Smt. Vasanti Sethi vs Assistant Commissioner Of Income ...
1992 Latest Caselaw 463 Del

ORDER

GORADIA, A. M. :

All these appeals are directed against the order dt. 5th Sept., 1991 passed by the CIT(A)-XII, New Delhi. They involve common controversy and, therefore, they are disposed of by this common order. The controversy is in connection with addition under S. 69 of the IT Act, 1961.

2. On 10th Dec., 1987, during the search operations under S. 132 of the Act, the Department found that deposits aggregating in all to Rs. 21.67 lakhs in the name of the assessed as also in the names of the assesseds minor children were found. On the day of search the assessed admitted ownership of the deposits in a statement recorded. In a statement recorded during the course of assessment proceedings the assessed denied having any knowledge as to the sources of the deposits. All the deposits were with National Confederation of Bank Employees Society Ltd. On 8th Jan., 1988, i.e., after a month of the statement at the time of search, she again admitted the ownership and also declared the amount as her income claiming immunity as provided in Explanation 5 of S. 271(1)(c) of the Act. We may clarify here that we are concerned with part of such deposits standing in assesseds own name for which details are separately given hereinafter. Thereafter after the lapse of approximately 16 months the assessed filed returns in accordance with what was submitted earlier. Notice under S. 148 was issued in July, 1989 in response to which the assessed submitted that returns were submitted on 20th April, 1989, wherein the amounts invested in deposits were declared as income and further that those returns should be taken as returns filed under S. 143. However, subsequently after about 7 months, on 26th Dec., 1989, the assessed submitted revised returns showing reduced income by excluding investments in fixed deposits with National Confederation of Bank Employees (NCBE) and interest accrued thereon. The reason for revising the returns was stated to be the claim of the assessed for the first time that the fixed deposits did not belong to the assessed. When the assessed was confronted with her earlier admission it was submitted that the earlier statement was given at the behest of assesseds father-in-law, Shri K. N. Sethi, who expired in September, 1989. She also expressed inability to give any clue to any transactions/actions which resulted in making of the deposits, except that she had signed the application forms for the impugned deposits. She further explained by letter dt. 1st Jan., 1990 that she was only a housewife and the deposits with NCBE were admitted on the advice that any asset in the name of the assessed if could not be explained satisfactorily could be treated as income of the assessed. The assessed, placing reliance on the decision in the case of K. S. Kannan Kunhi vs. CIT claimed that in the absence of any ostensible source of income, the value of deposits could not be added in the income of the assessed. The Assessing Officer rejected the claim of the assessed as, according to him, sequence of related facts indicated very strongly that the retracing of earlier stand by the assessed was only an afterthought. He further took into consideration the fact that the assessed had services of a chartered accountant right from the beginning and had stated everything about the deposits, etc. and, therefore, it could not be at the behest of her father-in-law that she admitted the deposits and further it took exactly two years to revise the statement, which was after the death of assesseds father-in-law. Moreover, the assessed was educated lady, a graduate and had claimed to have been tuitions and had earned income there from, had signed the application forms for fixed deposits and had also lodged claim before the Liquidator for return of money with interest. While referring to the decision cited on behalf of the assessed he further recorded a finding that the assessed admitted to have earned income from speculation, besides was operating bank accounts, raising loans and taking tuitions and, therefore, it could not be said that the assessed could not engage in income-earning activity. The Assessing Officer further observed that the assessed preferred to go back only with regard to the deposits with NCBE and interest on such deposits but stuck to her declaration regarding other investments, such as purchase of land at Deoli and deposits with M/s. Pure Drinks and other minor deposits in bank accounts. The Assessing Officer, therefore, held that the investment in the deposits belonged to the assessed and additions had to be made as income of the assessed under S. 69 of the Act. He accordingly made additions as under :

Year

Year

Value of deposit

Value of deposit

Interest accrued

Interest accrued

1983-84

Rs. 85,000

Rs. 4,940

1984-85

Rs. 4,23,500

Rs. 29,965

1985-86

Rs. 11,64,000

Rs. 1,25,098

1986-87

Rs. 80,000

Rs. 2,20,402

3. The assessed appealed. The grounds raised before the Commissioner (A) were on various aspects of the controversy, legality as also on merits. Briefly they were as under :

3.1 The action taken under S. 148 r/w S. 147 was irregular. The Commissioner (A) rejected this ground after observing that the assessed could not exactly specify the grievance. This ground is raised in the memo of appeal but no reference was made to this ground at the time of hearing and, therefore, this ground is rejected as not pressed.

4. The assessed also challenged the completion of the assessment on the basis of lack of jurisdiction and limitation as provided under S. 153 of the Act. The Commissioner (A) held that the assessments were completed within the time and regarding jurisdiction no fatal mistake was brought to his notice.

