TaxTMI 
TaxTMI 
1964 (7) TMI 39
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.... year ending Diwali 1949, respectively. Some of the appeals were by the department and others by the assessee. In particular, I.T.A. No. 7330 was by the assessee and I.T.A. No. 11075 was by the department. The status taken in the two appeals under consideration was that of individual. For the purpose of understanding the position, we may state that the same person figures in two different capacities, the individual assessee, Mathuradas Mohta, to whom we shall hereinafter refer to as M-I, and the assessee Hindu undivided family, which we shall hereinafter refer to as M-H. 3. In order to properly appreciate the contentions raised in these appeals we may set out the history of these assessments. At one time Mathuradas Mohta was being assessed as karta of the Hindu undivided family consisting of himself, his wife and three sons. In the course of assessment proceedings for the assessment year 1944-45 (the previous year being S.Y. 1999, i.e., November 9, 1942, to October 29, 1943), a claim under section 25A was made. It was to the effect that since Diwali 1944, or to be more precise on October 16, 1944, a complete partition took place amongst Mathuradas, his wife and their three sons ....
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....44-45, were rejected and once more the matters were brought in appeal to the Tribunal in I.T. As. Nos. 4413 to 4415 of 1950-51. On the said occasion, some additional facts were established before it and some additional material was also produced. In view of the additional data, the Tribunal on this occasion came to the conclusion that the partition claimed to have been made on October 16, 1944, was a genuine one and that the partition deed executed on December 30, 1944, was intended to be acted upon by the parties to it. It, however, found that the dwelling house of the family at Bikaner remained undivided though all the property was divided amongst the several parties to the partition as required by the provisions of section 25A. It, therefore, gave the following direction: "This being our view, we must cancel the assessments made on the family for the years 1948-49 and 1949-50. These assessments have been made on the family. Separate assessments will have to be made on Seth Mathuradas and the other members of the family. We also direct that fresh assessments be made on the Hindu undivided family in respect of its income from the Bikaner house." 5. In view of the fact that the ....
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....g challenged by the persons concerned before higher courts, assessments were being made according to the view then prevailing and naturally these assessments were being disputed by the parties concerned. It was in those circumstances the Tribunal had before it some assessments made in accordance with the first finding and some made in accordance with the second finding of the Tribunal. Both the findings given by the Tribunal and ultimately confirmed by the Supreme Court by its order made on November 22, 1960, were binding upon the parties concerned in respect of all assessments for which those findings were given and also in regard to all other assessments that had become final and conclusive. In regard to these assessments which were made either on M-H or M-I or appeals filed by the department which had not become final and conclusive, the Tribunal considered that the second finding of the Tribunal would prevail and those pending assessments and appeals would have to be decided on the footing that a genuine partial partition did take place on October 16, 1944, that the erstwhile Hindu undivided family property was divided amongst the several members except the dwelling house at Bi....
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....I, Samvat 2003, dated 25th October, 1946"; and "that the sale deed shall be completed within four months from to-day." The said agreement of sale also sets out the values of immovable properties at Rs. 14.8 lakhs and the balance was attributed to movable properties. In due course, a sale deed was executed on January 8, 1947, and it was registered on January 11, 1947. After reciting the facts contained in the agreement of sale made on October 23, 1946, the said sale deed specifically referred to the fact that it related to immovable properties only valued at Rs. 14.8 lakhs. It also stated that the total consideration of Rs. 47.5 lakhs was to be paid by fully paid up shares and that "till such time of allotment of shares by the purchaser-company to the vendors, hereinbefore mentioned, the said sum of Rs. 47,80,000 shall be a loan due to the vendors by the purchaser-company" and that it would carry interest at 6% per annum. It was also common ground that actual possession of the said mills was given, as agreed in the agreement of sale, on Kartik Sud I, Samvat 2003, i.e., the first day of the previous year relevant to the assessment year 1948-49. 10. On these facts and particular....
