1981 (10) TMI 76 - AT - Income Tax

Tribunal annuls reassessment due to lack of evidence, wife's investment not linked to husband

Manohar Lal. Versus Income-Tax Officer.

Manohar Lal. Versus Income-Tax Officer. - TTJ 013, 471, Issues Involved:1. Validity of reassessment proceedings under Section 147.2. Legitimacy of the addition of Rs. 10,000 as income from undisclosed sources.Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147:The original assessment for Dev Raj was made on 26th November 1973 under Section 143(1), determining taxable income at Rs. 6,980. Later, the ITO received information that Dev Raj's wife, Smt. Parma Devi, had filed a voluntary return for the assessment year 1973-74, declaring Rs. 10,000 out of Rs. 12,000 invested in a mortgage. The ITO issued a notice under Section 148 on 10th December 1976, served on 28th January 1977, proposing reassessment. The reassessment was based on the information from the ITO assessing Smt. Parma Devi, who had no documentary evidence to support her investment, leading to the protective assessment of Rs. 10,000 in her case.The AAC upheld the ITO's action, stating that the ITO had validly initiated proceedings under Section 147 after receiving information from his brother ITO. The AAC noted that the ITO observed the facts in the assessment were not genuine and not acceptable since the ladies did not have any source of income to justify their savings. Consequently, the assessments in the hands of the ladies were completed protectively, and a notice under Section 148 was issued to Dev Raj.2. Legitimacy of the Addition of Rs. 10,000 as Income from Undisclosed Sources:The ITO recorded statements from Dev Raj and his wife during the assessment proceedings. Dev Raj claimed no knowledge of his wife's investment and denied any involvement. Smt. Parma Devi stated that she had received cash gifts from her parents, which she kept at home and used for the investment. However, she had no documentary evidence to support this claim. The ITO found it unbelievable that the ladies would accompany a stranger to a distant place like Bhatinda alone with such a large sum of money. The ITO inferred that the money could have come from Dev Raj, as Smt. Parma Devi had no ostensible source of income. Consequently, the ITO added Rs. 10,000 to Dev Raj's taxable income as income from undisclosed sources.The AAC agreed with the ITO, noting that the facts and statements provided by Dev Raj and his wife were not convincing. The AAC concluded that the money advanced to Gurdeep Singh likely came from Dev Raj's undisclosed income, as Smt. Parma Devi had no substantial source of income to justify the investment.Tribunal's Decision:The Tribunal noted that the ITO's only reason for initiating reassessment proceedings was based on the unproven investment disclosed by Dev Raj's wife. The Tribunal found no evidence suggesting that the investment belonged to Dev Raj or that he had engaged in benami transactions. The Tribunal held that the reassessment proceedings were unwarranted and uncalled for, as the ITO's presumption that the unexplained investment by the wife belonged to the husband was not legally justified.Consequently, the Tribunal vacated the reassessment proceedings. Given this decision, the Tribunal did not find it necessary to address whether the AAC was justified in confirming the addition of Rs. 10,000 in each of the three cases.Conclusion:The appeals were allowed, and the reassessment proceedings were vacated due to the lack of legal basis for the ITO's presumption that the unexplained investment by the wife belonged to the husband.