KESHAVLAL LALLUBHAI PATEL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a Reference under sec. 66(1) of the Indian Income Tax Act 1922 at the instance of the assessee. The assessee in this case is Keshavlal Lallubhai Patel an individual. The relevant year of assessment is 1952-53 the relevant accounting period being 1/04/1951 to 31/03/1952. The assessee has a wife by name Revagauri an adult son by name Navinchandra and a minor son by name Hasmukhlal. The assessee and the members of his family had been assessed as individuals for a number of years past. The assessee his wife and two sons were members of a Hindu undivided family. As stated by the Income Tax Officer there was however no coparcenary property. The assessee was possessed of self-acquired properties. On 18/04/1951 the assessee threw some of his self-acquired properties consisting of agricultural lands a house and shares of limited liability companies into what is stated to be the common hotchpot of the said Hindu undivided family. This is evidenced by an affidavit sworn by the assessee on 18/04/1951. No entries in the books were made evidencing such a transaction. No transfers were effected at or about that time. On 18/06/1951 an oral partition was effected among the members of the aforesaid Hindu undivided family. Consistent with this partition entries were made in the books of account. On 26/06/1951 a joint declaration was made by the assessee his wife and his adult son in respect of such partition. A joint statement was also made that effect on 5/12/1951 before the talati and entries were made in the records of rights recording the transfers of the lands. the properties were transferred in accordance with the aforesaid arrangement to the names of the persons who became entitled thereto on such partition. The Income Tax Officer held that there did not exist any coparcenary property or any joint family prior to 18/04/1951 and that no coparcenary property or joint family came into existence subsequent to 18/04/1951. The included the entire income of those properties in the income of the assessee. An appeal was preferred from that decision to the Appellate Assistant Commissioner. He held that the Income Tax Officer was not justified in rejecting the assesses contention the as from 18/04/1951 the assessee had put some of his self-acquired properties in the family hotchpot. He was of the view that the Income Tax Officer was not justified in holding that there was no partition of the Hindu undivided family properties. He considered that a partition of the family properties had taken place on 12/06/1951. He however held that there was an indirect transfer by the assessee of his properties to his wife and minor child though the agency of a Hindu undivided family and that the said Hindu undivided family had been utilised only for the purpose of transferring the self-acquired properties of the assessee to his wife and minor son. He included the income of the properties which came to the share of the wife and minor son of the assessee in the income tax of the assessee under the provisions of sec. 16(3) of the Income Tax Act. As the provisions of sec. 16(3) of the Income Tax Act did not apply to the adult son of the assessee the income derived from properties falling to the share of the adult son was excluded from the income of the assessee for the relevant assessment year. The assessee preferred an appeal from this decision to the Income Tax Appellate Tribunal. The Tribunal proceeded on the footing of the genuineness of the transactions when under the properties were thrown into the family hotchpot and were petitioned. The Tribunal held that the provisions of sec. 16(3) (a) (iii) and (iv) were vide enough to cover an arrangement like the one entered into in this case. The Tribunal held that the throwing into the hotchpot of ones self-acquired property and a subsequent partition thereof among the members of the Hindu undivided family resulted in an indirect transfer of property within the meaning of sec 16(3) of the Act. The Tribunal upheld the decision of the Appellate Assistant Commissioner.

(2.) The question of law that arises for our consideration in the present reference is the following : `

(3.) Sec. 16(3) of the Income Tax Act to the extent that it is relevant provides as under :