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TMI Blog1971 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... shan Lal is the karta. Before the partition of the country, Roshan Lal carried on business at Lahore. Consequent upon partition, Roshan Lal migrated into India and started a jewellery shop in Delhi under the name and style of Roshan Di Hatti on March 31, 1948. The same day, i.e., March 31, 1948, a credit entry of Rs. 3,33,414 was made in the books of account of the assessee as capital of the business. Rs. 2,92,340 out of that represented the value of gold ornaments, gold bullion and precious stones, the details of which are as under: Rs. Gold ornaments 1,19,320 Gold Rawa, etc. 1,69,020 Precious stones 4,000 The balance of Rs. 41,074 represented cash. The assessee was never assessed to income-tax either at Lahore till 1946 or at Delhi. On receipt of a complaint that the assessee had made considerable income in gold and jewellery business, the Income-tax Officer initiated proceedings for the assessment year 1948-49 and subsequent years under section 34(1)(a) of the Act on March 28, 1957, in the name of Roshan Di Hatti (proprietor Roshan Lal). In the course of those proceedings, the assessee was called upon to explain the source of the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions, which, according to the assessee, arose out of the order of the Tribunal. When the matter came up for hearing before the High Court, the assessee pressed the application in respect of the following question only : " Whether the facts on the record and circumstances of the case justify the conclusion that out of the capital of Rs. 3,33,414 consisting of gold ornaments, gold rawa, precious stones and cash, a sum of Rs. 2,33,414 represented the income of the assessee from some undisclosed sources and whether there was any material for coming to this conclusion ? The High Court answered the question, referred to it, in the affirma, tive. It was observed that the allegation of partition could not be accepted since the Hindu undivided family had filed a return of its income in its own name even for the assessment year 1959-60, and that in the absence of an order under section 25A(1) of the Act, assessment on the Hindu undivided family was proper. The High Court also declined to call for a statement of the case on the other question under section 66(2) of the Act. The assessee then went up in appeal to the Supreme Court. Shah J. (as he then was), speaking for the court, obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, suffered from the same infirmity as had been pointed out by the Supreme Court inasmuch as the Tribunal had not set out its conclusion on the issue of fact as to whether there had in fact been a partition of the joint family and on that account the joint family had ceased to exist. The Tribunal was accordingly ordered to do the needful in accordance with the directions of the Supreme Court and file a supplementary statement. The Tribunal has thereafter filed a supplementary statement of the case. It has been found by the Tribunal that the Hindu undivided family had not disrupted, or ceased to exist, at any rate up to the date of the assessment in May, 1969. So far as question No. 1 is concerned, it is evident from the supplementary statement of the case that the various assessments have been made on the basis 'of the assessee's declaration in the status of a Hindu undivided family for the years 1948-49 to 1959-60. In the return filed for 1959-60 on August 3, 1959, after the alleged partition on March 31, 1958, the following note was made on behalf of the assessee : " N.B. As a result of partial partition the Hindu undivided family business ceased to exist on and with effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 23 : Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such. (3) Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family. " Dealing with the above provision, their Lordships of the Judicial Committee in the case of Sir Sunday Singh Majithia v. Commissioner of Income-tax , observed : " The section has nothing to say about any Hindu undivided family which continues in existence, never having been disrupted. Such a case is outside sub-section (3) because it is not within the section at all. No sub-section is required to enable an undivided family which has never been broken up to be deemed to continue. But it need not have the same assets or the same income in each year and it can part with an item of its property to its individual members if it takes the proper. steps." The proposition, in our opinion, is well established that section 25A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her and mother were stated to be more attached to Roshan Lal than to his brothers. In another declaration Roshan Lal stated that he had never been assessed to income-tax in Pakistan or in India till then and that he did not maintain any bank account in Pakistan except a current account in Sita Ram Bank and National Bank of Lahore. Roshan Lal added that there was no insurance of his household goods or stock-in-trade in Lahore. Prem Nath, brother of Roshan Lal, was examined by the Income-tax Officer on December 15, 1960. Prem Nath stated that their father in his peak days had between twenty to thirty thousands of rupees but the money was spent by 1940 because of his long illness. According to Prem Nath, their father gave Rs. 8,000 to the assessee for starting a shop in 1935, besides some amount by way of loan bearing nominal interest. During his lifetime the father used to pester the assessee for paying him rent