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Dr. H.N.Mehrotra v. C.I.T. - INCOME TAX REFERENCE No. 71 of 1990  RD-AH 295 (1 February 2005)
Income Tax Reference No.71 of 1990
Dr. H.N.Mehrotra, Etawah v. Commissioner of
Income Tax, Agra
Hon'ble R.K.Agrawal, J.
Hon'ble Prakash Krishna, J.
(Delivered by R.K.Agrawal, J.)
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that the income from property and agricultural land belonged to the assessee in his individual status and not in the status of Hindu Undivided Family?"
The reference relates to the Assessment Year 1977-78, 1978-79, 1979-80, 1980-81, 1984-85 and 1985-86.
Briefly stated, the facts giving rise to the present reference are as follows:-
The applicant is an individual who derives income from medical profession. In respect of the assessment years 1977-78 to 1980-81 original assessment has been completed bringing to tax only professional income of the applicant. The assessments were subsequently reopened under Section 147 of the Act on the ground that there was escapement of income due to the assessee's failure to disclose income from agricultural land and income from house property which was used by the assessee for his residential purpose and also on the ground that on the basis of the material seized at the time of the search of the assessee's premises on 6.2.1985, it became apparent that actual income from medical profession was much more than what has been disclosed by the assessee and which had been adopted in the original assessment. In the course of reassessment the applicant submitted that it was not correct to say that he has not disclosed income from agricultural land and from house property in the original return. According to him, he had given a note on the statement annexed to the original return for the assessment year 1977-78 stating that the agricultural land belonged to Hindu Undivided Family. Similar was the position in regard to the house in which he was residing. According to him, when he had given the aforesaid note, he could not be accused of having not disclosed the basic facts necessary for his assessment and as such the condition precedent for taking action under Section 147(a) of the Act was not fulfilled. The plea of the applicant that the agricultural land and the self-occupied property belonged to the Hindu Undivided Family of the assessee was, however, rejected by the Assessing Officer and the Commissioner of Income Tax (Appeals). The note given by the applicant in the return for the assessment year 1977-78 only made the following mention:-
"Agricultural grove is Hindu Undivided Family property. Hence not returned."
There was no mention in it to the property in which the applicant was residing. On merits also, the Commissioner of Income Tax (Appeals) has held that both the aforesaid properties belonged to the applicant as an individual and that they were not his Hindu Undivided Family properties. Accordingly, he added the income from agriculture and from self-occupied property in the rental income of the assessee for the assessment years under consideration.
In respect of the assessment years 1984-85 and 1985-86 the above view was repeated by the Income Tax Officer and additions were accordingly made in the course of the reassessment which was confirmed by the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) had further observed that admitted position is that the property was constructed by his late father and it was his (father's) self-acquired property who had three sons including the applicant, inherited in equal shares after his death as well as the death of their mother. While holding so, the Commissioner of Income Tax (Appeals) had relied upon a decision of this Court in the case of Commissioner of Income Tax v. Chander Sen, (1974) 96 ITR 634. The Commissioner of Income Tax (Appeals) has also rejected the plea raised by the applicant that he has blended his separate properties with the property of the Hindu Undivided Family and had thereby converted his separate property into that of his Hindu Undivided Family. Reliance was placed on the returns filed under the Wealth Tax Act for the assessment years 1977-78 to 1979-80 in which the aforesaid property was shown as belonging to Hindu Undivided Family, which has been accepted by the Wealth Tax Officer in the assessment under the Wealth Tax Act. This plea was rejected by the Commissioner of Income Tax (Appeals) by the following order :-
"I find the two returns had been filed on 5.7.82 and were later revised on 12.5.83 and 27.2.84. This plea of the appellant is also devoid of any force. Merely by filing the two returns on 5.7.82 such conduct could not be taken to be determinative of the intention of the assessee to thro the property into the common hotch potch. The Courts have held that in order that the blending of self-acquired property with the Hindu Undivided Family is valid, two conditions must be fulfilled viz. (i) that the person must have full knowledge that the property is self-acquired and (ii) the throwing of property into the Hindu Undivided Family hotchpoch must be voluntary. The two returns did not show that the assessee had filed the return with the full knowledge that the property was otherwise self-acquired or separate. In fact though a copy of the Court's compromise decree has not been filed by the appellant before me in his case, but it appears that there was a compromise decree on 24.3.83 passed by Civil Judge, Etawah confirming that the residential house alongwith appurtenant orchard had been divided among the three brothers including the appellant after family settlement and that this had been done because they assumed such property as joint family property. The plain reading of the compromise shows that certain parties i.e. three brothers and their sons always thought that the property was an Hindu Undivided Family property and not that they knew it to be self-acquired and separate property which they later on blended or throw into common hotchpoch of the bigger Hindu Undivided Family. This falsifies the appellant's case that it had, by clear intention, blended the property into the common hotchpoch. In any case, as per the law as it stands after 31.12.1969 any blending or throwing into the common hotchpoch is no longer permissible and the assessee cannot reap the benefits out of such action in the matter of assessment under the I.T.Act as well as under the W.T.Act."
