1. The appellant has come in appeal before the Tribunal against the orders of the authorities below for making an addition of Rs. 4,50,000 to the income of the assessee-company as income from undisclosed sources. This addition is based on inferences and presumptions, different facts and circumstantial evidence.
2. The brief facts as considered by the authorities for making the addition are as follows. Two companies, i.e., Bajaj Auto Ltd. and Bajaj Tempo Ltd., had a common management till 1968. Due to some internal disputes, these two companies got separated from each other in July 1968. Shri N.K. Firodia was chief executive of Bajaj Auto Ltd. and the managing director of Bajaj Tempo Ltd. till 1968. Shri N.K. Firodia ceased to be chief executive of Bajaj Auto Ltd. in 1968 and continued as managing director of Bajaj Tempo Ltd. after separation from Bajaj Auto Ltd. Bajaj Auto Ltd. went under the control and management of Shri Rahul Bajaj and Bajaj Tempo Ltd. came under the control and management of Shri N.K. Firodia and his brother Shri H.K. Firodia. In accordance with the separation, some of the furniture and cabins were also separated for the use of separate management of Bajaj Auto Ltd. and Bajaj Tempo Ltd. The appellant has filed a map on record. The factory premises of both these companies have been located at Akurdi, Pune, but some of the offices are situated in Bombay at Worli. The cabins 'A* and 'D' cross-lined by red pencil with other two big portions of red cross-lined came to the share of Bajaj Tempo Ltd. in separation.
Remaining portions went to the share of Bajaj Auto Ltd. Bajaj Auto Ltd. is a tenant of the entire premises at Worli, Bombay. Bajaj Tempo Ltd. is a sub-tenant of the cabins which have come to its share in the separation. After separation Shri N.K. Firodia started sitting occasionally as managing director in the air-conditioned cabin 'A' whenever he visited Bombay.
3. The staff members of both these companies since separation also started sitting in a hall which was previously used jointly by both these companies because of joint management. The keys of the cabin used by Shri N.K. Firodia used to remain with one of its staff members, Shri Ramesh G. Sambhus. Shri Sambhus used to keep the keys of the cabin in his unlocked drawer. A steel cupboard and a steel filing cabinet were put in the cabin used by Shri N.K. Firodia long before separation.
After separation the steel cupboard and the steel filing cabinet remained in the same cabin as Shri Rahul Bajaj did not want to disturb the said arrangement even after separation of Bajaj Tempo Ltd. and Bajaj Auto Ltd. from each other.
4. On 18-5-1976, the Income-tax Department raided the office premises of Bajaj Auto Ltd. as well as Bajaj Tempo Ltd. at Worli and at other places such as factory premises at Pune and the residential premises of the managing directors of Bajaj Auto Ltd. and Bajaj Tempo Ltd. The keys of the steel cupboard situated in the cabin, which was being allegedly used by Shri N.K. Firodia, were not available on 18-5-1976 to open it and to take search of the same. However, the said steel cupboard and the filing cabinet were sealed and ultimately they were broken open on 21-5-1976 by the authorities of the Income-tax Department. A paper label bearing the name of Bajaj Auto Ltd. was found pasted on the backside of the filing cabinet, but no such sort of paper label was found on the steel cupboard. After opening this steel cupboard and filing cabinet nothing was found by the department except a cash of Rs. 4,50,000 in a locker of the steel cupboard. The authorities made the panchanama, attached the money found in the locker of the steel cupboard and made further enquiries in the matter. The authorities recorded the statements of Shri N.K. Firodia, Shri H.K. Firodia and Shri Sambhus, a staff member of Bajaj Tempo Ltd. and also Shri Rahul Bajaj and the staff manager, Shri Rajan, on behalf of Bajaj Auto Ltd. Both the parties denied the ownership of the steel cupboard as well as money found in it. The matter was handed over to the assessment section and the department on the basis of the evidence before it attributed the occupation and possession of the cabin 'A' to Bajaj Tempo Ltd. and the ownership of the steel cupboard as well as the money found in it also to Bajaj Tempo Ltd. The appellant put forward several contentions before the authorities below in respect of its denial of the ownership of the steel cupboard as well as money found in it. The authorities below rejected the appellant's contentions and attributed the ownership of the steel cupboard as well as money to the appellant and, thus, added the said amount of Rs. 4,50,000 to the income of the appellant as income from undisclosed sources which was seized under Section 69A of the Income-tax Act, 1961 ('the Act').
5. The issues which have arisen for our consideration are : (7) whether, on the facts and in the circumstances of the case, the presumption that the steel cupboard and the money belonged to the appellant could be legally drawn or not, and (2) whether the money found in the steel cupboard is rightly added to the income of the assessee as income from undisclosed sources 6. To arrive at a correct conclusion in view of the evidence before us, it is necessary to take into account all the circumstances. The admitted facts are that, the appellant occupied a cabin in question after separation from Bajaj Auto Ltd. A steel filing cabinet and a steel cupboard were already situated in this cabin and the same remained in the said cabin. They were not disturbed even after the separation. The search and seizure was conducted and as the keys of the steel cupboard and the filing cabinet were not made available and, therefore, they were broken open. Cash of Rs. 4,50,000 was found in the locker. The same was attached under the panchanama by the authorities.
Bajaj Auto Ltd. is a tenant of the entire premises and Bajaj Tempo Ltd. is a sub-tenant in respect of the cabin in question as well as some other portions with which we are not concerned. Bajaj Auto Ltd. has filed a suit for eviction against Bajaj Tempo Ltd. and the said suit is pending. Overall control of the premises at Worli is with Bajaj Auto Ltd. except the control of the cabin in question and some other portions. Bajaj Auto Ltd. locks the main door of the entire premises after 5.30 p.m. and opens it in the morning before the office hours. A watchman of Bajaj Auto Ltd. guards these office premises. A watchman of Bajaj Tempo Ltd. also is there. One more admitted fact is that a telephone facility for the entire office premises including Bajaj Auto Ltd. is in this cabin being occupied by Shri N.K. Firodia. The staff members of both the companies have an access to enter into this cabin for telephone facility as the keys of the cabin always used to remain with Shri Sambhus, a senior staff member of Bajaj Tempo Ltd. 7. The disputed facts are that though the cabin in question was being used by Bajaj Tempo Ltd. and its managing director and directors but they had to do nothing with the filing cabinet and the steel cupboard.
The steel cupboard remained unused since- separation for a longer period. Shri N.K. Firodia used to keep some collaboration agreements with the foreign parties and some other documents in this steel cupboard prior to the separation. He used to hand over the keys of the said steel cupboard to Shri Rajan who worked as a private secretary to Shri N.K. Firodia till separation took place in 1968. After separation Shri Rajan opted to go to Bajaj Auto Ltd. and since then relations between Shri N.K. Firodia and Shri Rajan came to an end. Thereafter Shri Rajan had no occasion to open the steel cupboard and to use it for keeping collaboration agreements, etc., at the instance of Shri N.K.Firodia. Shri N.K. Firodia did not use the said steel cupboard and it remained as it was. The keys of the steel cupboard, according to the appellant, remained with Shri Rajan and he did not hand over the same to Shri N.K. Firodia or any other person on behalf of Bajaj Tempo Ltd. after separation. Bajaj Tempo Ltd. also did not demand keys from him.
