1. 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of the Appellate Assistant Commissioner relating to the cash credit of Rs. 40,000 in the assessment year 1965-66 '
2. This fact-oriented question has been referred by the Income-tax Appellate Tribunal, Gauhati Bench, Gauhati, Under Section 256(1) of the I.T. Act, 1961, hereinafter referred as ' the Act'. However, during the course of the argument, Shri J.P. Bhattacharjee, learned Advocate-General, Nagaland, appearing for the assessee has made valiant efforts to squeeze out some questions purported to be questions of law arising out of the order.
3. The pertinent facts necessary for disposal of the questions raised are as follows :
On scrutiny of the accounts of the assessee the Income-tax Officer, for short 'the ITO', found a cash credit entry in the name of M/s. Surekha Jute Co. entered on June 17, 1964. However, the enquiries by the ITO had revealed that (1) the firm had no means to lend such an amount to the assessee, (2) the firm was a mere ' name-lender ', and (3) it helped various parties to introduce secreted income in the books of account in the form of ' bogus loans'. The ITO asked the assessee to explain the nature and source of the amount fully and truly, to produce necessary evidence or materials and also asked to produce the alleged creditor for examination on
oath. While showing cause, the assessee took the stand that it was not a bogus entry ; it produced accounts and claimed that the amount of Rs. 49,000 was received from the lender by cheque No. 0547704 dated June 17, 1964, drawn on the Bank of India, Calcutta, and duly deposited in the assessee's account with the Mercantile Bank Ltd., Calcutta, on the same date. However, the assessee claimed that summons might be issued to the creditor and other witnesses and expressed that it would pay the necessary costs of the summons. The ITO held that the bank accounts merely reflected the receipt and the deposit of the amount which did not satisfy his mind that the transaction was a loan or that it was received from M/s. Surekha Jute Co. The ITO also held that the onus of proof as to the nature and source of the entry in the cash credit account lay on the assessee and it had failed to satisfy the nature as well as the source of the entry. The ITO treated the income as income of the assessee from 'undisclosed sources' Under Section 68 of 'the Act'. The assessee had also claimed payment of interest of Rs. 1,980 to the said M/s. Surekha Jute Co., in the assessment year 1965-66 and also claimed payment of Rs. 3,190 as interest to M/s. Surekha Jute Co., in the assessment year 1966-67. The ITO disallowed the two payments in respect of the interest allegedly paid in the assessment years and made additions of the said amounts in the assessments of the assessee. The appeals to the AAC were abortive as it confirmed the orders of the ITO, whereupon 'the assessee' preferred appeals to the Tribunal and produced certain documents, namely, (a) the receipt whereby M/s. Surekha Jute Company acknowledged that it had paid the amount by cheque to the assessee as loan ; and (b) the reassessment order of the ITO relating to one M/s. Assam Forest Products (P.) Ltd., Dibrugarh, wherein the ITO had mentioned, while considering the cash credit account of Rs. 60,000 purported to be loan from M/s. Surekha Jute Company, that enquiries had revealed that there was no such company as Surekha Jute Company ; however, there was a jute concern styled as Surekha Jute Co., owned by Shri Bidyananda Surekha. The assessee also filed the notice issued to it by the ITO in the income-tax proceedings, wherein the ITO had asserted that Surekha Jute Co. had no means to lend such a large sum of Rs. 40,000 to the asseesee and the said Surekha Jute Co. was only a name-lender who helped various parties to introduce secreted income in the books of account in the form of ' bogus loans'. The assessee filed the documents marked as annex. 'C-1' to 'C-11' and other documents. It was urged before the Tribunal that no opportunity as envisaged in Section 142(3) of the Act had been afforded to the assessee to explain the entries, the enquiries were made behind the back of the assessee and the statements of Shri Bidyananda Surekha, proprietor of M/s. Surekha Jute Company, had been used without giving it any opportunity to rebut 'the said statement'. Counsel
for the assessee submitted before the Tribunal that the statements of Sri Bidyananda Surekha were never shown to the assessee. The counsel also relied on the documents filed by it and urged that they had established that the receipts and payments of the cheques were actually made by the creditor (M/s. Surekha Jute Co.) to the assessee and by the assessee to the creditor. The entire thrust of the assessee before the Tribunal was to make out a case for fresh enquiry.
