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TMI Blog1978 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... income for the assessment year 1957-58, without any evidence or finding that the gold and jewellery sold had been purchased out of or represented the income of the relevant previous year ? " It may be mentioned that the reference arises from two appeals disposed of by the Tribunal by a common judgment inasmuch as the points involved were identical. The two assessees concerned were Gordhandas Hargovandas and Dharamdas Hargovandas, brothers, and the sum of Rs. 1,91,984 mentioned in question No. 1 pertained to the assessment of Gordhandas, whereas the other sum of Rs. 1,81,772 pertained to the assessment of Dharamdas. In this reference, we are concerned with the assessment year 1957-58, and the accounting year, so far as the disputed income is concerned, is the financial year 1956-57. The question which arose before the ITO, the AAC and the Tribunal, which the Tribunal disposed of by a common judgment, was whether the I.T. authorities, were justified in adding the sum of Rs. 1,91,984 in the case of Gordhandas and Rs. 1,81,772 in the case of Dharamdas as income from undisclosed sources. During Samvat years 2012 and 2013, the personal accounts of the two brothers disclosed large am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Hargovandas, the father of the assessees, of gold bars and guineas in the years 1939 and 1940. The extracts from the accounts for these years showed purchase of 1,500 guineas and gold bars weighing altogether about 4,074 tolas of gold. The aggregate sales of gold made by both the assessees in the various years including the material year came to 9,048 1/2 tolas. The relevant weight of gold that was required to be considered, therefore, was the difference between 9,048 1/2 and 4,074, i.e., 4,974 1/2 tolas. According to the assessees, this quantity of gold was obtained from the melting of gold ornaments left by Hargovandas. Various factors and arguments were examined by the Tribunal. We will not refer to these at this juncture inasmuch as it will become necessary to examine the entire approach of the Tribunal and the factors it has considered in some detail in view of the first question which has been referred to us. The factors, however, which were considered and the arguments which were advanced on behalf of the assessees before the Tribunal appear to have been well summarized in paras. 5 to 12 of the statement of case. After examining the entire evidence, the Tribunal uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he would not have with him considerable jewellery and other gold ornaments at the time of his death. It was submitted that it would be perverse to hold that the entire amount of gold in his possession would be the gold bars and the guineas purchased by him during the years 1939 and 1940 as mentioned earlier, viz, 1,500 guineas and 4,074 tolas of gold. We were similarly referred to the will of Harkorbai, the mother of the two assessees, who died on 10th March, 1941. Her will, however, is one made on, 10th February, 1934. In cls 4, 5 and 8 of the said will, which is also in Gujarati (annex. E-5), there is reference to gold, silver, diamonds, rubies and emerald ornaments. The same submissions were made in her case as were made in the case of Hargovandas, and we are invited to hold that at the time of their respective deaths Harkorbai and Hargovandas must have left considerable quantity of jewellery and gold ornaments which must have been inherited by and came into the possession of the two assessees. Since we are considering what may be referred to as a positive piece of evidence, we may now refer to details of the melting of gold and details of gold sold by the two assessees. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales by Dharamdas of 4,211 1/2 tolas of gold and by Gordhandas of 4,837 tolas of gold. This brings the quantity of gold sold by the two brothers in all these years, and, there are four such years, to 9,0481 tolas. As admitted, Hargovandas had purchased 4,074 tolas of gold in the two years 1939 and 1940, which amount was shown in his personal books of account. We have., therefore, to consider the source from which the two brothers could have obtained the balance quantity of gold of the weight of 4,974 1/2 tolas. As stated earlier, it was the assessees' case that there were certain gold ornaments which they had inherited from their parents. These ornaments were got melted at the two refineries and gold bars got prepared as disclosed in the certificates or memos issued by the refineries. These were the bars which were subsequently sold to various bullion merchants, whose purchase memos were produced and the proceeds of these sales were taken in the two years to the personal books of the assessees in the first instance, of which large portion was thereafter taken to the partnership business. It may be pointed out that the assessees had themselves made certain purchases personally of je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations between the two brothers. The Tribunal thereafter refers to the will of Harkorbai and the brief provisions regarding the ornaments made therein. From these facts to be found in paras. 