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Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) Vs. B.G. Narayana Bhat - Court Judgment

SooperKanoon Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberT.R.C. Nos. 241, 251, 252 and 255 of 1992, 31 to 34 of 1996 and CMP Nos. 979, 981, 983 and 985 of 19
Judge
Reported in[1997]227ITR613(Ker)
ActsKerala Agricultural Income-tax Act, 1950 - Sections 9(2) and 36(1); Kerala Joint Hindu Family System (Abolition) Act, 1975
AppellantDeputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes)
RespondentB.G. Narayana Bhat
Advocates: M. Lalitha Nair, Government Pleader
Cases ReferredN. B. Bavamooppan v. Commissioner of Agrl. I. T.
Excerpt:
.....the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee :provided that no such rectification shall be made having the effect of enhancing an assessment or reducing a refund unless the appellate or revisional authority or the agricultural income-tax officer, as the case may be, has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard......252 and 255 of 1992 are revisions filed against the order of the kerala agricultural income-tax appellate tribunal, addl, bench, kozhikode, in rectification application nos. 138 to 141 of 1991, whereby the assessee's applications for rectification of the appellate order passed by it in a. i. t. a. nos. 190 of 1984 and 334 to 336 of 1985, were allowed, whereas t. r. c. nos. 31 to 34 of 1996 are filed against the appellate order of the tribunal passed in a. i. t. a. nos. 190 of 1984 and 334 to 336 of 1985.2. all these tax revision cases relate to the assessment years 1980-81 to 1983-84. the sole question raised in these cases is regarding the status to be assigned for the purpose of making the assessment. in other words, the question is whether the assessment should be completed on the.....
Judgment:

G. Sivarajan, J.

1. T. R. C, Nos. 241, 251, 252 and 255 of 1992 are revisions filed against the order of the Kerala Agricultural Income-tax Appellate Tribunal, Addl, Bench, Kozhikode, in Rectification Application Nos. 138 to 141 of 1991, whereby the assessee's applications for rectification of the appellate order passed by it in A. I. T. A. Nos. 190 of 1984 and 334 to 336 of 1985, were allowed, whereas T. R. C. Nos. 31 to 34 of 1996 are filed against the appellate order of the Tribunal passed in A. I. T. A. Nos. 190 of 1984 and 334 to 336 of 1985.

2. All these tax revision cases relate to the assessment years 1980-81 to 1983-84. The sole question raised in these cases is regarding the status to be assigned for the purpose of making the assessment. In other words, the question is whether the assessment should be completed on the assessee in the status of an 'individual', as has been done by the authorities under the statute or in the status of tenants-in-common as contended by the assessee.

3. For the assessment years 1980-81 to 1983-84, in respect of the income derived from the properties standing in the name of the assessee and his minor son, the assessee claimed before the assessing authority that he should be assessed in the status of tenants-in-common.

4. The brief facts necessary for considering the said question are as follows : The assessee, Sri B. G. Narayana Bhat, originally was a memberof a Hindu undivided family of which his father, the late Sankaranarayana Bhat, was the karta who was assessed till 1970-71 in file under Section 28 of the Act. The family was partitioned on January 9, 1971, between his father and his brothers. The assessee begot a son in 1974. The assessee and his son thereafter constituted a smaller Hindu undivided family, jointly purchased properties in 1979 and since the joint family system was abolished with effect from December 1976, as per the Act 30 of 1976, they have to be treated as tenants-in-common. According to the assessee, since these properties belonged to the assessee and his son in their own individual right, there is no question of application of the provisions of Section 9(2)(a)(iv) of the Act.

