CONTROLLER OF ESTATE DUTY Vs. KUNJAMMAL SMT N

JUDGEMENT

(1.) THE following question of law has been refferred to this Court by the Tribunal, Madras, under s.64 of the E.D. Act, 1953 :

(2.) THIS question arose out of the assessment under the E.D. Act, 1953, relating to the estate of the late R. Krishanamurthy who died on 30th Nov., 1968. While determaining the principal value of the said estate, the Asstt. CED held that the legal representatives of the deceased had settled the IT assessment for the asst. yrs. 1959 -60 to 1966 -67 by admitting undisclosed income of Rs. 3,60,773 which was spread over these years by an order passed under S. 271 (4A) of the IT Act, 1961, that the said amount represented the cash credits in the books of the firm, M/s K. Orr & Co., which was the proprietary concern of the deceased and which could not be satisfactorily explained by the deceased, that, therfore, this amount should be taken to represent the suppressed profit of the deceased and that it should have been available either as cash or as investment and passed on to the heirs of the deceased on his death. He, therefore, called upon the accountable persons to show cause why it should not be added, as undisclosed cash assets of the deceased, the principal value of the estate. The accountable persons contended that the settlement was effected with the Department to purchase peace and that, in reality, the amount represented genuine loans which had been returned to the lenders by the deceased himself and, therefore,no portion of the said sum of Rs. 3,60,773 passed on the death of the deceased. The Asst. CED, however, did not accept this contention taking the view that be reason of the settlement the amount was considered to represent the concealed profits of the deceased and that even assuming that a part of it could ahve been spent away by the deceased, a sum of Rs. 3,00,000 can reasonably be taken as having passed on to the heirs of the deceased on his death, either as undisclosed cash or investment, in determining the principal value of the estate.

(3.) THE accountable persons took the matter in appeal to the Tribunal contending that the settlement in the IT proccedings could not by itself imply that the amount which was allowed to be taxed in the IT proceedings was the undisclosed income of the deceased and that it remained as an asset in his hands at the time of his death. It was also contended before the Tribunal that the cash credit, which was treated as undisclosed income, represented genuine loans and it was due to lack of evidence available with accountable persons, and to purchase peace that they agreed to have the amount taxed by way of settlement and that notwithstanding the settlement in the IT proceedings, so long as the amount had not been capitalised or correlated to any particular investment made by the deceased, the addition of Rs. 3,60,773 should be taken to be only an intangible addition. It was also contended that even assuming that the amount could be treated as the concealed income of the deceased for the period 31st March, 1959, to 31st March, 1961 having regard to the fact that the deceased died only on 26th Nov., 1968, the amount cannot be taken to have remained with the deceased at the at the time he died and, therefore, unless the Revenue establishes the actual existence of an asset on the date of his death, no addition can ne made by the Revenue as undisclosed cash or investment remaining in the hands of the deceased at the time of his death.