Where an amount stood in the name of the assessee's wife, the onus of proof was not on the assessee but was on the Income-tax Department to show by, at least, same materials that the amount did not belong to the assessee's wife but to the assessee himself.
Kamla Sahai, J.
1. In this case, the assesses is a Hindu undivided family consisting of M. L. Rungta (Mangilal Rungta) and his sons. Three of those sons are M. G. Rungta (Madan Gopal Rungta), B. N. Rungta) (Biswanath Rungta) and S. R. Rungta (Sitaram Rungta). The questions which arise for decision in this case relate to the income from Jugasalai Electric Supply. Co. The assessee's case is that shares are held in the Electric Supply Co. as follows:
M.L. Rungta (as representing the Hindu undivided family) .... as. -/4/- M. G. Rungta .... -/4/- B. N. Rungta .... -/4/- S. R. 'Rungta .... -/2/- An Outsider .... as. -/2/-
2. The assessment years in question are 1945-46, 1946-47, 1947-48 and 1948-49. But the assessment in respect of each of the assessment years does not have to be separately considered because the point involved is the same. The Income-tax Officer held that the shares allotted to M. G. Rungta, B. N. Rungta and S. R. Rungta in the Jugasalai Electric Supply Co. were all held by the Hindu undivided family in their names, as the funds said to have been contributed by these coparceners of the family to the Electric Supply Co. were the funds of the Hindu undivided family. The assessee took an appeal to the Appellate Assistant Commissioner of Income-tax in respect of each of the assessment years but the appeals failed. The assessee then took a further appeal in respect of each of the assessment years to the Income-tax Appellate Tribunal and the Tribunal, by its order dated 3-7-1952, held that the share standing in the name of Sitaram Rungta was held by him in his individual capacity. It, however, dismissed the appeals in respect of the shares held in the names of M. G. Rungta and B. N. Rungta.
On being required by a Bench of this Court under Section 66(2), Income-tax Act, to do so, the Income-tax. Appellate Tribunal has stated a case and has referred it on the following question of law:
"1. Whether there was any material before the Income-tax Appellate Tribunal to find that the capital standing in the names of the two partners, M. G. Rungta and B. N. Rungta, belonged to the Hindu undivided family.
2. Whether under the facts and circumstances of the case inclusion of the profits of M. G. Rungta and B.N. Rungta in the firm Messrs. Jugasalai Electric Supply Co. in the assessment of the petitioner was legal and valid?"
Both these questions are inter-connected and the real point for consideration is whether there was any material before the Appellate Tribunal on the basis of which it could be held that the capital said to have been contributed by M. G. Rungta and B.N. Rungta was really capital advanced by the assessee family.
3. Appearing for the assessee, Mr. Dutta has drawn jour attention to the abstracts of accounts appearing at pages 86 to 91 of the paper-book. The account book of the firm Harkarandass Mangilal of Calcutta, in which the assessee family is admittedly interested, shows that M.G. Rungta deposited a total amount of Rs. 20,000 on different dates and B.N. Rungta deposited a sum of Rs. 20,000 in one lump sum with this firm in the account of Jugasalai Electric Supply Co. The whole of this amount of Rs. 40,000 was transferred to the assessee family and the account book of" the assessee family shows that it was credited to the Electric Supply Co. The account book of the Electric Supply Co. shows that this Company received from the assessee family Rs. 64,847-7-3 partly as value of goods purchased and partly in cash. It further shows that the capital of this Company was made up as follows:
M.L. Rungta ... ... Rs. 25,000
M.G. Rungta ... ... 20,000
B.N. Rungta ... ... 20,000
S.R. Rungta ... ... 5,000
M.D. Agarwalla ... ... 2,100
Total ... Rs. 72,100
4. A perusal of the accounts mentioned above clearly shows that M.G. Rungta and B.N. Rungta deposited Rs. 20,000 each with the firm Harkarandass Mangilal and these amounts ultimately came to the Jugasalai Electric Supply Co. which treated them as sums contributed by these persons towards the capital.
