JUDGMENT
K.S. Radhakrishnan, J.
1. This appeal has been preferred by the Commissioner of Income-tax, Trivandrum, aggrieved by the order of the Income-tax Appellate Tribunal in I. T. A. No. 79/Coch./96 dated April 28, 2000. Though four questions have been framed in the appeal, the Revenue is primarily aggrieved by the order of the Tribunal in wrongly placing the burden of proof on the Revenue.
2. The assessee is an individual and carries on business as the proprietrix of M/s. Padmaja Jewellers. A search was conducted in the business premises of the assessee on January 23, 1992. During the search operations it was found that the assessee was in possession of unaccounted stock of gold weighing 502.330 gms in the form of 77 numbers of new gold bangles. At the time of search on January 23, 1992 one Govindraj, the brother of the assessee’s husband was present in the assessee’s jewellery shop. A statement was recorded from him. He stated that he was engaged in the work of making gold ornaments, particularly bangles and that G. Section 12 register was kept for such work and that his brother Devarajan, the assessee’s husband, was writing the said register. Further it was also stated that gold weighing 450 gms. were given for preparing ornaments by one Raju, brother of the assessee, on the morning of January 22, 1992, a day previous to the date of search. Govindarajan also stated that gold was accepted by his elder brother Devarajan who was at the shop when the gold was given to him for making the ornaments. Govindrajan had also stated that gold given by Raju on the previous day was yet to be converted into new bangles. From the above facts the Assessing Officer came to the conclusion that if at all Raju had given to Govindarajan any gold ornaments, they were not converted into new gold ornaments, and therefore the new gold ornaments of 77 bangles found at the time of search at the shop was not accounted for and the source for the acquisition of the gold was not known or explained.
3. The assessee, however, at the time of hearing filed a written statement before the Assistant Director of Investigation stating that the gold ornaments seized belonged to five customers who had given gold ornaments for remaking them into new bangles. A letter to that effect was also sent to the investigating officer. Following are the names and quantity of gold ornaments alleged to have been given by five customers.
1. Smt. Krishnammal 116.400 gms. 2. Shri B. Rajendran 98.870 gms. 3. Shri P. Pushpadas 96.300 gms. 4. Shri P. M. Prasanna Babu 112.40 gms. 5. Shri Chandrasekharan Pillai 150.200 gms.
4. The assessing authority noticed that the statement filed by the assessee was contrary to the sworn statement recorded from Govindrajan during the course of search. Govindrajan had clearly stated that about 450 gms. of gold ornaments were brought by Raju, partner of M/s. Karthika Jewellery on the morning of the previous day and that the ornaments were received by his brother Devarajan. The assessing authority did not believe the statement of the assessee that the gold ornaments were entrusted by the five customers mentioned hereinbefore. The assessing authority therefore concluded that the five claimants joined the fray just to help the assessee. It was therefore concluded that the gold ornaments weighing 502.330 gms, seized from the business premises of the assessee really belonged to the assessee. The value of the gold ornaments assessed at Rs. 2,33,081 was treated as the assessee’s income from undisclosed sources.
5. Aggrieved by the order of the Assessing Officer the assessee took up the matter in appeal before the Commissioner of Income-tax (Appeals) who allowed the appeal on the following reasoning:
On consideration of the aforesaid evidence which has not been disproved in the impugned order, it is difficult to accept that the ornaments represented the assessee’s undisclosed income. The persons who had claimed ownership are persons of standing. One of the claimants is an employee in the Panchayat Office, another in a Kerala Government undertaking yet another is a practising lawyer and the fourth is a live-stock inspector in the Veterinary Department of the Kerala Government. Considering the status of the claimants and the quantum of jewellery claimed to have been entrusted by them for converting into new ones and the fact that the machinery is capable of making more than 77 bangles, the preponderance of probability is that they belong to the claimants and not to the assessee. The addition on this account is therefore deleted.
6. The Revenue aggrieved by the said order took up the matter in appeal before the Tribunal. The Tribunal concurred with the view of the appellate authority and held as follows:
Considering the facts brought on record, we are of the view that there is no reason to disturb the order of the first appellate authority. The reason is, as rightly pointed out by the first appellate authority, the persons who came forward with the claim that they had entrusted gold with the assessee, are persons of means. Therefore, there is no reason why their statements should be discarded or disbelieved. It is not brought on record to show that the claim of the assessee that the machinery installed at her jewellery shop could produce or convert gold into 100 bangles per day was incorrect. No attempt has been made to discredit the above statement. It is true that there are inconsistencies in the statements of the assessee. The deponents say that they had entrusted gold as directed by Sri Raju. The inconsistency in the statements that gold was entrusted by Sri Raju or it was entrusted as directed by him alone is not sufficient to discredit the claim of the five parties. The reason is, it is difficult to believe that these five persons, who are either in service or carrying on profession as lawyer, will come forward with such a false claim only to accommodate the assessee. In the light of the above facts, we are of the view that no sufficient material has been brought on record to dislodge the finding of the Commissioner of Income-tax (Appeals).
