1. The following question has been referred to us for assessment years 1967-68, 1968-69 and 1969-70 :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right iun law in holding that the deposit of Rs. 50,000 had been properly explained within the meaning of section 68 of the Income-tax Act, 1961, and could not be treated as its unexplained income, and the consequent deletion of the disallowance of interest of Rss. 5,804 for the assesssment year 1967-68, Rs. 9,958 for the assessment year 1968-69 and Rs. 602 in the assessment year 1969-70 ?'
2. There are three income-tax references but as there is only one question, this judgment will dispose of all the three references.
3. The facts of the case are that in the assessment proceeding for the year 1967-68, cash deposits standing in the name of Shrimathi Dugra Devi, Shrimathi Parveen Kanta, Shrimathi Suraj Kanta, Shrimathi Trishla Devi and Shrimathi Suresh Rani, which were Rs. 10,000 each, were noticed by the ITO and these were unexplained credits. He accordingly, included the sum of Rs. 50,000 in the assessment year 1967-68 and disallowed the interest of Rs. 5,803.97 paid on these five deposits. Similarly, in the assessment year 1968-69, he disallowed a sum of Rs. 9,958 and a sum of Rs. 602 in 1969-70. The assessed appealed to the AAC who took into consideration the voluntary disclousres made by the five ladies under s. 24 of the Finance (No. 2) Act, 1965, and also made observations regarding these credits. He took the view that the credits were properly explained and did not represent the assesssee's income. He accordingly, deleted the addition of Rs. 50,000 and restored the allowance of interest in the three years.
4. On appeal to the Income-tax Appellate Tribunal, the judgment of the Delhi High Court in Rattan Lal v. ITO : 98ITR681(Delhi) was followed and the Tribunal came to the view that the voluntary disclosures made by the five ladies would be conclusive and, accordingly, the assessed could not be asked to prove the nature and source of the deposits as unexplained investments. This has led to the references.
5. The judgment of the Delhi High Court has been overruled by the judgment of the Supreme court in Jamnaprasad Kanhaiyalal v. CIT : 130ITR244(SC) , where the Supreme Court has held that the immunity under the Voluntary Disclosure Scheme only extended to the declarant and there was no bar on the amount being assessed in the hands of the person to whom it really belonged. Mr. Wazir Singh, learned counsel for the Commissioner, thereforee, urged that the question referred to us had to be answered in favor of the department. Unfortunately, the matter before us is not as simple as this. The question which was referred in the case before the Supreme Court was :
'Whether, on the facts and in the circumstancess of the case, and the declarations made by Shailendra Kumar, Satish Kumar, Sunil Kumar, Swatantra Kumar and Santosh Kumar under the Finance (No. 2) Act of 1965, and accepted as such by the Commissioner, there is justification in law in holding that the sums amounting to Rs. 46,250 credited to their accounts existing in the books of the applicant-firm was income of the applicant-firm from undisclosed sources ?'
6. The question referred to us is in quite a different form. The facts in the present case are also different from those of the case before the Supreme Court.
7. It is necessary to point out the factual difference. The firm in that case consisted of Kanhaiyalal and four married sons whereas there was a minor son who had been admitted to the benefits of the partnership. The Tribunal held on the facts that the credit appearqed in the name of the five persons mentioned in the question which included four sons who had no source of income and kanhaiyalal had also stated that he did not knop how this amount had come to his children. It was, thereforee, held on the facts that there was no Explanationn about the cash credits. if that had been the position in the present case, we would have had no hesitation in coming to the conclusion that the Tribunal was not right in the present reference.
8. Unfortunately, the position in this case is quite different on the facts. Although the ITO held that the credit were not explained, the AAC decided the case on quite a different ground. The conclusion of the Assistant Commissioner were as follows :
'In my opinion, there is force in income-tax Officer's remark that the Department could enquire whether the declared income represented the income of someone else. In this case, however, there is no material on record to suggest that the above-noted sum of Rs. 50,000 was the income of the firm as such. The question, thereforee, remains whether the assessed's Explanationn was satisfactory and if not then could it be presumed that the said credits represented assessed's income. The Explanationn furnished by the assessed in the declarations made on solemn affirmation by the ladies were accepted by the Commissioner without requiring them at that time to releval the exact sources. In these circumstances, the Explanationn furnished by the assessed was accepted as satisfactory. The appellant has also urged that the ladies were absolute owners of the credits. In support of this contention, it has produced copies of accounts of the ladies for the subseqent years showing some of the amounts utilised by them as under .......'
9. Thereafter details were shown that the sums of Rs. 14,954 in the case of two ladies Rs. 12,500 in the case of another lady and Rs. 22,500 and Rs. 12,502 in the case of the last two ladies, had been invested by them either for the purchase of shares or as advances to various firms. Thus, there was material to show that the sum belonged to the ladies themselves and not to the firm. The third conclusion of the AAC was as follows :
'The third contention is that declarations were made on March 28, 1966. Existence of amount of Rs. 50,000 before April 1,1966, has, thereforee, to be accepted. The previous year in this case starts on April 1,1966. The above-noted sum of Rs. 50,000 could not be the income of the previous year from April 1,1966, to March 31, 1967, under consideration. This is supported by the decision dated March 14,1972, of the Tribunal, Delhi Bench 'A' in I.T.A.No. 2231 of 1970-71 and also decision dated March 21,1972, of the same Bench in I.T.A. No. 2660 of 1970-71. The addition of Rs. 50,000 is, thereforee, deleted. Since the Explanationn had been accepted to be satisfactory, the addition of interest of Rs. 5,804 is also deleted.'
