Kerala High Court
Commissioner Of Income Tax vs K. K. Abdul Kareem. on 22 February, 1996
Equivalent citations: (1996)132CTR(KER)431
JUDGMENT
V. V. KAMAT, J. :
In this petition by the Department reference is sought under s. 256(2) of the IT Act, 1961 with regard to the following three (sic) questions :
"Whether on the facts and in the circumstances of the case,
(i) did the assessee discharge the burden of proof that lay on him ?
(ii) did the assessee rebut the presumption available to the Revenue under s. 132(4A) of the IT Act, ?"
2. The assessee is one Shri K. K. Abdul Kareem of Kannhangad. He and his friend Shri K. Hamsa were travelling by a service bus from Kanhangad to Payangadi on 4th July, 1982. The officers of the Special Customs Preventive Unit, Kanhangad had personally searched both of them. Rs. 40,000 in cash were found from the assessee and Rs. 1,10,000 were found from Shri K. Hamsa.
3. Naturally the Customs Department being in the seisin of the situation proceeded with the preliminary enquiry. The amount being in cash, the authorities prima facie did not find any case under the Customs Act and the relevant law and regulations.
4. The situation was passed over to the Enforcement Directorate. The Enforcement Directorate enquired and investigated the matter. The assessee, Shri K. Hamza and one Shri P. M. Hassan of Kottacherry, Kanhangad were held guilty and were penalised for Rs. 25,000. This was the outcome of the adjudication order dt. 18th Aug., 1984. On the basis of the finding of guilt, being contravention of s. 9(1) (b) of the Foreign Exchange Regulation Act (FERA) the substance of the accusation was that the amount was received and was attempted to pay as per the instruction of the non-residents. The provisions were thought of as not sufficient for confiscation of the amount under s. 63 of the FERA and therefore the Enforcement Directorate passed over the matter to the IT Department along with the cash amounts found with the assessee and Shri K. Hamza.
5. The Department proceeded after taking charge of the amount under s. 132A(1) of the IT Act on 27th June, 1985 and consequently proceeded to deal with the question as to what is to be done under the provisions of the IT Act.
6. The material on record shows that before the Customs authorities the assessee stated that along with K. Hamsa, when travelling to Payangadi for handing over Rs. 1,50,000 at the residence of Shri A. P. Mohammed at Puthiangadi, the Customs authorities intercepted.
7. The material further show that the amount was handed over by one Shri P. M. Kunhabdulla who is the brother-in-law of the assessee (wifes brother). Shri P. M. Kunhabdulla was employed abroad at Dubai. The money was intended to be handed over at the residence of Shri A. P. Mohammed. For convenience and safety Shri K. Hamza accompanied.
8. Equally well before the Customs authorities Shri Hamza supported the assessee in all respects, as specified above.
9. Shri P. M. Hassan stated that this amount of Rs. 1,50,000 was given by him to the assessee. This was on instructions received from Shri P. M. Kunhabdulla, who was the nephew of Shri P. M. Hassan.
10. At the other end in pursuance of the notice as stated above of the authority proceeding under the provisions of IT Act, the assessee stated that the money was handed over to him by Smt. Beefathumma, who is the wife of Shri P. M. Kubhabdulla asking him to give the said amount to one Shri Ibrahimkutty, a fish merchant of Payangadi. The material on record shows that even the statement of the assessee recorded on oath under the provisions of s. 132(5) of the Act is in the same manner.
11. The matter was taken up before the assessing authority and by the order dt. 25th Feb., 1987 (Annexure A), the assessing authority reached the conclusion that the material on record show that it is evident that the assessee has been dealing in business of compensatory payment, the exact nature of which is not disclosed to the Department but the money seized represented a portion of his income from such activities. In conclusion for the year in question (1983-84) the assessing authority estimated the income of the assessee at Rs. 2 lakhs from undisclosed sources.
12. In reaching this conclusion the assessing authority considered the material on record apart from the statements of the assessee and Shri K. Hamza, referred hereinbefore, both before the Enforcement Directorate and the Department in the present proceedings.
