ORDER
I.S. Verma, J.M.
1. These two appeals, one by the assessee and the other by the Department, relating to same assessee for the asst. yr. 1986-87 are heard together and disposed of by this common order for the sake of convenience.
2. ITA No. 5633/B/90 : In this appeal the Revenue has objected to deletion of the addition of Rs. 1,16,307 by the CIT(A) which was made by the AO on account of undisclosed investment in jewellery. The learned Departmental Representative has submitted that at the time of search the Revenue has not seized jewellery which was tallied with the details of jewellery already disclosed by the assessee and his family members in their respective returns of wealth and it was only the jewellery which did not tally with those returns was seized. As the assessee had failed to explain the source of investment in this jewellery the CIT(A) was not justified in deleting the addition on this account. The assessee’s counsel, on the other hand, has strongly relied on the order of the CIT(A) wherein the CIT(A) after considering the assessee’s submissions in paras 19 to 21 of his order, deleted the addition by observing as under :
“So far as the appellant is concerned he had been declaring jewellery in his hands and it is presumed that the balance jewellery belongs to the female members of the family and not to the appellant himself and hence the addition will have to be considered in their hands. This is to be deleted in the hands of the assessee. The ITO is directed to separately start proceedings against the female members to explain the source of acquisition of jewellery to his satisfaction. In any case this addition is deleted.”
3. After considering the rival submissions and having gone through the order of the CIT(A) carefully we are of the opinion that in case of a joint family i.e., where more than one adult members staying in the same premises, the presumption available with the Revenue under the provisions of s. 132(4) cannot be invoked against one person only and until it is established that the assets or valuables were found from the control or possession of that very person or from the person of that person and, therefore, we are of the opinion that the Revenue was not justified in holding that it is the assessee’s responsibility for explaining investment in the seized jewellery. As regards the merits of the case, the assessee was showing jewellery worth Rs. 36,000 in his own return and the balance had claimed that the same belonged to other family members. In view of the assessee’s explanation the Revenue was not justified without bringing any material on record to make the addition and the CIT(A) was thus justified in deleting the same.
4. ITA No. 5813/B/90 : In this appeal the assessee has raised seven grounds numbering (a) to (g). At the time of hearing ground No. (e) was not pressed and, therefore, the same is dismissed as such. We have heard the learned counsel for the assessee as well as the learned Departmental Representative as far as the other grounds are concerned and proceed to decide the same in seriatim.
5. Ground (a) : In this ground the assessee has agitated addition of Rs. 1,46,094 having been made on account of unexplained marriage expenses of the assessee’s two sons. The assessee’s counsel has submitted that there were two marriages of the sons of the assessee viz., Hira G. Bhatia and Moti G. Bhatia during the period relevant to the asst. yr. 1986-87. According to the assessee’s counsel the marriage expenses for the marriage of Hira G. Bhatia were amounting to Rs. 71,094 out of which a sum of Rs. 46,288 was spent by the assessee’s incoming daughter-in-law whereas an expenditure of Rs. 18,300 was added in the assessment of Hira G. Bhatia after considering the same having been met by him. In view of these facts the assessee’s counsel has submitted that expenditure on the marriage of his son Hira G. Bhatia which was incurred by the assessee was only Rs. 6,506 (Rs. 71,094 – Rs. 46,288 + Rs. 18,300). As regards the expenses on the marriage of the assessee’s son Moti G. Bhatia the assessee’s counsel has submitted that in this case also a majority of expenses were spent by son’s in-laws and the assessee had spent only a nominal amount as in the case of Hira G. Bhatia. The assessee’s counsel has further taken a legal objection and according to him the onus to establish that the expenditure was in fact incurred lies on the Revenue and it is only after discharging that onus that the assessee has to explain as to the source of such expenditure. According to him, the Revenue in the present case has brought no evidence to suggest that the assessee had incurred collosal expenditure as estimated by the AO. Concluding his submissions, the assessee’s counsel has submitted that the addition has been made on surmises and suspicion which cannot be sustained. The learned Departmental Representative on the other hand, relied on the orders of the lower authorities.
