COMMISSIONER OF WEALTH TAX VS M. RAJAGOPAL
1999 P T D 3286
[236 I T R 461]
[Madras High Court (India)]
Before Abdul Hadi and N. V. Balasubramanian, JJ
COMMISSIONER OF WEALTH TAX
Versus
M. RAJAGOPAL
T. C. P. Nos. 296 to 302 of 1996, decided on 31/03/1997.
Income-tax---
----Reference---Question of law---Wealth tax---Net wealth---Additions to net wealth---Wealth Tax Officer receiving information that assessee had misappropriated funds of employer---Amounts misappropriated confirmed by employer---Amounts misappropriated added to net wealth of assessee-- Assessee not found guilty of embezzlement of funds and civil and criminal proceedings only at initial stage---No evidence to show that assessee was found to be in possession of misappropriated funds or had retained amounts in the form of assets on relevant valuation dates---Tribunal deleting additions made to net wealth---No question of law arose for reference---Indian Wealth Tax Act, 1957, S.27(3).
The Wealth Tax Officer added amounts to the tune of Rs.55 lakhs to the net wealth of the assessee on the grounds that the assessee had misappropriated funds of his employer during the assessment years 1978-79 to 1984-85 that the misappropriation had been confirmed by the employer and that the assessee was presumed to be in possession of the funds as his assets. The Commissioner (Appeals) held that no material was brought on record to prove that the assessee had actually embezzled the funds or that the embezzled funds were found to be in the possession of the assessee or that the amounts misappropriated were available with the assessee in the form of assets on the relevant valuation dates. He, therefore, deleted the additions in all the years. On appeal by the Department, the Tribunal found that the assessee was not found guilty of embezzlement of funds, that the civil and criminal proceedings initiated against the assessee were only at an initial stage, that the additions made to the net wealth as if the assessee had embezzled funds, were based on surmises and suspicion and that the Department had not established that the assessee had some assets on the relevant valuation dates. The Tribunal further held that even if the assessee had retained any amount, it would be liable to be taken back and consequently the market value of such stolen goods would be practically "nil". The Tribunal, therefore, dismissed the appeals filed by tire Revenue. The Tribunal also rejected the applications of the Revenue under section 27(1) of the Wealth Tax Act, 1957, to refer a question of law. On petitions filed under section 27(3) before the High Court for directing the Tribunal to refer a question of law:
Held, affirming the decision of the Tribunal, that no question of law arose for reference under section 27(3) of the Wealth Tax Act.
C.V. Rajan for the Commissioner.
Nemo for the Assessee.
JUDGMENT
N. V. BALASUBRAMANIAN, J.---These are all petitions filed by the Commissioner of Wealth Tax, Tamil Nadu-V, Madras, to direct the Appellate Tribunal to state a case and refer the following question of law under section 27(3) of the Wealth Tax Act, 1957.
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in deleting the additions made to the net wealth by the Assessing Officer for the assessment years 1978-79 to 1984-85?"
The assessment years involved are 1978-79 to 1984-85. The assessee is an individual and was working as a cashier in Cholan Roadways Corporation Limited, Kumbakonam. The Assessing Officer received certain information from Cholan Roadways Corporation Ltd., that the assessee had misappropriated funds from the Corporation to the tune of Rs.55 lakhs during the assessment years 1978-79 to 1984-85. On the basis of the information obtained, the Assessing Officer brought to tax the entire amount of Rs.55,00,000 spread over the assessment years 1978-79 to 1984-85, on the ground that the misappropriation of funds was confirmed by the employer-Corporation and the assessee was presumed to be in possession of the funds as his assets. The assessee filed appeals before the Commissioner of Wealth Tax (Appeals) challenging the aforesaid inclusion representing misappropriated funds from the employer-Corporation. The case of the assessee was that it has not been proved that the assessee had actually misappropriated funds and the case was still pending before the High Court and no investment was detected by the Department. The Commissioner (Appeals) held that no material was brought on record to prove that the assessee had actually misappropriated the funds and the amounts so misappropriated were available with the assessee in the form of assets. He, therefore, held that in the absence of any evidence to prove that the assessee had made any investment or the assessee was found to be in possession of the misappropriated funds, the additions made were not sustainable in law and, therefore, deleted the entire additions. The Revenue filed appeals before the Income-tax Appellate Tribunal. The Appellate Tribunal also held that it was not established that the assessee had any embezzled funds of the Corporation, and there was nothing to indicate that the assessee had retained the amounts on the relevant valuation dates in the form of any asset. The Appellate Tribunal also held that even if the assessee had retained any amount, it would be liable to be taken back and, consequently, the market value of such stolen goods would be practically "nil". In this view of the matter, the Tribunal dismissed the appeals preferred by the Revenue.
