Income Tax Appellate Tribunal - Pune
Smt. Rajabai B. Kadam L/H Of Late S.B. ... vs Assistant Commissioner Of Income Tax on 12 April, 2001
Equivalent citations: [2002]83ITD229(PUNE)
ORDER
K.C. Singhal, J.M.
1. The only issue arising out of this appeal relates to the addition of Rs. 1,18,500 on account of unexplained money under Section 69A.
2. The facts giving rise to this appeal are these :
The assessee who was a minor was found carrying cash of Rs. 1,18,500 by police Department of Ullal, Mangalore Dist., on 9th Aug., 1994. Subsequently, at the direction of the Court, the money was transferred to IT Department, Mangalore, who in turn transferred the same to the IT authorities of Pune. An inquiry was started by the AO on 22nd Nov., 1996, and subsequently, the notice under Section 148 was issued on 18th Dec., 1996, which was served on Smt. Rajbai Bhidrao Kadam, mother of the assessee as legal heir, since in the meantime the assessee had died on 16th April, 1995. In pursuance to that notice his mother filed return declaring Nil income. His mother could not explain the money which was recovered from her son. The explanation as given by his mother has been dealt with by the AO at p. 3 of the assessment order which is being reproduced as under :
"It is contended that Shri Shivaji B. Kadam was studying in Pimpri-Khurd till 1993-94. Then he left his village, taluka, district and even state to try his luck and to earn bread. Therefore, till that date he was a schoolboy having no source of income. There was no sufficient communication from him when he left the village and suddenly his dead body was brought to his village which was cremated by his mother, brother, etc. The person who brought the dead body, orally narrated that police had seized cash sometime earlier to his death. The legal heir has no knowledge whatsoever of the activities of Shivaji B. Kadam and the place where police seized cash from him. Therefore, the legal heir does not believe that Shivaji had earned such income. It could have been borrowed by Shivaji from somebody, but from whom is also not known. Therefore, as per her understanding the income declared is Nil."
Since the legal heir could not produce any evidence with reference to the money recovered from the assessee, the same was treated as deemed income under Section 69A of IT Act, 1961, and accordingly, the same was assessed to tax by the AO vide order dt. 7th July, 1997.
3. The matter was carried before the CIT(A) before whom the submissions as made before the AO were reiterated. However, such submissions did not find favour with the CIT(A). According to him, the provisions of Section 132(4A) can apply to such cases and as a result thereof a presumption is raised that money found from the possession of the assessee belongs to him. Therefore, the onus was on the legal heir of the assessee to explain the same. Since this onus was not discharged, the addition made by the AO was held to be justified. Aggrieved by the same, the assessee has preferred this appeal.
4. Written submissions have been furnished on behalf of the assessee wherein the submissions raised before the lower authorities have been reiterated. However, legal submission has been made with reference to the provisions of Section 69A as under:
"The section contemplates that it is for the assessee himself to explain the possession of money/valuable. No other person can be expected to explain the valuables found with the assessee as the information about the possession is personal. Hence, provisions of Section 69A cannot be invoked where the assessee is not available for explanation and the other persons (legal heirs) have no precise information. Since in the case under consideration the assessee has died much before the proceedings are initiated under the IT Act, he could not be expected to explain the possession of money during the course of assessment proceedings. It is respectfully submitted that the provisions of Section 69A being deeming provisions must be construed very strictly and its application must be restricted to calling the explanation from the assessee alone and no other person. This is also logical because the legal heirs are not in possession of the information which the assessee only may be knowing."
Alternatively it has been submitted that provisions of Section 69A are not mandatory inasmuch as the word "may" has been used by the legislature and, therefore, a judicious discretions must be exercised by the AO considering the facts of the case. Reliance has been placed on the decision of the Supreme Court in the case of CIT v. Smt P.K. Noorjahan (1999) 237 ITR 570 (SC).
5. On the other hand, the learned Departmental Representative has supported the order of CIT(A) and also has relied on the decision of Bombay High Court in the case of J.S. Parkar v. V.B. Palekar (1974) 94 ITR 616 (Bom). For the proposition that provisions of Sections 69 and 69A are rules of evidence and once a person is found to be in possession of an article or thing, he could be presumed to be the owner thereof and as a result thereof it could be presumed that value of such article was income of assessee from undisclosed source during the concerned year.
