ROSHAN DI HATTI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The following two questions have to be dealt with by this Court under section 66 of the. Indian Income-tax Act, 1 ^22 (hereinafter referred to as "the Act") :-

(2.) The assessee is a Hindu undivided family of which Roshan Lal is the Karta. Before the partition of the country, Reshan Lal carried on business at Lahore. Consequent upon partition, Roshan Lal migrated into India and started a jewellery shop in Delhi under the name and style of Roshan Di Hatti on March 31, 1948. The same day, i.e. March 31, 1948 a credit entry of Rs. 3,33,414.00 was made in the books of the account of the assessee as capital of the business. Rs. 2,92,340.00 out of that represented the value of gold ornaments, gold bullion and precious stones, the details of which are as under:-

(3.) The balance of Rs. 41,074.00 represented cash. The assessee was never assessed to the income-tax either at Lahore till 1946 or at Delhi. On receipt of a complaint that the assessee had made considerable income in gold and jewellery business, the Income-tax Officer initiated proceedings for the assessment year 1948-49 and subsequent years under section 34 (1) (a) of the Act on March 28, 1957 in the name of Roshan Di Hatti (proprietor Roshan Lal). In the course of those proceedings, the assessee was called upon to explain the source of the capital introduced into the business. The assessee then stated that the assets entered as capital in the business account had been brought by him at the time of migration from Lahore. The Income-tax Officer held that the assessee had only brought assets of the value of Rs. 20,000.00 on migration from Lahore to Delhi and on that footing treated the balance of the capital introduced into the business on March 31, 1948 as income from undisclosed sources. In appeal to the Appellate Assistant Commissioner, the assessment was challenged on various grounds. One of the grounds was that the assessment was illegal and without jurisdiction as it related to Hidu undivided family which had ceased to exist as such on March 31, 1958. Reference in this connection was made to a note made by the assessee in the return filed on August 3, 1959 for the assessment year 1959-60. The Appellate Assistant Commissioner held that the Hindu undivided family, of which Roshan Lal was the Karta, continued to be in existence even though it might have parted with its business in April, 1958. The Appellate Assistant Commissioner estimated the assets borught by the assessee from Lahore at Rs, 1,00,000.00. He accordingly modified the order of assessment and directed assessment on Rs. 2.33,414.00 as income from undisclosed sources. The Income-tax Appellate Tribunal affirmed the order of the Appellate Assistant Commissioner without deciding whether there was disruption of the joint status of the assessee family. The Tribunal observed that there had been no formal application for an order under section 25A of the Act during the previous year, but only a claim for partial partition had been made long after the previous year and in the circumstances the question of partition under section 25A could not be agitated before the Tribunal. In the view of the Tribunal, the question of partition could only be agitated under section 25A of the Act. At the instance of the assessee the Tribunal referred the following question to the High Court under section 66(1) as per Income-tax Reference No. 15-T) of 1964 :-