13. The statement of Shri P. H. Hassan recorded by the Customs authority on 4th July, 1982 also is referred to, to the effect that the amount was given to the assessee by him on instructions from Shri Kunhabdulla Haji, his nephew. It is also mentioned that at the other end the statement of Shri P. M. Hassan in the Department proceedings showed that the amount represented loans, the amount of which was repaid by the firm M/s Ashraf Fabrics on 14th June, 1982. There is a reference to the statement of Shri P. M. Hassan (16th Dec., 1986) to the effect of retraction, stating that in fact the money was not handed over by him to the assessee but it was handed over by Smt. Beefathumma, wife of Kunhabdulla Haji to the assessee.
14. The assessing authority found discrepancies referred to above. The authority also emphasized that with regard to the withdrawals from M/s Ashraf Fabrics of which Shri P. M. Hassan is a partner, there was no whisper in the material before the Custom authorities. The assessing authority recorded that there are discrepancies, improvements with regard to the version relating to the manner in which the amount changed hands. The assessing authority has also considered in the context close relationship of Shri P. M. Hassan, Shri P. M. Kunhabdulla Haji, assessee himself and Beefathumma, wife of Shri Kunhabdulla as well as the sister of the assessee.
15. The assessing authority also considered the material in the nature of the statement of Shri P. M. Kunhabdulla Haji to the effect that Rs. 1,55,000 was advanced by a demand draft and cheques to M/s Ashraf Fabrics, Kanhangad during the period 1980-81. Out of the said amount Rs. 5,000 was returned sometime in March, 1981 and another sum of Rs. 1,50,000 on 14th May, 1982 in cash. The statement further reveals and is referred to that this amount of Rs. 1,50,000 was entrusted to his wife Smt. Beefathumma with instructions to hand it over to Shri O. P. Ibrahimkutty, Fish Merchant, Payyangadi.
16. In this connection the assessing authority has recorded as follows :
"On verification of the statement it was found that Shri P. M. Kunhabdulla Haji advanced a sum of Rs. 1,50,000 to M/s Ashraf Fabrics in 1980 and 1981 and as per entries in the books of the firm, it was returned to him on 14th June, 1982. However, it appears rather strange that the amount of Rs. 1,50,000 repaid to him on 14th June, 1982 was in cash whereas he had advanced the money to the firm only by demand draft and cheques. Further, there was also a time lag of 20 days in as much as the firm repaid the money on 14th June, 1982 whereas the cash was seized on 4th July, 1982."
It would be seen that the fact that Shri P. M. Kunhabdulla had advanced the said amount to M/s Ashraf Fabrics as per the entries in the books of accounts of the firm is borne out from the material on record before the authority itself and this was looked at with suspicion, as a result of the passage of 20 days from the repayment on 14th June, 1982 and the seizure of the cash on 4th July, 1982.
17. The assessing authority proceeds further in regard to his attempts to record the statement of Smt. Beefathumma as the position was confirmed by Shri P. M. Hassan that the moneys were paid to her as the wife of Shri Kunhabdulla. The text of the order in the context shows that because Smt. Beefathumma did not present herself and submitted applications for adjournments on medical grounds an inference of deliberate avoidance of appearance is reached by the assessing authority. Intrinsically the assessing authority did not accept that uneducated house-wife with no capacity and education would be entrusted to deal with such huge amount as she was not dealing with such amount in the past. In the process the authority has resorted to the question of discharge of onus in a situation where the only undisputed fact is the physical possession of the cash in the hands of the assessee, to the consequence that this position is the direct inference of ownership in regard thereto. The assessing authority has placed reliance on the decision of the Madhya Pradesh High Court in Ashok Kumar vs. CIT (1986) 160 ITR 497 (MP) for the proposition quoted ad verbatim in the order.
