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TMI Blog1988 (7) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... h operation the assessee was found in possession of cash amounting to Rs. 1,05,000; and gold ornaments valued at Rs. 2,40,090. The gold ornaments were, however, later on released to the assessee as per orders made by the ITO under section 132(5) as well as the order made under section 132(12) by the Commissioner of Income-tax. With regard to his possession of Rs. 1,05,000 the assessee had denied his ownership therein and had contended that a sum of Rs 45,000 out of the aforesaid sum of Rs. 1,05,000 belonged to S/Shri Rasiklal Mohanlal, Mohanlal Parbat and Hirji Parbat in equal shares and the rest of the amount of Rs. 60,000 similarly belonged to S/Shri Kantilal Devraj, Devraj Shamjid, Prabhudas Devraj and Bhagwanji Devraj in equal shares. The statement of the assessee to that effect was recorded on 27th August, 1981 under section 132(2) of the Act. 3. At the assessment proceeding the assessee was required to explain the possession of Rs. 1,05,000 by him on 27th August, 1981. The assessee tried to explain the possession of the said money with him on 27th August, 1981 on the lines indicated above and also relied upon the affidavits of the persons concerned as also the statement rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal, who was present could have straightway deposited his money in the bank account. (iii) Another circumstance which has to be remembered is that these persons are closely related to the partners of M/s. Jagdish Export Inds. In fact, one of them was an employee of M/s Jagdish Export Inds. In view of these facts, it would appear that the story of intended deposits was made up only to back up the statement made by the assessee for explaining possession of a portion of the cash of Rs. 1,05,000." The ITO, therefore, added the sum of Rs. 1,05,000 to the total income of the assessee under section 69A of the Act. 4. The assessee approached the CIT (A) in appealed. The learned CIT (A) examined the entire evidence on record quite elaborately and objectively and found sufficient force in the contention of the assessee. After having critically examined the matter before him the learned CIT (A) came to the conclusion that the amount of Rs. 1,05,000 found in possession of the assessee during the course of search operation under section 132 on 27th August, 1981 was not of the ownership of the assessee himself but in fact belonged to the seven persons as named above. The learned CIT (A) fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t their income from the land had enabled them to save Rs. 45,000 in the case of Rasiklal Mohanlal, Mohanlal Parbat and Hirji Parbat and Rs. 60,000 in the case of Kantilal Devraj, Devraj Shamji, Prabhudas Devraj and Bhagwanji Devraj the learned CIT (A) should have considered that in computing the agricultural income no concession was given to the expenditure incurred in connection with raising the crops. Mr. Banthia further urged that it should not be lost sight of that none of the seven persons were having any deposits in any bank and, therefore, it could be legitimately inferred from that circumstance that they were having no savings at all. It was also submitted that if the family of Kantilal Devraj was having sufficient earnings from agriculture there would have been ordinarily no necessity for two members of that family, Kantilal Devraj and Bhagwanji Devraj serving Jagdish Oil Industries, Junagadh and Jagdish Cake Industries at Baroda for petty salaries. Mr. Banthia thus asked us to disbelieve the story of ownership of the money seized from the possession of the assessee on 27th August, 1981, as being vested in the seven persons named above. Mr. Banthia stressed that in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to show that two of them were residing in Junagadh itself. If the ITO doubted the version given by the assessee in his statement dated 27th August, 1981 he could have very well summoned at least the said two persons who resided in Junagadh and could have been readily available to him. But that was not done. It was after some time that the ITO had begun to doubt the version given by the assessee on his statement dated 27th August, 1981 whereupon the assessee had filed the affidavits of all the seven persons. Not satisfied with the version given by the seven persons, and which fully corroborated the version of the assessee given in his statement dated 27th August, 1981, the ITO issued summons to all the seven persons and examined them on oath. All the seven persons stood the test of cross-examined by the learned ITO and fully supported the version given by the assessee. Not only that they had stated on oath that they were the owners of the money found in the possession of the assessee on 27th August, 1981 but also that they supported their version by producing the extracts from revenue record as also the bills of sale of agricultural produce from their land copies of which are