According to the appellant, the steel cupboard did not belong to it and it was only lying idle in the cabin in question. The appellant does not know who used the steel cupboard and when and how the money was put in it.
8. There is a direct evidence of Shri N.K. Firodia, Shri H.K. Firodia Shri Rahul Bajaj and Shri Rajan on the point of allotting the cabin in question to Bajaj Tempo Ltd,, in 1968. There is also a direct evidence that Shri N.K. Firodia started sitting in this cabin after separation as a managing director of Bajaj Tempo Ltd. alone occasionally whenever he visited the office premises in Bombay. There is no direct evidence that Shri N.K. Firodia had at any time opened steel cupboard in question and used it after 1968. The inferences are drawn by the authorities below that the steel cupboard might have been used by the appellant, i.e., Bajaj Tempo Ltd., after separation on the basis of circumstantial evidence. The inferences and presumptions have been drawn to support the conclusions arrived at by the authorities below.
There is also no direct evidence that either appellant or its managing director or directors kept money in the locker of the steel cupboard and anybody has noticed the same. Shri Rahul Bajaj in his statement on oath has deposed that no bifurcation of furniture was made and it was possible that some of the pieces of furniture belonging to Bajaj Auto Ltd. might have remained in possession of Bajaj Tempo Ltd. 9. It has come in evidence of Shri N.K. Firodia, Shri H.K. Firodia, Shri Rahul Bajaj and Shri Rajan that relations between Bajaj Auto Ltd. and Bajaj Tempo Ltd. were strained. The straining of relations between the parties is immaterial so far as the finding of fact of cash of Rs. 4,50,000 is concerned. We need not attribute the ownership of the steel cupboard and the money to a particular party or a person, but what we have to do is to find out whether steel cupboard and the money found in it actually belongs to the appellant and whether there is sufficient evidence on record beyond doubt to attribute the ownership of the steel cupboard and the money found in it to the appellant 10. It is the appellant's case that presumptions and inferences drawn by the authorities below would not have been drawn in view of the deposition of Shri N.K. Firodia and Shri H.K. Firodia and the circumstantial evidence on record does not support to draw such presumptions to attribute ownership of the steel cupboard and the money found in it to the appellant. Shri H.K. Firodia informed on telephone to the ITO, Shri Phatarphoda, that he would find out whether the keys of the cupboard are available but later on intimated in writing that the keys of the cupboard were not available with Bajaj Tempo Ltd. but the same were in possession of Shri Rajan, a staff manager of Bajaj Auto Ltd. It is pointed out that there are several inconsistencies and improbabilities in the statements of Shri Rajan and Shri Rahul Bajaj.
Shri N.K. Firodia and Shri H.K. Firodia have made definite efforts to attribute the ownership of the steel cupboard to Bajaj Auto Ltd. but their evidence must be judged in the light of being interested witnesses. It is urged before us that the presumptions are based on negative reasons and there is no positive material to connect the definite link between the ownership of the steel cupboard and the money with the appellant. It is further urged that the onus lies on the department to prove beyond doubt that the cash belongs to the appellant and the department has not discharged that onus. It is further urged that the mere possession of steel cupboard is no proof of its ownership.
11. Some part of evidence of Shri Rajan has been already discussed above. Remaining part is that he deposed on oath that he did not have the keys of the steel cupboard in question and he did not use the steel cupboard after separation of these two companies in 1968. He has stated that he handed over the keys to Shri N.K. Firodia. Shri N.K. Firodia and Shri H.K. Firodia have denied it and deposed that the keys remained with Shri Rajan himself. However, there is no direct evidence on record that the keys of the steel cupboard were handed over to Shri N.K.Firodia at the time of separation. Shri Rajan's evidence is not shattered, but at the same time he has not deposed anything about using of the steel cupboard by Shri N.K. Firodia after he left him as a private secretary and at any time Shri N.K. Firodia or Shri H.K.Firodia used to keep money in the steel cupboard. Shri Rajan does not say that the money in question belongs to the appellant. Hence, whether his evidence is shattered or not, no positive fact can be found out in this respect from his evidence.
12. There is no evidence at all to come to a conclusion that either the appellant or its managing director or directors used the steel cupboard in question after separation till 1974. However, it can be inferred that the cupboard might have been used from August 1974 on the basis of the evidence of slips found on the bundles of notes of withdrawing cash. As the notes were withdrawn from the banks between August 1974 and October 1975 and, therefore, it can be said that the cupboard might have been used by somebody during that period till the search and seizure was conducted. The attribution of ownership and the money found in it is made on the basis that as the cabin was used by the appellant, the steel cupboard was found in it and it was allotted to the appellant during separation in 1968 and the same might have been used by the managing director of the appellant. Similarly, nobody else could have kept the money in the locker of this steel cupboard because it was in the possession of the managing director of the appellant and, therefore, he himself might have kept the cash in it. To draw a presumption that keys were with the managing director of the appellant, Shri Rajan's evidence is relied upon and to draw inference that the steel cupboard might have been used by the managing director of the appellant, the allotment of the furniture during separation and non-removal of the steel cupboard and filing cabinet from the cabin in question have been relied upon. Shri Rahul Bajaj's evidence that because Shri N.K. Firodia was senior in age and as he held the position of chief executive of Bajaj Auto Ltd. and the managing director of Bajaj Tempo Ltd. till 1968 and to respect him, it was thought fit and proper not to remove pieces of furniture from the cabin allotted to him has been relied upon. Three more important circumstances have not at all been considered by the authorities below and they have been completely ignored.
13. The first is a weak circumstance, but it is a relevant circumstance to consider that when the residential premises of the managing director and director of Bajaj Tempo Ltd. were searched at Pune, nothing incriminating was found. The factory premises of Bajaj Tempo Ltd. were also searched and further nothing incriminating was found. To find out the keys of the steel cupboard in question also remained a mystery.
Here, it is tried to attribute that keys might have been with the appellant itself, but the same were not handed over to the searching and seizing authority. No discrepancy has been found out from the books of account of the appellant. However, it is urged on behalf of the appellant that the searching party would have demanded the keys from Shri Rajan immediately on the same day, i.e., 18-5-1976, but they did not demand the same. The authorities were not supposed to know that the keys were with Shri Rajan and, therefore, they could demand from him.
But, however, that circumstance does not throw much light on the correct aspect of having keys of the steel cupboard with a particular person. It is the appellant's case that as nothing was found in the search and seizure taken at all those places, therefore, it was not possible for it to keep the cash of Rs. 4,50,000 in the locker of the steel cupboard lying in its cabin unused for several years.
14. The second circumstance which is not taken into account by the authorities below is that the admitted fact of filing an eviction suit against the appellant by Bajaj Auto Ltd. to evict it from the premises occupied by the appellant in the tenanted premises of Bajaj Auto Ltd. The suit for eviction from the premises in question is pending. It is true that the appellant has pleaded in its reply as a defendant to the eviction suit that it is in exclusive possession of the cabin and other premises in its occupation. Unless exclusive possession is pleaded the defendant in eviction suit cannot get any protection though exclusive possession is not only the ingredient to get protection from eviction under the Bombay Rents and Lodging House Control Act, 1947. There is a fear of eviction from the cabin in question and other portions occupied by the appellant because of the pendency of a suit. Hence, a question arises, could it have been possible for Bajaj Tempo Ltd. or its managing director to keep cash in question in such premises in respect of which an eviction suit is pending for disposal. It can be argued that if a party wanted to keep unaccounted money hidden, then it could have been kept in a steel cupboard under such circumstances. But to draw such an inference, would it be possible for a party to take such a risk to lose a cash. If the second inference is correct, it can be said that it was not possible to keep money under such a circumstance.