5. The assessing authority rejected the said claim on the ground that the properties standing in the name of the assessee and his son were acquired only as per document No. 739 of 1979, that no evidence has been produced by the assessee to show that the minor had an independent source of income for acquisition of the said properties, that the properties were acquired long after the abolition of the Hindu joint family system by Act 30 of 1976, and that in the said circumstances, the property so acquired must be held to be the self-acquisition of the assessee himself. The assessing authority accordingly completed the assessment assigning the status as an 'individual'. In appeal by the assessee before the Appellate Assistant Commissioner of Agrl. Income-tax and Sales tax, Cannanore, the appellate authority confirmed the said orders of the assessing authority assigning the status as individual and also observed that the assessee has not produced any evidence before the appellate authority also regarding the source of the minor son for acquisition of the said property. On further appeal, the Agrl. Income-tax Appellate Tribunal, Addl. Bench, Kozhikode, considered the matter in paragraph 4 of the said appellate order, which reads as follows :

' We have considered these rival contentions and perused the records. As per the return, the appellant claimed the status of tenants-in-common consisting of himself and Sri Murali. It is evident from records that the appellant had not produced any documentary evidence in this connection before the assessing authority. In the assessment order for 1980-81 the assessing authority observed as under.

'I have carefully gone through the objections raised and examined the documents produced. As per document No. 739 of 1979 the sale deed is seen executed by Sri K. Y. Narayana Rai in favour of the assessee, Sri B. G. Narayana Bhat, and his minor son, Sri Murali, aged 5 years. Noevidence has been produced to prove the source of income of his minor son. Further, the properties have been purchased in 1979 only, i.e., after the abolition of the Hindu joint family system by Act 30 of 1976. In the document, the guardian of the minor son is shown as his father. In the circumstances, it has to be considered that the properties are the self-acquisitions of the assessee himself. The status will, therefore, be assigned as 'individual'. It is also evident from the first appellate orders that interference was not made only for want of evidence for the claim. Before us also the appellant did not bring in any evidence or document so as to enable us to interfere on the point. Though the appellant relied on the principles of the case of Gopal Raja : [1985]155ITR434(Ker) , its applicability could not be tested in the absence of details of source and proof for the raising of purchase of consideration. In the circumstances of the case, we only confirm the status assigned by the assessing authority.'

6. The Appellate Tribunal also confirmed the orders of the assessing authority and the first appellate authority on the ground that there is no evidence to show that the minor had funds for the acquisition of the said property. It was also observed that the assessee has not chosen to produce any evidence regarding the source for the acquisition even before the Tribunal. It is in these circumstances that the Appellate Tribunal observed that though the assessee had relied on the principles of the case of Gopal Raja : [1985]155ITR434(Ker) , its applicability could not be tested in the absence of details of source and proof for raising the consideration for purchase of the properties.

7. It is against this order of the Tribunal that the assessee filed applications for rectification before the Tribunal itself under Section 36 of the Agricultural Income-tax Act, 1950. Before the Appellate Tribunal, counsel for the assessee contended that the properties in the assessments were ancestral properties and obtained on partition in 1971 by the appellant and his wife, that in 1974, they begot a son, that the Hindu undivided family consisted of the appellant, his wife and son and therefore on disruption of the Hindu undivided family in 1975, the family should be considered as tenants-in-common in respect of the properties held by it. On that basis, it was also contended that the income from the properties acquired in the name of the appellant and his minor son should also be assessed as tenants-in-common, since the appellant's son had income from partitioned properties of the Hindu undivided family and that there was no necessity for providing funds for the purchase. It was also contended before the Tribunal that the decision in Gopal Raja's case : [1985]155ITR434(Ker) , squarely applied to this issue.

8. The Appellate Tribunal considered the said question afresh and after referring to the findings on this question rendered by the assessing authority, the first appellate authority and by the Tribunal in paragraph 5 of the said order, the Tribunal observed as follows :

' By a second look into the materials and records of the case, we are convinced that the dictum in Gopal Raja's case, : [1985]155ITR434(Ker) , is applicable squarely to the situation in hand. Accordingly, it is concluded that the applicant and his son should be treated as joint owners in respect of the properties purchased as per document No. 739 of 1979 (referred to in the assessment orders). The provisions of Section 9(2)(a)(iv) of the Kerala Agricultural- Income-tax Act, therefore, have no application to the situation in hand. The applicant and his son should, therefore, be assessed as tenants-in-common in respect of the properties jointly purchased by them. The finding in para 4 of the common order of the Tribunal in AITA 190 of 1984, 334 of 1985, 336 of 1985 and 334 of 1986 dated July 25, 1990, is, therefore, rectified as above. The assessing authority is directed to pass on the benefits of the above rectification in the appellant's respective assessments.'