18. The appellate authority, the CIT(A), however, did not agree with the inductive leap of the assessing authority. The appellate authority, in paragraph 4 of its order has summarised the factual matrix already dealt with in extenso hereinbefore. On the basis thereof the appellate authority observed that it is clear from the material on record that none has ever said that the sum of Rs. 1,50,000 belong to the assessee appellant. The appellate authority emphasised that even as regards possession of cash, only Rs. 40,000 was found in the possession of the assessee at the time of the seizure of the Customs authorities. The appellate authority accepted the statement of Shri P. M. Hassan and the copies of accounts, exhibiting the details of the monetary dealings dt. 1st March, 1980, 10th March, 1980, 2nd April, 1980 and 9th April, 1980 totalling to an amount of Rs. 1,55,000 which was to the credit of Shri Kunhabdulla and was returned on 14th June, 1982. In this context it is emphasized that the statement of accounts is signed by Shri P. M. Hassan, managing partner of M/s Ashraf Fabrics. The appellate authority also, on probabilities recorded that Smt. Beefathumma handed over the amount on behalf of her husband Shri Kunhabdulla to be given to Shri Ibrahimkutty. In this connection the appellate authority was alive to the importance of the factual situation that the money was received by Shri Kunhabdulla on 14th June, 1982 and he left India on 15th June, 1982, on the next day. The appellate authority reached the conclusion that the assessee cannot be brought any way closer to the amount in question on the basis of an inference of presumption of being found in possession of Rs. 40,000 only at the time of the search.
19. The Tribunal, by the careful, cautious and detailed order has accepted the strength of the reasoning of the first appellate authority.
20. The Tribunal has seen the importance of one common point on which there is no contradiction, as observed, that the assessee could be said to be the carrier of the amount. The Tribunal emphasized another important feature that the money was given to the assessee by someone else and if one may go by the statements on record before the Customs authorities, it could be Smt. Beefathumma, wife of Kunhabdulla Haji if one were to be guided by the statement of the Customs authorities. The Tribunal has also emphasized that if one were to be guided by the material before the Customs authorities the amount could be from one Shri P. M. Hassan, partner of M/s Ashraf Fabrics on instructions from Shri P. M. Kunhabdulla. Considering the position either way the Tribunal recorded that in neither case the ownership of funds could be traceable at the door step of the assessee.
21. The Tribunal has also been more than careful to deal with the interval of 20 days and did not react to this interval and the amount, which factors appeared to have flabbergasted the assessing authorities.
22. Thus the three authorities have considered the material on record. The golden thread running throughout the factual matrix would show one thing definitely and positively that there is no material even by whisper that the amount could be said to be of ownership of the assessee in question. Assuming the strength of the discrepancies vis-a-vis the material before the Customs authorities and the IT authorities, in our judgment the Tribunal is more than correct in tracing the golden thread that, no material can even provide an indirect pointer to the assessee except that he was a carrier.
23. No wonder, therefore, that the Department is strenuous in invoking the presumption on the basis of the undisputed fact that Rs. 40,000 was found on the person of the assessee whereas Rs. 1,10,000 was found on the first (sic) of his companion Shri K. Hamza. It is a common adage that possession is nine points in law. Even with regard to immovable properties, actual and physical possession has been a source of legal rise in regard thereto. It is either in regard to the recognition of substantive rights or in the nature of creating a bar of limitation adverse in regard thereto. In all such situations with reference to immovables or movables possession has traditionally acquired a meaning in the context. Possession has to be clear enough on its own and not a chance possession. Possession has to be open in the context. Possession also has to be of a determined character.
24. If on the basis of legitimate inference from the actual and physical possession is to be drawn and that too with regard to ownership it is always remembered that the fact of possession is an important step in understanding ownership in regard thereto. It is on the basis of this position being evidence of ownership the law of presumption has emerged whereby actual and physical possession or possession on the person of the person concerned is understood as a valid basis for inference therefrom. The question is as to whether it is possible to infer as a direct process without examining the character, the circumstances and other factors speaking about the possession itself. In other words would the Court be justified in taking a leap from the mere fact that the money is found on the person. Is it not for the Court to ascertain and decide in regard thereto as to what is the manifestation of the fact of possession with reference to the material on record. Is it necessary before resorting to inference to know actually as to whether the material is really such that there could be a legitimate basis to infer therefrom.
