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TMI Blog1972 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... e-family for the assessment years 1959-60, 1960-61 and 1961-62, respectively, is justified in law ? 4. Whether, on the facts and in the circumstances of the case, the inclusion and assessment to wealth-tax of sums of Rs. 3,47,793, Rs. 3,18,667, and Rs. 3,57,826, respectively, the value of the share in Kaloogala Estate in the net wealth of the assessee's family, for the assessment years 1958-59, 1959-60 and 1960-61, respectively, is valid in law ? 5. Whether, on the facts and in the circumstances of the case, the inclusion of the share from the Kaloogala Estate with that of the assessee-family in the assessment of 1950-51 was not justified? The first four questions have been referred at the instance of the assessee and the fifth question at the instance of the Commissioner of Income-tax, Madras. The assessee is a Hindu undivided family and V. N. S. Sockalingam Chettiar is the karta of the family. It derives income from property, money-lending business at Rangiem in India and dividends from shares in companies as well as from business carried at Muar, Bathupahat, Kulakangsar in Malaya and at Kyanapyaw and Basein in Burma. In the course of assessment proceedings of Sockalingam Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16): 2. Testimony of the two other sons-in-law of Palaniappa Chettiar that Meenakshi Achi was given a dowry of Rs. 15,000. 3. A copy of the account of Meenakshi Achi in the books of a firm by name, N. V. N. Firm, Kyanapyaw, Burma, for the year Sukla (1929-30) showing a credit balance in her favour of Rs. 24,713. 4. Acknowledgment for money lent by her to certain parties in Rangiem Taluq. 5. Affidavit by Karuppan Chettiar and Nagappan Chettiar that the investments in Kaloogala Estate had come out of Meenakshi Achi's resources and that she had given money to them personally. 6. An affidavit dated Apri129, 1951,signed by Sockalingam Chettiar's second wife, Chintamani Achi, stating that she and her daughters had no title or interest in the Kaloogala Estate, that Meenakshi Achi along with Nagappan Chettiar and Karuppan Chettiar purchased the Kaloogala Estate, that Meenakshi Achi paid for her share out of the streedhanam money and that the share income of Kaloogala Estate belonged to the sons of Meenakshi Achi. 7. A letter of the assessee's auditor, dated November 19, 1951, in reply to an enquiry made by the Income-tax Officer dated October 24, 1951, in which it had been stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined by the assessee on November 20, 1958, through his counsel and elicited that their statements that the share in Kaloogala Estate belonged to Sockalingam Chettiar was only a hearsay and that they did not know it personally. When the earlier statement dated June 23, 1951, made by Nagappan Chettiar was put to him in cross-examination he had stated that he said so because Sockalingam Chettiar required him to state like that and that since he was his paternal uncle he had obliged him. He asserted that there was no misunderstanding between him and Sockalingam Chettiar. The assessee was examined on December 6, 1958. He was not able to give any definite information as to the extent of the business carried on by his father-in-law but asserted that his wife was given Rs. 7,000 and odd as streedhanam and Rs. 5,000 as seermurai and that his wife invested the same in some firms through the assessee's elder brother, Valliappa Chettiar. On February 26, 1959, Karuppan Chettiar, who was a partner in Kaloogala Estate and who was also the son in-law of the assessee was again examined. In his evidence he stated that Sockalingam Chettiar paid the share capital for the purchase of the share in Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposed that he never took money personally from India from his mother- in-law and he received the money only in Ceylon by drafts as stated above. He also referred to the circumstance that no estate duty had been paid in Ceylon on the death of Meenakshi Achi. The Income-tax Officer continued the investigation and some time in March, 1961, got the Oor account and the Muar account of Nagappan Chettiar, the brother of Sockalingam Chettiar. It was seen from these accounts that from the firm of Nagappan Chettiar at Muar some monies were remitted from and out of the amounts payable to the assessee and these amounts were sent by two drafts for Rs. 46,750 and Rs. 31,250. These accounts also showed the contribution of Nagappan Chettiar himself of a sum of Rs. 1,24,500 towards the cost of Kaloogala Estate. The account books produced also were produced before the Income-tax Officer, Pudukottai, on March 4, 1951, and they bear the seal of the Income-tax Officer. These facts were put to the assessee and he was given an opportunity to examine Nagappan Chettiar but the assessee did not avail of the opportunity. By a letter dated March 26, 1961, signed by his authorised representative, Sockalinga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment of the assessee-family was justified. For the same reasons, he also dismissed the appeals filed against the wealth-tax assessment orders. The assessee preferred further appeals to the Appellate Tribunal which disposed of all the appeals by a common order dated September 21, 1964. The Tribunal held that the assessee did not disclose all the primary facts in connection with the original assessments