MUNSHI RAM Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) IN this reference under Section 256 (2) of the I. T. Act, 1961 (hereinafter referred to as "the Act"), assessment proceedings, which got initiated before partition of the country, are still hanging fire. For the assessment year 1945-46, return was filed by Munshi Ram, the assessee, on 7th September, 1945, declaring an income of Rs. 5,354. The status of the assessee was described as an "individual". The ITO added a sum of Rs. 47,200 as income from the business, and assessed the assessee for a sum of Rs. 66,165 (vide his order dated 12th March, 1946), and the assessee filed an appeal against this order. The AAC (vide his order dated 6th August, 1947) set aside the assessment and directed the ITO to frame the assessment order under Section 23 (3) of the Act. The ITO (vide order dated 17th October, 1949) assessed the total income at Rs. 60,852. This order was again set aside in appeal by the AAC, vide his order dated 10th June, 1950, on the ground that the cash credits in the account of Smt. Ram Bai had not been properly investigated and the income of the accounting year had not been taken into account.

(2.) SOME time in the year 1946, there arose a dispute between the assessee, Shri Munshi Ram, and the other co-partners of his family regarding the business run in the name and style of Munshi Ram, B. Sc. , consisting of hosiery machinery business and clothing factory which was said to be the joint business of the family. By an agreement dated 30th October, 1946, three members of the family appointed Shri Prem Nath, advocate, as an arbitrator to divide their joint business shown as Munshi Ram, B. Sc. The arbitrator gave an award on 3rd March, 1947, partitioning the joint properties amongst the three members including the business of Munshi Ram, B. Sc.

(3.) THE assessee then made an application under Section 154 of the Act to the AAC claiming that the grounds of appeal relating to the cash credits in the account of Ram Bai had not been discussed by the AAC and that the appellate order may be amended and finding be recorded on the specific grounds raised. The AAC, vide his order dated 24th September, 1968, recorded a finding that the Tribunal, vide its order dated 21st August, 1962, directed the AAC for deciding the point whether the business belonged to Shri Munshi Ram, individual, or to the HUF of Shri Munshi Ram and on all other points the appellate decision of the AAC dated 17th November, 1958, was allowed to remain in force. Consequently, the application for rectification was dismissed. The assessee filed an appeal against the order of the AAC dated 24th September, 1968. The ITO also filed an appeal to the Tribunal against the AAC's orders dated 30th October, 1967, and 24th September, 1968. The assessee filed cross-objections to the ITO's appeal against the AAC's orders dated 30th October, 1967. The Tribunal dismissed the appeal filed by the ITO and so also that filed by the assessee and the cross-objections. It was contended by the assesses before the Tribunal that the cash credits of Rs. 47,200 in the account of Smt. Ram Bai appeared in the books of the family business "munshi Ram, B. Sc. ", and in all the successive assessments made for the assessment year in question the total income determined for the business unit included the said cash credits either as a part of the business income or income from undisclosed sources and that the amount of cash credits in the name of Smt, Ram Bai were entered in the account books of the family business. Thus, it was the family which was answerable to explain the credits and if the family could not satisfactorily explain the cash credits and the source thereof, the assessee could not be assessed in respect of those cash credits. This contention was repelled by the Tribunal. The assessee made an application before the Tribunal that the following question of law be referred to this court for its opinion :