JANKI SAO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessee is an HUF. The assessment relates to the asst. yrs. 1949 -50 and 1950 - 51, the relevant accounting years being Sambat 2004 -05 and 2005 -06. Janki Sao is the Karta of the HUF. He has two sons, Lakhan Lal and Punu Lal. The business of the HUF was the manufacture of gold and silver ornaments. It was found by the taxing authorities that on the 11th of Feb., 1948, a sum of Rs. 18,000 was advanced on usufructuary mortgage of a house. On the 29th of June, 1949, the same property was purchased by Punu Lal for a sum of Rs. 29,500. A part of the consideration was the satisfaction of the mortgage debt and the balance of the amount, namely Rs. 11,500, was paid in cash. Both the documents, namely, the usufructuary mortgage bond dt. the 11th of Feb., 1948, and the sale deed dt. the 29th of June, 1949, were in the name of Punu Lal. On the 29th of June, 1949, there was an agreement between all the members of the Hindu joint family to the effect that the house property was really purchased by Punu Lal and the Hindu joint family had nothing to do with it. On the 1st of July, 1949, Janki Sao executed a kerayanama in favour of Punu Lal, agreeing to pay a rent of Rs. 24 per month for the use of the house for the purpose of the family business. On the 29th of Nov., 1950, there was a deed of family arrangement between Janki Sao and his two sons, Lakhan Lal and Punu Lal. It was recited in this document that the house property was purchased by Punu Lal from his individual funds and that Janki Sao and Lakhan Lal had nothing to do with it. Certain other properties were divided between the father and his two sons. In a proceeding taken under S. 34 of the IT Act the HUF was asked to explain the source of the two amounts, namely, Rs. 18,000 and Rs. 11,500. In the course of these proceedings under s. 34. Punu Lal and certain other witnesses were examined by the IT authorities. Punu Lal admitted that he had no profession and no independent source of income. He explained that he was married twice, once to the daughter of Lakshmi Sao and again to the daughter of Baldeo Sao. It was stated by Punu Lal that at the time of his first marriage he got 150 tolas of gold and Rs. 2,000 in cash, and at the time of his second marriage he got 32 tolas of gold and 1,000 tolas of silver from his father -in -law, Baldeo Sao. But the statement of Punu Lal has been falsified by the statements of Lakshmi Sao and Baldeo Sao. The evidence of Lakshmi Sao was that he gave Punu Lal at the time of marriage 50 tolas of gold and 150 to 175 tolas of silver. He also presented him 6 tolas of gold chain and 60 tolas of silver ornaments. Baldeo Sao stated that he presented about 15 tolas of gold ornaments and 135 tolas of silver ornaments to his daughter at the time of her marriage. The IT authorities held that the evidence of Lakshmi Sao was unreliable and that the explanation of Punu Lal that the source of money was the sale of ornaments belonging to his two wives was absolutely false. The Tribunal rejected the evidence of Punu Lal and other witnesses and held that Punu Lal had given a false explanation and that there was evidence to support the inference that the two amounts of Rs. 18,000 and Rs. 11,500 represented the secreted profits of the business of the HUF and was, therefore, liable to be taxed in the hands of the HUF for the two assessment years in question. The views of the Tribunal are summarised in paragraph 10 of the appellate order, which is in the following terms :

(2.) UNDER S. 66(1) of the Indian IT Act the Tribunal has submitted the following question of law for the determination of the High Court :

(3.) AFTER hearing counsel for both the parties we consider that the question should be recast in order to bring out the real controversy between the parties. We think that the question should be recast in the following manner :