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TMI Blog1989 (12) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... o income-tax in the hands of late Jamnadas Agiwal under section 69 of the Income-tax Act, 1961 for assessment years 1978-79 to 1986-87:--- Asst. Date of Name of bank Amount year deposit Rs. 1978-79 21-11-77 SBH 14,000 21-3-78 Canara bank 9,000 23,000 -------------- 1979-80 26-4-78 SBH 16,000 17-2-79 SBH 15,000 31,000 -------------- 1980-81 7-7-79 SBH 25,000 1981-82 Interest on FDs. 8,072 1982-83 " 7,422 1983-84 " 2,285 1984-85 " 11,352 1985-86 " 11,097 1986-87 19.12.85 Canara 10,206 20.12.85 Bank 3,348 9.1.86 6,642 20,196 ------------- Interest on FDs. 13,365" 2. It will be seen from the above that the fixed deposits amounted to Rs. 99,196 spread over the assessment years 1978-79 to 1986-87 and the interest accrued thereon of the varying amounts mentioned above. It is not necessary for me to discuss about the interest, because that will follow the ownership of the deposits. 3. The late Jamnadas Agiwal was carrying on business in cloth and the assessments were completed under section 143(1) upto the assessment year 1980-81. He expired on 1-11-1985 leaving behind four daughters and his wife of whom Smt. Nirmalabai Inani was the youngest. The Income-tax Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived thereafter either by her or by her children on their birthdays. To this category were attributed the deposits made on 21-11-1977 for Rs. 14,000 and on 21-3-1978 for Rs. 9,000 in State Bank of Hyderabad and Canara Bank respectively, both of which were assessed as unexplained income for the assessment year 1978-79. She next traced the deposits of Rs. 16,000 and Rs. 15,000 in State Bank of Hyderabad on 26-4-1978 and on 17-2-1979 and Rs. 25,000 in the same bank on 7-7-1979 to gifts of Rs. 50,000 to Rs. 60,000 received from the sister of her father-in-law, who died about 7 years before the date of the statement recorded from her i.e. 20-7-1986. The other deposits in Canara Bank mentioned above were attributed to the moneys she brought to Hyderabad of about Rs. 18,000 while coming to Hyderabad from the place where she was staying in Maharashtra just before the death of her father. She claimed that she was carrying on a business in stitching of sarees, blouses, preparing and selling "papads" and "chudwa" and savings she had out of the money given to her by her husband to run the household which accumulated to Rs. 18,000 or thereabout, which she brought to Hyderabad and deposited i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s having by far the greatest affection for Smt. Nirmalabai Inani and it was to benefit her that he had taken fixed deposits in her name and kept all the receipts with him for safe custody. As a consequence of the execution of this will, the Income-tax Officer observed that disputes arose in the family, which led the other two daughters to take the matter to the High Court contesting the authenticity of the will and, therefore, the fixed deposits appearing in the name of Smt. Nirmalabai Inani did in fact belong to late Sri Jamnadas Agiwal put in the name of Smt. Nirmalabai Inani. On this view of the matter, the Income-tax Officer invoked the provisions of section 69 for the relevant years and included the amount of the deposits as well as the interest accrued thereon in the respective assessment years as shown above. 5. When the matter went in appeal before the Commissioner (A), he agreed with the Income-tax Officer on all his conclusions and confirmed the additions made. Thereafter, the matter reached the Tribunal by way of second appeal and it was there, that both the Members have differed. 6. The learned Accountant Member in his order pointed out certain circumstances which acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inappropriately invoked and therefore those additions could not be sustained. According to him, if the explanation of Smt. Nirmalabai Inani was not satisfactory, then the matter should have been taken up for assessment in her hands but certainly not in the hands of the assessee. For this view he relied upon a decision of the Punjab and Haryana High Court in Shiv Charan Dass v. CIT [1980] 126 ITR 263, wherein it was held by the Punjab and Haryana High Court that if the assessee's explanation was not accepted the presumption that the amount was from undisclosed sources could be raised only against the major daughters and not against the assessee himself. Thus, the learned Accountant Member deleted all these additions and as a corollary, the interest accrued thereon in all these assessment years, and allowed the assessee's claim in toto although as mentioned above he rejected the theory of receipt of gift from the paternal aunt of the husband of Smt. Nirmalabai Inani which was explained to be the source for the major deposits made in this case of about Rs. 56,000 appearing in the assessment years 1979-80 and, 1980-81. 7. The learned Judicial Member was of a totally different view. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stensible owner viz. Nirmalabai Inani had neither the means nor the capacity to invest the money in fixed deposits in banks. He did not believe the theory that Smt. Nirmalabai Inani was carrying on her own business in sarees "papads", "chudwa" etc. or that she brought a sum of Rs. 18,000 from her husband when she arrived at Secunderabad prior to the death of her father and discounted the theory of receipt of gifts by observing that it was an afterthought trotted only to probability her version, which was false. He, therefore, held the entire amount as belonging to the deceased held benami in the name of Smt. Nirmalabai Inani and, therefore, they were correctly added under section 69 as the income of the assessee from undisclosed sources. 