Kerala High Court
Commissioner Of Income-Tax vs K.I. Pavunny on 6 February, 1998
Equivalent citations: [1998]232ITR837(KER)
Author: J.B. Koshy
Bench: J.B. Koshy
JUDGMENT Om Prakash, C.J.
1. The Income-tax Appellate Tribunal referred the following questions at the instance of the Revenue under Section 256(2) of the Income-tax Act, 1961 (briefly, "the Act") :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 40,37,351 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that Section 69A of the Income-tax Act was not attracted to the facts of this case ?
3. Whether there was any material before the Tribunal to hold that the gold bars were with the assessee in the year 1972 ?
4. Whether the finding entered by the Tribunal to reach the conclusion that Section 69A of the Act was not attracted to the case is supported by any material or evidence on record ?"
2. The brief facts as culled out from the order of the Income-tax Appellate Tribunal are that for the assessment year 1981-82 with which we are concerned, the assessee, the proprietor of A. C. Stores, Ernakulam, filed a return of income disclosing a total income of Rs. 3,31,900 which was reduced in a revised return to Rs. 3,31,250. The Income-tax Officer also completed the assessment on a total income Rs. 43,83,991, which included a sum of Rs. 40,37,351, which was taken to be the income of the assessee under Section 69A of the Income-tax Act, 1961, being the value of 23,337.287 grams of gold seized from the compound of the assessee by the Central Excise authorities during a search operation conducted on the premises of the assessee on December 6, 1980. During the search, the excise authorities recovered a wooden box buried in the compound of the assessee which site was clearly visible from the room of the assessee. On examination, it was found that the box recovered by the authorities, contained 200 gold bars, 155 gold biscuits bearing markings "CREDIT SUISSEE 9990-10 tolas CHI. ESSAYER FOUNDEUR" and 45 numbers bearing markings "JOHNSON MATHEY 9990-10 tolas LONDON".
3. The excise authorities took action against the assessee, who was ultimately convicted in the proceedings taken against him under Section 135 of the Customs Act and Sections 85(1)(a) and 86 of the Gold (Control) Act, 1968 (see K. I. Pavunny v. Asst. Collector (Central Excise Collectorate) [1997] 3 SCC 721.
4. Before the Customs and Excise authorities, the assessee denied having owned the aforesaid articles. He stated that he had a good relationship in the past with one M. P. Paulose, who for reasons turned to be hostile to the assessee and then he might have planted the aforesaid articles in the compound of the assessee. He also stated that the articles had been acquired in the year 1972.
5. It is noteworthy that the Income-tax Officer himself recorded the statement of the assessee on February 28, 1981, a copy of which was produced before us by learned senior standing counsel during the argument. In the statement recorded by the Income-tax Officer, the assessee simply denied having owned and possessed the articles in question. No statement was given by the assessee before the Income-tax Officer that the articles were acquired in the year 1972. Except the denial of ownership and possession and except the denial of knowledge of the articles, no other statement was made by the assessee before the Income-tax Officer.
6. The Assessing Officer invoked the provisions of Section 69A of the Act and relying on materials available on record concluded that the aforesaid articles belonged to the assessee and that they represented the concealed income of the assessee for the year in question. This is now he made an addition of Rs. 40,37,351 under Section 69A of the Act.
7. On appeal, the Commissioner of Income-tax (Appeals) held that ownership of the assessee over the articles was not proved. He took the view that to invoke Section 69A it was the duty of the Revenue to prove that the articles were owned by the assessee. Also he found that if the statement recorded by the customs authorities is read as a whole, then the articles might have been acquired by the assessee in the year 1972 and for that reason no assessment in regard to these articles could be made under Section 69A for the assessment year in question. This is how he deleted the addition of Rs. 40,37,351 from the assessment of the assessee.
8. The Revenue then carried the dispute before the Income-tax Appellate Tribunal, which upheld the decision of the Commissioner of Income-tax (Appeals).
