Shri Sajiv Vohra (Huf v. Commissioner Of Income Tax, Aayakar Bhawan, Amritsar

IN THE HIGH COURT OF PUNJAB AND HARYANAAT 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) Versus .....APPELLANT Commissioner of Income Tax, Aayakar Bhawan, Amritsar ....RESPONDENT CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'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 bearingITA Nos.178, 179,246,249,247 and 248 of 2007 which are arising from acommon order dated 16.06.2006 passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (hereinafter referred to as `the ITAT')in six appeals i.e. ITA Nos.644 to 649 (ASR)/2004, pertaining to theAssessment Years 1996-97 to 2001-02, whereby the appeals filed by theassessee have been dismissed. The brief facts of the case are that on 27.11.2001 noticesunder Section 148 of the Income Tax Act (hereinafter referred to as `theAct') in the case of Shri Sajiv Vohra, Individual were issued for theAssessment Years 1997-98 to 2000-01 for the reason that variousinvestments made by him did not stand reflected in the original returnsfiled by him in his individual capacity. He was required to explain theinvestment made by him in acquisition of plot and purchase of KisanVikas 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 capitalbrought forward as on 1.4.1995. His capital account for the period27.6.1991 to 31.3.1995 also revealed that he had credited the followingincome in his capital account as “by other income”:- After receipt of the aforesaid notices on 31.3.2002, returns inthe status of HUF were filed by the assessee. These were filed by theAssessing Officer as non-est being belated. Thereafter on 27.03.2003, theITO, Gurdaspur recorded his reasons to believe that income had escapedassessment. In these reasons, it was stated that the assessee had madeinvestments in KVPs etc., in his own name and in the names of his familymembers and that during re-assessment proceedings in the status ofindividual, Shri Sanjiv Vohra had stated that all investments stood in thehands of his HUF. The assessments in the status of individual werecompleted on 28.03.2003. In these assessments additions were made,observing that in case Shri Vohra was able to prove the assessment, beingin the hands of the HUF, the additions in the status of individual would beprotective else they would be treated as substantive. These assessmentswere not challenged and they attained finality. The Assessing Officer in the order dated 16.03.2004 for theAssessment Year 1996-97 concluded that in fact, no HUF existed and thebusiness was the individual business of Shri Vohra. However, income wasassessed in the hands of the HUF, on a protective basis since the returnhad been filed in the status of HUF. ITA No.246 of 2007 (O&M) -3- Feeling aggrieved against the aforesaid order, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals), whovide order dated 22.09.2004 upheld the findings of the Assessing Officerthat actually there was no HUF. However, the protective assessment madein the hands of HUF was deleted. The Assessing Officer in the order dated 16.03.2004 for theAssessment Year 1996-97 concluded that in fact, no HUF existed and thebusiness was the individual business of Shri Vohra. However, income wasassessed in the hands of the HUF, on a protective basis since the returnhad been filed in the status of HUF. ITA No.246 of 2007 (O&M) -3- Feeling aggrieved against the aforesaid order, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals), whovide order dated 22.09.2004 upheld the findings of the Assessing Officerthat actually there was no HUF. However, the protective assessment madein the hands of HUF was deleted. In the individual cases, the assessee stated that theinvestments stood explained in the hands of the HUF. Since the AssessingOfficer was of the view that investments have been made by individualand were liable to be considered in his case on substantive basis, he,therefore, made the additions in the hands of individual on substantivebasis subject to rider that since assessments in the case of HUF were stillpending and in case the assessee is able to explain the source ofinvestments in the hands of HUF, the additions in the hands of individualwould be protective, else they would be treated as substantive. Theseadditions were never challenged by the assessee and achieved finality. Assuch, they became substantive additions. In the HUF assessment, theCommissioner of Income Tax (Appeals) upheld the Assessing Officer'sfindings that the assessee never had an HUF. The protective assessmentsin HUF status were deleted on the premises that the same income couldnot be assessed twice over, in the hands of the individual as well as theHUF. Against the aforesaid order passed by the Commissioner ofIncome Tax (Appeals), the assessee filed appeals which have beendismissed by the ITAT vide order dated 16.06.2006, while observing asunder:- “....