MAHENDRA GARG (P) FAMILY SPECIFIC TRUST v. INCOME TAX OFFICER
[Citation -1986-LL-1024]

Citation 1986-LL-1024
Appellant Name MAHENDRA GARG (P) FAMILY SPECIFIC TRUST
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 24/10/1986
Assessment Year 1979-80, 1980-81
Judgment View Judgment
Keyword Tags prejudicial to the interests of revenue • production of evidence • reasonable opportunity • show-cause notice • trading account • capital account • wrong statement • specific trust • closing stock • opening stock • family trust • trust income • trust deed • trust fund
Bot Summary: From the pattern of assessments and the sequence of events, the Commissioner opined that the entries showed that the books of account of the trust were never produced before the ITO which could be scrutinised to check up the correctness of the claims regarding trust income and its activities. The assessments admittedly having been completed in one hearing only and without requiring the presence of the settlor of the trust, a notice under section 263 was issued on 26-10-1984 as the Commissioner was of the opinion that assessments were made in haste and without proper and adequate enquiries and these were erroneous and prejudicial to the interests of the revenue requiring the assessee to show cause as to why the assessments completed in a hurry and without proper scrutiny should not be set aside with directions to redo the same from the stage of filing the returns after giving the trust a reasonable opportunity of being heard. On 25-11-1982 Shri S.K. Agarwal, chartered accountant filed a copy of the trust deed but no other documents as pointed by the Commissioner, like copies of the capital accounts of the beneficiaries and the source of funds by which the business was conducted etc. Shri C.S. Agarwal, advocate stated that the trustees had shown the net income in trust's returns and filed all the details, i.e., trading account, profit and loss account, profit and loss allocation account, balance sheet, opening stock list, closing stock list, sundry debtors list, interest received details, commission received details, the beneficiaries' capital account, details of expenses and other details as asked by the ITO at the time of assessment. Required to substantiate his averment of having filed the documents in view of the learned Commissioner's assertion in paragraph 2 of his order, which we have reproduced above, Shri Agarwal stated that such details were filed in other similar cases and presumption was in the assessee's favour. For the revenue Shri K.K. Sharma in reply very effectively supported the Commissioner's order and submitted that on the facts there could be no other approach then the one taken by the learned Commissioner. Since the learned authorised counsel for the assessee has not been able to establish that the material/details as mentioned in paragraph 2 of the Commissioner's order had been furnished before the ITO before he completed the assessment and since the assessee had failed to furnish any reply to the show-cause notice issued by the Commissioner prior to the passing of the impugned order under section 263, I would agree with the conclusion arrived at by the learned Judicial Member in the special facts and circumstances of the case.


These two second appeals are directed against common order dated 22-11-1984 passed by Commissioner, Agra under section 263 of Income-tax Act, 1961 ('the Act') vacating assessments framed on 25-11-1982 on returned incomes of Rs. 35,073 and Rs. 42,230 in status of AOP in respect of assessment years 1979-80 and 1980-81, respectively. assessee filed returns in name and style of Mahendra Garg (P.) Family Specific Trust, Noorigate Agra on 3-2-1982 declaring incomes as stated above. In respect of assessment year 1979-80 following entries in order sheet were made by ITO before completing assessment: "23-11-1982 Issue notice under section 143(2) Sd/-ITO 25-11-1982 Shri D.K. Agarwal, CA attends. Copy of trust deed filed. Discussed. Assessed. Sd/- ITO" 2. From pattern of assessments and sequence of events, Commissioner opined that entries showed that books of account of trust were never produced before ITO which could be scrutinised to check up correctness of claims regarding trust income and its activities. Commissioner also took notice of fact that no tick marks whatsoever had been made on any of papers filed along with returns and ITO had not obtained copies of capital accounts of beneficiaries and had also not scrutinised same. assessments admittedly having been completed in one hearing only and without requiring presence of settlor of trust, notice under section 263 was issued on 26-10-1984 as Commissioner was of opinion that assessments were made in haste and without proper and adequate enquiries and, therefore, these were erroneous and prejudicial to interests of revenue requiring assessee to show cause as to why assessments completed in hurry and without proper scrutiny should not be set aside with directions to redo same from stage of filing returns after giving trust reasonable opportunity of being heard. 