1. The assessee had claimed that the income of Rs. 1,500 from the amount of Rs. 46,000 was not taxable as his individual income since that income, according to him, belonged to his HUF with his wife. He contended that the said sum of Rs. 46,000 was made up of gifts made by his near relatives and those of his wife and that these gifts were made to the said HUF. The ITO accepted this claim and excluded the said amount of Rs. 1,500 from the income of the assessee 2. However, the Commissioner, proceeding under Section 263, set aside the assessment and directed the ITO to club the said income of Rs. 1,500with the individual income of the assessee. In doing so the Commissione has relied upon mainly on the decision of the Supreme Court in the case of Surjit Lal Chhabda v. CIT  101 ITR 776.
3. Before us the learned counsel for the assessee has sought to distinguish the case of Surjit Lal Chhabda (supra) on the ground that in that case the assessee had thrown his individual property in the family hotchpot which was not the case here. He has also argued that the decision of the Special Bench of this Tribunal in the case of Rajen Ramesh Chandra v. ITO  1 ITD 791, on which the Commissioner had placed some reliance, was a case of inheritance and so was the case of Gowli Buddanna v. CIT  60 ITR 293 (SC). He has further argued that in N.V. Narendranath v. CWT  74 ITR 190 (SC) the Court was concerned with the property acquired on partition and he has also pointed out that in CIT v. M. Balasubramaniam  132 ITR 529 (Mad.) the Court was concerned with the case of gift given by a father to his son for the son's future HUF whereas in this case the HUF of the assessee and his wife existed when the gifts were received. In support of his case he has relied upon the decision of the Supreme Court in the case of Pushpa Devi v. CIT  109 ITR 730, where the Court held that when the gift was given to the HUF, it was the HUF which should pay the tax.
4. The learned departmental representative has mainly relied upon the order of the Commissioner.
5. In Surjit Lal Chhabda's case (supra) the Supreme Court has stated as follows : There are thus two classes of cases, each requiring a different approach. In cases falling within the rule in Gowli Buddanna's case, the question to ask is whether property which belonged to a subsisting undivided family ceases to have that character merely because the family is represented by a sole surviving coparcener who possesses rights which an owner of property may possess....In cases falling within the rule in Kalyanji's case 5 ITR 90 (PC), the question to ask is whether property which did not belong to a subsisting undivided family has truly acquired the character of joint family property in the hands of the assessee. In this class of cases, the composition of the family is a matter of great relevance for, though a joint Hindu family may consist of a man, his wife and daughter, the mere existence of a wife and daughter will not justify the assessment of in come from the joint family property in the status of the head as a manager of the joint family. The appellant's case falls within the rule in Kalyanji's case since the property, before it came into his hand's was not impressed with the character of joint family property. It is of great relevance that he has no son and his joint family consists, for the time being, of himself, his wife and daughter. (p. 793) The substance of this case is that in order that a property may be regarded as HUF property it should either have antecedents of joint family property or when the individual property is introduced into the HUF, there should be a coparcenary in existence within the HUF. The Supreme Court in Surjit Lal Chhabda's case (supra) has also observed at page 796 that 'since the personal law of the appellant regards him as the owner of Lodge and the income there from as his income even after the property was thrown into the family hotchpot, the income would be chargeable to income-tax as his individual income and not that of the family'. This, however, is only an additional reason in that case.
6. Now in Pushpa Devi's case (supra) the assessee had made gift of certain amounts in favour of the HUF which consisted of herself, her husband, her father-in-law, her mother-in-law and her minor son and three daughters.The Supreme Court held that the income from the gifted amount would have to be taxed in the hands of the HUF. Although the case of Surjit Lal Chhabcia (supra) has not been cited in this Pushpa Devi's case (supra), it can be said that this decisionis quite consistent with the decision in Surjit Lal Chhabda's case (supra) be causein Pushpa Devi's case (supra) there was a coparcenary in existence within the HUF in question.
However, in the present case although the gift might have been made to the HUF there is no coparcenary in existence in that HUF. Therefore, this case is distinguishable from the case of Pushpa Devi (supra).
Consistently with the decision of the Supreme Court in Surjit Lal Chhabda's case (supra) we hold that the income from the amounts gifted to the HUF cannot be taxed in the hands of the HUF but would have to be taxed in the hands of the individual assessee.