BENGALI SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BOTH these cases have arisen out of the same judgment of the Income Tax Appellate Tribunal and, hence they have been heard together and disposed of by this common judgment.

(2.) "Sumitra Sadan", a large building, situated in the city of Patna has a large rental income. The said rental income is shared by eight persons. Each of them, used to submit his Income Tax returns showing himself as part owner of the said building and in relation to his share in such rental income. One of those eight owners, Sumitra Devi, filed such returns which were accepted without scrutiny for the assessment years 1991 -92 to 1996 -97. The return of Sumitra Devi for the assessment year 1997 -98 was scrutinized, when it was accepted that the part rental income of the said building is of Sumitra Devi. Subsequent thereto, for the assessment year 1998 -99, the return of Sumitra Devi on being scrutinized, it was opined that she is not a part owner of the building in question and that the true owner of the building in question is the appellant -Hindu undivided family. On the basis of such opinion, a notice under Section 147 of the Income Tax Act, 1961, was issued to the appellant (HUF). Thereupon, under Section 143, assessment of the income of the said property for the relevant years was assessed in the hands of the appellant citing him as the owner of the building in question and the appeals preferred against the orders of assessment having been rejected, the appellant approached the Tribunal and after losing before Tribunal, the assessee (HUF) is before us in the present appeal.

(3.) IN the instant case, however, admittedly, at the time when the building had not been constructed, the Hindu undivided family had no taxable income and, accordingly, was not an assessee under the Income Tax Act. According to the assessee, the Hindu family stood disrupted by the family arrangement entered in the first week of April, 1989. Therefore, before the building was constructed the family stood disrupted and its properties were divided amongst its members. Although, division was not by metes and bounds, i.e., physical division, non -acceptance of such division on the basis of Section 171 of the Income Tax Act by the Assessing Officer was incompetent. However, the question is whether in fact a family arrangement was arrived at in 1989. It has come on record that subsequent to April 21, 1989, i.e., the date of the deed of family arrangement, Shri Bengali Singh, his wife and their sons granted a lease of a part of the building constructed on the said land in favour of Tata Iron and Steel Co. Ltd. and for that purpose got a lease deed dated December 28,1989, registered. In that Shri Singh described himself as the father of his sons and karta of joint family, comprising of himself, his wife and his major sons. His minor sons also had been represented by Sri Bengali Singh as their father and natural guardian in the said deed.