5. In rejecting the assessee's case that M.G. Rungta and B.N. Rungta hold shares in the Electric Supply Co. in their individual capacity, the Income-tax Appellate Tribunal has taken two points. The first point has been put as follows:
"The accounts of the Hindu undivided family indicate that expenses of the firm to the extent of Rs. 72,100 were met by the family. In other words the sum of Rs. 72,100 mentioned above, was advanced by the family to the Electric Supply Co. The capital of Rs. 20,000 each contributed by M.G. Rungta and B.N. Rungta is a part of this sum of Rs. 72,100. The capital contributed in the names of these two members of the family, therefore, came from the funds of the family."
The second point is that M.G. Rungta and B.N. Rungta were unable to prove that the amounts of Rs. 20,000 each advanced by them came out of their personal funds and not out of the funds of the assesee family.
6. So far as the first point is concerned, there can be no doubt that M.G. Rungta and B.N. Rungta are members and coparceners of the assessee which is a Hindu undivided family. There is, however, no presumption that amounts paid by different coparceners of a Hindu undivided family came out of the funds of that family. Hence there is no legal basis for this point.
7. Coming now to the second point, it seems to me that the Appellate. Tribunal has misdirected itself on the question of onus of proof. In --'D. D. Kapoor v. Commr. of. Income-tax, B. & O.', (S) AIR 1955 Pat 102 (A), a Bench of this Court of which my learned brother and I were members, held that there was
"no presumption in Hindu Law that any business carried on by a member of a joint Hindu-family is itself a joint family business."
We further said as follows:
"The mere fact that income is entered in the family accounts cannot lead to the inference that the income is joint family income. In order to establish that the income of a Hindu coparcener from the partnership business is joint family income, the Department should produce material to show that the Hindu coparcener had utilised the property or resources of the Hindu undivided family in the partnership business or the Department should produce material to show that the Hindu coparcener was in fact representing the Hindu undivided family for the share of the partnership he is holding."
8. It is clear, therefore, that the legal position is that it was for the Department in this case to prove that the funds contributed by M.G. Rungta and B.N. Rungta came from the funds of the assessee family and it was not for those two persons or the assessee family to prove that the amounts contributed by them came from their personal funds. The fact that this is the legal position which follows also from another line of reasoning. It is a well-recognised principle that the ostensible must be held to be the real state of affairs unless the contrary is shown. It is on the basis of this principle that a Bench of this Court decided in -- 'Ramkinkar Banerji v. Commr. of Income-tax, B. & O.', AIR 1936 Pat 267 (B) that, unless the Department proved to the contrary, a property held by the assessee's wife could not be held to belong to the assessee. In this connection, I may also refer to another decision of this Court in -- 'S. N. Ganguly v. Commr. of Income-tax, B. & O.', AIR 1954 Pat 51 (C). It was held in that case that, where an amount stood in the name of the assessee's wife, the onus of proof was not on the assessee but was on the Income-tax Department to show by, at least, same materials that the amount did not belong to the assessee's wife but to the assessee himself.
9. It is clear from what I have said above that the Appellate Tribunal placed the onus wrongly upon the assessed to prove that the amounts advanced by M.G. Rungta and B.N. Rungta to the Electric Supply Co. came out of their personal funds. The onus should have been placed upon the Department to show that those amounts came from the funds of the assessee family. There is absolutely no material placed on the record by the Income-tax Department to discharge the onus which lay upon it. There is, therefore, no escape from the conclusion that there was no material on the basis of which the Appellate Tribunal could come to the conclusion that the capital contributed by M.G. Rungta and B.N. Rungta was really capital advanced by the assessee family.
10. The result is that both the questions referred to the High Court by the Appellate Tribunal must be answered in favour of the assessee and against the Income-tax Department. The assessee is entitled to the cost of this reference. There will be one hearing fee for all these cases which is assessed at Rs. 250/-.
Ramaswami, J.
