1. This appeal by the assessee relates to the assessment year 1983-84, for which the accounting year ended on 31-12-1983 (31-12-1957) (M.E)for business and 31-3-1983 for other sources.
2. The assessee is a partner of M/s. P.P. Chandrasekhara Pai & Sons.
For the assessment year 1983-84, the assessee filed a return of income on 31-3-1984 declaring the total income at Rs. 63,090 which included income from house property, share income from M/s. P.P. Chandrasekhara Pai & Sons, interest on deposits in banks and also an income of Rs. 30,000 declared under other sources representing the undisclosed marriage expenses in connection with the marriage of the assessee's daughter. There was a search and seizure by the Central Excise authorities on 23rd and 24th December, 1982, during the course of which primary gold, coins and gold ornaments weighing in all 3,582 grams were seized along with silver ingots weighing 24.83 Kgs. There was also a simultaneous search and seizure by the Income-tax Department. On the basis of the statement of the assessee's son Ratnakara Pai, who is also staying with the assessee, the silver ingots were treated as having been declared by Ratnakara Pai, while the gold and gold ornaments etc.
were treated as owned by the assessee. During the course of search proceedings, the Central Excise authorities had also come across other gold jewellery which was claimed to be belonging to the assessee and his family. Such jewellery weighing 1,039 grams found at home and some other jewellery found in the locker which belonged to his daughter-in-law were not seized. The Income-tax Officer completed the assessment on a total income of Rs. 6,65,500, which included a sum of Rs. 5,80,000 being the value of alleged unexplained bullion and jewellery and Rs. 20,000 as alleged unexplained expenditure. The assessee was aggrieved and appealed to the CIT (Appeals), but did not succeed. Hence this second appeal by the assessee.
3. As regards the addition of Rs. 5,80,000 made in respect of the gold and gold jewellery possessed by the assessee, the assessee contended that he had filed an application for settlement before the then Commissioner of Income-ax on 5-9-1983. He had discussion with the Commissioner of Income-tax on 16-1-1984 for the settlement of his income-tax and wealth-tax affairs. The matter was explained in great detail to the Commissioner of Income-tax during his personal hearing.
After hearing the assessee, the Commissioner of Income-tax accepted the position that a substantial portion of the gold ornaments representing jewellery etc., had been acquired by the assessee over a period of years. The value of 345 grams of gold was agreed to be added as income for the assessment year 1981-82. The ornaments in respect of which the assessee was asked to explain in this case was agreed to be included in the net wealth for the previous year and a net wealth return for the previous year including the value of the above jewellery was filed on 24-2-1984. The Commissioner of Income-tax also required the assessee to file wealth-tax returns for the assessment years 1975-76 to 1982-83.
The assessee had already offered to submit the returns for the assessment years 1970-71 to 1982-83 and filed returns of wealth on 12-3-1984. Immediately after the receipt of the returns, the Wealth-tax Officer issued notices under Section 17 of the Wealth-tax Act in respect of the above years and the assessee filed a letter on 15-3-1984 agreeing to treat the returns filed earlier as having been filed in pursuance of the notices under Section 17. On the 28th June, 1984 the Wealth-tax Officer completed the assessments for the assessment years 1975-76 to 1982-83. Originally the assessee had submitted before the Commissioner of Income-tax that the jewellery should be assessed as the wealth of the Hindu undivided family, but the Commissioner of Income-tax was not inclined to accept the same, especially in view of the abolition of the Kerala Joint Hindu Family System (Abolition) Act, 1976. The matter was again discussed with the Commissioner of Income-tax on 6th March, 1984, when he directed that the assessments should be made only in the individual capacity and made a specific direction to this effect. The Wealth-tax Officer, thereupon, completed the assessments for the assessment years 1974-75 to 1982-83 on 28-6-1984 allegedly on the direction of the Commissioner of Income-tax.
But the Income-tax Officer in the income-tax proceedings was of the view that there was nothing on record to show that there was such direction given by the Commissioner of Income-tax. On the other hand, the Income-tax Officer noticed that there were discrepancies in the statements furnished by the assessee before the Central Excise authorities and the Income-tax Officer. In the statements given before the Central Excise authorities the assessee had stated that he kept the gold buried in the flower bed on the south of his bedroom, that out of it two ingots of primary gold weighing 1730 grams had been purchased by him about 10 years ago on two occasions from certain Chettiar from Madurai side, that it was buried along with ornaments after some years, that the ten standard gold bars had been removed by him piece by piece on different occasions from the gold purchased from Bombay for his jewellery shop, that the 85 gold coins weighing 364 grains had been purchased by him in retail from different persons who had offered them at his jewellery shop for sale, that in most of the cases the persons who owned gold sovereigns had sold them to him in emergencies and that certain prize medals included in it had been locally made in die works.
