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Assistant Commissioner of Income Vs. Gauri Kanta Barkataky and ors. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Guwahati
Decided On
Judge
Reported in(2004)267ITR37(Gau.)
AppellantAssistant Commissioner of Income
RespondentGauri Kanta Barkataky and ors.
Excerpt:
1. the appeal by the department in ita no. 188/gau/1993 has been filed against the order dt. 29th oct., 1992, of the dy. cit(a) for the asst.yr. 1988-89 and the appeals in ita nos. 11 to 13/gau/1996, for the asst. yrs. 1983-84 to 1985-86 have been filed against the consolidated order dt. 25th sept., 1995, of the cit(a). since identical grounds of appeal are involved, the appeals are disposed of by this consolidated order for the sake or convenience. the following grounds of appeal have been raised : "for that the dy. cit(a) erred in cancelling the protective assessment and holding that no part of the income of the appellant is assessable in the hands of sri ajit barkataky and shri krishna kanta barkataky." "1. for that the cit(a) had erred in law and in facts holding that there is valid.....
Judgment:
1. The appeal by the Department in ITA No. 188/Gau/1993 has been filed against the order dt. 29th Oct., 1992, of the Dy. CIT(A) for the asst.

yr. 1988-89 and the appeals in ITA Nos. 11 to 13/Gau/1996, for the asst. yrs. 1983-84 to 1985-86 have been filed against the consolidated order dt. 25th Sept., 1995, of the CIT(A). Since identical grounds of appeal are involved, the appeals are disposed of by this consolidated order for the sake or convenience. The following grounds of appeal have been raised : "For that the Dy. CIT(A) erred in cancelling the protective assessment and holding that no part of the income of the appellant is assessable in the hands of Sri Ajit Barkataky and Shri Krishna Kanta Barkataky." "1. For that the CIT(A) had erred in law and in facts holding that there is valid HUF in existence assessable to tax and cancelling the protective assessment.

2. For that the CIT(A) had erred in law and in facts in holding that the FDRs in the balance sheet and its income will be considered in the hands of the said HUF on a substantive basis." 2. The assessee filed its return of income claiming the status of HUF.In the asst. yr. 1988-89 while completing the assessment on 6th March, 1992, the AO held that the HUF is non-existent and he has taken the status of the assessee as AOP and assessed the income shown on protective basis. The AO also held that the same income is assessable on a substantive manner in the hands of Ajit Barkataky and Krishna Kanta Barkataky, The assessment for the asst. yrs. 1983-84 to 1985-86 have also been completed on 17th March 1994, with similar observations and findings in the status of AOP.3. The AO has recorded that Gauri Kanta Barkataky died sometime in 1947 leaving behind his four sons, out of which two sons, namely, Biswakanta Barkataky and Krishna Kanta Barkataky, claimed to have exercised their volition and formed an HUF having agricultural income and interest income. The HUF filed its first return of income for the asst. yr.

1979-80 on 21st Aug., 1982, and the assessment was completed accepting the income returned in the status of HUF. The AO has stated that the FDRs in the bank amounting to Rs. 5,80,000 made from April, 1978, to January, 1982, are in the name of Krishna Kanta Barkataky and his family members and none of the FDRs are in the name of Biswakanta Barkataky and his family members. He also observed that the coparceners have not been residing together or sharing a common kitchen. On going through the land Patta placed before him by the assessee, the AO has observed that these documents did not, in any way, show these were the lands of Gauri Kanta Barkataky and nor do they relate to 1947 to show the joint ownership and has opined that in later years these lands might have been purchased in joint names. The AO has also enunciated the legal position needed to form an HUF under the Dayabhaga Hindu Law and has come to the finding that the assessee-HUF does not meet the said requirement In view of the aforesaid observation, the AO has held that there is no HUF assessable to tax and completed the assessment in the status of AOP and held that the FDRs and the income assessed on protective basis in the hands of the AOP will be considered in the hands of Krishna Kanta Barkataky and Ajit Barkataky on a substantive basis.

