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Surya Prakash Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(1982)1ITD283(All.)
AppellantSurya Prakash
RespondentWealth-tax Officer
Excerpt:
.....assessee's share from the firm kanhaiya lal hanuman prasad and the assessment was, thus, made on a total income of rs. 37,260.subsequently, however, the commissioner was of the view that the assessment order of the ito dated 22-12-1977 was erroneous and prejudicial to the interests of revenue because the share income of smt. gita devi from the firm hanuman prasad surya prakash was not included in the assessee's total income. the commissioner, therefore, by order dated 16-10-1979 under section 263 of the income-tax act, 1961 ("the act") directed the ito to revise the assessment by including in the assessee's total income, the share of the wife smt. gita devi from the firm hanuman prasad surya prakash. in consequence of this order of the commissioner under section 263, the ito included in.....
Judgment:
1. These two appeals, both relating to the assessment year 1977-78, one filed by assessee against the order of the Commissioner, under Section 263, and another filed by the revenue against the order of the AAC, revolve round the same facts and are, therefore, for the sake of convenience, disposed of by a consolidated order.

2. The assessee is an individual. Here it will be necessary to point out that the assessee was also the karta of his HUF which was a partner in the firms Hanuman Prasad Surya Prakash and Kanhaiya Lal Hanuman Prasad. The assessee's wife Smt. Gita Devi was also a partner in both of these firms. The assessee, in his individual capacity, was, however, a partner in Kanhaiya Lal Hanuman Prasad only. The assessment of the assessee-individual was completed by the ITO by order dated 22-12-1977 on the assessee's share from the firm Kanhaiya Lal Hanuman Prasad and the assessment was, thus, made on a total income of Rs. 37,260.

Subsequently, however, the Commissioner was of the view that the assessment order of the ITO dated 22-12-1977 was erroneous and prejudicial to the interests of revenue because the share income of Smt. Gita Devi from the firm Hanuman Prasad Surya Prakash was not included in the assessee's total income. The Commissioner, therefore, by order dated 16-10-1979 under Section 263 of the Income-tax Act, 1961 ("the Act") directed the ITO to revise the assessment by including in the assessee's total income, the share of the wife Smt. Gita Devi from the firm Hanuman Prasad Surya Prakash. In consequence of this order of the Commissioner under Section 263, the ITO included in the assessee's total income, the share of the wife Smt. Gita Devi in the firm Hanuman Prasad Surya Prakash and by order dated 19-1-1980 redetermined the assessee's total income of Rs. 86,160. Against this order of the ITO the assessee went up in appeal to the AAC. The AAC by his order dated 12-8-1980 held that since the income of the wife (excluding the income which was to be the subject-matter of inclusion under Section 64 of the Act) was greater than the income of the assessee similarly worked out, the share of the wife Smt. Gita Devi from the firm Hanuman Prasad Surya Prakash could not be included in the assessee's total income and the aggregation of income, if at all, could only be considered in the assessment of the assessee's wife. He, therefore, excluded the share income of the wife Smt. Gita Devi from the firm Hanuman Prasad Surya Prakash amounting to Rs. 48,896 from the assessee's total income. The assessee has come up in appeal before us with the grievance that the order of the Commissioner under Section 263 directing the ITO to include in the assessee's total income, the income of share of the wife Smt. Gita Devi from the firm Hanuman Prasad Surya Prakash was unjustified. The revenue has also come up in appeal before us with the grievance that the AAC wrongly excluded from the assessee's total income, the income of share of the wife Smt. Gita Devi from the firm Hanuman Prasad Surya Prakash, which was in accordance with the ruling of the Hon'ble Allahabad High Court in the case of Madho Prasad v. CIT [1978] 112 ITR 492.

