SIMON VARGHESE P. vs. THE COMMISSIONER OF INCOME TAX

The Assessing Officer by order dated 30.12.2011 concluded that the amount of Rs.20,50,000/- having been admitted

In the challenge before the First Appellate Authority, the addition of Rs.20,50,000/- as unaccounted income in the hands of the assessee was interfered with. It was held that the addition is liable to be deleted since the same, if at all treated as liable to be assessed, should have been assessed as income of Sri.T.V.Johnson and not that of the assessee.

The Department took up the matter in appeal to the Appellate Tribunal. The Appellate Tribunal after an elaborate consideration of the facts arising in the case, reversed the finding of the First Appellate Authority and held that the cash flow statement of the assessee did not reflect the payments made by Sri.E.P.Jose to Sri.Simon Varghese and what was disclosed by the assessee in the cash flow statement did not tally with the withdrawals made by Sri.E.P.Jose. It was also found that the assessee had failed to explain the possession of amounts due to the assessee with ITA.No.159 OF 2016 4 Sri.T.V.Johnson, and that too in the bank locker. It was further held that since the assessee had failed to explain the circumstances under which it was kept in the bank locker and that too such a huge amount was kept in cash. The deletion of the addition of Rs.20,50,000/- from the income of the assessee as ordered by the First Appellate Authority was interfered with and set aside in ITA.No.776 to 778/Coch/2013 dated 28.03.2014. The assessee challenges the order of the Appellate Tribunal and has raised four questions of law as per Section 260A of the Act, as follows :- (i) Whether on the facts and in the circumstances of the case, is not the order of the Appellate Tribunal in restoring the addition of Rs.20,50,000/- in the assessment as income under other sources beings unexplained cash, arbitrary, illegal and unsustainable? (ii) Is not the finding of the Appellate Tribunal that the sum of Rs.20,50,000/- found in the locker of Shri T.V.Johnson, appellant's brother-in-law, was the unexplained income of the appellant, erroneous, illegal and perverse, when the above sum is admittedly paid by Shri E.P.Jose to Shri T.V.Johnson during the absence of the appellant from India (He being a NRI) towards payment of consideration under Agreement dated 08.01.2010? (iii) Did not the Appellate Tribunal err in law in reversing the finding and decision of the CIT (A)-I vide Annexure-B by accepting the source for the sum of Rs.20,50,000/-? (iv) Is not the order of the Appellate Tribunal with respect to the restoration of the addition of Rs.20,50,000/- arbitrary, illegal and ITA.No.159 OF 2016 5 unsustainable?

The Assessing Officer had found that the amount seized from the locker of Sri.T.V.Johnson was accepted and admitted by the assessee, as amounts belonging to him. After perusing the bank statement of Sri.E.P.Jose, the Assessing Officer found cash withdrawal of Rs.19,00,000/- on 04.01.2010 and Rs.8,00,000/- on 01.02.2010. However, the Assessing Officer was not convinced with the explanation offered by Sri.Johnson as to why the money was kept in the locker when the assessee had several bank accounts within the vicinity of Sri.Johnson. It had come out on verification that the assessee had bank accounts at the relevant time at different places like Irinjalakuda, Chalakudy, Angamaly and Thrissur. It was also found that if the amounts were received, as attempted to be explained, then nothing prevented Sri.T.V.Johnson from depositing the amounts in the account of the assessee. The story unfolded by the assessee was found to be not convincing and it was held that there was no justification in keeping such a huge amount in the locker and that since the assessee had claimed that the amount belongs to him, it was held as liable to be assessed in the hands of the assessee by adding the said amount of Rs.20,50,000/- as income from other sources.

The First Appellate Authority on the other hand concluded that the amount even if it is regarded as unexplained income, the same could have been at the most be assessed in the hands of Sri.T.V.Johnson and not the assessee. However, the Appellate Tribunal, by a detailed order, reversed the order of the First Appellate Authority after noting that the alleged payment by Sri.E.P.Jose to the assessee was not reflected in the cash flow statement and nor did it tally with the withdrawals and held the same as liable to be treated as income of the assessee, thereby restoring the order of the assessing officer.

