THE HON'BLE SRI JUSTICE P.S.NARAYANA A.S.No.1365 of 1988 Date : 18-6-2010 Between : The Income Tax Officer, A.Ward, Visakhapatnam .. Appellant And Tippala Yerrayamma and another .. Respondents THE HON'BLE SRI JUSTICE P.S.NARAYANA A.S.No.1365 of 1988 ORDER: 1. This Appeal is filed as against the Decree and Judgment made in O.S.No.161/81 on the file of learned Principal Subordinate Judge, Visakhapatnam whereby the suit filed by the Income Tax Officer, Visakhapatnam – the appellant herein/plaintiff, was dismissed. The said suit was filed to set aside the claim order made by the Tax Recovery Officer in O.P.No.104/79-80 dated 29-4-1980. The learned Principal Subordinate Judge, Visakhapatnam in the light of the respective pleadings of the parties, having settled the Issues, ultimately came to the conclusion that the order under challenge does not suffer from any illegality and accordingly the suit was dismissed directing the parties to bear their own costs. Aggrieved by the same, the present Appeal had been preferred. 2. The learned Standing Counsel representing the appellant had taken this Court through the respective pleadings of the parties and the evidence available on record in proper perspective. The learned Counsel also would maintain that the learned Judge should have held on Issue No.1 that Items 2 and 3 of the plaint schedule properties are purchased in the name of the 1st defendant benami for the benefit of the joint family of the 2nd defendant. The Counsel also had commented relating to the findings relating to perfection of title by adverse possession as well. The learned Standing Counsel also would maintain that in the facts and circumstances of the case, inasmuch as the 2nd respondent was a partner representing the joint family as such, the findings are to be set aside and the Appeal to be allowed. 3. Per contra, the learned Counsel representing the respondents had taken this Court through the findings recorded by the learned Principal Subordinate Judge, Visakhapatnam and would m that in the light of the convincing findings recorded by the trial Court, this is not a fit matter to be interfered with and the Appeal to be dismissed. 4. Heard the Counsel on record. 5. Before taking up further discussion on the Points for consideration which would arise in this Appeal, it may be appropriate to have a glance at the respective pleadings of the parties, the evidence available on record and the findings recorded by the trial Court in nutshell. 6. The parties hereinafter would be referred to as ‘plaintiff’ and ‘defendants’ as shown in O.S.No.161/81 aforesaid. 7. Pleadings of the parties : Averments made in the plaint : The plaintiff/Income Tax Officer, A-Ward, Visakhapatnam, pleaded in the plaint as hereunder:- The 2nd defendant is the husband of the 1st defendant and he is the kartha and father-manager of the joint family consisting of himself and his four sons viz., T.Ch.Appa Rao, T.Appalaswamy, T.Guru Murthy, T.Venkataramana and his wife the 1st defendant and his two daughters. The 2nd defendant had inherited from his father considerable properties, movable and immovable, including Acs.12-00 of agricultural land, a house at Venkannapalem and considerable cash all having fallen to his share in the partition with the brothers. Besides the above mentioned ancestral properties the defendant the 2nd defendant as karta of Hindu Undivided Family, further made certain acquisitions including the suit schedule properties with the aid of the joint family nucleus and from the income of the joint family properties and its assets. Besides the joint family properties referred to above, the 2nd defendant had no personal properties and he never possessed any movable or immovable properties in his personal capacity. Besides the above mentioned properties, the family was running arrack business since 1963-64 onwards. The 2nd defendant was not employed and was only managing the arrack business of the Hindu Undivided Family as its kartha and had been maintaining himself and his family from out of the income of the joint family properties which he is managing as the kartha and the father-manager of the Hindu Joint Family consisting of himself and his family. While so, in the year 1971, in his capacity as the Joint Family manager, he entered into a partnership with 18 others known as M/s. Visakha Gowda Association which carried on business in Abkari contracts by investing the Hindu divided family funds. The firm M/s.Visakha Gowda Association, now a dissolved firm, initially filed a return on 28-8-1971 disclosing a loss of Rs.12,185.00 for the Assessment Year 1971-72. A revised return of income was filed by the said firm on 26-11-1971 finally disclosing an income of