11. I agree.
Print Page
Mangilal Rungta vs Commr. Of Income-Tax on 4 March, 1955
Equivalent citations: AIR 1955 Pat 366, 1955 (3) BLJR 263
Bench: Ramaswami, K Sahai
JUDGMENTKamla Sahai, J.
1. In this case, the assesses is a Hindu undivided family consisting of M. L. Rungta (Mangilal Rungta) and his sons. Three of those sons are M. G. Rungta (Madan Gopal Rungta), B. N. Rungta) (Biswanath Rungta) and S. R. Rungta (Sitaram Rungta). The questions which arise for decision in this case relate to the income from Jugasalai Electric Supply. Co. The assessee's case is that shares are held in the Electric Supply Co. as follows:
M.L. Rungta (as representing the Hindu undivided family) .... as. -/4/- M. G. Rungta .... -/4/- B. N. Rungta .... -/4/- S. R. 'Rungta .... -/2/- An Outsider .... as. -/2/-
2. The assessment years in question are 1945-46, 1946-47, 1947-48 and 1948-49. But the assessment in respect of each of the assessment years does not have to be separately considered because the point involved is the same. The Income-tax Officer held that the shares allotted to M. G. Rungta, B. N. Rungta and S. R. Rungta in the Jugasalai Electric Supply Co. were all held by the Hindu undivided family in their names, as the funds said to have been contributed by these coparceners of the family to the Electric Supply Co. were the funds of the Hindu undivided family. The assessee took an appeal to the Appellate Assistant Commissioner of Income-tax in respect of each of the assessment years but the appeals failed. The assessee then took a further appeal in respect of each of the assessment years to the Income-tax Appellate Tribunal and the Tribunal, by its order dated 3-7-1952, held that the share standing in the name of Sitaram Rungta was held by him in his individual capacity. It, however, dismissed the appeals in respect of the shares held in the names of M. G. Rungta and B. N. Rungta.
On being required by a Bench of this Court under Section 66(2), Income-tax Act, to do so, the Income-tax. Appellate Tribunal has stated a case and has referred it on the following question of law:
"1. Whether there was any material before the Income-tax Appellate Tribunal to find that the capital standing in the names of the two partners, M. G. Rungta and B. N. Rungta, belonged to the Hindu undivided family.
2. Whether under the facts and circumstances of the case inclusion of the profits of M. G. Rungta and B.N. Rungta in the firm Messrs. Jugasalai Electric Supply Co. in the assessment of the petitioner was legal and valid?"
Both these questions are inter-connected and the real point for consideration is whether there was any material before the Appellate Tribunal on the basis of which it could be held that the capital said to have been contributed by M. G. Rungta and B.N. Rungta was really capital advanced by the assessee family.
3. Appearing for the assessee, Mr. Dutta has drawn jour attention to the abstracts of accounts appearing at pages 86 to 91 of the paper-book. The account book of the firm Harkarandass Mangilal of Calcutta, in which the assessee family is admittedly interested, shows that M.G. Rungta deposited a total amount of Rs. 20,000 on different dates and B.N. Rungta deposited a sum of Rs. 20,000 in one lump sum with this firm in the account of Jugasalai Electric Supply Co. The whole of this amount of Rs. 40,000 was transferred to the assessee family and the account book of" the assessee family shows that it was credited to the Electric Supply Co. The account book of the Electric Supply Co. shows that this Company received from the assessee family Rs. 64,847-7-3 partly as value of goods purchased and partly in cash. It further shows that the capital of this Company was made up as follows:
M.L. Rungta ... ... Rs. 25,000
M.G. Rungta ... ... 20,000
B.N. Rungta ... ... 20,000
S.R. Rungta ... ... 5,000
M.D. Agarwalla ... ... 2,100
Total ... Rs. 72,100
4. A perusal of the accounts mentioned above clearly shows that M.G. Rungta and B.N. Rungta deposited Rs. 20,000 each with the firm Harkarandass Mangilal and these amounts ultimately came to the Jugasalai Electric Supply Co. which treated them as sums contributed by these persons towards the capital.