3. date of hearing was fixed for 2-11-1984 when telegram was received for adjournment. Shri Mahendra Garg and Smt. Usha Devi, trustees were informed by Commissioner's office vide letter dated 5-11-1984, served on said trustees on 12-11-1984, that they were allowed to file written arguments by 19-11-1984. Neither anybody attended nor any reply was filed till 19-11-1984, as stated by Commissioner in his order, who proceeded to dispose of proceedings initiated under section 263 on basis of evidence available on record. 4. Reproduction of paragraph 2 of Commissioner's order gives us facts as also indicate evidence on record and project that certain essential documents and evidence which normally are taken on record for completing assessments, were not there and ITO did nothing even to complete bare formalities much less process returns as is required: "Assessee Mahendra Garg (P.) Family Specific Trust, Noorigate, Agra claimed to have come into existence with effect from 17-7-1977 by trust deed executed by Smt. Premwati wife of Shri Gulab Chand, resident of Church Road, Agra, as settler who set aside sum of Rs. 500 for benefit of Smt. Usha Devi wife of Shri Mahendra Garg, son of Shri Sriram, Master Umesh Garg, Master Vikas Garg and Master Navin Garg sons of Shri Mahendra Garg. Shri Mahendra Garg son of Shri Sriram, resident of 15/92, Noorigate, Agra and Smt. Usha Devi wife of Shri Mahendra Garg resident of 15/92, Noorigate, Agra have been appointed as trustees of trust. returns have been signed by Shri Mahendra Garg, trustee of trust. incomes shown in returns have been considered exempt on ground that trust is specific trust and, therefore, incomes in hands of trust are exempt and shares should be considered in hands of beneficiaries under section 161 of Income-tax Act, 1961. trust filed copies of trading and profit and loss account and balance sheet. copies of capital accounts of beneficiaries have not been filed in either of years. commodity of trading has been shown as Gilet ornaments and commission from PIC. How and in what manner and with what capital trust conducted its business relating to Gilet ornaments is not at all clear from papers filed. ITO has not cared to examine whether incomes shown to have been earned by trust really belonged to it or to persons who had earned this income by their personal efforts. ITO has not cared to obtain details of commission from assessee. No certificate of commission is available on record. ITO has not tried to obtain same from assessee, for verification of correctness and source." 5. From entries made in order sheet it has already been projected that ITO issued notice under section 143(2) of Act on 23-11-1982. implication of such notice is important because it is required to be issued only if ITO is not satisfied about correctness of return filed and considers it necessary or expedient to verify correctness and completeness of returns by requiring presence of assessee or production of evidence in this behalf. relevant provision in this regard are contained in clause (b) of sub- section (2) of section 143 as follows: "(2) Where return has been made under section 139, and (b) whether or not assessment has been made under sub-section (1), t h e Income-tax Officer considers it necessary or expedient to verify correctness and completeness of return by requiring presence of assessee or production of evidence in this behalf; Income-tax Officer shall serve on assessee notice requiring him, o n date to be therein specified, either to attend at Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which assessee may rely in support of return:" 6. On 25-11-1982 Shri S.K. Agarwal, chartered accountant filed copy of trust deed but no other documents as pointed by Commissioner, like copies of capital accounts of beneficiaries and source of funds by which business was conducted etc., etc. On abovestated facts assessments were certainly erroneous. absence of vital evidence for completion of assessments coupled with fact that settlor settled only sum of Rs. 500 and that income returns were very substantial naturally indicated that assessments were prejudicial to interests of revenue and, therefore, Commissioner's invoking of powers under section 263 cannot be said to be unjustified or wrong. 