Moreover, the managing director and director of the appellant, as argued before us always stay at Pune and only occasionally go to Bombay and whenever they visit their office they sit in a cabin for some time.
When the appellant and its managing director or director are unable to keep continuous watch on its alleged hidden unaccounted money because of their permanent staying at Pune, then the same question again arises, whether it could have been possible for the appellant or its managing director or director to keep a cash in the locker of the steel cupboard without it being used regularly.
15. The third circumstance which is overlooked and ignored by the authorities below is very important. The question and its answer put to Shri Sambhus, a senior assistant in Bajaj Tempo Ltd., Worli, is as follows : Question : If you can say that said cupboard is not operated or opened since 1968, then how the currency notes of Rs. 100 each was bundled up by the Union Bank of India on 19-8-1974 and 9-9-1974 in bundle No. 3 and by Central Bank of India, Nariman Point Branch, dated 14-8-1975 and Union Bank of India, Cotton Green Branch dated 30-10-1975 in Bundle No. 4 So what have you to say about this I have no connection with the cupboard and I do not know about the cash since I have not handled the cupboard and I have no knowledge of handling of the cash.
From this question on record on page No. 7 of the paper books, it would be clear that withdrawals of notes was made from two banks, i.e., Union Bank of India, Cotton Green Branch, and Central Bank of India, Nariman Point Branch. It would further clarify that some cash was drawn from the Union Bank of India m the months of August and September 1974 and further cash was drawn from the same bank in the month of October 1975.
Some more cash was drawn from Central Bank of India, Nariraan Point Branch, in August 1975. As this cash withdrawn from these banks was found in the locker, it would indicate that the steel cupboard was being operated from August 1974 to October 1975. It is the appellant's case that the appellant does not have any bank accounts in these banks.
The appellant did not withdraw any notes of bundles as found in the locker in the steel cupboard. Hence, it was not possible for the appellant to keep these bundles of notes in the steel cupboard. The appellant may lie in owning the bundle of notes but the facts do not lie.
16. When the appellant said that it did not have any bank accounts in these banks then what was necessary on the part of the department was to find out from the banks themselves, whether the appellant had bank accounts or not. Secondly, what was necessary for the department was to find out from whose accounts this cash was drawn. When this cash was withdrawn, it can be said certainly that it was withdrawn from somebody's accounts. Who was that account-holder has not been brought to light. Who withdrew these notes also has not been brought to light.
The banks are not supposed to issue bundles of notes immediately without giving any intimation in advance. It would have been possible for the department to find out who has given intimation to withdraw such amounts from those banks. The department has ignored all possibilities of making enquiry from the banks in respect of the above particulars. If the definite enquiry is not followed to find out the truth, then a question arises how the ownership of the notes can be immediately attributed to the appellant without finding out a definite fact from the available sources. The banks would have certainly furnished the particulars of withdrawing the cash on 19-8-1974, 9-9-1974, 14-8-1975 and 30-10-1975. The bank would not have shirked its responsibility to supply information when such a serious question was involved on account of the search and seizure by the department. It is not known why the department did not make any effort to find out the account numbers and the withdrawal of monies from these banks. If this fact would have come to light, the same would have enabled definitely to attribute the ownership of the money to a definite account-holder and if the appellant would have been the account-holder, then the question would have been solved easily.
17. It is the appellant's case and it is not challenged that it does not have any accounts in those banks. Then a question arises, who brought these bundles of notes and kept in the locker of the steel cupboard in question. If the available account-holder is not found, then it becomes difficult to attribute the ownership of the money to the appellant because of keeping the same in a locker of the steel cupboard which has been not operated for several years by the appellant or its managing director. It can be now said that how these inferences can be drawn and that the appellant or its managing director did not utilise the steel cupboard for a longer time. These inferences can be drawn on the basis that this steel cupboard was only allotted during the separation from Bajaj Auto Ltd. because of the seniority of Shri N.K. Firodia. There is no evidence that Bajaj Tempo Ltd. purchased this cupboard at any time. Allotment of the steel cupboard does not mean that it was being operated regularly. It is the appellant's case that it never used the steel cupboard and it might not have thought fit and proper to operate the same because of not removing certain pieces of furniture due to the seniority of Shri N.K. Firodia. Shri Rajan was put a question : "How long Shri N.K. Firodia used the cabin, after 1968, i.e., after the separation of Bajaj Auto Ltd. and Bajaj Tempo Ltd, ?" He answered : "I cannot give the correct answer. But he was occasionally coming and going from 1968 onwards and occupying the cabin." Can it be said that this answer gives any indication about the use of steel cupboard by Shri N.K. Firodia after separation It would be too much to say that such inference must be drawn. The conduct of the parties must be judged from all the acts and activities undertaken by them and not from a lonely act. Because of occasional visiting the cabin and sitting there does not mean that the appellant withdrew th is amount from its account and kept in the locker of the steel cupboard in question. The correct finding of fact on the basis of oral and circumstantial evidence depends on the probabilities of getting correct answers to the following questions beyond any doubt. The finding further depends on the minute scrutinization of the evidence and on the analogy of separation of chaff from the grain to enable to find out the truth. Several questions may arise, such as, who is the owner of the cupboard, who had the keys of the cupboard, whether Bajaj Tempo Ltd., being in exclusive possession of the cabin, can be said to be the owner of the cupboard, whether it was in exclusive control of the cupboard and, finally, whether it can be said that Bajaj Tempo Ltd. is the owner of the cash found in the cupboard The staff members of both the companies had an access to the cabin to use the telephone. The department's case is that (1) the cabin was in exclusive possession of the appellant, (2) keys of the steel cupboard were in the custody of the directors and not with Shri Rajan and, therefore, ownership can be attributed to the appellant of the cupboard and the money found in it.
The correct findings on the issues involved can be found out if the correct answers to the questions referred to above can be given. Shri Rahul Bajaj and Shri Rajan have tried to attribute the ownership of the steel cupboard to the appellant-company on the one hand. Shri N.K.Firodia and Shri H.K. Firodia have denied both the ownership of the steel cupboard as well as the money found in it. The learned Commissioner (Appeals) also raised certain questions and tried to answer them. He has held it as unexplained money to include in the income of the appellant.