Rs.88,890/-. Similarly a return was filed on 19-12-1972 for 1972-73 disclosing an income of Rs.72,903/- which was further revised under a return dt.26-3-1975 disclosing an income of Rs.73,403/-. The assessment for the said years could only be completed by the plaintiff on 28-2-1976 on account of the delaying tactics adopted and on account of the failure of the production of the accounts and the required data by the said firm in proper time for the assessment years 1971-72 and 1972-73. Finally the firm was assessed for a total amount of Rs.12,61,921/- as tax and penalties for the said two assessment years. The properties belonging to the joint family were got attached by the plaintiff for realization of the tax arrears of M/s. Visakha Gowda Association of which the 2nd defendant is a partner in the capacity as kartha or manager of the joint family for himself and his sons. The 1st defendant, who is the wife of the 2nd defendant, filed objection petition on 30-6-1979 before the Tax Recovery Officer in O.P.No.104/79-80 objecting to the attachment of the plaint schedule properties by setting up the rights of the joint family in the first instance and later by setting up her own rights in the building proper. In the said objection petition she had also contended that the house properties were set apart for the purpose of security and maintenance and also as marriage provision for her daughters while admitting that the said houses were constructed with joint family funds by her husband, the 2nd defendant. The learned Tax Recovery Officer while rejecting the contention of the 1st defendant that the properties (house properties) were set apart for maintenance of the 1st defendant and for marriage purposes of the daughters, erroneously allowed the claim of the 1st defendant regarding half share of Item No.1 house property, situate on Gajuwaka-Anakapalle road on the ground that she perfected title by adverse possession to the same. Similarly the Tax Recovery Officer, without any justification and contrary to the admitted facts, held that the site under the buildings covered by Item Nos.2 and 3 (i.e., the house sites situate at Balacheruvu road) constituted the streedhana property of the 1st defendant and accordingly raised the attachment with respect to the suit schedule properties. The conclusions arrived at by the Tax Recovery Officer with regard to the fact that the 1st defendant perfected title and became the owner of 50% of the house property on account of adverse possession is contrary to law and established facts and probabilities of the case; that the plea of adverse possession was an afterthought and subsequent development and was never set up originally in the petition filed by her. In fact, it had been established by positive evidence and admissions by the parties that the 1st defendant had neither the capacity nor personal income to purchase the sites in question and to invest any monies for construction; that the sites covered by item Nos.2 and 3 were purchased by the 2nd defendant as kartha of the family with the joint family funds and the buildings were also constructed from the Hindu Undivided Family funds and the rents received from the properties were also disclosed by the 2nd defendant and in the return filed by the Hindu Undivided Family and the property was right through treated as joint family property and as such the findings of the Tax Recovery Officer that the 1st defendant became entitled to 50% of the house covered by item No.1 of the plaint schedule and consequential raising of attachment to the item No.1 of the plaint schedule is not proper and correct. Similarly, the finding of the Tax Recovery Officer that the 1st defendant is the owner of the sites covered by item Nos.2 and 3 is contrary to law, the established fact and evidence and probabilities. The vacant sites covered by item Nos.2 and 3 were purchased benami for the benefit of the joint family by investing the joint family funds and a sale deed was simply taken in the name of the 1st defendant who happens to be the wife of the kartha of the family. As already submitted, the sale proceeds for the purchase of the site flowed from the Hindu Undivided Family and the 1st defendant never had any independent source of income or capacity. The purchase of the suit schedule sites in the name of the 1st defendant is benami for the benefit of the Hindu Undivided Family and the benami nature of the transaction is clear from the investment of the Joint family funds in the construction of the buildings thereon and from the treatment of the said property by the defendants as joint family property. As such the plaint schedule properties are Hindu Undivided Family properties of the 2nd