The Revenue filed applications before the Tribunal to state a case and refer the question set out in paragraph, 1 (page 462). The Appellate Tribunal held that its conclusion on the facts of the case did not give rise to a question of law. It is this order that is the subject-matter of the present tax case petitions.
Mr. C. V. Rajan, learned counsel for the Revenue, submitted that the Appellate Tribunal was not correct in deleting the entire additions. According to him, the assessee had misappropriated funds from the Corporation to the extent of Rs.55 lakhs and the assessee was having some properties in the name of his mother, Mangalathammal, and the properties were held by her as a benami of the assessee. Though notice was served, the assessee remained unrepresented.
We have carefully considered the contentions raised by learned counsel for the Revenue and perused the records. We are of the opinion that there is no referable question of law arising out of the order of the Appellate Tribunal. The Appellate Tribunal categorically found that the assessee was accused alongwith several others of having embezzled large funds and both criminal and civil proceedings instituted are still pending and they have not been concluded, but they are only at the initial stage. Since it was not proved before the Appellate Tribunal that the assessee had actually embezzled any amount, the Appellate Tribunal was quite correct in holding that the additions made as if the assessee had embezzled amounts, is based on certain surmises or suspicion, is justified That apart, the Tribunal also found that the Department has not established that it has found that the assessee had valuation dates. Therefore, we are of kind on the relevant officer were based had some assets of any kind on` the relevant valuation dates. Therefore, we are of the view that the additions made by the Wealth Tax officer were based purely on surmises. Further, even if it is found that the assessee had retained embezzled money, under the law, he is liable to return the same. Therefore, in the absence of any material to show that the assessee had been found guilty of embezzlement and in the absence of any evidence to show that the assessee had some assets of any kind, the Appellate Tribunal came to the correct conclusion that the addition made by the Wealth Tax Officer was not justified in law. That apart, we hold that even if the amounts is said to be embezzled., the assessee is duty bound to return the money to the employer Corporation. Hence, the market value of the embezzled money would be "nil" in the hands of the assessee on the relevant valuation dates. We are of the opinion that the Appellate Tribunal, has come to the correct conclusion in holding that the additions made by the Wealth Tax Officer were not correct Though in the petitions, there is a reference to a judgment of the Sub-Court, Kumbakonam, in O. S. No. 83 of 1984, dated December 23, 1985, a copy of the said judgment was not placed before us. Further, there is also reference to the properties acquired in the name of the mother of the assessee in the petition filed and that fact was also placed before the Appellate Tribunal only and no enquiry was made either by the Assessing Officer or by the Commissioner (Appeals) with regard to the properties standing in the name of the mother of the assessee. The finding is clear that the Department has not established that the embezzled funds were retained by the assessee. There is no material to indicate that there was any asset, available with the assessee on the relevant dates of valuation. The finding of the Appellate Tribunal that the amounts alleged to have been embezzled' are not includible in the hands of the assessee is purely a finding on fact and no question of law arises out of the order of the Appellate Tribunal. Accordingly, we reject the tax case petitions. No costs.
M.B.A./3316/FCPetition rejected.