Before the Income-tax Officer the assessee denied the ownership of the jewellery and hence the Income-tax Officer did not accept the contentions of the assessee.
4. The assessee produced a paper book before the Tribunal which contains all the documents relied on by him in support of the above contentions. From the paper book we find that the assessee had sent a letter on 16-1-1984 to the Commissioner of Income-tax stating that the gold in question belonged to the Hindu undivided family and also expressing his willingness to submit fresh returns of wealth from the assessment years 1974-75 onwards including the value of the gold which had been set apart for family necessity as part of his income and for completing the assessments for all the years including in the income the sums set apart by the assessee over a period of years as "Apath Dhana" for the security of the family. This letter also shows that the assessee had requested the Commissioner of Income-tax to direct the Wealth-tax Officer to issue notices to him under Section 17 of the Wealth-tax Act, for all the assessment years 1974-75 onwards. Along with the above letter the assessee had also enclosed a statement showing the net wealth of the assessee HUF for each year from 1970-71 to 1983-84 and stating his willingness to pay the wealth-tax thereon.
We also find on the paper book a letter from the Office of the Commissioner of Income-tax, Cochin, dated 8th February 1984 addressed to the Income-tax Officer, D-Ward, Ernakulam, to the effect that the assessee has filed a petition before the Commissioner of Income-tax and requiring the Income-tax Officer to obtain a copy of the above petition from the assessee and furnish a report through the Inspecting Assistant Commissioner by 24-2-1984. The subject-matter of that letter was the application filed by the assessee for settlement of the case of Sri P.P. Chandrasekhara Pai, the assessee herein. The assessee also received the notice under Section 17 and offered the value of the gold and the assessments were completed. Penalty proceedings were also initiated against the assessee.
5. The assessee also produced before us xerox copy of the Order (Original) of the Collector of Customs dated 13-1-1984 levying penalties under the various sections of the Customs Act, 1962, and confiscating gold, gold articles, gold ornaments and other items under Section 119 of the Customs Act, 1962 and under Section 71 of the Gold (Control) Act, 1968. The appeal preferred by the assessee against the above order of the Collector of Customs was also dismissed by the Customs, Excise and Gold (Control) Appellate Tribunal, South Regional Bench at Madras, vide order dated 1-8-1986. According to the assessee the gold jewellery seized from him was acquired in the past and not in the financial year relevant to the assessment year in question. The assessee contended that he had explained the position to the satisfaction of the Commissioner of Income-tax, Cochin and hence the addition of Rs. 5,80,000 under Section 69A of the Income-tax Act, 1961, is illegal and unjust and is to be deleted. In this connection, the assessee also placed reliance on the following decisions reported in The assessee, therefore, prayed for the deletion of the sum of Rs. 5,80,000 made under Section 69A. On the other hand, the learned departmental representative supported the view of the CIT (Appeals).
6. We have heard the parties. The point at issue is whether the addition of Rs. 5,80,000 made by the Income-tax Officer under Section 69A and upheld by the CIT (Appeals) is justified in law. The addition was made in respect of the possession of gold jewellery not explained by the assessee. The fact that the gold jewellery seized from the possession of the assessee is admitted. From the evidence on record we are inclined to hold that the assessee is the owner of the gold and gold jewellery in this case. Then the point to be considered is whether the assessee had acquired the gold jewellery in the financial year relevant to the assessment year under consideration or in the earlier several years as alleged by him. Section 69A is relevant in this regard which is reproduced below :- 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the income-tax officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.
We have, therefore, to see whether the explanation offered by the assessee was satisfactory or not. We have before us the letters written by the assessee to the Commissioner of Income-tax explaining that he acquired the jewellery and gold seized by the Central Excise authorities over a period of several years in the past and offering the value of the jewellery for assessment in respect of the preceding assessment years. The case of the assessee that after accepting the explanation offered by the assessee, the Commissioner of Income-tax has directed the Wealth-tax Officer to assess the value of the gold jewellery for wealth-tax also appears to be true. Pursuant to this, Section 17(7) notices were issued to the assessee for the assessment years 1975-76 to 1979-80 and the returns filed by the assessee earlier were treated as returns filed under Section 17 of the Wealth-tax Act.
