R.N Misra, J.:— These are several applications under section 256(2) of the Income-tax Act, 1961, all made by the assessee. By order dated December 6, 1973, made in these applications, this court called upon the Appellate Tribunal to state the case and refer the following three questions for opinion of the court:
“(1) Whether, in the facts and circumstances of the case, the Appellate Tribunal has come to the correct conclusion that there is no valid partition in the family of the assessee?
(2) Whether, in the facts and circumstances of the case, the assessee's status has been correctly determined and in accordance with law?
(3) Whether, in the facts and circumstances of the case, the claim for registration of the firm has been correctly decided?”
2. The Tribunal has accordingly stated the case. The assessment years with which we are concerned are 1961–62, 1962–63 and 1963-64. S.J Cs. Nos. 129 and 130 of 1972 relate to the quantum assessments for the assessment years 1961–62 and 1962–63, respectively. S.J.C No. 128 of 1972 arises out of a claim of partition made under section 25A of the Income-tax Act of 1922 for the assessment year 1961–62, which has been rejected. S.J.C No. 131 of 1972 is in relation to the claim of registration under section 25A of the Income-tax Act of 1922 for the assessment year 1961-62. S.J Cs. Nos. 133 and 233 of 1972 relate to refusal of registration under section 185 of the Income-tax Act of 1961 for the assessment years 1962–63 and 1963-64.
3. In order to appreciate the respective contentions of the parties, the facts may be shortly stated. The genealogy appended below shows the relationship of the assessee with members of his family—
4. This larger Hindu undivided family was resident at Kustia now in Bangladesh. Around 1946, soon before partition of India, Banarasilal with his children and Badrinarayan (father) migrated to India and in due course got rehabilitated at Berhampur in the District of Ganjam. There Banarasilal started some business. Surya Timber Works was an independent business which is said to have been owned by Badrinarayan and the wife of Banarasilal. For the assessment years 1959–60, 1960–61 and 1961–62 (for the last of these years up to July 1, 1960), returns were filed by Banarasilal declaring the status as Hindu undivided family. These returns were verified by Banarasilal as karta, but Badrinarayan had been shown as a member of the family. Before assessments were made, on February 25, 1966, revised returns were filed wherein Badrinarayan was deleted from the membership of the family.
5. On July 1, 1960, the assessee claimed a partition in the family and in assessment year 1961–62, a claim of partition under section 25A of the Indian Income-tax Act, 1922, was made by petition dated January 15, 1962. The assessee contended that the larger Hindu undivided family with Badrinarayan as the karta had got divided in January, 1940. The bigger Hindu undivided family was an assessee at Kustia. That business was also dissolved when partition took place. A document was duly registered according to the law then in force allotting shares to members of the family. Two separate coparceners had started a business in partnership in 1945 in Kustia and the Income-tax Officer had even accorded registration to that firm on the footing that the bigger Hindu undivided family had divided. Badrinarayan had his share of property in Kustia but very often came and lived with Banarasilal till he died in 1965. Badrinarayan had no share in the Hindu undivided family of Banarasilal. By mistake his name had been shown, and, therefore, revised return had been duly filed. The separated members after July 1, 1960, in the family of Banarasilal constituted a firm and claimed registration. The Income-tax Officer refused to recognise the partition and consequently declined to accept the claim of registration. He treated the entire income to be of the bigger Hindu undivided family and made the assessment accordingly.
6. In appeals before the Appellate Assistant Commissioner, fresh evidence was offered. He examined the matter at considerable length and accepted the plea of partition. He also allowed registration of the firm and cancelled the assessments in the hands of the bigger Hindu undivided family. Thereupon, the revenue appealed to the Appellate Tribunal. The Tribunal vacated the appellate orders of the first appellate authority and restored those made by the Income-tax Officer in the various proceedings. The Tribunal held:
“…The assessee claimed that there was a division of the family at Kustia, now in Pakistan, and stated that since there was a valid and lawful partition in the family, the question of B.N Choudhury joining in the partition of the Hindu undivided family represented by Sri B.L Choudhury did not survive. The Income-tax Officer negatived the contention of the assessee as he opined that no valid partition took place in the family. Against this, the assessee moved to the Appellate Assistant Commissioner challenging the order of the Income-tax Officer refusing to recognise the partition in the family. The Appellate Assistant Commissioner on the basis of an alleged draft of the partition deed and examination of one Sri S.K Choudhury (who was examined by the Appellate Assistant Commissioner) held that the valid partition has been effected in the family. He also recorded a finding of fact that determination of the status as Hindu undivided family of the firm was under the mistaken impression and the assessee cannot be estopped to agitate the correct status in the subseqent years as the principle of res judicata or estoppel does not operate in the income-tax proceedings. Having come to the conclusion that a valid partition took place, he accepted the assessee's appeal and recorded the partition of the family in pursuance of section 25A of the Act…
Before we dilate over the issue, we agree with the Appellate Assistant Commissioner that the principle of res judicata and estoppel does not operate in income-tax proceedings and the assessee is entitled to raise any point of law in any assessment year and crave for reconsideration of the status on new facts or facts already found in the earlier year. Bearing in mind the above enunciation of law, we proceed to examine the facts relating to the assessee.
