1973 (8) TMI 7 - HC - Income Tax

Assessee was a partner in a firm and also had his own business purchased land in his wife s name and constructed a house on it - explanation of the assessee regarding the source was rejected - there was also no withdrawals from the firm - 1. Whether Tribunal was legally justified in holding that the sum of Rs. 42, 000 represents the income of the assessee from undisclosed sources ? 2. Whether there was any evidence for the Tribunal to hold that the cost of construction of the property estimated by the Income-tax Officer at Rs. 84, 000 was correct?

Summary

Issues Involved:
1. Whether the Tribunal was legally justified in holding that the sum of Rs. 42,000 represents the income of the assessee from undisclosed sources.
2. Whether there was any evidence for the Tribunal to hold that the cost of construction of the property estimated by the Income-tax Officer at Rs. 84,000 was correct.

Issue-wise Detailed Analysis:

1. Legality of Tribunal's Decision on Undisclosed Income:

The Tribunal was tasked with determining if Rs. 42,000 could be classified as the assessee's income from undisclosed sources. The assessee, a partner in M/s. Roller Supply Company, had not shown any withdrawals for the construction of a house on a plot purchased in his wife's name. The Income-tax Officer (ITO) questioned the source of funds for the construction, leading the assessee to claim the money came from his wife's sale of gold, which she had allegedly converted from cash before migrating from Lahore in 1947. Despite presenting invoices and statements from gold traders, the ITO rejected the explanation and estimated the construction cost at Rs. 84,000, attributing Rs. 42,000 as income from undisclosed sources for the year 1954-55. The Tribunal upheld this view, noting inconsistencies and improbabilities in the assessee's explanations, such as the lack of evidence for the wife's claimed savings and agricultural income, and the improbability of converting cash to gold and bringing it to India.

The Tribunal's decision was challenged on the grounds that it had improperly rejected the evidence and drawn conclusions without sufficient basis. However, the court emphasized the Tribunal's role as a fact-finding body, whose conclusions, if based on a thorough consideration of evidence, should not be interfered with unless they were perverse or based on no evidence. The Tribunal had meticulously evaluated all submitted evidence, including statements and account books, and found significant discrepancies and improbabilities, leading to a justified rejection of the assessee's explanations.

2. Evidence Supporting the Cost of Construction Estimate:

The second issue concerned whether the Tribunal had any basis for accepting the ITO's estimate of the construction cost at Rs. 84,000 over the architect's certificate of Rs. 59,704. The assessee's failure to produce comprehensive accounts of the construction costs, despite his wife's claim of having kept full accounts, weakened his position. The Tribunal, relying on its own experience and the circumstances, found the architect's estimate insufficiently convincing. It is within the Tribunal's purview to reject such estimates and form its own conclusions based on broader experience and available evidence.

The court upheld the Tribunal's decision, noting that the Tribunal had the authority to make its own cost estimates in the absence of satisfactory evidence from the assessee. The Tribunal's conclusion was thus deemed to be based on a rational assessment of the circumstances and evidence presented.

Conclusion:

Both questions were answered in the affirmative, favoring the revenue and against the assessee. The Tribunal's findings were upheld as they were based on a careful and reasoned evaluation of the evidence, and the court found no grounds to interfere with these factual determinations. The special circumstances of the case led to no order as to costs.