2001 (3) TMI 242 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 1.50 lakhs in respect of F.D.Rs. in the names of the assessee's family members.
2. Validity of the affidavit submitted by the assessee's wife.
3. Application of the Benami Transaction (Prohibition) Act, 1988.
4. Interpretation of section 4(1)(a) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Deletion of Addition of Rs. 1.50 Lakhs in Respect of F.D.Rs.:
The primary contention in the Revenue's appeal was that the Dy. CIT(A) erred in deleting the addition of Rs. 1.50 lakhs related to three F.D.Rs. in the names of the assessee's family members. The Assessing Officer had included these F.D.Rs. in the wealth of the assessee, asserting that they were purchased from the compensation received by the assessee. The Dy. CIT(A) deleted the addition, observing that the Assessing Officer did not cross-examine the affidavit submitted by the assessee's wife, nor provided any opportunity to reject its contents.

2. Validity of the Affidavit Submitted by the Assessee's Wife:
The affidavit by the assessee's wife, Smt. Sureshta Rani, stated that the F.D.Rs. were acquired from her agricultural income and compensation received from land acquisition. The Dy. CIT(A) relied on this affidavit, citing the Supreme Court judgment in Mehta Parikh & Co. v. CIT and the Allahabad High Court decision in Sri Krishna v. CIT, which emphasized the necessity of cross-examination to reject an affidavit's contents. The Judicial Member upheld this view, noting that the Revenue did not prove the F.D.Rs. were the property of the assessee.

3. Application of the Benami Transaction (Prohibition) Act, 1988:
The Judicial Member also considered the Benami Transaction (Prohibition) Act, 1988, and related judgments, concluding that even if the F.D.Rs. were purchased by the assessee, they became the absolute property of the persons in whose names they stood. Therefore, the value of the F.D.Rs. could not be assessed in the Wealth-tax assessment of the assessee.

4. Interpretation of Section 4(1)(a) of the Wealth-tax Act, 1957:
The Accountant Member disagreed with the Judicial Member, emphasizing that section 4(1)(a) of the Wealth-tax Act, 1957, specifically includes the wealth held by an individual in the name of their spouse and minor children. He argued that the F.D.Rs. were purchased from the compensation money received by the assessee and thus should be included in the assessee's wealth. The Accountant Member also referenced the Madhya Pradesh High Court's explanation in Smt. Gunwantibai Ratilal v. CIT, which clarified that an affidavit could be deemed unreliable based on other material on record.

Third Member's Decision:
The Third Member, upon reviewing the case, upheld the Accountant Member's view. He noted that the assessee received Rs. 4,74,724 as compensation, and the investment of Rs. 1,50,000 was not accounted for in any other form. Therefore, the addition of Rs. 1,50,000 was justified and should be included in the assessee's wealth.

Conclusion:
The majority opinion concluded that the addition of Rs. 1,50,000 representing the F.D.Rs. was assessable in the hands of the assessee under section 4(1)(a) of the Wealth-tax Act, 1957. The Revenue's appeal was allowed, reversing the Dy. CIT(A)'s deletion of the addition.