defendant’s family and that the 1st defendant has absolutely no right or interest in the same and that the plaintiff is entitled to proceed against the said properties in realization of the tax dues of the firm M/s. Visakha Gowda Association of which the 2nd defendant, in the capacity as the kartha and father-manager of the Hindu Undivided Family had joined the business of the firm as a partner and hence the suit to set aside the order passed by the Tax Recovery Officer in O.P.No.104/79-80 dt.29-4-1980 in favour of the 1st defendant upholding her rights to the suit schedule properties. Averments made in the written statement filed by the 1st defendant: It is stated that the allegation that the 2nd defendant inherited property is admitted but it is stated that it is not correct to say that they are considerable properties or that the cash inherited is also considerable. The cash was about Rs.10,000/-. Further it is stated that it is no doubt that the 2nd defendant made certain acquisitions with the joint family nucleus. It is also admitted that apart from the joint family properties there is no other ancestral property. The allegation that the family was running arrack business since 16-3-1964 had been denied as not correct and it is stated that only milk business was carried on. It is further stated that the further allegation that the said business was carried on by the 2nd defendant as the manager of the Hindu joint family also had been denied as not correct. It may be that the 2nd defendant had been utilizing the income from the joint family property for the keeping of the family but it is not correct to say that the income from the arrack business was used for the family purposes. The further allegation that in the year 1971 the 2nd defendant entered into a partnership with 18 others as a firm known as “Visakha Gowda Association” in his capacity as joint family manager is absolutely incorrect. It is admitted that the 2nd defendant is a partner in the said firm but only in his capacity as an individual. It is further stated that to the best of information of the 1st defendant, the 2nd defendant never entered into a partnership in his capacity as manager of the joint family. The 1st defendant is not aware of the several assessment proceedings etc., referred in para 3(c) of the plaint. It is however admitted that an attachment was effected on the plaint schedule property and it was mentioned that the attachment was for income tax arrears of M/s. Visakha Gowda Association. The 1st defendant reiterated that the 2nd defendant was not a partner of the firm in his capacity as kartha or the manager of the joint family. It is admitted that the 1st defendant filed objection on 30-6-1979 before the Tax Recovery Officer and it was also admitted that she set up her rights in the property. In the objections raised by the 1st defendant on 30-6- 1979, she had only mentioned about the interests of the joint family but that does not mean that the 1st defendant’s right in the said property not having been mentioned in the objections raised is deemed to have been lost. The order passed by the Tax Recovery Officer is quite valid and proper and it cannot be taken exception to. Insofar as item No.1 of the plaint schedule property is concerned, half the site was acquired by her under a registered sale deed dated 19-2-1960 from G.Venkayyamma and the document was registered as 384/60. In fact, the said Venkayyamma is the mother of the 1st defendant and by then there was already a house consisting of two rooms etc., and the premises was enclosed by a compound wall. The remaining half of the property belonged to Pilaka Mallayamma, the sister of the 1st defendant and she conveyed her interest under a registered sale deed dated 21-8-1961 in favour of the 2nd defendant. Therefore on item No.1 of the plaint schedule property some remodeling was done in the year 1964-65 and a first floor was constructed in 1966-67 and the 1st defendant contributed half the amount for the construction of the said property and since 1964-65 the premises was leased out and the income was also being enjoyed in equal halves by both the defendants and her streedhana and other income was utilized for construction of the same and she is absolutely entitled to one half and in any view she was exclusively enjoying the same in her own right enjoying half of the property to the exclusion of her husband and the sons are entitled to the other half and in that view she had acquired alternatively title by adverse possession. For the said constructions, he raised money by sale of the gold jewellery and also by investing the cash belonging to her. So far as Item No.2 of the plaint schedule is concerned, the site had