Calcutta H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the addition made by the ITO on account of the estimated income on diverted funds ?

Counsel Appeared

Sunil Mitra & A. C. Prasad, for the Revenue : A. Paul, for the Assessee

AJIT K. SENGUPTA, J.:

In this reference under s. 256(2) of the IT Act, 1961, for the asst. yrs. 1983-84 and 1984-85, the following question of law has been referred to this Court :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the addition made by the ITO on account of the estimated income on diverted funds ?”

2. Shortly stated, the facts are that in the periods relevant to the asst. yrs. 1983-84 and 1984-85, the assessee-HUF permitted its three coparceners to use an aggregate sum of Rs. 90,000 for earning income. The AO, after rejecting the assessee’s claim that no interest was received by the assessee-HUF on the above interest-free debts, estimated the sum of Rs. 13,500 as income on “diverted funds” on the basis of past records and added the same to the income of the assessee. The addition was confirmed on appeal by the CIT(A).

Being aggrieved, the assessee challenged the addition in appeal before the Tribunal. The Tribunal confirmed the addition observing as under : “We have considered the matter. The uncontroverted fact is that there was no total partition of the family ; nor was there a partial partition either as regards the three members of the family who took the so-called advance or as regards the so-called advances in question. In the circumstances, therefore, we must hold that the aggregate sum of Rs. 90,000 remained the property of the family. We are not impressed by Shri Damle’s argument that the said sum was advanced as a loan by the family to the three members. Had it been so, there would have been some written agreement to go by. There would have also been some stipulation as to interest. But none of these features are present here. It is, therefore, impossible to accept the theory of loan advanced on behalf of the assessee.

In this connection, we find that the said theory had also been put forward on behalf of the assessee in the wealth- tax proceedings relating to the asst. yrs. 1978-79 and 1979-80. And the Tribunal, by its order dt. 15th Sept., 1988, in Wealth-tax Applications Nos. 55 and 55/(Cal) of 1988, rejected the said theory.

In view of the foregoing, therefore, we reject the ground relating to this issue.” As would appear from the order of the Tribunal, there was no total partition of the family nor was there a partial partition either as regards the three members of the family. This is the basic primary fact on the basis whereof the Tribunal proceeded to hold that the aggregate sum of Rs. 90,000 remained the property of the family. The contention that the said sum was advanced as loan by the family to the three members has not been proved before the Tribunal. The Tribunal also found that there was no agreement in support of the contention that any advance was made by the family to the three members.

In our view, on the facts and circumstances of the case, the Tribunal came to a correct conclusion and as the findings of the Tribunal have not been challenged as being perverse, we cannot go into the question whether, in fact, there was any agreement between the family and the three members.

For the reasons aforesaid, the question in this reference is answered in the affirmative and in favour of the Revenue.

There will be no order as to costs.

Nure Alam Chowdhury, J.:

I Agree.

[Citation : 203 ITR 656]