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TMI Blog1980 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee approached the High Court by a petition under s. 256(2) (I.T. Case No. 49/73). The court by its order dated October 10, 1975, directed the Tribunal to refer the following three additional questions for the opinion of the High Court: "1. Whether the Income-tax Appellate Tribunal was correct in law in holding that the amount of marriage expenditure estimated by the Income-tax Officer to have been incurred by the assessee during the year constituted income taxable under the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the addition of Rs. 10,000, as income from undisclosed sources, was justifiable in law? 3. Whether the finding of the Tribunal that the assessee had incurred additional expenditure of Rs. 10,000 for his marriage which had been met out of his undisclosed income of the previous year was based on any evidence ? " This additional reference has been numbered as I.T.R. No. 47/76 and it does not involve any further statement of facts but merely contains reference to the three questions which have been referred to the High Court under its directions dated October 10, 1975. The entire controversy in these two references ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provided to him by any of the employers-companies, the expenditure on such employees was said to have been met out of the petty withdrawals of Rs. 600 a month from January to March, 1970. This was in regard to the domestic expenditure. The ITO also pointed out that, keeping in view the financial status of the family, the assessee or his wife must have spent a lot of money during honeymoon and other occasions. The details of the expenditure for which the sum of Rs. 10,000 was utilised was, not furnished by the assessee. The officer felt that the above amount could not be said to be reasonable to meet the expenditure on " at Home ", customary clothings for the bride, bridegroom and other near relations, bands and other numerous expenditure required to be spent at the time of the marriage of a highly placed person of a very well-to-do family. In the light of the above discussion, the ITO concluded that the assessee must have spent substantial amounts towards domestic expenses and marriage expenses which had not been properly accounted for. He rejected the plea of the assessee that the domestic expenses during the previous year were quite comparable with those shown in earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even a moderate marriage involves an expenditure exceeding Rs. 10,000, the AAC was of opinion that the expenses shown at Rs. 10,000 by debiting the account of J. Dalmia were not enough to meet the marriage expenses. Even otherwise, considering that the assessee himself was a well to do person he must have made some presents to his wife, apart from the gift of jewellery. In view of the meagre expenditure shown on marriage it would be reasonable to infer that the expenditure incurred on marriage was not fully accounted for. In the view of the AAC, an amount of Rs. 10,000 could be taken as representing understatement of expenditure incurred on marriage. He, therefore, upheld an addition of Rs. 10,000 to the income declared as income from undisclosed sources. Both the assessee and the ITO preferred appeals to the Income-tax Appellate Tribunal. On behalf of the department, it was contended that the AAC was not justified in taking into consideration withdrawals of persons other than the assessee as there was no evidence about there being a common pool among the members of the family and further that it was ridiculous to suggest that the expenditure on the marriage of a boy in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on account of unexplained expenditure for the year in question. " On the above reasoning, the Tribunal dismissed both the appeals before it by its order dated August 8, 1972. On September 14, 1972, the assessee filed an application seeking a review of the order of the Tribunal. But this application was dismissed by the Tribunal on December 18, 1972. In this application for review, apart from certain legal contentions regarding the jurisdiction of the ITO to make a subjective estimate of personal expenditure it was submitted that even if the marriage expenses had really been larger as estimated by the ITO, the question of an addition, if at all, would be relevant only in the assessment of the joint family. It was pointed out that so far as the reception was concerned the assessee had engaged a confectioner to prepare the snacks at his residence. There was a Guest Control Order in force and there were severe restrictions on the items to be served at such functions. It was urged that these aspects have been overlooked by the Tribunal while disposing of the appeals. The Tribunal, however, held that there was no case for reviewing the earlier order that had been passed after conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws (Amendment) Act, 1975. But that apart, even if s. 69C is taken into account, the learned counsel argued, the position would not be different. He pointed out that the provisions of ss. 68, 69, 69A and 69B come into operation when the ITO finds tangible material like cash credits, investments and other items of wealth belonging to the assessee which the assessee is unable to explain. On the same analogy, it is contended that s. 69C would come into operation only when there is direct and tangible evidence that the assessee has incurred a certain amount of expenditure but he offers no explanation about the source of such expenditure or part thereof. Learned counsel submitted that, even if s. 69C is taken into account, the statute does not authorise the ITO to make an addition on the basis of a fictional or estimated item of expenditure. Learned counsel submitted that when the assessee comes forward with entries in the accounts of his father and the joint family which show that a sum of Rs. 11,500 had been spent in connection with the marriage, the ITO could not, without any positive material and