Madras H.C : Whether, on the facts and circumstances of the case and on the evidence on record, the Tribunal was right in law in upholding the addition of Rs. 5,61,000 to the income of the applicant for the asst. yr. 1981-82 under the head ‘income from undisclosed sources?

High Court Of Madras

R. Thiagarajan vs. CIT

Section 69A

Asst. Year 1981-82

R. Jayasimha Babu & N.V. Balasubramanian, JJ.

TC No. 867 of 1988

11th June, 1998

Counsel Appeared

P.P.S. Janarthana Raja, for the Applicant : C.V. Rajan, for the Respondent

JUDGMENT

N.V. BALASUBRAMANIAN, J. :

At the instance of the assessee, the following three questions of law have been referred to us, for ourconsideration, by the Tribunal under s. 256(1) of the IT Act, 1961 (hereinafter to be referred to as ‘the Act’):

“1. Whether, on the facts and circumstances of the case and on the evidence on record, the Tribunal was right in law in upholding the addition of Rs. 5,61,000 to the income of the applicant for the asst. yr. 1981-82 under the head ‘income from undisclosed sources?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that theidentity of Shri Narinder Kumar Neval Kishore had not been established when the applicant had produced copies of extracts from the room register maintained by Shri Lakshmi Lodge, Coimbatore in the normal course of business providing that the said Shri Narinder Kumar Neval Kishore had in fact stayed in the said lodge on the material dates?

Whether, on the facts and circumstances of the case and having regard to the facts that the applicant had established the existence of Shri Narinder Kumar Neval Kishore by documentary evidence, the Tribunal was right in law in holding that the initial burden of proving the alleged unexplained investment or cash credit were genuine had not been discharged by the applicant?

2. The assessee is employed in M/s Lakshmi Jewellery, Coimbatore. The assessee filed a return of income for the asst. yr. 1981-82 admitting a total income of Rs. 4,730. The ITO during the course of assessment of the income of the assessee, on examination of the draft applications pertaining to the Syndicate Bank, Oppanakara Street, Coimbatore, found that the assessee had applied for remittance of a sum of Rs. 5,61,000 consisting of two payments, one Rs. 3,40,000 dt. 28th Nov., 1980 and another Rs. 2,21,000 dt. 2nd Dec., 1980 to M/s R.B. Traders, Amritsar through telegraphic transfer. The ITO summoned the assessee on 5th Oct., 1981 and recorded his sworn statement. According to the assessee, he did not actually remit the amounts through telegraphic transfer and obliged some unknown person who was staying in a lodge situate behind his jewellery shop by going along with him to the bank and signing the necessary applications. The assessee also stated that he did not know the person who remitted the amounts and he signed the applications only to oblige the said person. The ITO disbelieved the statement given by the assessee. The ITO drew an inference from the application forms that the assessee had paid necessary cash for obtaining the demand drafts in favour of M/s R.B. Traders and according to him, the assessee had not discharged the burden cast upon him that the money did not belong to him but to M/s R.B. Traders or to one Narinder Kumar Neval Kishore or to somebody else. He, therefore, added the sum of Rs. 5,61,000 as undisclosed income of the assessee and completed the assessment. The assessee filed an appeal before the CIT(A) challenging the order of the ITO. The CIT(A) held that the assessee has not discharged the primary onus to prove the source of the amount and unless the assessee discharged that primary onus, there is no obligation on the part of the ITO to accept the statement of the assessee. The CIT(A) further held that there is no evidence to show that the money belonged to some other person. Therefore, he confirmed the assessment of Rs. 5,61,000 as income from the undisclosed sources in the hands of the assessee.

The assessee carried the matter further by filing an appeal to the Tribunal and the Tribunal also confirmed the view of the authorities. The Tribunal held that it was unable to agree with the explanation of the assessee that the money belonged to one Narinder Kumar Neval Kishore as the identity of that person was not established. The Tribunal also held that since the assessee remitted the amount, the assessee is deemed to be the owner of the amount remitted. The assessee has challenged the order of the Tribunal and the questions of law set out above have been referred to us. Learned counsel for the assessee submitted that there is nothing to show that the assessee had remitted the amount. According to him, the ITO has not conducted any investigation as to whom the money really belonged and the provisions of s. 69A of the Act are not applicable to the facts of the case. Learned counsel for the Revenue, on the other hand, submitted that the Tribunal has recorded a finding of fact and the assessee has not established that the money really belonged to one Narinder Kumar Neval Kishore or to whom the money really belonged. He also submitted that the Department has conducted the investigation and found that there is no such concern in the name and style R.B. Traders at Amritsar and therefore, the Tribunal has come to the correct conclusion that the amount belonged to the assessee. We have carefully considered the rival submissions of the learned counsel for the parties. The assessee has clearly stated in his sworn statement that he did not remit the money and only to oblige one Narinder Kumar Neval Kishore, he merely signed the application forms. It is no doubt true that the assessee has not established the identity of the said Narinder Kumar Neval Kishore. The ITO should have conducted a further enquiry as to who remitted the sums in question into the bank when the assessee had stated that he did not remit the money. It is not clear from the records whether the ITO had examined the staff of the Bank who received the money or conducted any investigation as to whether there is any concern in the name and style, R.B. Traders and who has encashed the drafts for the sum of Rs. 5,61,000. The case of the assessee was that he was not the owner of the money in question. The provisions of s. 69A of the Act would apply only where the assessee is found to be the owner of the money in question. Merely on the basis of his signature found in the draft application forms, no inference can be drawn that the assessee remitted the money and he was the owner of the money remitted. It is for the ITO to establish by evidence that the assessee was the owner of the money. We are of the opinion that the ITO should have conducted a further investigation to find out to whom the money really belonged and who had remitted the sums in question. The ITO, as we have seen already, has drawn an inference that the assessee was the owner of the sums in question merely because he had signed the application forms for drafts. But, that would not be sufficient to establish that the assessee was the owner of the sums in question. The ITO should have conduced a further enquiry to find out as to who had remitted the amount and whether the money reached the person in whose name the drafts were drawn. Therefore, we hold that there was no proper investigation of the entire matter. We are of the opinion that the matter should be further investigated by the ITO. We are of the opinion that the Tribunal should hear the matter once again and determine who is the owner of the money in question.

It is open to the Tribunal to remit the matter to the ITO with a direction to investigate the matter further particularly on the question who had remitted the money in the bank and whether the drafts have been encashed by the said R.B. Traders. In this view of the matter, we are not in a position to answer the questions of law referred to us. Accordingly, we return the reference without answering the questions of law, but with a direction to the Tribunal to consider the question afresh. As already stated, it is open to the Tribunal to remit the matter to the ITO to conduct further investigation into the matter and determine who is the owner of the money in question. There will be no order as to costs.

[Citation : 239 ITR 557]

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