Suhas Chandra Sen, J.
1. The assessee in this case is a registered firm carrying on business as dealer in precious stones and also as a middleman between sellers and buyers of precious stones. For the assessment year 1967-68, corresponding to the previous year being diwali 2022 (October 25, 1965, to November 12, 1966), the assessee filed a return on August 8, 1967, showing a total income of Rs. 22,120. The ITO received information from the Customs Officers of Preventive and Intelligence Unit, West Bengal, Calcutta, that at a search conducted in the business premises of the assessee on 2nd and 3rd August, 1966, diamonds, pearls and precious stones valued at Rs. 2,21,487 had been seized. When called upon to explain the source of these precious stones the assessee claimed that the seized goods were covered by the opening stock and purchases to the extent of Rs. 54,362 and that the remaining goods to the extent of Rs. 1,67,125 belonged to sixteen persons from whom they had been received on approval basis for sale or for repair on estimation. The assessee produced eleven persons whose statements were recorded by the ITO and written statements were filed from other persons. After examining the evidence the ITO came to the conclusion that only a part of the explanation of the assessee could be accepted. He held that the assessee was not able to explain properly: (1) the value of Rs. 58,256 alleged to have been received through Omkar Shankar Gupta; (2) the receipt of precious stones amounting to Rs. 1,184 alleged to have been received on approval from Banwarilal Srimal ; (3) the receipt of jewellery worth Rs. 1,850 from Parvin Chand C. Mehta ; and (4) the receipt of precious stones worth Rs. 13,476 from Bejoy Chand Bothra. Consequently, the ITO added the total sum of Rs. 74,766 being the unexplained value of precious stories as the income of the assessee from undisclosed sources and completed the assessment on a total of income of Rs. 1,00,126 after adding back certain other disallowable items.
2. The assessee appealed to the Assistant Commissioner who agreed with the ITO that the assessee had not satisfactorily explained the precious stones as alleged. He, therefore, confirmed the assessment by his order dated March 25, 1974.
3. The assessee appealed further to the Appellate Tribunal and reiterated the contentions that the receipt of the precious stones could be properly explained by the evidence on record. The Appellate Tribunal was of the view that the assessee had satisfactorily proved the receipt of the precious stones of the value of Rs. 1,184 from Banwarilal Srimal and, accordingly, deleted the addition of the sum of Rs. 1,184. Similarly, the Appellate Tribunal was of the view that the assessee had proved the receipt of precious stones worth Rs. 1,850 from Sri P. C. Mehta for cleaning. Thus, the Appellate Tribunal deleted an addition of Rs. 3,034 only. With regard to the rest of the items the Appellate Tribunal agreed with the authorities below that the assessee had not proved the source of the jewellery seized from the assessee and upheld the addition made under Section 69A of the Act.
4. The assessee applied to the Tribunal for referring the questions of law said to arise out of the order of the Tribunal under Section 256(1) of the I.T. Act, 1961. The Tribunal declined to refer the said questions on the ground that the questions were not questions of law arising out of the order of the Tribunal.
5. On a further application made by the assessee under Section 256(2) to the High Court, the Tribunal was directed to refer the following two questions of law :
'1. Was the Tribunal right in holding in the facts and circumstances of the instant case, that the provision of Section 69A of the Income-tax Act, 1961, were attracted?
2. Was there any material before the Tribunal on which the said Section 69A of the Income-tax Act, 1961, could be applied ?'
6. It has been contended on behalf of the assessee that under Section 69A the ITO must find that the assessee was the owner of 'any money, bullion, jewellery or other valuable articles' before the other provisions of the section are applied. In the instant case, there was no material before the ITO to hold that the assessed was the owner of the precious stones in question. In the absence of such material, the ITO could not proceed to apply Section 69A of the I.T. Act. It was submitted that it was for the department to establish that the precious stones were owned by the assessee arid the department had failed to discharge that onus. The department had equated possession with ownership in this case.
7. Counsel appearing on behalf of the assessee strongly relied upon the following observation of a Division Bench of the Punjab High Court in the case of Addl. CIT v. Karnail Singh V. Kaleran :
'It will be apparent that an assessee has to be an owner before anything in his possession can be deemed to be his income. It cannot be said in the case of stolen property that the thief is the owner thereof. Therefore, it is evident that Section 69A was enacted to make certain properties as income by the deeming provision but then facts must be found to bring a case within that deeming provision. In other words, in the face of the Tribunal's clear finding that it cannot be assumed that the assessee in the present case was the owner of the money, the deeming provision cannot be made to apply in his case.'
8. In our opinion, the deeming part of Section 69A comes into play only if the following two conditions are fulfilled :
(1) The assessee is found to be the owner of any money, bullion, jewellery or other valuable article, and
(2) Such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by the assessee for any source of income.
9. The question whether the assessee is the owner of any money, bullion, jewellery or other valuable article will depend, on the facts and circumstances tit each case. The fact that the assessee was found to be in possession of any money, bullion, jewellery or other valuable article is an important factor to be taken into account. There is also a legal presumption under Section 110 of the Evidence Act, 1872, that possession is prima facie proof of ownership. In a case where an assessee, a dealer in precious stones, is found to be in possession of precious stones and there is no indication or suggestion in the facts of the case, that the possession of the assessee was unlawful, the Tribunal is entitled to conclude, in the absence of any reasonable explanation from the assessee, that the assessee was the owner of the precious stories. The assessee's explanation to the contrary in this case was found to be unacceptable by the Tribunal.
10. In the case before the Punjab High Court Addl. CIT v. Karnail Singh V. Kaleran , the finding of the Tribunal was that the assessee was not the owner of the seized cash found in his possession but in the instant case the Tribunal rejected the assessee's explanation and has come to the conclusion that the assessee is the owner of the precious stones. In the facts of this case, it cannot be said that the finding of the Tribunal is perverse or erroneous in law.