Feeling aggrieved, the applicant preferred separate appeals before the Tribunal. The Tribunal has upheld the order of the Commissioner of Income Tax (Appeals). In respect of blending of the property, the Tribunal has held as follows:-
"We find it difficult to pursuade ourselves to agree with the contention of the assessee that the property should be considered to have been thrown by him into the common hotch pot of the Hindu Undivided Family. The assessee was all along under the impression that the property, which it had received on the death of his father, was the Hindu Undivided Family property. Under the circumstances, the question of throwing the property into the common hotch pot cannot just arise. It is only the individual property which could by a conscious act be impressed with the character of the joint family property. But when the assessee was all along under an impression that the property in question had belonged to the Hindu Undivided Family, we fail to understand as to how he could have impressed that property with the character of the joint family property."
We have heard Sri Shashi Kant Gupta, learned counsel for the applicant, and Sri Shambhoo Chopra, learned Standing Counsel appearing for the Revenue.
The learned counsel for the applicant submitted that on the death of his father, the property which was inherited by him, became the ancestral property at his hands and, therefore, it belonged to Hindu Undivided Family. In the alternative, he submitted that in the returns for the assessment years 1977-78 to 1979-80 filed under the Wealth Tax Act, which have been accepted by the Wealth Tax Officer and as also pursuant to the declaratory decree passed by the Civil Court that the property in dispute has been treated as Hindu Undivided Family, it would be treated that the applicant had thrown the property in question in common hotch potch of Hindu Undivided Family, therefore, it should be treated as Hindu Undivided Family property.
The learned Standing Counsel submitted that it is well settled that on the death of father, the self-acquired property became the joint family property and it is not correct to say that it became the ancestral property. He further submitted that throwing in the common hotch potch was not established and the applicant has all along treated the property as Hindu Undivided Family property and not as individual property.
Having heard the learned counsel for the parties, we find that the Apex Court in the case of Commissioner of Wealth Tax, Kanpur v. Chander Sen, (1986) 161 ITR 370, has held that in view of Section 4 of the Hindu Succession Act, 1956 income from the asset acquired by a son from his father can be assessed as income of the son individually and under Section 8 of the Hindu Succession Act, 1956, the property of the father devolves on his son in the individual capacity and not as Karta of Hindu Undivided Family. In this view of the matter, the property owned by the applicant after the death of his father which was inherited by him after the death of his father, became individual property of the applicant and not that of Hindu Undivided Family.
So far as throwing of property in common hotch potch is concerned, it may be mentioned here that the applicant all along has been treating the property in question as that belonging to Hindu Undivided Family and there was no independent act of throwing it into common hotch potch. For blending the property in the common hotch potch it is necessary that the said property should have been treated as different from Hindu Undivided Family.
We, therefore, answer the question of law referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.
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