3 to 7 of the order of the Tribunal it is not possible to say that any aspect concerning the financial position of Hargovandas or the wills left by Hargovandas and Harkorbai have been omitted from consideration by the Tribunal. It was very vehemently urged that it was impossible for any reasonable person to hold that Harkorbai and Hargovandas left no other jewellery or ornaments (apart from 4,074 tolas of gold and 1,500 guineas). Whether any thing was left, and, if so, of what value or what description or what were the items of jewellery and gold existing at the time of death of these two persons cannot be decided on such considerations of financial ability or status or the social strata to which these persons belonged. It was pointed out to us on behalf of the assessees that if it is assumed that ornaments weighing about 4,900 tolas of gold were required to be prepared in the years 1920 to 1930 when the prices of gold were low and in which years Hargovandas had established a mill at Bhavnagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gold in the shape of ornaments was supposed to have been left to the assessees and inherited by them. Once the question of sale of gold had arisen (which sale was out of the gold for which there was some specific mention in the father's books of account), would it not be appropriate and natural for the assessees to make an inventory of the other items of gold, i.e., ornaments in their possession, and inform the ITO that apart from this gold there was other gold in the form of ornaments or jewellery which also they had inherited and which was not being reflected in any books of account? The Tribunal was not referring to any obligation of the assessees to make the ITO aware of the inherited ornaments but was considering the simple question whether occasion had arisen for the assessees to refer to them in an appropriate manner. The Tribunal is obviously considering what would be the normal natural conduct on the part of persons placed in a situation similar to the one in which the assessees found themselves in that year. The observation made by the Tribunal does not appear to us to be inapposite ; rather it is the comment thereon made by Mr. Dastur that would seem to be unjustified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this person, G. Valiji, and ultimately hold that there should be no addition in respect of the sum of Rs. 79,500 but confirmed the addition of Rs. 75,000. After setting out all these proceedings for the assessment year, the Tribunal, from whose order the reference has been made to us, comments that there were total contradictions in the assessee's story before the I.T. authorities for this year at different stages. It is very clear from a proper perusal of this paragraph that the Tribunal was not considering as a relevant circumstance the fact that in the earlier year Gordhandas had produced some ankdas from G. Valiji which were of a suspicious character and which had come to the adverse attention of the Tribunal in other proceedings or that he had given contradictory explanations at different stages. It was not that the Tribunal was considering the past conduct of this assessee as somewhat improper and, therefore, inclined to dispose of the appeal for the year 1957-58 against him on the basis of his past impropriety. The Tribunal has, in our opinion, referred in detail to these previous proceedings to suggest that the question of sale of gold and gold ornaments had arisen earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese bars had been sold to various merchants. The certificates issued by the various refineries, to which we have adverted earlier, were shown to the Tribunal. The Tribunal at this point comments that there was nothing in the refinery certificates to show that any ornaments had been offered by the assessees for melting. This is a very pertinent comment and it cannot be regarded as irrelevant or immaterial or having no relevance to the question being considered by the Tribunal. Even at this stage when, according to the assessees, ornaments on different dates were submitted to the refineries for being melted and prepared in bars of different weights, it is curious that the assessees do not prepare any list of the items of jewellery which were sent for being melted from which the bars were to be prepared. The only argument which appears to have been strenuously canvassed before the Tribunal and which the Tribunal considers as not conclusive was based on the certificates of purity which ranged between 82.29% and 92.90%. According to counsel who appeared on behalf of the assessees, the bars which were got prepared and which were subsequently sold were not, therefore, pure gold or gold of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspects of the evidence available before it. It would be appropriate to set out this paragraph : " 20. The main point is whether the two brothers got as large quantity as 4,974 1/2 tolas in gold ornaments from their parents and as per their wills. There is no evidence from Hargovandas' accounts. The wills do not support any such large quantity. No inventory was made at any time. If the ornaments left were as large a quantity as contended, there should have been some inventory, some evidence. It cannot be said that there is any specific disclosure in any of the income-tax proceedings. Hargovandas was indeed a millionaire, but it could not be said that the purchase of the gold bars weighing 4,074 tolas was sufficient as a status symbol. It is not that people do not buy ornaments, but if they buy as status symbol in large quantities and not merely for the use of the family members, there would be some evidence somewhere of the purchases, the possession and the quantities involved. It was contended by Shri Palkhivala that the Tribunal, for the assessment year 1948-49, was influenced by the circumstance that the purchaser was G. Valiji and that in the present case there is no such pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by him, when he migrated from Lahore, in a sealed trunk which had been kept at Amritsar and later on deposited in a locker with a bank at Delhi. According to him, from June, 1947, till 30th March, 1948, neither the assessee nor R had any other business or means of income from which, the assets of Rs. 3,33,414 could be earned. Certain persons were examined to show that the assessee was having a large business in Lahore before migration and that they did not carry on any business till 30th March, 1948. The ITO treated the sum of Rs. 20,000 only as explained and the balance of Rs. 3,17,414 was brought to tax as income from undisclosed sources. On appeal, the AAC treated a further sum of Rs. 80,000 as explained. The Appellate Tribunal confirmed the order of the AAC. On a reference, the High Court held that there was material before the Tribunal