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P.N. Bajpai v. C.I.T. - INCOME TAX REFERENCE No. 261 of 1980  RD-AH 1 (4 February 1999)
INCOME TAX REFERENCE NO.261 OF 1980
Sri Prem Narain Bajpai
The Commissioner of Income Tax, U.P., Lucknow
Hon'ble M.C. Agrawal, J.
Hon'ble R.K. Agrawal, J.
[Delivered by Hon. R.K.Agrawal, J.]
The Income Tax Appellate Tribunal, Allahabad Bench, Allahabad has referred the following questions of law under section 256 of the Income tax Act, 1961 for opinion to this Court.
" Whether on the facts and the circumstances of the case, the Tribunal was legally correct in holding that income from house property at plot No.8, Kandhari Road, Agra, which was claimed by the assessee to have been thrown in the common hotch potch as per declaration made in the return for the assessment year 1968-69 and reiterated in the return for assessment year 1972-73 onwards, was not liable to be excluded from individual assessment of the applicant ?"
The aforementioned question of law is said to arise out of the order of the Income Tax Tribunal dated 30.11.1978 passed in I.T.A. No.1847 and 843 [Alld.]/1976-77, relating to assessment years 1973-74 and 1974-75.
The facts giving rise to the aforesaid reference is set out below :
The assessee is an individual and derives income from salary. In the return of income for the assessment years in question i.e. 1973-74 and 1974-75, the assessee had shown his income from salary. However, in the said returns he did not show income from the house property situated at 8, Kandhasri Road, Agra, on the ground that he had thrown the said property into the common hotch-potch of the HUF consisting of himself, two sons and three daughters as was evidenced in the return of income filed for the assessment year 1968-69. The Income Tax Officer did not accept the plea of the assessee and taking into account the fact that income from the said property was included in total income of the assessee for the assessment year 1968-69 to 1971-72, he once again included the income from that property in the total income of the assessee in each of the two years under reference. The Appellate Assistant Commissioner before whom the assessee had preferred appeals had upheld the action had taken by the Income Tax Officer. Further appeal to the Tribunal also failed.
We have heard Sri Vikram Gulati, learned counsel for the applicant-assessee and Sri Shambhu Chopra, learned Additional Standing Counsel appearing for the Commissioner of Income Tax , U.P., Lucknow.
It may be mentioned here that the Tribunal had found that the land on which the property was constructed was purchased out of the investment of the assessee and not out of the funds of the HUF. Further it found that when the claim of the assessee that the property has been thrown by him in common hotch potch of HUF in the assessment year 1968-69 was rejected by the Income Tax Officer, the assessee did not agitate the issue any further and had accepted the same. Moreover, the assessee had voluntarily included the income of the aforesaid house property in his return as belonging to him for the assessment year 1968-69 to 1971-72. Even though the assessee had filed revision applications before the Commissioner of Income Tax under section 264 of the Act, for the assessment years 1969-70 to 1971-72, but the assessee did not challenge the order of the Commissioner of Income tax, rejecting his revision for the assessment years 1969-70 and 1970-71 on the ground of limitation and for the assessment year 1971-72 on merits any further and he accepted the decision of the Commissioner. Thus, up to the assessment years 1971-72, the assessee had treated the income from house property as his own income. There was no fresh declaration of throwing the house property in the common hotch potch for the assessment years in question and, therefore, it came to the conclusion that there is no fresh material for the assessment years under consideration on the basis of which it can be held that the property in question belongs to HUF.
Sri Vikram Gulati, learned counsel for the assessee submitted that the assessee having declared his intention to throw the property in question in the common hotch potch of the HUF by mentioning in part IV of the income tax return for the assessment years 1968-69 was not at all required to make a fresh declaration every time. Once he had made a declaration that the property had been thrown in the common hotch potch in HUF, the said property cannot be treated to be an individual property any more notwithstanding the fact that for the assessment year 1968-69 the Income Tax Officer had not accepted the claim and for the assessment years 1969-70, 1970-71 and 1971-72 he had himself included the income from the said property in his individual return. He relied upon a decision of the Hon'ble Supreme Court in the case of Mallesappa Bandeppa Desai and andother v. Desai Mallappa alias Mallesappa and another reported in the AIR 1961 SC-1268 and submitted that where a member of a joint Hindu family blends his self-acquired property with property of the Joint family, either by bringing his self acquired property into a joint family account, or by bringing joint family property into his separate account, the effect is that all the property so blended becomes a joint family property. Thus, according to him the income of the house property could not have been treated as individual income of the assessee and instead it should be treated as income of the HUF. He further relied upon the decision of the Hon'ble Supreme Court in the case of G. Narayana Raju [dead] by his legal representative v. G. Chamaraju and others reported in AIR 1968 SC-1276 in which it has been held that it is a well established doctrine of Hindu Law that property which was originally self- acquired may become joint property if it has been voluntarily thrown by the coparcener into the joint stock with the intention of abandoning all separate claims upto it. But the question whether the coparcener has done so or not is entirely a question of fact to be decided in the light of all the circumstances of the case. It must be established that there was a clear intention on the part of the coparcener to waive his separate rights and such an intention will not be inferred from acts, which may have been done from kindness or affection. The important point to keep in mind is that the separate property of a Hindu coparcener ceases to be his separate property and acquires the characteristics of his joint family or ancestral property, not by mere act of physical mixing with his joint family or ancestral property, but by his own volition and intention, by his waiving or surrendering his special right in it as separate property. Such intention can be discovered only from his words or from his acts and conduct [emphasis supplied by us].