file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other valuable article should not be recorded in the books of accounts, if any, maintained by the assessee for any source of income; and, (iii) the assessee had failed to offer any explanation about the nature and source of acquisition of the money, billion, jewellery or other valuable article or the explanation offered by him is found unsatisfactory in opinion of the ITO. When all the above three ingredients are established in a given case, then the provisions of section 69A would stand attracted. It means that in orders to attract the provisions of section 69A the revenue shall have, prima facie, to prove all the three above ingredients. That having been done there would arise a legal fiction by virtue of which the money and the value of the bullion, jewellery or other valuable article would be deemed to be the income of the assessee for such financial year. 9. It is noteworthy that section 69A is, in a sense, a deeming provision creating a legal fiction as the use of the words "may be deemed to be the income of the assessee" indicate. The question is as to what is the legal fiction created by this section and to what extent does it run. The words "may be deemed to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting in the assessee, would be sufficient for attracting the provisions of section 69A. But that is not obviously the intention of the Legislature. By the use of the expression "found to be the owner of" money, bullion, etc. the Legislature clearly intended that the ownership of the unacquainted and unexplained money, bullion, etc. should fall within the purview of section 69A and be deemed to be the income of the assessee for that financial year in which an assessee has been found to be in possession of such money, bullion, etc. It is no doubt true that the possession of money, bullion, etc. by an assessee in a financial year would give rise to a presumption of his being owner of that money, bullion, etc. This is so because of the principle enunciated in section 110 of the Evidence Act. Section 110 of the Evidence Act, which embodies that principle, is based on one of the Common Law principles which is to the effect that one generally owns the property one possesses and, therefore, proof of possession is presumptive proof of ownership. It can hardly be disputed that the rule of evidence as enunciated in section 110 of the Evidence Act can be invoked in any proceedings where the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee of such financial year. That legal fiction does not create any presumption to the effect that the assessee would also be deemed to be the owner of any money, bullion, etc. which he has been found in his possession in the financial year. No doubt the proof of possession of money, bullion, etc. by an assessee in a financial year would give rise to presumption of ownership of the assessee of that money, bullion, etc. but such a presumption cannot be claimed to have been created by the deeming clause of section 69A. Such a presumption arises by virtue of the principle of common law embodied in section 110 of the Evidence Act and which is in general applicable to the proceedings under the Act. It follows, therefore, that the initial burden of providing that the assessee was found to be the owner of any money, bullion, etc. in a financial year, so that such money, bullion, etc. may be treated as his income for that financial year, lies on the revenue. 13. Now coming to the merits of the case we find the position like this. It is an admitted fact that on 27th August, 1981 the assessee was found in possession of cash amounting to Rs. 1,05,000. By virtue of the principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those seven persons none of them could materially contradict the assessee on any relevant point. The only objection of Mr. Banthia that all the persons spoke in the same language which suggests that theirs was a cramped testimony and, therefore, it should be rejected, does not convince us. As has been pointed out by Mr. Patel all the seven persons had given all the informations to the ITO regarding their source of income. It may be noted that in the amount of Rs. 60,000 brought by Kantilal Devraj for investment with or through the assessee the source of income of the four persons concerned could hardly be doubted. Shri Devraj Shamji, the father and his three sons owned 60 bighas of land at village Bhimora, Taluka Upleta and 25 to 30 bighas of such land was irrigated land. The extract from the revenue record clearly show that they had sown agricultural produce in their land and the same had been sold through the commission agents viz. M/s Harsukhlal Co., Patel Gordhandas Narshibhai's Co. That apart Kantilal Devraj and Bhagwanji Devraj, as stated above, were also earning from other sources like service. This family could, therefore, have an amount of Rs. 60,000 in their possession ..... X X X X Extracts X X X X X X X X Extracts X X X X
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