ADDITIONAL COMMISSIONER OF INCOME TAX Vs. ABBAS A

JUDGEMENT

(1.) THESE four tax cases arise out of the orders passed by the Income-tax Appellate Tribunal, Madras, in four appeals filed by two assesses, one A. Abbas and his brother, A. Abdul Khader, both of whom happened to be partners in a business firm for two assessment years. On July, 12, 1967, the Enforcement Directorate conducted a search of the business premises of the firm in which the said two assesses were partners. During the said search, a sale deed dated, July 14, 1966, relating to premises No. 29, Motilal Street, T. Nagar, in favour of the wives of the two assesses jointly for a consideration of Rs. 41,900 was seized. The said document showed that the stamp papers to the value of Rs. 4,100 had been used for that document. A similar sale deed dated May, 1, 1967, relating to premises No. 33, Sarojini Street, Madras, purchased for a consideration of Rs. 42,000 was also recovered from the premises along with a receipt dated April 11, 1967, issues by one Shri K. N. V. Narayanan to Shri Abbas, one of the assesses, which contained on the reverse certain details of the cost of the house, stamp and lawyer's feed, etc., writted in the assessee's own handwriting. There were certain receipts issued by the Madras State Housing Board to Abdul Khader, one of the assesses, and they were also recovered. On the same day, Abdul Khader, one of the assesses, who was present at the time of the search by the Enforcement Directorate, was examined. He gave a statement before the officers who made the search. In that statement he admitted that he had on the previous day paid Rs. 2,000 to a lady from Ceylon, who came to Madras. When questioned about the source of the purchase price paid in respect of Motilal Street property, he had stated that the sale price was paid from and out of loans raised four persons at the rate of Rs. 10,500 each and the said loans has not been discharged. As regards the property at 32, Sarojini Street, Madras, he has stated that the assesses have purchased the said house jointly in the names of their wives, that the value of the house was Rs. 68,000 excluding the stamp value of Rs. 4,000 and other expenses, that the cost of the property in all came to Rs. 72,910 and that for this purpose the wives had provided a sum of Rs. 36,000 each by raising loans and by selling jewels.

(2.) LATER, on June 20, 1968, the assessees filed their income-tax returns in respect of the two assessment years 1967-68 and 1068-69 and the income returned by Abbas was Rs. 5,898 and Rs. 4,155 respectively for the years 1967-68 and 1968-69. The return filed by Abdul Khader disclosed the very same figures as the income for the two years. On the same day, the ITO has noted in the order sheet that the representative for both the assesses was present, that the assessment for the assessment year 1966-67 was still pending, that enquires were to be made into the investments in Motilal Street property and Sarojini Street property and also in the Housing Board and that the assesses representative sought for further time for making further representations. However, it is seen that from the letter given by the ITO on December 24, 1970, that the returns were filed by the assessee when all the documents seized from the business premises of the firm on July 12, 1967, were with ITO. Subsequently, on November 29, 1968, the representative of the assessee wrote to the ITO two letters, one about Motilal Street property and the other Sarojini Street property. It has been stated there in that the source of purchase price for Motilal Street property was moneys raised by loans of Rs. 15,000 from Ahamed Meeran Sahib, Rs. 10,000 from Khan Meeran Sahib and Rs. 12,000 by sale of house at Palayamkottai Murugan Kuruchi by the other assessee, Abdul Khader, and the balance from the savings of the two assesses. The payment to the Ceylon lady was explained as made out of the savings of Abdul Khader. Confirmatory letter from the lender, Shri Ahmed Meeran Sahib, for Rs. 15,000 and another confirmatory letter from the lender Shri Khan Meeran Sahib, for Rs. 10,000 were also produced, as seen from the records before the ITO. As regards Sarojini Street property, the purchase price was stated to be Rs. 46,000 inclusive of the stamp charges and the source was explained as money raised by sale of jewels and borrowals of Rs. 30,000 from six person whose names and addresses were furnished in the statement. It was also stated that the assessment had invested their savings in the earlier year also in the purchase of the property. Four confirmatory letters from four persons out of six lenders for a total loan of Rs. 24000 out of Rs. 30,000 had been produced. A letter for the sale of jewels was also produced before the ITO. Thereupon, certain discussions took place between the ITO and the representative of the assesses and the assesses filed their revised returns on June 13, 1969. In the revised return, A. Abbas returned a sum of Rs. 17,000 as income from others sources and the said sum of Rs. 17,000 comprised (1) improvements of building not explained and (2) other times-Rs. 14,500. Thus, the aggregate of income from undisclosed sources, property and business was Rs. 28,232 Abdul Khader also filed a revised return showing income from other sources of Rs. 29,518 and the aggregate income including from all sources at Rs. 27,674 (sic).

(3.) THE Tribunal accepted the assessee's case in its entirety so far as the assessment year 1967-68 in concerned. According to the Tribunal, there were no incriminating materials warranting a presumption of concealment for that year. Merely on the basis of the revised return and the resultant assessments, concealment cannot be inferred. However, the Tribunal held that the position is different for the assessment year 1968-69. Though the revised return and the subsequent assessment cannot be the sole basis for presuming concealment, there are other materials in that assessment year to prove concealment of income, though not to the extent found by the IAC. Though the Tribunal made note of the fact that in the original statement made by the assessee, Sarojini Street property was said to have been purchased only for Rs. 42,000, yet on the basis of the statement made by one of the assessee, the assessees' representative agreed for an assessment being made on Rs. 72,910 taking it to be the purchase value of the property. THE assesses had explained the sources only to the extent of Rs. 30,000 and the assesses' case that the balance of the consideration came from the sale of jewels had not been accepted. THE Tribunal was of the view that the ITO himself has not accepted the explanation given by the assesses as to the sale of the jewels. THE Tribunal also noted that no explanation has been offered for the balance of Rs. 26,910 after deducting the sum of Rs. 30,000 said to have been borrowed from six persons and the sum of Rs. 16,000 said to have been obtained by the sale of jewels. No explanation has been offered before the ITO or before the IAC or at least in the grounds of appeal before the Tribunal. THE Tribunal also made noted of the fact that the sum of Rs. 2,563 which was added, no explanation was given by the assessees. In view of the fact that no explanation has actually been given by the assesses for the balance of the sale consideration of Rs. 26,910, the levy of penalty was held justified to the said extent. In that view, the Tribunal while vacating the order levying penalty for 1967-68, sustained the levy of penalty to the extent of Rs. 5,455 for the year 1968-69, so far as one assessee, A. Abbas, is concerned and Rs. 2,563 so far as the other assessee, Abdul Khader, is concerned.