COMMISSIONER OF INCOME TAX Vs. KISHAN LAL

JUDGEMENT

(1.) THIS judgment in IT Ref. No. 76 of 1971 will also substantially govern IT Ref. Nos. 108 of 1973 and 109 to 112 of 1974, as the same question arises in different years in respect of the assessee, Shri Kishan Lal. The statement of case in the six cases is similar. The assessment years involved are 1964 -65 and 1966 -67 to 1970 -71. IT Ref. No. 76 of 1971 relates to the asst. year 1964 - 65.

(2.) THE facts stated in the statement of case show that the assessee was a partner in a firm, Kishan Lal & Co., his share being 50 per cent. This partnership started in September, 1956, and the business was that of wine merchants. Shri Kishan Lal, the assessee, was assessed on his share in the partnership business right up to 1963 -64, but in 1964 -65 he did not show this income in his personal return because he claimed that the share in the partnership had been transferred to the HUF consisting of himself, his wife, his minor sons and minor daughters. There was a deed of declaration dated 1st June, 1963, to this effect. After the declaration had been made, an estimate for the purpose of advance tax was also made in the name of the HUF. A gift -tax return was filed in which it was claimed that no gift -tax was payable regarding the transfer of the partnership share to the HUF. This return was accepted in due course as per annexs. B -4 and B -5 which are annexed to the statement of case.

(3.) ON appeal to the AAC, the decision of the ITO was upheld. A copy of the AAC's order, which is annexed to the statement of case, shows that the decision was based on the absence of a nucleus, in the HUF. Moreover, it was thought that the assessee could not transfer debts to a family whose pot was already empty. Amongst other reasons given by the AAC were two points which may be mentioned here. The firm was dealing in wines, which required a declaration of the constitution of the firm with the Government and no change was possible; and secondly, the partners had an unlimited liability, hence a public notice was necessary.