4. Being aggrieved, the assessee-HUF preferred appeals before the Dy.

CIT(A) and CIT(A). The first appellate authority has accepted the claim of the assessee-HUF relying on the two affidavits, the first order of assessment passed in the case of the assessee for the asst. yr. 1979-80 accepting the status as HUF, clarification and explanation dt. 6th Sept., 1992, details of agricultural land along with land Pattas and land revenue rules, returns of income filed from year to year, provisions contained in Section 171 of the Act and various case laws relied on by the assessee-HUF. The first appellate authority has also observed that not an iota of evidence has been brought on record by the AO to prove that Krishna Kanta Barkataky or his family members were the sole beneficiary of the entire funds of the said HUF. It was held that there is a valid HUF in existence assessable to tax and determined the status of the assessee as that of an HUF. The protective measure of the assessment was cancelled and it was held that the FDRs of the said HUF and its income will be assessed in the hands of the said HUF on substantive basis and not in the hands of Krishna Kanta Barkataky and Ajit Barkataky.

5. We have considered the rival submissions at length and perused the orders of the lower authorities in light of the materials available on record. We have duly considered the various papers placed before us in the paper book. We have also considered the various case laws relied upon by the learned authorised representative of the assessee but we are of the considered opinion that the said case laws do not conclusively establish the contention of the respondent. It is observed that the point of time at which Sri B.K. Barkataky and Shri K.K.Barkataky exercised their claimed volition to form HUF is neither spelt out nor established. The state of facts during the period 1947 to 1970 are not on records, However, a scrutiny of the financial statements of the assessee shows that the source of income of the assessee is from agricultural income and interest income on FDRs. Agricultural income is derived from agricultural lands which are owned in joint names of Sri K.K, Barkataky and Sri B.K. Barkataky. The sources of investment in FDRs with the banks are from the above stated agricultural income as well as from loans borrowed in the name of the assessee. The AO has not found in the order of assessment that the funds invested in FDRs emanated from the individual income of Sri Krishna Kanta Barkataky and/or Sri Ajit Barkataky or that the income of the assessee was enjoyed by Sri Krishna Kanta Barkataky and Sri Ajit Barkataky. It is also observed that the AO has not just assessed the income of the assessee-HUF protectively but travelled further to determine the status of the assessee as AOP.6. In this case, this Tribunal in its order passed in ITA Nos; 99 to 101/Gau/1989 for the asst. yrs. 1983-84 to 1985-86 recorded at para 9 : "As stated earlier the assessment was made by the ITO in the status of AOP and there is apparently no assessment in the case of HUF. The CIT(A) held that there was no HUF. He did not give a finding whether there was an AOP which status was adopted by the ITO in the assessment order. In other words, the assessment made in the status of AOP remained in existence as the CIT(A) has not cancelled the assessment on the AOP." 7. Keeping in view the totality of the facts and circumstances of the case as stated above, we are of the considered view that the claim of the status by the assessee as to HUF is not conclusively proved. As there is clear evidence to show that Sri B.K. Barkataky and Sri K.K.Barkataky have jointed hands for common purpose, the object of which was to produce income, profits and gains. In view of the above, the AO was justified in taking the status of the assessee as AOP, Hence, to the above extent the order of the first appellate authority is set aside and that of the AO is restored back. The appeal of the Revenue in respect of this issue is allowed.

9. In view of the above stated facts of the case and as we have already held that the assessee is to be assessed in the status of AOP in respect of its income, interest income from the FDRs reflected in the balance sheet of the assessee is to be assessed in substantive manner in its hands. We uphold the orders of the first appellate authorities to the extent it cancelled the protective description of the assessment. The appeal of the Revenue in respect of this issue is dismissed.

1. The order proposed by learned Brother AM has been gone through by me carefully. I have agreed with learned Brother in respect of the issue involved in these appeals that the claim of the status by the assessee as HUF is not conclusively proved but have not been able to persuade myself to agree with his conclusion arrived at. Therefore, I proceed to express my dissenting views.

2. The question for our consideration in these appeals is, whether there was a valid HUF in existence assessable to tax or not. For the sake of clarity, I consider it necessary to state the grounds on which the Department has filed these appeals and the same are as under: "1. For that the CIT(A) had erred in law and in facts holding that there is valid HUF in existence assessable to tax and cancelling the protective assessment.

2. For that the CIT(A) had erred in law and in facts in holding that the FDRs in the balance sheet and its income will be considered in the hands of the said HUF on a substantive basis." "For that the Dy. CIT(A) had erred in cancelling the protective assessment and holding that no part of the income of the appellant is assessable in the hands of Shri Ajit Barkataky and Shri Krishna Kanta Barkataky".

