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Commissioner Of Income-Tax vs Sarvodaya Furnishers And ...

High Court Of Judicature at Allahabad|26 November, 1993


JUDGMENT R.K. Gulati, J.
1. The Commissioner of Income-tax, Meerut, has made this application under Section 256(2) of the Income-tax Act (for short, "the Act") with a prayer that the Income-tax Appellate Tribunal, New Delhi (Bench-A), may be required to refer the following question as a question of law to this court for its opinion :
"Whether, in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct to delete the credit appearing in the name of Sri Ratish Chand Gupta ?"
2. We have heard learned standing counsel and Sri P.K. Jain, who appeared on behalf of the respondent. Messrs. Sarvodaya Furnishers and Electricals (P.) Ltd., Meerut, the respondent, is a private limited company registered under the Companies Act. The dispute is in respect of the assessment year 1985-86. During the course of the assessment proceedings for that year, the Income-tax Officer noticed certain deposits in the account books of the assessee and one such deposit was of Rs. 50,000 appearing in the name of Ratish Chand Gupta. To substantiate the plea that the deposit in question was genuine and the money was taken on loan, the assessee filed a confirmation from the depositor which was to the effect:
"I confirm the above account. I am assessed to income-tax in Circle-I(4), Meerut."
3. An initial inquiry into the matter conducted by an Income-tax Inspector revealed that there was no assessee by the name of Ratish Chand Gupta in the circle mentioned in the confirmation. Subsequently, the assessee submitted a certain assessment order said to have been made in the name of the depositor. However, the Income-tax Officer not being satisfied with the explanation of the assessee brought to tax the deposit in question as the income of the assessee from undisclosed sources under Section 68 of the Income-tax Act.
4. In appeal, the assessment order was upheld by the Commissioner of Income-tax (Appeals). On further appeal when the matter came before the Income-tax Appellate Tribunal, it deleted the addition by saying that the identity of the depositor and the source of the deposit had been proved from the overwhelming evidence that had been placed before the Commissioner of Income-tax (Appeals).
5. Learned standing counsel contended that the order of the Income-tax Appellate Tribunal does give rise to a question of law proposed in the application. It was contended that the Income-tax Appellate Tribunal while recording its decision has not addressed itself to the various aspects on which the addition in question was made by the Income-tax Officer. Further, the additional evidence on which the Tribunal rested its decision had not been admitted by the Commissioner of Income-tax (Appeals) which was filed before him. It was contended that the Tribunal could not have relied upon the additional evidence without recording a finding that the Commissioner of Income-tax (Appeals) had erred in rejecting the additional evidence. Moreover, the Tribunal acted upon the additional evidence on its face value without directing any inquiry as to its correctness.
6. On a consideration of the assessment order, we find that the Income-tax Officer has referred to a number of circumstances in support of his conclusion that the deposit in question was not genuine. For instance, we found that there was no past assessment record of the depositor on September 24, 1987, when he filed the confirmation nor was he an assessee of Circle I(4), Meerut, as asserted in the confirmation. It was found as a fact that for the first time on October 7, 1987, returns of income for the assessment years 1985-86 to 1987-88 were filed and the assessment was completed on October 21, 1987. The income returned for those years was to the tune of Rs. 15,000 to Rs. 18,100 under the head "Income from interest/commission/business" and no further details were either given or were available. The process server could not serve the assessment order at the address given as the depositor was not traceable on that address. The deposit in question was made by cheque and an inquiry revealed that the amount represented by the deposit was debited in the current account held in the name of M.K. Gupta and Sons, in the Union Bank of India, Begum Bridge, Meerut. The depositor was also examined on oath. He denied that the signatures on the confirmation were made by him. He also denied the signatures on the return said to have been filed by him for the years mentioned above. He categorically stated that he was not assessed to tax. The current account on which the cheque was drawn revealed that on December 7, 1987, when the amount was debited in that account, there was also a credit entry on that date of Rs. 38,000 under the remarks "by clearing". In the statement on oath the depositor, however, stated that he had made the deposit of Rs. 38,000 in cash. Subsequently, he stated that he may have given Rs. 38,000 in cash to Sri Piyush Goel (director of the company) and he may have deposited the amount of Rs. 38,000 in his account. He could not give the details about the source of Rs. 38,000 which was deposited in his account on December 7, 1984. Sri Piyush Goel was a close relation of the depositor. The Income-tax Officer issued a notice to the assessee requiring its reply on the aforesaid matters, but no reply was filed despite two adjournments taken. Before the Commissioner of Income-tax (Appeals), it appears that some additional evidence was filed but the Commissioner of Income-tax (Appeals) refused to entertain the same. It is not in dispute and it is also apparent from the order of the Income-tax Appellate Tribunal that it has not addressed itself to the various matters on which the Income-tax Officer based its conclusion. There is no finding recorded by the Tribunal that the Commissioner of Income-tax erred in refusing to entertain the additional evidence. There is also no finding that the additional evidence was of such a nature which required no further enquiry into its correctness.
7. Learned counsel for the assessee contended that whether the deposit is genuine or not, is essentially a question of fact and the application is liable to be rejected on that ground, particularly, when the identity of the depositor had been established. We will not like to comment on the merits at this stage. Our jurisdiction is limited only to considering whether the order of the Income-tax Appellate Tribunal does give rise to any question of law or not. The proposition stated by learned counsel for the assessee that the order of the Income-tax Appellate Tribunal is concluded by findings of fact, as the deposit has been accepted as genuine, is not acceptable to us in the broad manner it is stated. It is true that in the hierarchy of authorities under the Act, the Tribunal is the final fact-finding body and its decisions on questions of fact are, ordinarily, not liable to be questioned in these proceedings. At the same time, it is a trite position in law that where the Tribunal does not consider the evidence covering all the essential matters and bases its finding upon some evidence only, ignoring other essential matters or reaches its conclusion brushing aside the conclusions or the findings recorded by the authorities below without giving any reasons, in such a situation, the findings of the Income-tax Appellate Tribunal, though of fact, are liable to be interfered with in proceedings under Section 256 of the Act. Likewise, where the Tribunal fails to consider the ground of fresh evidence in contravention of Rule 46A, the order of the Tribunal will give rise to a question of law. This has been so held by a Division Bench of the Madhya Pradesh High Court in CIT v. Elekchand Jain [1988] 171 ITR 308. In CIT v. Raza Textiles Ltd. [1988] 169 ITR 258, a Division Bench of this court has held that an order of the Income-tax Appellate Tribunal would give rise to a question of law where the Income-tax Appellate Tribunal reverses the decision of the Revenue authorities in appeal without meeting the reasons recorded therein and the material referred to in support thereof by the authorities below.
8. In view of the aforesaid discussion, in our opinion, the order of the Income-tax Appellate Tribunal does give rise to a question of law. Accordingly, we direct the Income-tax Appellate Tribunal to draw up a statement of case and to refer the aforesaid question for the opinion of this court.
9. In the result, the application succeeds and is allowed with costs which we assess at Rs. 150.
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Commissioner Of Income-Tax vs Sarvodaya Furnishers And ...


High Court Of Judicature at Allahabad

26 November, 1993
  • R Gulati
  • S Verma