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3. In the course of the investigation the Income-tax Officer, Madurai, found two cash credits in the books of account produced by the appellant showing a sum of Rs. 1,05,000 under date March 1, 1948, representing a draft from the Imperial Bank of India Ltd., Porbandar, and a sum of Rs. 53,199-12-6 under date March 15, 1948, representing a draft from the Porbandar State Bank through the Central Bank of India Ltd., Bombay, credited to the account of Yamma Bai Ahamed, the maternal grandmother of Kathija Bai Habib, wife of the appellant. The appellant was called upon to explain these entries and he made his statement on January 26, 1949, before the Income-tax Officer who recorded the same. His explanation was that the said two sums represented the sale proceeds of gold, jewellery and sovereigns which belonged to Yamnabai who was a native of Ranavav near Porbandar in Saurashtra. His case was that she was living in Ranavav but had come away to Madurai sometime in 1947, that she decided not to return to Ranavav owing to the communal disturbances which broke out in August, 1947, and empowered the appellant to sell the jewellery, gold and sovereigns situate in her house in Ranavav and bring over the sale proceeds to Madurai and invest the same there, that thereupon he proceeded to Ranavav, took the gold, jewellery and sovereigns from the house to Porbandar and got the same sold through Messrs. Shariff Hassan and Brothers and remitted the sale proceeds through bank drafts to Madurai, Rs. 1,05,000 on March 1st 1948, and Rs. 53,200 on March 15, 1948, and that these amounts were credited in her name as deposits in the books of account of the appellant. In proof thereof the appellant produced before the Income-tax Officer the original invoice relating to the sale of jewels and gold, furnished by Messrs. Shariff Hassan & Bros., Shroff Merchants, Porbandar, through whom the sales were effected along with a copy of their accounts. The letters received from the Imperial Bank of India and the Central Bank of India evidencing the transmission of funds were also produced.

8. When this notice under section 28(1) (c) was served on the appellant, he obtained three affidavits from three respectable residents of Ranavav who knew Yamnabai intimately and who could speak about her status and wealth. These affidavits were dated April 18, 1949, and were sworn by (1) Dadamiah, son of Omarmiah Town Kazi of Ranavav, aged 90, (2) Jusub son of Aboobacker of Ranavav, aged 35, who was a neighbour and a resident in the same compound with Yamnabai, and (3) Ebrahim Jan Mohamed, son of Jan Mohamed, aged 80, residing at Porbandar, and son-in-law of her uncle. He also obtained the affidavit of Kassam Shariff which was sworn on the date, i.e., April 18, 1949, showing the sale of the jewellery, gold and sovereigns by the appellant through his firm Messers. Shariff Hassan & Bros., merchants, residing at Porbandar, Kathiawar District. These affidavits were submitted by the appellant along with his reply to the penalty notice dated April 25, 1949, which recounted all the facts which supported the contentions of the appellant and pointed out that there was no discrepancy between the statements made in the affidavit dated November 18, 1941, and that dated February 24, 1949, and the affidavits dated April 18, 1949, which had been obtained by him from the parties at Ranavav above-mentioned showed that Yamnabai was possessed of plenty of jewels, gold and sovereigns which were sold by the appellant as aforesaid at Porbandar, having been armed with the power of attorney granted in his favour by her. It may be noted that in the affidavit filed by Kassam Shariff on April 18, 1949, the deponent besides giving the information in regard to the sale of the jewellery, gold and sovereigns through his firm and the transmission of the sale proceeds thereof to Madurai had also stated that on account of Viramgam Customs at the border of the Katiawar State and British India, during the British rule in India, gold was not allowed to pass through the said customs, outside the State, and hence all the jewells, gold and sovereigns were held only within the State and those who wished to leave the State and go to British India used to come to him for disposing of their jewellery, gold and sovereigns and take cash from him, that he used to sell them on their behalf on commission basis and that he had sold lots of jewels, gold bars and sovereigns on commission basis.

