Kanhaiyalal Thawarji vs Commissioner of Income Tax

G.G. Sohani, Actg. C.J.

By this reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law to this court for its opinion :

"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the liability determined u/s 132(5) of the Income Tax Act, 1961, was not an actual tax liability ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no partition of the joint family ?"

The material facts giving rise to this reference, briefly, are as follows : The assessee owned certain immovable property and was engaged in cutlery business. There was a raid on the premises of the assessee and ornaments, cash and account books were seized. An order u/s 132(5) of the Act was passed in which the assessee''s tax liability was estimated at Rs. 6,50,000. The assessee was being assessed in the status of a Hindu undivided family prior to the assessment year 1978-79. The accounting year for the assessment year 1978-79 ended on March 31, 1978. During the assessment year 1978-79, the assessee made a claim that on March 31, 1978, there was a total partition in the family and the property of the joint family was divided amongst the coparceners, Kanhaiyalal, Badrilal, Judgishchandra and Smt. Gitabai. After making an enquiry as required by Section 171 of the Act, the Income Tax Officer rejected the claim of the assessee that there was a partition in the family. Aggrieved by the order passed by the Income Tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner who dismissed it. On further appeal before the Tribunal, the Tribunal upheld the order passed by the Income Tax Officer. Aggrieved by the order passed by the Tribunal, the assessee sought reference and it is at the instance of the assessee that the Tribunal has referred the aforesaid questions of law to this court for its opinion.

Learned counsel for the assessee contended that the Tribunal was not right in rejecting the claim of the assessee that a partition had taken place. It was further contended that in any event, as the Appellate Assistant Commissioner had found that there was partition of immovable property, the Tribunal should have held that there was a partial partition. In reply, it was contended on behalf of the Revenue that after taking into consideration the facts and circumstances of the case, the Tribunal had come to the conclusion that there was no partition of the joint family and that the reference, therefore, deserved to be answered against the assessee.

Now, so far as the first question is concerned, it was not disputed before us on behalf of the assessee that the liability determined u/s 132(5) of the Act was not the actual tax liability, The Tribunal, therefore, was justified in holding that the liability determined u/s 132(5) of the Act was not an actual tax liability.

As regards question No. (ii), the assessee had placed on record a deed of family settlement to substantiate the claim for partition. The Tribunal held that by that deed, no physical division of cash, ornaments or securities had taken place and that even in regard to immovable properties mentioned in the deed of family settlement, no valid title to the allottees was conveyed, because the deed was not registered. Moreover, the claim of the assessee was that a total partition had taken place amongst the members of the family. That claim, on the facts and in the circumstances of the case, was found to be untenable by the Income Tax Officer and the Appellate Assistant Commissioner and that finding has been upheld by the Tribunal. In our opinion, therefore, on the facts and in the circumstances of the case, the Tribunal was right in holding that, there was no partition of the joint family.

For all these reasons, our answer to both the questions referred to this court by the Tribunal are in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.