6. We have considered the rival submissions and have gone through the orders of the lower authorities. As far as the assessee’s legal objection regarding the onus is concerned we are of the opinion that according to provisions of s. 69C of the IT Act the initial onus is on the Revenue to establish (a) that a particular quantum of expenses has been incurred and (b) that such expenses have been incurred by none other than the assessee himself and it is only after discharging of this initial onus that the onus shifts on to the assessee to refute the evidence gathered by the Revenue and if not then to prove the source of expenditure so incurred. However, in our opinion, there is an exception to this rule and the exception is in case of expenditure on functions such as marriage, birth day or other social functions, once the Revenue establishes the factum of its solemnisation then, the onus shifts on to the assessee either to deny such solemnisation or accept the factum to be correct and in case the factum is accepted to be correct, then, onus to explain the quantum as well as source of the expenditure incurred on such function may lay on the assessee.
In the present case the assessee has not denied solemnisation of marriage of his two sons, so the onus to explain the quantum and source of such expenditure lies on the assessee. The assessee’s legal objection therefore fails.
Coming to the merits of the case, we find the CIT(A) has dealt this issue elaborately in paras 9, 10 & 11 of his order and for the reasons given by the CIT(A) in his order we are unable to accept the assessee’s plea that whole of the expenses were met by son’s in-laws side. As regards the source of marriage expenses of assessee’s son Hira G. Bhatia the assessee submitted that the source of expenses amounting to Rs. 71,094 was as under :
Rs.
Mrs. Chandra Bhatia 7,500 Mrs. Natasha Bhatia W/o Hira Bhatia 46,288 Hira Bhatia 18,306
As regards the expenses on marriage of the second son Moti G. Bhatia the assessee has given a general explanation on the lines as given for the expenses on the marriage of Hira G. Bhatia and the main plea is that most of the expenses were met by son’s in-laws side. The authorities have rejected the assessee’s explanation without verifying the fact of incurring the expenses by persons stated by the assessee i.e., in the case of Hira G. Bhatia the AO has not examined any of the three persons named in the assessee’s explanation. Similarly in the case of Moti G. Bhatia the AO has not verified the matter from his in-laws. As the assessee’s explanation has been rejected without examining the persons stated by the assessee to have incurred the expenses, we are of the opinion that in the interest of justice the issue may be remanded back to the AO to decide the same afresh after verifying from the persons stated by the assessee in his explanation including the in-laws of assessee’s both sons.
6.1. Ground (b) : In this ground the assessee has agitated the addition of Rs. 53,000 having been made on account of assumed low household expenses. The assessee’s counsel has raised the legal issue relating to onus which, according to him, lie on the Revenue for proving incurring of expenses by the assessee and nobody else. The learned Departmental Representative on the other hand, has relied on the orders of lower authorities.
6.2. After considering the rival submissions we are of the opinion that the onus under s. 69A, as we have already stated while deciding the issue relating to marriage expenses, lies on the Revenue to prove that certain expenses have been incurred and the person incurred the expenses was none other than the assessee. The Revenue only after discharging the onus can ask the assessee to explain the source of the same. Simply to assume that the household expenses by a person are less is not sufficient to shift the onus on the assessee. Unless and until evidence is brought on record by the Revenue that a particular expenditure has been incurred by the assessee the question of explaining the source of the same by the assessee does not arise at all. From the order of the AO as well as the CIT(A) we find that the basis for estimating the household expenses @ Rs. 7,000 per month though fictionally seems to alluring one but when put to test to legal concept might fail miserably because there is no evidence except for assumptions. Even otherwise when, as admitted by the Revenue, there were adult members all earning then how the whole of household expenses could be presumed to have been incurred by the assessee and not by others. Simply because the search was in the assessee’s hands it cannot be assumed that all the household expenses were incurred by the assessee. Unless and until it is established with evidence that it was only the assessee who has incurred the expenses, it was not legally justified on the part of the Revenue to assume the total expenses. The Revenue failed to dealt with the matter in accordance with law and to discharge the onus cast on it by invoking the deemed provisions of s. 69A, the addition on this account cannot be sustained and the same is deleted.
