Selvakumar (Legal Heir of Late Chellappan Chettiar) vs Commissioner of Income Tax

T.L. Viswanatha Iyer, J.—One Chellappan Chettiar of Mayyanad who was running an oil mill was an assessee on the files of the Income Tax Officer, A-Ward, Quilon. He was assessed for the years 1967-68, 1969-70 and 1971-72. There was a search of his premises thereafter, consequent on which the assessments were reopened u/s 147(a). The assessee submitted fresh returns on July 30, 1977. He died thereafter on September 2, 1977, leaving behind him his wife, Chellammal, and 11 children of whom five were minors and six majors. Three of the daughters were also married. It was found in the course of the search that there were fixed deposits standing in the names of the wife and children of Chellappan Chettiar during the accounting year relevant to the assessment years 1967-68, 1969-70 and 1971-72 aggregating to Rs. 5,50,000, Rs. 2 lakhs during the year relevant to the assessment 1967-68, Rs. 3 lakhs during the year relevant to the assessment year 1969-70 and Rs. 50,000 in the third year. Consequent on Chellappan Chettiars death, the assessment proceedings were continued against his legal heirs, namely, his wife and 11 children. The contention taken at the final stage of the proceedings was that these investments which stood in the names of the various legal heirs really belonged to them, and that the amounts did not in reality belong to Chellappan Chettiar. We are not going into the various contentions put forward by the assessees at the various stages or to the various other materials on record which we find had undergone a thorough examination at the hands of the three authorities. Suffice it to say that, after detailed examination of the contentions raised by the parties, their conduct and the materials available on record, the Income Tax Officer came to the conclusion that the amounts in deposits in the names of the heirs belonged to the deceased, Chellappan Chettiar, and were assessable in his hands u/s 69 of the Income Tax Act, 1961. The Income Tax Officer, therefore, brought to assessment in the hands of Chellappan Chettiar the amounts covered by these investments, namely, Rs. three lakhs, Rs. two lakhs and Rs. 50,000 during the three assessment years in question. The petitioners who are a son and a daughter of Chellappan Chettiar took the matter in appeal before the Commissioner of Income Tax (Appeals). The Commissioner held that the deposits standing in the names of Chellammal and one son, Sivan, belonged to them in reality and not to Chellappan Chettiar. He, however, rejected the appeals so far as the other deposits were concerned holding that they constituted the income of Chellappan Chettiar, liable to be assessed in his hands. The petitioners preferred further appeals before the Tribunal and the Department, in its turn, challenged the decision of the Commissioner in favour of Chellammal and Sivan by the departmental appeals. The Tribunal dismissed all the appeals affirming the decision of the Commissioner of Income Tax.

The petitioners, thereupon, filed applications for referring certain questions of law alleged to arise out of the orders of the Tribunal for the decision of this court. The Tribunal rejected the applications in the view that the questions raised were purely questions of fact and, therefore, not liable to be referred. The petitioners, who were, as stated earlier, a son and a daughter of Chellappan Chettiar have, therefore, filed these applications u/s 256(2) of the Income Tax Act to refer certain questions of law for the decision of this court.

The first point which is sought to be raised in these cases is that the investments which have been brought to assessment really belonged to Chellappan Chettiar and not to this children. On this aspect of the matter, there has been a very thorough examination of the evidence and the materials by all the three authorities. They a have all come to the uniform conclusion that the various investments which constituted the subject-matter of the appeals before the Appellate Tribunal really belonged to Chellappan Chettiar and not to the various children. The Appellate Tribunal has also held in concurrence with the Commissioner of Income Tax (Appeals) that the investments which stood in the names of Chellammal and Sivan did not belong to Chellappan Chettiar.

The question whether the investments in the names of the various children belonged to Chellappan Chettiar or to the children in whose names the fixed deposits stood is a question of fact. There has been a thorough examination of the evidence and the materials by the three authorities and they have concurred in holding that these investments really belonged to Chellappan Chettiar and not to the children. We are not detailing here the reasons which led to the conclusion as the entire matter has been examined in detail by the three authorities and we are in agreement with them. The reasons given by them are relevant to the decision of the question in issue. There has been no misreading of any evidence; and the findings rendered by the three authorities are supported by ample evidence and material on record. No material fact has been omitted to be considered. The circumstances of the case set forth in the orders of the three authorities also lead to the conclusion that these investments really belonged to Chellappan Chettiar and not to the children. This finding is nor of fact depending on appreciation of evidence and on the circumstances appearing. No question of law, therefore, arises for consideration by this court on this aspect of the matter. The questions of law sought to be raised are not, therefore, liable to be referred to this court.

Alternatively, it is contended that even if the amounts belonged to Chellappan Chettiar, they were not liable to be assessed in entirety in the respective years in which they have been brought to assessment. It is pointed out that section 69 of the Act does not oblige such an assessment of the entire amount merely because the investments appear in a particular year. All that it says is that it may be treated as the income of that year. The assessing authority is not obliged to treated as the income of that year. The assessing authority is not obliged to treat the entire amount of the investment as the income of that year. What is stated is that the other circumstances of the case have to be considered and the assessing authority has to arrive at a conclusion at to whether the entirety of the income should be assessed in one accounting year or whether it shall be spread over. This is a matter which required examination, particularly in the light of the fact that the fixed deposits in question appear to be renewals of earlier deposits as stated in paragraph 2 of the Commissioners order. The question will, therefore, arise whether assessment of the entirety of the peak credit in each year, in the respective years, was valid.

Counsel for the Revenue, however, contended that this point has not been highlighted or argued before the Tribunal or the Commissioner and, therefore, this was not a question arising out of the Tribunals order. But the fact remains that the assessees had raised the contention that section 69 of the Act was not applicable to the facts of the case. Their contention all along had been that these amounts cannot be brought to tax. If so, it could be stated that the question does arise for consideration whether section 69 obliged the assessment of the entirety of the credits in each year.

We are not, however, expressing any final opinion on this question as the matter requires examination in depth and can be considered at the time the reference is being heard. Suffice it to say that a question of law arises on this point and that it is liable to be referred. In the circumstances, while declining to refer any question on relation to the matter as to whether the amounts brought to assessment really belonged to Chellappan Chettiar, we direct the Income Tax Appellate Tribunal, Cochin Bench, to refer the following question of law for decision u/s 256(2) of the Income Tax Act, 1961.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the assessment of the entirety of the amounts of rupees two lakhs, rupees there lakhs and rupees fifty thousand in the assessments for the respective years 1967-68, 1969-70 and 1971-72 ?

The Tribunal shall draw up a statement of the case and refer the aforesaid question for the opinion of this court.

The original petitions are allowed as stated above. No costs.