SUHAS CHANDRA SEN, J. - (1.) THE Tribunal has referred the following question of law under S. 256(2) of the IT Act, 1961 to this Court : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal had any evidence to hold that the beneficial interest in the business styled as Precision Mechanical Works and that the house property at 28 Hem Chakraborty lane, Howrah actually belonged to the assessee's wife and did not belong to the assessee and/or whether such finding of the Tribunal was otherwise unreasonable or perverse ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal had any evidence to hold that the Income arising from the share in the name of the assessee's wife in the firm Mechanical Precision Works could not be included in his hand under S. 64(iii) of the IT Act, 1961 and/or whether such finding of the Tribunal was otherwise unreasonable or perverse ?"
(2.) IN this case the assessment years involved are 1966-67 to 1971-72. The facts found by the Tribunal as contained in the Statement of Case are as under ; The assessee is an individual and the assessment year involved are 1966-67 to 1971-72. The dispute giving rise to the reference relates to the question, whether the income of the assessee's wife Smt. Tulsi Hazra from the share in the firm styled as Precision Mechanical Works could be included in the assessee's hands under S. 64(iii) of the IT Act, 1961 and whether the income from the property at 28 Hem Chakraborty Lane, Howrah standing in the name of the assessee's wife could be included in the hands of the assessee as his income. It appears that the business styled as Precision Mechanical Works, which stood in the name of the assessee's wife was started sometime in 1953-54 with the capital investment of Rs. 4,800. The said lady purchased a piece of land in 1951 and completed the construction of a property at 28 Hem Chakraborty Lane, Howrah in the year 1952. The total investment in the business and the house property was to the extent of Rs. 12,000. The ITO found that for the asst. yr. 1954-55 the assessee agreed to be assessed both in respect of the income from the above business and from the property, which was standing in the name of his wife and that right upto the asst. yr. 1965-66 the above incomes were assessed in his hands. In the returns for the period from the asst. yr. 1958-59 to the asst. yr. 1965-66 the assessee had also included in his returns the income from the property and the business and declared himself as the proprietor of the business styled as Precision Mechanical Works. In the returns for the asst. yrs. 1966-67 to 1971-72, however, the assessee did not include the income for the property or from the above said business. It was claimed that a partnership was constituted on 1st Jan.,1965 to carry on the business styled as Precision mechanical Works of which the assessee's wife, Tulsi Hazra was a partner with her son, each having 50 per cent share. On these facts, the ITO held that the assessee had transferred indirectly to his wife the assets of the business of Precision Mechanical Works without adequate consideration and therefore the share income of the assessee's wife from the said partnership business was incredible in his hands under s. 64(iii) of the IT Act, 1961. He also found no reason to depart from the mode of assessment adopted in the past in respect of the income from the property. Accordingly for each year under consideration he included the income from the property at 28 Hem Chakraborty lane, Howrah and also 50 per cent share income from the firm Precision Mechanical Works in the hands of the assessee.
(3.) THE AAC on appeal held that the ITO was not justified in adding the share income from the business of Precision Mechanical Works as also the income from the property in the hands of the assessee.;