The above detailed narration of facts is made only to analyse whether the finding of fact entered into by the Tribunal as the final fact finding authority was erroneous or not. From the facts arising in the case, we find that the assessee had accepted ownership of the money which was in tune with the statement of Sri. T V Johnson that the money belonged to the assessee. So the finding that the money found in the locker of Sri. T.V Johnson is to be assessed as belonging to the assessee cannot be faulted.

However, the assessee has not shown any receipt in his cash book or day book, about receipt of any income from Sri.E.P.Jose. As a builder engaged in construction of villas and other

The effect of money found in the ownership of an assessee is dealt with under section 69A of the Act. It may be apposite to refer to Section 69A of Act which is extracted as below: “S.69A. 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.".

Under section 69A of the Act, where the assessee is found to be the owner of any money and it is not recorded in the books of account, the same can be charged to income tax as deemed to be an income of the assessee for that financial year. The fiction gets attracted under the said provision not only when the assessee offers no explanation for the source, but also where the explanation offered by the assessee about the nature and its source is not satisfactory in the opinion of the Assessing officer. Thus Section 69A of the Act considers any sum found to be under the ownership of the assessee in a financial year and not recorded in the books of account if maintained by him, as a deemed income of the assessee, during such financial year, if the following conditions are satisfied: (i)Assessee offers no explanation about the nature and source of such money, or, (ii).The explanation offered by the assessee about the nature and source of such money is not satisfactory, in the opinion of the assessing officer.

At times, assessees misuse bank lockers to keep their undisclosed income. Many a time assessees contend that the source of cash is under one source or the other. In the absence of adequate documents to prove the source of the cash, a general statement of the source may not suffice and in such circumstances a discretion is ITA.No.159 OF 2016 9 vested with the assessing officer whether to treat the money as income of the assessee or not. The intention of Parliament in enacting S.69A was to confer a discretion on the assessing officer in the matter of treating the money which has not been satisfactorily explained by the assessee, as the income of the assessee. The explanation offered must be considered in the light of the facts of each case and the satisfaction of the assessing officer need not be interfered with lightly unless the same is inherently improbable or patently absurd or the officer acted capriciously or arbitrarily.

It is a settled law that the opinion of the assessing officer for not accepting the explanation offered by the assessees as not satisfactory, is required to be based on proper appreciation of material and other attendant circumstances available on record. The opinion of the assessing officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. Reference can be made to the decision in Commissioner of Income Tax v. P.Mohanakala [(2007) 6 SCC 21] for the above stated proposition.

In the instant case, the Tribunal concurred with the finding of fact and the conclusion drawn by the assessing officer. The ITA.No.159 OF 2016 10 findings are based on the material available on record and not on any conjectures and surmises. When the explanation offered by the assessee was found to be unsatisfactory to the assessing officer and the said conclusion was found favour with the Appellate Tribunal, this Court, in the circumstances that has arisen, may not be justified in interfering with the conclusions drawn by the assessing officer or the Tribunal. We are fortified in our conclusion not to interfere with the findings of the Tribunal on account of the doubtful nature of the transaction and the manner and the quantum of money that was kept in the locker which caused the assessing officer to come to the conclusion as stated earlier. The Assessing Officer had not acted arbitrarily or capriciously in coming to the conclusion that the amount detected during the search in the locker of the brother-in- law of the assessee should be treated as an income in the hands of the assessee.

At this juncture, we remind ourselves of the scope of jurisdiction of this Court under Section 260A of the Act. The appeal lies to the High Court under the aforesaid section only if it involves a substantial question of law. It is a cardinal principle that the Tribunal is the final fact finding authority and a decision on fact found by the Tribunal can be gone into by the High Court only if the finding of fact