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TMI Blog1996 (8) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... an currency and that he was also involved in illegal remittances, the officer of the Enforcement Directorate searched the first floor of the premises No. 34, Appu Maistry Street, Madras 1, wherein the assessee was present at the time of search. In the course of the search, the Enforcement Directorate found some notes, some slips of papers and Indian currency notes to the tune of Rs. 4,28,713. K. T. M. S. Mohamood who was found in the first floor of the premises at the time of the search, gave a statement before the Enforcement Directorate officials in his own handwriting that two persons from Bombay had earlier handed over to him a sum of rupees six lakhs, out of which a sum of Rs. 50,000 was passed on to one Kannan, Coral Merchant Street, and Rs. 49,000 was handed over to one Angappan of Sarathy and Co., Madras, and the balance remained for disbursement as per the instructions of one Gopal of Singapore. In the parallel proceedings to the action taken by the Enforcement Directorate under the Foreign Exchange Regulation Act, the Income-tax Officer made some independent enquiries and on the basis of the enquiries made came to the conclusion that the assessee had no proper explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been claimed to have been parted with by the assessee, i.e., Rs. 50,000 paid to one Kannan and Rs. 49,000 handed over to one Angappan. The assessee filed an appeal before the Appellate Tribunal, against the order of the Commissioner of Income-tax (Appeals) in sustaining the addition to the extent of Rs. 4,28,713 under "other sources", while the Department has filed cross-objections stating that the Commissioner of Income-tax (Appeals) should have sustained the entire addition. The Tribunal held that there is no case for sustaining even the addition of Rs. 4,28,713 as the assessee was not found to be the owner of the amount seized, but only a distributor of the amount on commission basis. According to the Appellate Tribunal, the possession of funds by the assessee was not certainly as the owner of the money, but also as a distributor of the money belonging to others. and that in such a situation, the provisions of section 69A of the Act would not be applicable. Before us, learned senior standing counsel appearing for the Department submitted that it is an admitted fact that the assessee was in possession of Rs. 4,28,713. This amount was recovered from the assessee. He is pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of the search. When the assessee was interrogated he said that he received a sum of Rs. 6 lakhs from Bombay and that he sent Rs. 50,000 to one Baskaran or Kannan of No. 108, Coral Merchant Street, Madras, through his brother-in-law, Jamal Mohamed, and Rs. 49,000 was paid to Angappan of Sarathy and Co., 21, Ramaswamy Street, Madras. In the course of the proceedings before the Income-tax Officer, Karaikudi, the assessee stated on November 16, 1966, that the first floor of No. 34, Appu Maistry Street, was used as a residence of one Amanullah Quaraishi with whom he had no connection whatsoever, that he went to the premises to visit his sick relations and at that time the officers of the Enforcement Directorate, after ascertaining that he was K. T. M. S. Mahamood, took him to the first floor where one Ibrahim was found. When he went there, Indian currency of Rs. 4,39,000 was found which was seized by the officers of the Enforcement Directorate. He told them that the amount did not belong to him, but they took him to the office and compelled him to give a statement as directed by them, on promise of immediate release from custody. Therefore, he gave the statement under compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is in possession of the undisclosed income, but he should also be the owner of the same. The assessee himself has admitted that he is in possession of Rs. 4,28,713. The point for consideration is whether the Department has established that the assessee is also the owner of Rs. 4,28,713. In a matter like this, under the provisions of section 110 of the Evidence Act, the onus is on the person, who is in possession of the money to show that he is not the owner of the same. Therefore, the burden is not on the Department to prove that the assessee is the owner of the amount found in the possession of the assessee. In Chuharmal v. CIT [1988] 172 ITR 250, the Supreme Court, while considering the provisions of section 69A of the Act, held "that all that section 110 of the Evidence Act, 1872, did was to embody a salutary principle of common law jurisprudence, viz., where a person was found in possession of anything, the onus of proving that he was not its owner was on that person. This principle could be attracted to a set of circumstances that satisfy its conditions and was applicable to taxation proceedings. The Supreme Court further held that the Tribunal had rightly treated the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that mere possession of the currency would not lead to the conclusion that the assessee is the owner of the currency. These views taken by the Tribunal were negatived by the Supreme Court in the decision reported in Chuharmal v. CIT [1988] 172 ITR 250. Admittedly, in the present case, the assessee failed to disclose, who is the person called Gopal, who is instructing from Singapore, for the distribution of the amount and who are the persons, who are in Bombay instructing the assessee to distribute the amount to the said two persons to whom the amounts were said to be disbursed. Admittedly, after distributing a portion of the amount of rupees six lakhs, the balance of Rs. 4,28,713 was admittedly in the possession of the assessee. The assessee failed to establish with cogent and convincing evidence that it does not belong to him. Under such circumstances, the Tribunal was not correct in stating that the sum of Rs. 4,28,713 cannot be assessed in the hands of the assessee under section 69A of the Act. Thus, considering the facts arising in this case, in the light of the decision cited supra, we hold that the assessee failed to establish that he is not the owner of the amount f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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