LAKHANI H N Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made under S. 66(2) of the Indian IT Act, 1922, at the instance of the assessee, who is now no more. An application is being made for bringing on record the legal representatives of the assessee, who will be substituted in place of the assessee in the reference.

(2.) IN the course of assessment proceedings for the asst. year 1955 -56, relevant to the accounting period ending on 31st March, 1955, the assessee had sold gold ornaments of the value of Rs. 35,653. When called upon to explain the source and the time of acquisition of the said ornaments, the assessee claimed that these ornaments belonged to his wife and that she had received them at the time of her marriage and on some ceremonial occasions. Some ornaments were claimed to have been given to the wife by the mother of the assessee. This explanation was rejected by the ITO and he held that having regard to the status of the assessee who belonged to a rich Marwari family, the sudden sale of his wife's ornaments was not warranted, and no dire need for money to be raised by sale of ornaments was proved. The amount of Rs. 35,653 was thus added to the income of the assessee as income from undisclosed sources. The AAC found that the assessee had not stated as to why he sold the ornaments in question and found that there was no direct or circumstantial evidence to support the explanation given by the assessee. He also found that the assessee was drawing fat cheques as and when he liked to meet his own needs and it was not known why he should have sold the ornaments. Holding that the acquistion of the ornaments had not been proved, he declined to interfere with the assessment order. The Tribunal before whom an appeal was taken by the assessee once again considered the explanation given by the assessee and rejected it. The Tribunal relied on an unreported decision of this Court in IT Ref. No. 66 of 1957, in which it was held that where certain amounts are shown to be sale proceeds of gold, then what the assessee has to establish is not that the amount was realised by sale, but that the gold which was sold belonged to him at any time and where the source of the amount, namely, the ownership of gold was not proved, that in itself was an item of evidence which would entitle the IT authorities to hold that the amount did not represent sale of gold belonging to the assessee but represented his concealed income. In addition, the Tribunal found that the assessee had acquired many other properties and had actually borrowed large amounts and that if the assessee had really ornaments with him at that time, then he would have sold them in normal course instead of borrowing monies. The conduct of the assessee was also taken into account. The conduct consisted of an attempt on the part of the assessee to pass off an amount of Rs. 25,000 received by him as remuneration, as gifts made by his employer to his three minor daughters, though later on the assessee agreed to be assessed on the said sum as his income. Considering all the circumstances, the Tribunal found that the authorities were justified in bringing to tax the sum of Rs. 35,653 as income from undisclosed sources.

(3.) REFERENCE Appln. No. 274 of 1963 -64 having been rejected by the Tribunal, an application under s. 66(2) of the Indian IT Act, 1922, was made to this Court and reference was directed to be made in respect of the following question :