5. In rejecting the assessee's case that M.G. Rungta and B.N. Rungta hold shares in the Electric Supply Co. in their individual capacity, the Income-tax Appellate Tribunal has taken two points. The first point has been put as follows:
"The accounts of the Hindu undivided family indicate that expenses of the firm to the extent of Rs. 72,100 were met by the family. In other words the sum of Rs. 72,100 mentioned above, was advanced by the family to the Electric Supply Co. The capital of Rs. 20,000 each contributed by M.G. Rungta and B.N. Rungta is a part of this sum of Rs. 72,100. The capital contributed in the names of these two members of the family, therefore, came from the funds of the family."
The second point is that M.G. Rungta and B.N. Rungta were unable to prove that the amounts of Rs. 20,000 each advanced by them came out of their personal funds and not out of the funds of the assesee family.
6. So far as the first point is concerned, there can be no doubt that M.G. Rungta and B.N. Rungta are members and coparceners of the assessee which is a Hindu undivided family. There is, however, no presumption that amounts paid by different coparceners of a Hindu undivided family came out of the funds of that family. Hence there is no legal basis for this point.
7. Coming now to the second point, it seems to me that the Appellate. Tribunal has misdirected itself on the question of onus of proof. In --'D. D. Kapoor v. Commr. of. Income-tax, B. & O.', (S) AIR 1955 Pat 102 (A), a Bench of this Court of which my learned brother and I were members, held that there was
"no presumption in Hindu Law that any business carried on by a member of a joint Hindu-family is itself a joint family business."
We further said as follows:
"The mere fact that income is entered in the family accounts cannot lead to the inference that the income is joint family income. In order to establish that the income of a Hindu coparcener from the partnership business is joint family income, the Department should produce material to show that the Hindu coparcener had utilised the property or resources of the Hindu undivided family in the partnership business or the Department should produce material to show that the Hindu coparcener was in fact representing the Hindu undivided family for the share of the partnership he is holding."
8. It is clear, therefore, that the legal position is that it was for the Department in this case to prove that the funds contributed by M.G. Rungta and B.N. Rungta came from the funds of the assessee family and it was not for those two persons or the assessee family to prove that the amounts contributed by them came from their personal funds. The fact that this is the legal position which follows also from another line of reasoning. It is a well-recognised principle that the ostensible must be held to be the real state of affairs unless the contrary is shown. It is on the basis of this principle that a Bench of this Court decided in -- 'Ramkinkar Banerji v. Commr. of Income-tax, B. & O.', AIR 1936 Pat 267 (B) that, unless the Department proved to the contrary, a property held by the assessee's wife could not be held to belong to the assessee. In this connection, I may also refer to another decision of this Court in -- 'S. N. Ganguly v. Commr. of Income-tax, B. & O.', AIR 1954 Pat 51 (C). It was held in that case that, where an amount stood in the name of the assessee's wife, the onus of proof was not on the assessee but was on the Income-tax Department to show by, at least, same materials that the amount did not belong to the assessee's wife but to the assessee himself.
9. It is clear from what I have said above that the Appellate Tribunal placed the onus wrongly upon the assessed to prove that the amounts advanced by M.G. Rungta and B.N. Rungta to the Electric Supply Co. came out of their personal funds. The onus should have been placed upon the Department to show that those amounts came from the funds of the assessee family. There is absolutely no material placed on the record by the Income-tax Department to discharge the onus which lay upon it. There is, therefore, no escape from the conclusion that there was no material on the basis of which the Appellate Tribunal could come to the conclusion that the capital contributed by M.G. Rungta and B.N. Rungta was really capital advanced by the assessee family.
10. The result is that both the questions referred to the High Court by the Appellate Tribunal must be answered in favour of the assessee and against the Income-tax Department. The assessee is entitled to the cost of this reference. There will be one hearing fee for all these cases which is assessed at Rs. 250/-.
Ramaswami, J.
11. I agree.
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