Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Hindu undivided family - Assessable as - Assessment year 1949-50 and 1950-51 - Claim of assessee - Hindu Undivided family was that cost of property purchased by its member P and used by family for its business purposes was met from individual funds of 'P' - Revenue authorities as well as Tribunal rejected assessee's claim - On instant reference, it was seen that 'P' had no independent source of income and however he deliberately gave false explanation that source of money was sale of ornaments belonging to his two wives - Whether, in aforesaid circumstances, Tribunal was justified in holding that amount in question represented secreted profits of assessee - HUF and was liable to be taxed in its hands - Held, yes FACTS The assessee was a Hindu undivided family. J was the karta of the said Hindu undivided family. He had two sons, L and P. the business of the Hindu undivided family was the manufacture of gold and silver ornaments. It was found by the taxing authorities that a sum of Rs. 18,000 was advanced on usufructuary mortgage of a house. On the 29-6-1949, the same property was purchased by 'P' for a sum of Rs. 29,500. A part of the consideration was the satisfaction of the mortgage debt and the balance of the amount, namely Rs. 11,500, was paid in cash. Both the documents, namely, the usufructuary mortgage bond and the sale deed were in the name of P. On the 29-6-1949, there was an agreement between all the members of the Hindu joint family to the effect that the house property was really purchased by P and the Hindu joint family had nothing to do with it. On the 1-7-1949, J executed a kerayanama in favour of P, agreeing to pay a rent of Rs. 24 per month for the use of the house for the purpose of the family business. On the 29-11-1950, there was a deed of family arrangement between J and his two sons. It was recited in this document that the house property was purchased by P from his individual funds and that J and L had nothing to do with it. Certain other properties were divided between the father and his two sons. In a proceeding taken under section 34…

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