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Sardar Diwan Singh Kohli Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Application No. 150 of 1983
Judge
Reported in(1985)49CTR(All)308; [1985]153ITR638(All); [1985]22TAXMAN107(All)
ActsIncome Tax Act, 1961 - Sections 147 and 256
AppellantSardar Diwan Singh Kohli
RespondentCommissioner of Income-tax
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateBharatji Agarwal and ;M. Katju, Advs.
Excerpt:
.....the second submission is concerned, we are of the view that lakhiram's case [1962]44itr726(sc) is clearly distinguishable as the facts involved in that case were entirely different. act in the year 1946. separate sets of accounts were maintained for the huf as well as for the two branches. on the facts of the case, the tribunal came to the conclusion that there was no omission or failure on the part of the assessee in disclosing fully and truly all material facts necessary for making the assessment. 1 involves interpretation of section 147(a) which clearly gives rise to a question of law......under section 147(a), on the non-disclosure of the investment in the pick-up van in the original return of income filed under section 139(1) by the assessee 2. whether, on the facts and circumstances of the case, the learned tribunal was correct in law that the money received by the assessee amounting to rs. 18,000 from his sister-in-law, smt. somamati,. was in the nature of income character and it was rightly included as income from undisclosed sources in the hands of the assessee 3. whether there is any material for the tribunal's finding that it is doubtful that smt. somawati possessed the sum of rs. 18,000 and whether such a finding is liable to be sustained 4. whether the tribunal was competent in law to sustain the impugned addition of rs. 18,000 on the ground that it did not.....
Judgment:

Om Prakash, J.

1. This is an application under Section 256(2) of the I.T. Act, 1961 (for short 'the Act, 1961'), by the asscssee relating to the assessment year 1976-77, for which the previous year ended on March 31, 1976, praying that the Income-tax Appellate Tribunal be asked to refer the following questions to this court:

'1. Whether, on the facts and circumstances of the case, the learned Tribunal was right in law in holding that the Income-tax Officer was fully justified in reopening the assessment under Section 147(a), on the non-disclosure of the investment in the pick-up van in the original return of income filed under Section 139(1) by the assessee

2. Whether, on the facts and circumstances of the case, the learned Tribunal was correct in law that the money received by the assessee amounting to Rs. 18,000 from his sister-in-law, Smt. Somamati,. was in the nature of income character and it was rightly included as income from undisclosed sources in the hands of the assessee

3. Whether there is any material for the Tribunal's finding that it is doubtful that Smt. Somawati possessed the sum of Rs. 18,000 and whether such a finding is liable to be sustained

4. Whether the Tribunal was competent in law to sustain the impugned addition of Rs. 18,000 on the ground that it did not arise out of the order of the Appellate Assistant Commissioner or out of the order of the Income-tax Officer and which was not the case of the Revenue authorities at any stage

5. Whether the order of the Tribunal was initiated and based on irrelevant considerations and surmises and conjectures and whether the order of the Tribunal can legally be upheld.'

2. At the very outset, Sri Bharatji Agarwal, learned standing counsel for the Revenue, informed us that the assessee had raised only questions Nos. 1 and 2 before the Tribunal and that questions Nos. 3 to 5 were never raised there. This being the position, questions Nos. 3 to 5 cannot be considered and they are accordingly rejected.

3. Then we take up question No. 1 for discussion. In the previous year relevant to the assessment year 1976-77, the assessee made a total investment of Rs. 50,082 in having purchased a pick-up van. The investment made in the said pick-up van included a loan of Rs. 18,000 from a bank. The aseessee filed income-tax/wealth-tax returns on a single date, viz., July 30, 1976. The factum of investment having been made in the pickup van was not disclosed in the income-tax return, but the assessee did disclose it in the wealth-tax return. It having been disclosed in the wealth-tax return and according to the assessee, there being no particular mode of disclosing such investment under the I.T. Act, the contention of the assessee is that he made a full and true disclosure within the meaning of Section 147(a) of the Act. The argument of Sri Bharatji Agarwal is two-fold : firstly, that question No. 1 is merely academic in view of a decision of the Supreme Court in the case of Malegaon Electricity Co. P. Ltd. v. CIT : [1970]78ITR466(SC) and, secondly, that question No. 1 is only a question of fact and not of law. For the second submission, he relied on CIT v. Lakhiram Ramdas : [1962]44ITR726(SC) . We have carefully 'gone through these authorities. In Malegaon's case : [1970]78ITR466(SC) , the assessee disclosed profits arising by way of capital gain, but the written down value (for short the W.D.V.) disclosure of which was necessary for computing capital gain, was not disclosed and the Supreme Court took the view that the facts necessary for making the assessment were not disclosed fully and truly. So the Supreme Court held that Section 147(a) of the Act was rightly invoked by the Revenue. In the instant case, the facts are that the assessee, admittedly, did not make a disclosure of the investment made in the pick-up van in the income-tax return, but the disclosure was made in the wealth-tax return which was filed on the same date when the income-tax return was filed. For disclosing capital gain, there was a legal requirement to disclose it in the return relating to the case which was discussed in Malegaon's case : [1970]78ITR466(SC) , but the argument of Sri Gulati, learned counsel for the assessee, in the instant case, is that though Parts IV and Vwere incorporated in the return with effect from June 1, 1976, requiring the assessee to furnish a statement regarding particulars of certain expenditure and outgoing during the previous year and statement of assets held at the end of the previous year, respectively, but these Parts IV and V were never enforced, as an amendment was made, whereby compliance of Parts IV and V was dispensed with for the assessment year 1976-77. The argument of Sri Gulati is that the compliance of Parts IV and V having been dispensed with by the subsequent amendment (Notification No. S.O. 420(E) dated June, 1976), published in the Gazette of India, Extraordinary, Pt. II, sec 3(ii), page 1377, dated June 19, 1976), the position remained, as if there was no legal requirement to disclose the investment made in the purchase of the pick-up van by the assessee. It is, therefore, argued that Malegaon's case : [1970]78ITR466(SC) is clearly distinguishable from the instant case, as the former considered a case where there was a legal requirement for the assessee to disclose capital gain and necessary facts relating thereto, but in the case of the assessee, though there was legal requirement, as Parts IV and V were introduced with effect from June 1, 1976, but they were never enforced. We find force in the submission of Sri Gulati that the two cases, the one considered by the Supreme Court in Malegaon's case : [1970]78ITR466(SC) and the instant case involve entirely different facts and, therefore, Malegaon's case : [1970]78ITR466(SC) cannot be applied to the facts of the instant case.