It may be recapitulated that the status of the firm was treated as Hindu undivided family by the Income-tax Officer. This finding of the Income-tax Officer was accepted by the assessee although an appeal against the quantum of assessment was filed for the assessment year 1955–56, vide Appeal No. 260/55-5.Ganjam. There is no conceivable reason as to why the status was not challeged when the assessee had the benefit of an appeal. The question of status should have been raised in the same memo of appeal as no separate appeal has been provided for the status. The assessee had given vague explanation for not filing an appeal against status to the effect that as the incidence of tax was negligible, no serious note of determination of the status was taken. In our opinion, such explanation is not valid and is incredible. Even the partnership deed of the firm was not produced so as to enable us to judge the constitution of the firm with referrence to the alleged partners.
The departmental representative…submits that the Appellate Assistant Commissioner had taken the Income-tax Officer by surprise in admitting the alleged draft of the partition deed effected at Kustia (now in East Pakistan). No plausible explanation was furnished as to the non-production of the draft of partition deed before the Income-tax Officer. He also attacked the evidence recorded by the Appellate Assistant Commissioner of S.K Choudhury. The Appellate Assistant Commissioner had considered the evidence without any contemporaneous record in support of his order which was not produced before the Income-tax Officer. The Income-tax Officer in his order made a pointer of non-production of late B.N Choudhury for his examination. The Appellate Assistant Commissioner held as a fact that at the time of request of the Income-tax Officer, Shri B.N Choudhury died and, therefore, could not be produced. It was the submission of the assessee before the Appellate Assistant Commissioner that application for recognising the partition in the family was made some time in 1961 and the examination was started from August 29, 1961; the Income-tax Officer if so desired could have issued notice on B.N Choudhury who was alive at that period of time. Sri Badrinarayan died on March 7, 1965, and since the Income-tax Officer did not have any intention of examining Badrinarayan after the death, non-production of Badrinarayan which was impossible could not be highlighted for the negation of the claim of partition……”
7. After indicating the contentions of both sides at considerable length, the Appellate Tribunal concluded by saying:
“We have heard both the parties on the point and are of the view that the depositions of late Badrinarayan of his right in the Hindu undivided family has not been brought on record. It is also clear to find that the Appellate Assistant Commissioner had accepted the factum of partition at Kustia without having any contemporaneous evidence on record. Although the assessee is entitled to reagitate the determination of status of the firm, no fresh evidence or material touching and/or concerning constituting the firm and the dissolution thereof was brought which could have been processed through to examine the veracity of the assessee's contentions that under the mistaken plea as well as incidence of tax was being nominal, no serious view of the earlier determination of the status was taken of there is no substance in the assessee's submission that the original partition deed at Kustia could not be brought into India because of the hazards prevailing at that time. The Appellate Assistant Commissioner had also examined one of the coparceners but failed to record any circumstances for not examining other coparceners which clearly tainted his findings. The questions put to the alleged coparcener in his examination by the Appellate Assistant Commissioner lacks clarity and seems to be partisan, and suggestive. In our view, the claim of partition in the family is ill-founded and could not be substantiated by any evidence.”
8. We agree with the submission of the assessee's counsel that though the Appellate Tribunal has nowhere indicated its acceptance of the contention made on behalf of the revenue that the Income-tax Officer had been taken by surprise by receipt of the new material placed before the first appellate authority, it has virtually proceeded on that footing. Section 250(4) of the Income-tax Act, 1961, provides the scope of disposal of appeals by the first appellate authority. It is as follows:
“The Appellate Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Income-tax Officer to make further inquiry and report the result of the same to the Appellate Assistant Commissioner.”
