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Addl. Commissioner of Income-tax Vs. Shyamlal Motilal Khurja - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 34 of 1975
Judge
Reported in[1981]129ITR291(All)
ActsIncome Tax Act, 1961 - Sections 256(1) and 256(2)
AppellantAddl. Commissioner of Income-tax
RespondentShyamlal Motilal Khurja
Appellant AdvocateAshok Gupta, Adv.
Respondent AdvocateK.B. Bhatnagar, Adv.
Excerpt:
- - shyam lal moti lal was being made from the assessment year 1925-26 in the status of an huf consisting of shyam lal and gulshan lal, sons of moti lal, up to 1947, and from 1947 to 1954 consisting of shyam lal and his children and widow as well as the children of gulshan lal. it is true, we have held above that the aac as well as the tribunal were justified in holding that the returns filed by manohar lal could not be treated as that of shyam lal moti lal, but that does not deprive the department of its jurisdiction to pass an order of assessment on that basis for the purposes mentioned above......manohar lal filed a similar return with respect to the year 1965-66. the ito treated the return filed by manohar lal as that of the bigger huf of shyam lal moti lal and imposed tax on the said firm on that basis. aggrieved by the order of the ito, shyam lal moti lal filed an appeal before the aac. in the appeal, one of the arguments advanced on behalf of the firm was that as the return filed by manohar lal was not on behalf of shyam lal moti lal, the ito committed an error in making the assessment on the said firm. the appellate authority found that as manohar lal was not the karta of the bigger huf, shyam lal moti lal, the return filed by him could not be treated to be that of the said firm. in his opinion, the assessment for these years had not been properly and legally made......
Judgment:

K.C. Agrawal, J.

1. By this reference made under Sub-section (2) of s, 256 of the I.T. Act, the Income-tax Appellate Tribunal has referred the following question for our opinion :

' Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in annulling the assessments made by the Income-tax Officer for the assessment years 1963-64 and 1965-66 '

2. The assessment of M/s. Shyam Lal Moti Lal was being made from the assessment year 1925-26 in the status of an HUF consisting of Shyam Lal and Gulshan Lal, sons of Moti Lal, up to 1947, and from 1947 to 1954 consisting of Shyam Lal and his children and widow as well as the children of Gulshan Lal. It appears that at the time of filing the return for the assessment year 1955-56, the members took a plea of partition in the family. This claim of partition was turned down on the ground that it had not been made by metes and bounds. Thereafter, no claim for partition was made by the assessee before the income-tax authorities.

3. For the assessment year 1963-64, Manohar Lal, son of Shyam Lal, filed a return in the status of an individual, but in the declaration in both the columns, i. e., ' me or I/family ' exists and Part IV of the return, which was to be filed in the case of the HUF, was also duly filled in. Before the assessment order in respect of the year 1963-64 could be com-pleted, Manohar Lal filed a similar return with respect to the year 1965-66. The ITO treated the return filed by Manohar Lal as that of the bigger HUF of Shyam Lal Moti Lal and imposed tax on the said firm on that basis. Aggrieved by the order of the ITO, Shyam Lal Moti Lal filed an appeal before the AAC. In the appeal, one of the arguments advanced on behalf of the firm was that as the return filed by Manohar Lal was not on behalf of Shyam Lal Moti Lal, the ITO committed an error in making the assessment on the said firm. The appellate authority found that as Manohar Lal was not the karta of the bigger HUF, Shyam Lal Moti Lal, the return filed by him could not be treated to be that of the said firm. In his opinion, the assessment for these years had not been properly and legally made. Dealing with the question of opportunity of hearing raised before him on behalf of the firm, Shyam Lal Moti Lal, the AAC found that as the assessee had not been given reasonable opportunity, the order of assessment was liable to be set aside on that basis. After having decided these two points in favour of Shyam Lal Moti Lal, the AAC set aside the assessment orders for the assessment years 1963-64 and 1965-66, arid sent back the case to the ITO to make fresh assessment orders after giving reasonable opportunity to the assessee.

4. Aggrieved by the judgment of the AAC, Shyam Lal Moti Lal filed two appeals before the Income-tax Appellate Tribunal. The main point taken in these appeals was that the AAC having found the assessment orders made against the firm, Shyam Lal Moti Lal, as invalid, should have annulled the assessment proceedings treating the same as void ab initio. The Tribunal upheld the objection of Shyam Lal Moti Lal and having found that the firm Shyam Lal Moti Lal had not filed any return held that the assessment orders as against the said firm were liable to be annulled and quashed.

5. Dissatisfied, the Commissioner of Income-tax filed an application under Section 256(1) of the I.T. Act for making a reference of the question whether, on the facts and in the circumstances of the case, the Tribunal was legally right in annulling the assessments.

6. Sri Ashok Gupta, learned counsel for the revenue, urged that the order passed by the Tribunal was illegal and erroneous. In his submission, although the return had not been filed by the karta of the HUF, Shyam Lal Moti Lal, but as the same had been filed by one of the members of the HUF it should be treated as having been filed on behalf of the HUF. The submission made does not appear to be correct. Out of the two brothers, Banwari Lal and Manohar Lal, Banwari Lal was elder. The return could be filed on behalf of the HUF by Banwari Lal and not by Manohar Lal. It is only in the circumstances specified in Section 140 of the I.T. Act that a person other than the karta can file a return on behalf ofthe HUF. As found by the Tribunal, the circumstances mentioned in the aforesaid section did not exist. Consequently, the Tribunal appears to be fully justified in holding that the return having not been signed and verified by the karta of the said HUF, the same could not be treated as that of the aforesaid HUF.

7. The next question urged on behalf of the revenue was that even if the said return was not that of the HUF, the assessment order could still be passed on its basis either against Manohar Lal in his individual capacity or as against the smaller HUF consisting of Manohar Lal and his children. There is no dispute between the parties that the said return had been filed by Manohar Lal. There was certainly an ambiguity in the said return inasmuch as at one place he described himself as an individual whereas at another he mentioned himself to be karta. The proper course for the ITO was to have put this aspect of the matter to Manohar Lal and should have got the mistake corrected. As the returns for the aforesaid assessment years had been filed by Manohar Lal voluntarily, it was the duty of the ITO to have passed orders on the same. It is correct that as the said returns could not be treated to be that of the bigger HUF, Shyam Lal Moti Lal, there is nothing in law to prohibit the ITO to treat the same as that of Manohar Lal in his individual capacity or on behalf of his smaller HUF. The Tribunal should have, therefore, not annulled the assessment orders passed by the ITO, but ought to have set aside the same and sent back the case to the ITO with that direction.

8. Sri K.B. Bhatnagar, counsel for the assessee, contended that as the income-tax department treated the returns in question as that of Shyam Lal Moti Lal it was not open to it to treat the same now to be that of Manohar Lal filed either in his individual capacity or on behalf of the smaller HUF. We do not find any substance in this submission. It is true, we have held above that the AAC as well as the Tribunal were justified in holding that the returns filed by Manohar Lal could not be treated as that of Shyam Lal Moti Lal, but that does not deprive the department of its jurisdiction to pass an order of assessment on that basis for the purposes mentioned above. It is not correct that on the findings recorded by the Tribunal and the AAC the only thing which could be done was to annul the assessment proceedings. An annulment may be permitted in a case where the proceeding is without jurisdiction. But, in the instant case, the same does not suffer from this defect. Accordingly, we are unable to hold that the order of annulment made by the Tribunal was correct.

9. In the result, the question referred to us is answered in the negative in favour of the department and against the assessee. The revenue would be entitled to get costs of this reference, which we assess at Rs. 200.


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