Mohan B. Samtani v. Commissioner Of Income-Tax

The Judgment of the Court was delivered by

Shyamal Kumar Sen, J.:— The facts, inter alia, leading to this refer-ence as appears from the statement of case are as follows:

The assessee is an individual. Shipping Bill No. AEP 235, dated January 6, 1973, relating to two packages, on account of the State Trading Corporation of Sikkim, was presented at the Calcutta Airport along with two cases booked under Air Way Bill No. 061 11947854 for shipment by BOAC against shipping documents. The customs authorities had reason to suspect that the packages contained articles other than those described in the shipping bill. On June 8, 1973, the packages were opened in the presence of the assessee and they were found to contain a bronze idol of Nataraja and its pedestal whereas the description of the packages was as “unaccompanied personal effects of His Majesty the Chogyal B.T Namgyal of Sikkim.” The statement of the assessee was recorded. The assessee testified under his signature that it was done by him as a repre-sentative of the State Trading Corporation of Sikkim. On examination of various documents and the papers, the Customs authorities were of the opinion that the assessee was the person who had booked the aforesaid packages for shipment to New York, U.S.A Prosecution proceedings were accordingly initiated against the assessee and though the assessee pleaded guilty, the court sentenced him to simple imprisonment for one year with effect from August 9, 1975. Subsequently, the assessee pleaded that he had acted on behalf of His Majesty, the Chogyal of Sikkim and pro-duced a xerox copy of the letter dated June 4, 1973, indicating that the idol and its pedestal belonged to the Chogyal. The Income-tax Officer was not satisfied because no original letter was produced before him to this effect and the Income-tax Officer further found that the assessee was not able to prove that he was not the actual owner of the idol and the pedestal which were found in the packages under his signature. Consequently, the Income-tax Officer added a sum of Rs. 80,000 being the value of the idol and its pedestal under section 69 of the Act in the total income of the assessee.

2. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) and contended that the real owner of the articles was His Majesty the Chogyal of Sikkim and that the articles were being discharged under his order from the State Trading Corporation of Sikkim, which was represented by the assessee. It was also contended that the idol and its pedestal belonged to His Majesty the Chogyal of Sikkim, who was enjoying immunity and, therefore, no action could be taken against him. The Commissioner of Income-tax, relying on the decision in J.S Parkar v. V.B Palekar, [1974] 94 ITR 616 (Bom), deleted the addition of Rs. 80,000. The Department preferred an appeal before the Tribunal against the said decision of the Commissioner deleting Rs. 80,000 from the total income of the assessee. The Tribunal held, inter alia, that the idol and its pedestal were found in the possession of the assessee, and as such, their owner-ship can be presumed safely as that of the assessee unless the same pre-sumption is rebutted. It was also, inter alia, held by the Tribunal that the assessee did not produce any evidence to show as to how the idol and its pedestal were found in his possession from Sikkim to Calcutta. The other aspect which was considered by the Tribunal was that the assessee knew that the idol and its pedestal were being sent out of India without taking specific permission from the Government of India. There-fore, the assessee was doing some illegal deal which was not permissible under the law of the land, and, as such, the Tribunal accordingly allowed the appeal by the Department and set aside the order of the Commissioner of Income-tax (Appeals) and the order of the Income-tax Officer was restored. The assessee thereafter preferred an application under section 256(1) and required the Tribunal to refer certain questions for de-termination by this court. The said questions are set out hereinbelow:

“(1) Whether there was any cogent material before the Tribunal to hold that the assessee was the owner of the bronze Nataraja idol and its pedestal and was liable to be assessed on the value thereof under section 69A of the Income-tax Act, 1961?

(2) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the assessee was the owner of the idol and its pedestal were vitiated by reason of the fact that in arriving at such finding the Tribunal ignored the relevant evidence and considerations and relied on irrelevant evidence and considerations, conjectures, surmises and suspicions?

(3) Whether, On the facts and in the circumstances of the case, the assessee discharged his initial burden of proving that His Majesty the Chogyal of Sikkim and/or his Majesty's State Trading Corporation of Sikkim at Calcutta was the owner of the idol and its pedestal and the burden shifted to the Revenue to prove otherwise?

(4) Whether, on the facts and in the circumstances of the case, the inference drawn by the Tribunal that the assessee could not explain properly that the idol and its pedestal did not belong to him but belonged to His Majesty the Chogyal of Sikkim was drawn in a state of confusion and was perverse?