4. The Tribunal upheld the contentions of the assessee that, (a) it was the duty of the ITO to place the statements of Shri Bidyananda Surekha before the assessee to enable it to take steps to rebut the statements appearing against it; (b) the ITO had violated the provisions of Section 142(3) of the Act in not affording the assessee opportunity to produce evidence in support of its case, notwithstanding prayers therefor. The learned Tribunal held that the mere production of accounts by the assessee showing the receipt of the amount in cheque as well as payment of the amount by cheque, in the absence of verification by the ITO whether the receipt and payment by cheques were actually made by the creditor (Surekha) to the assessee and repayment thereof by the assessee to the creditor, respectively, did not establish the nature or source of the entries. The Tribunal held that as the ITO had failed to verify the same, there was no sufficient material before it to adjudicate and decide whether the loan of Rs. 40,000 was 'genuine or spurious'. The Tribunal held that under similar contingency it had directed the AAC to make a fresh enquiry in Assam Forest Products (P.) Ltd. (I.T.A. No. 162 (Gau) of 1972-73). Therefore, following the same principles, it set aside the order of the AAC relating to the addition of the cash credit of Rs. 40,000 in the assessment of the assessee and directed the AAC to make enquiry 'on the lines indicated' in the order of the Tribunal. The decision of the Tribunal in Assam Forest Products (P.) Ltd. forms a part of the record (vide annex. 'D'). The decision is undoubtedly linked with the present case, Annexures 'C-2', 'C-3' and 'D' were produced by the assessee to establish us case that the ITO had been influenced by the statements of Shri Bidyananda Surekha made in other proceedings and though the statements were in existence, yet these were not furnished to the assessee which was violative of the provisions of Section 142 of the Act. In Assam Forest Products (P.) Ltd., the balance-sheet of the assessee-company showed a sum of Rs. 60,000 as a loan from M/s. Surekha Jute Co. Ltd. The ITO, in the course of enquiry, found that there was no such company but there was a proprietary concern and the proprietor, Shri Bidyananda Surekha, had made statements on different dates before the I.T. authorities admitting that he loaned the name of his firm to various persons to enable them to bring in their concealed income in the form of bogus loans. The ITO initiated reassessment proceedings and included the
sum of Rs. 60,000 as income from undisclosed sources. The Tribunal upheld the initiation of the reassessment proceedings but set aside the addition of the sum of Rs. 60,000 on the ground that the statements of the proprietor, Shri Bidyananda Surekha, were not placed before the assessee which had violated the provisions of Section 142(3) of the Act. On a reference, this court held that the initiation of reassessment proceedings was valid and, as there had been a violation of the provisions of Section 142(3), the Tribunal was justified in setting aside the order of the AAC relating to the cash credit and remanding the matter for further enquiry : vide Assam Forest Products (P.) Ltd. v. CIT . The facts are similar and the name of the lender is the same and the statements of the proprietor of the firm are also in the same tune. In the instant case as well, the Tribunal has remanded the case on the same ground, namely, violation of the provisions of Section 142(3) of the Act, following the set principles in Assam Forest Products (P.) Ltd. . It may be stated at this stage that in the instant case there is nothing to show that the assessee ever urged before the Tribunal that the ITO had no jurisdiction to call upon the assessee to explain the nature and source of the entries, as he had no material to act upon.
5. Before we consider the contentions of the learned counsel for the assessee, let us cogitate on the object and purpose of the reference by the Tribunal. The crux of the question asked by the Tribunal is to ascertain the outer limit of its jurisdiction to remand a case. The focal point is the nature and limit of the Tribunal's jurisdiction to remand a case. The Tribunal is a high-powered appellate authority having judicial powers created by 'the Act' composed of men having experience and expertise. Parliament in its wisdom has conferred upon the Tribunal broad and sweeping powers but at the same time controlled the powers by requisite constriction. The provision of Section 254 of the Act is an enabling as well as disabling provision. A passing glance creates an impression that the Tribunal has been endowed with plenary power under Section 254 of the Act to pass any order as it thinks fit. However, it is not so, as it will appear in the expression 'such orders thereon as it thinks fit', in Section 254. The word 'thereon' in the expression is a serious constriction on the exercise of power by the Tribunal. It can decide only the points or grounds raised before it whereas the I.T. authorities can travel beyond the grounds and consider the entire assessment. The Tribunal has no power for the enhancement of any penalty or assessment nor can it remand a case with the object of such enhancement.