9. Learned senior standing counsel urged before us that on the facts and in the circumstances of the case ownership of the assessee of the articles in question would have to be presumed for the purpose of Section 69A and unless the assessee successfully proved that the articles had been acquired in some other year they would be presumed to have been acquired in the year in question and they would be brought to tax in view of Section 69A, only in the assessment year 1981-82. To buttress his submission, the standing counsel relied on Chuharmal v. CIT [1988] 172 ITR 250 (SC).
10. In Chuharmal's case [1988] 172 ITR 250 (SC), the facts, briefly, were that in January, 1974, on the basis of the order passed by the Superintendent, Central Excise, Jagpur, dated December 25, 1975, there was confiscation of foreign watches from the house of the petitioner. Accordingly, the Income-tax Officer issued a notice calling upon the assessee to show cause why the value of the watches seized from his residence should not be treated as his income from undisclosed sources. Then almost the similar argument, which has been made before us by counsel for the assessee, was made before the Supreme Court for the assessee. Rejecting the submission of the petitioner, the Supreme Court held as follows (page 254) :
"Section 110 of the Evidence Act is material in this respect and the High Court relied on the same which stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, it follows from the well-settled principle of law that normally, unless the contrary is established, title always follows possession, In the facts of this case, indubitably, possession of the wrist-watches was found with the petitioner. The petitioner did not adduce any evidence, far less discharge the onus of proving that the wrist-watches in question did not belong to the petitioner. Hence, the High Court held, and in our opinion rightly, that the value of the wrist-watches is the income of the assessee."
11. The aforesaid authority squarely applies to the facts of the case at hand. When the gold articles were recovered from the compound of the assessee, unless cogent evidence is adduced by the assessee, it would have to be presumed that the articles belonged to him and they were owned by the assessee himself. Not only this, unless the assessee sets up a clear case and leads cogent evidence to show that the gold articles were acquired in some different assessment year, there would be a further presumption that the articles were acquired in the year in question and they represented the concealed income of the year in question itself.
12. Learned counsel for the applicant strenuously argued before us that the Revenue miserably failed to discharge the onus that the assessee owned the gold articles. This submission is stated only to be rejected in view of the aforesaid authority of the Supreme Court. The articles having been recovered from the possession of the assessee, the onus was on the assessee to prove that the articles in question belonged to someone else and not to him. No such evidence was adduced by the assessee and, therefore, the normal presumption would be that the assessee himself was the owner of the gold articles, recovered from his compound.
13. Another submission of counsel for the assessee is that the assessing authority extensively relied on the statement recorded by the customs authorities in which the assessee clearly stated that the acquisition of the gold articles related to the year 1972. He submits that the statement recorded by the customs authorities and relied on by the assessing authority should have been read as a whole and not piecemeal. He submits that part of the statement, which is favourable to the Revenue, cannot be chosen by the Revenue. We do not see any force in this submission. The fact remains that the Assessing Officer himself recorded the statement of the assessee in which it was not stated by the assessee that the acquisition related to the year 1972. If no statement is recorded by the Assessing Officer or if in the statement recorded by the Assessing Officer it is stated by the assessee that the acquisition related to the year 1972, then the position may have been different. In view of the statement recorded by the Assessing Officer himself, the question of the acquisition being related to the year 1972 does not arise.
14. Lastly, counsel for the assessee made a very queer submission that the contraband gold articles in question, could not be owned and possessed by any one. He submits that ownership over the goods remains in force against the whole world and that no possession can be conceived without legal ownership. We are not at all impressed by this submission, though this submission was accepted by both the Commissioner of Income-tax (Appeals) and the Appellate Tribunal. But for the prohibitory law, any article being a property can be owned by a person. Simply because the law prohibits retention of a property that does not mean that such property is without ownership. Even contraband or prohibited articles can be owned and possessed unlawfully. It is entirely a different thing that the law may not permit the owner of given articles to retain possession of them or the articles may be liable under law to be confiscated. It is, therefore, incorrect to contend that the gold articles in question could not have been owned by the assessee.
15. For the above reasons, we are of the opinion that the Commissioner of Income-tax (Appeals) and the Appellate Tribunal erroneously deleted the addition of Es. 40,37,351 made by the assessing authority under Section 69A of the Act.
16. In the result, all the four questions are answered in the negative, that is, in favour of the Revenue and against the assessee.