JUDGEMENT
R.M. Mehta, Accountant Member -
(1.)THESE two appeals are directed against the consolidated order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961. As the facts are more or less identical and as both the appeals have been heard together, we dispose them of by means of a consolidated order. At the outset it would be necessary to state certain basic facts with a view to appreciate the controversy involved.
(2.)I.T.A. No. 1164/ AHD./ 1986:
The return in this case was filed on 27-4-1983 declaring a total income of Rs. 82,542 but the taxable income was declared at NIL. The ITO completed the assessment vide order dt. 7-9-1983 on income of Rs. 83,042. He, however, did not raise any demand since he accorded the status of a specific trust whose income was distributed amongst the beneficiaries their shares being specified.
I.TA. No. 1165/ AHD./ 1986 :
The return was filed on 14-9-1983 and the assessment was completed vide order dated 26-9-1983. The order in this case was absolutely identical to that passed by the ITO in the case of Femina Fashion Group [IT Appeal No. 1164 (Ahd.) of 1986].
(3.)THE Commissioner of Income-tax initiated proceedings under Section 263 in both these cases and issued an identical notice on 3-9-1985. In this notice there was a proposal to set aside the assessments on the ground that the ITO who had passed the assessment orders had no jurisdiction to do so. Subsequently, however another notice was issued to both the assessees on 6-11-1985 in which the proposal was to set aside/revise the assessment on the ground that they were erroneous and prejudicial to the interests of revenue. In response to the first show cause notice it was stated on behalf of the assessees that the ITO passing the assessment order was within his jurisdiction in doing so and there was no reason to invoke the provisions of Section 263. In response to the second show cause notice the following submissions were made by the appellants :
Femina Fashion Group's case (supra) "I beg to refer to your above show cause notice and reply as follows. First of all, you had issued a show cause notice dated 3-9-1985 proposing to set aside the assessment on the ground that the assessing ITO had no jurisdiction. A reply dt. 12-9-1985 was given to the said show cause notice. Now another show cause notice under reference is issued on the ground that no investigation was conducted by the assessing ITO. You had issued a show cause notice in 'Shri D. H. Advani Family Trust' also stating that the business in names of 'M/s. Femina Fashion Collection' and 'M/s. Femina Fashion Selection' were converted into this trust. Here, in this show cause notice also, you are stating the same. It is submitted that such a show cause notice is illegal as you have issued the same without ascertaining the facts and so it cannot be said that you had correctly come to the conclusion that the assessment is prejudicial to the interest of revenue. It is obvious that somehow an action is proposed to be taken.
2. THE facts of the case are as under:
(i) Retail cloth, hosiery etc. business was done under the style of 'M/s. Femina Fashion Collection', which was a firm having two partners i.e. mother and a son. It was being carried on in a rented shop. Regular books of accounts were maintained.
(ii) Retail cloth, hosiery etc. business was done under the style of 'M/s. Femina Fashion Selection', which was a firm having two partners i.e. father and a daughter. It was being carried on in a separate rented shop. Regular books of accounts were maintained.
(iii) To develop the business of these two firms, a trust styled as 'Advani Foundation' was erected having all the members of the family as beneficiaries with definite shares. Majority of the beneficiaries were working in these two firms without any remuneration.
3. THE assessing ITO had examined minutely the books of accounts maintained by the trust and after satisfying himself had passed the assessment order. THE trust was rejected with the sole purpose of development and expansion of the business with the joint efforts of all the working members. THE trust is absolutely genuine and the trust is registered and assessed by the Sales-tax authorities also. THE assessment order is not at all prejudicial to the interest of revenue as alleged.
4. Facts of McDowell & Company Ltd. referred to in your show cause notice are absolutely different and has no relevance to the facts of this case. Hence, the observations made by the Court has no application to this trust, which is genuine and there is not an iota of evidence to show that it was created with a view to avoid or evade the tax.
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