IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. Nos. 246,247,248,249,178 and 179 of 2007(O&M) DATE OF DECISION: APRIL 29, 2008 Shri Sajiv Vohra (HUF) .....APPELLANT Versus Commissioner of Income Tax, Aayakar Bhawan, Amritsar ....RESPONDENT CORAM: HON'BLE MR.JUSTICE SATISH KUMAR MITTAL HON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present: Mr. S.K. Mukhi, Advocate, for the appellant. .. SATISH KUMAR MITTAL, J. This order shall dispose of six Income Tax Appeals bearing ITA Nos.178, 179,246,249,247 and 248 of 2007 which are arising from a common order dated 16.06.2006 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as `the ITAT') in six appeals i.e. ITA Nos.644 to 649 (ASR)/2004, pertaining to the Assessment Years 1996-97 to 2001-02, whereby the appeals filed by the assessee have been dismissed. The brief facts of the case are that on 27.11.2001 notices under Section 148 of the Income Tax Act (hereinafter referred to as `the Act') in the case of Shri Sajiv Vohra, Individual were issued for the Assessment Years 1997-98 to 2000-01 for the reason that various investments made by him did not stand reflected in the original returns filed by him in his individual capacity. He was required to explain the investment made by him in acquisition of plot and purchase of Kisan Vikas Patras etc. He was also asked to explain the source of deposits ITA No.246 of 2007 (O&M) -2- made by him in various bank accounts with reference to the capital brought forward as on 1.4.1995. His capital account for the period 27.6.1991 to 31.3.1995 also revealed that he had credited the following income in his capital account as “by other income”:- “1. 31.3.1992 77,000/- 2. 31.3.1993 1,00,000/- 3. 31.3.1994 1,00,000/- 4. 31.3.1995 75,000/-” After receipt of the aforesaid notices on 31.3.2002, returns in the status of HUF were filed by the assessee. These were filed by the Assessing Officer as non-est being belated. Thereafter on 27.03.2003, the ITO, Gurdaspur recorded his reasons to believe that income had escaped assessment. In these reasons, it was stated that the assessee had made investments in KVPs etc., in his own name and in the names of his family members and that during re-assessment proceedings in the status of individual, Shri Sanjiv Vohra had stated that all investments stood in the hands of his HUF. The assessments in the status of individual were completed on 28.03.2003. In these assessments additions were made, observing that in case Shri Vohra was able to prove the assessment, being in the hands of the HUF, the additions in the status of individual would be protective else they would be treated as substantive. These assessments were not challenged and they attained finality. The Assessing Officer in the order dated 16.03.2004 for the Assessment Year 1996-97 concluded that in fact, no HUF existed and the business was the individual business of Shri Vohra. However, income was assessed in the hands of the HUF, on a protective basis since the return had been filed in the status of HUF. ITA No.246 of 2007 (O&M) -3- Feeling aggrieved against the aforesaid order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who vide order dated 22.09.2004 upheld the findings of the Assessing Officer that actually there was no HUF. However, the protective assessment made in the hands of HUF was deleted. In the individual cases, the assessee stated that the investments stood explained in the hands of the HUF. Since the Assessing Officer was of the view that investments have been made by individual and were liable to be considered in his case on substantive basis, he, therefore, made the additions in the hands of individual on substantive basis subject to rider that since assessments in the case of HUF were still pending and in case the assessee is able to explain the source of investments in the hands of HUF, the additions in the hands of individual would be protective, else they would be treated as substantive. These additions were never challenged by the assessee and achieved finality. As such, they became substantive additions. In the HUF assessment, the Commissioner of Income Tax (Appeals) upheld the Assessing Officer's findings that the assessee never had an HUF. The protective assessments in HUF status were deleted on the premises that the same income could not be assessed twice over, in the hands of the individual as well as the HUF. Against the aforesaid order passed by the Commissioner of Income Tax (Appeals), the assessee filed appeals which have been dismissed by the ITAT vide order dated 16.06.2006, while observing as under:- “....we find that the findings recorded by the CIT(A) in this ITA No.246 of 2007 (O&M) -4- regard are categorical and Shri Vohra has not been able to controvert the same to any degree. The learned counsel has first off, contended that for the assessment year 1996-97, no substantive assessment has been made. But this is