A.R. Tiwari, J.
1. These applications are filed by the unsuccessful assesses (three brothers) under Section 27(3) of the Wealth-tax Act, 1957.
2. The aforesaid reference applications, twelve in number, involve common questions of fact and law and accordingly are heard analogously and disposed of by this common order.
3. Factual matrix lies in a narrow compass. The three assessees, sons of the late Shri Jaswantlal Jha, were partners along with their father in the firm named Oriental Chemical Works, Indore. Shri Jaswantlal Jha died on August 22, 1957, i.e., after enforcement of the Hindu Succession Act, 1956. The amount standing to the credit of Jaswantlal Jha in the accounts of the firm, devolved on the assessees in equal proportion. The assessees contended that they agreed to hold such amount in the status of karta of their respective branches of the Hindu undivided family (HUF) which comprised their wives and children and thus threw it in the commonhotchpotch before December 31, 1969. From 1970-71, the assessees put a note in their returns that such amount belonged to the Hindu undivided family and claimed exemption as by that time the amount of interest had become taxable. In the status of the Hindu undivided family, the interest became taxable from 1980-81. The Wealth-tax Officer rejected the contention and included such amount in the hands of the assessees as individuals and assessed them to tax accordingly.
4. Aggrieved, the assessees, placing reliance on a decision of the High Court of Gujarat (CIT v. Dr. Babubhai Mansukhbhai (decd.) : [1977]108ITR417(Guj) ) and a circular, issued by the Central Board of Direct Taxes ('CBDT' for short) under Section 119 of the Income-tax Act bearing reference No. F/1269/30/70/3 dated February 28, 1976, and said to contain instructions in conformity with the view expressed by the High Court of Gujarat in the abovestated case, challenged the orders of the Wealth-tax Officer before the Appellate Assistant Commissioner who allowed the appeals and accepted the plea of status of Hindu undivided families in regard to the property inherited from the father. Dissatisfied, the Department (Wealth-tax Officer, B-Ward, Indore) filed appeals registered as W. T. A. Nos. 129 to 132/(Ind) of 1987 (Prabhas Chandra Jha), as W. T. A. Nos. 133 to 136/(Ind) of 1987 (Satish Chandra Jha) and as W. T. A. Nos. 125 to 128/ (Ind) of 1987 (Sharadchandra Jha) for the assessment years 1980-81 to 1983-84 before the Tribunal which were allowed by the common order dated June 29, 1987, restoring the orders of the Wealth-tax Officer. The assessees then filed applications, registered as Nos. 97 to 100/(Ind) of 1987, as Nos. 101 to 104/(Ind) of 1987 ; and as Nos. 105 to 108/(Ind) of 1987, respectively, under Section 27(1) of the Wealth-tax Act, 1957, before the Income-tax Appellate Tribunal, Indore, demanding reference of four questions as reiterated in these applications filed in this court, as of law, for opinion. These applications were, however, dismissed by the common order on July 6, 1988. Undaunted by unsuccess, these three assessees have filed twelve separate applications, as particularised above, for each assessment year from 1980-81 to 1983-84 (four years) under Section 27(3) of the Wealth-tax Act, 1957.
5. The matter is without a conundrum. Tersely stated, the questions are whether the property, inherited from the father, was thrown into the common stock of the family before December 31, 1969, and was treated as such and whether the contrary finding of the Tribunal is perverse and vitiated. Reference to the decision of the High Court of Gujarat and dependence on Circular No. 1269 dated February 28, 1970, can be dealt with point-wise.
6. We have heard Shri J.W. Mahajan, learned counsel for the applicants, and Shri D.D. Vyas, learned counsel for the non-applicants/Department, in all these applications.
