COMMISSIONER OF INCOME-TAX VS M. D. JOSHI
2001 P T D 704
[239 I T R 315]
[Gujarat High Court (India)]
Before R. K. Abichandani and A. R. Dave, JJ
COMMISSIONER OF INCOME‑TAX
versus
M. D. JOSHI and others
Income‑tax Applications Nos. 193 with 191 and 194 of 1998, decided on /01/.
th
September 1998. Income-tax---
‑‑‑‑Income from undisclosed sources‑‑‑Reference‑‑‑Finding that particular amount did not constitute income from undisclosed sources‑‑‑Finding of fact‑‑‑Tribunal justified in deleting amount from income‑‑‑Indian Income Tax Act 1961.
The assessee who was at the relevant time, serving as an Income tax Officer at Amreli, was residing with his maternal uncle, D. During the accounting year relevant to the assessment year 1985‑86, the following two amounts were transferred to the family members of the assessee: (i) Rs.25,000 on March 26, 1985, to H, son of the assessee,. as gift; (ii) Rs.25,000 on April 5, 1984 to K, wife of the assessee, by way of loan. Since the Assessing Officer was not satisfied with the explanation given by the assessee, he treated the said amounts as income of the assessee from undisclosed sources and added them in his total income, by his order dated October 16, 1991, for the assessment year 1985‑86. For the assessment year 1987‑88, the Assessing Officer also issued notices under section 139(2) of the Income Tax Act, 1961, to the assessee's wife and his two sons. The Assessing Officer assessed on protective basis the income of three family members of the assessee. The income assessed in the hands of the family members was clubbed in the hands of the assessee for the assessment year 1987‑88 and the same was assessed in his hands on substantive basis. The Tribunal noted that D, in his affidavit had admitted the fact that the aforesaid amounts were given by way of gift and loan by him. However, subsequently, he filed another affidavit on June 11, 1988, stating that these amounts were actually not his and that they were given from the money which was given by the assessee to him for safe custody. The Tribunal, after: considering all the relevant material on record, held that the Assessing Officer ought not to have relied upon the affidavit of D made on June 11, 1988, without affording an opportunity to the assessee of cross‑examining D and that reliance placed on the affidavit without giving the assessee an opportunity to cross‑examine D at the time when he was alive, was in violation of the principles of natural justice. The Tribunal found that there was no material on record to prove that the assessee out of any undisclosed sources of income contributed towards the deposit to the extent of Rs.50,000 in the bank account of D, out of which D gave gift/loan to the assessee's family members. It was, therefore, held that the addition made of Rs.50,000 in the assessee's total income was not justified. On a reference:
Held, that it was obvious from the material on record and the findings of the Tribunal that the matter had been decided purely on appreciation of evidence and by reaching findings of facts. The Tribunal was right in law and on facts in deleting the addition of Rs.50,000 made in the assessment year 1985‑86. For the assessment year 1987‑88, the Tribunal remanded the matter to Commissioner of Income‑tax (Appeals) who allowed the appeals of the wife and two sons of the assessee for‑the assessment year 1987‑88 against which no appeal was filed by Revenue.
B. B. Nayak instructed by Manish R. Bhatt for the Commissioner.
N.R. Divetia for the Assessee.
JUDGMENT
R. K. ABICHANDANI, J.‑‑‑In these four applications, the Revenue has suggested the following questions in paragraph 4 of these applications, seeking a direction on the Income‑tax Appellate Tribunal to forward a statement of case in respect thereof.
Income‑tax Application No. 193 of 1998:
"(1) Whether, the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.50,000 made?
(2) Whether, when the Commissioner of Income‑tax (Appeals) had remanded the matter for affording opportunity to the assessee, the Income‑tax Appellate Tribunal was justified in law and on facts in entertaining the appeal and allowing the same?"
The following identical question was suggested in Income‑tax Applications Nos. 191 of 1998, 192 of 1998 and 194 of 1998.
"Whether, the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income‑tax (Appeals) holding that the assessee had sufficient amounts of income and that the income should be assessed on substantive basis and not on protective basis?"
All these applications arise from the common order made by the tribunal on April 22, 1997, in Income‑tax Appeals Nos.2436 to 2438/Ahd of 1992 for the assessment year 1987‑88. The controversy centres around two additions of Rs.25,000 each, which were made by the Income‑tax Officer in the income of the assessee. The assessee who was at the relevant time serving as an Income‑tax Officer at Amreli, was residing with his maternal uncle J. C. Dave. During the accounting year relevant to the assessment year 1985‑86, the following two amounts were transferred to the family members of the assessee:
(i) Rs.25,000 on March 26, 1985 to Shri Hitendra D. Joshi, son of the assessee, as gift.
(ii) Rs.25,000 on April 5,1984 to Smt. Kirtiben D. Joshi, wife of the assessee, by way of loan.
Since the Assessing Officer was not satisfied with the explanation given by‑ the assessee, he treated the said amounts as income of the assessee from undisclosed sources and added them in his total income, by his order dated October 16, 1991, for the assessment year 1985‑86.