18. The learned advocate, Shri S.E. Dastur, took us through the major part of the evidence of all the witnesses. He has contended that nothing was found in the filing cabinet and the filing cabinet bore paper label of Bajaj Auto Ltd. He has pointed out the provisions of Section 69A and submitted that the addition can be made to the income of the appellant only when the appellant 'is found to be the owner of any amount'. He has argued that the department has failed to find out that the assessee is the owner of the money found in the locker of the steel cupboard and it did not discharge the onus cast upon it. So far as the presumption under Section 132(4A) of the Act is concerned, Shri S.E. Dastur has submitted that this presumption is available only in the summary assessment and not in the regular assessment. He has contended that Section 69A itself is a presumptive section and .no presumption can be drawn from a presumption itself under Section 132(4A). Shri S.E. Dastur has argued from the facts and circumstances on record and contended that it cannot be said definitely that the money in question belongs to the appellant and the appellant is the only owner of the money. He has contended that there is sufficient doubt to give such a finding and, therefore, the appellant must get the benefit of doubt. He has urged to apply the principle of preponderance of probabilities correctly. According to him, if two inferences can be drawn on the basis of probabilities before the Tribunal, then the inference from the probability favourable to the appellant can be drawn. If two views are possible and if they are equally possible, then, according to Shri S.E. Dastur, the view beneficial to the appellant must be accepted. He has relied upon the ruling of the Bombay High Court in the case of J.S. Parkar v. V.B. Palekar  94 ITR 616, relevant portion on page 630, in support of his contention that inference of ownership cannot be derived from mere possession. Shri S.E. Dastur contends that because of the appellant being in possession of a cabin it cannot be inferred that the appellant itself was the owner of the steel cupboard and the money found in it. He has contended that there is no suppression of income, no black money and no possibility of suspicion on the part of the appellant. These points are not so material to decide the issues in question.
19. As against this, the learned departmental representative, Shri K.A.Sathe, has urged that the cabin was in the exclusive possession of the appellant. Keys of the steel cupboard were in the custody of the directors of the appellant and the conduct of the parties between 18-5-1976 to 21-5-1976 should be taken into account. In respect of conduct of the parties, he has pointed out that Shri H.K. Firodia informed the raiding ITO that he would make an enquiry to find out the keys of the cupboard and later on he intimated in writing that keys were not with the appellant or with its directors but keys were in the possession of Shri Rajan. According to him, the inference of ownership is sufficient from the possession of the cabin itself. He has submitted that Shri Rajan's evidence is creditworthy and there is nothing to be disbelieved in it. The appellant has failed to prove that Shri Rajan has deposed any lie. No sinister motive can be attributed to Shri Rajan to infer that he has deposed any lie. He has contended that the enquiry was made from the banks but no particulars were furnished to the department. When Shri Rajan left services of Shri N.K. Firodia of Bajaj Tempo Ltd., then there was no reason for him to keep keys of the steel cupboard with him. Shri N.K. Firodia would have a personal knowledge about the keys. Control and possession is enough. So far as the control of the cabin is concerned, there was an access to all staff members of both the companies. So far as the possession of the cabin is concerned, it is with the appellant-company. Shri N.K. Firodia had a special knowledge about the keys and his denial is not fitting to the circumstances. Keys were not found in the search at any place.
20. We have gone through the orders of the authorities below and have heard the arguments on behalf of both the parties. We have taken into account the arguments of the assessee's learned counsel, Shri S.E.Pastur, and the learned departmental representative, Shri K.A. Sathe.
The decision of the Bombay High Court in the case of CIT v. Deviprasad Khandelwal & Co. Ltd.  81 ITR 460 is relied upon, wherein the Bombay High Court held that the question referred to it was a question of fact and did not answer the same. The Tribunal in that case had held by disbelieving the explanation of the assessee on the facts and surrounding circumstances that it cannot be held to be the income of the assessee. The facts of the instant case are similar to those facts.
21. From the facts on record and the circumtstances it cannot be said that the presumption of attributing the ownership of the steel cupboard found in the appellant's cabin and the money found in the locker belongs to the appellant could be legally drawn. If that presumption cannot be legally drawn, then the money found in the steel cupboard cannot be rightly added to the income of the appellant. On the point of not making proper enquiry from the banks, it can be said that order may be set aside and directions may be issued to make a proper enquiry. The department which could not make proper enquiry immediately after search and seizure when it was possible, cannot make any enquiry now after lapse of seven years. The inferences and presumptions drawn by the authorities below are not correct. There is no doubt that the cabin 'A' in question can be said to be in exclusive possession of the appellant but the overall control of the entire premises is with Bajaj Auto Ltd. This is not to be considered for attributing anything to Bajaj Auto Ltd. but to know the fact regarding the overall arrangement only.
22. In the result, the appellant succeeds and the appeal is allowed.
Per Shri Kanwal Krishan, Accountant Member - I have carefully gone through the order of the learned Judicial Member but regret that I am unable to agree with his decision.
2. To my mind, it is essential to clearly pose the question which we are called upon to decide in this appeal. The departmental authorities have applied the provisions of Section 69A to hold that the sum of money amounting to Rs. 4,50,000 was the income of the appellant-company. The question that we have to decide is whether the requirements of Section 69 A have been fulfilled so as to sustain the conclusion drawn by the departmental authorities in terms of the provisions of that section. Now what are the requirements of Section 69A We have for our guidance the principles to be applied, for determining whether the requirements of those provisions have been fulfilled, as laid down by the Bombay High Court in the case of J.S.Parkar (supra). It has been held in that case that the contention that Section 110 of the Indian Evidence Act, 1872 could not be invoked because provisions of the Indian Evidence Act was not applicable to taxation proceedings and the reasons are stated thus : ... Firstly, what is meant by saying that the Evidence Act is not applicable to the proceedings under the Income-tax Act is that the rigour of the rules of evidence contained in the Evidence Act is not applicable, but that does not mean that if the taxing authorities are desirous of invoking the provisions of that Act in proceedings before them, they are prevented from doing so. Secondly, all that Section 110 of the Evidence Act does is that it embodies a salutary principle of common law jurisprudence which could be attracted to a set of circumstances that satisfy its condition. ... (p. 619) It has been further held in that case that the proceedings before the taxing authorities were not criminal proceedings, but proceedings of a civil nature where the question about the ownership in question, money in this case, was required to be decided not beyond a shadow of doubt, but by adopting the test of preponderance of probabilities. The question to be asked in this context is whether the view taken by the income-tax authorities is such as could not have been taken, or is not supported by material or is arbitrary or capricious 3. What, therefore, we are called upon to decide in this appeal is whether the conclusion drawn by the authorities below that the sum of Rs. 4,50,000 was assessable as income of the appellant-company under Section 69A is sustainable on the preponderant probabilities as revealed by the evidence brought on record. And we must begin by disabusing our minds forthwith of any presumption that such a conclusion would not be viable unless supported by direct evidence alone and not by circumstantial evidence, or that the evidence required must, in law, be of such a conclusive nature as to establish that conclusion beyond a shadow of doubt.
4. The appellant is a public limited company. On 18-5-1976 the Income-tax Department carried out a search under Section 132, in the business premises of the appellant-company situated at 134, Dr. Annie Beasant Road, Worli, Bombay. Now the facts found by the ITO on the basis of which he drew his inference are these. The sum of Rs. 4,50,000 was found by the authorised officer, Shri Phatarphode, in the course of the search and seizure proceedings on 21-5-1976. The amount was found in the locker of a steel cupboard which stood in a cabin located in the aforesaid business premises. The tenant of the premises was another limited company, Bajaj Auto Ltd. The premises consisted of cabins, of which the cabin where the steel cupboard was found was one, a hall and some space used for godowns. The appellant-company had a sub-tenancy of that cabin, apart from some portion of the rest of the premises.
