1989 (12) TMI 106 - AT - Income Tax

Summary

Issues Involved:

1. Ownership of Fixed Deposits (FDs)
2. Application of Section 69 of the Income-tax Act, 1961
3. Credibility of Sources of Income Claimed by Smt. Nirmalabai Inani
4. Validity of Assessments and Additions Made by Income-tax Officer
5. Relevance of Section 132(5) Orders and Amnesty Scheme Returns

Issue-wise Detailed Analysis:

1. Ownership of Fixed Deposits (FDs):

The primary issue was whether the fixed deposits standing in the name of Smt. Nirmalabai Inani belonged to her or to her late father, Sri Jamnadas Agiwal. The learned Accountant Member concluded that the FDs belonged to Smt. Nirmalabai Inani based on the evidence. Conversely, the learned Judicial Member found the evidence insufficient and attributed the ownership to the late Jamnadas Agiwal. The Third Member agreed with the Judicial Member, emphasizing that the deceased had a strong inclination to benefit Smt. Nirmalabai Inani, making it plausible that he put the money in her name.

2. Application of Section 69 of the Income-tax Act, 1961:

The point of contention was whether the amounts in the FDs should be assessed under Section 69 in the hands of late Jamnadas Agiwal. The Accountant Member argued that Section 69 was inapplicable as the FDs were in Smt. Nirmalabai Inani's name. However, the Judicial Member and the Third Member held that since the FDs were found in the deceased's possession and no satisfactory explanation was provided by Smt. Nirmalabai Inani, the provisions of Section 69 were rightly invoked. The Third Member cited the principle laid down by the Bombay High Court in J.S. Parkar v. V.B. Palekar, affirmed by the Supreme Court in Chuharmal v. CIT, that possession implies ownership unless proven otherwise.

3. Credibility of Sources of Income Claimed by Smt. Nirmalabai Inani:

Smt. Nirmalabai Inani claimed that the FDs were funded by gifts received during her marriage and from her business activities. The Judicial Member and the Third Member found these claims unconvincing due to inconsistencies in the cash flow statements and the improbability of receiving such substantial gifts. The Third Member emphasized that the theory of gifts from the paternal aunt was unanimously rejected, and the explanation of business income was deemed an afterthought.

4. Validity of Assessments and Additions Made by Income-tax Officer:

The Income-tax Officer did not believe the statements of Smt. Nirmalabai Inani and her husband, adding the FDs and accrued interest to the assessments of late Jamnadas Agiwal. The Commissioner (A) upheld these additions. The Tribunal, however, saw a split opinion. The Third Member ultimately supported the additions, agreeing with the Judicial Member that the FDs were correctly included under Section 69 due to the lack of credible explanations from Smt. Nirmalabai Inani.

5. Relevance of Section 132(5) Orders and Amnesty Scheme Returns:

The counsel for the assessee argued that the non-inclusion of certain deposits in the Section 132(5) order implied acceptance of their legitimacy by the department. The Third Member dismissed this argument, clarifying that Section 132(5) orders are tentative and not binding. The returns filed under the amnesty scheme were also deemed an afterthought, aimed at providing an alibi for the deposits. The Third Member emphasized that these returns could not override the findings from the search and subsequent assessments.

Conclusion:

The Third Member agreed with the Judicial Member that the fixed deposits did not belong to Smt. Nirmalabai Inani despite her claims. The deposits were correctly assessed under Section 69 in the hands of late Jamnadas Agiwal due to the lack of credible explanations from Smt. Nirmalabai Inani. The matter was to be decided by the regular Bench according to the majority opinion.