JUDGMENT
M. N. Chandurkar, C.J. – This order will govern W.A. No. 248 of 1987 which is listed for admission and W.P. No. 4818 of 1982 which is taken up for hearing since we found that there was really no substance in the writ petition.
2. The appellants-petitioners are the legal representatives of late Pravin J. Mehta. It is enough to mention that in respect of the asst. yr. 1967-68, a sum of Rs. 4,70,844 was added to the income of the original petitioner on the ground that he was not able to explain satisfactorily the source for the purchase of 315.81 carats of diamonds of alleged foreign origin which were valued by the customs authorities at that figure. Finally, however, in the assessment proceedings, the Tribunal reduced the addition to Rs. 3,70,844 on the basis of the presumption that could be the price at which he must have purchased the diamonds.
3. The assessee i.e., deceased Pravin J. Mehta had asked for a reference under s. 256(1) of the IT Act, 1961 referring substantially the question as to whether there was any valid material for sustaining the addition of Rs. 3,70,844 as income from other sources. That application having been rejected by the Tribunal, the deceased assessee came to this Court by way of a petition under s. 256(2) of the IT Act, 1961 in which he asked for a direction that a reference be made to the High Court by the Tribunal referring the following two questions :
1. Whether, the Tribunal had any valid material for sustaining the addition of Rs. 3,70,844 as income from other sources ?
2. Whether, the Tribunal had jurisdiction of basis or material for coming to the conclusion that the diamonds seized belonged to the petitioner especially when the fact of the ownership had not been established by the Customs Authorities or even by the Income-tax Authorities ?
4. This Court by an order dt. 11-1-1978 held that the assessee along with certain other persons was found in possession of large quantity of diamonds and that this would become a question of fact. This Court positively observed that the conclusion of the Tribunal was that the money for the purchase of diamonds belonged to the assessee and this conclusion of the Tribunal was based on facts and that the Tribunal had not committed any error of law, as to justify a direction to the Tribunal to forward a statement of the case. The petition under s. 256(2) of the IT Act was thus rejected.
5. The present petitioners who are the widow and sons of the deceased then filed in May, 1982 a petition under art. 226 of the Constitution of India challenging the order of the Tribunal on various grounds. Admittedly, these proceedings were taken only after the recovery proceedings were commenced. The facts actually show that in recovery proceedings after a demand was issued to the deceased assessee, the assessees house was brought to sale. The assessee in the meantime died on 9-10-1980. When the sale was bound to be confirmed on 20-5-1982, the City Civil Court granted an injunction in a suit filed by the present petitioners. It appears that it was after that suit was filed, the petitioners came to this Court by way of a writ petition. We are now informed that the petition was actually filed earlier and the suit was filed later; but the petition came up for hearing after the injunction was granted. A stay order came to be made in this writ petition. When the stay matter came up for final orders, the ld. Judge found that the property attached had already been sold and recovery proceedings had already been taken and, therefore, there was no justification to continue the interim stay of the recovery proceedings which was already granted. The writ appeal is filed challenging the order of the ld. Judge vacating the stay.
6. On a bare perusal of the facts of the present case, it is obvious that the entire proceedings in this court are wholly misconceived. The present petitioners being the legal representatives of the deceased assessee, all the orders passed in the assessment proceedings including the order of the Tribunal and the order of this Court under s. 256(2) of the IT Act, 1961 are binding on the present petitioners.
7. A bare perusal of the grounds on which the assessment proceedings are challenged will show that according to the petitioners, the income-tax authorities acted in a perverse manner when they proceeded on surmises and conjectures and that the orders are completely arbitrary and further that the ITO had not material at all and no assessment could be made on mere suspicion or assumption and hearsay evidence. It is difficult to see how the proceedings under the IT Act which culminated in the order of the ITAT could be questioned in the proceedings under art. 226 of the Constitution of India. The order of the Tribunal shows that the fact that the Central Board of Excise and Customs had set aside the order of the Addl. Collector was noticed by the Tribunal. The Tribunal also went into the evidence which was mainly circumstantial in nature. The Tribunal found that Loganathan who was a police Inspector could not have been the owner of the diamonds and admittedly Loganathan was utilised as a decoy by the Customs Department. The Tribunal also found that there was no proper explanation as to how the assessee with two other associates came to be found in the room in Dasaprakash hotel. The Tribunal observed that the only person who could be expected to be owner of the diamonds was either Loganathan, the assessee, Krishnamurthi, J. Srinivasan and the proprietors of hotel Dasaprakash. It was found that J. Srinivasan was a salaried employee of the assessee drawing a few hundred rupees as salary, but was not rich enough to be owner of diamonds worth Rs. 5 lakhs. Krishnamurthy was also known to be a play wright who was not financially well off. Even the assessee did not allege that the diamonds belonged to any one of these two persons. The only other persons accordings to the Tribunal who could own diamonds were the proprietors of hotel Dasaprakash and the Tribunal found that it would be preposterous to hold that they would throw away diamonds worth Rs. 5 lakhs in a matress and let it out to an unknown customer. In addition to these circumstances, the Tribunal found that there was no explanation as to why the deceased assessee had come there with a pistol and with anneping box. The Tribunal also noticed the fact that according to the handwriting expert the slip found in the purse could be in the hand writing of the assessee. The Tribunal thus took the view as follows :
“Summarising the position, therefore, we find that while on the one side there is ample evidence to show that of the five persons who could have owned or been in possession of the diamonds found cannot own them and the assessee alone was the most probable one to own them; on negative side the assessees behaviour including his statements, such as carrying the pistol, engaging two friends, speaking of an undesignated new business etc. shows that he is not telling the truth. As validly contended by the learned Departmental Representative, in matters of this type a decision has to be made on the basis of preponderance of probabilities and an appreciation of the circumstantial evidence available. This clearly points out to fact that the assessee himself a jewellery merchant of repute alone would be the possible owner of the diamonds detected. The Income Tax authorities, therefore, are correct in requiring him to explain be source of these amounts. Since he has flatly denied his ownership and thus not offered any valid explanation, they are entitled to include the value of the diamonds as the income from undisclosed sources.”
8. In view of the findings of the Tribunal which, in a sense, have now been confirmed by the High Court as the High Court has declined to entertain an application for reference under s. 256(2) of the IT Act, it is obvious that the petition challenging the orders of the Income-tax authorities and the Tribunal was wholly misconceived. As a matter of fact, we are surprised as to how such a petition at all was filed and entertained. Indirectly, the petitioners are asking a ld. single Judge of this Court to sit in judgment over the order made by a Division Bench of this Court while rejecting the application under s. 256(2) of the IT Act, 1961. In our view, the writ petition is wholly misconceived and must be dismissed. consequently the writ appeal which is directed against the order vacating the interim order of stay must also be dismissed. Both the Writ Appeal and the Writ Petition thus stand dismissed. However, we make no order as to costs.