Income Tax Appellate Tribunal - Mumbai
Miss Rose Ben vs Assistant Commissioner Of Income-Tax on 20 June, 1997
Equivalent citations: [1998]65ITD57(MUM)
ORDER
M.V.R. Prasad, A.M.
1. These are cross appeals by the assessee and the department directed against the order of the CIT (Appeals) dated 8-9-1994 for the assessment year 1988-89. The grounds taken by the assessee read as follows :-
"1. The learned Commissioner of Income-tax (Appeals) erred in confirming the addition to the income of the appellant on account of unexplained Investment.
2.1 The learned Commissioner of Income-tax (Appeals) erred in holding that re-opening was proper and valid.
2.2 The learned Commissioner of Income-tax (Appeals) failed to appreciate that mandatory condition for initiating and completing reassessment proceedings were fulfilled.
2.3 It is submitted that on the facts and circumstances of the case and in law no reassessment proceeding could have been initiated or completed.
3.1 The learned Commissioner of Income-tax (Appeals) erred in holding that the appellant is owner of the gold bars seized from her person and baggage.
3.2 It is submitted that in the facts and circumstances of the case and in law the appellant could not have been held to be the owner of the gold bars.
4.1 Without prejudice to the above, the learned Commissioner of Income-tax (Appeals) erred in holding that the appellant is not eligible for set off of the goods seized by the custom authorities against the addition made.
4.2 The learned Commissioner of Income-tax (Appeals) failed to appreciate that there is no condition for allowability of business loss that the business must be a continuing one.
4.3 The learned Commissioner of Income-tax (Appeals) failed to appreciate that even one single venture can be deemed to be business.
4.4 It is submitted that in the facts and circumstances of the case and in law the appellant should have been allowed deduction of gold bars seized as business loss."
The assessee has also raised an addition ground, which reads as follows :-
"The learned Assessing Officer is not justified in charging interest under section 217 of the Income-tax Act, 1961 since the assessment completed by him after the original assessment order was set aside cannot be termed as a "Regular Assessment" as defined in section 2(40) of the Income-tax Act, 1961 as held by their lordships of Bombay High Court in the case of M/s. French Dyes and Chemical (India) Pvt. Ltd. v. Commissioner of Income-tax [189 ITR 609 Bombay].
2. The grounds taken by the Department read as follows :-
"On the facts and in the circumstances of the case of the learned CIT (Appeals) XXIX Bombay erred in :
"Directing the Assessing Officer to value the 23 gold bars found in possession of the assessee at Rs. 5,41,723 based on International Market price in place of valuation made by the Assessing Officer at Rs. 8,55,494 on the basis of Local Market Price.
While giving such directions the learned CIT (Appeals) failed to appreciate that the addition was made as per provisions of section 69A of the Income-tax Act, 1961 and valuation was correctly determined on the basis of Local Market Price of the seized gold bars as stipulated in section 69A."
3. The facts of the case lie in a narrow compass. The assessee, during the relevant period, was an air hostess and she arrived in India as crew on Air India Flight No. 868 on 18-3-1988. On examination and search on her baggage, Customs authority had seized 23 gold bars of 10 tolas each and foreign currency of US Dollars 2018. The 23 gold bars weighing 2681.8 gms. were valued at Local Monetary Value (L.M.V.) of Rs. 8,55,494 and International Monetary Value (I.M.V.) of Rs. 5,41,723. The value of US currency was Rs. 26,234. The gold was a banned item and the assessee was carrying on the same without any valid document or permit for its legal import and the same was the situation with the US currency. Because of the illegality of the action of the assessee, the gold and the foreign currency were confiscated under section 111 of the Customs Act. Consequent to the information received from the Customs authorities, the assessment of the assessee was reopened under the provisions of section 148 of the Income-tax Act.
4. The assessee explained before the Assessing Officer that she was only a carrier and she had no ownership interest in the gold or the currency in question. She explained that as she did not purchase the same, she could not furnish the bills in support of the purchase of the same. She, however, did not name the owner of the seized goods.
5. As the assessee did not name the owner of the seized goods and as the goods were brought by her and were seized from her, the Assessing Officer held that she was the owner. As the source of the funds in the investment of gold and foreign currency was not explained, the Assessing Officer added the value of the gold of Rs. 8,55,494 (L.M.V.) and of the foreign currency of Rs. 26,234 as income under the head 'Other sources'.
