Law:

Section:

Section 4 of the Income-tax Act, 1961 - Association of persons - Assessable as - On search of a room in a hotel, where two assessees along with two other persons were staying, cash and valuable articles were seized from each of two assessees - ITO assessed assessees as an association of persons - Tribunal held that there was no association of persons - From order of Tribunal, however, it was clear that there was a joint venture and activity by said two assessees to earn profit by sale of smuggled goods in India, disposal of goods had been done only by joint activity of persons found in room of hotel and that cash, when returned by customs authorities, was received by said two assessees under a joint receipt - Whether finding of Tribunal was not based on proper evaluation of materials before it and, thus, ITO was justified in assessing assessees as an association of persons - Held, yes FACTS The police raided a room in a hotel and found four persons, including the two assessees. On searching the room, cash and other valuable articles were found from the said two assessees which were seized. The second assessee had stated that he had brought gold watches from Singapore worth Rs. 1 lakh concealed in his hold all. The first had stated that he assisted the second assessee at in the disposal of smuggled gold and watches. Before the customs authorities, the second assessee denied his earlier statement by stating that the cash was borrowed from a company in Bombay, which was disproved by the customs authorities. The cash was, however, returned by the customs authorities to the said two assessees after obtaining a joint receipt from them. The customs department, after detailed investigation, confiscated a part of the goods and released the cash and some of the goods to the assessee. As the assessees were not able to put forward any definiteExplanation as to the nature and source of the cash and goods seized which were in their possession, there were reasons to believe that the assessees had concealed the particulars of income. Hence, a notice under section 148 was issued and in response to the same, the assessees filed nil returns. In his assessment order, the ITO…

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