6. Rival submissions of the parties have been considered carefully. There is no dispute that the sum of Rs. 1,18,500 was found from the possession of the assessee. According to the general rules of evidence, i.e., Section 110 of the Evidence Act, a person from whose possession a valuable article is found, is presumed to be the owner thereof and the burden of proving that he is not the owner is on the person who affirms that he is not the owner. Though rigour of the rules of evidence contained in Evidence Act cannot be applied to tax proceedings but the salutory principle embedded in Section 110 of the Evidence Act can be applied to income-tax proceedings. This legal position has been laid down by the Bombay High Court in the case relied upon by the learned Departmental Representative. It is, further laid down that once the assessee is found to be the owner of the valuable article, the value thereof could be presumed to be the income from undisclosed sources. It was also pointed out by the Bombay High Court that facts and circumstances of each case would decide whether the burden has been discharged by the assessee or not. In that case, various circumstantial evidence were taken into consideration for coming to the conclusion that the gold found and seized from the motor launch belonging to the assessee was the gold of the assessee.
7. It is also well settled position now that provisions of Section 69A are not mandatory inasmuch as the legislature had used the word "may" in Section 69A. Therefore, considering the circumstantial evidences of each case, the AO must exercise the discretion in a judicious manner. If the circumstances so warrant, the addition may not be made in the hands of the assessee. Reliance can be placed upon the recent Supreme Court judgment in the case of Smt. P.K. Noorjahan (supra).
8. We have examined the facts of the present case in the light of the above legal position. Since, the money was found from the possession of the deceased, the burden was on him to prove that he was not the owner of the money. According to Section 69A as well as rule of evidence contained in Section 110 of Evidence Act, it was the deceased only who could explain and discharge his burden by referring to certain material or evidence. Unfortunately, he died in mysterious circumstances even before the assessment proceedings were initiated. Therefore, it cannot be said that after his death, the burden shifted to the legal heirs of the deceased. In our opinion, all these circumstances were known to and within exclusive knowledge of the deceased only and the legal heirs could not be forced to explain such circumstances which were not known to them. Further, the deceased was a minor at the time when the money was found from his possession as well as at the time when he died. The material produced before us shows that he was born on 2nd June, 1977, and left the school on 31st May, 1994, after passing the 10th standard. According to the death certificate, he expired on 16th April, 1995. Just after two months of leaving the school, he was searched by the police department and the aforesaid money was found from his possession. There is no material on record to suggest that he could earn said money just within a period of two months after leaving his school. The status of the family also shows that it was carrying on agricultural activity which indicates that he belonged to middle class family. The peculiar circumstances of the case do indicate that he could not be the owner of the money since he could not have earned such huge amount within a period of two months. Accordingly, we are of the view that money found from the possession of the deceased did not belong to him and, therefore, reasonable inference can be drawn that he must have been carrying the same on behalf of someone else. Consequently, no addition could be made under Section 69A. Since we are holding that money did not belong to the deceased, the Department may not return the seized money to the legal heirs and may deal with the same in accordance with the law.
9. The view which we have taken is fortified by the decision of Supreme Court in the case of Smt. P.K. Noorjahan (supra). In that case, the assessee was a muslim lady who was aged about 20 years during asst. yr. 1968-69. On 15th Nov., 1967, she had purchased certain lands against consideration of Rs. 34,628. Further, she purchased some other land on 27th Nov., 1968, against consideration of Rs. 25,902. The explanation of the assessee regarding the source of money was that the same was financed from out of savings from the income of the properties which were left by her mother's first husband. This explanation was not accepted by the AO and the first appellate authority. However, the Tribunal held that even though the explanation was not satisfactory but in the facts and circumstances of the case it was not possible for the assessee to earn the amount invested in the properties and by no stretch of imagination, could the assessee be credited with having that income in the course of assessment year. The Tribunal also took the view that Section 69 of the Act conferred only a discretion on the AO and it did not make it mandatory on his part to deal with investment as income of the assessee as soon as the explanation happened to be rejected. This view of the Tribunal was upheld by the Supreme Court in the case of Smt P.K. Noorjahan (supra). The circumstances of the present case are more or less similar and, therefore, the ratio laid down by the Supreme Court would apply to the present case.
10. In view of the above discussion, the order of CIT(A) is set aside and the addition sustained by him in hereby deleted.
11. In the result, appeal is allowed.