SELVAKUMAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) 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 under section 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 under section 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.

(2.) 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 under section 256(2) of the Income-tax Act to refer certain questions of law for the decision of this court.

(3.) 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.