CHUHARMAL S/0 TAKARMAL MOHNANI versus COMMISSIONER OF INCOME-TAX, M.P., BHOPAL

Citation: [1988] 3 S.C.R. 788 · Decided: 02-05-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
CHUHARMAL S/0 TAKARMAL MOHNANI 
v. 
COMMISSIONER OF INCOME-TAX, M.P., BHOPAL 
MAY 2, 1988 
ISABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.] 
Income Tax Act, 1961: Sections 69A and 271(1)(c) Explana-
tion-Assessee--Customs authorities seizing foreign watches from 
assessee's bedroom-Assessee not showing that he was not owner-
Value of watches-Whether 'deemed income'-Assessable to tax. 
Penalty-Income returned less than 80% of income assessed-
Penalty can be imposed. 
Indian Evidence Act, 1872: Section 110-Normally title follows 
D 
possession-Person shown to be in possession-Owner-Onus of prov-
ing that he is not owner is on person who affirms he is not owner-
Applicability of principle to income tax proceedings. 
Petitioner is the assessee. For the assessment year 1974-75 he 
submitted his return of income showing a total income of Rs.3, 113 and 
E 
stated that he derived this income from two stores which he had been 
running. 
F 
G 
On May 12, 1973 in a search by the Customs authorities, 565 
watches of foreign make of the value of Rs.87 ,455 were seized from the 
petitioner's bedroom. A panchnama was prepared. 
The Income Tax Officer issued a notice dated January 19, 1974 
to the petitioner to show cause why a sum of Rs.87 ,455 the value of the 
watches seized should not be treated as his concealed income and 
brought to tax under section 69A of the Act. He further directed 
issuance of notice under section 271(1)( c) of the Act. 
Being aggrieved the petitioner filed an appeal before the AppeUate 
Assistant Commissioner who dismissed the appeal holding that in view 
of the order passed by the Collector of Customs confiscating the 
watches and levying penalty of Rs.2 lakhs under the Customs Act, the 
Income Tax Officer was justified in including the cost of watches in the 
H 
income of the assessee for the assessment year 1974-75. 
788 
CHUHARMAL v. COMMR. OF INCOME TAX 
789 
Thereafter on March 29, 1978 the Assistant Commissioner issued 
a notice of. penalty under section 271(1)(c) of the Act, imposing a pen-
alty of Rs.90,000. 
The two appeals filed by· the petitioner were dismissed by the 
Income-tax Appellate Tribunal, and the petitioner sought a reference to 
A 
-)( the High Conrt under section 256(1) of the Act. 
B 
--
 
The High Conrt held that: (i) by virtue of the search in the house 
of the petitioner the watches were seized and a Panchnama was pre-
pared, that under Section 110 of the India~ Evidence Act, 1872 it 
clearly establishes that the possession of the wrist watches was found 
with the petitioner, that as the petitioner did not adduce any evidence, 
C 
he had not discharged the onus by proving that the wrist watches did 
not belong to him, the Tribunal had rightly held that the value of the 
wrist watches is the income of assessee, and (ii) that in view of the 
Explanation to section 27l(l)(c) the Department had discharged the 
burden of establishing. concealment. The reference was accordingly 
answered against the assessee. 
D 
Dismissing the Special Leave Petition, 
HELD: 1. The expression 'income' as used in section 69A of the 
,~ Income Tax Act, 1961 has a _wide meaning which meant any thing which 
-~ 
' 
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came in or resulted in gain. I 794D I 
E 
2. Section 110 of the Evidence Act provides that where a person 
was found in possession of anything the onus of proving that he was not 
the owner was on the person who a!Ttrms that he was not the owner. 
The High Court in J.S. Parker v. V.B. Palekar, 94 ITR 616 held that 
what was meant by saying that the Evidence Act did not apply to pro-
F 
ceedings under the Income Tax Act was that the rigour of the rules of 
evidence contained in the Evidence Act, was not applicable but that 
does not mean that when the taxing authorities were desirous in invok-
ing the principles of the Evidence Act in proceedings before them, they 
were prevented from doing so. [793G-H; 794A-B) 
3. AU 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. [7948 I 
G 
4. In the instant case, possession of the wrist watches was found 
with the petitioner. The petitioner did not adduce any evidence, far less H 
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790 
SUPREME COURT REPORTS 
[1988] 3 S.C.R. 
discharged the onus of proving that the wrist watches in question did 
not belong to him. Hence, the High Court held, and according to this 
Court rightly, that the value of the wri

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