Mukesh Chourasia Vs. Income Tax Officer - Court Judgment

Excerpt:

.....the assessee filed returns for all these years in the status of individual.it appears that in the return the assessee had given a note that he had also income from agriculture to the extent of rs. 20,000 claiming the same to be belonging to the huf. the ao recorded his finding that the assessee had simply stepped into the shoes of his late father taking all the assets and liabilities and, therefore, the correct status of the assessee was that of huf. on this basis the ao completed the assessment of the assessee in the status of individual on protective basis with the observation that substantive assessments would be made in the status of huf. the total income for the asst. yr. 1987-88 was assessed at rs. 65,000 which included the business income estimated at rs. 30,000 and income from undisclosed sources at rs. 35,000. the explanation offered by the assessee was not accepted by the ao. in the first appeal the learned dy cit(a) confirmed the order of the ao. hence the assessee is now before us.4. the counsel for the assessee contended that the business of pan is exclusively owned and run by the assessee in his individual capacity.the business of his father was closed down after.....

Judgment:

1. This appeal is by the assessee directed against the order of the learned Dy. CIT(A), Jabalpur Range, Jabalpur dt. 28th February, 1992.

2. We have heard the learned counsel for the assessee and the Departmental Representative and perused the records of this appeal. The assessee raised the following grounds of appeal : "That the learned first appellate authority erred both in law and facts in confirming the protective assessment made on the appellant in the status of an "individual".

That the income shown at Rs. 25,260 from the business of pans should have been accepted.

That without prejudice to the above, the estimate of income from pan business at Rs. 30,000 is arbitrary, excessive and high under the facts and circumstances of the case.

That in view of the explanation submitted by the appellant that the amount of Rs. 35,000 had its source in the earnings from agriculture, there is absolutely no warrant in holding that income as from undisclosed source. The explanation of the appellant in this behalf should have been accepted.

That without prejudice to the above, in case it is held that there is justification for not accepting the explanation of the appellant in regard to the amount of Rs. 35,000, the quantum of addition at Rs. 35,000 is arbitrary, excessive and high under the facts and circumstances of the case." 3. The brief facts of this case are as follows : The assessee is engaged in the business of pan. The father of the assessee is Late Shri Paras Ram Chourasia was stabbed to death in the year 1983. The assessee was also injured and was hospitalised for some time. The father of the assessee was carrying on the business of pan. The assessee recovered from his injuries after a gap of four or five months. He started the business of pan with initial investment of Rs. 20,000. According to the assessee, this initial investment was from savings of Rs. 5,000 and the balance of Rs. 15,000 as a loan from maternal uncle Shri L. L.

Chourasia of Damoh. The family of the assessee owned about 40 acres of agricultural land from which they have substantial savings from agricultural income. The family also has some rental income. On 16th December, 1987 there was a survey operation at the premises of the assessee under s. 133A of the IT Act. After the notices under s. 148 were issued to the assessee for the asst. yrs. 1983-84 to 1987-88 the assessee filed returns for all these years in the status of Individual.

It appears that in the return the assessee had given a note that he had also income from agriculture to the extent of Rs. 20,000 claiming the same to be belonging to the HUF. The AO recorded his finding that the assessee had simply stepped into the shoes of his late father taking all the assets and liabilities and, therefore, the correct status of the assessee was that of HUF. On this basis the AO completed the assessment of the assessee in the status of individual on protective basis with the observation that substantive assessments would be made in the status of HUF. The total income for the asst. yr. 1987-88 was assessed at Rs. 65,000 which included the business income estimated at Rs. 30,000 and income from undisclosed sources at Rs. 35,000. The explanation offered by the assessee was not accepted by the AO. In the first appeal the learned Dy CIT(A) confirmed the order of the AO. Hence the assessee is now before us.

4. The counsel for the assessee contended that the business of pan is exclusively owned and run by the assessee in his individual capacity.

The business of his father was closed down after his death. The assessee after the recovery of his illness started the business from the funds raised by him independently. Therefore, on the aforesaid facts there was no justification to hold the business as that of HUF.It was further argued that the returned income of the assessee was only Rs. 25,260. The AO estimated the same at Rs. 30,000 without having any basis. He also contended that non-maintenance of regular accounts cannot be a reason for enhancing the income. As far as the addition of Rs. 35,000 is concerned, it was contended that this amount belonged to HUF as the same was deposited on 3rd October, 1986 in HUF's account with Central Bank of India. The said HUF known as Shri Mukesh Kumar Chourasia is assessed under the IT Act with GIR No. M-203. The assessment orders have been passed by the learned Asstt. CIT vide his order dt. 28th March, 1990 for asst. yrs. 1985-86 to 1988-89. On the other hand, the learned Departmental Representative supported the orders of the authorities below.

5. We have perused all the records and considered the submissions made before us. The assessee filed a paper-book before us. It was pointed out at the time of hearing that the affidavit from the maternal uncle had also been filed averring that the assessee has borrowed a sum of Rs. 15,000 from his maternal uncle for the said business of pan. This fact is not denied by the Revenue. The fact that the father of the assessee was stabbed to death and that the assessee carried on the business after 4 to 5 months, are also not denied. From the above it is crystal clear that the assessee had started his own business by investing a sum of Rs. 20,000 as explained by him. This fact was also supported by the affidavits of mother and brother of the assessee. It is also pertinent to note that a statement was also recorded from the brother of the assessee in which he had stated that the income from pan business belongs to his brother, Shri Mukesh Kumar Chourasia in his individual capacity. Therefore, after considering all these facts and material placed on records, we are unable to accept the case of the Revenue that the pan business of the assessee belongs to HUF. The overwhelming evidence produced by the assessee clearly indicates that the income is earned in his individual capacity and not from HUF.Hence, the protective assessment made by the AO is modified and the AO is directed to treat the income from pan business in the hands of the assessee substantively. Accordingly, the ground No. 1 is allowed.

6. The next ground relates to estimation of income at Rs. 30,000 as against Rs. 25,260 returned by the assessee. As there are no accounts maintained by the assessee, in our view the AO is perfectly justified in estimating the income at Rs. 30,000. Hence, we uphold the order of the AO.7. As far as the addition of Rs. 35,000 is concerned, as we have already seen that this amount was deposited in a bank. The family of the assessee also has resources for such income. Further, it is also seen that the HUF had been assessed by the Asstt. CIT, Sagar for asst.

yrs. 1985-86 to 1988-89. All these facts clearly show that this amount of Rs. 35,000 is belonging to HUF and the same cannot be assessed in the hands of the assessee. We, therefore, delete this addition.