K.P. NACHIMUTHU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The above Tax Case (Appeal) is filed at the instance of the assessee against the order of the Income Tax Appellate Tribunal for block assessment period 1984-85 and 1985-86. The above Tax Case (Appeal) was admitted on the following substantial question of law:-

(2.) The assessment herein relates 1984-85 and 1985-86. The assessee is an individual. He filed returns in his capacity as Kartha of HUF. While passing the assessment order for 1984-85, the Assessing Officer referred to the order of the assessment relating to 1982-83, thereby rejected the claim of the assessee that he was owning an extent of 20.88 acres of agricultural lands at Alamarathupatti Village, Kolathur in the status of HUF. The Officer pointed out that in spite of the opportunity, the assessee had not substantiated its contention that the lands belonged to HUF. The Officer further rejected the claim of the assessee as regards the purchase of lands out of the income from the agricultural lands. The Assessing Officer pointed out that the assessee was asked to produce patta to show that the lands were ancestral. Except the letter from the assessee's father and brothers, filed along with patta, there was no materials to substantiate as regards the holding of the property as HUF property. The Officer pointed out that there was no partition deed executed on 24.2.81 as had been contended by the assessee. Hence, the property were held jointly and not as HUF property holding it as ancestral property. In the absence of any materials to show that the property was Joint family property, the entire income from the lorries and the lands were assessed at the hands of the assessee in the status as individual. The assessment was subsequently taken up for revision. Ultimately, the assessee's agricultural income was proposed at Rs.1,20,000/- and balance income as income from other sources. The assessment for the next assessment year 1986-86, which is involved in T.C.(A).No.384 of 2006 proceeded on the same lines as in the earlier years.

(3.) The assessee filed appeals before the Commissioner of Income Tax (Appeals) as against the protective assessment in the capacity of HUF as well as substantive assessment made in the status of individual. The first Appellate Authority granted partial relief. He viewed that inclusion of HUF income at the hands of the individual was not correct. Hence, the same had to be excluded from the individual assessment for the assessment years 1984-85 to 1986-87 and the assessment of the income made in the status of HUF in a protective manner should be treated as a substantive assessment. In so confirming the order of protective assessment on HUF, the first Appellate Authority pointed out that the assessee's agricultural income from 20.88 acres had been accepted upto Rs.1 lakh during the assessment year 1983-84. Taking note of the adangal extract, the Commissioner of Income Tax (Appeals) held that there were no material on the part of the Revenue to contradict the genuineness of the claim. Consequently, the question of adding any income under the head of income from other sources did not arise. Thus, while allowing the assessment of the assessee in the status of HUF, the Commissioner of Income Tax (Appeals) deleted the assessment to that extent at the hands of the individual. Aggrieved by this, the Revenue went on appeal before the Income Tax Appellate Tribunal. The Tribunal in paragraph 8.1 of the order pointed out that in the course of hearing of the appeals, by order sheet entry dated 7.2.2002, the Tribunal directed the assessee to produce materials regarding existence of HUF property before 31.12.1969 or HUF so formed throwing the self acquired properties into the family hotchpot after 31.12.1969. The Tribunal pointed out that the assessee had not complied with the directions of the Bench. In the background of the failure to produce the materials as to the existence of HUF and the partition deed, the Tribunal held that an inference be drawn that the assessee had failed to prove the existence of HUF and that individual property as HUF property before 31.12.1969. The Tribunal also rejected the Commissioner of Income Tax (Appeals)'s view that the property had to be treated as joint family property. Dealing with the question that the Revenue had not filed any appeal against the findings of the Commissioner of Income Tax (Appeals) confirming the protective assessment on the substantial basis, the Tribunal pointed out that the appeals before the Commissioner of Income Tax was relating to the assessee in his individual capacity and not HUF. Thus, the view of the Commissioner of Income Tax (Appeals) treating protective assessment as substantive assessment not being a subject matter of appeal was illegal it being beyond the scope of jurisdiction. The Tribunal held that the assessee had not substantiated that the property in question belonged to the assessee as HUF property. In the result, the order of the Commissioner of Income Tax (Appeals) was reversed.