 41 and 42 of 267 ITR (AT)) "We have considered the rival submissions at length and perused the orders of the lower authorities in the light of the materials available on record. We have duly considered the various papers placed before us in the paper book. We have also considered the various case law relied upon by the learned authorised representative of the assessee but we are of the considered opinion that the said case law do not conclusively establish the contention of the respondent. It is observed that the point of time at which Shri B. K. Barkataky and Shri K. K. Barkataky exercised their claimed volition to form Hindu undivided family is neither spelt out nor established. The state of facts during the period 1947 to 1970 are not on records. However, a scrutiny of the financial statements of the assessee shows that the source of income of the assessee is from agricultural income and interest income on FDRs. Agricultural income is derived from agricultural lands which are owned in joint names of Shri K. K. Barkataky and Shri B. K. Barkataky. The source of investment in FDRs with the banks are from the abovestated agricultural income as well as from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question, were acquired by the late Gauri Kanta Barkataky, during his life time, and that the same were jointly owned by his two sons, namely, Krishna Kanta Barkataky and Biswa Kanta Barkataky, that sources of income of the appellant have had been from agricultural income as well as interest, the source of funds, invested in the FDRs, were from agricultural income as well as borrowings made by the appellant and that there was no material that the funds, invested in the FDRs, came from the individual incomes of Krishna Kanta Barkataky and Ajit Barkataky, the learned Tribunal's finding that the appellant's claim of being assessed in the status of a Hindu undivided family, is not conclusively proved, cannot but be regarded as perverse. 17. To put it a little differently, the conclusion reached by the learned Tribunal that the appellant could not prove that it should be assessed in the status of a Hindu undivided family is completely perverse, when the learned Tribunal has itself recorded that the agricultural lands, in question, belonged to the deceased father of Krishna Kanta Barkataky and Biswa Kanta Barkataky and that it was from the income derived from the agricultural lands tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it Act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court." 20. From the decision rendered in Omar Salay Mohamed Sait [1959] 37 ITR 151 (SC), what becomes evident is that when a Tribunal's findings are based on suspicion, conjectures or surmises or are based On no evidence at all or improper rejection of material and relevant evidence or partly on evidence and partly on suspicion, conjectures or surmises, such findings, even though findings of fact, will be liable to be set aside by the High Court. 21. In Pyarelal Mittal v. Asst. CIT reported in [2007] 291 ITR 214, this court has held thus (page 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal's finding of fact, it would be justified if the High Court interferes with such a finding of fact, which is contrary to materials on record and/or based on surmises and conjectures, for, such a finding would be nothing but perverse. 23. In the face of the authorities discussed above, there can be no two opinions that where the finding of facts, reached by a Tribunal, is perverse and/or wholly contrary to the materials on record, the High Court, in exercise of its power under section 260A of the Act, would be competent to interfere with such a finding. 24. As regards the learned Tribunal's observation that the volition exercised by K. K. Barkataky and B. K. Barkataky is not established, it may be pointed out that the learned Tribunal has overlooked the affidavits filed by K. K. Barkataky and B. K. Barkataky before the Assessing Officer. The averments, made in these affidavits, have not been discredited at any stage of the proceedings. Hence, the averments, made in those affidavits, ought to have been accepted by the authorities below as correct. (See Mehta Parikh and Co. v. CIT [1956] 30 ITR 181 (SC) and Hanutram Ram Prasad v. CIT [1978] 114 ITR 19 (Gauhati). The learned Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were filed during this period. In view of the fact that there is nothing on the record to indicate that the appellant had derived such an income between 1947 and 1970, which were taxable, the fact that no assessment had been made in the status of Hindu undivided family, when Krishna Kanta Barkataky and Biswa Kanta Barkataky were alive, is of no material consequence. 26. Above all, what is extremely important to note is that the appellant was assessed, in the status of a Hindu undivided family in the assessment year 1979-80. This assessment attained finality inasmuch as no appeal was ever preferred against the assessment, so made, nor was the assessment interfered with in exercise of revisional jurisdiction in terms of the provisions contained in the Act. In this backdrop of the facts, when we turn to section 171 of the Act, we find that section 171 reads as under: "171. Assessment after partition of a Hindu undivided family. - (1) A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family, except where and in so far as a finding of partition has been given under this section in respect of the Hindu undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and collection of any penalty, interest, fine or other sum in respect of any period up to date of the partition, whether total or partial, of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of any such period. (9) Notwithstanding anything contained in the foregoing provisions of this section, where a partial partition has taken place after the 31st day of December, 1978, among the members of a Hindu undivided family hitherto assessed as undivided,- (a) no claim that such partial partition has taken place shall be inquired, into under sub-section (2) and no finding shall be recorded under sub-section (3) that such partial partition had taken place and any finding recorded under sub-section (3) to that effect whether before or after the 18th day of June, 1980, being the date of introduction of the Finance (No. 2) Bill, 1980, shall be null and void; (b) such family shall continue to be liable to be assessed under this Act as if no such partial partition had taken place; (c) each member or group of members of such family immediately before such partial partition and the family shall be jointly and severally liable for any tax, penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partition, in terms of the Hindu law, has no bearing on the assessment of income under the Act inasmuch as the Act deems that a Hindu family, "hitherto assessed as undivided" has continued to remain as Hindu undivided family except where partition in terms of the provisions of section 171 of the Act has been recorded. In other words, even if, according to the Hindu law, the properties of a