3. The assessee's learned counsel, Shri Gulati, submitted to us that even according to Explanation 1 to Section 64, the aggregation of income has to be done either in the case of the husband or the wife whose total income (excluding the income which is to be aggregated) is greater and since in the instant case the income of the wife was greater, the aggregation could only be done in the case of the wife and not the assessee under consideration here. Proceeding further, Shri Gulati invited our attention to the judgment of the Hon'ble Supreme Court dismissing the special leave petition filed by the Commissioner, Hyderabad, against the judgment of the Hon'ble Andhra Pradesh High Court in the case of CIT v. Sanka Sankaraiah [1978] 113 ITR 313.

Relying on the observations of the Hon'ble Allahabad High Court in the case of Raza Buland Sugar Co. Ltd. v. CIT[1976] 102 ITR 451, Shri Gulati submitted to us that where the Hon'ble Supreme Court rejects the special leave petition, it is to be inferred that the judgment of the Hon'ble High Court against which the special leave petition was moved, was impliedly approved by the Hon'ble Supreme Court and it follows, therefore, that the contrary view expressed by the Hon'ble Allahabad High Court in the case of Madho Prasad v. CIT (supra) is no longer good law. The last objection of Shri Gulati was that the direction of the Commissioner to the ITO to include in the assessee's total income, the income of the wife Smt. Gita Devi from share in the firm Hanuman Prasad Surya Prakash was a blanket direction without applying his mind and without considering the provisions of Section 64, particularly the Explanation 1 and this direction was not in accordance with law.

Summing up, Shri Gulati vehemently argued before us that the order of the Commissioner under Section 263 was unjustified and should be cancelled. Alternatively, the submission of Shri Gulati was that the direction of the Commissioner should be modified and that the ITO should act according to law, i.e., subject to the provisions of the Income-tax Act.

4. On the other hand, the learned departmental representative, Shri Srivastava, relying on the ruling of the Hon'ble Allahabad High Court in the case of Add!. CIT v. Saraya Distillery [1978] 115 ITR 34 submitted to us that an order was erroneous either when it does not decide a point and record a findying on an issue, which ought to have been done or comes to a decision on that issue wrongly. Elaborating on his argument, Shri Srivastava contended before us that the ITO while completing the assessment of the assessee-individual by order dated 22-12-1977, did not consider the applicability of Section 64 to the income of the wife arising from the firms in which the assessee was a partner. Proceeding further, Shri Srivastava submitted that in the interpretation of the various sections of the statute, we have to be guided by the rulings of the Hon'ble High Courts or the Hon'ble Supreme Court and, therefore, the ruling of the Hon'ble Allahabad High Court in the case of Madho Prasad (supra) was a binding authority for us. In this connection, he also submitted that there was a distinction between a special leave petition being not entertained and the judgment of the Hon'ble Supreme Court, which was to follow if the special leave petition had been admitted and, therefore, by the mere fact of the rejection of the special leave petition, it cannot be inferred that the Hon'ble Supreme Court had also gone into the merits of the issue raised in the special leave petition and taken a decision thereon, which it would have done only if the special leave petition had been admitted and the hearing of the petition came up subsequently before their Lordships. He, therefore, submitted that there can be no presumption of implied approval or disapproval of the judgment of the Hon'ble Andhra Pradesh High Court or of the Hon'ble Allahabad High Court by the mere fact of the rejection of the special leave petition by the Hon'ble Supreme Court in the case of CIT v. Sanka Sankariah (supra). The last argument of Shri Srivastava was that the assessee should be treated as an individual in respect of the incomes of HUF which comprised not only the share from the firm Hanuman Prasad Surya Prakash but also share from the firm Kanhaiya Lal Hanuman Prasad and property income and if this was done, the assessee's total income even excluding the income aggregation of which was under consideration will be more than the income of the wife. He, therefore, vehemently argued before us that the order of the Commissioner was perfectly justified and should be upheld.Alternatively, Shri Srivastava submitted that even if the income of the wife Smt. Gita Devi from share in the firm Hanuman Prasad Surya Prakash was held to be not includible in the total income of the assessee-individual because the income of the wife was greater and in view of the Explanation 1 to Section 64, the aggregation of income has to be considered in the hands of the wife, a finding to this effect should be given.