7. Sri P. K. Ravindranatha Menon, senior Central Government standing counsel (Taxes) submitted that the Commissioner of Income-tax (Appeals) as well as the Tribunal have committed a grave error in placing the burden of proof on the Revenue. Counsel submitted that the reasoning adopted by the appellate authority as well as the Tribunal to accept the statement of five customers is unsustainable and made on an afterthought. Counsel took us through the sworn statement given by Govindrajan which was recorded during the course of search operation and which would indicate that the entire gold ornaments were brought by one V. S. Raju, partner of M/s. Karthika Jewellery on the morning of the previous day of the search and that the gold ornaments were received by his brother Devarajan, who had handed it over to Govindrajan for preparing new ornaments. Counsel submitted that there is no reason to disbelieve those statements made by a person in charge of the jewellery, and it is only to wriggle out of the sworn statement made during the period of search that the letters of the five customers were subsequently obtained to show the source from where gold ornaments were obtained. Counsel placed reliance on the decision of the apex court in Chuharmal v. CIT and submitted that since possession of the gold ornaments with the assessee has been established, the onus of proving that those gold ornaments do not belong to the assessee is on the assessee. Counsel submitted that the burden of proof was wrongly placed on the Revenue and it amounts to a substantial question of law. Counsel made reference to the decision of the apex court in Parimisetti Seetharamamma v. CIT . Counsel also made reference to the judgment of the Bombay High Court in J.S. Parker v. V.B. Palekar . Reference was made to the provisions of the Evidence Act. Referring to Section 110 of the Evidence Act counsel submitted that all that Section 110 of the Evidence Act does is that it embodies a salutary principle of common law jurisprudence which could be attracted to a set of circumstances that satisfy its condition. Section 110 of the Evidence Act provides that where a person is found in possession of anything, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. Counsel also referred to a decision of the Calcutta High Court in CIT v. Precision Finance P. Ltd. . The court held that it is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions.
8. Counsel appearing for the respondent, Sri K. Anand, on the other hand, contended that there is no reason to disbelieve the letter of the assessee dated May 13, 1992, and the letters and affidavits submitted by the five customers who had entrusted the gold for remaking the same to gold bangles. Counsel submitted that they are men of means and status in society and their statements ought to have been accepted. Counsel further submitted that the Commissioner of Appeals as well as the Tribunal on the facts concurrently found that the gold ornaments were entrusted by the five customers and consequently there is no reason to discard their evidence. In any view of the matter, counsel submitted that no substantial question of law arises for consideration in this appeal and consequently, this Court shall not disturb the findings of fact rendered by the authorities below. Counsel made a reference to a recent decision of the apex court in [2005] 2 SCC 550.
9. We are of the view that this is a case where the Commissioner of Income-tax (Appeals) as well as the Tribunal wrongly placed the burden of proof on the Revenue. It is trite law that a person who is in possession of an article has to prove its source. The Tribunal in its order though found inconsistency in the statement of the assessee concluded that there is no reason to discard those statements of the five customers. Further, the Tribunal has stated that those customers are persons of means and so there is no reason why their statement should not be disbelieved. We fail to see how the question of means determines the acceptability or otherwise of the statements. Further the assessee is pitted against the sworn statement of Govindarajan for which the assessee has no explanation. In the sworn statement given by Govindarajan the following questions were put to him.
Question : As per G. Section 21 register of this shop, it is seen that nobody has given any gold to this institution for making after November 1, 1991. Is this correct ?
Answer : Yes, it is correct. The work was very less for the last many days, so no gold was received for work.
Question : What is the stock of gold in this shop at present ?
Answer : There is approximately more than 500 gms of gold here at present.
Question : Who has given the abovementioned gold ?
Answer : It was received yesterday at 9.00 a.m. for Mr. Raju, Karthika Jewellery, Alleppey.
Question : When gold was received for working from Karthika Jewellery, whether the legal voucher was given along with it ?
Answer : I do not know. It is my elder brother who is writing all these things.
Question : All the gold given by Mr. Raju yesterday from his shop are kept here working, is not it so ?
Answer : Yes.
10. The original statement in Malayalam with regard to the last of the above questions and answers reads as follows:
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11. The sworn statement given by Govindarajan would show that the gold ornaments were brought to the shop by Raju, partner of Karthika Jewellery on the morning of the previous day, i.e., January 22, 1992, and the gold ornaments were received by his brother Devarajan who had handed it over for preparing new ornaments. It is evident from the sworn statement that the gold ornaments given by Raju on the previous day were yet to be converted into new bangles. But what was seized from the premises of the assessee on January 23, 1992, were 77 newly made bangles. There is overwhelming evidence to show that the new gold ornaments by way of 77 bangles found at the time of search at the shop Padmaja Jewellery were not accounted for and there was no evidence for its source. Consequently, it can safely be concluded that those bangles belong to the assessee. The burden is heavy on the assessee to dislodge the above facts for which no evidence was adduced by the assessee. Without any reliable documents it is difficult to accept the subsequent statements of those customers even if they are men of standing or men of means.
12. The Commissioner of Income-tax (Appeals) as well as the Tribunal, in our view wrongly cast the burden on the Revenue and a wrong application of settled principles of law amounts to an error of law giving rise to a substantial question of law within the meaning of Section 260A of the Income-tax Act. No reliable documents such as a register under Rule 16(3) of the Gold Control (Forms, etc.) Rules were kept or produced at the time of search. Since the assessee had not complied with the statutory requirement the burden was heavy on the assessee to show that the gold bangles do not belong to the assessee. That being the factual and legal position we are inclined to allow this appeal and set aside the orders of the Commissioner of Income-tax (Appeals) as well as the Tribunal and restore the order of the assessing authority.
13. I.T.A. is allowed as above.