5. Before the Tribunal the assessed has raised a ground with regard to limitation but the same is treated as not pressed, as no submissions were made.

6. A ground was also raised against charge of interest under Ss. 139(8)/215 and 217 of the Act. The Commissioner (A) observed that the assessed had remedies under the Act and, therefore, no findings had to be given. Before us also these grounds are raised but it was not pointed out how the order passed by the Commissioner (A) was, in any way, erroneous and, therefore, these grounds are rejected.

7. With regard to the main ground with respect of the addition under S. 69, the Commissioner (A) confirmed the addition. He held that investment stood in the name of the assessed and this was sufficient to prove that the investment belonged to the assessed and she was the owner. Pursuant to her admission at the time of search, she also filed returns of income claiming therein the ownership of the deposits and, therefore, the same had to be accepted as such in view of S. 132(4A) of the Act. Referring to sub-s. (4) of S. 132, he observed that the statement and other material gathered during the course of search could be treated as evidence in any proceedings under the Act. He further highlighted the factual aspect that the revised returns were filed only after the assesseds father-in-law expired on 13th Sept., 1989.

7.1 It may further be stated over here that before the Assessing Officer as also before the Commissioner (A) the assessed had claimed that the income by way of interest on fixed deposits with NCBE, be taxed on receipt basis and not on accrual basis. But this claim of the assessed was not accepted by the tax authorities drawing guidance from decision of the Supreme Court in the case of State Bank of Travancore vs. CIT . Such contention, as was taken earlier, was not made before the Tribunal and, therefore, it is presumed that the position is accepted by the assessed.

8. At the time of hearing before the Tribunal the learned Chartered Accountant, Mr. R. Ganesan, fairly admitted that there was almost no explanation with regard to the source of the deposits because the ownership of the deposits was admitted earlier to the filing of the revised returns. However, highlighting a factual aspect that the assessed had no independent source of income, whether S. 69 could be invoked, it was posed because in S. 69 the words used are, ".... the assessed has made investments......" and these words are very significant. In the context of these words he highlighted the judicial approach required to be adopted, as was done in the following cases :

(i) in the case of K. S. Kannan Kunhi vs. CIT (supra);

(ii) in the case of CIT vs. Smt. P. K. Noorjahan ;

(iii) in the case of Navnit Lal C. Javeri vs. AAC especially the observations at page 210; and

(iv) in the case of K. P. Varghese vs. ITO .

where certain observations were made with regard to right to receive something. It was submitted that in the absence of any source of income and considering the status of the lady, as also the age of the assessed it could not be believed that such large amounts invested in various deposits could have come out of undisclosed income of the assessed. The learned Departmental Representative relied upon the appellate order.

9. On consideration of the material placed before us we are not inclined to take a view different from one taken by the Commissioner (A). The Commissioner (A) has given categorical finding on the basis of sub-s. (4) of S. 132 of the Act. The said sub-section reads as under :

"(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian IT Act, 1922 (11 of 1922) or under this Act."

10. Mr. Ganesan had nothing to comment on this finding recorded by the Commissioner (A). In our opinion, sub-s. (4) of S. 132 gets clearly attracted and, therefore, the initial admission regarding ownership of the deposits has to be treated as an evidence in the proceedings for assessment. Subsequent retracting from the earlier statement cannot be called a statement made by such person during such examination, but stand was revised long after the statements were recorded not only in 1987 but also in January, 1988 coupled with filing of returns of income originally. It would also be worthwhile to note that these returns were filed consequent to action under S. 148 of the Act. Considering this aspect together with the entirety of the circumstances and the material gathered during the course of the assessment, we uphold the appellate order.

11. We may now touch upon the decisions cited during the course of submissions. First such decision relates to the case of K. S. Kannan Kunhi (supra). In this case the assessed-HUF was carrying on business in Ceylon for quite a long time, finally settled down in his village in India in the year 1940. He started business in India in 1950 and in the assessment apart from the income from business and property an addition was made on account of income from undisclosed sources, which comprised of three items, namely, a credit entry of Rs. 46,000 plus on start of business in India; purchase of immovable property for Rs. 14,000 plus as also another property of Rs. 3,000. The assessed explained that the amount represented past remittances from Ceylon but this explanation was rejected by the Assessing Officer, by the first appellate authority as also in the second appeal. Before the High Court the assessed contended that it was not the law that once the explanation was rejected it automatically followed that the receipt was income. The High Court observed that in the case of assessed, who was known to be carrying on several activities of income earning character or who can reasonably be found to be involved in such activities, to draw the inference that the credits constituted income from undisclosed sources, in the absence of satisfactory explanation, but such an inference should not be readily made in the case of a person who had no known business or other sources of income, or who could not even be reasonably suspected as engaged in income earning activities, in which case there must be substantial reasons to reject the assesseds explanation so as to make an addition. Mr. Ganesan highlighted these observations of their Lordships. But on going through the facts before us we find that the assessed had admitted engagement in income earning activities. Besides, there was a categorical and specific admission by the assessed during several proceedings in the case under consideration. Therefore, the ratio laid down by the Hon able Supreme Court in the case of Govindarajulu Mudaliar vs. CIT was required to be followed. In this case it was held whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case.