without discovering any specific or concrete instance of any expenditure incurred but no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition exceeds the amount recorded in the books of account maintained by the assessee and the assessee offers no explanation about such excess or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. The principle behind this section is equally valid where the expenditure incurred by the assessee is, not for the purpose of acquiring bullion, jewellery or other valuable articles but for some other purposes. It is well known that the whole catena of sections starting from s. 68 have been introduced into the taxing enactments step by step in order to plug loopholes and in order to place certain situations beyond doubt even though there were judicial decisions covering some of the aspects. For example, even long prior to the introduction of s. 68 in the statute book, courts had held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was, in the opinion of the ITO, not satisfactory, the sums so credited could be charged to inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence between a case where there is direct proof (such as, say, discovery of a separate set of books in which they are recorded) of the actual amount of the expenditure incurred and a case where the circumstances clearly justify an inference that there must have been such excess expenditure but the amount thereof can be only estimated for want of direct evidence. In the course of the arguments, we put to the counsel for the assessee the extreme example of a case where an assessee has failed altogether to account for any expenses at all, say, on his daughter's marriage, blandly denies having spent anything at all himself and furnishes no explanation as to how he performed the marriage or who else met the expenditure. In such a case, we think, an inference would certainly be justified that marriage expenses must have been incurred by him but have not been accounted for. Such an inference, based on the rules of evidence relating to normal and natural presumptions of fact and the onus of proof of matters which are within the special knowledge and control of one of the parties, would be legally sound in assessment proceedings, though it may be debatable as to how far it would be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torily accounted for. For instance, the ITO can collect information regarding the rent or hire charges for the place where the marriage was celebrated, the nature of the shamiana that was put up and the usual cost of putting up such a shamiana, and the expenditure which should have been normally incurred in respect of other items like band, reception, bridal clothings and so on. However, we are unable to agree with Mr. Sharma that such a detailed analysis and investigation is a must in every case. In our opinion, the nature and extent of the material would depend upon the extent of the estimate and the circumstances of each case. For instance, in the example which we have already given, suppose the ITO, after referring to the failure of the assessee to account for any expenses at all on the marriage of his daughter, estimates such expenditure, taking a liberal view, at Rs. 5,000, we do not think that one would be justified in calling for a meticulous basis for such an estimate. In the social and economic conditions prevailing in this decade, an estimate of Rs. 5,000 in respect of the marriage of a daughter is so reasonable prima facie as to call for no elaborate justification. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 a couple of days before the marriage. There is, therefore, reason to conclude that this entry cannot explain the entire expenditure on the marriage. The assessment order gives the details of the financial status of the assessee and the members of his family. Apart from the income-tax returns (the weight of which Mr. Sharma sought to belittle by referring to the income-tax payable thereon) the ITO has pointed out that the total wealth of the assessee and his wife comes to Rs. 20,61, 111 excluding jewellery and many other items of exempt assets. The assessment order refers to a claim of the assessee to have gifted jewellery of the value of Rs. 49,983 to his wife. The Tribunal has pointed out that the assessee's mother was stated to have gifted jewellery worth Rs. 1 lakh to the bride It is not denied that there was a reception after the marriage but it was stated in the application for review that for the reception a confectioner was engaged to prepare the snacks at the residence of the appellant. It was also suggested that because there was a Guest Control Order in force, the expenditure incurred on the reception could not have been considerable. In our opinion, these contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawal of Rs. 11,500 on the eve of the marriage. We have, therefore, come to the conclusion that, though it would be satisfactory and desirable as a general rule that in such cases there should be a definite and tangible basis for the estimate, the estimate in the present case upheld by the fact-finding authorities cannot be said to be capricious, arbitrary or without basis. This leaves for consideration one further question which arises in the peculiar facts and circumstances of the present case and that is whether assuming that the expenditure on the marriage was not Rs. 11,500 as claimed by the assessee, but Rs. 10,000 more, there is any material for coming to the conclusion that the extra expenditure must have been incurred by the assessee. That is where, we fear, there is no material and the assessee would be entitled to succeed. The assessee is a young man who has, we are told, just come out of college and who had joined his first employment after the marriage. He is a member of the joint family consisting of his parents and others which is very well to do and financially well off. No doubt, when the assessee was married, the expenditure would be, and admittedly was, met by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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