7. We shall first consider the decision of the Gujarat High Court and the effect of the circular.
8. As regards reference to the decision of the High Court of Gujarat in CIT v. Dr. Babubhai Mansukhbhai : [1977]108ITR417(Guj) , suffice it to say that the apex court, while affirming CWT v. Chander Sen : [1974]96ITR634(All) and approving CIT v. Ram Rakshpal, Ashok Kumar : [1968]67ITR164(All) ; Addl. CIT v. P.L. Karuppan Chettiar : [1978]114ITR523(Mad) ; Shrivallabhdas Modani v. CIT : [1982]138ITR673(MP) and CWT v. Mukundgirji : [1983]144ITR18(AP) , disagreed with and overruled CFT v. Dr. Babubhai Mansukhbhai : [1977]108ITR417(Guj) in CWT v. Chander Sen : [1986]161ITR370(SC) decided on July 16, 1986. It is observed that the Hindu Succession Act, 1956, modifying and codifying the law, luculently laid down that the property of a male Hindu dying intestate shall devolve according to the provisions of Chapter II and Class I of the Schedule which excluded son's son but included the son of a predeceased son. It is inbred to inter that the son as heir of Class I thus inherits the property in his individual status and not as karta of his own undivided family because the son of a living son, i.e., grandson, is not included in the scheme of succession in terms of Section 8 of the Hindu Succession Act, 1956, and Class I of the Schedule. The view of the Gujarat High Court, contrary to this position of law, is thus unhelpful to the assessees.
9. As regards the circular, noted above, it is held in Bengal Iron Corporation v. CTO : 1993(66)ELT13(SC) that circulars, etc., should be understood as containing the understanding of their authors and not as binding upon the courts, Section 119(1)(b) of the Income-tax Act itself clarifies that no instructions, etc., shall be issued so as to interfere with the discretion of the specified authorities in the exercise of their appellate functions. Article 141 of the Constitution of India mandates that the law declared by the Supreme Court shall be binding. It is the duty of every body to obey the law (Narinder Singh v. Surjit Singh : AIR1984SC1359 ), A circular in conflict with the law laid down in Chander Sen's case : [1986]161ITR370(SC) should be held to be inoperative even without its technical withdrawal by the concerning authority. The contrary view of CIT v. B.M. Edward, India Sea Foods : [1979]119ITR334(Ker) as argued, does not lay down the correct law. The circular thus does not remain a protective umbrella and is not rightly invoked in this case.
10. Shri Mahajan, however, strenuously submitted that the Tribunal wrongly ignored the application of the aforesaid circular and placed reliance on Bharat Vijay Mills Ltd. v. ITO : [1985]154ITR786(Guj) . He submitted that benevolent circulars issued by the Central Board of Direct Taxes, even if they deviate from the legal position are required to be followed by the Income-tax Officer since the circulars would go to the assistance of the assessee. The Tribunal, however, concluded that the circular is not a benevolent circular and rests on the decision of the Gujarat High Court in CIT v. Dr. Babubhai Mansukhbhai : [1977]108ITR417(Guj) which stands overruled in Chander Sen's case : [1986]161ITR370(SC) . In view of this position and in view of the decision of Bengal Iron Corporation's case [1993] 90 STC 47 (SC), the contention of counsel for the applicants is found to be meritless. In our view, the Tribunal committed no error of law in ignoring the circular on the conclusion that it was not a benevolent circular but based on the decision of the High Court of Gujarat which stood overruled by the Supreme Court in Chander Sen's case : [1986]161ITR370(SC) . In this view of the matter, the questions formulated by the applicant with regard to Circular No. 1269 is not found to be a question of law for reference and opinion. Shri Mahajan then submitted that the question of hotchpotch is decided in ignorance of cogent and convincing material on record. Shri Vyas, on the other hand, contended that this question is a question of fact and as such the prayer for reference is without merit. We shall consider this aspect a little later. The question about the circular also becomes infirm in view of the admission made before the Tribunal. The contention with regard to Section 119(1)(a) of the Income-tax Act is equally unhelpful, On the point of hotchpotch, counsel for the applicants has placed reliance on Goli Eswariah v. CGT : [1970]76ITR675(SC) .
11. Aware of the legal position, the assessees thus themselves put forththe plea of agreement of putting the property in question in commonhotchpotch and unhesitatingly conceded (paragraph 4 of the order of theTribunal) before the Tribunal as under :
'It is fairly conceded by learned counsel for the assessees that in view of the judgment of the Supreme, Court in the case of Chander Sen : [1986]161ITR370(SC) , the assessees inherited the self-acquired property of their father of their separate property and not as the joint family property of their respective Hindu undivided families.'