been acquired by the 1st defendant under a registered sale deed dated 29-1-1964 executed by Md.Miskin Saheb and the said site is the absolute property of the 1st defendant and subsequently on the said site a three storeyed structure had been constructed by the 1st defendant with her own income and the property is also assessed to tax in the name of the 1st defendant and the 1st defendant is the exclusive owner of the site. Similarly, so far as the third item of the plaint schedule property is concerned, the title to the same had been acquired by the 1st defendant under a registered sale deed dated 24-6-1964 and the 1st defendant alone is exclusively entitled to the said site. In that view of the matter the decision of the Tax Recovery Officer holding that the site belongs to the 1st defendant cannot be found fault with. The Tax Recovery Officer on a consideration of the relevant material placed before him was fully satisfied that Items 2 and 3 of the plaint schedule property belonged to the 1st defendant exclusively having been purchased from out of her streedhana monies and the very fact that the sale deeds of the year 1964 under which items 2 and 3 had been purchased had been in her name and subsequently she was assessed to tax on the same clearly proves that she is the owner of the property. The contention of the plaintiff that the decision reached by the Tax Recovery Officer is opposed to the admitted facts, is not at all correct. There is nothing wrong in the plea of adverse possession on being raised more so when it was clearly averred that in respect of Item 1 of the plaint schedule property, she had spent her money and raised the construction and only as an alternative plea the plea of adverse possession is raised. The allegation that the 1st defendant had not the capacity to raise the money for the purchase of the site or to raise any money for the construction of the building is absolutely false. The allegations that the sites covered by items 2 and 3 were purchased by the 2nd defendant with the aid of the joint family funds are all false. The allegations that it was all along treated as a joint family property is not correct. In so far as item-1 is concerned, for the reasons already mentioned, one half of the property is owned by her and as such the finding of the Tax Recovery Officer does not call for any interference. The allegation that items-2 and 3 are purchased benami is also not correct. The assertion that the sale deed was nominally taken in the name of the 1st defendant because she happens to be the wife of the 2nd defendant is not at all correct. The assertion that the 1st defendant had no independent source of income is palpably untrue. Her parents are rich and from time to time they were giving her sufficient funds. In addition to it, she has lot of jewellery also, portions of which were disposed of by her for the acquisition of immovable property. The allegation that the 1st defendant has no interest in any of the three items of the plaint schedule is absolutely incorrect. The plaintiff is not entitled to proceed against the properties for the tax arrears allegedly due from the firm of Visakha Gowda Association. The 1st defendant owns considerable other properties which will clearly prove that she had not only the capacity to buy the sites covered by items 1 to 3 but also to raise the building on item No.1. The suit as framed is not maintainable and the suit claim is also barred and hence the suit may be dismissed with costs. 8. The 2nd defendant also filed a written statement on similar lines and hence the averments in the said written statement need not be repeated again. 9. Issues settled by the trial court : The trial court settled the undernoted Issues : (a) Whether Items 2 and 3 of the suit properties were purchased in the name of 1st defendant benami for the benefit of the joint family of 2nd defendant by investing joint funds ? (b) Whether 1st defendant perfected title to the half share in Item-1 of suit property by adverse possession ? (c) Whether the 2nd defendant entered into partnership business styled as Visakha Gowda Association in his individual capacity or as Kartha of joint family ? (d) Whether the orders of the Tax Recovery Officer are liable to be set-aside ? (e) Whether the suit is barred by time ? (f) To what relief ? 