ZAKIR HUSSAIN vs. CIT, UDAIPUR and ANR

ITA/84/2002HC RajasthanRJHC01027045200207 November 2005Author: RAJESH BALIA,RAJENDRA PRASAD VYAS27 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was not justified in declining permission to raise additional grounds merely on the ground of limitation, especially when the grounds raised were pure questions of law based on a Supreme Court decision. The Court allowed the additional grounds concerning interest under Sections 234A and 234B. Regarding the substantive assessment of Smt. Huma's income in the hands of Zakir Hussain, the Court found that the AO rejected Smt. Huma's explanation for her investments and then automatically linked the source to her husband's undisclosed income without any specific material on record. The Court stated that provisions like Section 69 allow deeming the value of unexplained investments as income of the assessee in whose possession or name they are found. However, there is no provision allowing the AO to automatically assume that an investment found in the wife's name, with an unsatisfactory explanation of its source, is income from the husband's undisclosed sources. The Court held that for such clubbing, specific material linking the investment to the husband was required, which was absent. Therefore, the substantive assessment in the hands of Zakir Hussain by clubbing his wife's income could not be sustained. The Court decided question No. 3 in the negative, in favour of the assessee and against the revenue.

What were the facts?

The assessee, Zakir Hussain, filed two appeals (No. 84/2002 for AY 1993-94 and No. 82/2002 for AY 1995-96) against the common order of the Income Tax Appellate Tribunal (ITAT). The appeals arose from assessments where income declared by his wife, Smt. Huma Hussain, was clubbed substantively in the hands of Zakir Hussain. Smt. Huma had declared gifts and interest income, but her explanations for the source of investments were rejected by the Assessing Officer (AO). The AO made a protective assessment in her hands and then substantively assessed the income in the hands of Zakir Hussain, deeming it as his undisclosed income. The appeals also challenged the ITAT's refusal to allow additional grounds related to interest under Sections 234A and 234B, citing a Supreme Court decision.

What were the issues?

1. Whether the Tribunal was justified in declining permission to raise additional grounds challenging the levy of interest under Sections 234A and 234B, solely on the basis that these grounds were not raised within the period of limitation for filing the appeal? - Assessee's contention: Permission should have been granted as the grounds raised were purely questions of law, based on a Supreme Court decision (CIT Vs. Ranchi Club, 247 ITR 209), and the Tribunal ought to have allowed them. - Revenue's contention: Not recorded. 2. If permission to raise additional grounds is granted, whether interest under Sections 234A and 234B could be levied in the present case? - Assessee's contention: Interest under Sections 234A and 234B could not be levied without specific directions, as per the Supreme Court decision in CIT Vs. Ranchi Club. - Revenue's contention: Not recorded. 3. Whether the Tribunal was right in substantively assessing income declared by Smt. Huma Hussain in the hands of the assessee, Zakir Hussain, by clubbing the amount of gifts and interest received by her, when her explanation regarding the source of investment was rejected? - Assessee's contention: The AO rejected Smt. Huma's explanation regarding the source of investment but made a protective assessment in her hands. The substantive assessment in the hands of the husband was unjustified as no material linked her investments to his undisclosed income. The initial burden of proving the source was discharged by her, and the evidence went unrebutted. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 234A,Section 234B,Section 148,Section 132(4),Section 69,Section 68

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR :: O R D E R :: (1)- D.B. INCOME TAX APPEAL NO. 84/2002 (For Assessment Year 1993-94) (Zakir Hussain Vs. CIT, Udaipur and Anr.) (2)- D.B. INCOME TAX APPEAL NO. 82/2002 (For Assessment Year 1995-96) (Zakir Hussain Vs. CIT, Udaipur and Anr.)

DATE OF ORDER :: 07.11.2005 PRESENT HON'BLE MR RAJESH BALIA,J. HON'BLE MR R.P.VYAS,J. Mr Arun Bhansali, for the appellant/s Mr K.K. Bissa, for the respondent/s. The Income Tax Appeal No.84/2002 filed by Zakir Hussain assessee relate to assessment year 1993-94 and arise out of the common order passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur in appeals filed by the present appellant Zakir Hussain as well as appeal filed in respect of same assessment year by Smt. Huma Hussain wife of the present appellant Zakir Hussain. The questions framed at the time of admitting

the appeal No.84/2002 relating to assessment year 1992-93 were as under :-

2 “(i)- Whether in the facts and circumstances the Tribunal was right in holding that permission to raise additional grounds in appeal can be granted only if such additional grounds are also taken within the period

The order continues below.

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