9. It is against this finding of the Appellate Tribunal that the Revenue has filed revision petitions, T. R. C. Nos. 241, 251, 252 and 255 of 1992.

10. In order to test the correctness of the decision rendered by the Appellate Tribunal in the rectification applications, it is necessary to refer to Section 36 of the Agricultural Income-tax Act, 1950. The relevant portion reads as follows :

' 36. Rectification of mistake. -- (1) The authority which passed an order on appeal or revision may at any time within three years from the date of such order passed by him on appeal or in revision, and the Agricultural Income-tax Officer may at any time within three years from the date of any assessment or refund order passed by him, of his own motion, rectify any mistake apparent from the record of the appeal, revision, assessment or refund, as the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee :

Provided that no such rectification shall be made having the effect of enhancing an assessment or reducing a refund unless the appellate or revisional authority or the Agricultural Income-tax Officer, as the case may be, has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard.'

11. From a bare reading of the provision of Section 36(1) of the Act, it is clear that the mistakes that can be rectified are only mistakes apparent from the record of the appeal. In the instant case, the main grievance of the assessee before the Tribunal was that the Appellate Tribunal overlooked a binding decision of this court in P. S. Gopal Raja v. Agricultural Income-tax Officer : [1985]155ITR434(Ker) , and that this is a mistake committed by the Appellate Tribunal warranting rectification under Section 36 of the Act.

12. As we have already noticed, all the authorities including the Tribunal had entered a finding that the assessee had not produced any evidence before any of these authorities to establish that the minor in whose favour also the property has been acquired, had the requisite source for acquiring the same. Under Section 9(2)(a)(iv) of the Agricultural Income-tax Act, the assessee is bound to include in his agricultural income, the income from assets transferred directly or indirectly to the minor child not being a married daughter by such individual otherwise than for adequate consideration. In the instant case, as already stated, the properties were acquired in the name of the assessee and his minor children. Under such circumstances, in order to claim that the income from the said properties are to be assessed in the name of the assessee and his son as tenants-in-common, it is necessary that the assessee should establish that the properties are purchased in the name of the minor son with the funds of the minor. The assessing authority and the appellate authorities have found that the assessee had not established that the minor son had an independent source to acquire the said property in his name also. In view of the concurrent finding on this question of fact by all the three authorities, it is difficult for the assessee to contend to the contra and we also find that there is no material on record to show that the minor had the requisite funds for acquisition of the properties. It is, therefore, clear that this is an indirect way of transfer of assets in favour of a minor child otherwise than for adequate consideration. .

13. Learned counsel appearing for the assessee vehemently contended before us that Section 9(2)(a)(iv) of the Act has application only in a case where there is a transfer of properties to or in favour of the minor directly or indirectly by the assessee otherwise than for adequate consideration and that in this case the assessee had not transferred any of his assets directly or indirectly in favour of the minor son. In any way, the properties which are said to have been purchased in the name of the minor are not properties which belong to the assessee or over which he has got anyright whatsoever. On these, it was further contended by learned counsel appearing for the assessee that the decision of this court in Gopal Raja's case : [1985]155ITR434(Ker) squarely applied and that the Tribunal overlooked the significance of this decision, which according to the assessee is a mistake committed by the Tribunal apparent from the record.

14. We have gone through the decision in Gopal Raja's case : [1985]155ITR434(Ker) minutely and we find that the said decision is of no help to the assessee. That was a case where the assessee had purchased 2.50 acres and 2.34 acres of cardamom estates in the name of his minor sons, P. G. Subbaraju and P. J. Praohu Ram, respectively, and the source of income for purchasing these properties in the name of his minor sons had not been proved. The assessing authority included the income from the said properties in the hands of the father, the assessee therein. The assessee challenged that part of the assessment order in a writ petition under Article 226 of the Constitution of India before this court, wherein it was contended that Section 9(2)(a)(iv) of the Act has been wrongly invoked and that the said provision has no application to the admitted facts. This court after referring to the factual situation in the case in paragraph 4 of the judgment observed as follows (page 437) :

' The respondents have no case that the properties which have been assigned in favour of the two minors belonged to the petitioner. There must be a transfer of properties to or in favour of the minors directly or indirectly by the petitioner otherwise than for adequate consideration. It is not disputed, as stated earlier, that the petitioner has not transferred any of his assets directly or indirectly in favour of the minors in any way and the properties which are said to have been purchased in the names of the minors are not properties which belonged to the petitioner or over which he has got any right whatsoever. Section 9(2)(a)(iv) can, therefore, have no application to the case on hand. The second part of exhibit P-1 is, therefore, issued in violation of the statutory provisions in the Act and is thus liable to be quashed.'