8. I have heard at great length the learned counsel for the assessee Shri A. Satyanarayana and the learned Departmental Representatives S/Sri Ashok K. Aneja and K.K. Viswanatham. After carefully considering their arguments, perusing the records and going through the orders of my learned colleagues And those of the departmental authorities, my inclination is to agree with the view expressed by the learned Judicial Member that these deposits could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts to find out whether a transaction was benami or not is to find out as to who enjoyed the usufruct of the investment and from where the consideration flowed. The bank transactions and the cash flow statement showed that the interest from these fixed deposits was partly utilised in getting further fixed deposits in her own name and partly applied for the personal use of Smt. Nirmalabai Inani. She had already admitted that the funds came out of her own resources and the bank statements proved that she enjoyed the usufruct and therefore these transactions could not be held to be benami at all. If at all the source for the deposit was traceable to the deceased assessee, it must be deemed to the gift made by the deceased to Smt. Nirmalabai Inani in the earlier years, in which case the interest accruing on those deposits was not available for inclusion in the assessment of the assessee because the gift was made to a married daughter. He took me through the various entries made in the cash flow statement in a bid to substantiate his contention that the moneys available were out of her own resources and nothing was traceable to the deceased assessee. He also submitted that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order under section 132(5) is to enable the Income-tax Officer to estimate the undisclosed income in a summary manner to the best of his judgment on the basis of such materials as are available with him to calculate the amount of tax on the income so estimated, to determine the amount of interest payable and the amount of penalty imposable, to specify the amount that will be required to satisfy any existing liability under the Income-tax Act and lastly and more importantly to retain in his custody such assets or part thereof as are sufficient to satisfy the aggregate amount of the tax, interest, penalty and existing liability arrived at as above. Since there is a possibility of making, a wrong estimate thereby depriving the assessee the user of the asset, an appeal has been provided under sub-section (11) of section 132 of the Income-tax Act, 1961 to the Commissioner (A). Thus when the purpose of an order under section 132(5) is only to retain the assets as are sufficient to meet the estimated, but not final, tax liability, that arose as a consequence of the materials found on search, it should not be presumed that those findings are conclusive and binding. He submitted that becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o time including from her paternal aunt as the source for the fixed deposits, the subsequent theory that she had a business of her own and the proof sought to be provided by way of returns filed under the amnesty scheme was only an invention to find an explanation for the deposit and could not be taken as true at all. He submitted by taking me through the cash flow statement that for the deposit of Rs. 9,000 made in Canara Bank on 21-3-1978, the immediate source shown was gift from paternal aunt received on 25-2-1978 of Rs. 4,000. In that year the opening cash balance as per cash flow statement was only Rs. 1,688 and if this Rs. 4,000 was taken out of account, there was not enough money for the deposit. While the cash flow statement shows the source as gift from paternal aunt, the explanation given was that this Rs. 9,000 came out of gifts at the time of marriage and thereafter on the occasions of birth of children etc. There was thus a contradiction in the explanation. Further both the learned Members have agreed categorically that the gift from paternal aunt could not be accepted. When gift from paternal aunt could not be accepted and when there was no disagreement between the Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account again to deprive her sisters from laying their hands upon it and therefore the explanation given by her that she was able to save out of her business, which was non-existent and the theory that she brought Rs. 18,000 from her place of residence to Secunderabad just before the death of her father was totally false. Defending the theory of benami as found by the learned Judicial Member, he submitted that there was no scope to consider gift at all because the ingredients necessary for the gift were absent and secondly there was no difference of opinion on that issue between the learned Members and it was not open to me as a Third Member to go into that field. He wound up his arguments by submitting that the view taken by the learned Accountant Member was insupportable and that the additions made should be sustained. The learned Senior Departmental Representative also addressed me. His argument was that applying the rule of evidence embodied in section 110 of the Evidence Act, it was the person, who was found in possession of anything who was to be supposed to be the owner and the burden of proving that he is not the owner was on the person, who affirms that he is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m as belonging to the deceased assessee and reiterated his submission that section 69 was wrongly applied in the case of the assessee because the assessee having died, he did not offer any explanation and when the person in whose name the fixed deposits stand came forward and admitted them as her own and gave explanation for the source, those fixed deposits could not still be taken to be the fixed deposits belonging to the assessee. If the explanation was found unsatisfactory, the amount should have been added in the hands of Smt. Nirmalabai Inani. The department having failed to establish the link was not justified in ignoring the material evidence. He therefore justified the view taken by the learned Accountant Member. 