1. These two references may be taken up together. Both of them have been made at the instance of the assessee, Sri Rai Satya Vrata, a Hindu undivided family. W.T.R. No. 143 of 1978 relates to the wealth-tax assessments of the assessee for the assessment years 1964-65 to 1968-69. For these years the assessee filed his wealth-tax returns in the status of an HUF and claimed that the immovable properties mentioned in Part IV of the returns belonged to his wife, sons and daughters, to whom they had been gifted in 1946. The assessee, therefore, requested that these properties should not be included in his wealth. The assessee, further claimed that his correct status should be taken as that of an individual and the returns filed by him in the status of an HUF should be treated as amended to that extent. According to the assessee, his father, Rai Sheo Prasad, died in 1935 leaving behind his son, the present assessee, and his widow. The assessee married in 1939 under the Special Marriage Act. His mother died in 1943 and the aforesaid gift was made by him on December 30, 1946, by means of a registered document in favour of his minor sons, daughters and wife. The case of the assessee was that since his marriage had taken place under the Special Marriage Act it would amount to a severance of his joint status and whatever property he had received from his father became his separate property and he could validly make a gift in favour of his minor sons, daughters and wife. Some of the gifted properties had been sold and the sale proceeds had been kept with the assessee, and, in respect of those amounts, the assessee claimed that they should be treated as debts owed by him to his wife and children and he claimed a deduction of the same while computing his wealth.
2. The WTO did not accept the assessee's contentions. According to him the correct status of the assessee was that of an HUF, (as the property) devolved on him as the sole surviving coparcener and he formed an HUF with his widowed mother. His sons acquired a right in that property by birth and he had no right whatsoever to make a gift in respect of those properties in favour of his children and wife. The WTO accordingly included the properties mentioned in Part IV of the returns in the wealth of the assessee and completed the assessments taking the status of the assessee as that of an HUF.
3. Tbe assessee filed appeals against the assessment orders. The very same submissions were urged before the AAC, but they did not find favour with the latter and the appeals were dismissed. Aggrieved, the assessee took up the matter in further appeal before the Appellate Tribunal and urged the same contentions before it. The Tribunal found that even after making a gift of the Zamindari properties to his wife, Smt. Krishna Mohini, and five minor children, it was the assessee who continued to exercise control over the gifted property. The sale proceeds of the various properties sold by the donees were credited by the assessee in his bank account and interest earned on that account was shown as the income of the assessee. According to the Tribunal the assessee really did not intend to hand over the gifted properties to the donees. In other words, the gift was not intended to be acted upon. It also found that even though the marriageof the assessee took place under the provisions of the Special Marriage Act, the marriage was also solemnised according to Hindu Dharma Shastras and, therefore, the fact that his marriage was performed under the provisions of the Special Marriage Act did not have the effect of severing the assessee from his HUF. It was also found that the assessee had brought up his children as Hindus. Thus the properties which devolved on him from his father did not become his exclusive properties but continued to belong to the joint family and the assessee had no right to make any gift in respect of the same. On the same reasoning the Tribunal held that the sale proceeds of some of the gifted properties sold by the donees and deposited by the assessee in his bank account could not be treated as a debt owed by the assessee to them. In the result the assessments were confirmed.
4. The following questions have been referred at the instance of the assessee for the opinion of this court:
(1) Whether, under the facts and circumstances of this case, the Income-tax Appellate Tribunal was not justified in holding that the gift made by a registered gift deed of 1946 by the applicant was invalid/inoperative
(2) Whether, upon the facts and in the circumstances on the case, the Tribunal was legally right in holding that the value of the property gifted away by the assessee was liable to be assessed in the hands of the Hindu undivided family '
5. In Income-tax Reference No. 144 of 1978, the assessment years involved are 1970-71 and 1971-72 and the dispute relates to income-tax assessments. The assessee had filed his income-tax returns for these years as karta of HUF, but during the assessment proceedings he claimed that his correct status was that of an individual and the income from the properties, which he had gifted to his wife and children in 1946 should not be assessed in his hands. The ITO rejected that contention and completed the assessments taking the status of the assessee as that of an HUF. The income from the property claimed by the assessee to have been gifted to his wife and minor children was included in these assessments.
