R.M. Sahai, J. - (1.) THIS is an application under Section 256(2) of I.T. Act for calling a question of law arising out of the order passed by the Income-tax Appellate Tribunal. Although three questions were raised, yet the learned counsel for the assessee has mainly argued for question No. 2, which runs thus : "Whether, on the facts and circumstances, the Tribunal was legally correct in holding that the property purchased in the name of Sri Ayodhya Prasad, individual, on November 16, 1971, was actually purchased by the HUF with the view that the burden lies on the applicant to prove otherwise ?"
(2.) NORMALLY in application under Section 256, no reasons are required to be recorded but as my brother does not share my view that a question of law does arise and is inclined to record independent reasons and dismiss the application, I am left with no option except to notice in brief why I think that the application should be allowed. The assessee is an HUF. In respect of the assessment year 1972-73, the ITO reopened proceedings as he was of opinion that the house purchased on November 16, 1971, in the name of Ayodhya Prasad, who was the karta, was in fact, purchased by the undisclosed funds of the assessee. An affidavit was filed by the son of Ayodhya Prasad before the ITO that his father had agricultural property and money-lending business from which he had independent income. It was also stated that his mother had savings. And the house was purchased from the funds so available. The Tribunal did not place any reliance on the affidavit, as according to it, it contained arguments and not facts. Further, while considering an unexplained investment of Rs. 25,000, which was another deposit, the Tribunal found that the assessee carried on cloth business with a capital of Rs. 17,000 only, and therefore, its income was nominal. And the income from agricultural property and money-lending business must have been consumed by the family. Therefore, according to the Tribunal, it was not possible to accept that Ayodhya Prasad had Rs. 13,500 from which he could have purchased the house. Another circumstance which weighed heavily with the Tribunal was that the income from the house was shown as the income of the HUF in the regular return filed by the assessee, which became final.
(3.) NONE of the circumstances, in my opinion, were relevant. Affidavit is on record. It contains factual averments and not arguments. In fact, the case disclosed in the affidavit that Ayodhya Prasad had agricultural property and money-lending business has been believed by the AAC and it has not been set aside by the Tribunal. It could not ignore the affidavit. The Tribunal, therefore, omitted to consider a relevant evidence. Then, after having found that the assessee had nominal income from cloth business, which was insufficient, how could it conclude that Rs. 13,500 was available with the assessee for purchasing the house? It again committed an error of law in dismissing the appeal of the assessee on the finding that it was not satisfactorily explained that Rs. 13,500 belonged to Ayodhya Prasad. Even if the explanation of Ayodhya Prasad was disbelieved, it would not result in a finding that the house which stood in the name of Ayodhya Prasad was a benami (property) of the assessee. No evidence has been pointed out by the Tribunal which could support the case of the Department that the house was a benami purchase of the assessee. Even the last circumstance was erroneously construed against the assessee. Ayodhya Prasad having died, the house in the hands of his sons and other members became the property of the HUF by the operation of law. In the return which was filed, the income from the property had to be shown as the income of the HUF. But this could not reflect back to the date of the purchase. In my opinion, therefore, none of the circumstances enumerated by the Tribunal were sufficient for holding that the funds for the purchase of the house were the undisclosed funds of the assessee. I would, therefore, allow this application and direct the Tribunal to submit a statement of case on the aforesaid question. V. K. Mehrotra, J. 16-3-1983 ;