INCOME TAX OFFICER v. HARI DAS RASTOGI
[Citation -1986-LL-0630-1]

Citation 1986-LL-0630-1
Appellant Name INCOME TAX OFFICER
Respondent Name HARI DAS RASTOGI
Court ITAT
Relevant Act Income-tax
Date of Order 30/06/1986
Assessment Year 1978-79
Judgment View Judgment
Keyword Tags status of individual • individual capacity • agricultural income • cross-objection • fresh evidence • survey report • money lending • maharaja • karta
Bot Summary: The ITO on the basis of Inspectors' survey report issued a notice under s 139(2) on 21st Aug., 1978 to the assessee as Karta of HUF. The assessee submitted the return of income in the status of 'Individual' on 26th Feb., 1980 disclosing agricultural income of Rs. 6,000 which the ITO acted upon by issuing of a notice under s. 143(2). According to the ITO both the businesses which were carried on by the assessee's two sons Sri Mohanlal Rstogi and Sri Puskar Nath Rastogi were actually the businesses of their father since the initial capital for carrying on the two businesses had been gifted by the assessee. Learned AAC erred in admitting fresh evidence in violation of r. 46A. The assessee in turn has field a cross-objection claiming that the assessment should have been completed in the status of 'Individual' an not in the hands of the assessee as Karta of the HUF. We have considered the submissions of both the rival parties. The departmental representative stated that while the AAC held that the assessment was invalid, he was wrong in retaining a portion of the income assessed in the hands of the assessee-HUF. It has been further stated that the AAC in excluding the income of M/s Arvind Vastralaya and Janata Handlook Stores relied on a certificate issued by the Panchayat Pradhan in violation of the provisions contained in r. 46A. I has been stated that before the ITO the assessee failed to establish that the aforesaid two businesses were actually carried on by the assessee's two sons. In reply, the assessee's ld counsel stated that the assessee in the past had been assessed in his individual status by the ITO, Survey Circle, Varanasi. The ITO has not given any other reasons excepting the fact that the two businesses were started with the money gifted by the assessee, in coming to the conclusion tha the income derived by the two sons was the income on the assessee as the Karta of his HUF. The mere fact that the capital was contributed by the assessee does not ipso facto lead to the conclusion that the income derived by the sons of the assessee belonged to the assessee representing his HUF. It was for the ITO to establish that the assessee being head of the family was in full control of the businesses carried on by the sons of the assessee. We have mentioned earlier that the ITO besides mentioning that the assessee gifted a sum of Rs. 5,000 on 14th Jan., 1974 which was utilised by the two sons in their cloth businesses, did not bring any other material to show that the management and control of the two businesses vested with the assessee and that the from the two businesses was enjoyed by the family consisting of the assessee and his two sons.


ITO on basis of Inspectors' survey report issued notice under s 139(2) on 21st Aug., 1978 to assessee as Karta of HUF. assessee submitted return of income in status of 'Individual' on 26th Feb., 1980 disclosing agricultural income of Rs. 6,000 which ITO acted upon by issuing of notice under s. 143(2). assessment was completed on total income of Rs. 48,000 which included income derived from two shops, namely, Arvind Vastralaya and Janata Handloom Stores. According to ITO both businesses which were carried on by assessee's two sons Sri Mohanlal Rstogi and Sri Puskar Nath Rastogi were actually businesses of their father since initial capital for carrying on two businesses had been gifted by assessee. It was assessee's case before ITO that he gifted sum of Rs. 5,000 to his son Sri Mohanlal which had been utilised by him to carry on separate cloth business independently. ITO rejected said explanation and held that "the assessee has not been able to produce any other evidence to s h o w that business carried on in name and style of M/s Arvind Vastralaya and Janata Handlook Stores were started by his two sons from their own resources." Accordingly, he estimated income from Arvind Vastralaya and Janata Handlooms Stores on basis of Inspector's survey reports at Rs. 25,000 and Rs. 12,000 respectively and brought to tax aforesaid amounts aggregating to Rs. 37,000 in hands of assessee as Karta of his HUF. AAC deleted both additions by observing, inter alia, that assessment framed by ITO in status of 'HUF' on basis of return filed by assessee in his individual capacity were invalid. He further observed that two sons of assessee carried on independent business by obtaining separate trade licences in their names. AAC on basis of certificate produced from Panchayat Pradhan was satisfied that two sons of assessee maintained their families separately. AAC accordingly directed ITO to exclude income from Arvind Vastralaya and Janata Handloom Stores in computing income of assessee for year under appeal. Department being aggrieved with AAC's order has filed present appeal on following grounds: "1. Learned AAC having held that assessment in status of HUF on return filed in status of Individual was not valid should not have decided question whether business styled Arvind Vastralaya and Janata Handloom Stores belonged to HUF or not. Learned AAC erred in adjudicating upon quantum of income of these two concerns. Learned AAC erred