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....pany styled 'Perfect Pottery Co. Ltd.' agreed to purchase a colliery under an agreement dated March 31, 1947. It was provided that the vendors were to sell and the purchasers were to purchase as from April 1, 1947, and also the purchasers were to take over the business as from April 1, 1947. Thus, it is evident that a distinction has been made there. This is, however, not enough in that case. The possession was kept by the vendors up to the date of completion of sale, viz., December 31, 1947, and in the meantime, the vendors carried on business on behalf of the purchasers. During this period, there was a loss and the company claimed that the loss belonged to it. The department disallowed the loss while the High Court held that the vendors were mere agents on behalf of the purchasers and it was the purchaser who was entitled to the loss. Accordingly, the loss was allowed against the income of the vendors, viz., Perfect Pottery Co. Ltd. It will thus be seen that the facts in the case of the appellant are quite different. From the books produced both of the company and of the vendor, it is clear here that the company took possession as from October 25, 1946. In this connection....
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....ear 1944, sold the same to a limited company under an agreement of sale dated October 23, 1946, and the sale deed dated January 8, 1947, to Rekhchand Mohta Spg.&Wvg. Mills Ltd. Under clause 4 of the agreement for sale, it was provided that the possession of the mills was to be given on October 25, 1946. The Income-tax Officer raised the point regarding the effective date of the sale of assets for the purpose of arriving at the capital gains. In this connection, I may state that in the case of the original assessment for the assessment year 1948-49, in respect of the Hindu undivided family which was then not recognised by the department as partitioned, the facts regarding this capital gains were gone into when the amount of capital gains was computed and also the date of sale was ascertained by the Income-tax Officer to be October 25, 1946, which fell for the assessment year 1948-49 for which year the capital gains was taxed. However, for the year under appeal, the Income-tax Officer found that the agreement of sale was dated October 23, 1946, while the sale deed was dated January 8, 1947. Besides, clause 4 of the agreement of sale provided that the vendor should give possession of ....
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....wing the status as an "individual", which all along was his contention on the strength that there was a partition of joint Hindu family properties as from October 16, 1944. This was not a case of voluntary return filed as an individual, but it was a return submitted in pursuance of notice under section 22(2) against the joint Hindu family. I, therefore, do not accept the plea of Shri Mulla that it was a voluntary return. All that has happened is that the Income-tax Officer did not recognise the status as returned by the appellant, but he assessed him in the status of joint Hindu family. In the circumstances, the first plea is not accepted. This action has been taken under section 34 on March 3, 1956, by issuing a notice under section 34 received by the appellant on March 22, 1956, on the basis of the finding of the Appellate Tribunal in its order dated February 20, 1952, in the case of the Hindu undivided family, which claimed a partition as from October 16, 1944. In paragraph 7 of their order, there is a distinct finding of the Tribunal as under: "Separate assessments will have t....
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....hat the profits available for remittance amounted to only Rs. 49,287 and consisted of the profits relating to account years relevant for the assessment years 1946-47, 1947-48 and 1948-49, i.e., while those businesses were carried on by M-I. In view of the fact that a lakh of rupees was already remitted in the account year relevant to the assessment year 1949-50, and was to be assessed in the hands of the assessee for 1949-50 assessment year, he held that there would not be any profit available for the assessment year 1950-51. 14. This finding of the Appellate Assistant Commissioner was challenged before the Tribunal by the department. There was a similar challenge before the Tribunal in regard to the remittance of Rs. 46,910 in respect of Bikaner profits. The Appellate Assistant Commissioner's decision turned upon the view taken by him that profits available for remittance to this assessee, M-I, would be only the profits that he would make as owner of the said business from and after October 16, 1944, and that the profits that fell to his lot when he took over the several business concerns as going concerns as a result of partition made on October 16, 1944, would be consider....