7. Ground No. (c) : In this ground the assessee has agitated the addition of Rs. 66,220 on account of cash found in the premises at the time of search where the assessee was residing along with other adult members of his family. The assessee in his statement at the time of search had stated that out of Rs. 66,220 cash of Rs. 50,000 was out of past savings belonging to himself and his wife. But later on he changed his stand and claimed that Rs. 50,000 belonged to the firm Jaikishan Bros. and Rs. 16,220 represented domestic savings. In yet another statement taken during the proceedings under s. 132(5) the assessee has submitted that (1) Rs. 31,509 belonged to Jaikishan Bros. (2) Rs. 10,000 belonged to his wife Chandra G. Bhatia, (3) Rs. 5,000 belonged to his daughter-in-law and (4) Rs. 13,241 represented his personal savings.
8. We have heard the assessee’s counsel as well as the learned Departmental Representative and after considering the rival submissions and having gone through the orders of lower authorities, we noticed that the explanation relating to cash belonging to the firm has been rejected on the basis that a cash of Rs. 42,000 belonging to the firm was found at the firm’s premises. The authorities have not brought any material or have given any finding as to the total cash available in the books of account of the firm on the date of search and without verifying this fact the assessee’s explanation should not have been rejected because if the firm’s books of accounts shows cash balance covering the cash of Rs. 42,000 found during the search at the firm’s premises and Rs. 31,509 claimed by the assessee as that of the firm, no addition would be warranted. In view of these facts and circumstances we restore this issue back to the AO with the directions to consider the assessee’s explanation after verifying the availability of cash in the books of account of the firm Jaikishan Bros.
9. As regards the availability of balance cash from past savings with the assessee’s wife and daughter-in-law the authorities have gone by the quantum of drawings for household expenses but forgot that the ladies might have savings of these petty amounts of Rs. 10,000 and Rs. 5,000 out of cash gifts/Sagan received at various religious or social functions. We are, therefore, of the opinion that the ladies could have saved these amounts as explained by the assessee and, therefore, cash of Rs. 10,000 + Rs. 5,000 is accepted as belonging to the assessee’s wife and daughter-in-law respectively which we direct to be excluded from the addition in this account.
10. Coming to the balance of Rs. 13,241 claimed to be assessee’s past savings we are of the opinion that the assessee has not been able to explain the source of savings and, therefore, the addition to this extent is sustained.
11. Ground (d) : This ground relates to the addition of Rs. 1,34,349 under the caption ‘jewellery on the basis of loose papers’. The facts relating to this addition as gathered from the lower authorities are that certain loose papers were seized at different places and they were organised in the form of a file and numbered by the raiding party. At pp. 34 and 35 of these loose papers appears in the name of Natasha H. Bhatia jewellery worth Rs. 21,702 and Rs. 24,550 respectively. The assessee’s explanation regarding the contents of the loose papers p. 34 as under :
“In respect of p. 34 it was stated that the purchases were covered by Natasha Bhatia. As she was merely a house wife and had no independent source of income and the purchase of jewellery had been made only after 6 months of the marriage this explanation is not accepted”.
Before us the assessee’s counsel has taken a legal plea regarding the presumption under s. 132(4). According to him, when a search of the premises, where persons other than the assessee are also residing, is carried on, then the assessee is responsible to explain the source of acquisition of assets or valuables or documents found from the portion of premises under his control or from his possession and is not liable to explain the sources of investment in assets or valuables or documents found with other members of the family. The assessee’s counsel has, therefore submitted that loose papers having been found at various places of the premises the ownership of the same cannot be presumed to be that of the assessee and the assessee is not under obligation to explain the contents or sources of investment if any as per these loose papers. The learned Departmental Representative on the other hand, has relied on the orders of the lower authorities.