3. The facts have been narrated by the learned AM in paras 3 to 4 in his order. However, for the sake of completeness, I would like to state the same briefly.

4. In respect of asst. yrs. 1983-84 to 1985-86, the assessee filed the returns claiming the status as HUF. The AO completed the assessment for the asst. yrs. 1983-84 and 1984-85 in the status of AOP on a protective basis as he did not find any entity assessable to tax in respect of the income returned. However, for the asst. yr. 1985-86, the AO completed the assessment in the status of HUF on a protective basis. The AO held that there was no HUF in existence at all. However, the original assessments for the abovementioned years were set aside by the first appellate authority by a consolidated order dt. 18th Nov., 1988, The learned CIT(A) stated at p. 7 thereof that the existence of HUF had not been proved, the business of HUF had not been proved, the cash credit had not been proved to be genuine and the learned CIT(A) held that there was no question of making a protective assessment because there was no HUF in existence and thus cancelled the assessment. The assessee filed appeals before the. Tribunal being ITA Nos. 99, 100 and 101/Gau/1989 for the asst. yrs. 1983-84, 1984-85 and 1985-86, The Tribunal by its order dt. 22nd June, 1990, restored the matter back to the file of the learned CIT(A) after stating inter alia, that the learned CIT(A) held that there was no HUF but did not give a finding whether there was an AOP, which status was adopted by the ITO in the assessment order. The Tribunal also observed that the assessment made in the status of AOP remained in existence as the learned CIT(A) had not cancelled the assessment on AOP.5. Pursuant thereto the first appellate authority by a consolidated order dt. -18th June, 1992, set aside the assessments to the file of the AO.6. Presently, these appeals arise out of the assessment orders made for the asst. yrs. 1983-84, 1984-85 and 1985-86 under Section 143(3)/261/144A all dt. 7th March, 1994. The AO in the assessment orders after considering the facts and the requirements of legal position under Dayabhaga Hindu Law, has held that there is no HUF assessable to tax as the status of HUF has not been accepted by the Department from asst. yr. 1980-81 onwards. Since the returns were filed, the AO completed the assessment as a protective measure in the status of AOP. AO, further held that the FDRs as shown in the balance sheet and the income would be assessed in the hands of the person(s) in whose name the FDRs were found viz., K.K. Barkataky and Ajit Barkataky on a substantive basis.

7. Similarly, in respect of asst. yr. 1988-89, the AO completed the assessment under Section 143(3) by order dt. 30th March, 1992, by denying the existence of HUF and assessing the returned income on protective basis in the status of AOP but on substantive basis in the hands of the concerned persons Sri K.K. Barkataky and Ajit Barkataky.

8. Being aggrieved, the assessee filed appeals before the first appellate authority.

9. The learned CIT(A) by a consolidated, order dt. 25th Sept., 1995, for the asst. yrs. 1983-84, 1984-85 and 1985-86 and by an order dt.

29th Oct., 1992, for the asst. yr. 1988-89 accepted the contention of the assessee that there was a valid HUF in existence assessable to tax.

Accordingly, the learned CIT(A) cancelled the protective nature of assessment and held to consider the FDRs in the balance sheet of the said HUF and its income in the hands of the said HUF on a substantive basis and not in the hands of K.K. Barkataky and Ajit Barkataky. Hence, the Department has filed these appeals before the Tribunal.

10. We heard the learned representatives of the parties. During the course of hearing of the appeals, the learned Departmental Representative supported the orders of the AO, whereas the learned authorised Representative of the assessee justified the orders of the first appellate authority by making his submissions on the lines of the submissions made before the learned CIT(A).

