TMI Blog1979 (6) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... Poonamchand and his elder brother Shri Kanmal used to live with their maternal grand-mother Smt. Bageli Bai. After his marriage, Shri Knmal started living separately while Shri Poonamchand continued to live with Smt. Bageli Bai. Smt. Bageli Bai, had no son, and therefore, she bestowed motherly affection and love on Shri Poonamchand. The assessee also took the stand that till the age of about 25 years, he was in petty employment with a salary of Rs. 200 per month, with his brother, Shri Kanmal Nahata. The assessee produced evidence to show that the source of deposit of Rs. 4,25,000 by Smt. Bageli Bai was her ancestral gold and silver and jewellery, it was claimed that the husband of Smt. Bageli Bai because she became a widow. It was also claimed that Shri Surajmal, father-in-law of Smt. Bageli Bai, was having a lot of jewellery and gold, which, later on, came to Smt. Bageli Bai. Shri Surajmal was a Kamdar of a royal family of Jodhpur. The ITO, Bombay, ultimately, dropped the proceedings. 2. Subsequently, the assessee was served with a notice under s. 148 of the IT Act, 1961, on 26th Feb., 1964. Pursuant to the service of the said notice, the assessee had filed return, under protes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Smt. Begali Bai. The assessee also produced over-whelming evidence. The learned ITO was of the opinion that Smt. Bangeli Bai was not in position to make the advance in question. In his opinion, the sum of Rs. 4,25,000 was earned by the assessee in taxable territory, namely, in Bombay. The assessee failed to disclose this amount. Consequently, the learned ITO held that the sum of Rs. 4,25,000 was the income of the assessee from undisclosed sources. The learned ITO completed the assessment of Rs. 4,27,500. 5. Being aggrieved with the order of the ITO, the assessee took up the matter in appeal. The first contention of the assessee before the learned AAC was that the ITO, who completed the assessment under s. 148 of the Act was not having jurisdiction to proceed in respect of the sum of 4,25,000 about which the ITO, Bombay, had already dropped the proceedings initiated under s. 34 of the India IT Act, 1922. This contention was not accepted by the learned AAC. The other submission of the assessee was that the proceedings under s. 147 (a)/148 of the Act were bad in law because it was merely a change of opinion. According to the assessee, the ITO did start proceedings under s. 34 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 4,25,000 was advanced by Shri Poonam Chand on 25th July, 1947 to the Prince of Berar. This amount was repaid by the said Prince on 8th June, 1949. So, the point is whether this money could be advanced by the assessee out of his earnings in Bombay, or really this amount came from Smt. Begeli Bai, who was residing at Jodhpur. In this contention, we may make it clear that the stand of the assessee, right from the very beginning, has been that the said amount came from Smt. Begeli Bai. During the proceedings under s. 34 of the Indian IT Act, 1922, Smt. Begeli Bai filed an affidavit dt. 18th Feb., 1955. Copy of the said affidavit is on the paper book. This is a detailed affidavit. In this affidavit, the lady has given details and the circumstances under which she gave the sum of Rs. 4,25,000 to Shri Poonamchand. In this affidavit, the lady has clearly stated that she was having considerable gold, silver and jewellery. She also stated that after death of her husband on account of custom, it was not possible for her to wear ornaments etc. She also stated that she was having property more than Rs. 5 lakhs. She also stated that she was having no confidence in anybody else but she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document, the gift being of a movable property has got to be accepted, in the absence of any other adverse evidence. The point is also connected with the sum of Rs. 4,25,000 about which enquiries are still continuing at Bombay. Inform the ITO, Bombay of this as well this to be watched and if any evidence comes in sight which would throw any light on the nature of this enquiry, the assessment will be got quashed under s. 33(b)." After the death of Smt. Bageli Bai on 16th June, 1955, in Estate Duty matter, this point also came up for consideration before the learned Asstt. Controller of ED. The assessment order dt. 28th May, 1958 is on the paper book. The learned Asstt. Controller of Estate Duty, while completing the assessment, held as under: "Smt. Begeli Bai made a declaration on 24th Nov., 1951 that out of the amount of Rs. 4,25,000 which she had advanced in s. 2004 to Shri Poonamchand and had received back on Jeth Sudi 12, s. 2006, she had only a sum of Rs. 1,50,000 left with her on Kartik s. 2008 that out of this sum of Rs. 1,50,000 she advanced a loan of Rs. 65,000 and Rs. 30,000 on 22nd Oct., 49 and 12th Dec., 50 respectively to Shri Poonamchand, that the sum of Rs. 