12. It was on a consideration of the above that I came to the conclusion that the view expressed by the learned Judicial Member is more appealable and acceptable than the view expressed by the learned Accountant Member. As rightly pointed out by the Departmental Representative the fact that some of the deposits were not included in the order passed u/s 132 (5) cannot be read as an acceptance on the part of the Revenue that those deposits belonged to Smt. Nirmalaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise the proceeds in discharge of the liabilities. Thus, the amounts retained is only a mode of recovery of the tax due and that does not mean that the amounts retained or released have anything to do with the income concealed or not concealed. Sub-section (4A) of section 132 raises certain presumptions in respect of books of account, documents, money, bullion, jewellery or other valuable articles or thing found in the possession of or control of any person in the course of a search. The first presumption is that such books of account, documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person and that the contents of such books of account and other documents are true. Even though this is a rebuttable presumption, the presumption available to the department is that the valuable article or thing found during the course of the search in the possession or control of any person shall belong to him. It is this presumption that enables the department to presume that they represented the concealed income of the assessee and then proceed to recover the tax out of the seized assets. This presumption is not only available for the purpose of passin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Representative with reference to the entries made in the cash flow statement. At one stage the learned counsel for the assessee had given up the cash flow statement as basis for his argument and preferred to rely upon original statement of Smt. Nirmalabai Inani given at the time of sworn deposition. Therefore nothing will or should turn upon the entries shown in the cash flow statement as proving the assessee's case. It is unanimous view of both the learned Members that much preference was shown by the deceased assessee to Smt. Nirmalabai Inani over his other daughters. The fact that the assessee was doting excessively on Smt. Nirmalabai Inani and her children was there for anybody to see, inasmuch as, he was not only maintaining her children and educating them by keeping them with him at Secunderabad and bequeathed all his properties to the son of Smt. Nirmalabai Inani to the entire exclusion of the other daughters and their children. From this fact it is quite normal and natural to infer that Smt. Nirmalabai Inani was the most favoured daughter of the deceased assessee. It is not necessary that the party appearing before the Tribunal should admit it. It is possible and permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement given by her, should also be taken as true and correct. If that is taken as true and correct, then where is the scope to say that she was having business yielding high income. Therefore the business of preparation of "papad" and " chudwa" is only a story got up to build up an explanation for the fixed deposits made in 1986 in Canara Bank. To recapitulate the source for Rs. 14,000 and Rs. 9,000 was said to be marriage gift and gift thereafter. I have already discussed above with reference to the cash flow statement and also the position of the family that it was not likely that she could have received such huge gifts. The fixed deposit of Rs. 31,000 and Rs. 25,000 were attributed to the gifts received from the paternal aunt but this was rejected by both the learned Members unanimously and therefore that explanation is not available and there being no other explanation, it must be held that Smt. Nirmalabai Inani was notable to prove the source for the deposit of these two sums. So far as the deposits in Canara Bank are concerned, it was stated that it was out of her income from business but since I have held that there could not be any business carried on by her as to give h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of J.S. Parkar was approved by the Supreme Court in the case of Chuharmal. Therefore the learned Accountant Member in my opinion does not seem right in stating that section 69 was not properly applied in this case and that the proper place for its application was the case of Smt. Nirmalabai Inani. When he observed that the proper place for section 69 to be applied in the assessment of Smt. Nirmalabai Inani, by implication, he must be deemed to have considered the explanation of the source offered by Smt. Nirmalabai Inani for these fixed deposits, as unacceptable. If that was so, I can even say that there is no difference of opinion between the learned Members on the unacceptability of the explanation offered by Smt. Nirmalabai Inani, although I am not basing my conclusion on this aspect except that to suggest that even the learned Accountant Member was not fully in favour of accepting this explanation. I may also state that it was the salutary principle embedded in section 110 that was incorporated as a presumption in sub-section (4A) of section 132 and it was acting upon that presumption that the assessee was to be deemed as the owner of the fixed deposits foun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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