15. In fact we had occasion to consider a similar situation in I.T.R. No. 39 of 1990 (Sunny Kuriakose v. Commr. of Agrl. I. T. : [1996]221ITR12(Ker) ). That was a case where the assessee purchased an estate by name Kavitha Estate having an extent of 10 acres in the name of his minor daughter, Anitha. On the ground that the assessee has not established that the minor daughter had any independent income to effect the said purchase, the assessing authority clubbed the income of the minor child from Kavitha estate in the hands of her father, the assessee in that case. In thatcase, this court considered the issue with reference to the provisions of Section 9(2)(a)(iv) of the Agricultural Income-tax Act, 1950, and held that in view of the concurrent finding by the authorities under the Act to the effect that the assessee has not established that the minor had an independent source of income to acquire the said properties, the assessing authority was justified in invoking the provisions of Section 9(2)(a)(iv) of the Act. For arriving at the said conclusion, we had also relied on an earlier decision of a Bench of this court in P. M. Paily Pillai v. State of Kerala : [1981]129ITR197(Ker) and also the decision of the Supreme Court in CIT v. Prem Bhai Parekh : [1970]77ITR27(SC) . The decision rendered in I. T. R. No. 39 of 1990 (Sunny Kuriakose v. Commercial Agrl. I. T. : [1996]221ITR12(Ker) ) is again followed by this Bench in the judgment dated March 6, 1996, in A. I. T. R. Nos. 48 to 52 of 1991 (N. B. Bavamooppan v. Commissioner of Agrl I. T. : [1997]227ITR610(Ker) ).

16. The decisions rendered by this Bench in I. T. R. Nos. 39 of 1990 Sunny Kuriakose v. Commissioner of Agrl I. T, : [1996]221ITR12(Ker) , and AITR Nos. 48 to 52 of 1991, N. B. Bavamooppan v. Commissioner of Agrl. I. T. : [1997]227ITR610(Ker) and the principles discussed therein squarely apply to the facts of the present case also. Though the assessee had put forward a case of tenants-in-common, he was not able to substantiate the same by adducing evidence to show that the property in question was purchased with the alleged joint family funds. There is absolutely no material in this regard. In view of the categoric finding by the assessing authority as confirmed by the appellate authorities to the effect that the assessee had not established the source of income for acquisition of the properties in question we are of the view that the provisions of Section 9(2)(a)(iv) of the Act is attracted to the facts of this case and the status to be assigned to the assessee is only that of an individual.

17. In view of the aforesaid findings of ours, we are of the further view that there is no mistake apparent from the record of the appeal, much less any mistake in the appellate order of the Agricultural Income-tax Appellate Tribunal, Kozhikode, in AITA Nos. 190 of 1984 and 334 to 336 of 1985 and that the Appellate Tribunal had committed a serious error in holding to the contra and allowing the rectification applications. Accordingly, we quash and set aside the order dated October 10, 1991, passed by the Agrl. Income-tax Appellate Tribunal, Kozhikode, in rectification Applications Nos. 138 to 141 of 1991 and restore the appellate order dated July 25, 1990, in AITA Nos. 190 of 1984 and 334 to 336 of 1985. These tax revision cases are accordingly allowed.

18. Learned counsel for the assessee during the course of hearing of the Tax Revision Cases Nos. 241, 251, 252 and 255 of 1992, by way of abundant caution, has filed T. R. C. Nos. 31 to 34 of 1996 accompanied by applications for condonation of delay challenging the appellate order of the Tribunal rendered in AITA Nos. 190 of 1984 and 334 to 336 of 1985.

19. In view of the decision which we have already rendered in T. R. C. Nos. 241, 251, 252 and 255 of 1992, these tax revision cases have to be dismissed, after condoning the delay in filing the petitions. We do so.


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