6. It has discretionary power to admit additional evidence under Section 255(6) of the Act read with Rule 29 of the I.T. (Appellate Tribunal) Rules, 1963. Rule 29 does not confer any right to the parties to the appeal to
produce additional evidence, oral or documentary. However, the Tribunal may require any document to be produced or any witness to be examined, etc. However, it can do so only upon ' recording reasons therefor '. The avowed object of the provisions just referred is to dispense justice and to insulate or rectify the mistakes committed by the parties and/or the I.T. authorities. If a party fails to produce relevant documents or evidence the provisions empower the Tribunal to accept them or the Tribunal may itself take such additional evidence or cause production thereof. Similarly, if appropriate evidence or materials were not admitted by the I.T. authorities, the Tribunal may rectify the defects by taking additional evidence.
7. The implied power of the Tribunal to remand a case was read in Section 254(1). However, the power has been expressly provided in Rule 26 of the Rules framed in 1963. The power of the Tribunal to remand a case has been put beyond any shadow of doubt in Rule 28 of 'the Rules', which we extract hereinbelow :
'28. Where the Tribunal is of the opinion that the case should be remanded, it may remand it to the authority from whose order the appeal has been preferred or to the Income-tax Officer, with such directions as the Tribunal may think fit.'
8. It must form an opinion judiciously and thereafter it can exercise the power of remand. A detailed reason may not be given in the decision. The exact nature of the remand order to be passed in a given case is a matter within the absolute discretion of the Tribunal, but the power being judicial it must be exercised judiciously, according to rule and not according to humour ; the order must be legal and regular, disciplined as opposed to capricious. A capricious or impetuous order of remand is an abuse of the discretionary power conferred on the Tribunal. When such a discretionary order is made by a Tribunal, a high-powered authority, the presumption ought to be that it was a disciplined and responsible exercise of power. The grounds of such exercise of power may appear either from the order or the reasonings of the Tribunal in the decision rendered by it or in an appropriate case implicitly from the decision rendered by it in the background of the contentions raised before it. If the Tribunal decides to remand, taking a view of the case, but an alternative view or other views might exist for not remanding the case, in our opinion, the exercise of the power of the Tribunal should not be disturbed. If the effect of the order of remand is not injurious to the parties, the order should not be disturbed.
9. In this backdrop let us consider the points urged by Mr. J.P. Bhattacharjee, learned Advocate-General, Nagaland, appearing on behalf of the assessee. Counsel raised the following contentions :
(1) There was no material or evidence before the ITO to call upon the assessee to explain the nature and source of the entries under Section 68 of the Act, therefore, the Tribunal had no option but to allow the appeal of the assessee holding it to be a ' no evidence case ' ;
(2) The Tribunal went wrong in assuming that the statements of Shri Bidyananda Surekha were material and admissible for any purpose whatsoever;
(3) When the Tribunal was in doubt whether the transactions were 'genuine or spurious' and upon observing : 'Taking the aforesaid circumstances into view we hold that there was no sufficient material before us to say whether the loan of Rs. 40,000 is genuine or spurious', it had no alternative but to allow the appeal, and
(4) The Tribunal should have considered the documents produced by the assessee marked C-1 to C-11 and others by itself and should have disposed of the case on merits. The order of remand was uncalled for.
10. On these premises the learned counsel has submitted that the Tribunal has failed to exercise its power of remand in accordance with the known principles of law wherefore the answer to the question ought to be in the negative and in favour of the assessee.
11. Let us consider the first contention. The contention was never raised before the Tribunal, so 'no answers' ought to have been our appropriate reply. It was never urged before the Tribunal, to obtain any decision, that the ITO had no power or jurisdiction to call upon the assessee to explain the books of account under Section 68 of 'the Act' nor did the assessee question the admissibility or sufficiency of the material. Rather, the assessee itself produced C-2 and C-3 and D to establish the existence of the statements of Shri Bidyananda Surekha and claimed that it was deprived of the opportunity, made loud protests as to the violation of natural justice and the statutory protections Under Section 142(3) of the Act. The Tribunal upheld the claims and directed that the statements should be shown to the assessee. Therefore, the existence of material to form the requisite opinion was the admitted case of the assessee before the Tribunal. It asked for furnishing the material and the Tribunal made necessary directions. Existence of some such statements of Bidyananda are before us in annex Section 'C-2', 'C-3' and 'D' apart from the admission of the assessee. As such the first contention has no force.