of the shop but the assessee put him off by saying that there was not sufficient income to pay the rent. In 1940, at the instance of the relatives, the assessee started paying rent of Rs. 16 to Rs. 20 per month. According further to Prem Nath, Rosban Lal and his family, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to displaced persons. Regarding the affidavits of persons filed by the assessee it was observed that they had been obtained by influence as the language of the affidavits indicated that the aforesaid persons had been made to sign those affidavits. Note was also made of the fact that the assessee had not been assessed to income-tax in Pakistan or in India. After referring to the evidence brought on record, the Income-tax Officer held that the assessee's contention that he was able to put in assets to the tune of Rs. 3,33,414 out of the business carried on in Pakistan was untenable. The Income-tax Officer, accordingly, gave the assessee credit for Rs. 20,000 for assets brought from Pakistan. The balance of Rs. 3,13,414 was treated as the assessee's income from undisclosed sources. When the matter came up before the Appellate Assistant Commissioner, he took note of the fact that the assessee had transferred an amount of Rs. 12,094 from the Punjab National Bank account at Lahore to the same bank in New Delhi in June, 1947. The assessee had also transferred two amounts, one of Rs. 13,000 in his own name and another of Rs. 6,000 in the name of his wife from the Punjab National Bank, La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn nor was ever assessed to tax there. To say the least, this in any event shows that the assessee has not been very straight-forward in his dealings with the income-tax department. (b) The evidence produced is in the form of oral testimony of some persons coming from Pakistan. After careful perusal of such deposition of these gentlemen, we find that they are vague and were necessarily based on hearsay. They are of little evidentiary value in the absence of any contemporaneous primary evidence, particularly when the assessee did not himself furnish a declaration to the amount he had brought from Pakistan. We agree with the authorities below that the assessee has not properly explained and adduced necessary evidence in support of his contention that he had brought in Rs. 3,33,414 from Pakistan. This means that the origin and source of Rs. 3,33,414 remains unsubstantiated. (c) Coming to the quantum of income assessed, we find that the authorities below have given the assessee credit for rupees one lakh (Rs. 20,000 by the Income-tax Officer and Rs. 80,000 further by the Appellate Assistant Commissioner). This is a matter of guess and the assessee has not helped the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had accepted the stand of the assessee that he had been carrying on business in Lahore and had brought assets from that place, it should have also accepted his statement that the value of these assets was Rs. 3,33,414 and should not have drawn the line at the figure of Rs. 1,00,000. the Tribunal considered the various circumstances of the case and came to the conclusion that the Appellate Assistant Commissioner had given adequate consideration and relief to the claim of the assessee. The material question before the Tribunal was regarding the value of the assets brought by the assessee from Lahore and the mere fact that the Tribunal accepted the stand that the assessee had carried on business at Lahore and had brought assets from that place would not lead to the conclusion that those assets were of the value of Rs. 3,33,414 as claimed by the assessee. There was, in our opinion, nothing to prevent the Appellate Assistant Commissioner or the Tribunal to reject the claim of the assessee regarding the value of the assets brought by him, if, on consideration of the material on record, the stand of the assessee in this respect was considered to be not correct. Reference has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessable nature. We may in this context refer to the case of A. Govindarajulu Mudaliar v. Commissioner of Income-tax. In that case there were some credit entries in the books of a firm of which the assessee-appellant was a partner. The assessee furnished explanation in respect of the amounts of the credit entries but the explanation was rejected. Question arose whether the amounts in question could be considered to be receipts of an assessable nature. The question was answered in the affirmative in the following words: " Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appell ant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been, it was clearly open to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation shows that the receipt was not of an income nature, the department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected, the department can reject it and draw the inference that the amount represents income either from the sources already disclosed bythe assessee or from some undisclosed source. The department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence against the assessee." In Kale Khan Mohammad Hanif v. Commissioner of Income-tax Sarkar J. (as he then was), speaking for the court, observed : " It is well-established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Income-tax Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income." In Commissioner of Income-tax v. M.Ganapathi Mudaliar Sikri J. (as he then was), speaking for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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