5. Now certain facts have been incontrovertibly brought out on the evidence in regard to this cabin and the steel cupboard which stood inside it. The cabin was in the occupation and use of Shri N.K. Firodia up to 1968. Thereafter also, it was used by him and by Shri H.K.Firodia, his brother. Up to 1968 both Bajaj Tempo Ltd. and Bajaj Auto Ltd. were under a common management, Shri N.K. Firodia being the managing director of the former company and chief executive of the latter company. It was in this dual capacity that he functioned from this cabin. In 1968 there was a separation of the two companies, whereby Shri N.K. Firodia ceased to be the chief executive of Bajaj Auto Ltd. but continued to be the managing director of Bajaj Tempo Ltd. The head office of the latter company was shifted to Pune. However, even after the separation Shri N.K. Firodia used to visit the Worli office as occasion demanded for the business of his company and continued to function from the same cabin as before. It had been agreed at the time of separation that the use of this cabin would continue with Bajaj Tempo Ltd. of which the appellant-company, as already noted, was the sub-tenant.
6. It is in evidence that Shri Rahul Bajaj, the new managing director of Bajaj Auto Ltd., had specifically given orders that whatever furniture was lying in the cabin before the separation would remain undisturbed and continue to be used by Shri N.K. Firodia. This was done out of regard for the seniority of Shri N.K. Firodia. Now this means, and it stands to reason, that occupation and use of the cabin and the furniture lying inside it was determined, as between the two companies, not on the strength of their respective legal rights of ownership of the furniture or tenancy of the cabin, but by mutual understanding that their occupation and use would continue with Bajaj Tempo Ltd. despite separation. It is in evidence that "occupation and use of the cabin did in fact and in accordance with the mutual understanding continue with Shri N.K. Firodia and also Shri H.K. Firodia, when he succeeded as the managing director of Bajaj Tempo Ltd. and other senior officers of the appellant-company on their tours to Bombay. This was the position when the income-tax raid took place on 18-5-1976.
7. Now in this state of affairs, it appears to me to be singularly irrelevant and fruitless to embark upon an enquiry regarding the legal rights of the two companies over the cabin and the steel cupboard or other furniture inside it. It is true that a suit for eviction from the premises had been filed in 1974 by Bajaj Auto Ltd. against the appellant-company, but quite apart from the fact that the suit was stoutly resisted by the appellant-company claiming exclusive possession, it is nobody's case that the occupation and use of the cabin and the furniture by Shri N.K. Firodia, Shri H.K. Firodia or other officers of the appellant-company was in any way hampered by this litigation.
8. I would examine now the facts concerning the steel cupboard inside the cabin, in which the money was found. Here again we must keep aside as quite irrelevant the entire controversy as to which of the two companies was the legal owner of the steel cupboard. What is of importance is that unquestionably the cupboard was in the use of Shri N.K. Firodia up to 1968. The papers and documents kept in it were those which Shri N.K. Firodia desired to be kept therein. We have the categorical assertion of Shri Rajan who was his personal assistant up till the separation, that such indeed was the case. What happened after 1968 This, in my view is the crucial question because whoever had access to the cupboard after the separation he alone could answer for, if not account for, the money which was found in it in the income-tax raid. That is because the money was stacked in bundles with slips which bore the stamp and date of the banks from which it was withdrawn and these dates cover the period from August 1974 to October 1975. Now the person having access to the cupboard obviously means the person who had custody and possession of the key to the cupboard.
9. Who had this key The authorised officer of the Income-tax Department Shri Phatarphode, who conducted the income-tax raid made this enquiry on the very day when the raid commenced on 18-5-1976 from the persons present on the premises. He came to know from these enquiries about the cabin being used by the managing director of the appellant-company. Shri Sambhus, who was the senior assistant of Bajaj Tempo Ltd., working at the Worli office informed him that the key was not available with the staff in those premises. It was, thus, that the authorised officer rang up Shri H.K. Firodia at Pune asking for the key. Shri H.K. Firodia replied saying that, the key was not available with him but that he would make enquiries and he promised to send the key with a messenger on the next day. There was, however, no response either on the next day or the day after and the authorised officer had to put his seal on the cupboard. Then on 21-5-1976, i.e., on the fourth day, after the authorised officer had asked for the key from Shri H.K.Firodia, a letter was sent to him by Shri H.K. Firodia, which is dated 20-5-1976 in which for the first time an allegation was made that the key was kept all along by Shri Rajan.
10. Now, is that allegation established on the evidence And we must not forget that the burden lay squarely on the appellant company to establish it. In order to answer this question, we need to have a very close look at the allegation. In his letter dated 20-5-1976 Shri H.K.Firodia stated that it was Shri Rajan who was using the cupboard as also a filing cabinet lying in the cabin to keep his papers and files with which he dealt, that the keys of both the cupboard and the cabinet were with Shri Rajan and that when Shri Rajan resigned from Bajaj Tempo Ltd. and joined service with Bajaj Auto Ltd., he retained the keys saying that the cupboard and filing cabinet belonged to Bajaj Auto Ltd. Now, here is an open attempt to make out the total indifference to the cupboard on the part of Shri N.K. Firodia and H.K. Firodia with reference to its use and its contents, for the reason that the cupboard was used by Shri Rajan to keep his papers, who, therefore, took away the cupboard key when he left the service of the appellant-company and joined Bajaj Auto Ltd. But this allegation is contradicted in the testimony of Shri N.K. Firodia himself. What did the cupboard contain This is what he stated, when he was questioned, in his statement recorded by the assessing IAC on 29-11-1979 : Question 7. What types of files and papers used to be there in the cupboard Answer : In the cupboard and in the filing cabinet the files of correspondence with foreign collaborators, namely, Piaggio & Co. and Vidal & Sohn Tempo Works, Hamburg, Z.P. from Germany and correspondence with the Government and generally such files as were dealt either by myself or my brother H.K. Firodia, who was the general manager both of Bajaj Auto Ltd. and Bajaj Tempo Ltd. Answer : They were normal business files, nothing important and confidential about the files.
Question 9. If they were not important why they were kept in the cupboard in the cabin of the managing director Answer : Because I was directly dealing with those files and up to 1964 we were overcrowded in the Worli office and as the cabin was big enough, the cupboard and the filing cabinet were accommodated there.
11. Shri N.K. Firodia, therefore, himself admits that the files and papers were those relating to the two companies and such as were dealt with by him and by his brother in the course Of their responsibilities for management of the companies. It is significant to note that the attempts made on behalf of the appellant-company to denigrate the importance of the documents, files and papers kept in the cupboard fly in the face of the above statement made by Shri N.K. Firodia as well as the statement of Shri H.K. Firodia recorded on 29-11-1979. In answer to question No. 10 put by the assessing officer regarding the use of the cupboard, this is what Shri H.K. Firodia stated : Before separation the cupboard was used by Shri Rajan to keep important files dealing with our collaborators, Italian and German, industrial licence applications and Government files. I used to be in the workshop at Goregaon from morning to 3 p.m. and then I used to come to Worli to do the work up to 8-9 p.m. During my stay even when Shri N.K. Firodia was away Shri Rajan used to bring the various files for my references and dictation. After the separation the question of using the cupboard did not arise because I had moved to Pune and Shri Rajan left the company and joined Bajaj Auto Ltd. without handing over the keys, saying it belonged to Bajaj Auto Ltd. Therefore, the cupboard did not belong to Bajaj Tempo Ltd. 12. The conclusion to my mind from this evidence is inescapable that the documents, etc., kept inside the cupboard certainly included those of the appellant-company, that these documents and papers were being dealt with by the top management of the appellant-company, that they were important enough to have been kept in the cupboard standing in the cabin of the managing director of the appellant-company.