(5) Whether, on the facts and in the circumstances of the case, the Tribunal was right in throwing the burden upon the assessee to prove that he was not the owner of the idol and its pedestal when admittedly the consignee of the antiques was His Majesty the Chogyal of Sikkim and the consignor was His Majesty's State Trading Corporation at Calcutta and the assessee was an employee of His Majesty employed as represen-tative of the State Trading Corporation at Calcutta?

(6) Whether, when the Commissioner of Income-tax (Appeals) accepted the photostat copy of the letter dated June 4, 1973, of the Chogyal of Sikkim addressed to the Collector of Customs, Calcutta, the onus shifted to the Revenue for the production of the records of the Collector of Customs and disprove the letter?

(7) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the question of immunity of the Ruling Monarch of Sikkim did not arise when His Majesty was not in appeal against the assessment made by the Income-tax Officer?

(8) Whether the assessee being the representative of the State Trading Corporation of Sikkim could not be held liable to income-tax in respect of the value of the idol and its pedestal when His Majesty Chogyal of Sikkim himself was not liable under the international law and juris-prudence?”

3. The Tribunal, however, held that the following question will cover all the questions suggested by the assessee and, accordingly, the same is referred to the Hon'ble High Court at Calcutta for its esteemed opinion:

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the addition of Rs. 80,000 being the value of the Nataraja idol and its pedestal?”

4. It has been submitted on behalf of the assessee that the assessee is not the owner of the said idol and its pedestal. The assessee was only carrying the baggage which was found in the possession of the assessee and that the same belonged to the Chogyal of Sikkim. The said fact cannot be disputed in view of the letter dated May 30, 1973, addressed to the Assistant Collector of Customs which is included in the paper book. There was nothing on record to show that the assessee was the owner of the idol and its pedestal. In our opinion, there cannot be any basis for the finding that the assessee is the owner only because the said article was found in his possession. The liability of the assessee for the articles will arise under section 69A of the Income-tax Act only if it is found that the assessee is the owner of the said article. The said section 69A of the Income-tax Act is set out hereunder:

“69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the expla-nation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

5. From the facts on record, there cannot be any dispute that the consignor was the State Trading Corporation of Sikkim and the consignee was the Chogyal of Sikkim and the assessee was a representative of the State Trading Corporation of Sikkim. The assessee also claimed that the Chogyal of Sikkim was the owner and, under his verbal instruction conveyed through his A.D.C, he arranged for despatch thereof by signing the papers. In fact, the Chogyal also claimed ownership of the said packages on the basis of the letter by the Under Secretary of the Chogyal of Sikkim addressed to the Assistant Collector of Customs dated May 30, 1973. The Chogyal was the head of an independent State at the relevant time and it was necessary, if the claim for ownership of the Chogyal is to be disputed, to have the said letter verified by obtaining the original from the customs authorities. Merely because the packages were presented before the customs authority, it does not ipso facto prove the ownership of the assessee of the goods.

6. In our view, it has not been established or found that the assessee is the owner of the said idol and pedestal. On the contrary, the said letter dated May 30, 1973, addressed to the Assistant Collector of Customs shows that the Chogyal is the owner of the said articles. Under such circum-stances, there is no reason to hold the assessee liable and to add Rs. 80,000 being the value of the said articles to his income.

7. The case of Chuharmal v. CIT, [1988] 172 ITR 250 (SC), relied upon on behalf of the Revenue, has no application to the instant case. The assessee in that case in whose possession the wristwatch was found could not adduce any evidence to rebut the presumption of ownership. But, in the instant case before us, the assessee produced evidence to substantiate that the article which was found in his possession really belonged to the Chogyal. In fact the necessary documents being the invoice and the letter dated May 30, 1973, issued by the Chogyal of Sikkim were produced by the assessee, but some documents were not considered in their proper perspective.

8. In view of the aforesaid it appears to us that the Tribunal fell into error in holding the assessee the owner only on the basis of possession of the articles and holding him liable by adding Rs. 80,000 being the value of the said articles to his income.

9. We, therefore, answer the question in the negative and in favour of the assessee and against the Revenue. There will be no order as to costs.

Ajit K. Sengupta, J.:— I agree.