JUDGMENT B.P. Jeevan Reddy, C.J.
1. The Income-tax Appellate Tribunal, Allahabad, has stated the following question under Section 256(1) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in holding that the entire share from Messrs. Shree Sidh Co. (Agra) was includible as its income in the assessments of the assessee for the assessment years 1978-79, 1979-80 and 1980-81 ?"
The assessee is a Hindu undivided family comprising Shri Om Prakash Tandon, his wife, Smt. Pushpa Tandon, and two minor sons, Sanjeet Kumar and Vineet Kumar, besides two unmarried daughters, Reena and Gunjan. Om Prakash Tandon is the karta. As the karta of this Hindu undivided family, he was a partner in two firms, Messrs. Shree Sidh Co. (Agra) and Messrs. Sanjeet Kumar Vineet Kumar. The assessee-Hindu undivided family was maintaining its own books of account. We are concerned herein with assessment year 1978-79, the previous year whereof began on January 24, 1977, and ended on February 11, 1978.
2. On January 24, 1977, the assessee's capital investment in the firm, Shree Sidh Co., was Rs. 1,23,734. During the assessment proceedings for the assessment year 1978-79, the assessee-Hindu undivided family put forward a plea of partial partition. According to it, a sum of Rs. 50,000 from out of the capital contribution of Rs. 1,23,734 was divided amongst some of the members of the family in the following manner :
Rs.
(i) 12,500 Master Sanjeet Kumar
(ii) 12,500 Master Vineet Kumar
(iii) 25,000 Om Praakash Tandon and his wife, Smt. Pushpa Tandon (smaller Hindu undivided family).
It is this plea of partial partition which has created the present controversy.
3. In the statement of the case, the following facts are set out:
"(i) In the books maintained by the assessee-Hindu undivided family, there is an account styled 'Om Prakash Tandon-bigger Hindu undivided family". This account shows a sum of Rs. 1,23,734.08 as invested in the firm of Messrs. Shree Sidh Co. (Agra) as on January 24, 1977. It is in this account that credits have been given for the above division to the respective parties.
(ii) No entries were passed even in the books of the assessee-Hindu undivided family in the account of Messrs, Shree Sidh Co. (Agra).
(iii) The fact of partition was not communicated to the firm of Messrs. Shree Sidh Co. (Agra) or to any of its other partners excluding Shri Om Prakash Tandon himself. Obviously, therefore, no entries were passed in the books of the above firm and the capital of Rs. 1,23,734 to the credit of Shri Om Prakash Tandon continued as such.
(iv) On July 13, 1977, the assessee executed a memo of partial partition. Besides recording the distribution of Rs. 50,000 as stated above, the memo stated that, out of the profits received from the firm, Shree Sidh Co., a sum of Rs. 8,000 will be paid to Kum. Reena and another sum of Rs. 8,000 to Kum. Gunjan and the remaining profits will be distributed in the following manner ;
(i ) Master Sanjeet Kumar --1/4th share ;
(ii) Master Vineet Kumar --1/4th share ;
(iii) Om Prakash Tandon ;
and Smt. Pushpa (smaller Hindu undivided family), the remaining half. share.
(v) On February 11, 1978, entries were made in the assessee's books of account with respect to the profit received from the said firm. Rupees 8,000 was paid to each of the two unmarried daughters and the remaining amount of profit was divided amongst the three parties as stated above.
(vi) On February 11, 1978, a balance-sheet was drawn up by the assessee. In this balance-sheet, the entire amount due from Shree Sidh Co., amounting to Rs. 1,71,782, was shown on the assets side, while, on the liabilities side, Sanjeet Kumar and Vineet Kumar were shown as creditors. The books of the aforesaid firm also showed a credit of Rs. 1,71,782 as due to the assessee-HUF.