12. The case of Smt. P. K. Noorjahan (supra) made interesting study. The assessed, a Muslim lady about 20 years of age, made investment of Rs. 34,000 plus in asst. yr. 1968-69 and Rs. 25,000 plus in asst. yr. 1969-70, in property situated in Ernakulam. The assessed herself had no business, nor she earned income under any head mentioned in S. 14, except a small property income. She was not any time an income-tax assessed. He husband was a piece goods merchant in Ernakulam. While explaining the source of investment in the property it was stated to be out of accumulated savings from the income of the property consisted of coconut plantation and rent of line building etc. On the basis of evidence gathered the Assessing Officer rejected the explanation except to the extent of Rs. 2,000. In first appeal the AAC concurred with the Assessing Officer. In second appeal also the Tribunal found the explanation about the nature and source unsatisfactory but it was of the opinion that the assessed, being a Muslim lady aged about 20 years, had no other source of income, that it was not possible for the assessed to have earned the amounts invested in the properties, that these amounts should necessarily be amounts given to her by somebody else and that by no stretch of imagination could the assessed be credited with having earned this income in the course of the assessment year, or even be in a position to earn it, for a decade or more. The Tribunal took the view that although the explanation of the assessed was liable to be rejected, S. 69 of the Act conferred only a discretion on the Assessing Officer to deal with the investment as income of the assessed and it did not make it mandatory on his part to deal with the investment as income of the assessed as soon as the latters explanation was rejected. On a reference the High Court held that the unsatisfactory ness of the explanation did not and need not automatically result in deeming the value of the investment to be the income of the assessed because that was still a matter within the discretion of the officer. The High Court further held that considering the language in respect of the powers conferred on the Tribunal under S. 254, it was open to the Tribunal to interfere with the judicial discretion exercised by the tax authorities and substitute the same by its own discretion even after rejecting the explanation of the assessed and in so acting differently it could not be said that the Tribunal acted arbitrarily or capriciously because it took into account complete absence of resources of the assessed, besides having regard to the age of the lady and the circumstances in which she was placed.

13. We would have happily followed this judgment so as to decide the issue in favor of the assessed because the judgment highlights the finer aspect of the judicial discretion which can be exercised by the Tribunal because of the wide powers granted to it under S. 254, but in the case before us the facts are not exactly similar. In the case under consideration there was no explanation as fairly stated by Mr. Ganesan, apart from the same being unsatisfactory. Besides, the lady has admitted time and again that she used to earn income from various sources like tuition and speculation. The age of the lady is also not that tender as was the case before the Kerala High Court. On the top of all she admitted various assets found at the time of the search though only for the part she took a different stand that too after a lapse of two years, after the death of her father-in-law. During the course of submissions Mr. Ganesan made an implicit point suggesting that the amounts were invested in cash and could belong to the late father-in-law of the assessed because Mr. Sethi was having legal practice as an Advocate and that is how the importance of the statement by the assessed that the ownership of the deposits was accepted at the behest of her late father-in-law and when the father-in-law expired different and correct, according to the assessed, stand was canvassed. Accordingly, revised returns were filed so as to exclude the amount of investments. If we are right in understanding about the submissions of Mr. Ganesan that the amount could belong to the late father-in-law of the assessed, in which event appropriate steps were necessary to revise the returns of assesseds late father-in-law or to disclose the amount of investment in that name, but this was not done. We, therefore, hold that even this case of Kerala High Court does not salvage the case of the assessed.

14. On going through the other cases pressed into service by Mr. Ganesan, we find that the controversy and facts were altogether different and, therefore, they need not be discussed. Probably these cases were activated just to highlight the judicial approach required to be adopted and this we have appropriately discussed in earlier paragraphs. We, therefore, uphold the appellate order on this point.

15. In asst. yrs. 1985-86 and 1986-87 grounds are also raised against additions made on account of gifts received. In asst. yr. 1985-86 the amount of gifts added is Rs. 63,500 and in asst. yr. 1986-87 the amount so added is Rs. 5,000. It was submitted by Mr. Ganesan that the decision taken in connection with the ground concerning addition on account of deposits in NCBE be applied to this ground also and, therefore, we uphold the appellate order.

16. In the result, all the appeals are dismissed.