10. Evidence available on record : Witnesses examined for plaintiff : PW-1 – Sri P.Venkateswara Rao, Inspector of Income Tax, A-Ward, Visakhapatnam Witnesses examined for defendants : DW-1 – Tippala Apparao (2nd defendant) DW-2 – G.Appanna Reddi DW-3 – G.Satyarao DW-4 – Kaki Apparao DW-5 – P.Bhoolokareddi Documents marked for plaintiff : Ex.A-1 dated 26-12-1970 – Photostat copy of partnership deed entered into between Perumalla Raghavarao and 18 others Ex.A-2 – dated 23-3-1971 – Photostat copy of application for registration of M/s. Visakha Gowda Association firm for purpose of Income tax Ex.A-3 dated 30-6-1979 – Objection Petition of 1st defendant to Tax Recovery Officer, Visakhapatnam Ex.A-4 dated 3-8-1980 - -do- Ex.A-5 dated 29-4-1980 – Copy of order of Tax Recovery Officer, Visakhapatnam in O.P.No.104/79-80 filed by 1st defendant Ex.A-6 dated 12-8-1976 – Photostat copy of Return of Income submitted by 2nd defendant for Asst. Year 1964-65 Ex.A-7 dated 12-8-1976 - -do- for 1965-66 Ex.A-8 dated 12-8-1976 - -do- for 1966-67 Ex.A-9 dated 12-8-1976 -do- for 1967-68 Ex.A-10 dated 30-3-1977 – Photostat copy of Asst. order for Asst. Year 1969-70 Ex.A-11 dated 30-3-1977 - -do- for 1973-74 Ex.A-12 dated 13-12-1977 – Photostat copy of Return of Income submitted by 2nd defendant for Asst. Year 1977-78 Ex.A-13 dated 27-7-1979 - -do- for 1978-79 Ex.A-14 dated 20-11-1976 – Application of 2nd defendant to Income Tax Officer, C Ward, Visakhapatnam Ex.A-15 – Statement of investments of 2nd defendant and others Documents marked for defendants : Ex.B-1 dated 21-2-1986 – Copy of order of Asst. Commissioner of Income Tax, Visakhapatnam for 1972-73 Ex.B-2 dated 31-3-1984 – Photostat copy of Assessment order for Asst. Year 1971-72 Ex.B-3 dated 31-3-1984 - -do- of Income Tax Officer, Award, Visakhapatnam for 1972-73 Ex.B-4 dated 19-2-1960 – Photostat copy of Registration extract of sale deed for Rs.400/- executed by Gudla Venkayyamma in favour of 1st defendant Ex.B-5 dated 29-1-1964 - -do- for Rs.1500/- executed by Mohammad Saheb in favour of 1st defendant Ex.B-6 dated 24-6-1964 - -do- for Rs.1000/- executed by G.Nagireddi in favour of 1st defendant Ex.B-7 dated 28-2-1976 – Photostat copy of Assessment order for for 1971-72 Ex.B-8 dated 28-2-1976 - -do- for 1972-73 11. Findings recorded by the trial court in nutshell : The learned Principal Subordinate Judge after referring to several decisions ultimately came to the conclusion that in the facts and circumstances of the case it cannot be said that the 2nd defendant participated in the business in question as kartha or manager of the joint family and also further came to the conclusion that the Items standing in the name of the 1st defendant cannot be said to be having kept in her name benami and further recorded certain further findings relating to the plea of adverse possession as well and ultimately came to the conclusion that the order under challenge does not suffer from any illegality and dismissed the suit. 12. In the light of submissions made by the Counsel on record, the following Points arise for consideration in this Appeal : (a) Whether the findings recorded by the learned Principal Subordinate Judge, Visakhapatnam dismissing the suit are to be confirmed or to be disturbed or set-aside in the facts and circumstances of the case ? (b) If so to what relief the parties would be entitled to ? 13. Point No.1: The 2nd defendant is the husband of the 1st defendant and the 2nd defendant joined as partner in M/s.Visakha Gowda Association. It is the case of the plaintiff that the 2nd defendant joined the said Association as one of the partners ofM/s.Visakha Gowda Association representing the Hindu Undivided Family, in short referred to as “HUF" but however specific stand taken by the defendants is that the 2nd defendant joined as a partner in the said Association in his individual capacity and not representing the joint family. It is also the specific case that the sites covered by Items 2 and 3 were purchased by the 1st defendant herself and hence the plea of benami cannot be sustained. The learned Judge after appreciating the evidence available on record referred to the undernoted decisions : Sidramappa Vs. Babajappa [1], P.Murugavva Vs. S.Somasundaram [2], Pichappa Vs. Chokalingam [3], Rama Krishna Transport Vs. Income Tax Commissioner [4], Shanmukeshwararao Vs. Venkatappaiah and sons [5], Benaras Bank Vs. Hari Narayan [6], A.Robini Vs. Akak Sethumadhavan [7], Kanakaratnamala Vs. Logenadha [8], G.Narayana Raju Vs. Chamarju [9], Lakshmi Ammal Vs. Meenakshi Ammal and others[10]. The learned Judge appreciated in elaboration the oral evidence of PW-1 and also the oral evidence of DW-1, DW-2, DW-3, DW-4 and DW-5 as well and also recorded further findings in relation to documentary evidence as well – Exs.A-1 to A-15 and Exs.B-1 to B-8 as well and ultimately came to the conclusion that the order under challenge does not suffer from any illegality whatsoever and accordingly dismissed the suit. 14. It is true that the 1st defendant had not chosen to enter into the witness box and much comment had been made on