Balchand Malaiya (No. 2) vs Commissioner of Income Tax

N.D. Ojha, C.J.—This application has been made by the assessee u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), with a prayer that the Income Tax Appellate Tribunal, Jabalpur, may be directed to draw up a statement of the case and refer the following question to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the demand notices issued and served by the Income Tax Officer upon the members of the ''Balchand Malaiya, Hindu undivided family '' by his reassessment order dated July 8, 1974, for the assessment year 1946-47 were valid in law when the original assessment order of the Income Tax Officer was dated March 17, 1951, and was made under the old Act of 1922, and the demand notice against this order was served on ''Balchand Malaiya, Hindu undivided family'' only ?"

The relevant assessment year in the instant case is 1946-47. An order of assessment was passed on February 29, 1952. Subsequently, however, on March 14, 1963, a notice was issued to the assessee u/s 148 of the Act and an order of reassessment was passed on July 8, 1974, making an addition of Rs. 1,10,000 to the returned income of the assessee for the aforesaid assessment year. The assessee was a Hindu undivided family and it appears that, in between, there was a partition on November 10, 1958, which was recognised by the Income Tax Department in proceedings for assessment in the assessment year 1959-60. Relying on the partition in his order dated July 8, 1974, the Income Tax Officer directed that the additional demand shall be reallocated among the divided members of the Hindu undivided family.

Aggrieved by the order of the Income Tax Officer, the assessee-applicant preferred an appeal which was allowed by the Commissioner of Income Tax (Appeals) on March 22, 1983, whereby the addition of Rs. 1,10,000 to the returned income of the assessee was deleted. No order, however, seems to have been passed with regard to the reallocation of the demand as aforesaid.

A second appeal was preferred by the assessee before the Tribunal which was dismissed on August 11, 1983. The Tribunal, in its order, pointed out that since the additional demand raised as a result of treating Rs. 1,10,000 as the assessee''s income from undisclosed sources which was ordered to be realised from the seven disrupted members of the assessee-Hindu undivided family had itself been deleted in appeal by the Commissioner of Income Tax (Appeals), there was no demand outstanding against the assessee-Hindu undivided family. Consequently, the apprehension of the assessee with regard to reallocation was only academic. The assessee thereafter made an application u/s 256(1) of the Act requiring the Tribunal to refer the aforesaid question to this court for its opinion. That application too was dismissed by the Tribunal by its order dated January 16, 1984. The Tribunal took the view that the question proposed by the assessee did not arise from the order of the Tribunal keeping in view the nature of the order passed by the Tribunal which has already been referred to above.

Having heard learned counsel for the parties, we are of the opinion that, on the facts and circumstances of the instant case, no exception can be taken to the view taken in this behalf by the Tribunal. As the Tribunal has pointed out, the reallocation was as a consequence of the addition of Rs. 1,10,000 to the returned income of the assessee. When the addition itself was deleted, the consequential demand did not survive and there was no occasion for making any recovery of the tax demanded on the added income so deleted on the basis of reallocation. This being so, the Tribunal was justified in taking the view that the question sought to be referred to this court did not arise from the appellate order of the Tribunal inasmuch as it had disposed of the appeal on a different footing already indicated above.

In the result, we find no merit in this application. It is accordingly dismissed. There shall be no order as to costs.