95,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue in connection with enquiries made in respect of the source of Rs. 4,25,000. The assessee requested the Department that if it was not satisfied with the affidavit filed by the lady, her statement may be recorded. The learned ITO never decided to record the statement of the lady. The lady also filed a declaration before the competent authority, namely, the GTO. The said declaration was accepted by the learned GTO. Even in Estate Duty matters, the said gift came up for consideration, and it was also held to be genuine. The orders passed by the GTO and the Asstt. Controller of Estate Duty in respective years, became final and the Department never challenged those orders. The affidavit and the declaration are quite detailed, and remained uncontroverted. The Department had the occasion to cross-examine the lady on the said affidavit, but it never preferred to do so. Now the lady is no-more in the world. The said affidavit and declaration are very important pieces of evidence for the purpose of deciding the point in controversy. Apart from it, those statements are statements of dead persons, and as such, also are having evidentiary value. The learned ITO, during the course of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ug., 1954, the copy of his statement is on the paper book at page 62. This witness also stated that Smt. Bageli Bai sold her ornaments through Shri Tejraj sons of Shri Laxmichand and Jawantraj, son of Shri Nathmalji. Indirectly, his statement also supports the case of the assessee showing that Smt. Begeli Bai belongs to a rich family, and she did sell the ornaments and jewellery. On Shri Joharimal Pariksh, chartered Accountant, son of Shri Tansukhdassji also filed an affidavit in November 1975. before the ITO Jodhpur. This affidavit is very important. As scuh, we would like to reproduce it. It is as under; "I Joharimal Parikh, son of Shri Tansukhdassji aged 45 years, residing at Balsamand, Jodhpur, do hereby state on oath as under: 1. That from Aug., 1953 to March, 1963, I practised as Chartered Accountant at Bombay. 2. That in connection with the income-tax assessment of Shri Poonamchand Nahata, son of Shri Jaweanmalji of Jodhpur, the asst. yr. 1947-58 and 1948-49, I appeared alongwith him before Shri Chitley, ITO, Salaries Section-I, Bombay at Aayakar Bhawan., Bombay on two hearing-one on the 26th April, 1957 and the other day of two earlier. The assessment proceedings were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the orders were passed in my client s favour on merits we agree and did not press the point of limitation at the instance of the said ITO. Solemnly declared at Jodhpur on this day of Nov., 1975." In this affidavit, the learned Chartered Accountant has clearly stated that the sum of Rs. 4,25,000 was taken by Shri Poonamchand from his maternal grandmother, Smt. Begeli Bai at Jodhpur. It means, Shri Joharimal Parikh is an eye-witness of the fact of advancing the loan of Rs. 4,25,000 by Smt. Begeli Bai to the Prince of Berar through Shri Poonamchand. After filling this affidavit, the learned ITO did not cross-examine the deponent on the said affidavit. The affidavit is quite detailed, and exhaustive. It also corroborates the affidavit of Smt. Begeli Bai, referred to above. Under the circumstances, this affidavit also remains uncontroverted. So, in view of the decision in the case of Mehta parikh Co.(1) the contents of the said affidavit should be accepted as correct. There is also affidavit of Smt. Bastu Bai at para 188 of the paper book. In this affidavit, it was stated that Shri Poonamchand Nahata was her neighbour at Jodhpur. She also stated that Shri Poonamchand during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...... In the statement, he also stated that when his Nani gave him Rs. 4,25,000, he wrote a Rukha in her favour on 16th July, 1947. The learned ITO put another question to the assessee, in the following words: "Can you thrown light as to how Smt. Bageli Bai came in possesison of the huge amount?" The answer was as under: "The lady has ancestral money in gold, silver and jewellery. Shri Beni das, husband of my Nani kept the jewellery gold etc. and he died after two years of marriage of Bangeli Bai and then he handed over the jewellery to her this point was told to me by my Nani only when she advanced Rs. 4,25,000 in the years 1947". Another question put before the assessee by the ITO was in the following words: "You know about that she inherited gold, silver and jewellery and how she came in the possession of cash of Rs. 4,25,000?" Answer given by the assessee, Shri Poonamchand, was as under: "Out of realisation of the gold ornaments and jewellery after her husband s death when I was 7 or 8 years old. I am not aware as to when these sales were made because I was only 7 or 8 years old. In the year 1946, I was told about the sale of the ornaments by my Nani." If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to show that he