Hindu undivided family came to be partitioned, yet the Hindu undivided family would be treated, for the purposes of the Act, to have continued as a Hindu undivided family if it has been once assessed as Hindu undivided family unless a partition, total or partial, has been recorded in terms of sub-section (3) of section 171 of the Act. In short, thus, if once a Hindu family has been assessed as an undivided family, whenever, following such assessment, the question of assessment of such a person, again, arises or income of such a person is required to be assessed for the purposes of the Act, such a person shall have to be treated to have continued as a Hindu undivided family, if the factum of partition has not been recorded in terms of sub-section (3) of section 171 of the Act, even if the Hindu un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kalloomal Tapeswari Prasad (HUF) [1982] 133 ITR 690 and Smt. T. K. Sarada Thampatty [1991] 187 ITR 696, the apex court firmly held that a Hindu undivided family would be liable to be taxed as Hindu undivided family if it had been until before the assessment sought to be made, assessed as an undivided family under the Act, even if there is partition of properties in terms of the Hindu Succession Act, unless a finding with regard to partition, total or partial, has been made in terms of sub-section (3) of section 171 of the Act. The observations made by the apex court, in R. B. Tunki Sah Baidyanath Prasad v. CIT [1995] 212 ITR 632 read as under (page 636): "That being so, in view of the language of section 171(1), the Hindu undivided family would be liable to be taxed as undivided not withstanding the effect of section 14(1) of the Hindu Succession Act. In our view, it is not necessary to go into the details because the matters stand covered by the decision of this court in Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690, which came to be followed in the subsequent decision recorded in Smt. T. K. Sarada Thampatty [1991] 187 ITR 696. In these two decisions, the court exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty of the appellant-Hindu undivided family and the interest income derived from such FDRs were assessable in the hands of the appellant-Hindu undivided family. Reference made, in this regard, to the case of V. D. Dhanwatey v. CIT reported in [1968] 68 ITR 365 (SC), by Mr. Agarwalla, is also not misplaced inasmuch as in V. D. Dhanwatey [1968] 68 ITR 365, the apex court observed and held as follows (page 369): "The general doctrine of Hindu law is that property acquired by a karta or a coparcener with the aid or assistance of joint family assets is impressed with the character of joint family property. To put it differently, it is an essential feature of self-acquired property, that it should have been acquired without assistance or aid of the joint family property. The test of self-acquisition by the karta or coparcener is that it should be without detriment to the ancestral estate. It is, therefore, clear that before an acquisition can be claimed to be a separate property, it must be shown that it was made without any aid or assistance from the ancestral or joint family property. The principle is based on the original text of Yagnavalka who, while dealing with property not liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT [1982] 133 ITR 690, wherein the deeming provisions of sub-section (1) of section 171 of the Act have been succinctly explained. This apart, as far as the case of Gauri Shankar Bhar [1972] 84 ITR 699 (SC) is concerned, suffice it to point out that a cautious reading of this decision shows that the court was concerned with the individual property of the deceased Prafulla Chandra Bhar and it had been conceded, in the apex court, that on the death of the said Prafulla Chandra Bhar, his property had devolved on his heirs in severalty and that each one of his heirs had taken a definite share in the property left by the deceased. In such circumstances, the apex court observed, "in view of that concession it is not necessary for us to decide in this case whether a Dayabhaga Hindu family can be considered as a Hindu undivided family within the meaning of section 3 of the Wealth-tax Act, 1957." In the light of the observations, made in Gauri Shankar Bhar [1972] 84 ITR 699 (SC), it becomes clear that in Gauri Shankar Bhar [1972] 84 ITR 699, the apex court did not decide the question as to whether a Dayabhaga Hindu family would or would not be considered as a Hindu undivided family within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his father, succeeds to a definite share in the property left by his father. Whereas a Hindu, under the Mitakshara school, becomes a coparcener, by operation of law, a Hindu, governed by the Dayabhaga school, becomes a coparcener by an act of volition. What is, however, important to bear in mind is that even a joint Hindu family, governed by the Dayabhaga school, will be deemed to have remained joint until the time the contrary is proved. 39. A careful reading of the case of Shantilal C. Shah [1988]169 ITR 805 shows that the decision of the apex court in Kalloomal Tapeswari Prasad (HUF) [1982] 133 ITR 690 (SC), had not been brought to the notice of the Kerala High Court. In Shantilal C. Shah [1988] 169 ITR 805, the attention of the court seems to have also not been drawn to its earlier decision in Sankanarayan Bhattathiripad v. ITO reported in [1985] 153 ITR 562 (Ker), though, in Sankaranarayanan Bhattathiripad v. ITO reported in [1985] 153 ITR 562, the Kerala High Court had held thus (page 567): "A joint family is disrupted either by an actual partition by volition of parties or by arbitration or suit, or by a deemed partition by operation of the law. In either event, the fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as necessary to investigate the question whether the income was of a Hindu undivided family or of the appellant individually and that unquestionably demand enquiry into facts. We are, therefore, unable to accept the argument of Mr. Pathak that the new plea sought to be raised did not necessitate enquiry into facts which had not been investigated." 42. From the discussions held above, as a whole, it is clear that the finding, reached by the learned Tribunal, to the effect that the appellant could not prove that it was a Hindu undivided family is perverse and not at all sustainable in the face of the materials on record and the reasons assigned by the learned Tribunal itself. This apart having been assessed until before the impugned assessments, as a Hindu undivided family, the appellant could not have been treated or assessed, in any status, other than a Hindu undivided family, when there was not even an iota of material on record showing that any partition of the property of the Hindu undivided family, in question had been recorded, in the past, in terms of the provisions of sub-section (3) of section 171 of the Act. Thus, viewed from any angle, the impugned orders are not sustain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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