4. So far as the second submission is concerned, we are of the view that Lakhiram's case : [1962]44ITR726(SC) is clearly distinguishable as the facts involved in that case were entirely different. The assessee in that case carried on cloth business. He was assessed to income-tax in the status of an HUF. In the account period relating to the assessment year 1943-44, the assessee opened a branch at Karachi. The total income for that assessment year was determined at Rs. 38,400. For the next following two years, the assessee maintained joint accounts for the whole period of two years. In the assessment year 1945-46, he opened a branch at Bombay and original assessment for the aforesaid two years was completed under the provisions of Section 23(3) of the I.T. Act in the year 1946. Separate sets of accounts were maintained for the HUF as well as for the two branches. The books of account were produced and were examined by the examiner of accounts who submitted a report to the ITO. Some time after the completion of the said assessment, the ITO received information that the assassee had purchased a draft for Rs. 1,10,000 from the Exchange Bank of India and Africa Ltd. at Bombay and the draft was deposited on July 17, 1944, in a branch of the said bank at Ahmedabad. On these facts, proceedings under Section 34(1)(a) of the Indian I.T. Act, 1922, analogous to Section 147(a) of the I.T. Act, 1961, were initiated and then the question arose whether the assessee disclosed fully and truly necessary facts for making assessment. On the facts of the case, the Tribunal came to the conclusion that there was no omission or failure on the part of the assessee in disclosing fully and truly all material facts necessary for making the assessment. The Supreme Court agreed with the conclusion of the Tribunal as the latter drew an inference from the facts found in the case. So, on the basis of this authority, it cannot be said that question No. 1 is a question of fact.

5. Before us, the point for consideration is whether the assessee can be said to have disclosed fully and truly the material facts necessary for making the assessment when he disclosed the investment in the wealth-tax return, which was not disclosed in the income-tax return, especially when the requirement for making the disclosure of investment in a vehicle in view of Part IV of the statement was never enforced. To decide question No. 1, the Tribunal will have to consider the issues : (1) whether there was any legal requirement in the Act of 1961 to disclose the investment made in the pick-up van for the relevant year ; (2) whether disclosure made in the wealth-tax return was sufficient compliance on the part of the assessee; and (3) whether Section 147(a) can be invoked on the peculiar facts of this case. Thus question No. 1 involves interpretation of Section 147(a) which clearly gives rise to a question of law.

6. Coming to the next question, we are of the view that the Tribunal cannot be asked to make a reference on that question. The assessee made a repayment of the loan taken from the bank during the previous year relevant to the assessment year 1976-77. The contention was that for making the repayment of the loan, the assessee had taken a sum of Rs. 18,000 from his sister-in-law, Shrimati Somawati. Considering the facts in its entirety, the Tribunal reached the conclusion that the lady was not in a position to advance Rs. 18,000 to the assessee. That is why the Tribunal took the view that the repayment of the loan had been made by the assessee out of the income from undisclosed sources. This conclusion was reached by the Tribunal simply on appraisal of the material available on the record, specially the statement of Shrimathi Somawati, and, therefore, no question of law arises therefrom. The finding of the Tribunal on question No. 2 is essentially a finding of fact.

7. In the result, the application is partly allowed. The Tribunal is directed to draw up a statement of the case and refer question No. 1 to this court. Parties will bear their own costs.


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