Ashok Kumar vs Commissioner of Income Tax

J.S. Verma, Actg. C.J.

This reference u/s 256(1) of the Income Tax Act, 1961, is at the instance of the assessee for decision of the following question of law, viz. :

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the addition of Rs. 16,000 being the cash found at the residence of the assessee as the assessee''s income u/s 69A of the Income Tax Act, 1961 ?"

The relevant assessment year is 1975-76. The assessee is a partner in various firms and also derives income from house property. In a search of his premises by the Central Excise Department on October 11, 1974, the assessee was found in possession of cash amounting to Rs. 21,090 in addition to gold ornaments, primary gold, silver articles and other valuables. The assessee''s explanation for cash in his possession was that it comprised of house rent amounting to Rs. 17,251 belonging to different co-owners and not the assessee alone in addition to the agricultural income and some cash belonging to his sister. This reference relates only to the amount of cash found in the assessee''s possession and, therefore, the facts relating to the other valuables, etc., are not material.

The Income Tax Officer rejected the assessee''s explanation given for the cash and came to the conclusion that the same belonged to him. It was, therefore, treated as the income of the assessee in accordance with Section 69A of the Act. The assessee''s appeal to the Appellate Assistant Commissioner partly succeeded in this respect. The Appellate Assistant Commissioner accepted the assessee''s explanation to the extent of Rs. 5,090 only, but rejected it in respect of the remaining amount of Rs. 16,000 found in his possession as cash. The assessee''s further appeal to the Tribunal has also failed to this extent as the Tribunal had also held that the assessee''s explanation for cash amounting to Rs. 16,000 is not acceptable. Hence, this reference at the instance of the assessee to answer the above question of law.

In substance, the only question for decision is whether the Tribunal was justified in refusing to accept the assessee''s explanation given in respect of the cash amounting to Rs. 16,000. It is obvious that the question whether the assessee''s explanation was acceptable in the facts of the case or not is purely one of fact since it did not involve the application of any principle of law in the present case. For this reason, no question of law really arises out of the Tribunal''s order on this point requiring decision of this court.

Learned counsel for the assessee, however, contended that the requirement of Section 69A is that the assessee should be found to be the owner of the money and his mere possession of the cash does not indicate that he was its owner. On this basis, it is contended that a question of law arises inasmuch as Section 69A has not been properly construed or applied to the facts found proved. We are unable to accept this contention. It is settled that possession is evidence of ownership and the strength of the presumption of ownership arising from the fact of possession depends on the nature of property involved. This presumption is one of the strongest in case of cash found in the possession of a person since cash is one of the properties of which title is transferable by mere delivery of possession. In such a situation, unless any cogent explanation is given by the person in the possession of cash to explain his possession and show that someone else was the owner of that amount of money, it is reasonable to assume that the cash belonged to the person from whose possession it was found as its owner. ''In view of the assessee''s explanation for possession of the cash being rejected, it logically follows that the assessee was the owner of that unaccounted cash found in his possession and this is the conclusion reached by the Tribunal.

The decision in J.S. Parkar Vs. V.B. Palekar and Others, relied on by the learned counsel for the petitioner, is distinguishable on facts inasmuch as the inference of ownership to be drawn in that case from the fact of possession was in respect of contraband gold and not merely cash as in the present case. It is well-known that the contraband gold passes through the hands of several persons so that the ownership thereof cannot be attributed merely on the basis of its possession with an individual at a particular point of time as it is quite likely that he may be merely the carrier involved in the transaction of smuggling. We do not find anything in that decision to suggest that a different view should be taken from that which has been indicated earlier on the question of inference to be drawn about the ownership of cash from the fact of its possession when no acceptable explanation has been given to indicate the ownership of someone else.

Consequently, this reference is answered in the affirmative, in favour of the Revenue as under :

" The Tribunal was justified in upholding the addition of Rs. 16,000 being the cash found at the residence of the assessee as the assessee''s income u/s 69A of the Income Tax Act, 1961. "

There will be no order as to costs.