Skip to content


Commissioner of Income-tax Vs. Ghewarchand Kamalkumar - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtOrissa High Court
Decided On
Case NumberS.J.C. No. 171 of 1973
Judge
Reported in[1977]108ITR398(Orissa)
ActsIncome Tax Act, 1961 - Sections 256
AppellantCommissioner of Income-tax
RespondentGhewarchand Kamalkumar
Appellant AdvocateStanding Counsel
Respondent AdvocateB.K. Mohanty, Adv.
Cases ReferredSovachand Baid v. Commissioner of Income
Excerpt:
.....also contended that when the appellate assistant commissioner was satisfied that the other four cash credits were absolutely genuine and were not open to challenge, the remand should not have covered those items. it was the figment of imagination of the income-tax officer to condemn the cash book of some of the creditors without assigning any reason therefor and no credence could be given for that. the tribunal clearly indicated that even if the fresh evidence produced before the appellate assistant commissioner was kept out, the rest of the evidence was sufficient to come to a finding that the impugned transactions represented genuine cash credits and were not concealed income of the assessee introduced into its books in the garb of cash credits. basically, the dispute in the present..........in the facts and circumstances of the case, the tribunal was justified in deleting the cash credits assessed as income from undisclosed sources and in cancelling the appellate assistant commissioner's order setting aside the assessment for being made after re-examination ?'2. the assessee is a partnership firm deriving income from commission agency and wholesale business in groceries. while examining its books of account for the assessment year 1964-65 (corresponding to the previous year ending on april 19, 1964) the income-tax officer came across cash credits to the tune of rs. 1,20,000 as per the following particulars:rs.1.sri surekha jute co., calcutta 25,0002.sri budhkaran surekha, calcutta 10,0003.sri budharmal saraf, calcutta 25,0004.sri murarilal gupta, calcutta.....
Judgment:

R.N. Misra, J.

1. This is an application by the revenue under Section 256(2) of the Income-tax Act, 1961, for a direction to the Appellate Tribunal to state a case and refer the following question said to be of law for determination of this court:

'Whether, in the facts and circumstances of the case, the Tribunal was justified in deleting the cash credits assessed as income from undisclosed sources and in cancelling the Appellate Assistant Commissioner's order setting aside the assessment for being made after re-examination ?'

2. The assessee is a partnership firm deriving income from commission agency and wholesale business in groceries. While examining its books of account for the assessment year 1964-65 (corresponding to the previous year ending on April 19, 1964) the Income-tax Officer came across cash credits to the tune of Rs. 1,20,000 as per the following particulars:

Rs.1.Sri Surekha Jute Co., Calcutta 25,0002.Sri Budhkaran Surekha, Calcutta 10,0003.Sri Budharmal Saraf, Calcutta 25,0004.Sri Murarilal Gupta, Calcutta 20,0005.Sri Om Prakash Kedia, Calcutta 15,0006.M/s Daluram Goganmal, Calcutta 25,000

1,20,000

3. The assessee was called upon to explain the nature and source of these cash credits and thereupon the assessee produced letters of confirmation from the creditors all of whom were income-tax assessees and supplied their index numbers as also the discharged hundis. Not being satisfied with the confirmatory letters, the Income-tax Officer issued notices to the creditors under Section 131 of the Act. Some of the creditors responded by appearing before the Income-tax Officer either in person or through agents and the Income-tax Officer recorded their statements. He rejected the assessee's stand and included the entire cash credits as assessable incomefrom other sources in the hands of the assessee. Consequently, the claim of interest was disallowed.

4. In the appeal before the Appellate Assistant Commissioner the assessee produced affidavits of creditors as also certified copies of transactions through banks to evidence the flow of the money from the creditors to the assessee as also repayment thereof (both capital and interest) through banks. The Appellate Assistant Commissioner looked into the records as also the fresh evidence produced at the stage of appeal and adjourned the hearing to enable the Income-tax Officer to have his say after examining the documents. But, ultimately, instead of disposing of the appeal on the materials laid before him, he vacated the assessment and remitted the matter to the Income-tax Officer with a direction that he should look into the documents and examine the position and arrive at a proper finding instead of proceeding on surmises and suspicions.

5. In his order the Appellate Assistant Commissioner stated :

'.....I have, very closely examined the documents adduced before me.I have no hesitation in observing that there was some force in the contention of the learned advocate. But the materials placed before me raised certain other issues directly concerning such transactions, i.e., availability of funds with the creditors, viz., Daluram Goganmal and Surekha Jute Co. for the issue of demand draft as the statements made by Sri Bidyananda Surekha, proprietor of Surekha Jute Co. and partner of Daluram Goganmal, that some of the loans advanced to the parties by them were genuine and some were bogus ones. So it was highly essential to ascertain that on the date of issue of loan by demand draft, cash balance was actually available with the creditor or availability was manipulated artificially.....

So far as the other creditors are concerned, they are found to be assessed on their incomes inclusive of interest in different circles in Calcutta. Their genuineness has not been doubted. Their credit-worthiness too cannot be entirely challenged in the face of the evidence adduced.....'