12. After considering the rival submissions and having gone through the materials placed before us we are of the opinion that the assessee’s legal plea has got some force because the presumption available under s. 132(4) can be invoked only when it is established that certain asset available was found from the control or possession of a particular person against whom the Revenue wants to invoke the presumption. From the orders of the lower authorities we find that there is no finding that any of the loose paper was found from the possession of the assessee or assessee’s person and some of them even bear the name of other person. In view of this factual position we are of the opinion that the presumption available to the Revenue under s. 132(4) could not be invoked against the assessee. Even otherwise the presumption being rebuttable the Revenue could not reject the assessee’s explanation without bringing any material on record to do so. From the orders of the lower authorities we have noticed that they have proceeded on the basis of presumption available under s. 132(4) and hypothetical assumption without bringing any cogent material to reject the assessee’s explanation. The action of the lower authorities not being in accordance with law and also not based on any evidence cannot be sustained so as to clothe the assessee with the burden of paying tax on the investment which has not been found to have been made by him. The addition on this account is deleted.
13. Ground (f) : In this ground the assessee has agitated the addition of Rs. 33,226 having been made on account of unexplained investment for purchase of drafts. The CIT(A) has discussed this issue in paras 32 and 33 of his order which we reproduce as under :
“Page Nos. 54 to 57 of the loose papers seized at the time of search reveal that the assessee has purchased four drafts on 7th January, 1986 from Central Bank of India. All these drafts amounting to Rs. 33,226 were treated as funds not disclosed to the party. The appellant in this regard states that a draft of Rs. 8,356 was taken out by their concern Jaikishan Bros. in favour of Liberty Industries and is accounted for Jaikishan Bros. Second draft of Rs. 9,911 has been deposited in the bank account of Rajesh Bhatia. It was a repayment of loan received by him from Naresh Bhatia. The loan given is stated to be duly reflected in return which is submitted to the tax Department before the date of search. The third draft of Rs. 9,959 has been deposited in the bank account of Sunder Bhatia. This again was duly reflected on his balance sheet submitted to the tax Department before the date of search. The fourth draft could not be explained by the appellant.
So far as the first draft of Jaikishan Bros. is concerned the fact is verifiable. The ITO is directed to verify it and decide the matter after his verification because it can be doubly verified both from the bank a/c and books of the assessee as well as Liberty Industries And it can be verified from the bank receipt for purchase of draft also. Since the item can be verified with reference to three evidences it is in the fitness of things. The ITO is directed to carry out the verification and decide the matter. Regarding the second and third drafts it has been explained by the appellant’s authorised representative that Naresh Bhatia and Anitha Bhatia are husband and wife and they are not related to the appellant. The theory of the loan payment from these two people does not stand to reason that the purchase of receipt draft should be lying with the assessee. This fact itself establishes that the drafts were purchased by the appellant out of his own unexplained money though in the names of Naresh Bhatia and Anitha Bhatia. This explanation is rejected. The addition is upheld. The fourth draft of Rs. 5,000 in any case has not been explained to us. Addition on this account is also upheld.”
14. After considering the rival submissions and having gone through the material available before us as well as the order of the CIT(A) we are of the opinion that the assessee having not brought any fresh fact or material except the material made available to the lower authorities and dealt with by them there is no reason to interfere with the findings of the CIT(A). The addition on this account is confirmed.
15. Ground (g) : In this ground the assessee has agitated levy of interest under s. 139 and under s. 217 of the Act. We direct the AO to allow consequential relief on this account.
16. The appeal of the assessee is allowed in part, while the appeal by the Revenue is dismissed.