on the basis of which the Tribunal could have come to the conclusion that the sum of Rs. 2,33,414 represented the undisclosed income of the assessee. The matter was thereafter carried in appeal to the Supreme Court by special leave. It was observed by the court that the findings of the Tribunal were clearly findings of fact and could be assail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) Ordinance, 1946, came into force. A certain explanation had been offered by the assessee which the Tribunal had rejected, holding against him. According to the High Court, the Tribunal rejected the explanation of the assessee on surmises. The opinion of the Tribunal, according to the High Court, was not based on any material but on fallacious reasoning, which was not accepted. Accordingly, the High Court found in favour of the assessee. It was pointed out by Mr. Dastur that in Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC), which was also a case of high denomination notes, the Supreme Court has referred to the decision of the Allahabad High Court in Kanpur Steel Co. Ltd.'s case [1957] 32 ITR 56, with approval (see pages 300-301). In Lalchand Bhagat Ambica Ram's case [1959] 37 ITR 288, the Supreme Court referred to its earlier decisions in Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736, Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775, Mehta Parikh and Co. v. CIT [1956] 30 ITR 181, Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 and Omar Salay Mohamed Sail v. CIT [1959] 37 ITR 151, and set out the proper approach to be adopted by the High Courts in such cases; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... textile mills. The explanation of an assessee as regards the origin or source of gold and ornaments may differ from case to case. Therefore, it cannot be said that any observation in any case pertaining to some argument or some aspect of the evidence in that case must be regarded as one which is universally applicable to all cases and binding in all matters irrespective of the facts under consideration. Further, as stated earlier, materials being considered by a fact-finding body, whose decision is final, normally cannot be considered in isolation, and the total cumulative effect thereof will be required to be considered. The proper approach to the decision of the Tribunal in the instant case is to ask : (1) whether there is any relevant material or aspect which it has ignored and failed to consider ? (2) whether there is any material on which it has based its decision which appears to be irrelevant ? (3) whether it has refused to accept the version or explanation of the assessees by reason of any prejudice against them? (4) whether any of the conclusions reached have been based on conjectures or surmises? (8) whether the probabilities have been properly considered and the onus pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion up to 1956-57, the matter will have to be judged on various pieces of evidence, from which it would have to be held whether the assessees'version is to be accepted or not. If all these pieces co evidence have been properly considered, none of any relevance ignored and none irrelevant emphasised, then, in our opinion, it would not be proper to reappraise the evidence for ourselves and hold that the Tribunal was in error in not accepting the assessees' claim in toto or at least partially. These observations are not to be taken to suggest that in our opinion there is sufficient material on record to hold that we, as a tribunal of fact, would have taken a view different from the one taken by the Tribunal. It would appear to us that the approach of the Tribunal is the one which is proper and the view taken by it is a possible one which could be taken on the material on record; and if that is so, then it is not possible for us to hold that the decision of the Tribunal is perverse or so erroneous that it is required to be quashed in the limited reference jurisdiction either under s. 66 of the Indian I.T. Act, 1922, or under s. 256 of the I.T. Act, 1961. Indeed, reference may be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a specific section, viz., s. 69A which was introduced by the Finance Act. 1964, which provided as follows : " 69A. Unexplained money, etc.- Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." Our attention was drawn to the observations to be found in J. S. Parkar v. V. B. Palekar [1974] 94 ITR 616 (Bom); these are summed up in the headnote as follows (p. 618) : " Though section 69A of the Income-tax Act, 1961, was brought on the statute book for the first time with effect from April 1, 1964, and was not in existence during the period of the assessment year, both sections 69 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74] 94 ITR 616 (Bom), to which reference was made at the bar, the court was not directly concerned with an assessment made prior to 1st April, 1964; the assessment before it was after that date and, accordingly it was observed that since at that time s. 69A was on the statute book, the rule of evidence incorporated in the section was required to be applied.. These observations cannot be taken to mean that the court decided that if the assessment had been made prior to 1st April, 1964, the rule of evidence contained in s. 69A was not applicable. Even if the court had expressly so stated, its decision would be obiter since the question did not arise for consideration before it. What we have stated must net be taken to suggest that in our opinion s. 69A would have to be applied to the assessment of the two assessees before us but that s. 69A contains a commonsense principle-an approach, which, if applied to any particular assessment, cannot be regarded as contravening any principle of law or any rule of evidence. To give an example, if an amount is brought into the assessee's business by the assessee and on being questioned the assessee gives some farfetched explanation, which is reje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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