Commissioner of Income Tax vs P.N. Beri and Sons (HUF)

G.S. Singhvi, J.—These four petitions have been filed by the Commissioner of Income Tax u/s 256(2) of the Income Tax Act, 1961 (for short "the Act"), for directing the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, to draw up a statement of case and refer the following two questions of law for decision by this court :

"1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in accepting the genuineness of the entity styled as Sh. P.N. Beri and Sons (HUF) created by the legal heirs of Sh. P.N. Beri after his death and the death of his father, Sh. K.R. Beri ?

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in directing to make the assessment of income in the status of HUF on substantive basis ?"

In view of the similarity of the points raised in all the four petitions, we are deciding them by one order.

Reference to some of the facts, common to all the cases is necessary far the purpose of deciding whether any question of law deserves to be referred to this court. The assessee, P. N. Beri and Sons (HUF), filed its returns of income for the years 1986-87, 1988-89, 1989-90 and 1990-91. For the year 1986-87, it declared income of Rs. 11,170 in the status of an HUF. For other years different declarations of income were filed by the asses-see. The assessing authority held that P.N. Beri and Sons (HUF) was not a genuine entity. The assessing authority further held that Shri K.R. Beri never constituted an HUF from the assessment year 1962-63 up to the date of his death on February 5, 1975, and it was only his legal heirs who had started claiming that K.R. Beri was the karta of the HUF. The assessing authority further held that even if K.R. Beri constituted an HUF, then on the date of death of Shri P.N. Beri, the HUF devolved upon the surviving member of the coparcenary, namely, Shri J.K. Beri. The Assessing Officer then relied on the observations made by the Commissioner of Income Tax (Appeals) in his order dated December 19, 1988, passed in Appeal No. 458-J/87-88/CIT(A)-I in the case of P.N. Beri and Co. for the assessment year 1985-86 and observed that the appellate authority has held that the share of P.N. Beri in the property of K.R. Beri (HUF) had devolved upon his widow and son in equal proportions in individual capacity on the date of his death, i.e., May 31, 1973. In conclusion, the Assessing Officer held that there was no HUF under the name of K.R. Beri and the returns were filed in the status of K.R. Beri (HUF) only after his death by his legal heirs. He, therefore, proceeded to make a protective assessment by passing an order. Similar orders came to be passed by the Assessing Officer for all the assessment years to which reference has been made hereinabove. The appeals filed by the non-petitioners were allowed by the Deputy Commissioner of Income Tax (Appeals). The appellate authority held that the appellant, non-petitioner herein, has been assessed to tax in the status of an HUF ever since 1977-78 to 1984-85 on substantive basis and these assessments were still operative. The appellate authority further held that the subsequent decision of the Commissioner of Income Tax (Appeals) cannot be of any consequence. The appellate authority concluded that P.N. Beri and Sons genuinely constituted an HUF and, therefore, the assessment should have been made in their hands on substantive basis. The appeals preferred by the Revenue against the orders of the Deputy Commissioner of Income Tax (Appeals), Jalandhar, were dismissed by the Income Tax Appellate Tribunal, Amritsar Bench, and the applications filed by the petitioner u/s 256(1) of the Act have also been dismissed by the Tribunal.

We have heard Shri R.P. Sawhney, senior advocate, appearing for the Revenue, and Shri N.K. Sood, counsel for the assessee, at length on the issue whether any question of law arises for determination in these petitions.

The main bed-rock of the orders passed by the Assessing Officer is the order of the Commissioner of Income Tax (Appeals) passed on December 19, 1988, in Appeal No. 458 J-87-88/CIT(A)-I. This order of the Commissioner of Income Tax (Appeals) has been reversed by the Income Tax Appellate Tribunal (Delhi Branch "B" Delhi), vide order dated July 15, 1992, passed in I.T.A. Nos. 34 and 35 of 1989. In its order, the Income Tax Appellate Tribunal took note of the observations made by it in I.T.A. Nos. 557 and 558/ASR of 1987 which were to the following effect :

"For both the assessment years, the assessee appealed to the Commissioner of Income Tax (Appeals). He was of the opinion that the registration to the firm cannot be denied on the ground that the firm had not intimated the change of the constitution to the Registrar of Firms or to the bank. The partnership deed showed constitution of three partners with specified shares represented by their respective HUF, kartas and adult members. The Commissioner of Income Tax (Appeals) further noted that the assessment orders in the case of three HUFs for the assessment year 1983-84 showed that all the three HUFs which constituted the firm were genuine HUFs who were being assessed regularly to tax. These three HUFs through their kartas and adult members entered into a partnership which was quite in order. The Commissioner of Income Tax (Appeals) further held that the Assessing Officer did not bring any material on record to establish his reliance on the decision of the Supreme Court in the case of McDowell and Co. Ltd. Vs. Commercial Tax Officer, . The Commissioner of Income Tax (Appeals) further concluded that there was no material on record to justify the contention of colourable device to dodge the tax authorities. The Commissioner of Income Tax (Appeals) finally concluded that the genuineness of the partnership firm has been established. He further found that Sh. J.K. Beri was already a partner and was representing another HUF in the firm. This would not mean that the skill contributed by Shri J.K. Beri to the firm was exclusively on behalf of that HUF as he was undoubtedly a representative of the newly added partner, namely, Dhiraj J.K. Beri (HUF). Thus, according to the Commissioner of Income Tax (Appeals), a genuine firm was constituted by the three HUFs. He, accordingly, granted registration to the firm for the assessment year 1983-84 and further granted continuation of registration for the subsequent assessment year."

Thereafter, it observed that J.K. Beri (HUF) was being regularly assessed to Income Tax and wealth-tax and in ). K. Beri (HUF) partial partition had taken place on April 3, 1972, May 27, 1977, and July 25, 1979, and P. N. Beri and Co. was an assessable unit right from 1973-74. The Tribunal declared that non-continuation of the registration of P. N. Beri and Co. was wholly illegal.

The aforesaid order of the Tribunal has become final and, therefore, it must be held that the substratum of the order passed by the Assessing Officer not accepting P. N. Beri and Sons (HUF) as a genuine entity has disappeared. After the acceptance of the appeal filed by the non-petitioner before the Income Tax Appellate Tribunal it can no longer be said that the question of genuineness of the entity of P. N. Beri and Sons (HUF) requires further adjudication. In our opinion, no question of law arises for determination by this court.

For the reasons mentioned above, these applications are dismissed.