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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 ..... , under section 34(1)(a) of the Indian Income-tax Act, 1922, are valid in law ? 2. Whether, on the facts and circumstances of the case, the inclusion and assessment to tax of the share income of Rs. 37,374, Rs. 52,203 and Rs. 28,369 from Kaloogala Estate in Ceylon in the hands of the assessee-family for the assessment years 1951-52, 1952-53 and 1953-54, respectively, are justified in law? 3. Whether, on the facts and in the circumstances of the case, the inclusion and assessment of the interest income of Rs. 9,839, Rs. 7,345 and Rs. 4,721 in the hands of the assessee-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in purchasing properties in the name of women or taking women as partners under the Ceylon law. In the end he stated that the share in the Kaloogala Estate and the income thereof belonged to his wife, Meenakshi Achi, only. The following further materials were also placed before the Income-tax Officer to show that Meenakshi Achi was possessed of adequate resources of her own and that the share in the estate belonged to her: 1. A cadjan leaf inscription recording that her father, Palaniappa Chettiar, had gifted her a sum of Rs. 15,043-8-0 on the 8th Ani, Pingala (June 21, 1916): 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 Apri12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her deposed that Meenakshi Achi came from a very ordinary family and with not much of resources and that, therefore, Meenakshi Achi could not have contributed any money for the purchase of the estate. The Income-tax Officer also examined on the same day, Chidambaram Chettiar, son of Nagappan Chettiar, who also confirmed the evidence of Nagappan Chettiar. On September 25, 1958, Karuppan Chettiar, the other partner in, Kaloogala Estate, was examined by the Income-tax Officer. He also affirmed the evidence of Nagappan Chettiar. Both Nagappan Chettiar and Chidambaram Chettiar, were cross-examined 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 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that no proof had been adduced that the funds alleged to have been loaned to several parties belonged to her and not to Sockalingam Chettiar. He also held that the money sent from Muar to India must have come out of the Hindu undivided family as Sockalingam Chettiar did not have any individual business of his own abroad. The Income-tax Officer further relied on the fact that the assessee never disclosed the important material relating to the despatch of the two drafts from Muar to Ceylon for the purchase of the share in Kaloogala Estate and that Karuppan Chettiar, the son-in-law, had 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he possession of the Income-tax Officer and that, therefore, the action of the Income-tax Officer in invoking the provisions of section 34(1)(a) was justified. He was also of the view that the latter statement of Karuppan Chettiar and the entries in the books of Nagappan Chettiar proved that the contribution towards Sockalingam Chettiar's share in Kaloogala Estate must have come from the assessee-family and that, therefore, the inclusion of the share income from Kaloogala Estate and the interest from the fixed deposits, which represent the sale proceeds of the share in Kaloogala Estate, in 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 payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment on February 29, 1960, the inclusion of the share income from the Kaloogala Estate for the assessment year 1950-51 could not be sustained. In that view the Tribunal ordered the deletion of the share income in the revised assessment for the year 1950-51. In view of the above findings of the Tribunal, the appeals filed against the wealth-tax assessments were also dismissed. In these references, the learned counsel for the assessee strenuously contended that the assessee had placed all the primary and material facts before the Income-tax Officer in the course of the original assessment 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 Meena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Muar firm and not by cash from Meenakshi Achi. To a specific question as to whether he received any amount by way of cash, he asserted that he did not receive cash and stated that his account books are the proof for receipt of the money by drafts from Nagappan Chettiar. In particular, Karuppan Chettiar stated that a draft for Rs. 50,000 from Muar on Hongkong and Shanghai Bank, and another draft for Rs. 31,250 on the State Bank, Tiruchirapalli, were received by him through Nagappan Chettiar and the draft for Rs. 31,250 represented a sum of 20,000 Muar dollars given to Nagappan Chettiar by Sockalingam 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to a correct conclusion. If the original statements were not true in full or in part it is certainly not a disclosure much less a true and full disclosure. Such disclosure as had been made in the original assessment proceedings would only tend to mislead the authorities. Further, the Income-tax Officer considered on these facts that there had been an omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It is not open to the courts to question the adequacy of the grounds. In this connection, we may usefully refer to the 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 wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me therefrom in the assessment of the joint family for the assessment years 1951-52 to 1953-54 was justified. The findings of the Tribunal on facts were these: Meenakshi Achi might or might not have had large sums of money. But there is paucity of evidence to support the case of the assessee that with Meenakshi Achi's funds only the share in the estate was purchased. Karuppan Chettiar's subsequent statements, dated September 25, 1958, and February 26, 1959, were acceptable in preference to his earlier statement in the original assessment proceedings and this evidence of Karuppan Chettiar strongly indicates 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. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks were not available on February 29, 1960, when the reassessment under section 34 was completed in respect of the assessment year 1950-51. Of course, the evidence of Karuppan Chettiar was available even at the time of assessment for the year 1950-51. But a reading of the order of the Tribunal shows that that evidence of Karuppan Chettiar strongly indicated that the consideration for the purchase of the share in the Kaloogala Estate should have come out of the funds of the assessee-family. This evidence, by itself, probably, the Tribunal thought, was not enough to conclude that the consideration came only from the joint family funds. It is because of this, the Tribunal thought that complete evidence was not available on the day when the assessment for 1950-51 was completed and that, therefore, the share income from Kaloogala Estate could not be included in the assessment for the assessment year 1950-51. We are not persuaded to hold that the Tribunal was wrong in this finding. We, therefore, hold that the inclusion of the share income from the Kaloogala Estate with that of the assessee-family in the assessment year 1950-51 was not justified. In the result, we answer the first fou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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