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.... had paid tax under section 18A and since the same income was being assessed in his hands in his capacity as M-I, no charge of interest under section 18A could be made as it would amount to making two demands upon the same income. The Appellate Assistant Commissioner accepted this contention. He held in paragraph 8 as follows: "8. The last contention (i.e., No. 16), is in respect of the penal interest of Rs. 24,214 charged against the 18A-demand. It is pleaded by Shri Mulla that the full payment was made against 18A-demand in the case of the Hindu undivided family as it was held that there was no partition. It is, therefore, submitted by him that there was no justification in raising a demand for the same income for the second time against the individual case. This contention has force, and I hold that no two demands can be made against the same income." The Tribunal took the view that the Appellate Assistant Commissioner erred in accepting this contention. In dealing with this, the Tribunal observed as follows: ....
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....61 and 3962 of 1948-49 relating to assessment years 1944-45 to 1947-48 (marked annexure "F"); a copy of the grounds of appeal filed before the Appellate Assistant Commissioner in I.T.A. No. Spl. C. 65/57-58 (marked annexure "G"); a copy of the grounds of appeal filed by the Income-tax Officer before the Tribunal (departmental appeal) in I.T.A. No. 7331 of 1958-59 (marked annexure "H"); a copy of the grounds of appeal filed by the assessee before the Tribunal in I.T.A. No. 7330 of 1958-59 (marked annexure "I"); a copy of the Tribunal's order in I.T.A. No. 11075 of 1958-59 dated December 23, 1960 (marked annexure "J"); a copy of the order of the Appellate Assistant Commissioner dated November 24, 1958, passed in I.T.A. No. Spl. C. 35/55-56 for the assessment year 1950-51 under section 23(3) and section 34 of the Income-tax Act (marked annexure "K"); a copy of the Income-tax Officer's assessment order dated March 30, 1955, for the assessment year 1950-51 (marked annexure "L"); a copy of the Tribunal's consolidated order in I.T. As. Nos. 4413, 4414 and 4415 of 1950-51 in the case of Seth Mathuradas (Hindu undivided family), dated February 20, 1952 (marked annexure "M"); a c....
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....late Assistant Commissioner, while dealing with the assessee's appeal for the assessment year 1947-48, was competent to give any direction in relation to assessment of capital gains and profits arising out of the sale of the textile mills for the year 1948-49? (3) Whether, in the facts and circumstances of this case, the amounts of Rs. 97,945 (Rs. 51,035 from Rajnandgaon and Rs. 46,910 from Bikaner) could be assessed as remittance of profits? (4) Whether, in the facts and circumstances of this case, an appeal to the Appellate Assistant Commissioner against the charge of penal interest was competent?" 19. We have heard the parties on this statement. The assessee suggests substitution of the figure of Rs. 1,25,451 for the figure of Rs. 1,51,035 in paragraph 13 of the statement. Similarly, for the figure of Rs. 46,910 in paragraph 14 the assessee wants the figure of Rs. 16,910 to be substituted. In paragraph 15 for the sum of Rs. 51,035 the assessee suggests the figure of Rs. 25,451 and, similarly, for the figure of Rs. 46,910 in the same paragraph, the assessee suggests the figure of Rs. 16,910. Consistently, the assessee suggests alteration of the figures in question No....
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....s contention of Seth Mathuradas and he was being assessed in the status of a Hindu undivided family. In the assessment year 1947-48 also Seth Mathuradas had been assessed in the status of Hindu undivided family. There had been an appeal by Seth Mathuradas against the decision of the Income-tax Officer. The Income-tax Officer, therefore, though it proper to take precautionary measure by having the precautionary assessment made against Seth Mathuradas in his capacity as individual also. The Income-tax Officer, therefore, issued a notice under section 34 for that purpose, and ultimately an assessment against him in his capacity as an individual also has been made for the same income for which there had been an order of assessment in his capacity of a Hindu undivided family. The matter has ultimately been decided by the Supreme Court, and it appears that as a result of the Supreme Court decision Seth Mathuradas is liable to be assessed in the status of Hindu undivided family till the assessment year 1947-48. We are here concerned with the assessment year 1947-48. This being the final result flowing from the decision of their Lordships of the Supreme Court, the Income-tax Officer has no....
