CHUNILAL RASTOGI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessee has been assessed in the status of a Hindu undivided family for the assessment year 1947-48. The accounting year is the Diwali Year 2002-2003 corresponding approximately to the period 24th October, 1945, to 23rd October, 1946. The assessee is a zamindar and apart from the agricultural income from the zamindari the derives non-agricultural income from that zamindari as well as income from house property and money-lending. For the assessment year in question the assessee returned a total income of Rs. 3 only. He showed in his return the income of house property at Rs. 423 and deducted a sum of Rs. 420 out of it as being business loss. After the passing of the High Denomination Bank Notes (Demonetization) Ordinance, 1946, the assessee encashed 73 high denomination notes of Rs. 1,000 each on the 19th of January, 1946, which falls within the accounting period. The INcome-tax Officer estimated the income from house property at Rs. 1,200 and from other sources at Rs. 1,000. The business income estimated by him amounted to Rs. 2,06,082. This sum included the amount of Rs. 73,000 representing the value of the high denomination notes encashed by the assessee. We are concerned only with this amount of Rs. 73,000 in this case.

(2.) IN the form of declaration that had to be made under section 6 of the aforesaid Ordinance against column No. 16 as to when and from what source the declarant came in possession of bank notes now tendered the assessee noted "not rememberable because of above being kept with female inmates of the family" and against column No. 15 as to the reasons for keeping above amount in high denomination notes rather than in current account, fixed deposit or securities, he noted "kept with the female inmates of the family privately." IN the verification of that declaration, however, the assessee declared that the bank notes tendered belonged to him and were not benami holdings. On being required by the INcome-tax Officer to explain the nature and source of the high denomination notes encashed by him, the assessee stated that out of the above sum of Rs. 73,000, a sum of Rs. 55,000 was the money given to his daughter-in-law on the occasion of his sons marriage and the balance of Rs. 18,000 represented the savings of his wife. It may be noted that the assessee never put forward a case that the aforesaid notes formed part of the cash balance of his zamindari income. IN his statement recorded under section 37 of the INcome-tax Act the assessee stated that the sum of Rs. 55,000 had been given to his daughter-in-law by her grandfather, Lala Raghubir Dayal of Rastogi Tola, Lucknow. With regard to the sum of Rs. 18,000, the assessee could not give any account as to how his wife could be in possession of that sum. He, however, stated that that amount might be her personal savings. The INcome-tax Officer, thereafter, made a reference to the INspecting Assistant Commissioner of INcome-tax, Lucknow, and requested him to verify the truth of the assessees version about the payment of Rs. 55,000 by Lala Raghubir Dayal to the assessees daughter-in-law. The statement of Brij Gopal, son of the aforesaid Lala Raghubir Dayal, recorded under section 37 of the Act, shows that the said Lala Raghubir Dayal did not take any active part in the marriage and that the presents at the time of marriage consisted only of cash of Rs. 5000 and of clothes and ornaments worth Rs. 8,000 to 10,000. The assessee being confronted with the statement of Brij Gopal put forward a different claim as regards the source of those notes. The case that he put forward was that the notes had been encashed in his name in order to oblige one Mr. N. K. Mishra, who was the manager of the Bank of Bihar. No satisfactory proof having been given, the INcome-tax Officer refused to accept this belated version. Therefore, as the assessee could not disclose the nature and source of those notes, the INcome-tax Officer treated the entire sum of Rs. 73,000 as the assessees secreted income and included it in his total income. On appeal being preferred by the assessee the Appellate Assistant Commissioner accepted the assessees version that the notes belonged to Mr. N. K. Misra and had been encashed on his behalf in the name of the assessee. He, however, took the view that the assessee, in having the notes encashed in his name, might have been given a share in the profit and he estimated his share of profit at Rs. 7,500. He, therefore, excluded the balance of Rs. 65,500 from the assessment. The INcome-tax Officer went in appeal to the Tribunal who gave an opportunity to the assessee to produce Mr. N. K. Misra for examination. Mr. Dutt who appeared for the assessee before the Tribunal, however, frankly admitted that Mr. N. K. Misra was not likely to support the assessees version and, therefore, he could not examine him. The Tribunal accepted the departments contention and held that the aforesaid notes were not encashed on behalf of Mr. N. K. Misra. The Tribunal, however, held that it was not unlikely that the assessee who was a zamindar and moneylender could have some notes of high denomination with him as part of his savings and estimated such savings at Rs. 20,000. The Tribunal, therefore, excluded this sum of Rs. 20,000 from the assessment and confirmed the inclusion of the balance of Rs. 53,000 in the assessees total income from secreted sources. An application before the Appellate Tribunal by the assessee to refer to the High Court certain questions of law having failed, the assessee filed an application in this Court under section 66(2) of the INcome-tax Act to require the INcome-tax Appellate Tribunal to state a case on questions enumerated therein. IN this state of facts the Appellate Tribunal on being required by this Court referred the following question of law for the opinion of the High Court :

(3.) IN this case, as already observed, the assessee never put forward a claim that the high denomination notes formed part of his zamindari income. The explanations that he has given are prevaricating. Different explanations have been put forward by the assessee at different times. On the very first occasion when he had to make a declaration under section 6 of the High Denomination Bank Notes (Demonetization) Ordinance, 1946, he declared that though the said notes were kept with the female inmates of the family privately, they belonged to him and were not benami holdings. When he was required by the INcome-tax Officer to give his explanation as to how he could be in possession of those notes, he changed his version and definitely stated that they did not belong to him and put forward a different case that out of the above sum of Rs. 73,000, a sum of Rs. 55,000 belonged to his daughter-in-law as having been given to her by her grandfather at the time of her marriage and the balance of Rs. 18,000 belonged to his wife as being her personal savings. When any gift of this amount to his daughter-in-law was denied by Brij Gopal, the father of his daughter-in-law, the assessee came out with a new case that the entire sum of Rs. 73,000 belonged to one Mr. N. K. Misra who encashed the notes in his name. No material was placed before the INcome-tax Officer to support the explanation. Mr. N. K. Misra was not examined, and, as already observed, Mr. Dutt appearing for the assessee conceded before the Appellate Tribunal that N. K. Misra might not support the assessees version. Thus, the authorities were left only with the contradictory versions of the assessee on the point of the explanation as to how he could be in possession of those high denomination notes and they were, therefore, perfectly justified and within their rights to refuse to accept the explanation given by the assessee. The assessee not having satisfactorily proved the source and nature of the aforesaid amount of Rs. 73,000 which he encashed in the accounting year, the revenue authorities were perfectly justified in drawing an inference that the said sum was of an income nature. As the assessee never put forward the case of having got the said amount or any part thereof as being part of his zamindari income, the argument of Mr. Sahay that the increase in wealth could not only be from the taxable income but could also be from the zamindari income which was not taxable, has to be rejected as being without any substance.