JUDGMENT
1. The Tribunal, Allahabad, has referred the following three questions under Section 256(2) of the IT Act, 1961 (hereinafter referred to as 'the Act1), for opinion to this Court :
(1) Whether, on the facts and circumstances of the case, pronotes of the value of Rs. 18,000 executed in favour of Ku. Vandana Kedia recovered from the room of Smt. Prakashwati Devi Kedia constituted investments made by the assessee-HUF?
(2) Whether, on the facts and circumstances of the case, investments of Rs. 20,000 represented by the pronotes executed in favour of Smt. Janki Devi and Rs. 27,500 in the pronotes executed in favour of Sri Satya Narain Agarwal were the investments of the assessee-HUF ?
(3) Whether, on the facts and circumstances of the case, pronotes recovered from the custody of Smt. Prakashwati Devi Kedia could be considered for assessment in the case of assessee-HUF ?
2. Briefly stated, the facts giving rise to the present reference are as under :
The present reference relates to the asst. yr. 1973-74. The applicant is HUF. A search was conducted in the premises of the applicant-HUF on llth May, 1973. A larger number of pronotes amounting to Rs. 2,25,500 were recovered from the premises occupied by the members of the applicant-HUF, namely, Smt. Prakashwati Devi Kedia, the mother of the Karta of the applicant-HUF. In the present case, we are concerned with three pronotes of the value of Rs. 18,000 executed in the name of Vandana Kedia, Rs. 20,000 executed in favour of Smt. Janki Devi and Rs. 27,500 executed in favour of Sri Satya Narain Agarwal, which were recovered from the custody of Smt. Prakashwati Kedia. The ITO as well as the appellate authority have held these pronotes as belonging to the applicant-HUF.
3. Heard Sri Vikram Gulati, learned Counsel for the applicant and, Sri A.N. Mahajan, learned standing counsel for the Revenue.
4. The applicant submitted that these pronotes were recovered from the room of Smt. Prakashwati Devi and, therefore, could have been taxed at her hands and not at the hands of HUF as they were not recovered from the premises of Karta HUF. He further submitted that in respect of pronotes of Rs. 18,000 it has been stated by Sri Vijay Kumar Kedia that his daughter Ku. Vandana Kedia had received Rs. 15,000 towards gift from her maternal grandmother, on which gift-tax has already been paid and as such, said amount could not have been included in the income of the applicant-HUF. In respect of other two pronotes, he submitted that disclosure petition admitting the tax liability by the person in whose favour the pronotes in question existed has already been filed. In this view of the matter, he submitted that the value of the two pronotes could not have been added to the income of the applicant.
5. Having heard learned Counsel for the parties, we find that Smt. Prakashwati Devi who is a member of HUF was living in the premises in question. There is no demarcation as such. She was the head of the family even though under Hindu law she cannot be treated as Karta of HUF or coparcener. It is but natural that important documents and cash are kept with the head of the family and, therefore, the plea that as these documents were recovered from the room of Smt. Prakashwati Devi, could not be considered in the case of applicant-HUF, as it has not been recovered from the room of Karta has rightly been disbelieved. So far as the pronotes in the name of Ku. Vandana Kedia is concerned, it may be stated that the authorities below including the Tribunal have recorded a categorical finding of fact that the theory of alleged gift of Rs. 15,000 is an afterthought and have been set up to cover up the said pronote. The return of gift-tax was filed after search had been conducted. Further, Ku. Vandana Kedia has shown ignorance about the said gift. In this view of the matter, the Tribunal has rightly upheld the inclusion of the value of Rs. 18,000 in respect of pronote executed in favour of Ku. Vandana Kedia. So far as other pronotes are concerned, it may be mentioned here that they were found in the room of Prakashwati Devi and further no advantage can be taken from the fact that these two persons namely, Smt. Janki Devi and Sri Satya Narain Agarwal had owned up the pronotes and have disclosed the same in the disclosure petition. It is common practice that pronotes are transferable or are offered by way of security for taking up of the loan and if pronotes which have been executed in the name of Satya Narain Agarwal and Janki Devi, have been found in possession of Smt. Prakashwati, the natural inference would be that the amount covered by the said pronotes relates to the investment of the HUF as there is no plausible explanation under what circumstances it had come in their possession. It may be mentioned that these two persons are neither family members nor business associate of the applicant and, therefore, finding of these two pronotes in the possession of Prakashwati Devi does give an impression that there were some transaction of money-lending between them.
6. In this view of the matter, we are of the considered opinion that the Tribunal was perfectly justified in upholding the addition of the value of pronotes at the hands of the applicant,
7. In view of foregoing discussion, we answer the aforesaid questions referred to us in affirmative, i.e., in favour of the Revenue and against the assessee. There shall be however, no order as to costs.