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 tocontrovert the same to any degree. The learned counsel hasfirst off, contended that for the assessment year 1996-97, nosubstantive assessment has been made. But this is not so. Asdiscussed hereinabove, the protective individual assessmentshave undisputedly attained finality, as not having beenchallenged. The status of HUF has not been proved. Nopositive evidence whatsoever has been brought to anotherwise effect. Rather, all the indication is, as observed byboth the authorities below, to the contrary. To begin with, theHUF returns were filed belatedly, only on receipt of noticeu/s 148 in the status of individual. The deposits in questionwere made in the hands of the individuals and not with theHUF. All the bank accounts were in the names of theindividuals, rather than in that of the HUF the source of thesefunds is also not proved to be any HUF. The bankdeclarations were also signed as sole proprietor and not askarta of an HUF. The column in these declaration formsapropos the capacity as HUF has, to be made pointed mentionof, been left blank, showing the intention and fact situation atthe relevant time. No material of the existence of any corpusof HUF funds was brought, either before both the AO andCIT(A) or before us. The KVPs or FDRs were not declared inthe individual status. Once notices u/s 148 were issued in theindividual status, the only way out for legalizing suchinvestments was to declare them in the status of HUF. It hasbeen so done. However, this machination is amplytransparent from all the aforesaid circumstantial evidence tothe contrary. It has thus, correctly been deduced that it wasthe section 148 notice issued in the individual capacity whichtriggered the filing of the sham HUF Returns. 7.1 Then, the entire business was found to be carried on byShri Vohra in his individual capacity. This chemist businesswas 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 MedicalStore. Shri Vohra was not found to have been running thisbusiness in the name of the HUF. It does not stand provedotherwise. xxxxxxxxxx xxxxxxxxxx 8.12 We, however, are not impressed by the stand taken bythe assessee. It remains a fact that for the assessment years1992-93 to 1995-96, i.e. for the assessment yearsimmediately preceding present one, substantial amounts ofmoney were shown in the assessee's Capital Account, to havebeen earned as `Other Income'. The details of this `OtherIncome', never saw the light of day undisputedly, no return ofincome for any of these years was filed. The sources of thisincome thus remained shrouded in mystery. In the individualassessments, on the other hand substantial in additions weremade, which were allowed to remain, having not beenappealed against. Also, huge gifts were received from ShriVohra's parents, whereas loans were advanced to them free ofinterest. All this is gathered for the APB itself, constitutingself-incrimination documentary evidence produced by theassessee itself, little realizing that these very documentswould comprise evidence capable of working and being usedagainst, rather than in favour of, the assessee. 8.13 To wit, the modus operandi of the assessee is selfexplanatory. Resipsa loquitor. It is merely by design that thestatus of HUF has been tried, albeit unsuccessfully, to beengineered by Shri Vohra, to suit his nefarious purpose ofevading the tax which was the rightful and legitimate due ofthe Revenue. Such design must (sic) be allowed to succeed.” Against the aforesaid impugned orders, the instant appealshave been filed in which the assessee has raised the following substantialquestion of law for consideration of this court:- ITA No.246 of 2007 (O&M) -6- Whether, on the facts and circumstances of the case, theITAT was justified in confirming the action of the authoritiesbelow in not accepting the legal status of HUF havinglegally created as per provisions of law through valid giftdeed/affidavit of the donor being the mother of the appellant(Annexure A-7) clearly dispelling her wishes and thusfinalizing the assessment on substantive basis in the hands ofIndividual and protective in the hands of HUF which isagainst the established principles of law, thus, needs to bequashed? We have heard the arguments of the learned counsel for theappellant and gone through the impugned orders. Learned counsel for the appellant submitted that theCommissioner of Income Tax (Appeals) as well as the learned ITAT havenot properly appreciated the facts of this case and thus have wronglycome to the conclusion