B.S.DHILLON,J. - (1.) IN this reference under Section 256 (2) of the I. T. Act, 1961 (hereinafter referred to as "the Act"), assessment proceedings, which got initiated before partition of the country, are still hanging fire. For the assessment year 1945-46, return was filed by Munshi Ram, the assessee, on 7th September, 1945, declaring an income of Rs. 5,354. The status of the assessee was described as an "individual". The ITO added a sum of Rs. 47,200 as income from the business, and assessed the assessee for a sum of Rs. 66,165 (vide his order dated 12th March, 1946), and the assessee filed an appeal against this order. The AAC (vide his order dated 6th August, 1947) set aside the assessment and directed the ITO to frame the assessment order under Section 23 (3) of the Act. The ITO (vide order dated 17th October, 1949) assessed the total income at Rs. 60,852. This order was again set aside in appeal by the AAC, vide his order dated 10th June, 1950, on the ground that the cash credits in the account of Smt. Ram Bai had not been properly investigated and the income of the accounting year had not been taken into account.
(2.) SOME time in the year 1946, there arose a dispute between the assessee, Shri Munshi Ram, and the other co-partners of his family regarding the business run in the name and style of Munshi Ram, B. Sc. , consisting of hosiery machinery business and clothing factory which was said to be the joint business of the family. By an agreement dated 30th October, 1946, three members of the family appointed Shri Prem Nath, advocate, as an arbitrator to divide their joint business shown as Munshi Ram, B. Sc. The arbitrator gave an award on 3rd March, 1947, partitioning the joint properties amongst the three members including the business of Munshi Ram, B. Sc. When the third ITO took up the assessment proceedings for the year 1945-46 afresh, Munshi Ram filed two returns on 14th April, 1953, one return showing the status of an "individual" and the income being nil, and the other in the status of "huf" showing the family members as Faqir Chaud, Banwari Lal and Munshi Ram and containing the income of the business, Munshi Ram, B. Sc. The ITO completed the assessment of ' the business income in the name of Munshi Ram, B. Sc. , in the hands of the assessee in individual status and determined a total income of Rs. 1,40,752 vide order dated 14th November, 1953. On an appeal filed by the assessee, the AAC, vide his order dated 17th November, 1958, held that the income from the business, Munshi Ram, B. Sc. , including income from undisclosed sources comprising of cash credits had been correctly assessed in the hands of the assessee in individual status. However, his total income was assessed at Rs. 91,452. The assessee appealed against this order. The Income-tax Appellate Tribunal, Delhi, vide order dated 21st August, 1962, set aside the order of the AAC and restored the appeal to the file of the AAC to give a finding as to whether the business in question belonged to Munshi Ram or to the HUF. Consequently, the AAC, vide order dated 30th October, 1967, recorded a finding that the business in question till the date of partition, i. e. , 31st March, 1946, belonged to the HUF, and thus the ITO was not justified in including the income of the business carried on in the name and style of Munshi Ram, B. Sc. , in the assessment of the assessee. The income of the business as assessed was, therefore, excluded from the assessment of the assessee. The assessee applied to the ITO for refund of the whole tax paid by him but the ITO while giving effect to the orders of the AAC dated 30th October, 1967, took the income of the assessee at Rs. 61,200 as income from undisclosed sources.
(3.) THE assessee then made an application under Section 154 of the Act to the AAC claiming that the grounds of appeal relating to the cash credits in the account of Ram Bai had not been discussed by the AAC and that the appellate order may be amended and finding be recorded on the specific grounds raised. The AAC, vide his order dated 24th September, 1968, recorded a finding that the Tribunal, vide its order dated 21st August, 1962, directed the AAC for deciding the point whether the business belonged to Shri Munshi Ram, individual, or to the HUF of Shri Munshi Ram and on all other points the appellate decision of the AAC dated 17th November, 1958, was allowed to remain in force. Consequently, the application for rectification was dismissed. The assessee filed an appeal against the order of the AAC dated 24th September, 1968. The ITO also filed an appeal to the Tribunal against the AAC's orders dated 30th October, 1967, and 24th September, 1968. The assessee filed cross-objections to the ITO's appeal against the AAC's orders dated 30th October, 1967. The Tribunal dismissed the appeal filed by the ITO and so also that filed by the assessee and the cross-objections. It was contended by the assesses before the Tribunal that the cash credits of Rs. 47,200 in the account of Smt. Ram Bai appeared in the books of the family business "munshi Ram, B. Sc. ", and in all the successive assessments made for the assessment year in question the total income determined for the business unit included the said cash credits either as a part of the business income or income from undisclosed sources and that the amount of cash credits in the name of Smt, Ram Bai were entered in the account books of the family business. Thus, it was the family which was answerable to explain the credits and if the family could not satisfactorily explain the cash credits and the source thereof, the assessee could not be assessed in respect of those cash credits. This contention was repelled by the Tribunal. The assessee made an application before the Tribunal that the following question of law be referred to this court for its opinion : "whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the cash credits of Rs. 47,200 in the account of Smt. Ram Bai in the account books of the joint family business formed the individual income of the assessee from undisclosed sources? " ;