11. In the case of Maqbool Hussain v. State of Bombay, : 1983ECR1598D(SC) , the Supreme Court had to deal with a case where gold was found in the possession of the appellant when he landed at the Santa Cruz airport. The appellant was detained by the Customs authorities and the gold was seized from his person. Proceedings were started under the Customs Act against the appellant. The Supreme Court observed (pp. 327, 328):
'This question of the ownership of the gold was not, in our opinion, material. The gold was found in the possession of the appellant when he landed at the Santa Cruz airport... Once the appellant was found in possession of the confiscated gold the burden of proving that he was not the owner would fall upon whosoever affirmed that he was not the owner.'
12. In the case of J.S. Parkar v. V.B. Palekar : 94ITR616(Bom) , the Bombay High Court had to go into the question of the scope of Sections 69 and 69A of the I.T. Act, 1961, and Section 110 of the Evidence Act. There Deshpande J. (with whom Tulzapurkar J., agreed) observed, after referring to the aforesaid judgment of the Supreme Court (p. 632):
'It has, however, to be noted that the above observation of the Supreme Court is not based so much on the provisions of Section 110 of the Evidence Act, as on the basic principles of jurisprudence. This apart, every court or Tribunal or statutory body invested with the duty of ascertainment of the facts is entitled to assume that apparent set of facts is true and the burden to show that the same is not so always lies on the person who is interested in asserting so.'
13. Tulzapurkar J. observed (p. 686) :
'Besides, the explanation that was offered at the stage of the appeal before the Tribunal was that he could be in possession of the gold as a carrier and that explanation was rejected by the Tribunal and, in my view, rightly. In the circumstances the principle enunciated in Section 110 at once came into play and, in my view, the taxing authorities as also Tribunal were entitled to draw the inference of ownership of the gold being with the petitioner.'
14. Counsel for assessee also relied on a number of cases in support of his arguments but the facts and principles laid down in those cases are quite different from the question raised in this reference.
15. In the case of CIT v. Smt. P.K. Noorjehan : 123ITR3(Ker) . the Tribunal held that although the explanation about the nature and source of the money invested in question was unsatisfactory, the assessee being a muslim lady aged 20 or 21 years, who had no other source of income, it was impossible for her to have earned the amounts invested in the properties. It was held by the Division Bench of the Punjab High Court that the Tribunal did not act arbitrarily or capriciously. It took into account the complete absence of the sources of income of the assessee and the fact that having regard to her age and the circumstances in which she was placed, she could not be credited with having earned any income of her own.
16. In the case of Yadu Hari Dalmia v. CIT : 126ITR48(Delhi) , a sum of Rs. 10,000 was added back. In that case the assessee was a member of a Hindu joint family. For her marriage a sum of Rs. 11,500 was shown as having been incurred. Keeping in view the high status and standard of living of the assessee and various other factors, the ITO estimated the expenditure to be higher. The AAC and the Tribunal affirmed the order of the ITO on principle, but reduced the quantum of addition to Rs. 11,000 only. The Delhi High Court on a reference held that the addition made on estimate by the Tribunal was not capricious, arbitrary or without basis. The High Court, however, held that since it was the joint family which spent monies on the marriage, there was no reason why it should be assumed that the extra expenditure estimated as not accounted for came out of the assessee's income from undisclosed sources and not from the family itself. The High Court, therefore, held that the addition of Rs. 10,000 as assessee's income from undisclosed source was not justified in law in the facts of that case.
17. Reliance was also placed upon the case of Rahmat Development & Engineering Corporation v. CIT : 130ITR602(Cal) . This was a case under Section 69. The High Court held that 'unless the assessee had given the source of investment of this additional amount, whatever be the amount, that must have come from some source of income of the assessee'.
18. Counsel for the assessee also relied on certain passages from Salmond on Jurisprudence, 12th Edn., for the purpose of establishing the difference between the legal concept of 'ownership' and 'possession'. But, in our opinion, those questions really do not arise in this case because of the findings of fact made by the Tribunal. The question in this case is whether there was any material before the Tribunal for coming to those findings.
19. In this case, the assessee was found in possession of the jewelleries in question. The Tribunal found that the assessee carries on business as dealer in precious stones and also as a middle man between sellers and buyers of precious stones. The assessee's explanation as to the nature of possession of the stones was rejected by the Tribunal. The Tribunal thereafter concluded that the assessee was the owner of the precious stones.
20. It cannot be said that the order of the Tribunal was without any material. Once the assessee was found to be in possession of the stones it was for the, assessee to explain the nature of his possession. If a satisfactory explanation was not forthcoming it was open to the Tribunal to conclude that the assessee was the owner of the stones in question. The Tribunal has considered the explanation of the assessee and the entire circumstances of this case.
21. Counsel for the assessee also argued that under the provisions ofSection 69A, the precious stones can only be deemed to be the income of the assessee in the financial year in which the assessee was found in possession of the precious stones in question. The ITO has assessed the tax in this case on the basis of the accounting period shown in the assessment return, that is, 25th October, 1965 to 12th January, 1966.
22. In our opinion, this argument is not acceptable. This question hasnot been referred to this court nor does this question arise out of the orderof the Tribunal. In any event this point is without any substance. Theprecious stones were seized from the business premises of the assessee on2nd August, 1966 and 3rd August. 1966, which fall within the accountingyear 1966-67, for which the relevant assessment year will be 1967-68. Inthis case, the amount in question has been included in the assessment year1967-68.
23. Both question Nos. 1 and 2 are, therefore, answered in the affirmativeand in favour of the revenue. Each party will pay and bear their owncosts.
Sabyasachi Mukharji, J.