12. Hence, the controversy veered round the blend of the property. The solitary question thus is whether the property, inherited as separateproperty of the individual was thrown into the common stock of the family before December 31, 1969, so as to make it the property of the respective Hindu undivided family of the assessees to avoid taxability as separate property.
13. The date is material because Sub-section (2) was inserted in Section 64 of the Income-tax Act by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, stating that income from any property thrown into the common stock of the family after December 31, 1969, shall be deemed to arise to the individual and not to the family. A similar amendment was incorporated in Section 4 of the Wealth-tax Act by the insertion of Sub-section (1A) by the Finance (No. 2) Act, 1971, with effect from April 1, 1972, providing for the consequence of conversion of the properties after December 31, 1969.
14. The exact date of throwing into common stock, however, does not seem to have been asserted. The plea emerging from record is that it was thrown before December 31, 1969. It is contended that (i) note was put in the returns showing such property as of a Hindu undivided family ; (ii) in the books of the firm, the property was shown as belonging to the Hindu undivided families from the assessment year 1958-59 onwards ; (iii) this position was reflected also in the balance-sheets of the firm from the assessment years 1973-74 to 1979-80 ; and (iv) properly was treated as of a Hindu undivided family from receipt on October 22, 1957. The question is whether the contention shows conversion by putting into common stock and whether there is sufficient material and proof of date before the Tribunal to sustain the contention of the assessees. The Tribunal, however, negatived the contention and held that there was no substantive and sufficient evidence in its support and reversing the orders of the Appellate Assistant Commissioner held that the property in question continued to hold the character of separate property and was not thrown into the common stock of the family before December 31, 1969, or at any time so as to make it the property of the Hindu undivided families of the assessees as contended and claimed and thus ordered the levy of tax as separate property. The point, short and simple, is that it requires examination whether this finding is on a firm foundation or is vitiated by non-consideration or improper consideration of the material piece of evidence, i.e., returns, circumstances and conduct, etc., or by error of law and is thus perverse. It is contended that the finding is against weight of evidence and results in miscarriage of justice. This contention is opposed. However, the conclusion gives rise to a referable question.
15. It is contended that question about the tainted finding needs to be referred and answered one way or the other, after a scrutiny of the orders. It is argued that the conclusion, when branded as unsupportable and perverse, becomes a question of law. In our view, this limited question in the instant case should be permitted to prevail. The answer, however, would depend on the examination of the entire material which can be undertaken only when such a question is before us for opinion.
16. In our view the proposed questions Nos. 1, 2 and 4 are not questions of law. As regards question No. 3, we find that it needs to be reshaped and reformulated.
17. In the circumstance after bestowal of our anxious consideration, we hold that only one common question of law, does arise out of the common order of the Tribunal in respect of all the three assessees for all the four assessment years from 1980-81 to 1983-84.
18. We, therefore, deem it proper to reshape and reformulate the question of law in the undernoted terms :
'Whether the 'conclusion' of the Tribunal that the property inherited as individual was not thrown into common stock of the family before, December 31, 1969, and is taxable as separate property and not as of a Hindu undivided family is against the. weight of the evidential material and is thus perverse and vitiated and results in levy of lax, in violation of Article 265 of the Constitution of India ?'
19. We are thus not satisfied with the correctness of the decision of the Tribunal as regards refusal to state the cases and refer one question as formulated by us.
20. Ex consequenti, we allow all these reference applications in part as above and call upon the Tribunal under Section 27(3) of the Wealth-tax Act, 1957, to state the cases and refer the aforesaid common question of law arising out of the common order dated June 29, 1987, in each appeal as noted above for our opinion as expeditiously as possible.
21. There shall, however, be no order as to costs, Counsel fee for each side in each case is, however, fixed at Rs. 750 on certification.
22. The copy of the order under the seal of the court and the signature of the Registrar, in terms of Section 27(6) of the Act, shall be transmitted to the Tribunal for compliance.
23. This order shall be retained in Miscellaneous Civil Case No. 289 of 1988 and its copy each shall be placed in the connected cases.