5. Coming to the appeal filed by the revenue, Shri Srivastava submitted to us that the ITO had merely given effect to the order of the Commissioner by including in the total income of the assessee-individual, the income of the wife, Smt. Gita Devi, from share in the firm Hanuman Prasad Surya Prakash as directed by the Commissioner in his order under Section 263 and against this consequential order of the ITO, in the first place no appeal could lie to the AAC and even if an appeal did lie, it was not open to the AAC who was an authority subordinate to the Commissioner to question and adjudicate upon what was done by the Commissioner in exercise of his powers under Section 263. He, therefore, vehemently argued before us that the order of the AAC was erroneous.

6. On the other hand, the assessee's learned counsel, Shri Gulati, submitted to us that since the order of the Commissioner under Section 263 was itself erroneous, the consequential order of the ITO also became erroneous and the order of the AAC which had the effect of restoring the assessment as originally made by the ITO, was correct both technically and on merits.

7. We have carefully considered the rival submissions. The HUF is a distinct and separate entity from the individual. We, therefore, find no merit in the argument of the learned departmental representative, Shri Srivastava, that the income of the HUF of which the assessee was a karta should also be treated as the income of the assessee-individual for the purpose of deciding whether the income of the assessee-individual or the income of the wife (excluding the income aggregation of which was under consideration) was greater. Here it might perhaps not be out of place to mention that the Hon'ble Allahabad High Court in the case of Madho Prasad v. CIT (supra) merely laid down that even if the person represented his HUF as partner of a firm, he was a partner in his individual capacity only and, therefore, even if the income from share was the income of the HUF represented by him, for the limited purpose of determining, who was a partner, the partner was the person in his individual capacity and, therefore, the provisions of Section 64 will be applicable on the footing that he was a partner in his individual capacity. We do not know how from this it can be inferred that the income of the HUF represented by the assessee-individual should be treated as the income of the assessee-individual. We have, therefore, no hesitation incoming to the conclusion that there is no merit in the argument of the learned departmental representative, Shri Srivastava, that the income of the HUF, represented by the assessee, should be treated as the income of the assessee-individual for the purpose of finding out whether it was the income of the assessee or it was the income of the assessee's wife which was higher. The finding has been given by the AAC in his order that excluding the income aggregation of which was under consideration, the income of the wife Smt. Gita Devi was higher than the income of the assessee-individual, this was also the claim of the assessee's learned counsel, Shri Gulati, before us and both the finding of the AAC in his order as well as the claim made by Shri Gulati before us, is not controverted by the learned departmental representative, Shri Srivastava. This means that even if the provisions of Section 64 were to be applied, it was only the income of the assessee-individual which could be included in the total income of the assessee's wife in view of Explanation I to Section 64(1). In these circumstances, if the ITO while making the assessment of the assessee-individual does not include in his total income the income of his wife, the order of the ITO cannot be said to be erroneous. We have, therefore, no hesitation in coming to the conclusion that the order of the Commissioner under Section 263 was itself erroneous and unjustified. The order of the Commissioner under Section 263 is, therefore, hereby cancelled.

8. This means that the order of the AAC which had the effect of restoring the assessment originally made by the ITO and deleting the addition made in consequence of the order of the Commissioner under Section 263 cannot be said to be at all incorrect. It is, therefore, not necessary for us to comment on the other arguments of the learned departmental representative, Shri Srivastava, raised in the appeal filed by the revenue and we have no hesitation in coming to the conclusion that on the facts and in the circumstances of the present case, the order of the AAC, Range-I, Kanpur, does not call for any interference.

9. The appeal tiled by the assessee against the order of the Commissioner under Section 263, therefore, succeeds and is hereby allowed, while the appeal filed by the revenue against the order of the AAC, Range-!, Kanpur, fails and is hereby dismissed.


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