He further submitted that the act by which the coparcener throws his separate property into the common stock is a unilateral act and there is no question of the family either rejecting or accepting it. In support of his aforesaid plea he relied upon a decision of the Hon'ble Supreme Court in the case of Goli Eswariah v. Commissioner of Gift-Tax , A.P. reported in  Vol.76 ITR-675. He also relied upon the decision of the Hon'ble Andhra Pradesh, High Court in the case of Commissioner of Income Tax, A.P. v. A. Krishna Murthy reported in - 76 ITR-315 for the proposition that the intention of throwing the self acquired property in the common hotch potch of HUF may manifest itself in any form, such as by a statement in a deposition, an affidavit, execution of a document as a declaratory deed, or by course of conduct. What transforms the separate property into joint family property is not the outward act or the conduct or the public declaration of the coparcener owning the separate property, but his intention to so treat it--the intention of the coparcener who owns the separate property to waive and surrender his special rights in the property as separate property. The outward acts are merely evidence of the intention and by themselves they do not change the character of the property.
The learned counsel for the applicant submitted that a member of the Joint Hindu family is always competent to impress his separate property with the character of HUF property which he can do by making a unilateral and unequivocal declaration and when such a thing is done, it will be impressed with the character of HUF property. For the aforesaid submissions, he relied upon the following decisions:
(i) Commissioner of Income- Tax, Bombay v. Gopal Das T. Agarwal, reported in  116 ITR-613 [Bombay] .
(ii) Commissioner of Income- Tax, Orissa v. Harish Chandra Gupta , reported in  132 ITR-799 [ Orissa].
(iii) Commissioner of Income Tax, Orissa v. Babulal Joshi and others, reported in , Vol.133 ITR-30 [Orissa].
(iv) Commissioner of Income-Tax, Karnataka, Bangalore v. K.N. Narayan, reported in  Vol.150, ITR-103 [Karnataka].
(v) Commissioner of Income-Tax v. P.M. Muthuramakrishnan, reported in  Vol.157 ITR-654 [Madras].
Sri Vikram Gulati, learned counsel for the assessee further submitted that the declaration made by the assessee in the Income Tax return is sufficient declaration of his intention and, therefore, the income of the house property in question ought not to have been treated as his income. He relied upon the decision of the Andhra Pradesh High Court in the case of Gundlapalli Mohan Rao and others v. Gundlapalli Satya Narayan and others reported in  Vol. 84, I.T.R.-685 and of the Orissa High Court in the case of Autoways [India] v. The Commissioner of Income-Tax, Orissa, reported in  Vol. 102 I.T.R.-761.
On the other hand Sri Shambhu Chopra, learned counsel appearing for the Commissioner submitted that there is no dispute on the proposition that an individual can throw his personal property in common hotch potch of the joint family, however, it has to be found as a fact whether, the assessee had thrown the house property in the common hotch potch of HUF or not. According to him the assessee had accepted the decision of the Income Tax Officer for the assessment year 1968-69 in which his claim of throwing the property in common hotch potch of HUF was not accepted. The assessee himself had not only accepted the aforesaid decision for the assessment year 1968-69 but for subsequent three assessment years also i.e. upto assessment year 1971-72 he had himself treated the said property as his individual property. Thus, the intention of the assessee from the very beginning was to treat the property in question as his individual property and the declaration was not unequivocal.
Having considered the rival submission and in the light of the principles laid down by the Hon'ble Supreme Court in the cases referred to above, let us examine as to whether the intention of the assessee from his acts and conduct was to throw the house property in the common hotch potch of the HUF or not. It is not disputed that the assessee did not include the income from the house in his return for the assessment years 1968-69 by making a declaration in part IV of the return. Part IV of the return deals with sums not included in Part-I and claimed to be non-taxable. The statement made in part-IV is reproduced below :
"PART IV : [ Sums not included in part I and claimed to be non-taxable].
Particulars Amount Reasons why not taxable
House property income 4,600 Rent received from
house which is the
property of the HUFafter
being thrown into
common hotch potch of
From the reading of the reasons mentioned in part-IV it appears that the property had been thrown earlier into the common hotch potch of HUF. No specific date has been given as to when the said property was thrown into the common hotch potch of HUF. It only makes a statement of an act done earlier. This was not accepted by the Income Tax Officer and for the reasons best known to the assessee, he had accepted the decision of the Income Tax Officer and voluntarily included the income of the house property as his own while filing the returns of income for the three subsequent assessment years i.e. 1969-70, 1970-71 and 1971-72. The assessee unsuccessfully challenged the assessment orders for the assessment years 1969-70 to 1971-72 before the Commissioner of Income tax by filing the revision, which was rejected. The assessee had accepted the decision of the Commissioner and allowed it to become final.
From the aforesaid conduct of the assessee it can safely be presumed that there was no intention on his part to throw the house property in question in the common hotch potch of the H.U.F. He did not make any fresh declaration nor intended to throw the house property in question into common hotch potch of HUF after the decision of the Income tax authority and merely claiming it to be non-taxable while filing the income tax returns for the assessment years 1973-74 and 1974-75 on the basis of the alleged declaration made in the return for the assessment year 1968-69, which had not been accepted by the Income Tax Officer and which decision the assessee had allowed to become final, does not establish his intention to throw the aforesaid house property in the common hotch potch of HUF.
Having found that there was no intention from the act and conduct of the assessee to throw the house property in question into the common hotch potch of HUF, we are of the view that by merely declaring the same in the return of income will not blend the said property with the HUF property.
We, therefore, answer the aforementioned question of law referred to us in the affirmative i.e. in favour of the department and against the assessee. However, there shall be no order as to costs.
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