1996 (2) TMI 586 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee discharged the burden of proof that lay on him.
2. Whether the assessee rebutted the presumption available to the revenue under section 132(4A) of the Income-tax Act.

Detailed Analysis:

Issue 1: Whether the assessee discharged the burden of proof that lay on him.
The Department sought a reference under section 256(1) of the Income-tax Act, 1961, focusing on whether the assessee discharged the burden of proof. The facts reveal that the assessee and his companion were found in possession of significant cash amounts by the Customs authorities. The Enforcement Directorate's investigation led to penalties under the Foreign Exchange Regulation Act, but the matter was then handed over to the Income-tax Department.

The assessing authority concluded that the assessee was involved in undisclosed income activities, estimating his income at Rs. 2 lakhs for the year 1983-84. This conclusion was based on discrepancies in statements and the nature of the transactions, including the involvement of close relatives and the manner in which the money changed hands.

However, the appellate authority and the Tribunal disagreed with the assessing authority's conclusions. They emphasized that there was no material evidence suggesting that the Rs. 1,50,000 belonged to the assessee. The appellate authority noted that the money was found in the possession of the assessee's companion and that the assessee was merely a carrier. The Tribunal supported this view, noting that the money was given to the assessee by someone else, and there was no indication of ownership by the assessee.

Issue 2: Whether the assessee rebutted the presumption available to the revenue under section 132(4A) of the Income-tax Act.
Section 132(4A) of the Income-tax Act allows for a presumption that money found in possession of a person during a search belongs to that person. The assessing authority relied on this presumption, citing a decision from the Madhya Pradesh High Court to support the inference that possession implies ownership.

The appellate authority and the Tribunal, however, found that the presumption was not applicable in this case. They pointed out that the material on record indicated that the money belonged to other individuals, not the assessee. The Tribunal emphasized that the money was traced back to transactions involving Shri Kunhabdulla Haji and Ashraf Fabrics, and not to the assessee. The appellate authority also noted the timing of the transactions and the departure of Shri Kunhabdulla Haji from India, which supported the conclusion that the money did not belong to the assessee.

The court further elaborated on the distinction between possession and ownership, stating that possession alone does not necessarily imply ownership. The court explained that the presumption under section 132(4A) requires clear evidence of possession, which was not sufficiently established in this case. The court also emphasized the need for a factual relationship to support the presumption of ownership, which was lacking in the present case.

Ultimately, the court concluded that the Tribunal and the appellate authority were correct in their findings. The court dismissed the petition, stating that there was no need to exercise powers under section 256(2) for the questions raised by the Department.

Conclusion:
The court dismissed the Department's petition, upholding the findings of the appellate authority and the Tribunal that the assessee did not own the money found in his possession and that the presumption under section 132(4A) was not applicable. The court emphasized the importance of distinguishing between possession and ownership and the need for clear evidence to support any presumption of ownership.