CONTROLLER OF ESTATE DUTY MADRAS Vs. N KUNJAMMAL

JUDGEMENT

(1.) THE following question of law has been referred to this court by the Income-tax Appellate Tribunal, Madras, under s. 64 of the Essential Commodities Act, 1955.

(2.) THIS question arose out of the assessment under the Essential Commodities Act, 1955, relating to the estate of late R. Krishnamurthy who died on November 30, 1968. While determining the principal value of the said estate, the Asst. Controller held that the legal representatives of the deceased had settled the I.T. assessment for the assessment years 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. Or & Co., which was the proprietary concern of the deceased and which could not be satisfactorily explained by the deceased, that, therefore, 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, to 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. Controller, however, did not accept this contention taking the view that by 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 have 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 estateThe accountable persons had appealed to the Appellate Controller contending that the settlement in the income-tax proceedings could not lead to the inference that there was undisclosed cash available with the deceased at the time of his death. The Appellate Controller, however, did not accept the said contention on the ground that the sum of Rs. 3, 60, 773 really represented the concealed income of the deceased but held that as a part of it, at least a sum of Rs. 1, 00, 000, would have been spent by the deceased having regard to the time-lag, and, therefore, the balance of Rs. 2, 00, 000 may be taken as having passed to the heirs on his death, either as undisclosed cash or investment.

(3.) IN Smt. Shantabai Jadhav v. CED, the deceased, before his death, admitted possession of jewellery of a certain value in his wealth statements for some previous years furnished to the ITO in connection with his I.T. assessments. The said wealth statements were taken as the basis for an inclusion of jewellery, of such value, as having passed to the deceased's heirs and estate duty was sought to be levied on that. The accountable person denied that the deceased had any jewellery on his death. The question arose as to whether the wealth statements given by the deceased in connection with his I.T. assessment could be taken as the sole basis for treating the jewellery as having passed on his death. A Division Bench of the Andhra Pradesh High Court held that if the accountable persons had denied that the deceased had any jewellery on his death, it is the duty of the EDO to decide whether any jewellery was in existence as the property of the deceased at the time of his death and when especially the existence of the jewellery at the time of the death of the deceased was denied, the EDO cannot merely rely on the wealth statements given by the deceased. The court also took the view that the fact that the jewellery existed at an earlier point of time while the deceased was alive does not by itself establish that he continued to be the owner of the jewellery at the time of his death.