Income-tax---

----Income from undisclosed sources---Finding that undisclosed income belonged to assessee and not to a third person as claimed---Finding based on evidence---Assessment of income was justified---Indian Income Tax Act, 1961.

The assessee was a registered firm carrying on moneylending business. In the return, the income of the assessee was shown as Rs.24,770 and Rs.13,170 for the assessment years 1985-86 and 1986-87. A search was conducted under section 132 of the Income Tax Act, 1961, at the business premises of the assessee. Certain number of pawned ornaments which were not recorded in the books of account and valued at Rs.74,793 inclusive of the interest deemed as accrued for the assessment year 1985-86 and at Rs.40,842 for the assessment year 1986-87, were found and seized from the assessee's possession. The assessee explained that the said ornaments belonged to U, one of the partners of the assessee-firm, who was carrying on his individual and separate business of moneylending for 10 years under a moneylender's licence issued to him by the State Government under the Madhya Pradesh Professional Tax Act. The Income-tax Officer rejected the explanation. The Income-tax Officer, therefore, concluded that the ornaments belonged to the assessee. Accordingly, he made an addition of Rs.74,783 for the assessment year 1985-86 and of Rs.40,842 for the assessment year 1986-87 to the total income of the assessee as its income from undisclosed sources. On appeal, the Appellate Assistant Commissioner confirmed the addition. On second appeal before the Tribunal it was urged that the affidavit of U had been wrongly rejected without cross-examining him. The Tribunal after going through the contents of the affidavit and the statement recorded on oath, held that it did not inspire confidence. The Tribunal accordingly upheld the order of the Appellate Assistant Commissioner. On a reference:

Held, that as per the findings recorded by the three authorities, i.e., Pro the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal, the assessee failed to show that U was an individual person, who was also doing the moneylending business and, therefore, the affidavit was produced to justify the undisclosed income of the assessee. All the authorities below had found that there was a contradiction between the statement recorded on oath of U and the subsequent affidavit filed by him. A perusal of the record showed that the affidavit of U filed by the assessee was nothing but an afterthought and just to cover up the undisclosed income. The authorities below after considering the affidavit and statement found that the affidavit did not inspire any confidence. In this view of the matter, it was not necessary- to examine U on his affidavit. The statement given by U was on oath after the raid was on record and thereafter, it appeared that U wanted to change his stand in order to oblige the assessee. The Tribunal was right in arriving at the conclusion that the money-lending business carried on by U belonged to the assessee-firm.

Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC) ref.

B.L. Nema for the Assessee.

Abhay Sapre for the Commissioner

JUDGMENT

A.K. MATHUR, C.J.---This is a reference at the instance of the assessee and the following questions of law have been referred by the Tribunal for answer of this Court, which read as under:

"(1) Whether, in the facts and under, the circumstances of the case, the Appellate Tribunal was justified in appreciating the evidentiary value of the affidavit of Shri Uma Shankar and rejecting the same without examining the deponent thereof?

(2) Whether, on the facts and under the circumstances of the case, the Tribunal was right in arriving at the conclusion that the money lending business carried on by. Shri Uma Shankar belonged to the assessee-firm?"

The relevant facts are that the assessee is a registered firm carrying on money-lending business. In the return, the income of the assessee was Rs.24,770 and Rs.13,170 for the assessment years 1985-86 and 1986-87. A search was conducted under section 132 of the Income Tax Act, 1961, at the business premises of the assessee. A certain number of pawned ornaments which were not recorded in the books of account and valued it at Rs.74,793 inclusive of the interest deemed as accrued for the assessment year 1985-86 and at Rs.40,842 for the assessment year 1986-87, were-found in and seized from the assessee's possession. The assessee explained that the said ornaments belonged to Shri Uma Shankar, one of the partners of the assessee-firm, who was carrying on his individual and separate business of money-lending for the last 10 years under a money-lender's licence issued to him by the State Government under the M.P. Professional Tax Act. In this behalf, the assessee relied upon, viz., the return of income filed by Shri Uma Shankar for the assessment years 1983-84 and 1984-85 on October 25, 1985, for the first time, and the service of notices upon Shri Uma Shankar by some of the persons who had allegedly pawned their ornaments with him. The Income-tax Officer rejected all the contentions holding them to be irrelevant, immaterial, afterthought, false and fabricated. The Income-tax Officer, therefore, concluded that the ornaments belonged to-the assessee. Accordingly, he made an addition of Rs.74,783 for the assessment year 1985-86 and of Rs.40,842 for the assessment year 1986-87 to the total income of the assessee as its income from undisclosed sources. On appeal, the Appellate Assistant Commissioner confirmed the addition.

A second appeal was preferred before the Tribunal and it was urged that the affidavit of Shri Uma Shankar has been wrongly rejected without cross-examining him. Reliance was placed in that behalf on the decision of the Supreme Court in the case of Mehta Parikh & Co. v. CIT (1956) 30 ITR 181. The Tribunal, after going through the contents of the affidavit and the statement recorded on oath, held that it does not inspire confidence. The Tribunal accordingly upheld the order of the Appellate Assistant Commissioner. 'Hence, the assessee moved the Tribunal for making a reference to this Court and, accordingly, the aforesaid questions of law have been referred by the Tribunal for answer of this Court.

We have heard learned counsel for the parties and perused the records. As per the findings recorded by the three authorities, i.e., the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal, it appears that the assessee failed to show that Shri Uma Shankar is an individual person, who is also doing money-lending business and thereafter, the affidavit was produced to justify the undisclosed income of the assessee. All the authorities below have found that there is a contradiction between the statement recorded on oath of Shri Uma Shankar and subsequent affidavit filed by him and assessed the liability of the assessee aforesaid and made the addition in his income. We have also gone through the records and we find that the affidavit of Uma Shankar filed by the assessee appears to be nothing but an afterthought and just to cover up the undisclosed income. The authorities below after considering the affidavit and statement found that the affidavit does not inspire any confidence. In this view of the matter, it was not necessary to examine Shri Uma Shankar on his affidavit. The statement given by Uma Shankar on oath after the raid was on record and thereafter; it appears that Uma Shankar wanted to change his stand in order to oblige the assessee. This affidavit was sought to be produced which is nothing but an afterthought. The findings of fact recorded by the Tribunal appear to be correct. Hence, we answer both the questions against the assessee and in favour of the Revenue. This reference is disposed of accordingly.

M.B.A./3130/FC Reference disposed.