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....under appeal. The Appellate Assistant Commissioner no doubt was competent to hold whether a particular item or a particular amount was income of that assessment year, but he has no jurisdiction further to decide in that appeal the appropriate year in which the said income would fall. That being the position, the answer to the second question will have to be in favour of the assessee. We, accordingly, answer the second question in the negative. The third question is in the following terms: "Whether, in the facts and circumstances of this case, the amount of Rs. 42,361 (Rs. 25,451 from Rajnandgaon and Rs. 16,910 from Bikaner) could be assessed as remittance of profits?" Before we state the facts it may be stated that in the question which has been referred to, the respective figures given are Rs. 97,954, Rs. 51,035 and Rs. 46,910. At the time the statement of the case was prepared, the assessee had made a suggestion that these figures be corrected, but the suggestion does not appear to have been accepted by the Tribunal. Before commencing the argument on the third question, Mr. Joshi, ....
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....nt year 1950-51 the amounts brought by him were not liable to be included in the total income of the assessee. The department took an appeal against this decision of the Appellate Assistant Commissioner to the Tribunal. The Tribunal did not disagree with the finding of the Appellate Assistant Commissioner that when in a partition an assessee takes several business concerns as a result of partition, the profits thereof are capitalized, turning them into assets. The Tribunal, however, following the decision in Commissioner of Income-tax v. Annamalai Chettiar [1944] 12 I.T.R. 226, came to the conclusion that even in such a case the amounts when brought from nontaxable territories to taxable territories would be taxable and are liable to be included in the total income of the assessee. The Tribunal has observed that in the absence of any other decision it was following the decision in Commissioner of Income-tax v. Annamalai Chettiar*. On this finding of the Tribunal, at the instance of the assessee, the aforesaid third question has been referred. The question that arises is whether the amount which the assessee gets in a general partition between different members of a Hindu undivid....
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....n its nature income or profits that had accrued to him in non-taxable territories. The view taken by us finds support in a decision of the Madras High Court, Veerappa Chettiar v. Commissioner of Income-tax [1950] 18 I.T.R. 396. In that case the facts were, two brothers who were members of a Hindu undivided family, carried on a money-lending business in Colombo. They partitioned their property at some time. Under the partition deed, the elder brother took over the entire assets of the Colombo business consisting of its properties outstanding and profits that had been earned by the business till then and agreed to pay to his younger brother, the assessee, a certain sum as for his half share of the family properties including the money-lending business. During the relevant accounting year the assessee brought one lakh of rupees from Colombo to British India. The income-tax authorities held that out of the sum of rupees one lakh at the time of the partition, Rs. 36,000 and odd was the share which the assessee had obtained in the profits of the Colombo money-lending business. They therefore held that amount to be taxable. The High Court held that the amount was not taxable. The reasons ....
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....er, it appears that the Tribunal has followed the decision in Commissioner of Income-tax v. Annamalai Chettiar [1944] 12 I.T.R. 226 because the decision in Veerappa Chettiar v. Commissioner of Income-tax [1950] 18 I.T.R. 396 or any other decision was not brought to its notice. For the reasons stated above, in our opinion, the answer to the third question will have to be in favour of the assessee. We accordingly answer the third question in the negative. This brings us to the fourth and the last question as follows: "Whether, in the facts and circumstances of this case, an appeal to the Appellate Assistant Commissioner against the charge of penal interest was competent?" Facts giving rise to the question, in brief, are: We have already said that in the assessment year 1947-48 the assessee was claiming that he should be assessed in that year in his status as an individual. Advance tax however was not paid by him in his capacity as an individual, but as the department was insisting on taxing him in his status of a Hindu undivided family advance tax has been paid by him in that capacity. The Income-....