11. We find on the record a reply dated January 9, 1951, addressed by the Income-tax Officer, Ward B, Junagad, to the Additional Income-tax Officer, Madurai, which reported that Yamnabai's father and husband were said to have done very good reported that Yamnabai's father and husband were said to have done very good business in Africa and as she was the only surviving issue of her father it came about that she inherited a good amount by way of gold valuables, bullion and cash, that on that side of the country wealthy Muslims invested their finances in purchase of ornaments and bullion, that four or five persons who had been interviewed by his Inspector had in general terms confirmed the well-to-do condition of both the father and the husband to whom she had inherited on the death of both of them about 25 to 30 years ago, that the sale of gold and sovereigns and ornaments appeared to be quite genuine so far as the transaction between Messrs. Shariff Hassan & Bros., and the appellant was concerned, that this transaction was not a solitary one, but Messrs. Shariff Hassan & Bros., had done similar transactions which were also found in their books, that under his instructions the Inspector had interviewed Harjivan Trikamji, the head munim of Messrs. Shariff Hassan & Bros., who had also confirmed the transaction as having been effected during 1948 and stated that actual delivery of gold and bullion stock took place in his presence, and that his Inspector had also interviewed Messrs. Jusub Aboobacker and Dadamiah who had confirmed their affidavits filed before the Income-tax Officer, Madurai. By his letter dated February 22, 1951, the Additional Income-tax Officer, Madurai, wrote back to say that there were suspicions about the transaction inasmuch as it was likely that the appellant could have earned a large income during the control and had subsequently not brought the same to account, the inference being that he had invested these unaccounted profits in purchase of gold and jewellery and had later sold the same and brought the sale proceeds to Madurai. The question moreover was whether the appellant would have allowed such a large amount to lie idle for 25 to 30 years with Yamnabai and that too in the not very secure precincts of the house at Ranavav. He therefore asked the Income-tax Officer, Junagad, to make detailed enquiries of cloth merchants and others known to the appellant who might give useful information in the matter. Pursuant to this letter from the Additional Income-tax Officer, Madurai, Harjivan Trikamji Mehtaji of Messrs. Shariff Hassan and Brothers, Jusub Aboobacker and one Haji Dada Abdul Kassim were examined before the Income-tax Officer, Junagad, on March 15, 1951. Harjivan Trikamji confirmed that the appellant had gone to his firm to sell ornaments and he remembered that the appellant had said at that time that those ornaments belonged to his mother-in-law, and he had also possessed the power of attorney. He distinctly remembered that such a talk had taken place between the appellant and his proprietor because it was a transaction of a big amount and all these things were clarified with the appellant. When he was asked to say what the ornaments were like, he replied that the ornaments were of old time and were of old model which he knew very well. Jusub Aboobacker stated that he had been asked by Yamnabai to keep watch over her house and household things during her absence from Ranavav as she went to Madurai for a short period, that she thereafter changed her mind about coming back to Ranavav on account of communal troubles and sent the appellant who was the son- in-law of her daughter to dispose of all the furniture and valuables lying in the house, that he was present at the time of the removal of valuables from an "old treasure" which was in the house, that he also witnessed the removal of the ornaments and the sovereigns, that he did ask for the authority which she had given to the appellant for the removal of valuables as while going to Madurai she had particularly asked him to keep a watch as a good amount by way of gold, jewellery and sovereigns was lying in the house and that the ornaments which she had inherited from her father and husband whose only heir she was, were of old type. Haji Dada Abdul Kassim stated that and it was well known in their community that she was a rich lady possessing a good amount of money and valuables. The Income-tax Officer, Junagad, enclosed these statements along with his letter dated March 17, 1951, addressed to the Additional Income-tax Officer, Madurai, wherein he stated that he had taken an opportunity of visiting Ranavav which was 8 miles away from Porbandar, that he had seen the house belonging to her which was a pacca building but of old style and if put in market would not fetch more than Rs. 10,000 to Rs. 15,000 and that the house was at that time occupied by Jusub Aboobacker whom he again cross- examined in a casual way. He further stated that there were few cloth dealers in Ranavav and they were mostly Hindus who did not know her but there was one Mohammadan cloth dealer who knew her and who was also cross-examined by him and his answers were also sent by him along with the letter. He also stated that he had cross-examined the head munim of Messrs. Shariff Hassan & Bros, and tried to get from him something to prove whether the ornaments in question were newly purchased or not but the result was in the negative. He therefore suggested that if the latter wanted his suspicions to be confirmed, the jewellery, gold and sovereigns in which the unaccounted profits were suspected to have been concealed must have been purchased somewhere in Bombay or Madurai and the enquiries in that behalf should be pursued there.