6. The CIT (Appeals) confirmed the additions with a slight modifications. He relied upon section 110 of the Evidence Act and held that in the light of its provisions, the burden of proving that the assessee is not the owner of the gold and foreign currency in question is on the assessee. He observed that even though the Evidence Act does not apply to taxation proceedings, the taxing authorities are not precluded from invoking the provisions of this Act. Accordingly, as the assessee was not able to rebut the burden that lay on her regarding the ownership of the gold and the foreign currency, he held that the Assessing Officer was justified in making the additions being the value of the gold and the foreign currency. He however, held that what is required to be added is not Rs. 8,55,494 (L.M.V.) but only Rs. 5,41,723 (I.M.V.). He accordingly gave a relief of Rs. 3,13,771.
7. It was pleaded before the CIT (Appeals) that if the assessee were to be held as the owner of the gold and the foreign currency in question, the additions will have to be deleted because the gold and foreign currency were confiscated and the ratio of the decision of the Apex Court in the case of CIT v. Piara Singh [1980] 124 ITR 40/3 Taxman 67 would come into play. In support of this proposition, the assessee also cited the following other cases :
(1) CIT v. Ram Chander [1986] 159 ITR 689 (Punj. & Har.).
(2) Vishnu Kumar Soni v. CIT [1985] 155 ITR 34/23 Taxman 68 (MP).
(3) Addl. CIT v. S. Pichaimanickam Chettiar [1984] 147 ITR 251 (Mad.).
(4) Princess Maheshwari Devi of Pratapgarh v. CIT [1984] 147 ITR 258/[1983] 12 Taxman 220 (Bom.).
8. The CIT (Appeals) however, disposed off this contention with the following remarks :-
"4.2.1. The other contention of the learned counsel that the amount may be treated as business loss also cannot be accepted as no evidence has been filed that the assessee was carrying on business of smuggling of gold and the cases relied upon are on the presumption or based on the evidence on record that in these cases the assessee were carrying on business of smuggling of gold or were carrying on the business of gold where the gold smuggled could have been used. In this case such feature is totally absent and there has not been an iota of evidence that she was engaged in the business of smuggling of gold. Therefore, I hold that the cases cited by appellant are distinguishable on facts. On the contrary I am of the view that the case of the appellant is covered by the decision of Bombay High Court in the case of J. S. Parkar v. V. V. Palekar & Others [1974] 94 ITR 616."
9. Before us, the learned counsel for the assessee advanced a two-fold argument. Firstly, it is contended that the assessee is not the owner of the gold and foreign currency in question and she was only a carrier. It is also pleaded that if the department wants to hold that the assessee is the owner, the onus of proving the same lies on the department and the assessee cannot be expected to discharge such an onus. In this context, reliance is placed upon the decision of the jurisdictional High Court in the case of CIT v. Lalchand Bhabutmal Jain [1985] 151 ITR 360 (Bom.) and also of the Hon'ble Madras High Court in the case of Pichaimanickam Chettiar (supra). In support of the contention that the assessee was only a carrier, it is pleaded that she was functioning, during the relevant time, as an airhostess and it was impossible from her meagre income to make a substantial investment of about Rs. 5 1/2 lakhs in gold and foreign currency.
10. To a query from the Bench, the learned counsel gave the details of the incomes declared by the assessee in her returns for the assessment years 1984-85 to 1988-89 and they are as follows :-
1984-85 Rs. 25,018
1985-86 Rs. 22,780
1986-87 Rs. 31,029
1987-88 Rs. 28,700
1988-89 Rs. 57,634
It is also pleaded that for the assessment year 1988-89, the assessee disclosed gross commission receipts of the order of Rs. 96,000 and these receipts could indicate that she was only a carrier. We may mention at this stage that the assessee did not clarify at any stage the nature of commission receipts of Rs. 96,000. The commission was allegedly received from one Wonderworld Enterprises and the copy of the statement of accounts issued by this concern reads as follows :-
"Accounting Period : 1-4-1987 to 31-3-1988 Assessment Year : 1988-89 Statement of Account Miss Roslynd Ben of Beach Heaven II Taj Cake Shop at Juhu for the year ending 31st March, 1988.