9. Wide provision has thus been made conferring jurisdiction on the first appellate authority to make such inquiry as he deems fit. The provision seems to have been based on the fact that before the Appellate Assistant Commissioner there is generally no opposite party. The appellate authority himself is the departmental authority representing the revenue. Therefore, he has been invested with the power of making further inquiry. He does not exceed his jurisdiction if he asks or allows the assessee to produce or file additional papers or additional evidence in the matter he thinks fit. This view has been accepted by the Supreme Court in the case of Keshav Mills Co. Ltd. v. Commissioner of Income-tax [1965] 56 ITR 365, 381 SC.. Interpreting similar provisions in the Orissa Sales Tax Act, this court in the case of Babulal Chhapolia v. The State Of Orissa [1963] 14 STC 880 Orissa.. came to the same conclusion and the decision of this court has been affirmed by the Supreme Court in State of Orissa v. Babu Lal Chappolia [1966] 18 STC 17 SC.. Therefore, no objection was available on the ground that the Appellate Assistant Commissioner had received new materials. In fact, receiving new material by the Appellate Assistant Commissioner cannot be equated with receipt of additional evidence as contemplated in Order 41, rule 27 of the Code of Civil Procedure or even at the stage of second appeal by the Tribunal. Large discretion has been vested in the first appellate authority and if he received evidence which had not been placed before the Income-tax Officer, it is not for the Tribunal to question its receipt. Obviously, the Tribunal equated the stage of the first appellate authority with its own jurisdiction. In our view, the evidence received by the first appellate authority was in accord with law and the same could not be brushed aside.
10. Whether there has been a partition or not is certainly a question of fact and both the first appellate authority as also the Appellate Tribunal being forums of fact could take a decision on such a matter. If the Tribunal reached its conclusion appropriately, the finding of fact would conclude the dispute and there would be no scope for this court in the advisory jurisdiction to take a different view. We are, however, of the view that the Tribunal was obsessed with the idea of the first appellate authority having committed a mistake and, therefore, looked at the performances of the Appellate Assistant Commissioner with an element of doubt. The observations of the Appellate Tribunal that the questions put to the coparcener who was examined before the first appellate authority are partisan and suggestive are without any basis and the criticism seems to have been born out of the obsession.
11. Before the Tribunal during the hearing of the appeals, the departmental representative had claimed that in the returns the brothers of the assessee were shown which negatives the claim of earlier partition of 1940. The Tribunal proceeded on the footing that the contention was correct without looking into the record. The learned standing counsel had produced the original returns during preliminary hearing of these cases and as would appear from the order of the court in paragraph 8:
“The original returns were produced before us at our request by the learned standing counsel and on verification, the assessee's contention appears to be true ……”
12. The reasonings given by the first appellate authority for accepting the claim of partition were not examined point by point and each of the reasonings has not been met by the Appellate Tribunal when the findings were vacated. We think the disposal of the second appeals in the facts of the case are not appropriate and as the conclusion regarding the claim of partition has been reached by not dealing with the entire evidence keeping the true legal perspective in view regarding the powers of the first appellate authority as also the evidence placed in support of the claim of partition, interests of justice would be appropriately served if the claim of partition is re-examined by the Tribunal. Our answer to the first question is—
In the facts and the circumstances of the case, the Appellate Tribunal has not come to the correct conclusion that there is no valid partition in the family of the assessee.
13. It must be made clear that we do not finally decide the question and when the matter goes before the Tribunal with our opinion, the Tribunal must hear the matter again keeping the law as indicated by us in view and deal with the claim in accordance with law. It is conceded before us that the claim regarding the status of the assessee as also registration of the firm are dependent upon the acceptance of the claim of partition. If the assessee fails to establish his claim of partition as alleged, the claim of status as also registration of the firm would stand rejected. In case the claim of partition is accepted, these two questions have to be independently examined on their own merits. In the circumstances of the case, therefore, these two questions cannot be answered at this stage. If the Tribunal is satisfied that the assessee has succeeded to establish his claim of partition, these two questions have to be examined on the basis of the materials available before the Tribunal and in case the assessee fails to establish his claim of partition, these questions must be taken to have been concluded against the assessee.
14. We make no order as to costs of these references.
N.K Das, J.:— I agree.
Comments