6. The assessee filed appeals against those assessment orders; but remained unsuccessful and then took up the matter in further appeal before the Appellate Tribunal. The Tribunal, relying on its decision given in wealth-tax appeals filed by the assessee for the assessment years 1964-65 to 1968-69, agreed with the revenue authorities and dismissed the appeals.
7. Now, at the instance of the assessee, the following question has been referred to this court:
'(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from property gifted by the assessee in favour of his wife and sons was assessable as the income of the Hindu undivided family '
8. These submissions were made before us on behalf of the assessee by his learned counsel, Sri R. P. Goel:
(1) Though after the death of Sri Rai Sheo Prasad in 1935, the entire joint family property devolved on his son, Rai Satya Vrata, as the sole surviving coparcener, when in 1939, he married under the provisions of the Special Marriage Act, there was a severance of his joint status and the property in his hands became his separate property.
(2) It was by means of a registered deed of gift that Rai Satya Vrata gifted some of his properties to his wife and minor children, that the gift deed was acted upon, inasmuch as, the names of the donees were mutated in the revenue records and hence it was legally valid. In the alternative, since it effected an equal partition, it operated as a family arrangement and the transfer of properties to the wife and children was perfectly valid.
(3) Lastly, that the property gifted consisted of agricultural land and after the enforcement of the Zamindari Abolition & Land Reforms Act, the donees, whose names were duly mutated in the revenue papers over the property gifted, acquired fresh rights as bhumidhars. These rights were distinct from the rights conferred by the gift deed and that being so, the income from these properties could not be treated as belonging to the HUF nor could the income therefrom be treated as the income of the HUF.
9. We do not find any merit in any of these submissions. It cannot be disputed that after the death of Rai Sheo Prasad the entire property of the family devolved on his son as the sole surviving coparcener. However, it would be taken that he constituted a joint Hindu family along with his mother. Further, the character of the property did not undergo any change and it continued to remain coparcenary property in his hands. It is correct that in 1939 he was married under the provisions of the Special Marriage Act. That fact certainly would have amounted to his severance from the joint family. However, that situation did not arise because it has been found as a fact by the Tribunal that after the celebration of the marriage under the provisions of the Special Marriage Act, the assessee solemnized his marriage in accordance with the rites prescribed in the Hindu Dharma Shastras. Therefore, the assessee continued as a coparcener of the family and that being so, he could not have made a gift in respect of any part of the same in favour of his wife and minor children. The gift was, therefore, an illegal and invalid transaction and did not confer any rights on the donees. The minor sons had already acquired a right in the property by birth and for that reason also their father could not have conferred any better right on them by making the gift. In regard to the nature of the gift, therefore, the view taken by the Tribunal is absolutely correct.
10. The contention urged on behalf of the assessee that the impugned transaction operated as a family arrangement and further that after the U.P. Zamindari Abolition and Land Reforms Act came into existence the donees came to acquire the rights of bhumidhars in respect of the land gifted to them and that right being distinct from the right conferred on them by the gift deed would prevail, were not taken before the Tribunal and cannot be allowed to be urged now in this reference. We, therefore, do not propose to enter into the merits of these contentions. Learned counsel invited our attention to a decision of this court in CGT v. Ram Kishan : 120ITR589(All) , in support of his contention that the gift deed can be taken to operate as a family arrangement and thus there was a valid transfer of the properties by the assessee to his wife and children. As noted above, this contention cannot be entertained for the first time in a reference. The Appellate Tribunal is the last fact-finding authority. It had no occasion to examine this contention. The facts in this behalf have not been found by the-Appellate Tribunal and thus we cannot entertain it. Apart from this in Ram Kishan's case it had been found by the Tribunal that the transaction in dispute was a sort of family settlement by partial partition. By that transaction the co-sharers in the family were allowed shares, though they themselves were co-owners, and the documents, hence, could not be validly called gifts. On these facts this court had no hesitation in holding that the view taken by the Tribunal was correct that the transaction was one of family settlement. No such facts have been found in the present case and heace we cannot accept the contention urged by the learned counsel for the assessee and hold that the gift deed dated 30th December, 1946, operates as a family settlement. We, thus, agree with the view taken by the Appellate Tribunal on the controversy involved in the case.
11. In the result, therefore, question No. 1 is answered in the negative, in favour of the Department and against the assessee. Questions Nos. 2 and 3 are answered in the affirmative, in favour of the Department and against the assessee. The Department is entitled to costs which we assess at Rs. 250 but of ona set only.