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1988 1987
Feb. 25 to Cheque 25,926.80 April 1 by Bal. B/f 25,926.80
Mar. 31 to Sundry
Expenses 40% 47,970.05 1988
"To Balance Cf 48,029.05 Mar. 31 By Commission 96,000.00
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1,21,926.80 1,21,926.80"
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The assessee filed a copy of her income and expenditure account for
the year ended 31-3-1988 and it reads as follows :-
"Income & Expenditure Account for the Year ended 31-3-1988
To Sundry Expenses @ 40% 47.971 By Commission 96,000
(as per statement) received from
Wonderworld
To Compensation paid 12,000 Enterprises (as per certificate)
"Telephone charges 1,846
"Insurance 3,472
"Motor Car Expenses 8,500
"Expenses of Income
over Expenditure 22,211
--------- --------
96,000 96,000"
--------- --------
She computed her income as follows :-
"Salaries
Basic Salary Rs. 44,945
Add : House Rent Allowance Rs. 3,435
----------
Rs. 48,380
Less : Standard Deduction Rs. 10,000 Rs. 38,380
under section 16(i) ----------
Business Income Rs. 38,380
Net Income as per Income Expenditure A/C Rs. 22,211
Income from Other Sources.
Interest on S.B. A/C Rs. 6,367
----------
Gross Total Income under section 80B(5) Rs. 66,958
Less : Deduction under Chapter VIA
U/s 80(C)
P.F. & V.P.F. Rs. 2,653
L.I.P. Rs. 304 Rs. 2,957
U/s 80(L)
Interest On S.B. A/C Rs. 6,367 Rs. 9,324
------------
Net Taxable Income Rs. 57,634"
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11. In the light of the above details, the learned counsel for the assessee pleaded that, as already mentioned, the smallness of her income would itself indicate that she could only be a carrier and not the owner of the seized valuables. The learned counsel for the assessee further pleaded that in case the assessee were held to be the owner of the seized valuables, it has to be inferred that she was in the smuggling business and accordingly, the loss consequent to confiscation by the Customs Authorities of the seized valuables has to be allowed as a deduction from her income in the light of the decision of the Apex Court in the case of Piara Singh (supra) and also the other decisions cited before the CIT (Appeals).
12. Regarding the additional ground about levy of interest under section 217, the learned counsel for the assessee relied upon the decision of the Apex Court in the case of Modi Industries Ltd. v. CIT [1995] 216 ITR 759/82 Taxman 377 wherein "Regular Assessment" has held to mean only the original assessment made under section 143/144 of the Income-tax Act. The learned counsel did not advance any arguments on grounds 2 to 2.3 regarding re-opening of the assessment taken by the assessee in the appeal.
13. The learned D.R., on the other hand, relies on the order of the CIT (Appeals) and in particular has invited our attention to the decision of the Hon'ble Bombay High Court in the case of J. S. Parkar v. V. B. Palekar [1974] 94 ITR 616, cited supra, wherein it was held that the loss consequent to confiscation of gold because of the pursuit of an illegal activity is not allowable as a deduction. He has also invited our attention to para 4.2.1 of the order of the CIT (Appeals) which has been extracted hereinabove and pleaded that there is no evidence at all that the assessee was carrying on the business of smuggling and so the benefit of the decision of the Apex Court in the case of Piara Singh (supra) cannot be granted.
14. Regarding the additional ground in respect of levy of interest, the learned D.R. pleaded that the provisions of section 215(3) were introduced with effect from 1-4-1985 and these provisions are applicable for the levy of interest under section 217 in terms of section 217(2) and so, it is claimed that the decision of the Apex Court cited supra, does not apply to the facts of the present case.
15. Having regard to the rival submissions, we are of the view that the assessee is only a carrier, atleast in respect of gold. As per the ratio of the decision of the jurisdictional High Court in the case of Lalchand Bhabutmal Jain (supra), the onus is clearly on the department to prove that the assessee is the owner. The relevant portion of the head note of this decision reads as follows :-
"Held, that the Tribunal had not given the necessary and proper factual findings on the question that arose for determination before it. It had to decide on the basis of the available material, which was brought to its notice very properly by the Department, whether the assessee could be properly regarded as the owner of the gold found with him. In coming to this conclusion, the Tribunal would have to consider the conduct of the assessee, the different explanation given him from time to time, the contradictions in his statements and the truth or falsity in such statements as may be established by the material on record. Taking on overall view, the Tribunal would have to come to the conclusion one way or the other. The onus would be on the Department to establish that the assessee was the owner of the seized goods. The onus had to be established as in an ordinary civil trial and no more. The approach of the Tribunal was not the proper approach and was contrary to the modalities indicated in the decision in Gordhandas Hargovandas v. CIT [1980] 126 ITR 560 (Bom.)."
Section 110 of the Law of Evidence (The Indian Evidence Act, 1872) reads as follows :-
"110. When the question is whether any person is owner of anything of which he is shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner."