13. Now who would in normal circumstance keep the key of the cupboard Would the managing director deprive himself, as is sought to to be made out, of the custody and possession of the key and abjectly accept that the personal assistant, Shri. Rajan, should walk off with the key on leaving the service of the appellant-company to join, in the same premises another company, with which its relations were far from amicable This is precisely what we are asked to believe. All that a subordinate like Shri Rajan had to tell Shri N.K. Firodia, holding the top executive positions in the two companies, whom he had been serving as a personal assistant, was that he would take away the key of the cupboard. No matter that the cupboard stood in the cabin of this top executive, no matter that the cupboard contained documents and files, etc., which were admittedly dealt with by the top executive, yet he would take away the key because he had decided that the cupboard belonged to Bajaj Auto Ltd., whose service he preferred to that of Bajaj Tempo Ltd. If such an assertion is striking for its shear unrealism, much more so is the implication that Shri N.K. Firodia should without a murmur of protest against such rude behaviour from a lowly official, have so meekly accepted it. And yet we are asked to believe that for all the long years after separation in 1968 this cupboard kept on standing in the same cabin admittedly used by top officers of Bajaj Tempo Ltd., inviolable and inaccessible to them, because a personal assistant had pronounced that it belonged to Bajaj Auto Ltd. To my mind, it would be stretching credulity to the breaking point to believe these assertions made on behalf of the appellant-company.
14. But it is not only the incredibility of the explanations offered on behalf of the appellant-company which preclude the possibility of Shri Rajan keeping custody and possession of the key. There are the straightforward statements made by Shri Rajan himself whenever he was questioned on this point, confidently and categorically denying the allegation. He was questioned by the authorised officer as early as on 21-5-1976 when he was faced with Shri H.K. Firodia's letter alleging that it was Shri Rajan who had kept the key. He denied the allegation totally and without hesitation. It was pursued by the assessing officer on 27-5-1979 whereupon Shri Rajan gave a clear account of the contents of the cupboard while he was working as personal assistant to Shri N.K.Firodia, his handling of those files and papers under the directions of Shri N.K. Firodia and again reiterated his denial that he had ever kept custody of the key. In answer to the direct question put to him as to whether the key of the cupboard in the cabin was kept by him, his answer was a forthright : 'No. It was kept with Shri N.K. Firodia'. No amount of attempt made in his cross-examination on behalf of the appellant-company could shake or rattle him. It was insinuated in the course of the cross-examination that he had surreptitiously handed over files connected with Bajaj Auto Ltd. in 1968 to Shri Rahul Bajaj and that he was scolded by Shri N.K. Firodia for this conduct and for which he gave a letter of apology. He stoutly denied all these insinuations and the cross-examiner of the appellant-company had nothing at all to dislodge these stout denials. In my view, Shri Rajan's testimony stands unimpeached.
15. In contrast is the conduct of Shri H.K. Firodia with regard to the production of the key. When contacted at Pune on 18-5-1976 by the authorised officer who asked him for the key of the cupboard, he denied knowledge as to the whereabouts of the key. Can this denial be accepted as true If, as he subsequently alleged, the key was always in the custody and possession of Shri Rajan, did he not know this on 18-5-1976 He has himself stated in his deposition made before the assessing officer on 29-11-1979 in answer to question No. 10 that Shri Rajan used to keep important files in the cupboard before separation took place in 1968 and up to that period Shri Rajan used to bring out from the cupboard various files for Shri H.K. Firodia's reference and dictation.
Earlier, in his deposition on 21-5-1976, in answer to question No. 23 he had stated that the key of the locker used to be kept by Shri Rajan.
This is what he knew when the authorised officer asked him for the key on 18-5-1976. What he did not know was that Shri Rajan when he left service of Bajaj Tempo Ltd. did not hand over the key, but had kept it.
Why did Shri H.K. Firodia not part with all this information to the authorised officer Why did he not, as any person in his position would be normally expected to do, straightforwardly reply to the authorised officer's query frankly saying that as far as he knew the key was with Shri Rajan Why did he keep this knowledge secret 16. He did so, an inference which, to my mind, is inescapable, because he had something to hide and was not prepared at that stage that the authorised officer, had he been supplied with the allegation of Shri Rajan holding the key, should proceed to question Shri Rajan. Shri H.K.Firodia's subsequent conduct is not less questionable. He promised the authorised officer to make enquiries regarding the key and to inform him as to its whereabouts on the very next day. Now, who, in all reason, would be the most likely person that Shri H.K. Firodia should have sought to obtain this information but the one person who, to his knowledge, had the closest connection with the cupboard and its handling That person was none other than his brother Shri N.K.Firodia living in Pune and very much available for supplying the information yet Shri N.K. Firodia is the one person to whom no such enquiry was addressed. Rather than making this enquiry Shri H.K.Firodia let 18th May pass, he let 19th May pass despite his promise to the authorised officer, when Shri N.K. Firodia was available in Pune, but thought it fit to ask him about the whereabouts of the key only when Shri N.K. Firodia returned to Pune on the evening of 20th May. To my mind the entire conduct of Shri H.K. Firodia, as of Shri N.K.Firodia, smacks of nothing but an overt attempt to deny custody and possession of the key with themselves and to foist that custody and possession up to Shri Rajan. To sustain this attempt, Shri N.K. Firodia indeed had to go far out. When questioned on 27-11-1979, on his assertion that the key was always kept by Shri Rajan even when he was working as his personal assistant, as to what would happen about the files kept in the cupboard if Shri Rajan remained absent without prior notice, his reply was that for the period of almost 10 years that Shri Rajan worked with him, he did not remember that Shri Rajan had remained absent at any time during that entire period ! 17. Shri. S.E. Pastur, the learned counsel for the appellant, apart from making his submissions on the facts to contend that no convincing or conclusive evidence has been led by the authorities below to sustain the conclusion that it is the appellant-company which has been found to be the owner of the money, has sought to support his case on a ruling of the Bombay High Court in the case of Deviprasad Khandelwal & Co.
Ltd. (supra) and of the Madras High Court in CIT v. S. Pitchaimanickam Chettiar [l983] 15 Taxman 68. He has further submitted that an affidavit of one Shri M.S. Mankar dated 2-7-1976 had been filed before the assessing officer which had not been duly considered by the authorities below and that therefore, the inference drawn against the appellant-company is vitiated. Now I fully agree with Shri S.E. Dastur that the principles laid down in these rulings must guide us in drawing proper inferences. However, on the facts the appellant's case as discussed in the foregoing paragraphs is clearly distinguishable.
18. As for the affidavit of Shri M.S. Mankar, he was the license officer of the appellant-company and claims that he had the overall charge of the office of the appellant-company at the Worli premises.
