INCOME TAX OFFICER Vs. HEMESH FAMILY TRUST
INCOME TAX APPELLATE TRIBUNAL
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Abdul Razack, Judicial Member -
(1.) THE Income-tax Officer, Ward 4(4), Ahmedabad has preferred this appeal challenging the decision of the Appellate Commissioner (A/C) in his order dated 26-3-1990 which relates to the assessment year 1983-84. In order to decide the fate of this appeal brief facts accompanying this appeal are to be recorded and they are as follows :
One Shri Ishwardas Gordhandas Patel, resident of 4/A Shivalaya, Chembur, Bombay executed a deed of settlement on 20-4-1982 on two non-judicial stamp papers one of the value of Rs. 60 bearing No. 467 and another of the value of Rs. 40 bearing No. 466 purchased by Shivalaya Construction Co. on 5-7-1982 from the General Stamp Office, Bombay. By virtue of the said deed of settlement he transferred a sum of Rs. 1,000 to three persons, namely,(1) Shri Bhagwandas Gordhandas Gujarati, resident of Pune, (2) Shri Purshottamdas Bhikhabhai Patel of Dholka and (3) Smt. Kalindi Jayantilal Patel of Dholka as trustees to hold the said sum for the benefit of three beneficiaries who are mentioned in Clause (2) of the said deed of settlement and their names are as under :
1. Hemesh, son of Shri Navnit Kanaiyalal Patel,
(2.) Pinakin, son of Shri Bhagwandas Gordhandas Gujarati.
Amarish, son of Shri Bhagwandas Gordhandas Gujarati.
There are several terms and conditions set out in the deed of settlement and the same are not being extracted here being irrelevant for deciding the dispute in the appeal. The said deed of settlement Xerox copy of which has been filed by the assessee's counsel Shri S.N. Soparkar contains 15 typed pages. On the first page of the said deed of settlement it is recited 'this settlement is made at Ahmedabad on 20-4-1982 between ...' and on the last and the 15th page it is recited on the left side "solemnly declared at Dholka by the...and the settlor Shri Ishwardas Gordhandas Patel has signed it". There are two signatures of witnesses, namely, Shri Kanjibhai Nagarbhai Patel and Shri Dineshbhai Keshavlal Shah. The three trustees named above have also signed against their typewritten names. The signature of other two trustees viz. Bhagwandas Gordhandas Gujarati and Smt. Kalindi Jayantilal Patel are in English. On the said last 15th page again it is typed "on this 20-4-1982" and the same is underlined. A return showing nil taxable income after distribution of income of Rs. 1,46,276 to the three beneficiaries was filed on 27-7-1984. The income arose to the trustees was from business carried on of agricultural machinery particularly pumps. The Assessing Officer (A.O.) during the course of assessment proceedings treated the said trust/settlement as bogus, illegal and invalid as well as sham on the ground that the said deed was executed on 20-4-1982 on stamp paper purchased at Bombay on 5-7-1982 by Shivalaya Construction Co. of Bombay. Besides the Assessing Officer was of the opinion that the settlor was resident of Bombay, one trustee was resident of Pune and two trustees were resident of Dholka and the travelling expenses were only Rs. 2,079. The Assessing Officer was of the opinion that the trust was created by the settlor to evade taxes and after drawing support from the decision of the Supreme Court in the case of McDowell & Co. v. CTO  154ITR 148 treated the said trust as sham, bogus and invalid but nonetheless charged tax at the maximum marginal rate under Section 164 of the Act and computed the income in a round sum of Rs. 1,48,000 as against the income earned and declared by the trustees in a sum of Rs. 1,46,276. One of the trustees not being satisfied with the order passed by the Assessing Officer went to the A/C for redressal of the grievance.
2. The A/C after taking the appeal on record called for a remand report from the Assessing Officer as per his order dated 6-10-1986. The remand report was received by the A/C from the Assessing Officer through letter dated 20-1-1990. In this report the Assessing Officer pointed out that the claim of the assessee that the trust deed was executed on 20-9-1982 and not on 20-4-1982 is not correct. According to the Assessing Officer the assessee filed certain declaration in assessment year 1984-85 and in this declaration the date of trust deed is written as 20-4-1982. In another copy the date is corrected as 20-9-1982. But the signature of the witnesses are not there. According to the Assessing Officer all these show that efforts were made to change the date as an afterthought. The Assessing Officer was therefore of the view that the trust created by the settlor was bogus, illegal and invalid. The A/C therefore framed an issue, whether the trust is bogus, illegal and invalid trust. According to the A/C from the facts on record it was obvious that the main reason for treating the trust as bogus by the Assessing Officer is that there is a discrepancy in the date while as per the deed of settlement it is 20-4-1982, it is claimed later on that it was executed on 20-9-1982. Another reason was that while the settlor of the trust is a resident of Bombay and the trustees are at Pune and Dholka and the business of the trust is at Ahmedabad. Through letter dated 5-3-1987 it was explained that at the time of original assessment a copy of the trust deed was submitted which was executed on a stamp paper dated 5-7-1982. The date of execution of the deed of settlement was mentioned through oversight as 20-4-1982 instead of 20-9-1982. In support of the contention of the correct date of execution was 20-9-1982 an affidavit dated 16-10-1986 solemnly affirmed at Bombay by the settlor Shri Ishwardas Gordhandas Patel was filed. In this affidavit the settlor (deponent) had stated that the deed of settlement was actually executed on 20-9-1982 and the sum of Rs. 1,000 was duly handed over on the said date to the trustees. An affidavit of Shri Purshottamdas Bhikhabhai Patel, a trustee executed on 27-2-1987 and solemly