MISRA C.J. - Pursuant to a direction issued from this court under s. 236(2) of the I.T. Act of 1961 (hereinafter referred to as 'the Act') on the assessees applications, the Income-tax Appellate Tribunal, Cuttack Bench, stated a case and referred the following question for the opinion of the court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the addition of Rs. 80,000 in the assessment year 1960-61 as income from other sources and in disallowing the claim of interest on the said amount claimed in the following assessment year, being 1961-62 ?'
The assessee is a registered firm and the references relate to the assessment years 1960-61 and 1961-62, corresponding to the calendar years 1959 and 1960. The assessee filed returns of income for the assessment year 1961-62 and claimed deduction on account of payment of interest on loans. Subsequently, it filed a return for the assessment year 1960-61 on May 8, 1961, in response to a notice under s. 148 of the Act. In the course of the assessment proceedings, the ITO noticed cash credits in the names of different parties in the assessee, s accounts. A letter was given to the ITO on behalf of the assessee on January 17, 1967, saying :
'In the circumstances we request you to please take a sympathetic view and add the peak amount of such credits to our returned income for which we will have no objection. Further, we request you to please treat us leniently and not penalise us for the unexplained credits.'
The ITO found that the peak amount was Rs. 80,000 on October 28, 1959, and treated that amount as the assessees income from unexplained sources.
The assessee failed to get relief in appeal before the AAC as also in second appeal before the Tribunal The matter came before this court in S.J. Cs. Nos. 76 and 77 of 1973 and was disposed of on September 19, 1975. While disposing of the matter, this court made observations that the matter could be given a fresh look by the Tribunal particularly to find out whether there was actually a letter given by the assessee accepting the addition of the peak amount. The Tribunal took into consideration the letter of the assessee referred to above and dismissed the appeals.
Four contentions have been raised by Mr. Pasayat on behalf of the assessee, namely :
(i) No opportunity has been given to the assessee by the Tribunal to meet the material utilised by the Tribunal,
(ii) The assessment records has been placed before the Tribunal after the matter was heard. Therefore, the material relied upon by the Tribunal has really been collected behind the back of the assessee,
(iii) The Tribunal proceeded on the footing that the assessee had not produced the relevant materials in support of its stand that the cash credits were genuine, and
(iv) The miscellaneous petition filed by the assessee has not been properly disposed of by the Tribunal.
The Tribunal having passed the order under s. 260(1) of the Act, we do not think, the jurisdiction under s. 256(2) of the Act was available to be utilised in this case. That objection was not raised at the applications to be stage by the standing counsel and that is how treating the application be under s. 256(2) of the Act, this count again called upon the Tribunal to state a case and refer the common question for the opinion of the court. We are inclined to think that the fresh reference application were not maintainable. Even if we accept Mr. Pasayat, submission that the references are validly made, we find no substance in the contention of Mr. Pasayat on merits. It is not disputed that on behalf of the assessee a letter as referred to above had been given to the ITO in the course of the assessment proceedings. The assessee has offered that the peak amount could be added and has prayed for being excused from the imposition of penalty by soliciting a lenient consideration from the assessing officer, As we have already indicated, in the first assessment year under consideration the cash credits appeared and in the second year the claim for interest arose for consideration. Both the matters are therefore, interconnected. If the cash credits are not genuine, interest as an expenditure was not admissible. Once the assessee accepts the letter, it must follow that the ITO acted within his powers to raise the demand and refuse the claim of expenditure by way of interest. The assessee having once agreed to have the matter disposed of in a particular way could not change the course of events by raising further disputes. Since the letter is of the assessee and we must assume that it knew about its existence, utilisation thereof with pout confrontation cannot prejudice the assessee. The letter was very much in focus from an earlier stage and it is not for the first time that the same was being referred to. The ITO has completely quoted the letter in his order of assessment. There is no force in the submission that the observations in the portion of the order of assessment not meant for the assessee has been taken into account by the Tribunal. We are not at all impressed by the submissions advanced on behalf of the assessee that it has been prejudiced by the action of the Tribunal.
Our answer to the question posed, therefore, is in the negative namely :
On the facts and in the circumstances of the case, the Tribunal was justified in upholding the addition of Rs. 80,000 in the assessment year 1960-61 as income from other sources and the Tribunal was also justified in disallowing the claim of interest on the said amount in the assessment year 1961-62.
The revenue shall have its costs. Hearing fee is assessed at rupees one hundred.
J. K. MOHANTY J. - I agree.