11. The learned AM vide paras 5 to 7 of his order after considering the material on record, orders of the authorities below ,and the rival submissions of the parties has held that claim of the status of the assessee as of HUF is not conclusively proved. In this regard, I agree with my learned brother AM.12. In view of the above, the issue involved in the appeals filed by the Department before us as to whether learned CIT(A) had erred in law and in facts holding that there is a valid HUF in existence assessable to tax is decided in favour of the Department by reversing the order(s) of the first appellate authority. So, on this issue, I agree with the findings of my colleague learned AM.13. However, I did not agree with learned AM to hold that the AO was justified in taking the status of the assessee as AOP and to hold that the assessee is to be assessed in the status of AOP in respect of its income, interest income from the FDRs reflected in the balance sheet of the assessee and is to be assessed in substantive manner in its hands, Firstly, this issue is not the subject-matter of appeal in the appeals filed by the Department before us nor any submissions were made by the parties at the time of hearing of the appeals. The AO made a protective assessment in the status of AOP as the AO did not find HUF as an entity assessable to tax but to complete the assessment. On the other hand, the learned CIT(A) accepted the existence of the HUF and accordingly, held to assess the income shown by the assessee on substantive basis and consequently cancelled the protective assessment and also cancelled the order of the AO to make the substantive assessment of the income in the hands of the other persons namely, K.K. Barkataky and Ajit Barkataky. 1 am of the considered view that in the facts and circumstances of the case, the order of the AO that there is no existence of valid HUF is to be confirmed but the protective assessment made in the hand of AOP without making any investigation by him is to be cancelled and consequently the returned income is to be assessed in the hands of the other persons namely, K.K. Barkataky and Ajit Barkataky on a substantive basis.

14. In view of the above, I allow both the grounds of appeal for the asst. yrs. 1983-84, 1984-85 and 1985-86 and also allow the only ground of.appeal for the asst. yr. 1988-89 on the appeals filed by the Department by accepting the order of the AO that there is no valid HUF in existence assessable to tax. However, the protective assessment made by the AO in the hand of AOP is to be cancelled and consequently, the income is to be assessed on substantive basis in the hands of the respective persons namely, K.K. Barkataky and Ajit Barkataky in their assessments. 15. In the result, the appeals filed by the Department are allowed.

As there is a difference of opinion between the AM and the JM, the matter is being referred to the Hon'ble President of the Tribunal under Section 255(4) of the IT Act, 1961, with a request that the following question may be referred to a Third Member or the pass such orders as the President may desire : "Whether, on the facts and in the circumstances of the case, is it in order to confirm the returned income as AOP on substantive basis when the said issue is not a ground of appeal filed before us ?".

In these appeals, there is difference of opinion between the Members.

In view thereof, the issue is referred to the Hon'ble President of the Tribunal under Section 255(4) of the IT Act, 1961, for opinion of the Third Member on the issue which are framed as under: (1) Whether, in view of the facts and circumstances of the case, when the AO himself after rejecting the status of the assessee as HUF assessed the assessee in the status of an AOP, on second appeal, finding that the status claimed as HUF is not proved, was there any error in accepting the status of the assessee as an AOP (2) Whether, in view of the facts and circumstances of the case and also in view of the finding recorded in para 5 of the order in respect of the sources of the funds invested in FDRs the income in question can be held to be the individual income of Shri K.K. Barkataky and Shri Ajit Barkataky The above appeals for the asst. yrs. 1983-84, 1984-85, 1985-86 and 1988-89 had been heard by a bench constituting two members. As a result of difference of opinion arising between the members of the Division Bench, I have been nominated by the Hon'ble President, as Third Member, for deciding the points of difference in these appeals.

(1) Whether, in view of the facts and circumstances of the case, when the AO himself after rejecting the status of the assessee as HUF assessed the assessee in the status of an AOP, on second appeal, finding that the status claimed as HUF is not proved, was there any error in accepting the status of the assessee as an AOP (2) Whether, in view of the facts and circumstances of the case and also in view of the finding recorded in para 5 of the order in respect of the sources of the funds invested in FDRs the income in question can be held to be the individual income of Shri K.K. Barkataky and Shri Ajit Barkataky Whether, on the facts and in the circumstances of the case, is it in order to confirm the returned income as AOP on substantive basis when the said issue is not a ground of appeal filed before us 3. In my considered view, the question framed by the learned JM brings out the real difference of opinion between the Members insofar as the Members have agreed that there was no HUF in existence, as held by the AO.4. The relevant facts, briefly stated, are that in this case the assesses had filed returns of income for the asst. yrs. 1983-84, 1984-85 and 1985-86 in the status of Hindu Undivided Family (HUF) on 31st March, 1986, The Assessing Officer (AO) on security of record found that the HUF claimed by the assessee did not exist at all. The AO in the assessment order for the asst. yr. 1983-84 has given the family tree of M/s Gauri Kanta Barkataky and Ors. as below : Gourikanta Barkataky _____________________________|_____________________________ | | | | Paras Biswakanta Manik Krishnakanta 5. The assessee had claimed the status of HUF consisting of two coparceners viz. (1) Biswakanta and (2) Krishnakanta. Gourikanta Barkataky, the father of the aforesaid brothers, died sometime in 1947, It was claimed by the assessee that Biswakanta and Krishnakanta had formed an HUF and it had derived agricultural income and some business income out of trading in agricultural produce. Rejecting the claim of HUF, it has been pointed out by the AO that the first return was filed by the said HUF for the asst. yr. 1979-80 on 21st Aug., 1982, i.e., 35 years after the formation of the so-called HUF. The return for the asst. yr. 1979-80 had been accepted in the status of HUF without making any enquiry and without going into details. However, the AO had made enquiries in the asst. yr. 1983-84 onwards and asked the assessee to establish the claim of status as HUF. It was found by the AO that the returns of income for the asst. yrs. 1980-81, 1981-82 and 1982-83 were purportedly verified by Biswakanta Barkataky, as Karta, but the signature was that of Krishnakanta Barkataky. For the asst. yrs.

