Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,00,000 is not assessable in the asst. yr. 1955-56 ?

Counsel Appeared

C.V. Rajan for the Revenue : A. Devanathan for the Assessee

RATNAM, J.:

At the instance of the Revenue, under s. 256(2) of the IT Act, 1961 (hereinafter referred to as “the Act”), the following two questions of law have been referred for the opinion of this Court “

‘(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,00,000 is not assessable in the asst. yr. 1955-56 ?

(2) Whether the finding of the Tribunal is a reasonable one to take on the facts and in the circumstances of the case ?”

The assessee is an individual and the reference relates to the asst. yr. 1955-56. In the course of the assessment proceedings, the ITO found that the assessee deposited on June 8, 1954, and June 10, 1954, two sums of Rs. 50,000 each, that those amounts were withdrawn on January 29, 1955, and March 2, 1955, respectively, and advanced to the late Bajranglal Bhuwalka, who introduced the same in the books of Rambilas Nandlal in his own name on the same dates. The assessee was unable to place any evidence regarding the aforesaid amounts and she also did not maintain any books of account. An inspector was depute to inspect the accounts of Nathuram Badridas and therefrom, it was seen that the assessee received interest in a sum of Rs. 2,772 and the ITO completed the assessment to the best of his judgment on a total income of Rs. 1,02,772. On appeal by the assessee before the AAC, it was contended that the addition of Rs. 1 lakh was not warranted as during the course of the asst. yr. 1953-54, the assessee had already filed a balance-sheet as on March 31, 1953, which showed that she had cash in hand of Rs. 1.35 lakhs and, therefore, the investment of Rs. 1 lakh had come out of that cash. It was also further urged before the AAC that since her marriage in 1940, the assessee came into possession of large cash and the deposit of Rs. 1 lakh had come out of this cash. The AAC examined the stand of the assessee so taken and found that the assessee never maintained books of account and he found that the assessee had throughout taken the stand that she had not maintained accounts, and in that context, the balance- sheet as on March 31, 1953 could not be understood as anything but a piece of paper on which something was typed and not supported by the books of account or even a cash book. Referring to the solitary letter produced by the assessee dated December 19, 1968, to the effect that the assessee had large cash in her possession, the AAC dealt with the utter improbability of such a case and concluded that the assessee could not have had in her hand any sum as on March 31, 1953, for deposit in the year in question. In that view, the AAC dismissed the appeal. On further appeal to the Tribunal, it took the view that the ITO could have assessed the amount of Rs. 1 lakh in the hands of the assessee for the asst. yr. 1953-54 and having omitted to do so, he cannot attempt to assess this amount for the asst. yr. 1955-56 as income of the assessee from undisclosed sources and in that view, deleted the addition of Rs. 1 lakh. That is how the matter has come up before this Court for its opinion on the questions of law referred to earlier.,

Learned counsel for the Revenue contended that, even according to the reasoning of the Tribunal, the assessee had not established that she had possession of cash of Rs. 1.35 lakhs as on March 31, 1953, relevant to the asst. yr. 1953-54 and for the next asst. yr. 1954-55 and the Tribunal was, therefore, in error in holding that the amount could not be assessed in the hands of the assessee for the asst. yr. 1955-56 when the amount was invested by the assessee. Strong reliance in this connection was placed by learned counsel for the Revenue upon the decisions in Kale Khan Mohammad Hanif vs. CIT (1963) 50 ITR 1 (SC); CIT vs. M. Ganapathi Mudaliar (1964) 53 ITR 623 (SC); CIT vs. Devi Prasad Vishwanath Prasad (1969) 72 ITR 194 (SC) and CIT vs. Durga Prasad More (1969) 72 ITR 807 (SC).

On the other hand, learned counsel for the assessee contended, drawing attention to s. 147(a) of the Act, that the amount of Rs. 1 lakh should have been assessed in the hands of the assessee even in 1953-54 and not having been so assessed in that year, that amount could not be subjected to tax treatment in the hands of the assessee in respect of the asst. yr. 1955-56. Reference was also made to the decisions in CIT vs. Kalyanmal Mills Ltd. (supra); CIT vs. M. Ganapathy Mudaliar (supra) and P. Joseph Swaminathan vs. CIT (1987) 63 CTR (Mad) 161 : (1984) 145 ITR 198 (Mad), to support the conclusion arrived at by the Tribunal as based on evidence not warranting any interference.