for the years 1950-51 to 1953-54, that Sockalingam Chettiar studiously kept back the facts as to how the payments were made for this purchase and that Karuppan Chettiar knew that the payments were made by drafts from Muar from and out of the amounts belonging to the family of the assessee, but he was made to say that he received the amount in cash from Meenakshi Achi. Thus, in the view of the Tribunal, the assessee put the department on a wrong scent altogether. The Tribunal was also of the view that the assessee could have proved his version by production of his foreign books, but he had satisfied himself by stating that the books were not available. On these facts, the Tribunal came to the conclusion that the assessee failed to disclose very material facts which had a be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings for 1949-50. The material fact that was necessary for the determination of the question was: "What was the source of money for the purchase of the share in Kaloogala Estate ?" The assessee had stated that Meenakshi Achi's money was utilised for the purchase and not the joint family funds and in support of that statement he had produced evidence to show that Meenakshi Achi was possessed of means and also affidavits from the partners of Kaloogala Estate, the daughters and the second wife of Sockalingam Chettiar and two other sons-in-law of Palaniappa Chettiar, the father of Meenakshi Achi. The assessee also produced the Ceylon assessment orders in the name of Sockalingam Chettiar as " individual " for the assessment years 1945-46 to 1947-48. Sockalingam Chettiar was also not required to produce the account books of Kaloogala Estate at that time if the Income-tax Officer was not satisfied with his statements. The fact as to whether the amount was sent by cash or draft was immaterial. Further, Karuppan Chettiar and Nagappan Chettiar are not expected to know from which source the purchase consideration came and even the latter statements of these two individuals were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ockalingam Chettiar in Muar. No explanation was offered by Sockalingam Chettiar in respect of this statement. Karuppan Chettiar was also not cross-exammined on these statements by Sockalingam Chettiar. This fact was within the knowledge of the assessee at the time of the original assessment proceedings but he kept it back and, according to Karuppan Chettiar, he was asked by Sockalingam Chettiar to state in the original assessment proceedings that he received money in cash from Meenakshi Achi. The assessee also did not produce his account books to disprove the statement of Karuppan Chettiar. The evidence that the consideration was received by Karuppan Chettiar from Muar by way of drafts and not in cash from Meenakshi Achi had a very important bearing on the question whether the share in the Kaloogala Estate was purchased from and out of Meenakshi Achi's funds, because, admittedly, Sockalingam Chettiar had no individual business or account of his own in any foreign place and all the business done by Sockalingam Chettiar in foreign parts belonged to the joint family of the assessee. Therefore, the funds remitted from Muar could not have come from and out of the individual account of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following passage in Calcutta Discount Co. v. Income-tax Officer: "The position, therefore, is that if there were in fact some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have a material bearing on the question of 'under assessment', that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notices under section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non-disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax Officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non-disclosure of material facts. Clearly, it is the duty of the assessee who wants the court to hold that jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been such non-disclosure." Again, the Supreme Court reiterated the same principle in the decision in S. Narayanappa v. Commissioner of Income-tax and held: "But the legal po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicates that the consideration for the purchase of the share in the estate should have come out of the funds of the assessee-family. The entries in the Oor account (headquarters account) and the Muar account of Nagappan Chettiar which were produced before the Income-tax Officer in March, 1961, disclosed that a sum of Rs. 31,250 equivalent to 20,000 Muar dollars was given to Sockalingam Chettiar by Nagappan Chettiar's firm at Muar and the same was sent by Nagappan Chettiar's firm at Muar and the same was sent to Karuppan Chettiar by Nagappan Chettiar himself by draft. Another sum of Rs. 46,750 on account of Sockalingam Chettiar was sent by a draft on the Imperial Bank, Tiruchirapalli, from Muar, to Karuppan Chettiar at Ceylon. There are corresponding entries both in the Oor account and the Muar account. It was admitted that there was no individual account in any foreign parts and that all the business in the foreign parts belonged to the assessee-family. The books of Nagappan Chettiar were produced before the income-tax department in March, 1951, and they bear the seal of that department. The assessee also had not categorically impugned these entries and had not also offered any ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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