1. While it is not the practice of this court to give reasons when discharging a rule issued, we depart from that long standing practice because we have been recently directed by the Supreme Court to give reasons, vide Commissioner of Income-tax v. Daulatram Rawatmall and Reform Flour Mills P. Ltd. v. Commissioner of Income-tax.
2. Having heard counsel for both the parties we are satisfied that in this case the rule ought to be discharged. The dispute relates to an amount of Rs. 2,77,500 which the Income-tax Officer added back as the income of the assessee from undisclosed sources. The details regarding this amount are mentioned in paragraph 4 of the Income-tax Officer's order. The assessee's case was that these are genuine transactions of borrowings on hundies from various parties. The Income-tax Officer has himself said that 'complete details have been furnished by the assessee in respect of loans from these bankers'. The assessee had given the names, addresses and the amounts borrowed from each and every one of the persons to make up this amount of Rs. 2,77,500. The Income-tax Officer, however, wished to have all the bankers before him for examination and the assessee agreed that they should be summoned. They were summoned but they did not appear but instead each one of them sent a letter confirming the loan advanced by them to the assessee. The Income-tax Officer was nonetheless not satisfied and held as follows :
'The most important point to be noted in the case of cash credits is that the assessee should prove to the satisfaction of the I.T.O. that the person concerned was in a position to have given the loan. And the only way in which the I.T.O. can have satisfaction is to cross-examine the party. The I.T.O. is only obliging the assessee by issuing summons to the third party concerned. If, therefore, the summons is not served or if after the service of the summons the party does not turn up, it is for the assessee to produce the party himself so that the I.T.O. can examine and satisfy himself that the party was in a position to give the loans alleged to be taken from him.'
Now in this view undoubtedly the Income-tax Officer was in error. It is not for the party to have produced the witnesses without a summons. The Income-tax Officer did summon afresh the parties concerned. They received the summons but did not appear. The assessee could not be blamed for all this.
3. This was the main ground of challenge to the Income-tax Officer's order before the Appellate Assistant Commissioner in appeal and the Appellate Assistant Commissioner realised the error into which the Income-tax Officer had fallen but circumvented it. He appreciated the argument advanced as can be seen from the following passage :
'It was submitted that for enforcing attendance of the hundi brokers the appellant had no powers; on the contrary the Income-tax Officer had necessary powers to enforce the terms of summonses issued which he has failed to do.'
Now this submission was made on behalf of the assessee because the assessee desired that upon the evidence which he had led the decision of the Income-tax Officer should be reversed and that it should be held that the loans were genuine loans and could not be added back to the income of the assessee.
4. The Appellate Assistant Commissioner, however, avoided answering the argument advanced, but on the other hand took advantage of this arguments to hold that the Income-tax Officer had not made proper enquiries and that therefore the two assessments had not been properly made, should be set aside and the assessments should be ordered to be made de novo.
5. In a further appeal to the Income-tax Appellate Tribunal at Bombay it was urged on behalf of the assessee that he had not asked for a remand nor for the setting aside of the assessment, but on the other hand, he had desired that upon such evidence as had been produced before the Income-tax Officer it should have been held that these loans were genuine transactions and could not be added back to the income of the assessee. The Tribunal accepted this contention. In paragraph 3 of their order they have set forth adequate and strong grounds for showing why the Appellate Assistant Commissioner ought not to have remanded the case for an assessment de novo, but the controversy between the department and the assessee could not be disposed of merely by that finding. The further view which the Tribunal took was that upon the material or evidence which had been produced by the assessee before the Income-tax Officer - and it was overwhelming and clinching material - the only conclusion which the Income-tax Officer could come to was that the loans were genuine loans. The Tribunal set forth these circumstances in paragraph 2 and we can only enumerate them to show how their conclusion is only a pure finding of fact. The Tribunal found that the following circumstances had been established :
1. That all the hundi loans taken by the assessee were through crossed cheques which had passed through recognized banks.
2. That those hundi loans were obtained through a broker whose name had been disclosed, namely, Messrs Madhvdas & Co.
3. That the brokerage was paid to this broker through a crossed cheque which had also passed through a bank.
4. That the interest on the loans was also paid through the respective bankers by cheques.
5. That the assessee had given the complete names and addresses of all the bankers who had advanced moneys to him and the amounts borrowed from them. All these bankers were themselves income-tax assessees and the present assessee had also given their G.I.R numbers as recorded in the income-tax office.
6. Summonses to those hundi bankers as also the brokers were duly served.
7. Those bankers has submitted confirmatory letters before the Income-tax Officer confirming having made the advances to the assessee.
Now the conclusion which the Tribunal reached was that upon this material there was absolutely no suspicion or doubt regarding these loans and that they were perfectly genuine and could not be held to be the undisclosed income of the assessee. The Tribunal found as follows :
'Notwithstanding all the evidence that has been placed on record, the I.T.O. did not move his little fingers to examine the correctness and truth of that evidence. When all the payments have been made by cheques and the interest were also paid by cheques and all the lenders and the broker were all Income-tax assessees and the lenders had confirmed having lent the amounts in question, we are unable to agree with the department that there was any prima facie suspicion or reason to doubt the genuineness of the loans.'
It also appears from paragraph 3 of the Tribunal's order that the Income-tax Officer had made some enquiries from the bankers. Who those bankers were and what were their names, was not disclosed in spite of the assessee having asked for their names. The assessee had also asked for evidence if any which was recorded but that was also not given. The Tribunal held in regard to this as follows :
'The evidence that has been recorded by the Income-tax Officer behind the back of the assessee cannot be used against the assessee because the assessee was not offered an opportunity to cross-examine those witnesses. The assessee had furnished documentary evidence in the shape of confirmatory letters from those bankers. The Income-tax Officer has not denied the genuineness of those letters and that evidence proves the genuineness and source of the cash credits.'
In our opinion, this finding given by the Tribunal was a pure finding of fact. The Tribunal also remarked that the Income-tax Officer had not brought on record any evidence to show that the evidence which the assessee had adduced was incorrect or untrue in any manner. That again shows that the finding arrived at by the Tribunal was based purely upon appreciation of evidence and that no question of law arises out of that finding.
6. In the result, the rule is discharged with costs.