16. The above section gives effect to the principle that possession is prima facie evidence of complete title and anyone who intends to oust the possessor must establish the right to do so. This section, to our mind, appears to operate in a different situation, that is, where contenting claims are made about the title. It comes into picture when another person questions the ownership title of a person who is in possession of the property in question. To bring out the import of section 110 of the Indian Evidence Act, it may be contrasted with section 132(4A), which also contains a similar presumption. The relevant portion of this section reads as follows :-
"132(4A). Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed -
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature of every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person are in that person's handwriting and in the case of a document stamped, executed or attested that it was duly stamped and executed or attested by the person by whom it purports to have been executed or attested."
The presumption contained in section 132(4A) is only for the purpose of seizure of valuables in a search operation and the provisions of section 132(4A) have no application for assessment purposes. This section casts a burden on the person in possession of proving that he is not the owner. In contrast, section 110 of the Indian Evidence Act comes into play only when another person disputes the title of the person who is in possession. At any rate, we are bound by the decision of the jurisdictional High Court in the case of Lalchand Bhabutmal Jain (supra) and we have to hold that the onus of proving that the assessee is the owner of the seized valuables lies on the department. We find that this view also finds support in the decision of the Hon'ble Madras High Court in the case of S. Pichaimanickam Chettiar (supra). In this case, it was held that the assessee must be shown to be the owner of the asset to invoke the provisions of section 69A. It was also held that surrounding circumstances like running a small business in oilman stores would indicate that the assessee was not the owner. We do not find any material to hold that, atleast in respect of the gold, such onus is discharged by the Department. The Revenue authorities have simply come to the conclusion that the assessee is the owner on the basis of the bare fact that she was found in possession of the seized valuables. The details of her incomes extracted hereinabove and their smallness would not, to our mind, lend any credibility to such a conclusion. It is also important to note that she returned some income from M/s. Wonderworld Enterprises. No enquiries were made about the nature of this receipt or the antecedents of the concern. The name of the concern has a phonetic resemblance to the underworld. The disclosure of commission receipts would indicate that she is a commission agent or in other words, a carrier of smuggled valuables.
17. If, on the other hand, the assessee were to be held as the owner, we find that she has to be given the benefit of the decision of the Apex Court in the case of Piara Singh (supra). Even the other decisions relied on by the learned counsel for the assessee before the CIT (Appeals) support this view. The CIT (Appeals) sought to distinguish these decisions on the ground that there is no evidence that the assessee was in the business of smuggling. During the hearing, the learned counsel for the assessee pleaded that the seized valuables are found on the body of the assessee and the mode of carrying thereon itself would indicate that she is an accomplished artist in this illegal activity and so, this cannot be a case of solitary instance. We are in agreement with this contention. Even otherwise, a continuous activity spread over a period of time, is not a desideratum for postulating a business. Even a single adventure in the nature of a trade can amount to a business. In this view of the matter, we are of the view that the benefit of the decision of the Apex Court in the case of Piara Singh (supra) has to be extended to the assessee.
18. As already mentioned, we accept the contention of the learned counsel for the assessee that she was only a carrier atleast of gold. So far as the foreign currency is concerned, it can be her own acquisition to meet her personal expenses abroad. Accordingly, she has to be assessed on her commission, which we estimate at 5% on the value of gold of Rs. 5,41,723 (I.M.V.). As no explanation is given for the acquisition of the foreign currency of the value of Rs. 26,234, we are of the view that this amount can be brought to tax under the head "Other sources", besides the commission on the gold in respect of which we hold the assessee to be only a carrier. Accordingly, we determine her income at Rs. 53,320 (Rs. 27,086 + Rs. 26,234). So, out of the addition of Rs. 8,81,728 (Rs. 8,55,494 + Rs. 26,234) made by the Assessing Officer, we uphold the addition of Rs. 53,320.
19. Regarding the levy of interest under section 217, the provisions of section 215(3), read with section 217(2) are attracted. But the enhanced interest has to be levied only till the date of the original assessment and not till the date of the reopened assessment. The assessee may also be granted relief consequential to giving effect to this order. The appeal of the assessee is partly allowed.
20. Regarding the appeal of the Department, the learned counsel for the assessee pleaded that local value cannot be adopted because, the assessee came to India on an International Flight and the extent of the investment cannot be in terms of the local value of the gold. We agree with this contention and dismiss the appeal.
21. In the result, the appeal of the assessee is partly allowed and that of the Revenue is dismissed.