HARI CHAND AND PREM CHAND BASSI LEGAL HEIRS OF LATE SHRI KANSHI RAM BASSI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In pursuance of an order of this Court under section 66(2) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) the Income-tax Appellate Tribunal, Delhi Bench (hereinafter referred to as the Tribunal) has referred the following two questions to this Court :-

(2.) The assessment year under reference is the year 1954-55, the relevant previous year being the financial year 1954-55. Shri Kanshi Ram Bassi, the assessee herein, was a partner in a firm M/s Roller Supply Company and also derived income from letting out on hire some rollers of his own. During the assessment proceedings, the Income-tax Officer found that a plot of land had been purchased in the name of the assessee's wife, Smt. Ganesh Devi, in the year 1951-52 for Rs. 14,724.00 and that a house had been constructed on the said plot, the construction having commenced in February, 1952 and completed in March, 1954. The Income-tax Officer found that the assessee had not withdrawn any sum for the construction of the said property. He, therefore, called upon the assessee to explain the source from which the cost of construction was met. The assessee thereupon filed a certificate from an architect according to which the cost of construction was Rs. 59,704. As regards the source of the money for the construction of the house, the assessee in his letter to the Income-tax Officer dated 24-11-1957 explained that the cost of construction of the house was met by his wife by the sale of her ornaments. On further elucidation being sought, it was stated before the Income-tax Officer that just before the assessee came from Lahore in 1947, he converted the liquid cash available with his wife into gold and that the cost of construction was met by the sale proceeds of the gold. In support of this explanation, the assessee filed five invoices of M/s. Panna Lal Roshan Lal showing that gold worth Rs. 66,000 was purchased by the assessee's wife. Shri Panna Lal was also examined before the Income-tax Officer and he admitted that the invoice belonged to him. The assessee also produced the books of account of M/s Ram Parkash Vinay Kumar to whom the gold had been sold and also examined Shri Ram Parkash in support of the alleged sale. The Income-tax Officer did not accept the explanation of the assessee with regard to the source of the cost of construction. He also did not accept the estimate of the cost of construction by the architeet. The Income-tax Officer estimated the cost of construction at Rs. 84,000. As the construction of the house was spread over a period of two years relevant to the assessment years 1953-54 and 1954-55, he included a sum of Rs. 42,000 as the assessee's income from undisclosed sources for the year 1954-55. The addition was confirmed by the Appellate Assistant Commissioner. When the matter came up before the Tribunal, the latter found that the assessee's wife Smt. Ganesh Devi who, according to the assessee, had met the cost of construction by the sale of her gold, had not been examined by the Income-tax Officer. The Tribunal, therefore, directed the Income-tax Officer to record her statement. Accordingly, the Income-tax Officer recorded the statement of Smt. Ganesh Devi. She stated that she had saved about Rs. 35,000 from household expenses and also received Rs. 25,000 as income from her two agricultural lands in Raising Nagar, which had been gifted to her by her father in 1925 and that she had purchased gold worth Rs. 66,000 from Panna Lal Roshan Lal in 1947. She further stated that when she left Lahore in 1947, she brought the gold with her and then in 1951, she asked her husband to sell the gold and buy a house for her or construct one on a plot purchased by her at Kamla Nagar for Rs. 14,000. The Tribunal considered the entire evidence placed by the assessee to prove the source of the cost of construction of the house and also the statement of Smt. Ganesh Devi and came to the conclusion that the assessee had failed to explain the source of investment in the construction of the property and that the alleged sale of gold could not be held to be proved. The Tribunal further held that even if it be taken that the gold was sold to Ram Parkash Vinay Kumar, the alleged source of acquisition of the gold was unproved and was not worthy of any credence. The Tribunal further held that the explanation of the source from which the assessee gave the money to his wife having been rejected as being false and untenable, the Revenue authorities were under the circumstances justified in including the amount in question in the assessment year of the assessee as income from undisclosed sources. The Tribunal also agreed with the Income-tax authorities regarding the estimate of the cost of construction at Rs. 84,000. The Tribunal, therefore, sustained the above addition of Rs. 42,000 in the assessee's income for the assessment year 1954-55.

(3.) With regard to the first question referred to us, Shri K. R. Bajaj, learned counsel for the assessee, has raised a two-fold contention namely :-