10. Thus, the conclusion of the AAC was that the sum was established to belong to the ladies on various grounds : (1) because they had made a declaration which had been accepted by the Commissioner, and (2) on account of the fact that later on they used the same amount themselves. A third point was that the money was declared much before it appeared in the books of this firm. It may be mentioned that the cash credit were mode on August 1,1966, whereas the declarations were made on march 28,1966, several months earlier.
11. When this matter went to the Tribunal, the findings of the AAC were reproduced, but the decision was based entirely on Rattan Lal's case : 98ITR681(Delhi) , which by itself is not sufficient to hold that the deposits were from undisclosed sources.
12. To explain this point of view, it is necessary to say that the declarations made under the Voluntary Discloure scheme are a piece of evidence. The Delhi High Court in Rattan Lal's case : 98ITR681(Delhi) , had held that the declarations were conclusive. But, this view has been overruled as being incorrect by the Supreme Court. This does not mean that the opposite view-point, namely, that the declarations are false, has to be adopted. A declaration can either be true or it can be false. It depends on the facts of each case as to whether the amount is in fact the money of the declarant or has been declared in the hands of the declarant though belonging to some one else. This is, thereforee, one circumstance which can be taken into consideration for determining whether the credits have been explained or not. The declaration cannot be disregarded, nor can it be treated as conclusive.
13. The main question in this case was whether the five ladies in question could have a sum of Rs. 10,000 each belonging to themselves. The ladies were wives of five of the seven partners in the firm, M/s. Popular Jewellers (the assessed). It had been urged that they could have an income of their own by doing speculation in gum and oil as their husbands were in that very business. It was also urged before the AAC that two of the partners, i.e., Shri Sri Chand and Shri Narinder Mohan, were unconnected with the deposits, and, hence, this sum could not be the income of the firm of seven partners. In other words, one of the points urged was that the five ladies could opt have been benami for the seven partners of the firm as they were unconnected with two of them. There is also the conclusion of the AAC based on the other circumstances of the case, namely, the subsequent withdrawal of the amount by the ladies and their investment subsequently in either shares or deposits in other firms. This was a case where it was open to the Department top accept the Explanationn or reject the same. The Explanationn was accepted by the AAC not on the basis that the declaration was conclusive but on the basis that it was a piece of evidence showing that these ladies had the money and had made solemn declarations about the same. There was also the circumstance that the declarations were made in March, 1966, whereas the money came to the firm in August, 1966.
14. There is a further circumstance which could arise in this case. If the amount was a benami amount for argument's sake, then it could be a benami amount of the husbands of the five ladies and not of the assessed-firm. As these are all questions of fact-which had to determined one way or the other, it is difficult to say that the question referred to us can be answered merely on the ground; that Rattan Lal's case : 98ITR681(Delhi) , has been overruled and reversed by the Supreme Court. The decision of the AAC was not based on this ground.
15. This bring us to the question how to answer the question referred to us Either we have to hold that the Tribunal was right or the Tribunal was wrong in the sense that the Tribunal followed Rattan Lal's case : 98ITR681(Delhi) and held the declarations to be conclusive. The Tribunal was wrong. But this is not sufficient to answer the question referred to us, because there is nothing to indicate whether the Tribunal accepted the facts as found by the AAC in our view the orders of the ITO were set aside and merged in the order of the AAC. In our view the orders of the ITO were set aside and merged in the order of the AAC. The facts as found by the AAc would, thereforee, continue to be operative and would be binding on the Department and could only be reversed by another appellate body like the Income-tax Appellate Tribunal. As there is no reversal on facts, the factual position has to be taken to be that as the AAC found.
16. Mr. Wazir Singh on behalf of the Department strongly that we should merely say that the Tribunal was wrong in law in following Rattan Lal's case and the Tribunal would not like to say here as to what is to be done under s. 260 of the Act as there are a number of reported decisions regarding the scope of the Tribunal's powers. We would merely answer the question as follows. It the facts as found by the AAC are accepted as final, then the Tribunal is right in holding that the cash deposits in question are not to be treated as the income of the assessed from undiclosed sources, and hence, the interest accruing on the same has to be allowed as a deduction. We also hold that the tribunal was wrong in treating the voluntary disclosures of these five ladies as conclusive regarding the question whether the cash credits belonged to these ladies. The follows from the decision of the Supreme Court.
17. It will be now for the tribunal to see the effect of the answer on the question whether the sum of Rs. 50,000 is to treated as the undiclosed income for the assessment year 1967-68 and whether the interest amounts are to be treated as allowable deductions for the assessment years 1967-68, 1968-69 and 1969-70. This being the position, we allow the parties to bear their own costs.