In the assessment year 1987‑88, the assessee filed a return declaring total income of Rs.15,000 but the was assessed at Rs.42,800 on March 30, 1990. While completing .the assessment, the Assessing Officer added the interest and dividend income of his wife and two sons.
For the assessment year 1987‑88, the Assessing Officer also issued notices under section 139(2) of the Act to the assessee's wife and his two sons. The Assessing Officer assessed on protective basis the income of three family members of the assessee for the assessment year 1987‑88. as under:
| Hitesh D. Joshi | Rs. 17,700 |
| Rajesh D. Joshi | Rs. 3,000 |
| Smt. Kirtiben Joshi | Nil |
The income assessed in the hands of the family members was clubbed in the hands of the assessee for the assessment year 1987‑88 and the same was assessed in his hand on substantive basis.
On appeal preferred by the assessee as well as three other members of the family against the assessment so made for the assessment year 1987‑88, the First Appellate Authority noted that Smt. Kirtiben Joshi earned income from stitching of saree falls, etc., and investment made in shares was properly explained. He, therefore, held that there was no justification in taxing the same on protective basis, as it was her own income from her own investment. As regards the income of the sons, it was held that both were adults and educated, doing service and taking tuition and thereby earning individually. It was, therefore, held that the family members of the assessee were not benamis of the assessee and as such the clubbing of their income with the income of the assessee was not justified. The appeals for the assessment year 1987‑88 in the case of the assessee and in the cases of his wife and two sons were therefore allowed.
For the assessment year 1985‑86, the appeal filed by the assessee was dismissed by the First Appellate Authority sustaining the addition made of Rs.50,000. The assessee, therefore, approached the Tribunal while the Revenue preferred appeals against the common order of the Commissioner of Income‑tax for the assessment year 1987‑88 in the case of the assessee, his wife and two sons. The Tribunal in the assessee's appeal for the assessment year 1985‑86 found that the First Appellate Authority while sustaining the addition of Rs.50,000 did not consider relevant facts and evidence brought on record and the finding recorded and conclusion reached were without any reasoning. That matter was, therefore, restored to the file of the Commissioner of Income‑tax (Appeals) for the assessment year 1985‑86. As regards the Revenue appeals for the assessment year 1987‑88, they were also restored to the file of the Commissioner of Income‑tax (Appeals) for the same reason. The Commissioner of Income‑tax (Appeals) thereafter, by his order, dated October 27, 1994, allowed the appeals of the assessee, his wife and two sons for the assessment year 1987‑88 by a common order. The Revenue did not prefer any appeal against that order. The Revenue appeals in the cases of the assessee's wife and two sons for the assessment year 1987‑88 were, however, shown as pending though they were already decided by the Tribunal by its order, dated February 22, 1994, while disposing of the appeal of the assessee for the assessment years 1985‑86 and 1987‑88. The Tribunal, therefore, treated the appeals in the cases of the assessee's wife and sons for the assessment year 1987‑88 as having become infructuous and. dismissed them as such, as recorded in paragraph 7 of its order.
The Commissioner of Income‑tax (Appeals) while disposing of the assessee's appeal by his order, dated October 27, 1994, set aside the assessment with a direction to the Assessing Officer to give an adequate opportunity of rebuttal to the assessee, so that he could cross‑examine J. C. Dave on whose affidavit made on June 11, 1988, the Assessing Officer had earlier relied for holding against the assessee. That is the decision of the Commissioner of Income‑tax (Appeals) which was challenged before the Tribunal for the assessment year 1985‑86. Before the Tribunal, it was mentioned that J. C. Dave passed away on December 10, 1996. and, therefore, it would not be possible for the Assessing Officer to give any opportunity to the assessee to cross‑examine J.C. Dave in respect of the affidavit which he had filed on June 11, 1988. The Tribunal noted that J. C. Dave, in his affidavit which was sworn earlier on July 31, 1986, on oath, had admitted the fact that the aforesaid amounts were given by way of gift and loan by him. However, subsequently, he filed another affidavit on June 11, 1988, stating that these amounts were actually not his and that they were given from the money which was given by the assessee to him for safe custody. The Tribunal, after considering all the relevant material on record, held that the Assessing Officer ought not to have relied upon the affidavit of J.C. Dave made on June 11, 1988, without affording an opportunity to the assessee of cross‑examining J. C. Dave and that reliance placed on 'the affidavit without giving the assessee an opportunity to cross‑examine J. C. Dave at the time when he was alive, was in violation of the principles of natural justice. The Tribunal found that there was no material on record to prove that the assessee out of any undisclosed sources of income contributed towards the deposit to the extent of Rs.50,000 in the bank account of J. C. Dave, out of which J. C. Dave gave gift/loan to the assessee's family members. It was, therefore, held that the addition made of Rs.50,000 in the assessee's total income was not justified.
It is obvious from the material on record and the findings of the Tribunal that the matter has been decided purely on appreciation of evidence and by reaching findings of facts. No question of law arises in these matters and all these applications are, therefore, rejected.
M.B.A./222/FCApplication rejected.