We may observe that the assessee has not been able to place any material in support of the stand that a large amount of cash amounting to nearly Rs. 1.35 lakhs was available with her on March 31, 1953, relevant to the asst. yr. 1953-54. The so-called balance sheet as on March 31, 1953, could not in any manner assist the assessee, for, the statements therein had not been supported by any books of account. Indeed, the Tribunal, in para 4 of its order, has referred to the non-maintenance of accounts by the assessee and it was only on account of this, that the AAC discredited the so-called balance-sheet. Even in the letter addressed by the assessee, as late as December 19, 1968, vide annexure ‘D’, the assessee had stated that she had been having large cash for a long time. Despite the stand so taken, the assessee has not been able to establish possession of large amounts. Even according to the reasoning of the Tribunal in para 11 of its order, this is a case where the assessee has stated that she had possession of cash of Rs. 1.35 lakhs as on March 31, 1953, for which, no doubt, there is no evidence and it was also equally so for the next assessment year. Thus, even according to the Tribunal, the assessee had not established that she had possession of cash during the asst. yrs. 1953-54 and 1954-55. It has also to be borne in mind that the amounts were invested on January 29, 1955, and March 2, 1955, in the name of the late Bajranglal Bhuwalka in the books of Rambilas Nandlal. It is thus seen that even according to the Tribunal, the assessee had not established possession of cash of Rs. 1.35 lakhs for the asst. yr. 1953-54 as well as for 1954-55. The sum of Rs. lakh had been deposited by the assessee on June 8, 1954, and June 10, 1954, relevant to the asst. yr. 1955-56. Likewise, the amounts had also been withdrawn on January 29, 1955 and March 2, 1955, and advanced to the late Bajranglal Bhuwalka, who introduced the same in the books of Rambilas Nandlal, on the same dates again during the asst. yr. 1955-56. Thus, even according to the Tribunal, the assessee had not established that she had possession of cash of Rs. 1.35 lakhs during the assessment year 1953-54 or 1954-55 and it is only during the accounting year relevant to the asst. yr. 1955-56 that the amount had surfaced in the form of an investment and necessarily, therefore, steps for its assessment could be taken-only during the asst. yr. 1955-56. Therefore, the view taken by the Tribunal that the amount of Rs. 1 lakh could not be assessed in the hands of the assessee in respect of the asst. yr. 1955-56 is plainly erroneous on the findings recorded by the Tribunal with reference to the failure of the assessee to prove possession of cash as on March 31, 1953, and also as on March 31, 1954. We are unable to agree that there was any lapse on the part of the ITO to assess the said amount for the asst. yr. 1953-54 and that such a lapse was sought to be remedied by assessing the amount in the hands of the assessee for the asst. yr. 1955-56. In the view we have taken, it is unnecessary to refer to the decisions relied on by counsel for the Revenue and the assessee. We, therefore, hold that the Tribunal was in error in holding that the sum of Rs. 1 lakh is not assessable in the hands of the assessee for the asst. yr. 1955-56 and answer question No. 1 referred to us in the negative and in favour of the Revenue.

6. We now proceed to consider the second question referred to us. On the available materials, the view taken by the Tribunal cannot be stated to be a reasonable one. It was not disputed that the assessee had not maintained any accounts at all. If that be so, we are unable to appreciate the reliance placed upon the so- called balance-sheet for the period ending March 31, 1953. That was rightly rejected as nothing more than a piece of paper. There was no material to show that the assessee had large funds in her possession as claimed by her. The amounts referable to the assessee came to be invested only during the asst. yr. 1955-56, as seen earlier. Even according to the Tribunal, the assessee had not established possession of cash during the relevant asst. yrs. 1953-54 and 1954-55. When the assessee did not have the funds in her hands as claimed by her during the relevant assessment years, it is difficult to see how during those years, the amounts could have been assessed in the hands of the assessee as income from undisclosed sources. Rightly, therefore, as soon as the amounts surfaced in the shape of investment at the instance of the assessee, which was during the asst. yr. 1955-56, steps had been taken to include that amount as the income of the assessee from undisclosed sources. The Tribunal has misdirected itself in holding that there was some lapse on the part of the Officer. We may also observe that we are unable to uphold the finding of the Tribunal as reasonable one based on the facts and the circumstances of the case and on the materials made available. We, therefore, answer the second question referred to us in the negative and in favour of the Revenue. The Revenue will be entitled to its costs of this reference.

Counsel’s fee Rs. 500.

[Citation :181 ITR 547]