| SooperKanoon Citation | sooperkanoon.com/65505 |
| Court | Income Tax Appellate Tribunal ITAT Delhi |
| Decided On | Aug-07-1992 |
| Judge | P Goradia, M Bakshi |
| Reported in | (1992)43ITD447(Delhi) |
| Appellant | Vasanti Sethi |
| Respondent | Assistant Commissioner of |
2. On 10th December, 1987 during the search operations under Section 132 of the Act, the department found that deposits aggregating in all to Rs. 21.67 lakhs in the name of the assessee as also in the names of the assessee's minor children were found. On the day of search the assessee admitted ownership of the deposits in a statement recorded. In a statement recorded during the course of assessment proceedings the assessee 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 January, 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 Section 271(1)(c) of the Act. We may clarify here that we are concerned with part of such deposits standing in assessee's own name for which details are separately given hereinafter. Thereafter after the lapse of approximately 16 months the assessee filed returns in accordance with what was submitted earlier. Notice under Section 148 was issued in July 1989 in response to which the assessee 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 Section 143. However, subsequently after about 7 months, OR 26th December, 1989 the assessee 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 assessee for the first time that the fixed deposits did not belong to the assessee. When the assessee was confronted with her earlier admission it was submitted that the earlier statement was given at the behest of assessee's 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 dated 1-1-1990 that she was only a house wife and the deposits with NCBE were admitted on the advice that any asset in the name of the assessee if could not be explained satisfactorily could be treated as income of the assessee. The assessee, placing reliance on the decision in. the case of K.S. Kannan Kunhi v. CIT [1969] 72 ITR 757 (Ker.) claimed that in the absence of any ostensible source of income, the value of deposits could not be added in the income of the assessee. The assessing officer rejected the claim of the assessee as, according to him, sequence of related facts indicated very strongly that the retracing of earlier stand by the assessee was only an afterthought. He further took into consideration the facts the assessee 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 assessee's father-in-law. Moreover the assessee was educated lady, a graduate and had claimed to have taken tuitions and had earned income therefrom, 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 assessee he further recorded a finding that the assessee 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 assessee could not engage in income earning activity. The assessing officer further observed that the assessee 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 assessee and additions had to be made as income of the assessee under Section 69 of the Act. He accordingly made additions as under :-Year Value of deposit Interest accrued83-84 Rs. 85,000 Rs. 4,94084-85 Rs. 4,23,500 Rs. 29,96585-86 Rs. 11,64,000 Rs. 1,25,09886-87 Rs. 80,000 Rs. 2,20,402 3. The assessee appealed. The grounds raised before the Commissioner (Appeals) were on various aspects of the controversy, legality as also on merits. Briefly they were as under: 3.1 The action taken under Section 148 read with Section 147 was irregular. The Commissioner (Appeals) rejected this ground after observing that the assessee 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 assessee also challenged the completion of the assessment on the basis of lack of jurisdiction and limitation as provided under Section 153 of the Act. The Commissioner (Appeals) 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 assessee 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 Section 139(8)/215 and 217 of the Act. The Commissioner (A) observed that the assessee had remedies under the Act and, therefore, no findings had to be given. Before us also these grdunds are raised but it was not pointed out how the order passed by the Commissioner (Appeals) was, in any way, erroneous and, therefore, these grounds are rejected.
7. With regard to the main ground with respect of the addition under Section 69, the Commissioner (Appeals) confirmed the addition. He held that investment stood in the name of the assessee and this was sufficient to prove that the investment belonged to the assessee 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 Section 132(4A) of the Act. Referring to sub- Section (4) of Section 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 assessee's father-in-law expired on 13-9-1989.
7.1 It may further be sated over here that before the assessing officer as also before the Commissioner (A) the assessee 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 assessee was not accepted by the tax authorities drawing guidance from decision of the Supreme Court in the case of State Bank of Travancore v.CIT[1986] 158 ITR 102/24 Taxman 337. Such contention, as was taken earlier, was not made before the Tribunal and, therefore, it is presumed that the position is accepted by the assessee.
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 assessee had no independent source of income, whether Section 69 could be invoked, it was posed because in Section 69 the words used are.
"...the assessee 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 :- (ii) in the case of CIT v. Smt. P.K. Noorjehan [1980] 123 ITR 3 (Ker.);Navnil Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 (SC) especially the observations at page 210; and 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 assessee it could not be believed that such large amounts invested in various deposits could have come out of undisclosed income of the assessee. 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 (Appeals). The Commissioner (A) has given categorical finding on the basis of Sub-section (4) of Section 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 proceedings under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act.
10. Mr. Ganesan had nothing to comment on this finding recorded by the Commissioner (Appeals). In our opinion, Sub-section (4) of Section 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 retracing 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 Section 148 of the Act. Considering this aspects 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 assessee-HUF was carrying on business in Cylon 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 assessee explained that the amount represented past remittances from Cylon 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 assessee 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 assessee, 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 assessee's 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 assessee had admitted engagement in income earning activities. Besides, there was a categorical and specific admission by the assessee during several proceedings in the case under consideration. Therefore, the ratio laid down by the Hon'ble Supreme Court in the case of A. Govindarqjulu Mudaliar v. CIT [1958] 34 ITR 807 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. Noorjehan (supra) made interesting study. The assessee, a Muslim lady about 20 years of age, made investment of Rs. 34,000 plus in assessment year 1968-69 and Rs. 25,000 plus in assessment year 1969-70, in property situated in Ernakulam. The assessee herself had no business, nor she earned income under any head mentioned in Section 14, except a small property income. She was not any time an income-tax assessee. Her 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 assessee, being a Muslim lady aged about 20 years, had no other source of income, that it was not possible for the assessee 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 assessee 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 assessee was liable to be rejected, Section 69 of the Act conferred only a discretion on the Assessing Officer to deal with the investment as income of the assessee and it did not make it mandatory on his part to deal with the investment as income of the assessee as soon as the latter's explanation was rejected. On a reference the High Court held that the unsatisfactoryness of the explanation did not and need not automatically result in deeming the value of the investment to be the income of the assessee 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 Section 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 assessee 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 assessee, 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 favour of the assessee 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 Section 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 assessee because Mr. Sethi was having large practice as an Advocate and that is how the importance of the statement by the assessee 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 assessee, 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 assessee, in which event appropriate steps were necessary to revise the returns of assessee's 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 assessee.
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 assessment years 1985-86 and 1986-87 grounds are also raised against additions made on account of gifts received. In assessment year 1985-86 the amount of gifts added is Rs. 63,500 and in assessment year 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.