12. The second contention does not bear any scrutiny. There is no legal bar to use such materials to form the requisite opinion by the ITO to call upon the assessee to explain cash credit entries in the books of account. Counsel for the assessee has failed to point out any provision of law that such materials are inadmissible or irrelevant. Nor could the counsel point out any particular type or class of material prescribed as admissible or
relevant to call upon the assessee to explain cash credits under Section 68 of 'the Act'. The statements of Shri Bidyananda Surekha and the enquiry made were the foundations for forming the opinion by the ITO--they had nothing to do with the proof or otherwise of the genuineness of the entries. Such materials, in our opinion, are sufficient to form the requisite opinion by the ITO to put the onus on the assessee to satisfy the nature and source of the entries. For the reasons set forth we hold that the said contentions have no merit. Further, the point was never raised before the Tribunal.
13. The third contention is that the Tribunal having held that it was in doubt as to whether the transaction was genuine or spurious was bound to allow the appeal. To appreciate the casual observation of the Tribunal it is necessary to note that the Tribunal held that the I.T. authorities did not furnish the statements of Shri Bidyananda Surekha nor did they allow the assessee to adduce evidence in support of its case. It further held that the documents by themselves did not establish 'whether the receipts and payments by cheques were actually payment by the creditor, M/s. Surekha Jute Co., to the assessee and by the assessee to the creditor', without enquiry or verification as to whether the transaction was genuine or spurious. As such, no legal fault can be found with the approach of the Tribunal who, instead of deciding the case on quarter-boiled materials before it, ordered for further enquiry.
14. It is settled law that when a cash credit entry appears in the assessee's books of account in an accounting year, the assessee has a legal obligation to explain the nature and sourge of such credit, when asked for. We rely on Sreelekha Banerjee v. CIT : 49ITR112(SC) . Be that as it may, in the instant case, the Tribunal left the matter for the decision of the AAC and merely observed that in the absence of verification or enquiry it was not possible for it to hold whether the entries were genuine or spurious. The finding does not go in favour of the assessee as he had to explain the nature and source of the entries. It was just a neutral observation. On the basis of such conclusion the Tribunal could not have held that the assessee had explained the nature and source of the entries. Under these circumstances, any decision on merits would have been a wrong decision. Accordingly, we hold that the Tribunal was justified in making the neutral observation and thereafter remanding the case to the AAC.
15. The last contention that the Tribunal should have decided the case on the documents produced by the assessee and upon holding enquiry by itself, does not appeal to us. The documents required necessary enquiry and verification to find out 'the nature and source of the entries'. The Tribunal in exercise of its judicial discretion has remanded the case to the AAC, for holding the enquiry and making a decision, which cannot be
said to be violative of any known principle of law. Rather, it was in consonance with the principles enunciated in Assam Forest Products (P.) Ltd. . The order of remand for enquiry was what the assessee had asked for. It is a full-scale enquiry after furnishing the statements of Shri Bidyananda Surekha and in the fitness of things the Tribunal, instead of holding the enquiry, remitted the case to the I.T. authorities. It is not a case of mere proof of a document or examination of a witness which might have been made by the Tribunal. We are unable to hold that the Tribunal has abused its power in remanding the case to the appropriate authority. We find no force in this contention.
16. Having disposed of the contentions of the assessee let us scrutinise the decision of the Tribunal. Upon scrutiny of the decision we arrive at the conclusion that the sole object behind the order of remand was to give the appropriate reliefs asked for by the assessee. The Tribunal found that the assessee was deprived of the opportunities to peruse the statement and to produce evidence in support of his explanation, nor did the I.T. authorities hold any enquiry to find out the truth of the explanation offered by the assessee. These are the avowed and dominant rationale for remanding the matter. The object was to afford all facilities to the assessee to enable it to explain the nature or source of the entries. The directions are to hold a full-scale enquiry after furnishing the statements to the assessee on the basis of which the ITO had asked the assessee to explain the accounts. This being a full-scale enquiry, in the fitness of things, the Tribunal was justified in making the order. This apart, the learned Tribunal relied on the set principles on the basis of which it had remanded a similar case, namely, Assam Forest Products (P.) Ltd. . The principles have been accepted by this court in Assam Forest Products .
17. In the result we conclude that the power of remand was exercised in a disciplined and responsible manner, strictly in accordance with the principles the Tribunal had followed in its earlier decision. Therefore, our answer to the question is in the affirmative, that is, in favour of the Revenue and against the assessee. There is no order as to costs.
18. Let a copy of the judgment be sent under the seal of the court and signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to the judgment.
B.L. Hansaria, J.
19. I agree.