1983-84 and 1985-86 the returns of income had been verified and signed in the name of Biswakanta Barkataky. When asked to furnish evidence regarding formation of HUF after the death of Gaurikanta Barkataky the assessee referred to the consistent conduct which, according to them, established the existence of HUF. The AO pointed out that Biswakanta Barkataky had always stayed at village Jammuguri, Naogaon District, and was basically a cultivator. Two of his sons were cultivators and others were Government servants (now retired) one being a supervisor, the other a Junior Engineer. It was further pointed out that Krishnakanta Barkataky was a Government servant and he along with his sons were based in Guwahati. One of his sons was in business, while the other two were doctors. The AO, accordingly, held that the so-called coparceners were not residing together or sharing a common kitchen. The assessee had also produced evidence regarding ownership of lands. On perusal of evidence produced, the AO found that lands on Patta Nos. 243, 212, 74 and 4 were in the names of Biswakanta, Krishnakanta and about eight other names, 6. The AO further observed that the law was clear on the formation of a Dayabhaga HUF. The heirs of a Dayabhaga deceased do not spontaneously, by operation of law, become members of HUF. They remain co-owners with definite and ascertained shares and were to the assessed individually unless there was evidence that the heirs voluntarily decided to constitute an HUF amongst themselves. For this proposition, reliance was made on the decision of Hon'ble jurisdictional High Court in the case of CWT v. Gouri Shankar Bhar (1968) 68 ITR 345 (Cal) which was affirmed by the Hon'ble Supreme Court (though on different grounds) in CWT v. Gouri Shankar Bhar (1972) 84 ITR 699 (SC). It was further held by the AO that there was nothing on record to establish that there was an agreement in 1947 between two of the four brothers to form an HUF.There was also no evidence of joint property at that time. No evidence about the conduct of the parties, in terms of common residence or common kitchen or otherwise was also produced. Referring to the claim of the assessee about the existence of HUF, the AO pointed out that most of the FDRs were in the name of Krishnakanta, his wife and sons.

In the statement of accounts, Biswakanta and his heirs appear as creditors. The AO, accordingly, held that the onus that lay upon the assessee to prove the jointness and the possession of lands since 1947 was not discharged by the assessee. In the final analysis, the AO held as under: "In the light of the above, there is no HUF assessable to tax. As return of income is filed in the name of M/s Gourikanta Barkatakay and Ors. the assessment completed as a protective measure in the status of AOP. The FDRs in the balance sheet and the income assessed on a protective basis will be considered in the hands of Krishnakanta Barkakaty and Ajit Barkakaty on a substantive basis." 7. For the asst. yrs. 1984-85 and 1985-86 also the AO did not accept the status of the assessee as HUF. The assessment orders for the asst.

yrs. 1983-84, 1984-85 and 1985-86 have been made on 31st March, 1986.

The assessments were completed on protective basis in the status of AOP for the asst, yrs. 1983-84 and 1984-85, For the asst. yr. 1985-86 the assessment was made on protective basis in the status of HUF, The assessment for the asst. yr. 1988-89 was made on similar lines vide order dt. 6th March, 1992. It is not disputed that assessments have also been made in respect of investment made in FDRs and interest derived therefrom in the hands of individuals for which there is no controversy involved in these appeals.

