JUDGMENT

MULLA, J. - By an order dated February 16, 1934, passed by a bench of this Court the Commissioner of Income Tax was directed under the provision of section 66 (3) of the Indian Income Tax Act to state a case on certain questions, the Commissioner having refused to state the same on the application of the assessee u/s 66 (1). The questions formulated by this Court are :-

(1) Whether the payments made by M. K. Khanna from November 16, 1923, to September 9, 1927, were rightly taken into account in making the assessment for the year in question 1931-32 ?

(2) Whether in law the partition of the family was effected from the date of the decree or award, or from the year 1921 as held by the Assistant Commissioner of Income Tax ?

(3) Whether Rs. 44,611-9-9 realised from M. K. Khanna in Sambat 1980-81 is liable to Income Tax as the income or profit of the assessee, or is this sum exempt from Income Tax u/s 14 of the Income tax Act ?

(4) Whether on the facts found the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars of his income and is, therefore, liable to penalty u/s 28 of the Income Tax Act ?

In order to answer the questions satisfactorily it will be necessary to state a few facts. The Reference has arisen out of the assessment made in the year 1931-32. u/s 3 of the Act the assessment shall be in respect of all income, profits and gains of the previous year. The previous year in the case of the present assessee, according to the system of accounts maintained by him, would be the year beginning from Kuar Sambat 1986 to Kuar Sambat 1987. The assessee is a Hindu undivided family of Azamgarh which goes by the name of Messrs. Ratan Chand Lallu Mal of Azamgarh and Rai Bahadur Mukand Lal is the head of the family. As a matter of fact this family came into existence as a result of the disruption of a bigger Hindu undivided family known as Messrs. Sital Prasad Kharag Prasad of Calcutta and the head of this bigger family was the late Raja Sir Moti Chand of Benares, and one of the questions that we shall have to decide is as to when there was a partition of or separation in the bigger Hindu undivided family. The assessee began to be taxed from the year 1925-26 on the income of the previous year which ran from Kuar 1980 to Kuar 1981. The first and the most important question is whether the payments made by M. K. Khanna from November 16, 1923, to September 9, 1927, were rightly taken into account in making the assessment for the year in question 1931-32. It is clear that the assessment year being 1931-32 the income of the previous year 1930-31 ought to be ordinarily taken into consideration and the payments made or income received from November 1923 to September 1927 would be beyond the scope of assessment, but it is the case for the department that under the peculiar circumstances of this case the above income made in those years can also be taken into consideration.

It appears that on March 31, 1918, a loan of Rs. 2,00,000 was advanced by the late Sir Moti Chand to Mr. Maharaj Kishore Khanna. The amount due under this loan fell to the share of Ratan Chand Lallu Mal after partition in the bigger family to Sital Prasad Kharag Prasad. Payments were made by Mr. Khanna from time to Rai Bahadur Mukand Lal.

The first payment for the purpose of this case was made in November 1923 and the sum so paid was Rs. 10,000. In the assessment year for 1925-26 when this payment along with certain other payments made in the previous year 1923-24 ought to have been taken into consideration, the assessee did not show them in his return nor did the department assess any tax on those payments. It is, however, quite clear that as much as Rs. 44,611-9-9 was received by the assessee. The appellate order of the Assistant Commissioner dated March 28, 1933 shows that in the books of the assessee the entries are :-