that the appellant has failed to prove the status ofHUF. Learned counsel further submitted that the appellant has beendealing in sale and purchase of all types of veterinary and poultrymedicines and vaccines on retail sale basis since 1989 in the name of hisproprietary firm M/s Vohra Medical Store. He was regularly filing itsincome 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 jointfamily. and thereafter, he started running the wholesale medicine businessin the status of HUF. He further stated that he continued to file his returnsin the capacity of Individual, and thereafter, he filed his returns in thestatus of HUF from the Assessment Year 1996-97. Learned counsel alsosubmitted that from the income of HUF, various investments were made ITA No.246 of 2007 (O&M) -7- ITA No.246 of 2007 (O&M) -7- which have been wrongly treated by the Assessing Officer as individual'sincome of Shri Vohra. Learned counsel submitted that the assessee hascompletely proved on record, the creation of HUF as well as the incomeof the HUF. In spite of that, the adjudicating authorities have wronglyupheld the order of the Assessing Officer while coming to the conclusionthat the assessee has failed to prove the creation and existence of HUF.Learned counsel further submitted that a Hindu male with his wife andchildren constitutes the HUF. He submitted that the HUF is a creature ofHindu law and it can exist even without any nucleus or ancestral jointfamily property. Learned counsel also submitted that the property may bejoint family property without having been ancestral. Where the membersof joint family acquire property by or with the assistance of joint funds orby their joint labour or in their joint business or by a gift or a grant madeto them as a joint family, such property is the coparcenary property of thepersons who have acquired it, whether as an increment to ancestralproperty, or whether it has arisen without any nucleus of ancestralproperty. Learned counsel further submitted that in the instant case, theassessee, his wife and his children constitute the Joint Hindu Familyproperty and the gift made by his mother for the benefit of the jointfamily of the assessee, was sufficient in creating the HUF and any incomederived from the said nucleus should have been treated as the income ofthe Joint Hindu Family. While referring to the decision of the SupremeCourt in CIT v.Satyendra Kumar [1998] 232 ITR 360, learned counselfor the appellant submitted that where a gift made by a grandmother forthe 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 fromsuch property was treated as the income of the HUF. After hearing the learned counsel for the appellant and goingthrough the impugned orders, in the facts and circumstances of the case,we do not find any illegality or perversity in the impugned order passedby the ITAT as in our view no substantial question of law is arising fromthe order passed by the ITAT. In the instant case, though the assessee hastaken the stand that after getting married and receiving the gift ofRs.20,000/- from his mother in the year 1991, he started the business inthe status of HUF in the year 1991 itself and the income from the saidbusiness was invested by him in various heads, but the assessee has failedto prove these facts. It is admitted fact that since the very beginning theassessee is running the business in the name of proprietorship firm in theindividual status. All the bank accounts of the said firm were in the nameof the individual and not in the name of HUF. All the investments weremade 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 ofindividual and not in the name of HUF. The bank declarations were alsosigned as a sole proprietor and not as a Karta of HUF. There was acolumn 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 notshow the business of the firm in the status of HUF. It is only when thenotices were issued under Section 148 of the Act for re-opening of theassessments made in the individual status, then the assessee filed thereturn of the HUF with an object to regularize the undisclosedinvestments made by him. The entire business was found to have been ITA No.246 of 2007 (O&M) -9- 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 onby him was in the name of the HUF and not in his individual capacity andthe income derived from such business was in the status of HUF. In ouropinion, 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 IncomeTax (Appeals) which has been affirmed by the ITAT, and the said findingof fact does not require any interference in these appeals. Hence, finding no merits in theses appeals, the same arehereby dismissed. (SATISH KUMAR MITTAL) JUDGE April 29, 2008vkg (RAKESH KUMAR GARG) JUDGE