8. The assessee appealed to the CIT(A) against the orders of the AO, and the CIT(A), vide consolidated order for the asst. yrs. 1983-84, 1984-85 and 1985-86, dt. 18th Nov., 1988, dismissed the appeals of the assessee by holding as under: "In view of all these facts, I am of the opinion that the existence of HUF has not been proved, the business of the HUF has not been proved, the cash credits have not been proved to be genuine and, therefore, I hold that there is no question of making protective assessment because there was no HUF in existence and thus, I cancell the assessment." 9. The assessee appealed to the Tribunal against the above decision of the CIT(A). The Tribunal observed that in the case of Ajit Barkakaty in ITA No. 98/Gau/1987 and Krishnakanta Barkakaty in ITA Nos. 89 to 95/Gau/19.89 vide order dt. 22nd June, 1990, the Tribunal had restored the issue regarding assessment of income to the file of the AO for fresh decision after bringing the necessary materials on record, as discussed by the Tribunal, in those respective orders and after giving the assessee reasonable opportunity of being heard. It was felt by the Tribunal that since the facts of the present case were linked with the above-mentioned cases, the matter required to be restored to the file of the CIT(A) for fresh consideration. The Tribunal also pointed out that assessments have been made by the AO in the status of AOP on protective basis and whereas the CIT(A) has recorded a finding that there was no HUF, he has not recorded any finding as to what happens to the substantive assessment. According to the Tribunal, the assessments in the status of AOP remained in existence as the CIT(A) did not cancel the assessments made in AOP status. The CIT(A) was thus directed to dispose of the grounds of appeal as originally filed by the assessee vis-a-vis the ground adopted by (sic) were directed to be made.

10. Subsequently, in the asst. yrs, 1983-84 to 1985-86 the CIT(A), vide order dt. 18th June, 1992, remanded the matter back to the file of the AO for fresh decision in accordance with law after examining the evidence and contentions advanced on behalf of the assessee. The AO made fresh assessments vide order dt. 17th March, 1994, reiterating the earlier stand that there was no HUF in existence. On appeal, in the second round, the CIT(A) vide order dt. 25th Sept., 1995, held that HUF was in existence and, therefore, the AO was not justified in making the assessments on protective basis in the hands of AOP. Similar view was taken for the asst. yr. 1988-89.

11. Aggrieved by the order of the CIT(A), the Revenue filed appeals before the Tribunal.

12. The controversy arising in these appeals essentially is as to whether the AO was justified in not accepting the status of the assessee as that of HUF. The learned AM as well as learned JM have concurred in regard to the said issue, insofar as they have agreed that the AO was justified in not accepting the existence of an HUF. Thus, as a result of concurring opinion of the learned Members of the Division Bench, the action of the AO in denying the status of HUF to the respondents stands confirmed. As far as the said issue is concerned, it is unnecessary for me to record a finding one way or the other as there is no difference of opinion in regard to this issue. The difference of opinion has arisen only on account of consequences of not recognising the respondents' status as that of HUF. The AO, after recording a finding that the HUF existed, held that the returns of income filed in the name of Gaurikanta Barkataky and others, the assessments are completed, as protective measures, in the status of AOP. It is also held that the FDRs in the balance sheets and the income assessed on protective basis will be considered in the hands of Krishnakanta Barkataky and Ajit Barkataky on substantive basis. The finding of the AO, being necessary for appreciating the difference of opinion, assumes importance. The said finding has already been quoted in para 6 above.

It is evident from the relevant order of the AO that after recording the finding that no HUF was assessable to tax, there is no enquiry or finding that an AOP existed for the purpose of assessment. In fact, in the normal course, once the return of income is field in the name of an HUF and the same is not accepted on substantive basis, the only course open to the AO is to make the assessment on the basis of the return in the same status in which the return is filed. This has been done in the asst, yr. 1985-86 and I think this is the correct procedure which ought to have been followed by the AO.13. Reverting back to the actual difference of opinion between the Members it is essential to point out as to whether it was necessary for the Tribunal to record a finding that the AOP was in existence and that the assessment was to be completed in the hands of the AOP on substantive basis. The learned AM in his proposed order has recorded a finding that there was an AOP in existence which was required to be assessed on substantive basis. In my considered view, the issue regarding the existence of an AOP does not arise in these appeals at all. It is to be remembered that the assessee had filed the returns of income in the status of HUF. The AO has recorded a finding that there was no HUF in existence, though claimed by the assessee. The AO has also recorded a finding that the returns in the status of HUF had been filed purportedly to cover up the fixed deposit investments made by the individuals. When a return is filed in the status of HUF and the AO comes to the conclusion that HUF does not exist, it is open to the AO to initiate proceedings for the purpose of assessment in the hands of the rightful owner of the income. The AO has recorded a finding that the investment in FDRs and the income derived therefrom belongs to individuals. Such individuals have been separately assessed to tax.