6. The assessee went up before the Appellate Tribunal in further appeal and challenged the order of remand. It contended in support of its appeal that the materials placed before the Income-tax Officer were sufficient to discharge the burden that lay on the assessee to establish the genuineness of the cash credits and the evidence which had been produced at the first appellate stage was corroborative of the evidence produced before the Income-tax Officer. The Appellate Assistant Commissioner had full jurisdiction under Section 251 of the Act to deal with the matter completely and, therefore, the remand was wholly unjustified. It was also contended that when the Appellate Assistant Commissioner was satisfied that the other four cash credits were absolutely genuine and were not open to challenge, the remand should not have covered those items. The AppellateTribunal took note of the materials produced before the Income-tax Officer and the Appellate Assistant Commissioner and observed :

'On a proper streamlining of the evidence we further hold that the primary onus cast upon the assessee to prove the genuineness of the cash credits stood discharged when income-tax file numbers, confirmation letters and the statements of the creditors were recorded by the Income-tax Officer. The assessee cannot be called upon to prove the source of the money of the creditors and the availability of the amounts with them before lending the same to the assessee. All the creditors, in unequivocal terms, have affixed the seal of approval to the transactions with the assessee and it mattered little whether the books of account of one of the creditors were seized by the Commissioner of Income-tax, West Bengal, and any confession had been made there. The confession, if any, without providing an opportunity to the assessee to rebut the same, cannot be used against the assessee. Even if, for the sake of argument, we agree that the confession could be used in examining the confessor, the transactions with the assessee were not put to the confessor and the confessor critically admitted that some of the transactions were genuine. In our opinion, the following admission of Sri Bidyananda Surekha representing Surekha Jute Company and M/s. Daluram Goganmal is relevant:

'I said in my statement that transactions, some were genuine and bogus, because the recording Income-tax Officer suggested that all were bogus. I said it was not so. Hence, I said all were bogus then my reputation in the market was at stake.' There is not an iota of evidence that Surekha Jute Company and M/s. Daluram Goganmal did not transact with the assessee in real money but only lent their names as a cover to the assessee's money. It is also curious to note that all the contemporaneous evidence by the said deponent was produced before the Income-tax Officer while rendering the statement. It was the figment of imagination of the Income-tax Officer to condemn the cash book of some of the creditors without assigning any reason therefor and no credence could be given for that. Having regard to the totality of the evidence we hold that the genuineness of the cash credits was proved beyond reasonable doubt and, therefore, the addition is deleted. As a corollary, payment of interest is also allowed.'

7. Before the Appellate Tribunal its jurisdiction to examine all the materials on record and to dispose of the appeal was not disputed. The Tribunal clearly indicated that even if the fresh evidence produced before the Appellate Assistant Commissioner was kept out, the rest of the evidence was sufficient to come to a finding that the impugned transactions represented genuine cash credits and were not concealed income of the assessee introduced into its books in the garb of cash credits. The Appellate Tribunalappropriately focussed its attention on the transaction of Surekha Jute Company and M/s. Daluram Goganmal in view of what the Appellate Assistant Commissioner had said in respect of the remaining four transactions.

8. When the Appellate Tribunal was asked to state a case by an application made by the Commissioner of Income-tax under Section 256(1) of the Act, the Tribunal came to hold that the finding reached by the Tribunal was one of fact and no question of law emerged out of its order.

9. The learned standing counsel for the revenue contended that the Tribunal had no justification to interfere with the order of the Appellate Assistant Commissioner as the order of remand would have assisted the assessee as also the revenue to establish the true position. The Tribunal, learned standing counsel urged, did not examine each item of cash credit and was persuaded to come to its conclusion by referring to the position relating to two of the cash credits only. According to learned standing counsel, it was the duty of the assessee to establish before the Income-tax Officer that not only his alleged creditor existed in the shape of a definite person but also was capable of making the loan. In support of his submission he relied upon a Bench decision of the Bombay High Court in Commissioner of Income-tax v. Deviprasad Khandelwal & Co. Ltd. : [1971]81ITR460(Bom) .

10. In our view it is unnecessary to dilate upon the decision of the Bombay High Court at any length. It is settled law that only when a question of law arises out of the order of the Appellate Tribunal a reference under Section 256 of the Act is competent. In the present case the determination of the issue as to whether the sum of Rs. 1,20,000 in the assessee's books of account represents cash credits or his profits in the garb of cash credits depends upon the appreciation of the evidence on the materials on record. The finding reached by the Tribunal in favour of the assessee is one of fact. In Amarchand Sobhachand v. Commissioner of Income-tax : [1971]82ITR591(SC) , where the question for determination was whether certain remittance of money was in the course of money-lending business or was merely by way of accommodation wholly unrelated to the business of the money-lender, the Supreme Court came to hold that the conclusion was one of fact. Similarly, in Sovachand Baid v. Commissioner of Income-tax : [1958]34ITR650(SC) , dealing with the question whether the cash credits were not income of the assessee, in the circumstances of the case, the Supreme Court came to hold that it was one of fact. Basically, the dispute in the present case is one of fact and having read the record and heard learned counsel for the parties we are not satisfied that the conclusion of the Tribunal on such a question of fact has been vitiated by any wrong application of law. Counsel for the assessee relied upon observations of this court in S.J.Cs. Nos. 83and 84 of 1972 disposed of on October 31, 1973 [Commissioner of Income-taxv. Deonarayan Jagdishlal [1977] 108 ITR 8], where, in similarcircumstances, this court refused to issue a direction to the AppellateTribunal to state a case.

11. We, accordingly, hold that no question of law emerges out of theappellate order of the Tribunal and, therefore, the application made by therevenue must stand rejected. We make no direction for costs.

B. K. Ray, J.

12. I agree.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //