1. This is a reference made under s. 66(2) of the Indian I.T. 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 assessment year 1955-56 relevant to the accounting period ending on March 31, 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.
3. The AAC found that the assessee 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.
4. 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 an unreported decision of this court in Income-tax Reference 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 income-tax 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 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.
5. Reference Application No. 274 of 1963-64 having been rejected by the Tribunal, an application under s. 66(2) of the Indian I.T. Act, 1922, was made to this court and reference was directed to be made in respect of the following question :
'Whether, there was any material before the Tribunal to hold that the sale proceeds amounting to Rs, 35,653 (rupees thirty-five thousand six hundred and fifty-three) of the old gold ornaments was the assessee's income of the accounting year from some undisclosed sources ?'
6. The manner in which the question has been framed clearly shows any material on which the finding that the sale proceeds of Rs. 35,653 could be treated as the assessee's income of the accounting year from some undisclosed source could be based. It was at one stage contended by Mr.Thakar, on behalf of the assessee, that the amount in question could not be treated as undisclosed income for the accounting year ending March 31, 1955. This controversy appears to us to be beyond the scope of the reference because at no stage before any of the income-tax authorities has any contention been raised that assuming that the amount in question represents income, it could not be treated as an income of the accounting year ending March 31, 1955, but of some other year.
7. As already observed, the only thing that we have to find out in this reference is whether there was any material before the Tribunal. We must, therefore, go to the order of the tribunal and as we have already pointed out, the Tribunal has relied on the decision of this court in Income-tax Reference No. 66 of 1957, in which a view has been taken that were an amount is represented to be the sale proceeds of gold ornaments if the assessee fails to prove the source of the gold ornaments, then the said amount can be treated as undisclosed income. It is for us to find any error in this proposition of law. If an assessee succeeds in proving that the amount which the income-tax authorities are wanting to treat as income from undisclosed sources is nothing but conversion into cash of gold which belongs to him, then such inclusion of that amount as income from undisclosed sources would be wholly impermissible. But, what the assessee is required to prove is that the gold belonged to him, because unless it is found and proved that the gold belonged to the assessee the amount in dispute can never be treated as conversion of gold belonging to the assessee into cash thus preventing that amount from being treated as income from undisclosed sources. On this question the finding of all the three authorities are against the assessee. If there is some material for reaching this finding, the question referred has to be answered in the negative. The material may be in the form of any direct evidence or the material may be in the form of circumstances which the income-tax authorities are entitled to take into consideration to decide the question in issue. Admittedly, the assessee has merely given an explanation that the ornaments belonged to his wife. In order to ascertain the acceptability of this explanation, the Tribunal considered certain other circumstances. At the stage of the appeal before the AAC, the assessee was not able to explain as to why he was required to sell ornaments. The Tribunal has further consideration that the assessee had been purchasing properties and had been borrow in g monies which he would not have done if he had possessed gold, because then he would have sold that gold. Then the Tribunal has considered the conduct of the assessee who wanted to treat the remuneration paid in cash to him by his employer as gifts made by the employer to his three minor daughters. Before accepting the explanation given by the assessee the Tribunal was entitled to consider how reliable the assessee was while considering his statement. It appears to us that this is clearly a case of a finding of fact recorded by the Tribunal that the assessee has failed to prove that he owned the gold which he sold and converted that gold into cash. That finding is supported by the material referred to above and the Tribunal was entitled to take the view on that material that the assessee had failed to prove that the gold belonged to him.
8. Mr.Thakar on behalf of the assessee has tried to rely upon the decision of this court in J. S. Parkar v. V. B. Palekar : 94ITR616(Bom) and in Vishnukantham Chetty v. CIT : 34ITR678(Mad) . We do not think it necessary to refer to these decisions because of the nature of the question which has been referred and the matter does not require any further consideration once it is found that there was material to support the findings recorded by the Tribunal. Accordingly, the question referred is answered in the affirmative and against the assessee. Assessee to pay the costs of this reference.