It is on the above facts that the question at issue fell for decision before the authorities under the Act. The Income-tax Officer rejected the claim of partial partition. He pointed out that the fact of partition was not reflected in the books of Messrs. Shree Sidh Co. (Agra), that the distribution of profits was at variance with the memo of partition and that, in this case, the Explanation to Section 171 of the Act was not satisfied. He also observed that provision for maintenance and marriage of unmarried daughters could not be made in a partial partition and that such a provision could be made only when there was a complete partition. The assessee appealed. The Appellate Assistant Commissioner upheld the assessee's plea and accepted the case of partial partition. He opined that if there is sufficient evidence of partition in the books of the assessee-Hindu undivided family itself, the non-mention of such partition in the books of the firm cannot be a ground for rejecting the plea. It was a case of internal partition with which the firm had no concern. The Explanation to Section 171 is satisfied in this case inasmuch as the amount has been divided in the manner it is capable of division. The Income-tax Officer was also not right in holding that provision for maintenance and marriage of minor daughters is not permissible in a partial partition. It is for the members of the Hindu undivided family to decide when to make such a provision. The Revenue appealed to the Tribunal. The Tribunal referred to the facts aforesaid and reversed the order of the Appellate Assistant Commissioner. The Tribunal found that the plea of partial partition cannot be accepted. The Tribunal referred to the circumstances that, in the books of the firm, there was no reference to such partition, not even in the balance-sheet as on the last day of the relevant accounting year. The Tribunal also referred to the circumstance that, in the balance-sheet of the assessee as on February 11, 1978 (the last day of the relevant previous year), the Hindu undivided family was shown as owner of the entire capital invested in the firm and the Hindu undivided family was shown as a debtor to the various members of the family in different amounts. The Tribunal inferred from the above facts that it is a case where the Hindu undivided family has voluntarily made gifts of certain amounts to its members without affecting its capital in the firm in any manner. The Tribunal referred to the Explanation to Section 171 and held that inasmuch as there were no entries in the books of the firm and also because there were no proper entries even in the books of the assesses, the plea of partial partition cannot be accepted. It is thereupon that the present reference was obtained.
4. Sri Sudhir Chandra, learned counsel for the assessee, submitted that the finding of the Tribunal is vitiated on account of considering irrelevant circumstances. He submitted that partial partition was a matter between the members of the assessee-Hindu undivided family. It had nothing to do with the firm, Shree Sidh Co. So far as the firm was concerned, the Hindu undivided family represented by its karta continued to be a partner of the firm. There was no division of the Hindu undivided family. It is only a case of division of an asset among some of the members of the Hindu undivided family. In such a case, there was no occasion, much less a necessity, to make any entries in the books of the firm recording or reflecting the partial partition. The Tribunal could not have disbelieved the plea of partial partition on the ground of absence of entries to that effect in the books of the firm. The partial partition was duly recorded in the books of the assessee Hindu undivided family. It was also evidenced by a memo of partial partition. The Tribunal's finding is, therefore, unsustainable, whereas the order of the Appellate Assistant Commissioner is perfectly in accordance with law and is based upon a proper appreciation of the relevant facts.
5. On the other hand, learned standing counsel for the Revenue, Sri B. Dayal supported the finding of the Tribunal. He disputed the contention of the assessee's counsel that any of the facts relied upon by the Tribunal for rejecting the plea of partial partition was inadmissible or irrelevant.
6. On consideration of the entire material, we are of the opinion that the finding of the Tribunal cannot be said to be vitiated by considering any irrelevant or inadmissible fact or material. Learned counsel for the assessee may be right in his submission that the partial partition among the members of the assessee-Hindu undivided family need not have been recorded or reflected in the account books of the firm, but that is only one of several reasons inducing the Tribunal to arrive at the finding of fact it did. The Tribunal has found as a fact that, in the account books of the assessee-Hindu undivided family, there was a separate account for Shree Sidh Co., in which this partial partition was not referred to or recorded. It is also held by the Tribunal that the actual distribution of profits was at variance with the alleged partial partition which is found recorded in the memo of partition dated July 13, 1977. Whereas, according to the said memo, only a sum of Rs. 50,000 out of the total of Rs. 1,23,734.08 was divided and distributed among two minor sons of Om Prakash Tandon and himself and his wife, the entire amount of profits attributable to the entire capital contribution was divided in the same proportion among them. It, therefore, cannot be said, in the circumstances, that the finding recorded by the Tribunal is either perverse or is based on no evidence. It cannot also be said that any of the several reasons for which the Tribunal has recorded its finding is irrelevant or inadmissible. The evidentiary value of the several reasons may vary, but that is not the same thing as taking into consideration any inadmissible or irrelevant circumstance or fact. Facts must be distinguished from reasons. Reasoning may be faulty, but that is not the same thing as consideration of irrelevant or inadmissible facts or circumstances which vitiates the finding, as contemplated in Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736 (SC).
7. Sri Sudhir Chandra contended that the Tribunal has stated a wrong fact, namely, that no entries were passed even in the books of the assessee-Hindu undivided family in the account of Shree Sidh Co. (Agra). He submitted that there is no such account in the account books of the assessee-Hindu undivided family. We cannot accept this statement. This fact is repeatedly stated in the statement of the case and has also been referred to in the Tribunal's order. It may be remembered that the assessee's business is money-lending. If so, there is nothing unusual or strange in the assessee maintaining a separate account for the said firm in its account books. For the above reasons, we are unable to agree with learned counsel.
8. The question referred is, accordingly, answered in the affirmative, that is, in favour of the Revenue and against the assessee.
9. No costs.