7. Shri C.S. Agarwal, advocate stated that trustees had shown net income in trust's returns and filed all details, i.e., trading account, profit and loss account, profit and loss allocation account, balance sheet, opening stock list, closing stock list, sundry debtors list, interest received details, commission received details, beneficiaries' capital account, details of expenses and other details as asked by ITO at time of assessment. Required to substantiate his averment of having filed documents in view of learned Commissioner's assertion in paragraph 2 of his order, which we have reproduced above, Shri Agarwal stated that such details were filed in other similar cases and, therefore, presumption was in assessee's favour. He also was not in position to explain assessee's stand vis-a-vis, entries made on 25-11-1982 when ITO stated that only trust deed copy was filed. In relation to learned Commissioner's observation that there was no response to notice served on 12-11-1984. Shri Agarwal stated that representation was not made because according to assessee, learned Commissioner was sitting with closed mind and no useful purpose could have been served. learned advocate was not in position to elaborate this statement in view of fact that Commissioner, was passed impugned order, was in his post only for short time. Shri Agarwal also very kly argued that on 24-11-1982 assessee had filed letter dated 24-11-1982 before ITO which gave all details like names and addresses of beneficiaries, name and address of trustee, settlor's relation with beneficiaries, etc., as also allocation of profit and loss between beneficiaries. copy of said letter is given to us at pages 14 to 16. It may be mentioned here that in said letter trust fund is stated to Rs. 500 and other contents reveal that necessary vital information was not filed with return. Since letter was not even marked by ITO it only goes to prove Commissioner's assertion that ITO did not apply his mind, neither had any material to frame assessments. 8. For assessee copies of accounts of beneficiaries were sought to be placed before us for two years under appeal, but since same were not be placed before us for two years under appeal, but since same were not established to have had been filed before ITO we have not accepted such documents as forming part of record. Shri Agarwal also made part of his paper book copies of Tribunal orders in certain family trust cases of Agra and submitted that present case being similar, Tribunal orders should be followed. We, however, find facts in present case to be peculiar and, therefore, find no guidance from those orders. 9. For revenue Shri K.K. Sharma in reply very effectively supported Commissioner's order and submitted that on facts there could be no other approach then one taken by learned Commissioner. He particularly emphasised that Commissioner's version that accounts of beneficiaries had not been filed was not even attempted to be controverted for assessee. 10. In rejoinder Shri Agarwal persisted that copies of capital accounts of beneficiaries were on ITO's record. On query from Bench Shri Agarwal insisted that there was no rule which provided that if Commissioner makes wrong statement assessee must rebut by affidavit. However, except making bald assertion Shri Agarwal was unable to establish existence of said documents on record. In alternative Shri Agarwal also submitted that at best non-filing of documents, as stated in Commissioner's order, was error. 11. Alternative contentions are not strange bed fellows but sometime these have effect of diluting and demolishing case altogether. It would be strange if motorist is to say that he was cautiously driving at time of accident and alternatively he was miles away from scene of accident. Shri Agarwal's contentions are also similar in character, inasmuch as he primarily insisted that documents were on record and in alternative that non- submission was at best error. 12. In view of all facts, therefore, we are of considered view that Commissioner rightly vacated assessments of 25-11-1982 and directing de novo assessments from stage of filing of returns. 13. In result, appeals dismissed. Per Shri B. Gupta, Accountant Member -- Ordinarily I would have fallen in line with decisions of Tribunal Delhi Benches in cases of Gauri Shanker (P.) Family Trust [IT Appeal Nos. 5332, 5333 and 5334, dated 19-3- 19851 and Mukand Family Trust [IT Appeal Nos. 5193 to 5195, dated 25-6- 1985] on which learned authorised counsel of assessee has placed reliance and by which orders of Commissioner, passed under section 263 had been cancelled but I find that facts in present case are significantly distinguishable. Since learned authorised counsel for assessee has not been able to establish that material/details as mentioned in paragraph 2 of Commissioner's order had been furnished before ITO before he completed assessment and since assessee had failed to furnish any reply to show-cause notice issued by Commissioner prior to passing of impugned order under section 263, I would agree with conclusion arrived at by learned Judicial Member in special facts and circumstances of case. 2. appeals by assessee fail and are hereby dismissed *** MAHENDRA GARG (P) FAMILY SPECIFIC TRUST v. INCOME TAX OFFICER
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