not so. As discussed hereinabove, the protective individual assessments have undisputedly attained finality, as not having been challenged. The status of HUF has not been proved. No positive evidence whatsoever has been brought to an otherwise effect. Rather, all the indication is, as observed by both the authorities below, to the contrary. To begin with, the HUF returns were filed belatedly, only on receipt of notice u/s 148 in the status of individual. The deposits in question were made in the hands of the individuals and not with the HUF. All the bank accounts were in the names of the individuals, rather than in that of the HUF the source of these funds is also not proved to be any HUF. The bank declarations were also signed as sole proprietor and not as karta of an HUF. The column in these declaration forms apropos the capacity as HUF has, to be made pointed mention of, been left blank, showing the intention and fact situation at the relevant time. No material of the existence of any corpus of HUF funds was brought, either before both the AO and CIT(A) or before us. The KVPs or FDRs were not declared in the individual status. Once notices u/s 148 were issued in the individual status, the only way out for legalizing such investments was to declare them in the status of HUF. It has been so done. However, this machination is amply transparent from all the aforesaid circumstantial evidence to the contrary. It has thus, correctly been deduced that it was the section 148 notice issued in the individual capacity which triggered the filing of the sham HUF Returns. 7.1 Then, the entire business was found to be carried on by Shri Vohra in his individual capacity. This chemist business was shown in the individual status returns. There was only ITA No.246 of 2007 (O&M) -5- one licence, which was in the name of M/s Vohra Medical Store. Shri Vohra was not found to have been running this business in the name of the HUF. It does not stand proved otherwise. xx xx xx xx xx xx xx xx xx xx 8.12 We, however, are not impressed by the stand taken by the assessee. It remains a fact that for the assessment years 1992-93 to 1995-96, i.e. for the assessment years immediately preceding present one, substantial amounts of money were shown in the assessee's Capital Account, to have been earned as `Other Income'. The details of this `Other Income', never saw the light of day undisputedly, no return of income for any of these years was filed. The sources of this income thus remained shrouded in mystery. In the individual assessments, on the other hand substantial in additions were made, which were allowed to remain, having not been appealed against. Also, huge gifts were received from Shri Vohra's parents, whereas loans were advanced to them free of interest. All this is gathered for the APB itself, constituting self-incrimination documentary evidence produced by the assessee itself, little realizing that these very documents would comprise evidence capable of working and being used against, rather than in favour of, the assessee. 8.13 To wit, the modus operandi of the assessee is self explanatory. Resipsa loquitor. It is merely by design that the status of HUF has been tried, albeit unsuccessfully, to be engineered by Shri Vohra, to suit his nefarious purpose of evading the tax which was the rightful and legitimate due of the Revenue. Such design must (sic) be allowed to succeed.” Against the aforesaid impugned orders, the instant appeals have been filed in which the assessee has raised the following substantial question of law for consideration of this court:- ITA No.246 of 2007 (O&M) -6- Whether, on the facts and circumstances of the case, the ITAT was justified in confirming the action of the authorities below in not accepting the legal status of HUF having legally created as per provisions of law through valid gift deed/affidavit of the donor being the mother of the appellant (Annexure A-7) clearly dispelling her wishes and thus finalizing the assessment on substantive basis in the hands of Individual and protective in the hands of HUF which is against the established principles of law, thus, needs to be quashed? We have heard the arguments of the learned counsel for the appellant and gone through the impugned orders. Learned counsel for the appellant submitted that the Commissioner of Income Tax (Appeals) as well as the learned ITAT have not properly appreciated the facts of this case and thus have wrongly come to the conclusion that the appellant has failed to prove the status of HUF. Learned counsel further submitted that the appellant has been dealing in sale and purchase of all types of veterinary and poultry medicines and vaccines on retail sale basis since 1989 in the name of his proprietary firm M/s Vohra Medical Store. He was regularly filing its income tax returns in the individual status. He got married on 3.2.1991. His wife is a qualified pharmacist, and