RAMJILAL MAHESWARI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under Section 256(1) of the Income-tax Act, relates to the assessment year 1960-61. The question that calls for determination is whether the proceeding for reassessment under Section 147(a) of the Act was validly initiated or not Shortly stated, the facts are that the original assessment of the assessee had been made by the Income-tax Officer, Varanasi, who has also made a reassessment under Section 34(l)(b) of the Indian Income-tax Act, 1922. But, later on, the Income-tax Officer found, on the basis of a letter dated June 26, 1988, from an Income-tax Officer in Calcutta, that certain investments amounting to Rs. 66,000 had been made by the assessee on September 26, 1959, in the name of the minor daughter, Smt. Tara Devi Maheshwari. The Income-tax Officer, therefore, for the reasons given in his order, initiated proceedings under Section 147(a) of the Income-tax Act and assessed two items of Rs. 66,600 and Rs. 11,930 as the assessee's income from undisclosed sources.

(2.) Before the Appellate Assistant Commissioner, the assessee challenged the entire proceedings under Section 147(a) and also challenged the additions made by the Income-tax Officer while completing the reassessment of the-assessee. The Appellate Assistant Commissioner found that the assessee's daughter, Smt. Tara Devi Maheshwari, was born on February 2, 1942, and before she became major in 1960, returns of income were filed by her in respect of the assessment years 1951-52 to 1955-56 on September 28, 1959, and those for 1956-57 to 1959-60 on December 20, 1959.

(3.) In these returns, it was shown that Smt. Tara Devi was deriving income from a partnership firm known as Hem and Co. and it was stated that the initial capital of Rs. 15,000 had come from the gift received from her grandfather, Shri P. D. Maheshwari, who had made a deposit in the name of the daughter of the assessee with the firm known as Nirmal Kumar Devkinandan. It was also shown in the returns that the lady had received a gift of Rs. 10,000 on January 14, 1958, from her grandmother. The Income-tax Officer found that there was no material or evidence to show the existence of a firm styled Nirmal Kumar Devkinandan. There was nothing to show that any such firm was in existence in the name of Hem and Co. as claimed by the assessee. No deed of partnership had been produced in the course of any of the assessments of Smt. Tara Devi. The Income-tax Officer found that, from the assessment orders passed in the case of Smt. Tara Devi, it was found that no books of account were maintained by her in respect of the income offered by her for taxation for the assessment years 1951-52 to 1960-61. The Appellate Assistant Commissioner also observed that there was no evidence about the existence of the firm styled Hem and Co. and also there was no material to show as to who were the partners of that firm. The Appellate Assistant Commissioner was of the view that the entire story of the receipt of gifts by Smt. Tara Devi and earning of income by her from pawn-broking and speculative transactions were cooked up to explain the source of investment of Rs. 66,600 in shares of Mirzapur Electric Supply Co. Ltd. The Appellate Assistant Commissioner also found that there was no evidence to show that Smt. Tara Devi had actually carried on any business at any time in respect of which the assessment had been made and it could not be proved that she had earned any income. The Appellate Assistant Commissioner further observed that the assessee had not produced any evidence at the time of the original assessment about those investments. He held that these incomes actually belonged to the assessee. In the premises, it was held that the Income-tax Officer was justified in reopening the assessment under Section 147(a) of the Income-tax Act.