RAMESHWARLAL SANWARMAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions of law have been referred to us under s. 66(1) of the Indian IT Act, 1922 (hereinafter called "the Act"), for opinion : "(1) Whether, on the facts and in the circumstances of the case, and upon a true interpretation of the provisions of the second proviso to s. 34(3), the assessment for the year 1955 -56 on the applicant HUF made on February 6, 1961, pursuant to an order under s. 27 cancelling the assessment of Sri S. M. Saharia, as an individual, was barred by limitation? (2) Whether, on the facts and in the circumstances of the case, and on a true interpretation of the terms of s. 2(6A)(e) of the IT. Act, 1922, the Tribunal was right in holding that the amounts of Rs.

(2.) ,21,702 (gross) and Rs. 3,43,505 (net) were taxable as dividends in the hands of the applicant HUF for the asst. yrs. 1955 -56 and 1956 -57, respectively, when the shares were registered in the name of Sri S. M. Saharia, the Karta of the family ? (3) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to justify the conclusion that Sri S. M. Saharia was holding shares in M/s Shyam Sundar Tea Co. (P) Ltd. in his capacity as Karta of the applicant family consisting of himself and his minor son ? (4) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal for the finding that the applicant family was the beneficiary up -till August 16, 1955, in respect of 50 shares registered in the name of Sri S. M. Saharia on May 16, 1953, before the disruption in the joint status of the family of Hanutram Ramprotap ? (5) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the HUF of Hanutram Ramprotap was not a shareholder in M/s Shyam Sunder Tea Co. (P.) Ltd. up -till August 16, 1955 ? (6) Whether, on the facts and in the circumstances of the case, in computing the accumulated profits of M/s Shyam Sundar Tea Co. (P.) Ltd. within the meaning of s. 2(6A)(e), the Tribunal acted rightly in refusing to allow : (a) deduction in respect of loans advanced by the said company to the erstwhile family of M/s Hanutram Ramprotap which amounted to Rs. 3,60,989 as at December 31, 1954, and increased to Rs. 3,80,567 as at August 16, 1955, and written off at the end of the year 1955; (b) deduction in respect of Rs. 51,049 and Rs. 66,206 for the asst. yrs. 1955 -56 and 1956 -57, respectively, being the difference between the written down value of depreciable assets of the said company as per income -tax records and their book value - 2. The material facts disclosed in the statement of the case are that the assessee, M/s Rameshwarlal Sanwarmal, is an HUF represented by its Karta, Sri Sanwarmal Saharia. The reference relates to two assessments for the years 1955 -56 and 1956 -57. Point No. 1 arises only in connection with the assessment for the year 1955 -56. The corresponding accounting year for 1955 -56 is the Ramnavami year 2011 (ending on March 31, 1955) and the corresponding accounting year 1956 -57 is the Ramnavami year 2012 (ending on April 18, 1956). The necessary facts for answering the question No. 1 are that on the 27th December, 1955, the ITO, Special Survey Circle, Shillong, issued a notice under s. 22(2) of the Act to Sri Sanwarmal Saharia. By this notice the addressee was called upon to furnish a statement of his income during the previous year. Sri Sanwarmal Saharia filed on return in response to the aforesaid notice. A further notice under s. 22(4) of the Act for production of books was also not responded to and the ITO made an ex parte assessment under s. 23(4) on 29th February, 1960. This assessment was made in the status of an "individual". The assessee was described in the assessment order as "Sri Sanwarmal Saharia" and the total income was estimated to be Rs. 3,17,548. On the 9th March, 1960, Sri Sanwarmal Saharia applied for cancellation of his ex parte assessment under s. 27 of the Act on the ground that there was no service of notice under ss. 22(2), 22(4) and 23(2) and thus he has sufficient cause for non -appearance. He also pointed out that on the 29th October, 1959, a return had been filed on behalf of the HUF. By an order dated the 16th December, 1960, the ITO cancelled the ex parte assessment for the asst. yr. 1955 -56. The ITO held that as the ex parte assessment was made under s. 23(4) without issuing a notice under s. 23(2), it was void ab initio and was illegal. A fresh assessment was directed to be made after issuing notice under s. 23(2) of the Act. On the 6th February, 1961, the ITO made a fresh assessment after issuing a notice under s. 23(2) for the asst. yr. 1955 -56 and the HUF of which Sri Sanwarmal Saharia was the Karta was assessed to income -tax. The assessee was described as "Sri Sanwarmal Saharia, Karta of M/s Saharia & Co. alias Rameshwarlal Sanwarmal (HUF consisting of Karta and a minor child)". The total income was estimated at Rs. 2,70,333. The contention raised by the assessee was that the assessment made on the 6th February, 1961, was barred by limitation under the second proviso to sub -s. (3) of s. 34.

(3.) IT cannot be denied that ordinarily the assessment for the year 1955 -56 should have been completed on the 31st March, 1960, and as it was completed on the 6th February, 1961, it was beyond time. The assessee went up in appeal against the order of the ITO making a fresh assessment on the 6th February, 1961, to the AAC. The AAC repelled the contention of the assessee and held that the assessment was within time. As against that, an appeal was filed to the Tribunal, "A" Bench, Calcutta, which dismissed the appeal.