Commissioner of Income-tax-II,Chennai v. B.Jayalakshmi

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 13.06.2007Coram :THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJATax Case (Appeal) Nos.622 to 624 of 2007Commissioner of Income-tax-II,Chennai. ..Appellant in all the T.C.(A)s. Vs.B.Jayalakshmi ..Respondent in all the T.C.(A)s.Appeals under Section 260A of the Income-tax Act, 1961against the order of the Income-tax Appellate Tribunal, "A"Bench, Chennai in I.T.A. Nos.1508, 1509 & 1510/Mds/2003 dated12.07.2004 for the assessment years 1991-92, 199293 and 1993-94,respectively. For Appellant :Mr.J.Narayanaswamy,Standing Counsel forIncome-tax DepartmentJUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.)These appeals are filed by the Revenue against the order ofthe Income-tax Appellate Tribunal, "A" Bench, Chennai in I.T.A.Nos.1508, 1509 & 1510/Mds/2003 dated 12.07.2004 raising thefollowing common substantial questions of law:-"i) Whether in the facts and circumstances ofthe case, the Tribunal was right in holdingthat the income of the minor daughters cannotbe clubbed with that of their mother, theassessee?2. Whether in the facts and circumstances ofthe case, the Tribunal was right in holdingthat the failure of the assessing officer to https://hcservices.ecourts.gov.in/hcservices/ enquire further into the veracity of theaffidavits produced by the assessee wouldlead to the presumption that they aregenuine?2.The facts leading to the above substantial questions oflaw are as under:The assessee is an individual. The assessee is the wife ofa Customs Officer and is engaged in money lending business andalso derives interest income from banks. The relevantassessment years are 1991-92, 1992-93 and 1993-94 and thecorresponding accounting years ended on 31.03.1991, 31.03.1992and 31.03.1993, respectively. The assessee filed Return showingincome from money lending as well as interest from bank deposits.The assessments were processed under Section 143(3) of theIncome-tax Act ("Act" in short). There was a raid on 19.2.1997on the assessee's residential premises and her lockers at IndianBank and Canara Bank were searched and cash amounts were seized.Hence, notice was issued under Section 148 of the Act for theabove three assessment years, i.e., 1991-92, 1992-93 and 1993-94and Sworn Statement was also recorded. The Assessing Officercompleted the assessment and made additions being the income ofthe assessee's minor daughters clubbed in her hands under Section64(1)(iv) of the Act. Aggrieved by the orders, the assesseefiled appeals to the Commissioner of Income-tax (Appeals). TheC.I.T.(A) allowed the appeals. Aggrieved, the Revenue filedappeals to the Income-tax Appellate Tribunal ("Tribunal" inshort). The Tribunal dismissed the Revenue's appeals andconfirmed the orders of the C.I.T.(A). Hence the present taxcases by the Revenue.3.Learned Standing Counsel appearing for the Revenuesubmitted that the minor children had no independent source ofincome to form the corpus for the money lending activities andbank deposits. Hence, the Assessing Officer is justified inclubbing the income of the assessee's minor daughters to theincome of the assessee. 4.Heard the counsel. The Tribunal considered the scopeof Section 64(1)(iv) of the Act and confirmed the orders of theC.I.T.(A), who had considered the matter in detail. Thereasoning of the Tribunal in paragraph 3 of the order reads asunder:-"3. The first issue in assessment year 1991-92 relatesto the addition of Rs.89,436/- representing income ofminor daughters clubbed in the hands of the assesseeu/s.64(1)(iv) of the Act. This addition was deleted bythe CIT(A). The learned CIT(A) while dealing with thisissue had noted that certain returns of income in thenames of the minor daughters were filed for theassessment year 1991-92 on 16-3-95. The Assessing https://hcservices.ecourts.gov.in/hcservices/ Officer did not take any action on those returns filedbeyond the time limit stipulated u/s.139 of the Act.In the returns filed it is seen that the minordaughters derived income from bank deposits and moneylent as loans/advances to several persons. There wasno evidence in the returns that the income had arisenfrom assets transferred to them by the assessee eitherfor inadequate or no consideration so as to attract theprovisions of sec.64(1)(iv). The learned CIT(A) onthis issue had observed as under:-"7. In the case of CIT v. M.S.S. Rajan (252ITR 126), the Hon'ble Madras High Court heldthat the scope of section 64 was limited toincomes which were directly or indirectlyreceived from transfer of assets or the onessubstituted for the transferred assets anddid not include income received from savingseffected from the income realised from thetransferred assets. The High Court,therefore, held that this special provisionu/s.64 which was meant to prevent theassessees from avoiding the payment of tax onincome under their control by divestingthemselves of the title to the asset infavour of their spouse or minor children forno consideration or inadequate consideration,could not be stretched to include the secondgeneration income, namely, income from theinvested income from the asset that had beentransferred or substituted. It is, however,seen in the case of the appellant that theAssessing Officer has not shown orestablished that any asset had beentransferred by the appellant to her minorchildren or substituted by bank deposits andloans/advances which were the source ofincome for them, if any such transfer hadtaken place. The Assessing Officer,therefore, does not have any basis to clubthe income totalling to Rs.89,436/- shown inthe name of minor daughters in the hands ofthe appellant. The same is, therefore,deleted.""The categorical finding given by both the authorities is that theAssessing Officer had not brought any material on record even tosuggest that there was any asset transferred to them by theassessee and the additions are made on mere surmises andconjectures. Concurrent finding has been given by theauthorities that no evidence on record that the income had arisenfrom assets transferred to the children of the assessee, by theassessee, either for inadequate or no consideration so as to https://hcservices.ecourts.gov.in/hcservices/ attract the provisions of sec.64(1)(iv) of the Act. Recently,the Supreme Court in the case of Commissioner of Income-tax Vs.P.Mohanakala (291 ITR 278), held that whenever there is aconcurrent finding by the authorities below, no interferenceshould be called for by the High Court. Under thesecircumstances, we do not find any error or legal infirmity in theorder of the Tribunal so as to warrant interference. 5.In view of the foregoing reasons, no substantialquestions of law arise for consideration of this Court andaccordingly, the tax cases are dismissed. Consequently, M.P.No.1of 2007 in T.C.(A) No.623 of 2007 and M.P.No.1 of 2007 in T.C.(A)No.624 of 2007 are closed. No costs. kmSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Assistant Registrar, Income-tax Appellate Tribunal, 'A' Bench, Madras.2. The Secretary, Central Board of Direct Taxes, New Delhi.3. The Commissioner of Income-tax (Appeals) IV, 121, Mahatma Gandhi Road, Chennai-600 034.4. The Assistant Commissioner of Income-tax, Salary Circle II, Chennai-34.5. The Assistant Registrar,Income Tax Appellate TribunalRajaji Bhavan,Basant Nagar, Chennai.90. (5 Copies)+ 1 cc to Mr. Pushya Sitaraman, SSC (IT) SR No. 34588RA(CO)SR/22.6.2007 T.C.(A) Nos.622 to 624 of 2007