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Commissioner of Income-tax Vs. Avtar Singh and Sons - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 60 of 1976 and I.T. Case No. 66 of 1976
Judge
Reported in[1981]129ITR671(P& H)
ActsIncome Tax Act, 1961 - Sections 40A(3) and 256(2); Income Tax Rules, 1962 - Rule 6DD
AppellantCommissioner of Income-tax
RespondentAvtar Singh and Sons
Appellant Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Respondent Advocate H.L. Sibal and; H.K.L. Bajaj, Advs.
Excerpt:
.....has not communicated the order of refusal passed to the persons concerned, the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order. - rules, 1962 (hereinafter referred to as 'the rules'), stood satisfied in the facts and circumstances of this case. , rajpura, for cash payments after banking hours and the payments made by the firm in cash in view of its reputation and non-charging of interest by the supplier company constituted exceptional circumstances for the appellant-firm to make payment in cash. (b) the supplier had a good reputation. we agree with the department that there is no material to show that the payments mentioned in the certificate dated 22-8-1972 were made under..........in view of the division bench judgments of this court reported as cit v. new light tin manufacturing company , cit v. kishan chand maheshwari dass and cit v. grewal group of industries . mr. sibal, learned counsel for the assessee, has contested the correctness of these judgments, but we, as members of a bench of co-ordinate jurisdiction, are unable to differ from the view taken in these cases. the question of law referred therein is, therefore, decided in the negative, i.e., in favour of the revenue and against the assessee.7. in i.t. case no. 66 of 1976, it has been submitted by mr. sibal that the aac had taken three specific grounds for accepting the contention made on behalf of the assessee, that r. 6dd(j) of the rules stood complied with and that the tribunal did not notice.....
Judgment:

M.R. Sharma, J.

1. The petitioner is a registered firm deriving income from the sale of ghee, sugar, maida, etc. During the financial year 1971-72, the petitioner purchased ghee from M/s. Amrit Banaspati Company, Rajpura. The value of this purchase aggregated to Rs. 54,13,342. This amount was paid to the supplier company on as many as 189 occasions during the year under reference. The payment also included the payment of Rs. 4,47,000 in cash on 15 occasions. On each occasion, the payment exceeded the sum of Rs. 2,500. According to the assesses, these payments were so made on urgent demands made by the company. The ITO noticed these payments and in view of the provisions of Section 40A(3) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), declined to accept the explanation given by the assessee and included them in its taxable income.

2. The assessee went up in appeal, which was disposed of by the AAC on November 30, 1973. Two points were raised before him. One was whether the money spent on the purchase of ghee fell within the definition of the word 'expenditure' or not. The second point was whether the ingredients of r. 6DD(j) of the I.T. Rules, 1962 (hereinafter referred to as 'the Rules'), stood satisfied in the facts and circumstances of this case. The AAC decided both the points in favour of the assessee. On the second point, he observed as under :

' 5. I have carefully considered the arguments made on behalf of the appellant. In my opinion, urgent demands from M/s. Amrit Banaspati Co. Ltd., Rajpura, for cash payments after banking hours and the payments made by the firm in cash in view of its reputation and non-charging of interest by the supplier company constituted exceptional circumstances for the appellant-firm to make payment in cash. '

3. The revenue went up in appeal before the Income-tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as ' the Tribunal '), The Tribunal affirmed the finding arrived at by the AAC on the first point and reversed his finding on the second point. Even in these findings, the assessee was not burdened with the payment of income-tax. Both the parties applied for a point of law to be referred to this court for its opinion. The application filed by the revenue was allowed and the following point of law was referred to this court for its opinion :

' Whether, 'on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the word ' expenditure ' used in Section 40A(3) of the Income-tax Act, 1961, does not cover expenditure on purchase of stock-in-trade '

4. The application filed by the assessee was, however, dismissed. The assessee has filed I.T. Case No. 66 of 1976 against the decision of the Tribunal and has prayed that the same be directed to refer the following point of law to this court for its opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the respondent's case was not covered by the exception provided in Clause (j) of Rule 6DD of the Income-tax Rules, 1962?'

5. The reference and the application filed by the assessee are being disposed of by this judgment.

6. As far as Income-tax Reference No. 60 of 1976 is concerned, the question of law involved therein stands concluded against the assessee in view of the Division Bench judgments of this court reported as CIT v. New Light Tin Manufacturing Company , CIT v. Kishan Chand Maheshwari Dass and CIT v. Grewal Group of Industries . Mr. Sibal, learned counsel for the assessee, has contested the correctness of these judgments, but we, as members of a Bench of co-ordinate jurisdiction, are unable to differ from the view taken in these cases. The question of law referred therein is, therefore, decided in the negative, i.e., in favour of the revenue and against the assessee.

7. In I.T. Case No. 66 of 1976, it has been submitted by Mr. Sibal that the AAC had taken three specific grounds for accepting the contention made on behalf of the assessee, that r. 6DD(j) of the Rules stood complied with and that the Tribunal did not notice any of these three points while deciding against the assessee on this point. According to the learned counsel, the manner in which the case has been disposed of by the Tribunal raises a point of law. We agree with the submission made by the learned counsel. As noticed earlier, the AAC had taken into consideration three matters for coming to the conclusion that the explanation given by the assessee was acceptable. They were :

(a) The payments were made beyond the bank hours.

(b) The supplier had a good reputation.

(c) The said company did not charge any interest from the assessee.

8. The Tribunal disposed of this aspect of the case by making the following observations:

' We agree with the department that there is no material to show that the payments mentioned in the certificate dated 22-8-1972 were made under exceptional circumstances. No copy of the agreement has been produced to suggest that every time cash payment alone was to be accepted by the payee. The fact remains that during some of the months, three payments on different dates had been made and it is hard to infer that every time the transaction concluded or the delivery took place after banking hours and every time the payee was in direct or urgent necessity of cash on account of these sales. We are unable to believe the version put forward on the assessee's side in this regard.'

9. The reputation of the supplier company and the fact that it did not charge any interest were not at all taken into consideration. What importance is to be attached to these factors is entirely a different matter and it is wholly immaterial if the final decision on this point goes in favour of the revenue. The question whether the assessee has been able to offer a valid explanation of this point is a mixed question of law and fact and if the inference is drawn by the AAC from facts which have an important bearing on the determination and they are ignored by the Appellate Tribunal from consideration, a question of law arises. In Sree Meenakshi Mills Ltd. v. CIT : [1957]31ITR28(SC) , the court after an exhaustive discussion of case law on the point laid down the following four tests for determining whether the decision rendered by the Appellate Tribunal involved a point of law or not. These are (p. 50):

(1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under Section 66(1).

(2) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of these findings is a question of law which can be reviewed by the court.

(3) A finding on a question of fact is open to attack under Section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse.

(4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.'

10. In our considered opinion the case in hand falls within the ambit of the second principle laid down by the Supreme Court. We, therefore, allow this petition and direct the Tribunal to state the point of law to us for our opinion.

11. No costs.

B.S. Dhillon, J.

12. I agree.


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