1992 (7) TMI 16 - HC - Income Tax

High Court upholds Tribunal's ruling against assessee on undisclosed income from unfiled wealth-tax returns.

The High Court affirmed the Tribunal's findings, ruling against the assessee. It held that the wealth-tax returns were not filed as claimed and that the ... Income From Undisclosed Sources Issues Involved:1. Whether there was any material before the Tribunal to hold that the wealth-tax returns were not filed on the various dates as shown on the respective returns.2. Whether the Tribunal was right in rejecting the explanation offered by the assessee in respect of Rs. 1,82,535 and in treating the same as undisclosed income for the assessment year 1968-69.Issue-wise Detailed Analysis:Issue 1: Material Before the Tribunal Regarding Wealth-tax Returns Filing DatesThe Tribunal concluded that the wealth-tax returns purportedly filed between May 1966 and July 1967 were not actually filed on those dates. Despite the returns bearing date stamps, they lacked inward numbers and initials from the receiving clerk or the Wealth-tax Officer, which are standard procedural requirements. The Tribunal inferred that these returns were manipulated and possibly created after the search in September 1967 to justify the possession of the assets.The Tribunal's skepticism was further supported by the fact that the assessee had not filed any wealth-tax returns prior to 1966, despite having assessable wealth. The sudden filing of multiple returns in quick succession in 1966 raised doubts about their authenticity. Additionally, the Tribunal noted that the returns were missing when requested for verification, which added to their suspicion.The Tribunal also found inconsistencies in the assessee's explanations regarding the source of the funds. Initially, the assessee claimed the funds were received from his father and father-in-law, but later attributed them to gifts received by his wife from her parents. This inconsistency further undermined the credibility of the returns.Issue 2: Rejection of Assessee's Explanation and Treatment as Undisclosed IncomeThe Tribunal upheld the lower authorities' decision to treat the assets found during the search as undisclosed income. The assessee claimed that the assets were acquired from gifts received by his wife, which were allegedly disclosed in the wealth-tax returns. However, the Tribunal found this explanation unconvincing for several reasons.Firstly, the Tribunal found it improbable that the assessee's wife would keep a substantial sum of about Rs. 2,00,000 idle for 15 years, especially given her familiarity with making investments, as evidenced by her previous investments in India Marine Service (P.) Ltd. Secondly, the Tribunal noted that the assessee's behavior of immediately investing the funds after the search contradicted the claim that the funds had been idle for so long.The Tribunal also pointed out that the assessee's statements under section 132(4) did not mention the wealth-tax returns or the alleged prior disclosure of the assets, which would have been a natural defense if the returns were genuinely filed earlier. This omission further supported the Tribunal's conclusion that the returns were not filed on the claimed dates.The Tribunal's decision was based on a thorough examination of the facts and circumstances, including the inconsistencies in the assessee's explanations and the procedural irregularities in the filing of the wealth-tax returns. The Tribunal's disbelief of the dates of filing was deemed reasonable, given the lack of corroborative evidence and the pattern of omissions in the returns.ConclusionThe High Court affirmed the Tribunal's findings, answering both questions in the affirmative and against the assessee. The court found no perversity in the Tribunal's conclusions and held that the wealth-tax returns were not filed on the purported dates and that the assets discovered during the search represented undisclosed income. The court also noted that the Tribunal's decision was based on a fair and correct appraisal of the materials and facts presented. There was no order as to costs.