In addition, the assessee also filed revised returns for the assessment years 1980-81 to 1982-83. Assessment orders were passed on the same date. Going through the assessment orders it is apparent that the Wealth-tax Officer had accepted the existence of gold ornaments weighing about 3237 grams for the assessment years 1975-76 to 1980-81 and included the same in the net wealth of the assessee. For the other two years, viz., 1981-82and 1982-83 in addition to 3237 grams of gold jewellery other ornaments weighing about 345 grams and the value of 58 sovereigns were also included in the assessments. On the basis of such inclusion of the impugned gold ornaments etc., for the assessment years beginning from 1975-76 onwards, the Wealth-tax Officer had initiated penalty proceedings under Section 18(2) and imposed penalties under Section 18(7 )(a) of the Wealth-tax Act. The above Orders are on record. Thus, the documents produced before us clinch the issue that the Income-tax Officer acting in the capacity of Wealth-tax Officer had accepted the explanation offered by the assessee that the gold ornaments were in existence with the assessee at least as early as 1975-76. Therefore, there is enormous force in the contention of the learned advocate, Sri V. Ramachandran that it is not open to the Income-tax Officer to turn round and say that the impugned gold ornaments constituted the unexplained investment for the assessment year 1983-84 for the purposes of income-tax. We uphold his contention.
Therefore, Section 69 A of the Income-lax Act cannot be invoked for the assessment year 1983-84. We also place reliance on the decision of the Madras Bench 'A' of the Tribunal in the case of S. Mariappa Nadar (supra).
7. The learned counsel for the assessee relied on the decision of the Jaipur Bench in the case of Shakuntala Devi Saraf (supra) and Ahmedabad Bench "C" of the Tribunal in the case of ITO .Nagardas Jashraj (supra) in support of his contention. In the latter case it was observed by the Ahmedabad Bench as follows: - Section 69A creates a legal fiction by the deemed phrase 'may be deemed to be the income of the assessee' but such legal fiction is restricted to treating the money, bullion etc. of. which an assessee has been found to be the owner in any financial year, to be the income of the assessee of such financial year. That legal fiction does not create any presumption to the effect that the assessee would also be deemed to be the owner of any money, bullion, etc.
which has been found in his possession in the financial year. No doubt the proof of possession of money, bullion, etc., by an assessee in a financial year would give rise to presumption of ownership of the assessee of that money, bullion, etc. but such a presumption cannot be claimed to have been created by the deeming clause of Section 69A. Such a presumption arises by virtue of the principle of common law embodied in Section 110 of the Evidence Act and which is, in general, applicable to the proceedings under the Act. It follows, therefore, that the initial burden of proving that the assessee was found to be the owner of any money, bullion etc. in a financial year, so that such money, bullion, etc. may be treated as his income for that financial year, lies on the revenue.
Thus the burden is initially on the revenue and in the light of the fact that the revenue itself has chosen to assess the impugned gold and gold ornaments for the assessment year 1975-76 in the wealth-tax proceedings, it does not lie in the hands of the revenue to take a different view in the income-tax proceedings. Therefore, we hold that the addition of Rs. 5,80,000 made by the Income-tax Officer under Section 69 A of the Income-tax Act is unjustified and the same is deleted. Thus the ground is decided in favour of the assessee.
8. The next ground relates to the addition of Rs. 20,000 from other sources on account of marriage expenses of the daughter. According to the assessee, he incurred a sum of Rs. 30,000 in connection with the marriage of his fifth daughter held on 9-12-1982. The assessee returned an income of Rs. 30,000 under other sources. The Income-lax Officer found that the unexplained expenditure incurred by the assessee in connection with the marriage of his fifth daughter would be Rs. 50,000 and added Rs. 20,000 to the income of the 3ssessee. For making this addition, the Income-tax Officer also relied on the entries in the two small note books seized along with the jewellery from the possession of the assessee, wherein marriage expenses of two daughters were recorded.
The expenses for the marriage of the fifth daughter conducted on 9-12-1982 were noted as Rs. 75,500. According to the assessee, he gave 40 sovereigns to his daughter at the time of her marriage and they were available with him. Considering all the facts and the Income-tax Officer fixed the marriage expenses of the fifth daughter of the assessee held on 9-12-1982 at Rs. 50,000 which was confirmed by the CIT (Appeals).
9. We have heard the parties. Having considered the status and the wealth of the assessee, we would hold that the marriage expenses as fixed by the Income-tax Officer at Rs. 50,000 is only reasonable and there is no warrant to interfere with the view of the CIT (Appeals) on this point. The ground is decided against the assessee.