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....ell settled principle of law that a right of appeal is a creature of statute and no person can claim by way of right a right to appeal. An appeal therefore from a certain order would not lie unless a right to file an appeal against it has been conferred by law. Section 30 is the relevant section in the Act relating to appeals to the Appellate Assistant Commissioner against the assessment order. The material section is sub-section (1) of section 30, and it is in the following terms: "30. (1) Any assessee objecting to the amount of income assessed under section 23 or section 27, or the amount of loss computed under section 24 or the amount of tax determined under section 23 or section 27, or denying his liability to be assessed under this Act, or objecting to the cancellation by an Income-tax Officer of the registration of a firm under sub-section (4) of section 23 or to a refusal to register a firm under sub- section 27, or objecting to any order under sub-section (2) of section 25 or section 25A, or sub-section (2) of section 26 or section 28, made by an Income-tax Officer, or objecting to any penalty imposed by an Income-tax Officer under sub-section (6) of section 44E or sub-s....
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....whole. He has placed reliance on certain observations in Commissioner of Income-tax v. Jagdish Prasad*, the decision on which the Tribunal itself has relied. Mr. Joshi on the other hand contends that charge of interest under sub-section (8) of section 18A is not imposition of any tax. Sub-section (8) deals only with arithmetical calculations to be made in accordance with the provisions of the Act when it is found that the assessee who was liable to pay an advance tax has failed to pay the advance tax. If the assessment stands, the amount added by way of interest must stand. If the assessment fails or is modified, the amount of interest would accordingly be either deleted or modified. The assessee, therefore, has no right of appeal against the levy of interest under the clause "denying his liability to be assessed under this Act" occurring in section 30 of the Act even when the assessee had filed an appeal against the order of assessment made under section 23 of the Act. The first question that arises is whether the levy of interest under section 18A is levy of tax under the Act. Now "tax" has not been defined in the Act. In considering this question the decision of their Lordships ....
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.... of income-tax". The question was whether the provisions relating to imposition of penalty fell within the expression "levy, assessment and collection of income-tax". Their Lordships upheld the contention of the department that the provisions relating to imposition of penalty were saved. Their Lordships, referring to their earlier decision in Abraham's case*, observed at page 128 of the report as follows: "This court regarded penalty as an additional tax imposed upon a person in view of his dishonest or contumacious conduct. It is true that under the Hyderabad Income-tax Act, distinct provisions are made for recovery of tax due and penalty, but that in our judgment does not alter the true character of penalty imposed under the two Acts." In our opinion, the ratio that emerges from these two decisions of their Lordships of the Supreme Court is that whatever addition is made in the amount of tax by reason of the provisions of the Act which formed part of the machinery of assessment of tax liability, is a tax. Chapter IV of the Income-tax Act relates to deduction and assessment and con....
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....true that sub- section (1) of section 30 confers a right of appeal in respect of orders under section 28 and other sections which empower the Income-tax Officer to add certain amounts to tax and does not in express terms make reference to section 18A. That by itself, in our opinion, would not be a sufficient ground for giving a limited meaning to the clause as contended for by Mr. Joshi. Mr. Joshi has also made a reference to the two decisions on which the Tribunal has placed reliance in this respect and has contended that no appeal lies against the order made under section 18A. These decisions no doubt to a certain extent support the contention of Mr. Joshi, but the view taken by this court in Commissioner of Income-tax v. Jagdish Prasad was that there was a clear distinction between a tax and a penalty or penal interest, and, therefore, an assessee who merely denies his liability to pay penalty or penal interest cannot be said to deny his liability to be assessed under the Income-tax Act. It is to be noticed that the decision in Abraham's case and Bhikaji Dadabhai's case were then not available. In view of the decision of their Lordships it can hardly be said that any mat....