25. It is to be seen as to whether it is necessary to examine peculiarities of the character of possession in the context in which the Court is asked to infer by proceeding in the matter of induction. With the help of logic in the context to state that possession is an inevitable factor pointing to the ownership of the person found in possession.
26. For this purpose, in the process the difference between concept of ownership and that of possession will have to be borne in mind. It is difficult to dispute that the concept of ownership is the superior -most legal right with regard to the title of any person with reference to any kind of property. These concepts of ownership and possession relate to the property in question in regard to which under the legal system the ownership is at the highest pinnacle point. This is not so with the concept of possession. The two concepts can be imagined only as two independent circles dissecting each other. The ownership in the context of difference can be appreciated in terms of duration as against the concept of possession. It is more permanent, ultimate and residuary in character, as distinguished from the concept of possession. There is yet another aspect to understand the difference. Possession is the source of legal rights with regard to the property depending on its nature. But such rights as flowing from the concept of possession can never be understood as of a permanent nature except as a bar for others to deal with them. At the other end ownership has its source in the system of law and rights in regard thereto are to be derived from the legal rules provided by the system. In the process of final analysis concept of ownership is understood in a system of law as against which the custom of possession has to be looked into with reference to the factual situation in regard thereto. In other words the person connected with the rights of possession has to be understood with reference to the property in the context and also with reference to the members of the society at large, admittedly the relationship to be understood is not other than a factual relationship emerging from the concept. At the other end the ownership gets traceable to a legal situation provided by a legal system and it is not a factual relationship but a relationship recognised, nurtured and accepted by the system of law of a person with reference to the property in question.
27. The Court cannot be unconcerned in the matter of resorting to an inference based on the presumption in the context flowing from the aspect of possession. When such is the difference, however strong the language of the statute regarding possession the Court approaches the situation, always after knowing as to what the character and quality of possession is through the material before it.
28. Wherever there are occasion for the Court to presume anything the general philosophy available under s. 4 of the Indian Evidence Act, 1972 has to be kept in mind. The Court may presume such facts unless and until it is disproved or a proof in regard thereto is required. This is the general basis fundamental to the approach. If any legislation by the Act under consideration directs the Court to presume a situation the Court has to presume unless and until it is disproved. This elementary definition relates to a fact capable of raising a situation of presumption. In other words, wherever the Court has to presume a situation, the Court has to be sure that the necessary fact on the basis of which the presumption is to rest is neatly established. Even a reference to the general situations relating to the human conduct as is available in s. 114 of the Indian Evidence Act, this basic requirement is pre-existent by the expression that the Court has to have regard to the common course of natural events, human conduct and public and private business, in relation to the facts of the particular case. Illustratively, presumption arising out of recent possession is also required to be appreciated with regard to its relation with the fact of theft in regard thereto. Similarly with regard to the presumption of good consideration, the Court is required to consider and satisfy itself that the document was accepted and endorsed and its is only then a presumption of good consideration can be understood to be resorted to with justification.
29. In our context, from the point of view of its being dealt by the three authorities the statutory provision is s. 132(4A) of the IT Act. The statutory provision is as follows :
"(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 belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and 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 persons 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 so executed or attested."
If the above provision is read the presumption could be said to arise when it is established that the article or thing in question, in this matter cash, is found in the possession or control of any person in the course of a search. It is only after this aspect is established, the statutory provision raises a presumption with regard to the three aspects specified in s. 132(4A) (i) (ii) (iii) as provided thereafter. In other words for the purposes of this matter if it is established that the amount of cash found in the possession or control of such person in the course of a search then it can be presumed that the cash belongs to the concerned person. It is needless to pinpoint that the presumption first is required to be raised and then to deal with all situation as to whether there is reluctance. Although for not any vital consequence the facts are clear that under s. 132A(1) (c) the action is initiated by the assessing authority and as a result thereof a resort is taken to the presumption referred to hereinbefore provided by s. 132(4A) quoted ad verbatim hereinbefore. The two questions are required to be considered for answer in relation to the factual findings referred to at the outset of this judgment. The appellate authority did not find any material to see that the sum of Rs. 1,50,000 belong to the appellant. Actually the appellate authority has emphasized that out of the above amount only Rs. 40,000 was on the person of the assessee. The appellate authority has not found any fault with the accounts position and the corresponding statement in regard thereto of Shri P. M. Hassan, managing partner thereof. Further it is emphasized that Shri Kunhabdulla Haji had withdrawn Rs. 1,50,000 on 14th June, 1992 and he left India on the next day on 15th June, 1982.