affirmed at Dholka was also filed wherein he confirmed that he received an amount of Rs. 1,000 on 20-9-1982. Photostat copy of cash book of the trust showing receipt of Rs. 1,000 on 20-9-1982 and also copy of account of trust fund from ledger showing date as 20-9-1982 was filed. A certificate from Dena Bank, Dholka branch regarding the bank account of the trust was also filed in which it is certified that the account was opened in the name of Hemesh Family Trust on 19-1-1983. A copy of minutes of the first meeting of the trustees held on 25-9-1982 accepting the trust settlement of Rs. 1,000 as well as deciding to start business in the name of Hem Trading Co. to be run by Purshottamdas Bhikhabhai Patel the trustee of the trust was also filed. It was submitted that in view of the evidences produced above it is very clear that the trust is genuine bona fide and has come into existence in pursuance to trust deed executed on 20-9-1982. It was further submitted that mere writing of wrong date does not invalidate a genuine settlement made by the deed. The assessee also relied upon the decision of the Madras High Court in the case of Imperial Automobttes v. CIT  87 ITR 695. The A/C took note of the abovementioned documents and accepted the contention raised before him and held that the trust created was a genuine, legal and valid trust and the discrepancy in the date was a technical mistake. While allowing the assessee's appeal the A/C drew support from the decision of the Madras High Court in the above-mentioned case of Imperial Automobiles. The Assessing Officer is riot satisfied with the decision arrived at by the A/C and hence this appeal.
3. Shri M.S. Rai, representative of the department submitted that the A/C has ignored the salient features of this case viz. the user of the stamp paper by the settlor purchased by Shivalaya Construction Co. at Bombay; non-payment of stamp duty to the Government of Gujarat as per the Bombay Stamp Act; the unsatisfactory explanation regarding the execution of the deed of settlement which was actually on 20-4-1982 and not. on 20-9-1982; inadmissibility of the said deed of settlement on account of non-payment of proper chargeable stamp duty in accordance with the provisions of Bombay Stamp Act, variance in the signature of one of the trustees viz. Shri Purshottamdas Bhikhabhai Patel at page 15 of the deed of settlement in comparison with the signature of the said person/trustee on the affidavit dated 27-2-1987 affirmed at Dholka. If all these factors were judiciously considered by the A/C then his decision would have been perfect and justified in law. According to the D.R. no trust came into existence by virtue of the alleged deed of settlement which was executed on 20-4-1982 and not on 20-9-1982 as has been made out by the trustees. The D.R. therefore submitted that the impugned order of the A/C was not in accordance with law and therefore should not be sustained.
(3.) THE assessee's counsel Shri S.N. Soparkar on the other hand submitted that there has been a bona fide and genuine mistake in mentioning the correct date of execution of the deed of settlement which was on 20-9-1982 and not on 20-4-1982 as was written and reiterated at two places in the deed of settlement executed by the settlor Shri Ishwardas Gordhandas Patel. Regarding user of the stamp paper by the settlor which was purchased by Shivalaya Construction Co. our attention was drawn to the averments made in para 4 of the affidavit of the settlor dated 16-10-1986 which has been solemnly affirmed at Bombay and which forms part of the paper book filed in the appeal by the assessee's counsel. THE assessee's counsel further submitted that the deed of settlement was actually executed on 20-9-1982 and not on 20-4-1982 and relied on the affidavit of one of the trustees Shri Purshottamdas Bhikhabhai Patel who confirmed that he received the amount of Rs. 1,000 on 20-9-1982. Photostat copy of the cash book showing the receipt of Rs. 1,000 on 20-9-1982, certificate from Dena Bank, Dholka branch regarding the opening of the bank account on 19-1-1983, copy of the certificate of registration under the Gujarat Sales Tax Act dated 24-12-1982, copy of the minutes of the first meeting of the trustees held on 25-9-1982 accepting the trust/settlement as well as deciding to start business in the name of Hem Trading Co. to be run by Purshottamdas B. Patel were all filed before the lower authorities and the A/C duly considered all those documentary evidences and came to the conclusion that a trust was created by the settlor on 20-9-1982 and not on 20-4-1982. THE assessee's counsel also drew support from the decision of the Madras High Court in the case of Imperial Automobiles (supra) which has been relied by the A/C in allowing the assessee's appeal. Regarding the admissibility of the deed of settlement on account of non-payment of proper stamp duty to the Government of Gujarat as the instrument was executed at Ahmedabad the assessee's counsel submitted that the same was not raised by the ITO and the same could not be taken note of by us in this appeal on the basis of the argument advanced by the D.R. THE assessee's counsel also objected to the argument advanced by the D.R. bringing to our notice the variance of the signature of one of the trustees Shri Purshottamdas B. Patel appearing on the last and 15th page of the said deed of settlement with the signature contributed by the said person on the sworn affidavit dated 27-2-1987 at Dholka. According to the assessee's A.R. the same was not taken note of or considered by any of the lower authorities and therefore it was not open for this Tribunal in the present appeal to take note of the same and weigh it for the purpose of arriving at a decision on the controversy involved. According to the assessee's A. R. the A/C has considered the issues before him in proper perspective and the impugned order being valid and proper in law requires to be upheld by us.;
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