The further circumstances which impressed the Appellate Tribunal was that Yamnabai had no near relative nor anybody to look after her in Ranavav, that she had a small house, which according to the appellant was worth only Rs. 5,000 and that it was strange that she should keep jewellery, gold and sovereigns of the value of Rs. 1,70,000 tucked away in her house costing about Rs. 5,000 just not knowing when she would flicker away with the possibility of anybody claiming the movable property which was said to be with her. The mere fact, however, of her staying alone at her native place at Ranavav in Kathiawar and not going to live with her granddaughter at Madurai was of no consequence. The house was no doubt of the value of about Rs. 5,000 but that appears to have been the value of the house as constructed and there was evidence to show that at the time of the enquiry made by the Income-tax Officer, Junagad, it was valued at Rs. 10,000 to Rs. 15,000. There was nothing incredible about her keeping such a large amount of jewellery, gold and sovereigns in her own house at her native place. Even though she was about 70 years old there was nothing to show that she was ailing when she left for Madurai in early 1947 and if regard be had to the longevity of life of these people in Saurashtra as also to the fact that not only in 1952 but also in the year of grace 1958 she was yet alive the mere fact of her being 70 years old was not sufficient to create any apprehension in her mind that she was going to pass away in the near future, jeopardizing the treasure which she possessed in her house. Moreover, there was evidence that she had secreted these valuables in an "old treasure" which was in the house (vide the statement of Jusub Aboobacker in his examination by the Income-tax Officer, Junagad, dated March 15, 1951). She had been staying in her own mohalla where the people of her own community stayed and who apparently had great regard for her, she being a lady of charitable disposition. Jusub Aboobacker was also looking after her and as a matter of fact he had been asked by her to keep a watch over her house when she left Ranavav for Madurai as aforesaid and if she had entertained the idea of returning from Madurai to Ranavav after some time, there was really no necessity for her to take away these valuables, jewellery, gold and sovereigns from the "old treasure" where she had kept them and carry the same along with her to Madurai. She did not entertain any apprehension in regard to the safety of these valuables in her house nor was there any immediate occasion for her taking the same away to Madurai and giving the same away to the wife of the appellant. It was also to be remembered in this connection that there was a customs barrier at Viramgam at the border of the Kathiawar States and British India and people were not allowed to take away jewellery, gold and sovereigns out of the States into British India and used to dispose them of and take the cash away with them if they wanted to migrate out of the State (vide the affidavit of Kassam Shariff dated April 18, 1949). It would appear that she normally expected to live for some time more and even if she died perchance they did not appear to be much danger of anybody finding these valuables from the "old treasure" unless she herself gave information to anyone in regard to the same. Jusub Aboobacker in fact stated that he was present at the time of the removal of those valuables from the "old treasure" which was in the house and he also witnessed the removal of the ornaments and the sovereigns by the appellant. It was contended that this circumstance, therefore, was not such as to create any suspicion in the minds of the Income-tax Officer or the Appellate Tribunal and the suspicion, if any, entertained by them was absolutely unfounded.