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1982 Supreme(Cal) 107
High Court Of Calcutta
SABYASACHI MUKHERJI, SUHAS CHANDRA SEN
KANTILAL CHANDULAL AND CO. - Appellant
Versus
COMMISSIONER OF INCOME-TAX - Respondent
Income-Tax Reference 36 Of 1977
Decided On : 03/24/1982
A.K.RAY, AJIT SEN GUPTA, B.K.NAHA
The deeming provision of Section 69A of the Income Tax Act, 1961, can be applied only if 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 the assessee for any source of income.
Headnote:
INCOME TAX - SECTION 69A - OWNERSHIP OF PRECIOUS STONES - TRIBUNAL'S FINDING - MATERIAL - DEEMING PROVISION - APPLICABILITY - CONDITIONS - POSSESSION AS PRIMA FACIE PROOF OF OWNERSHIP - EVIDENCE ACT, 1872, SECTION 110.
Fact of the Case:
Assessee, a dealer in precious stones, was found in possession of precious stones worth Rs. 2,21,487 during a search of his business premises. He claimed that the stones were covered by opening stock and purchases, and the remaining belonged to others received on approval basis for sale or repair. The ITO added the unexplained value of Rs. 74,766 as income from undisclosed sources under Section 69A of the Income Tax Act, 1961. The Tribunal upheld the addition, except for a small amount.
Finding of the Court:
The Tribunal held that the assessee had not satisfactorily explained the possession of the precious stones and that he was the owner of the stones. The Tribunal also held that the provisions of Section 69A were attracted in the instant case.
Issues: 1. Whether the Tribunal was right in holding that the provisions of Section 69A of the Income-tax Act, 1961, were attracted in the facts and circumstances of the instant case? 2. Whether there was any material before the Tribunal on which the said Section 69A of the Income-tax Act, 1961, could be applied?
Ratio Decidendi: 1. The deeming part of Section 69A comes into play only if the following two conditions are fulfilled: (1) The assessee is found to be the owner of any money, bullion, jewellery or other valuable article, and (2) Such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by the assessee for any source of income. 2. The question whether the assessee is the owner of any money, bullion, jewellery or other valuable article will depend on the facts and circumstances of each case. The fact that the assessee was found to be in possession of any money, bullion, jewellery or other valuable article is an important factor to be taken into account. 3. In this case, the Tribunal found that the assessee was in possession of the precious stones and that the assessee's explanation for the possession was not satisfactory. The Tribunal was, therefore, entitled to conclude that the assessee was the owner of the precious stones.
Final Decision: Both questions Nos. 1 and 2 are, therefore, answered in the affirmative and in favour of the revenue.
( 1 ) THE assessee in this case is a registered firm carrying on business as dealer in precious stones and also as a middleman between sellers and buyers of precious stones. For the assessment year 1967-68, corresponding to the previous year being diwali 2022 (October 25, 1965, to November 12, 1966), the assessee filed a return on August 8, 1967, showing a total income of Rs. 22,120. The ITO received information from the Customs Officers of Preventive and Intelligence Unit, West Bengal, Calcutta, that at a search conducted in the business premises of the assessee on 2nd and 3rd August, 1966, diamonds, pearls and precious stones valued at Rs. 2,21,487 had been seized. When called upon to explain the source of these precious stones the assessee claimed that the seized goods were covered by the opening stock and purchases to the extent of Rs. 54,362 and that the remaining goods to the extent of Rs. 1,67,125 belonged to sixteen persons from whom they had been received on approval basis for sale or for repair on estimation. The assessee produced eleven persons whose statements were recorded by the ITO and written statements were filed from other persons. After examining the evidence the ITO came to the conclusion that only a part of the explanation of the assessee could be accepted. He held that the assessee was not able to explain properly: (1) the value of Rs. 58,256 alleged to have been received through Omkar Shankar Gupta; (2) the receipt of precious stones amounting to Rs. 1,184 alleged to have been received on approval from Banwarilal Srimal ; (3) the receipt of jewellery worth Rs. 1,850 from Parvin Chand C. Mehta ; and (4) the receipt of precious stones worth Rs. 13,476 from Bejoy Chand Bothra. Consequently, the ITO added the total sum of Rs. 74,766 being the unexplained value of precious stories as the income of the assessee from undisclosed sources and completed the assessment on a total of income of Rs. 1,00,126 after adding back certain other disallowable items.
( 2 ) THE assessee appealed to the Assistant Commissioner who agreed with the ITO that the assessee had not satisfactorily explained the precious stones as alleged. He, therefore, confirmed the assessment by his order dated March 25, 1974.
( 3 ) THE assessee appealed further to the Appellate Tribunal and reiterated the contentions that the receipt of the precious stones could be properly explained by the evidence on record. The Appellate Tribunal was of the view that the assessee had satisfactorily proved the receipt of the precious stones of the value of Rs. 1,184 from Banwarilal Srimal and, accordingly, deleted the addition of the sum of Rs. 1,184. Similarly, the Appellate Tribunal was of the view that the assessee had proved the receipt of precious stones worth Rs. 1,850 from Sri P. C. Mehta for cleaning. Thus, the Appellate Tribunal deleted an addition of Rs. 3,034 only. With regard to the rest of the items the Appellate Tribunal agreed with the authorities below that the assessee had not proved the source of the jewellery seized from the assessee and upheld the addition made under Section 69a of the Act.
( 4 ) THE assessee applied to the Tribunal for referring the questions of law said to arise out of the order of the Tribunal under Section 256 (1) of the I. T. Act, 1961. The Tribunal declined to refer the said questions on the ground that the questions were not questions of law arising out of the order of the Tribunal.
( 5 ) ON a further application made by the assessee under Section 256 (2) to the High Court, the Tribunal was directed to refer the following two questions of law :"1. Was the Tribunal right in holding in the facts and circumstances of the instant case, that the provision of Section 69a of the Income-tax Act, 1961, were attracted? 2. Was there any material before the Tribunal on which the said Section 69a of the Income-tax Act, 1961, could be applied ?"
( 6 ) IT has been contended on behalf of the assessee that unde