30. Again with regard to the nature of circumstance in which the amount was found on the person of the assessee and his companion Shri K. Hamsa even the Tribunal has taken into consideration the golden thread running throughout that there is one common point that there is nobodys case that except being the carrier of the amount, the amount belong to the assessee. Additionally the Tribunal also has re-emphasized that the entire material on record is a pointer to one definite situation that the amount belonged to someone else and not at all to the assessee or his companion.
31. In other words the factual material with regard to the possession of the cash being found on the person is of an equivocal character and when the material spells out equivocal character in regard to its origin, in our judgment it would be more than hazard to say that the situation of the amount being found on the person by itself is capable of giving rise to the presumption at the inception. In our judgment for the purpose of raising presumption the amount has to be basically proved to have been in possession of the person concerned that all the necessary requirements of the character of possession and not showing situation of a chance in regard thereto. The law relating to the requirement and justification of the rise of presumption requires possession to be understood in the context of the situation.
32. Alternatively even assuming that mere fact of finding cash on the person of the assessee would give rise to the presumption and requiring us to consider the consequent situation as to whether the material on record provide proof of rebuttal. The conclusion could not be contrary to the one reached by the two authorities below, when not only that there is no material to connect the assessee and his companion with the cash amount except that it was found on their person. The material on record discussed hereinbefore leaves no manner of doubt that the ownership is traceable to other persons and not the assessee or his companion in any manner. If the material on record is not sufficient, any rebuttal of the presumption, there can be no other matter providing material for rebuttal in regard thereto.
33. Even if we consider the order of the assessing authority, reliance is blind on the decision of the Madhya Pradesh High Court - (1986) 160 ITR 497 (supra) on the basis of the paragraph quoted in the order. A little probe into the factual situation before the said Court would show that the assessee therein, a partner in various firms. deriving income from house property was required to face a search by the Central Excise Department when cash amounting to Rs. 21,090 in addition to gold ornaments, primary gold, silver articles and other valuables was traced. The assessees explanation with regard to the major part of the amount amounting to Rs. 17,251 as belonging to different co-owners was accepted and the reference related to only the amount of cash in regard to which the assessing authority added Rs. 16,000 as the assessees income under s. 69A of the IT Act 1961. The course as we see from the judgment proceeded on the basis that possession is evidence of ownership depending on the nature of the property involved and in regard to cash the presumption becomes stronger. In our judgment the facts and circumstances specified hereinbefore from the factual matrix of the proceedings before us present an actively different picture in regard to which, firstly it is not possible to state that a presumption arises and even if so the abundant material on record would inevitably lead was to the conclusion that the Tribunal as well as the first appellate authority has viewed the situation in the most appropriate manner. In the decision cited before us an attempt to rely on the decision of the Bombay High Court in J. S. Parkar vs. V. B. Palekar (1974) 94 ITR 616 (Bom) appears to have been made and the decision is held to be distinguishable because the commodity in the Bombay case was contraband gold at not merely cash as in the present case. We have taken the trouble of going through the 90 page judgment of the Bombay High Court. In fact the general approach with regard to the raising of presumption referred to by us in the earlier part of the judgment is borrowed by us from the decision of the Bombay High Court. All that we can state is that the said judgment should not have been brushed aside in such a manner.
The result of the above discussion is that we find it wholly unnecessary to exercise our powers under s. 256(2) of the Act or any kind of direction with regard to the question sought to be directed in this petition.
Petition stands dismissed. Order accordingly.