after his marriage, his mother Smt. Bimla Vohra gave a gift of Rs.20,000/- in cash on 27.6.1991 to the joint family. and thereafter, he started running the wholesale medicine business in the status of HUF. He further stated that he continued to file his returns in the capacity of Individual, and thereafter, he filed his returns in the status of HUF from the Assessment Year 1996-97. Learned counsel also submitted that from the income of HUF, various investments were made ITA No.246 of 2007 (O&M) -7- which have been wrongly treated by the Assessing Officer as individual's income of Shri Vohra. Learned counsel submitted that the assessee has completely proved on record, the creation of HUF as well as the income of the HUF. In spite of that, the adjudicating authorities have wrongly upheld the order of the Assessing Officer while coming to the conclusion that the assessee has failed to prove the creation and existence of HUF. Learned counsel further submitted that a Hindu male with his wife and children constitutes the HUF. He submitted that the HUF is a creature of Hindu law and it can exist even without any nucleus or ancestral joint family property. Learned counsel also submitted that the property may be joint family property without having been ancestral. Where the members of joint family acquire property by or with the assistance of joint funds or by their joint labour or in their joint business or by a gift or a grant made to them as a joint family, such property is the coparcenary property of the persons who have acquired it, whether as an increment to ancestral property, or whether it has arisen without any nucleus of ancestral property. Learned counsel further submitted that in the instant case, the assessee, his wife and his children constitute the Joint Hindu Family property and the gift made by his mother for the benefit of the joint family of the assessee, was sufficient in creating the HUF and any income derived from the said nucleus should have been treated as the income of the Joint Hindu Family. While referring to the decision of the Supreme Court in CIT v. Satyendra Kumar [1998] 232 ITR 360, learned counsel for the appellant submitted that where a gift made by a grandmother for the benefit of the entire family of her son and from the said amount, the ITA No.246 of 2007 (O&M) -8- son acquired the property and started doing business, the income from such property was treated as the income of the HUF. After hearing the learned counsel for the appellant and going through the impugned orders, in the facts and circumstances of the case, we do not find any illegality or perversity in the impugned order passed by the ITAT as in our view no substantial question of law is arising from the order passed by the ITAT. In the instant case, though the assessee has taken the stand that after getting married and receiving the gift of Rs.20,000/- from his mother in the year 1991, he started the business in the status of HUF in the year 1991 itself and the income from the said business was invested by him in various heads, but the assessee has failed to prove these facts. It is admitted fact that since the very beginning the assessee is running the business in the name of proprietorship firm in the individual status. All the bank accounts of the said firm were in the name of the individual and not in the name of HUF. All the investments were made by the appellant in the individual name and not in the name of HUF. The licence for running the business was also obtained in the name of individual and not in the name of HUF. The bank declarations were also signed as a sole proprietor and not as a Karta of HUF. There was a column in those forms whether the account is opened in the name of HUF. Those columns were left blank. Up to the year 2001, the assessee did not show the business of the firm in the status of HUF. It is only when the notices were issued under Section 148 of the Act for re-opening of the assessments made in the individual status, then the assessee filed the return of the HUF with an object to regularize the undisclosed investments made by him. The entire business was found to have been ITA No.246 of 2007 (O&M) -9- carried on by the assessee in his individual capacity. Thus, in this case, the assessee has miserably failed to establish that the business carried on by him was in the name of the HUF and not in his individual capacity and the income derived from such business was in the status of HUF. In our opinion, in the instant case, on the basis of the material and the evidence, a pure finding of fact has been recorded by the Commissioner of Income Tax (Appeals) which has been affirmed by the ITAT, and the said finding of fact does not require any interference in these appeals. Hence, finding no merits in theses appeals, the same are hereby dismissed. (SATISH KUMAR MITTAL) JUDGE April 29, 2008 (RAKESH KUMAR GARG) vkg JUDGE