Now apart from making statements about the control and possession of the premises by Bajaj Auto Ltd., use of part of the premises by Shri N.K. Firodia subsequent to separation, Shri M.S. Mankar deposes that the steel cupboard and the filing cabinet in the cabin were used by Shri Rajan when he was the personal assistant of Shri N.K. Firodia for keeping the files that he dealt with and that no director, officer or other employees of the appellant-company opened or handled the cupboard of the filing cabinet either in his presence or according to his information. To my mind, Shri M.S. Mankar's affidavit is self-serving and in the light of the discussion in the foregoing paragraphs, I am unable to see how this affidavit advances the case of the appellant.
19. The inferences to be drawn from the evidence which has been brought on record, the testimony of the deponents and their conduct are to my mind clearly these : that the cabin in which the steel cupboard was kept, in which the amount of Rs. 4,50,000 was found on 21-5-1976, was at all relevant times in the possession of the appellant-company and was used by its top management and other senior officers ; that the cupboard was kept locked and contained documents, files and papers belonging to the appellant-company ; that the allegation made on behalf of the appellant-company that the key of the cupboard was in the custody and possession of Shri Rajan is wholly unsustainable on the evidence ; that, on the other hand, the preponderance of evidence points to the facts regarding the custody and possession of the key being in the special knowledge of Shri N.K. Firodia and Shri H.K.Firodia ; that both these gentlemen made an overt attempt to hide this knowledge upon being questioned and to foist the custody and possession of the key upon Shri Rajan that at all material times it was the top management of the appellant-company who had access to the cupboard. On the strength of these inferences, the conclusion drawn by the authorities below that the requirements of Section 69A are fully satisfied has to be sustained and the addition of the sum of Rs. 4,50,000 as income of the appellant m terms of provisions of that section clearly to be upheld. I would, therefore, confirm the order of the Commissioner (Appeals) and dismiss this appeal.
Since we have difference of opinion on the point arising in this appeal, we hereby state the point of difference as under and refer the case to the President, Tribunal, Bombay, in terms of Section 255(4) of the Act : Whether the sum of Rs. 4,50,000 in question was the deemed income of the appellant in terms of Section 69A for the assessment year 1977-78 and was rightly assessed as such for that year 1. There has been a difference of opinion between the Members who heard this appeal originally. The following point of difference was stated : Whether the sum of Rs. 4,50,000 in question was the deemed income of the appellant in terms of Section 69A for the assessment year 1977-78 and was rightly assessed as such for that year The point of difference has been referred by the President to himself for decision under Section 255(4).
2. The facts have been stated both by the learned Judicial Member and the learned Accountant Member in their own way in their respective orders. For the sake of ready reference, I would like to state herein only those facts about which there is no dispute.
3. The appellant is a company with head office at Pune and office and godown at Worli. On 18-5-1976 the Income-tax Department raided the office premises of the appellant-company both at Pune and at Bombay as well as the residential premises of its directors, Shri N. K. Firodia and Shri H.K. Firodia. The raid was simultaneously conducted in the office and factory premises of Bajaj Auto Ltd. and the residential premises of the managing director of the said company. At the time of the raid, the appellant was occupying a part of the Worli premises jointly with Bajaj Auto Ltd. It is common ground that the area under the occupation of the appellant-company was a portion of the common hall, a godown and two cabins. In one of the cabins there were, inter alia, one steel cupboard and one riling cabinet. The keys of these cabins were found in an open drawer of a table in the common hall which table was used by a staff member of the appellant-company by the name of Shri Sambhus. The keys of the steel cupboard and the filing cabinet were not available. There was a label on the filing cabinet bearing the name of Bajaj Auto Ltd. There was no label of the name of Bajaj Auto Ltd. or of the appellant-company on the steel cupboard.
As stated above, the keys of the cabinet and the steel cupboard were not made available to the raiding party by the staff members of the appellant-company on the ground that they did not have the same. It was stated that the cabin was used by Shri H.R. Firodia, the managing director of the appellant-company, who was at Pune. The ITO, Shri Phatarphode, contacted Shri H.R. Firodia on phone and inquired about the keys of the steel cupboard and the filing cabinet in the particular cabin. Some conversation exchanged between them and the cabin was sealed on that date. Since, however, there are no details as to the exact contents of the conversation, it is only proper to refer them as mentioned in his letter dated 20-5-1976 by Shri H.R. Firodia himself to the ITO, Shri Phatarphode : On Tuesday, 18th inst., you telephoned me from Bombay and inquired about the keys of the steel cupboard and the filing cabinet lying in the cabin there. I told you that the cupboard and the filing cabinet are lying there unused for a long time and we do not have the keys.
I however agreed to make further inquiries and let you know.
Bajaj Auto Ltd. and Bajaj Tempo Ltd. were under the same management till early 1968. Shri Rajan was using the said cupboard and the filing cabinet to keep his papers and files with which he dealt. The keys were with Shri Rajan who resigned from Bajaj Tempo Ltd. and joined service with Bajaj Auto Ltd. He retained the keys saying the said cupboard and filing cabinet belonged to Bajaj Auto Ltd. Shri Rajan is still in the service of Bajaj Auto Ltd. and works in Worli office.
This letter was received by the ITO on 21-5-1976 at 10.30 a.m. There is no evidence on record as to the circumstances under which the cupboard and the filing cabinet were broken open. According to Shri S.E. Dastur, the learned counsel for the appellant, it was done mala fide by the Income-tax Department. Shri K.A. Sathe, the departmental representative, stated that there could be no mala fide in it, The ITO must have asked Shri Rajan who was supposed to have the keys according to Shri Firodia and would have broken open the steel cupboard and the filing cabinet only after Shri Rajan had denied the possession of the keys. It is pertinent to mention that Shri Rajan's statement has been recorded at 2.30 p.m. on that date, presumably after the steel cupboard and the filing cabinet were broken open and a cash sum of Rs. 4,50,000 was recovered from the steel cupboard. It is Shri S.E. Dastur's case that the proper course for the ITO would have been to record Shri Rajan's statement before breaking open the steel |cupboard and the filing cabinet. On the other hand, Shri K.A. Sathe finds nothing wrong in the conduct of the ITO who after Shri Rajan's denial of possession of the keys, asked Shri Rajan to wait for his statement to be recorded and proceeded to break open the cupboard and the filing cabinet.
4. In order to properly appreciate the rival contentions it is desirable to refer to the provisions of Section 69A, which read as under : Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.
It is evident that Section 69A provides that the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for a particular financial year only if the following two conditions are satisfied, namely, (i) the assessee is found to be the owner of any money, bullion, jewellery, etc., and as such money, etc., is not recorded in the books of account, if any maintained by him ; and (ii) the assessee offers no explanation about the nature and source of acquisition of the money, etc., or the explanation offered is not satisfactory.