Therefore, the action required to be taken as a result of non-recognition of HUF by the AO stands as already taken by the AO. It is neither the case of the assessee nor that of the Revenue that there was an AOP in existence and that the investments as also the income, therefrom, related to such AOP. Even before the Tribunal, the assessee did not claim that any AOP existed. In such circumstances, recording a finding that the income disclosed by the assessee in the status of HUF should be assessed in the status of AOP, on substantive basis, on the basis of returns filed by the assessee in the status of HUF, is, in my considered view, not in order.

14. As already pointed out, substantive assessments having been made in the hands of the individuals, in separate proceedings, there is no scope for recording a finding that the income should be assessed in the hands of the AOP on substantive basis. As far as the present assessments are concerned, the Tribunal having recorded a finding that HUF was not in existence at all, the returns filed in the status of HUF have got to be cancelled on assessments in the cases of actual owner of investment/income on substantive basis becoming final. I, therefore, concur with the view expressed by the learned JM that there is no scope or justification for declaring the assessments made by the AQ on protective basis to be on substantive basis in the hands of the AOP.15. Let the matter be placed before the regular Bench for passing a consequential order in accordance with the majority view.

"For that the Dy. CIT(A) erred in cancelling the protective assessment and holding that no part of the income of the appellant is assessable in the hands of Sri Ajit Barkataky and Shri Krishna Kanta Barkataky." "1. For that the CIT(A) had erred in law and in facts holding that there is valid HUF in existence assessable to tax and cancelling the protective assessment.

2. For that the CIT(A) had erred in law and in facts in holding that the FDRs in the balance sheet and its income will be considered in the hands of the said HUF on a substantive basis." 2. Both the members constituting the Bench originally have held that claim of the status of the assessee as of HUF is not conclusively proved. Therefore, it was agreed by both the members that AO was justified in not accepting the existence of an HUF. Since the learned AM (originally constituting the Bench) held that AO was justified in taking the status of the assessee as AOP and held that the assessee is to be assessed in the status of AOP in respect of its income, interest income from FDRs reflected in the balance sheet of the assessee in substantive manner in its hand and cancelled the protective description of the assessment, the learned JM did not agree with the above view and held that the protective assessment made in the hand of AOP without making any investigation by the AO is to be cancelled and consequently the returned income is to be assessed in the hands of the other persons viz., Sri K.K. Barkataky and Ajit Barkataky on a substantive basis in their assessments. In view of the above, there was a difference of opinion between the two Members constituting the Bench, a reference was made to the Hon'ble President, IT Tribunal under Section 255(4) of the IT Act for opinion of the Third Member on the issues which are as under: "(1) Whether, in view of the facts and circumstances of the case, when the AO himself after rejecting the status of the, assessee as HUF assessed the assessee in the status of an AOP, on second appeal, finding that the status claimed as HUF is not proved, was there any error in accepting the status of the assessee as an AOP (2) Whether, in view of the facts and circumstances of the case and also in view of the finding recorded in para 5 of the order in respect of the sources of the funds invested in FDRs the income in question can be held to be the individual income of Shri K.K. Barkataky and Shri Ajit Barkataky ?" "Whether, on the facts and in the circumstances of the case, is it in order to confirm the returned income as AOP on substantive basis when the said issue is not a ground of appeal filed before us ?" 3. The Hon'ble President of the Tribunal nominated the Hon'ble Vice President of Calcutta Zone as Third Member for deciding the points of difference in these appeals.

4. The Hon'ble Vice President has as Third Member, after taking the totality of the facts and circumstances of the case into consideration, concurred with the view expressed by the learned JM that there is no existence of valid HUF. The protective assessments made in the hand of AOP is to be cancelled and the returned income is to be assessed in the hands of the other persons namely, Sri K.K. Barkataky and Sri Ajit Barkataky on substantive basis in their assessments.

5. In accordance with the majority views, the appeals filed by the Department are allowed.


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