in admitting fresh evidence in violation of r. 46A." assessee in turn has field cross-objection claiming that assessment should have been completed in status of 'Individual' not in hands of assessee as Karta of HUF. We have considered submissions of both rival parties. departmental representative stated that while AAC held that assessment was invalid, he was wrong in retaining portion of income assessed in hands of assessee-HUF. It has been further stated that AAC in excluding income of M/s Arvind Vastralaya and Janata Handlook Stores relied on certificate issued by Panchayat Pradhan in violation of provisions contained in r. 46A. I has been stated that before ITO assessee failed to establish that aforesaid two businesses were actually carried on by assessee's two sons. Accordingly he urged that AAC's order should be set aside and order of ITO be restored. In reply, assessee's ld counsel stated that assessee in past had been assessed in his individual status by ITO, Survey Circle, Varanasi. In this connection our attention was drawn to assessment order passed by ITO Survey Circle from File No. 38- H/S.C./Vns. dt. 9th March, 1977 pertaining to asst. yr. 1974-75. He also submitted before us copy of assessment order passed in hands of assessee in status of 'individual' for asst. yr. 1981-82. It has been pointed out that assessee on basis of notice issued under s. 139(2) submitted his return of income under honest impression that he was assessable in status of 'individual' as in past. It has been stated that no other notice was received for assessment year under appeal even though assessee was being assessed in his individual status for earlier years. According to ld. Counsel, ITO was competent to frame assessment in status of 'HUF' on basis of return filed by assessee in his individual status. In support reliance was placed on Rajasthan High Court decision in CWT vs. Ridhkaran & Ors. (1972) 84 ITR 705 (Raj). In his counter-reply decision brought to our notice Patna High Court Departmental Representative in CGT vs. Maharaja Kumar Kamal Singh (1986) 52 CTR (Pat) 24 wherein it has been held that Tribunal was wrong in cancelling assessment made in status of 'individual' when G.T. return was filed by assessee as Karta of HUF. assessment has been made from different filed is would be evident from file No. noted in ITO's order. GIR No. Mentioned in order passed by ITO, Survey Circle for asst. yr. 1974-75 is 38H which is different from GIR No. Mentioned in ITO's order for assessment year under appeal. It seems therefore, that ITO initiated proceedings separately on basis of survey report for including income of two businesses carried on by assessee's sons as also money lending business income carried on by name of assessee's wife in hands of assessee as Karta of his HUF. We have been informed that no notice under s. 138(2) had been issued in assessee's individual name for year under appeal. ITO, therefore, was wrong in acting upon return which assessee submitted in his individual capacity in response to notice issued to him as Karta of HUF. High Court decision relied on by assessee's learned counsel is not applicable in instant case since ITO framed assessment in status of HUF on basis of proceedings initiated by him by issue of notice under s. 139(2) on assessee as Karta of his HUF. Nevertheless it would cause unnecessary hardship in case assessment is set aside on strength of Patna High Court decision relied upon by departmental representative inasmuch as assessment relates to previous year ending 31st day of March, 1978 also fact that it made protective assessments in hands of two sons of basis of returns filed by them. In our opinion, AAC was correct in directing ITO to exclude income from two businesses carried on by assessee's two major sons viz. Sri Mohanlal Rastogi and Puskar Math Rastogi. ITO has not given any other reasons excepting fact that two businesses were started with money gifted by assessee, in coming to conclusion tha income derived by two sons was income on assessee as Karta of his HUF. mere fact that capital was contributed by assessee does not ipso facto lead to conclusion that income derived by sons of assessee belonged to assessee representing his HUF. It was for ITO to establish that assessee being head of family was in full control of businesses carried on by sons of assessee. Even if we accept revenue's contention that AAC was wrong in placing reliance on certificate issued by Panchayat Pradhan that in itself. In our opinion, cannot justify inclusion of Rs. 37,000 in hands of assessee, particularly when there is clear finding that sons of assessee carried on independent business in dealings of cloth. We have mentioned earlier that ITO besides mentioning that assessee gifted sum of Rs. 5,000 on 14th Jan., 1974 which was utilised by two sons in their cloth businesses, did not bring any other material to show that management and control of two businesses vested with assessee and that from two businesses was enjoyed by family consisting of assessee and his two sons. Accordingly we hold that correct status of assessee for year under appeal is that of 'individual' and that AAC was justified in directing ITO t exclude income of Arvind Vastralaya and Janata Handlom Stores aggregating to Rs. 37,000. Ground. No. 2 and 3 raised in assessee's cross-objection have not been pressed. I result, departmental appeal is dismissed and assessee's cross objection is allowed in part. *** INCOME TAX OFFICER v. HARI DAS RASTOGI
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