Thus, the question of the assessee's offering any explanation, etc., would arise only if the assessee has been found to be the owner of money, etc. The condition precedent for application of Section 69A, thus, is that the assessee is found to be the owner of any money, bullion, etc. In this context, it may be desirable to refer to the provisions contained in Section 132(4A) where it is specifically provided that where any books of account, other documents, money, bullion etc., is found in the possession or control of any person in the course of a search, it may be presumed that such items belong to the assessee. Accordingly, I am inclined to accept Shri S.E. Dastur's contention that the mere fact that the money is found in the possession or control of an assessee is not by itself a conclusive proof of the fact that the assessee is the owner of the money. This is apart from the other contention of Shri S.E. Dastur that in the case before us even the money has not been seized from the possession or control of the appellant. In the circumstances I have to appreciate the evidence with a view to ascertain (a) whether the money, i.e., the sum of Rs. 4,50,000, was found in the possession or control of the appellant and (b) whether the said fact by itself or along with some other facts on record justifies the conclusion that the appellant is the owner of the money. The appellant has not offered any explanation as it has denied having anything to do with the money. In case I accept the department's case that the appellant is the owner of the money, the inclusion of the said amount in the income of the appellant for the year under appeal will be fully justified.
5. The appellant-company and Bajaj Auto Ltd. were functioning like sister concerns up to 1968. Shri N.K. Firodia, elder brother of Shri H.K. Firodia, was the managing director of the appellant-company and the general manager of Bajaj Auto Ltd. Shri H.K. Firodia was the chief executive of both the companies, i.e., the appellant-company and Bajaj Auto Ltd. Offices of both the companies were at Worli. Differences arose between the two companies and they decided to separate as a result of which the godown at Worli was, admittedly, under the exclusive possession of the appellant-company. The common hall was used by the members of the staff of both the appellant-company and Bajaj Auto Ltd. and out of a number of cabins two cabins were earmarked for the appellant-company. The appellant, it may be mentioned, has urged that the particular cabin was not in its exclusive use. Its keys were kept in the open drawer of the table used by its staff member, Shri Sambhus, and that while the cabin was used occasionally by Shri N.K.Firodia arid Shri H.K. Firodia when they visited Bombay for few hours once in a while, it was mostly and quite often used by the staff members and senior officers of Bajaj Auto Ltd. also. In support of his contention, Shri S.E. Dastur stated that there was only one telephone in the entire premises and that was in that cabin. The staff members of not only the appellant but also those of Bajaj Auto Ltd. used to avail of telephone facility. This would not have been possible but for the fact that the cabin was open to all concerned. This has been denied by Shri Rahul Bajaj the managing director of Bajaj Auto Ltd., as well as Shri Rajan who was until 1968 in the employment of the appellant-company and went over to Bajaj Auto Ltd. thereafter.
5.1 As regards the steel cupboard and the riling cabinet also, there are different versions. According to the appellant, their keys were with Shri Rajan who refused to hand them over on the ground that the steel cupboard and the filing cabinet belonged to Bajaj Auto Ltd. It was stated that after 1968 the appellant had no control or even access to the steel cupboard and the filing cabinet. On the other hand, Shri Rajan and Shri Rahul Bajaj have categorically stated that these two items of furniture and the cabin itself were under the exclusive use of the appellant-company. In this context, it is desirable to refer to the two letters being Exhibits 'D' and 'E' to which attention has been invited by both the parties. Shri Rahul Bajaj is a director of Bajaj Auto Ltd. Enquiry was made in the year 1968 by one Shri Kailash from Shri Rahul Bajaj, director of Bajaj Auto Ltd., as to what should be done with regard to the furniture in the common premises which do not bear any name. In reply, Shri Rahul Bajaj, by his letter dated 14-9-1968 stated that the furniture should be separated as belonging to 'Auto's' and 'Tempo's' and in case any excess furniture of 'Auto' is left over, his instructions should be sought. He specifically directed his people that so far as the furniture in the two cabins earmarked to the appellant-company is concerned, the same should be allowed to remain. Shri S.E. Dastur reads the letter as meaning that the steel cupboard and the filing cabinet belonged to Bajaj Auto Ltd., but they were allowed to remain in the cabin without giving the appellant-company the right of user. On the other hand, Shri K.A. Sathe reads the two letters as saying that irrespective of the ownership of the furniture in the two cabins, they were thereafter to remain in the cabins under the control and use of the appellant-company, otherwise, according to him, it would mean that the furniture was kept in those two cabins treating them as a godown for them.
5.2 That apart, there is no dispute about the fact that the relations between the appellant-company and Bajaj Auto Ltd. are not cordial and that Bajaj Auto Ltd. has filed a suit against the appellant for ejectment in the year 1974, which is pending.
6. I may agree with the learned Accountant Member that the question of ownership and control over the cupboard from which the money was seized has to be decided by adopting the test of preponderance of probabilities. The pertinent question, however remains, which conclusion is more reasonable on the facts and in the circumstances as available on record. The key of the cabin in which the particular cupboard was there is kept in the open drawer of a table in the common hall which is used by one of the assistants of the appellant-company, Shri Sambhus. A litigation is going on between the appellant-company and Bajaj Auto Ltd. for ejectment of the premises. Both Shri N.K.Firodia and H.K. Firodia, the directors of the appellant-company, who are supposed to have the keys of the cupboard came to Bombay from Pune, their regular headquarters, occasionally and for few hours. Even if it is assumed that the keys were in the possession of Firodias, is it reasonable to assume that the appellant-company would keep a cash sum of Rs. 4,50,000 in a cupboard placed in a cabin whose keys are available to almost everybody. No doubt, one could pose almost the same question in another form, viz., then whom should this money belong to and the question is difficult to be answered. The burden of proof under Section 69A being on the revenue, I do not think that the fact that it will be difficult to establish the ownership of the money if it is held that the appellant is not the owner of the money, is of no consequence and has, therefore, to be ignored.
7. In a case like the one before me, one has also to appreciate the issue from a different point of view. Assuming a finding that the money seized from the cupboard belongs to the appellant is justified, penal provisions for concealment or prosecution, on the facts and in the circumstances of the case, will certainly not be attracted. The amount will, of course, be liable to tax. The tax computed on the amount of Rs. 4,50,000 in the order under Section 132(5) has been Rs. 2,59,875.
The balance amount of Rs. 1,90,125 may have to be refunded. On the other hand, if the appellant's contention that the money seized does not belong to it is accepted, the revenue will get the entire amount.
Keeping in view all these aspects of the matter, for reasons given by me earlier and the reasons given by the learned Judicial Member in his dissenting order, with which I agree, I hold that the facts and material on record do not justify the conclusion that the amount of Rs. 4,50,000 was seized from the possession or control of the appellant or that the appellant is the owner of the said money. I, therefore, agree with the learned Judicial Member that the addition of Rs. 4,50,000 to the income of the appellant requires to be deleted.
8. The order will now go to the Bench for deciding the appeal according to the majority view.
1. Due to the difference of opinion between the Judicial "Member and Accountant Member, they had passed dissenting orders dated 6-4-1984 and 5-6-1984, respectively. Thereafter, the matter was referred to the President of the Tribunal, Bombay, to appoint a Third Member to hear the appeal and, accordingly, the President himself has heard the appeal as a Third Member. The Third Member has agreed with the view taken by the Judicial Member that the addition of Rs. 4,50,000 made by the revenue to the assessee's income is liable to be deleted. Now, in view of the decision of the Third Member, a final order requires to be passed and, accordingly, we pass the order.
2. In the result, the appeal is allowed and the addition of Rs. 4,50,000 is deleted.