was not having money to advance to the said Prince, but really he borrowed the said amount from his Nani, and advanced the same to the Prince of Berar. After a lapse of 10 to 15 years, it was not possible to produce other evidence in support of the said theory. Inspite of so many difficulties, the assessee did produce convincing evidence before the ITO in proceedings under s. 148 of the IT Act, 1961 The said evidence has also been discussed in detail. In the case of S. Hastimal vs. CIT(2) the Hon ble Madras High Court held that after the lapse of a decade, an assessee should not be placed upon the rack and called upon to explain not merely the origin and source of a capital contribution by the origin or origin and source of source as well. The difficulty on the part of any assessee to explain a transaction which took place before a decade has to be borne in mind by the Department and should under no circumstances be underestimated or taken advantage of by them." 13. Against the direct evidence, produced by assessee in support of the contention that the sum of Rs. 4,25,000 was really given by Smt. Bageli Bai, on behalf of the Department, there is not even an iot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay, on the basis of the material in his possession, has reason to believe that income chargeable to tax escaped assessment in the year of account, and so, he started proceedings under s. 34 of the Indian IT Act, 1922. It is different matter that ultimately those proceedings were dropped by him. It was further contended that the Department, in the present proceedings, cannot be heard to say that the ITO, Bombay, was not having jurisdiction to start proceedings under s. 34 of the Indian IT Act, 1922. The learned counsel also relies on the decision in the case of Seth Gurmukh Singh(3). It was further contended that the law laid down in this decision was subsequently approved by Their Lordships of the Supreme Court. Thus, it was submitted that the evidence produced by the assessee before the ITO, Bombay, is admissible, and may not be ignored. 16. In our opinion the contention of the Revenue could hardly be accepted. The ITO, Bombay started the proceedings under s. 34 of the Indian IT Act, 1922 because he was having reason to believe that income assessable in the year of account had escaped assessment. Whether the material before him for starting proceedings under s. 34 of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax was payable in the Indian States, including Jodhpur, Hyderabad and other. Under the circumstances, no assessment proceedings or re-assessment proceeding can be started in respect of that amount under s. 148 of the IT Act 1961. In the alternative, it was also contended that in respect of this very amount, proceedings under s. 34 of the Indian IT Act, 1922. Were initiated by the ITO Bombay, and, as such in respect of that very amount, proceedings under s. 148 of the Act could not be started. 18. The learned Departmental Representative, contended that the ITO, Jodhpur was perfectly justified in starting proceedings under s. 147(A)/148 of the Act. From the material in his possession, be had reason to believe that in the year of account, income chargeable to tax had escaped assessment. The proceedings under s. 34 of the Indian IT Act 1922 were dropped before 31st March, 1957. It means, at the time of coming into force of the IT Act of 1961, no proceedings under s. 34 of the old Act were pending. So, in view of s. 297(2)(d)(ii) of the Act, the ITO is perfectly justified in starting proceedings under s. 148 of the Act. 19. In view of finding on merit, this point becomes only acade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 34 of the Indian IT Act, 1922 were dropped before 1957. It means that when the new Act came into force, no proceedings under s. 34 of the Indian IT Act, 1922 were pending before the ITO Bombay. So, in view of s. 297(2)(d)(ii) of the IT Act, 1961, the ITO, Jodhpur was quite competent to start proceedings under s. 147(a)/148 of the Act. In order to elaborate this point, we may point out that in view of s. 297 (2)(d)(ii) of the Act, if any income chargeable to tax had escaped assessment within the meaning of that expression in s. 147 and no proceedings under s. 34 of the replaced Act in respect of any such income are pending at the commencement of this Act, a notice under s. 148 may, subject to the provisions contained in s. 149 on s. 150 can be issued with respect to that asst. yr. and all the provisions of this Act shell apply accordingly. If we read this provision, alongwith the Notification No. S.R.O. 341 dt. 13th Feb., 1956, issued by the Board, it would be clear that for the purpose of starting proceedings under s. 148 of the Act, the ITO, Jodhpur was quite competent to start such proceedings. Looking to the aforesaid facts, evidence on record, preponderance of probabili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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