BIRADHMAL LODHA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a miscellaneous income tax case in which an assessee made an application to this Court under Section 66 (3), Income-tax Act, and this Court framed five questions provisionally on the facts as stated by the assessee and required the Income Tax Commissioner to state a case. The Income Tax Commissioner has stated a case and the case has now been argued before this Court by learned Counsel on each side. The first two questions which were framed by this Court provisionally were as follows: (1) Whether in the case of a partial division of a joint family property Section 25-A has any application ? (2) Whether any failure on the part of the assessees to substantiate their claim on this point, in an earlier year of assessment, precludes them from raising the point in a subsequent year of assessment ?

(2.) In, regard to the second question the Income Tax Commissioner states that, the assessees are not precluded from advancing a claim, and therefore there is no contest on this point, and we accept that view. On the first question the facts as stated are as follows: The assessees are a joint Hindu family carrying on business in the name of Kanwamen Hamir Singh. The business is managed by Rai Bahadur Seth Biradh Mal Lodha, the karta of the joint family. Their head-quarters are in Ajmere, but money lending and other transactions are carried on in other parts of British India and in Indian States. The joint family submitted a return for the income for the year 1927, to November 1928, on 10 September, 1929, for the year 1929-30. The return was not accepted as correct by the Income Tax Officer because the extracts from the accounts showed that losses incurred outside British India had been deducted and income derived from dividends on shares of the Edward Mills, Beawar, had not been included. The assessees were therefore directed by notices under Secs.22 (4) and 23 (2), Income Tax Act, to produce account books or any other evidence on which they relied to substantiate their return. The assessees did appear before the Income Tax Officer and proceedings before the Income Tax Officer went on for over a year, and on 31 October, 1930, the Income Tax Officer assessed the income of the assessees including the dividends on shares in the Edward Mills, Beawar. It is in regard to these shares that the first question is framed. The facts stated by the Commissioner are as follows: In 1906 there were 392 shares purchased by the joint family with joint family funds and they were shown in the names of certain members of the joint family and of the munim as follows: Shares Seth Guman Mal ... 121 Rai Bahadur Seth Biradh Mal (the present Karta) ... 113 Diwan Bahadur Umed Mal ... 21 Seth Gadh Mal ... 21 Seth Chand Mal ... 21 Seth Abhai Mal ... 85 Seth Choga Lal ... 10 Total ... 392

(3.) On 20 October, 1922, 315 shares were transferred to the names of various members of the joint family as follows: Shares Diwan Bahadur Seth Umed Mal (who was then Karta) ... 105 Seth Biradh Mal (the present Karta) ... 53 Seth Gadh Mal ... 52 Seth Kan Mal ... 53 Seth Jeth Mal ... 52 Total ... 315 and 76 shares were sold, and one share was given to charity. Up to 1926 the income from these shares was taken as part of the joint family income for the purposes of income tax assessment, and no objection was made. In the year 1927 the manager of the joint family made an objection to the ; inclusion of the income derived from these shares in the joint family income and notices were issued to the various members of the family to appear before the Income Tax Officer in order that an enquiry might be made. A letter dated 28 November, 1927, was received from the manager asking for a postponement and saying that he would later appear and explain in regard to the shares and that the members need not attend. He jailed however to give any explanation or evidence, and on 16 January, 1928, the Income Tax Officer informed him that as the evidence required had not been given, the income from dividends of the Edward Mills will be treated as joint income. This was done for that year and for the two subsequent years and no objection was made by the assessees. As we have seen, in the year of which the assessment is in question, the return omitted this income, and the Income Tax Officer issued notices to the assessees to substantiate their return by the production of account books and other evidence. The order of the Income Tax Officer dated 31 October, 1930, making the assessment mentions : " Income shown less and detected on examination Rs. 35,918-10-8." This income apparently includes Rs. 24,906-9-1. But there does not appear to have been any claim advanced before the Income Tax Officer in regard to the dividends from the Edward Mills on this occasion, and there is no mention in his order that any such claim was made. The order is a long and detailed one and deals in detail with various items claimed by the assessees. There is no allegation in any affidavit of the assessees that the point was raised before the Income Tax Officer. The point was raised before the Assistant Commissioner of Income Tax on the appeal of the assessees, and he deals with the point and considers an affidavit which was produced by the assessees. He states that he was not satisfied with the evidence produced before him by the assessees, and he then adds that as the law of income tax stands he believes that he is not competent to make a decision. He refers to Section 25-A, Income Tax Act, and says: Under that section the claim that a partition has taken place must be made before the Income Tax Officer while he is making his assessment under Section 23 of the Act. It was improper for the assessees to raise this question for the first time in appeal, and as an appellate Court I am not competent to decide the question raised by them now