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Commissioner of Income-tax Vs. Mahendra and Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference Application No. 131 of 1981
Judge
Reported in(1986)51CTR(Raj)14; [1987]163ITR316(Raj)
ActsIncome Tax Act, 1961 - Sections 40A(3) and 256(2)
AppellantCommissioner of Income-tax
RespondentMahendra and Co. Ltd.
Appellant Advocate R.N. Surolia, Adv.
Respondent Advocate N.M. Ranka and; N.K. Jain, Advs.
Excerpt:
.....of the tribunal and the question whether the payment was made under exceptional circumstances is a finding of fact and, therefore, the application should be dismissed. cit ,wherein it has been held that no question of law arose which could be referred in that case wherein the tribunal after taking into consideration the material on record had found that there was no exceptional circumstance for making payment in cash and that was a finding of fact. [1968]68itr200(sc) in which the supreme court has observed as under (headnote) :it is well established that the high court is not a court of appeal in a reference under section 66 of the indian income-tax act, 1922, and it is not open to the high court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings..........of the income-tax officer and held that the income-tax officer had correctly disallowed the cash payment. on further appeal by the assessee, the income-tax appellate tribunal by its order dated june 7, 1980, found that the payment of rs. 35,000 was made under exceptional circumstancesand, therefore, it was not hit by section 40a(3) of the income-tax act. the commissioner of income-tax, jaipur, filed an application under section 256(1) of the income-tax act requiring the tribunal to draw up a statement of the case and refer the question quoted above to the high court for its opinion, but the tribunal rejected the said application by its order dated january 5, 1981, as in its opinion no question of law arose from the order of the tribunal dated june 7, 1980. it is in these.....
Judgment:

1. This is an application under Section 256(2) of the Income-tax Act requiring the Appellate Tribunal to state the case and to refer the following question of law :

'Whether, on the facts and circumstances of the present case, the Tribunal was justified in holding that the payment of Rs. 35,000 was made by the assessee under exceptional circumstances and the same is not hit under Section 40A(3) of the Income-tax Act, 1961.'

The assessee-firm, non-petitioner, filed a return of income declaring an income of Rs. 84,862 on June 30, 1975, for the assessment year 1975-76. The assessee was asked to state whether there was any payment in cash above Rs. 2,5,00. The assessee stated that no payment had been made in cash above Rs. 2,500. The assessing authority scrutinised and examined the cash book of the firm and found that a sum of Rs. 35,000 was paid in cash to M/s. Kishore Trading Co. on May 14, 1974. The assessee filed a reply on October 28, 1977, claiming that the payment was made under exceptional circumstances at the request of M/s. Kishore Trading Company which is also an assessee. Copies of three letters, one addressed to the assessee by M/s. Kishore Trading Co. and a reply by the assessee to Kishore Trading Co. and a confirmatory letter by M/s. Kishore Trading Co. were also filed along with the reply dated May 14, 1974. The assessing authority disallowed the payment as it contravened the proviso to Section 40A(3) of the Income-tax Act as it found that the three letters produced did not bear any reference number and they were only an after-thought. The assessee preferred an appeal and the Appellate Assistant Commissioner confirmed the findings of the Income-tax Officer and held that the Income-tax Officer had correctly disallowed the cash payment. On further appeal by the assessee, the Income-tax Appellate Tribunal by its order dated June 7, 1980, found that the payment of Rs. 35,000 was made under exceptional circumstancesand, therefore, it was not hit by Section 40A(3) of the Income-tax Act. The Commissioner of Income-tax, Jaipur, filed an application under Section 256(1) of the Income-tax Act requiring the Tribunal to draw up a statement of the case and refer the question quoted above to the High Court for its opinion, but the Tribunal rejected the said application by its order dated January 5, 1981, as in its opinion no question of law arose from the order of the Tribunal dated June 7, 1980. It is in these circumstances that the Commissioner of Income-tax has filed the present application under Section 256(2) of the Income-tax Act before this court. Notice was issued to the assessee and Shri N. M. Ranka with Shri N, K. Jain has put in appearance and have opposed the said application.

2. We have heard learned counsel for the parties and perused the record of the case. Learned counsel for the Revenue has vehemently argued that the assessee firm and M/s. Kishore Trading Company were sister concerns and belonged to the Bangad Group and that the assessee in the first instance had denied that any payment in cash above Rs. 2,500 was made during the assessment year 1975-76 and thereafter, when the cash book and account books were scrutinised and examined by the Income-tax Officer, the assessing authority, it was found that a payment of Rs. 35,000 was made in cash to M/s. Kishore Trading Co. on May 14, 1974, and the letters produced by the assessee, non-petitioner firm do not bear any reference number and is merely an after-thought and the evidence has been manufactured for the purpose of showing that it was on account of unavoidable circumstances that the payment was made in cash of Rs. 35,000. Therefore, it is contrary to Section 40A(3) and amounts to evasion of tax. On the other hand, learned counsel for the assessee has also very vehemently argued that there is no question of law arising out of the order of the Tribunal and the question whether the payment was made under exceptional circumstances is a finding of fact and, therefore, the application should be dismissed. He has placed reliance on a decision of this court Registhan Pvt. Ltd. v. CIT , wherein it has been held that no question of law arose which could be referred in that case wherein the Tribunal after taking into consideration the material on record had found that there was no exceptional circumstance for making payment in cash and that was a finding of fact. He has further placed reliance on CIT v. Greaves Cotton and Co. Ltd. : [1968]68ITR200(SC) in which the Supreme Court has observed as under (headnote) :

'It is well established that the High Court is not a court of appeal in a reference under Section 66 of the Indian Income-tax Act, 1922, and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Appellate Tribunal. The High Court should confine itself to the facts as found by the Appellate Tribunal and to answer the question of law referred to it in the context of those facts. A finding of fact may be defective in law if there is noevidence to support it or if the finding is unreasonable or perverse, but it is not open to the assessee to challenge such a finding of fact unless he has applied for a reference of the specific question under Section 66(1). It is for the party who applies for a reference to challenge those findings of fact first by expressly raising the question about the validity of the findings of fact and if he has failed to do so, he is not entitled to urge before the High Court that the findings of the Appellate Tribunal are vitiated for any reason'.

Mr. Ranka has submitted that in the present case also, the Commissioner of Income-tax never challenged before the Tribunal in the application under Section 256(1) that the finding of fact in regard to whether there was any exceptional circumstance or not, was wrong and now it is not open to the Commissioner of Income-tax to challenge before this court any finding of fact arrived at by the Tribunal and in the present case even before this High Court, the Commissioner of Income-tax has not challenged the finding of fact arrived at by the Tribunal.

3. Having considered the submissions made at the Bar and the authorities cited by the parties, we are clearly of the opinion that there is no question of law which arises out of the order of the Tribunal. Whether the payment of Rs. 35,000 was made by the assessee under exceptional circumstances is a pure finding of fact based on the evidence and material before the Tribunal and this finding of fact was not challenged by the Department before the Tribunal in the reference application under Section 256(1) of the Income-tax Act nor has it been challenged before us in the application under Section 256(2) of the Income-tax Act and, therefore, we are bound by the same and cannot go behind the finding arrived at by the Tribunal. Moreover, it cannot be a case of avoidance of tax because the firm, Kishore Trading Co., was also an assessee and the amount of Rs. 35,000 paid to M/s. Kishore Trading Co. in cash on May 14, 1974, was verifiable and the assessing authority could have cross-checked whether the said amount was in fact received by M/s. Kishore Trading Co.

4. We do not find any force in this application and this application under Section 256(2) of the Income-tax Act is dismissed.


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