SIRDAR BAHADUR INDRA SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference by the Commissioner of Income-tax, Bihar and Orisa, under Section 66(3) of the Indian Income-tax Act.

(2.) IT is common ground that Sirdar Indra Singh and his two sons, Sirdar Baldev Singh and Sirdar Ajaib Singh were members of a joint Hindu family up to 1935, but there is a serious dispute between the assessee and the Income-tax department as to whether this Hindu undivided family had joint family property the income whereof was the subject of assessment to Income-tax in a number of years and particularly in the year of assessment 1938-39 for the accounting period 1937-38 with which this reference is concerned. In that year Sirdar Indra Singh, the assessee, made a return showing his status as of a Hindu undivided family and was assessed on a total income of Rs. 1,30,805. He contended at the time of making of the assessment that he should be assessed as an individual and not as joint Hindu family. This contention does not appear to have been clearly raised before the Income-tax Officer but was allowed to to be raised in the appeal before the Appellate Assistant Commissioner who overruled the contention and held that the status of the assessee was that of a Hindu undivided family. In the assessable income the Income-tax Officer included a sum of Rs. 12,000 as directors fees received by Sirdar Indra Singh on behalf of the joint Hindu family in circumstances to be described fully hereinafter. The assessees objection that this was his own private income and not the income of the joint Hindu family was overruled both by the Income-tax Officer and by the Assistant Commissioner who dismissed the appeal on the December 29, 1939. IT may be observed here that the assessee had objected to inclusion of two other items, (1) Rs. 185-6-6 received from the Indian Steel and Wire products, Ltd., and (2) Rs. 5,000 which was said to belong to one A.N. Biswas. The assessee failed in getting these two items exclude from his assessable income and the question now framed do not cover these two items of income and so nothing further need be said about them. Thereafter the assessee moved the Commissioner of Income-tax to refer to the High Court under Section 66(2) of the Act certain question of law formulated by him. But the Commissioner on the August 9, 1940, held that these questions were questions of fact and declined to make a reference. The assessee thereafter moved this court when the following three questions of law were formulated upon which the Commissioner of Income-tax was asked to state a case :-

(3.) SUCH in brief is a survey of the facts which have been relied upon by the Commissioner in the statement of the case to come to the conclusion that Sirdar Indra Singh and his two sons constitute a Hindu undivided family for the purpose of the Indian Income-tax Act, 1922, and, therefore, he invites that the answer to the first two questions should be in favour of the department. The assessee on the other hard contends that the Commissioners finding, apparently a finding of fact, is vitiated by errors of law in that the Commissioner has thrown the onus upon the assessee to prove that the property or business which produced the assessable income in the year of assessment is his private property and has mis constructed the legal effect of the admissions of Sirdar Indra Singh before the Commissioner in 1924 and in the sub-sequent years. It is also contended that the admission made before the Commissioner in 1925 was due to a misapprehension of the legal position or it might have been an incarnate statement deliberately made to avoid payment of super-tax and that the subsequent declarations which were made in the several years of assessment were similarly being made inadvertenly and draftsman of the various returns simply copied out the statement from the earlier assessment orders. It is argued that when it is the admitted case that this joint Hindu family business or the property was transferred to the joint family in a manner recognised by law. It is pointed out that the Commissioner has failed to consider the effect of the various documents which went to form the limited companies in 1935 or the deed of agreement of the February 8, 1936, or the family arrangement of March, 1939, and, therefore, the Commissioner erred in law when he stated that the assessee He produced no evidence to support his claim that the business or the property was the self-acquired property of Sirdar Indra Singh. Objection is also taken grown up and of good training and experience in business have been evidently throwing their earning in the common stock. It is claimed that there is no evidence whatsoever to show that the assessees sons have been throwing their earnings in the common stock. Mr. Isaacs, who argued the case on behalf of the assessee, also submitted that even if the business and the property be considered to be that of a Hindu undivided family the effect of the transaction in 1935 was to disrupt the joint family so that the family could no longer be treated in laws as a Hindu undivided family from February, 1936, and, therefore, in the year of assessment the status of the assessee in law was that of an individual.