RAMKRISHNA RAMNATH Vs. LAKSHMI NARSIMHAN G ITO

JUDGEMENT

(1.) THIS petition concerns the tax liability of the petitioner during the asst. yrs. 1951 -52 to 1957 -58, that is, Diwali ending 1950 to Diwali ending 1956. During the said period, the petitioner was being assessed as a joint Hindu family firm. With respect to the asst. yrs. 1951 -52, 1952 -53 and 1953 -54 the ITO made the assessment orders on 30th March, 1956, 9th March, 1957, and 7th March, 1958, respectively. These orders were challenged by the assessee in appeal before the AAC and were disposed of by him by orders dated October 20, 1958, October 23, 1958, and October 31, 1958, respectively. Further appeals were taken by the petitioner before the Tribunal, which decided all these three appeals by order dated January 22, 1960. All the three appeals were consolidated as they related to the same assessee and involved common contentions. Before the Tribunal, the Department had also filed appeals relating to the asst. yrs. 1952 -53 and 1953 -54 and they were also disposed of by the same order.

(2.) ONE Ramnath, son of Ramkrishna Agarwal of Kamptee, was doing business of manufacture and sale of bidis. He died on 23rd of February, 1948. On 10th of February, 1948, he had executed a will disposing of the property and the business. In that will he made certain arrangement for his wife and also for his son -in -law and other relations of his. According to this arrangement made in the will, an amount of Rs. 6,971 each was paid to Chandabai and Madan Mohan Jaipuria, Rs. 3,485 to Pushkarraj Dharmashala, Rs. 3,900 to Chhugnibai during the year 1951 -52. These sums were disallowed by the ITO as being merely an appropriation of income after it had accrued to the family. This was upheld by the AAC in appeal. The AAC seems to have taken the view that Ramnath was assessed in his lifetime in the status of an HUF and, therefore, he had no right to execute the will. The ITO further applied the proviso to S. 13 of the IT Act, 1961. In the view he took, the manner of accounting was such that the income, profits and gains could not properly be deduced therefrom and the ITO, accordingly, made an ad hoc addition to the income of the assessee. This decision of the ITO was also confirmed. There were other objections taken before the ITO, but we are concerned presently with these two points only, as before the Tribunal these two grounds were put. It was argued before the Tribunal that the status of Ramnath was not fully appreciated by the Department. It was urged that Ramnath was an individual who could bequeath his property by the will. On the other hand, it was contended on behalf of the Department that the status of Ramnath must be taken to be that of an HUF as he was assessed as such during his lifetime and acquiesced in such assessment. As regards the applicability of the proviso to S. 13, the Tribunal seems to have taken the view that the production register was such as could be reasonably maintained by the producer for the control of his production and that it might be that there were defects in this register, but it was for the ITO to find out and establish such defects so that adjustments could be made therefor. The Tribunal took the view that it was a case where the cumulative effect of the facts and the nature of accounts were not properly appreciated by the ITO. In dealing with the nature of the account books and the applicability of the proviso to S. 13, the Tribunal stated as under :

(3.) THE appeals with respect to the asst. yrs. 1954 -55 and 1955 -56 were decided by the Tribunal by its order dated November 13,. In those appeals also similar questions were raised and in view of the decision already given by the Tribunal in the earlier cases on January 22, 1960, and for the reasons stated therein, the Tribunal set aside both the assessments for proper reassessments after an investigation on the following points :