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16 High Court — Appeal lies only when substantial question of
law is involved — Cash credits — Where any sum is found credited in the books of
the assessee for any previous year, the same may be charged to income-tax as
income of the assessee of that previous year, if the explanation offered by the
assessee about the nature and source thereof is in the opinion of the Assessing
Officer, not satisfactory.
[Vijay Kumar Talwar v. CIT, (2011) 330 ITR 1 (SC)]
The assessee was a partner in a firm, named and styled as
M/s. Des Raj Tilak Raj, having its business at Delhi, with a branch at Calcutta.
The said partnership firm was dissolved with effect from April 1, 1982. As per
dissolution deed, the assessee took over the business of the Calcutta branch of
the erstwhile firm. Thereafter, from October 21, 1982, the assessee started a
proprietary concern by the name of M/s. Des Raj Vijay Kumar.
On May 27, 1983, a search took place at the assessee’s
premises during which certain incriminating documents were recovered and seized.
During the course of assessment proceedings for the A.Y. 1983-84, for which the
previous year ended on March 31, 1983, the Assessing Officer examined the seized
record. One of the registers so examined, revealed cash receipts of Rs.3,49,991
in the name of 15 persons, most of which were purportedly received during the
period of April, 1982 to October, 1982. When the Assessing Officer sought an
explanation from the assessee with regard to the said cash credits in the
register, the assessee merely stated that the cash receipts were in the nature
of realisations from the past debtors of the erstwhile firm. In order to
appreciate the said stand, the Assessing Officer called for the account books of
the Calcutta branch of the erstwhile firm for the relevant period, but the
assessee failed to produce them. The Assessing Officer also examined the
assessee’s brother, a partner in the erstwhile firm, who also stated that the
account books were not available.
Having noted that the outstanding realisations of the
Calcutta branch in the preceding years varied from Rs.25,000 to Rs.30,000, the
Assessing Officer held that the assessee’s submission that cash receipts of
Rs.3,49,991 related to earlier years was untenable. Therefore, the Assessing
Officer added a sum of Rs.3,49,991 as the assessee’s income under the head
‘unexplained cash receipts’.
Aggrieved, the assessee appealed to the Commissioner of
Income-tax (Appeals) who dismissed the same and confirmed the addition made by
the Assessing Officer.
Being still aggrieved, the assessee carried the matter in
appeal before the Tribunal. The Tribunal remitted the matter back to the
Assessing Officer for de novo adjudication. The Tribunal inter alia observed
that some of the entries pertained to the period when the erstwhile firm was in
existence, whereas the assessee did not conduct business at Calcutta in a
proprietary capacity but was only a partner in the erstwhile firm.
Pursuant to the Tribunal’s order, the Assessing Officer asked
the assessee to file confirmations of the 15 parties in whose names cash credit
entries appeared in the register seized. In reply, the assessee filed
confirmations of seven parties with address of other six parties. The Assessing
Officer considered the two remaining parties as non-existent. The Assessing
Officer did not accept the confirmation filed because they were identical and it
did not contain GIR No. Also, when the letters were sent to those parties, four
letters were returned unserved, and one of the parties denied any relationship
with the firm. Out of the letter sent to six parties whose addresses had been
supplied, three did not respond, while two others denied any relationship with
the firm and remaining one letter was returned unserved. The Assessing Officer
therefore confirmed the original assessment. The assessee preferred an appeal
before the Commissioner of Income-tax (Appeals), which was dismissed. Still not
being satisfied, the assessee carried the matter in appeal before the Tribunal.
The Tribunal, held that the addition of Rs.3,49,991 was correct.
The assessee moved an application u/s.254(2) of the Act
before the Tribunal for rectification of mistakes in the order of the Tribunal,
which was rejected by the Tribunal.
The assessee preferred an appeal before the High Court
u/s.260A of the Act, which was dismissed holding that the findings recorded by
the Commissioner of Income-tax (Appeals) and the Tribunal were findings of fact
and no substantial question of law arose for consideration.
On further appeal, the Supreme Court held that it was
manifest from a bare reading of the Section that an appeal to the High Court
from a decision of the Tribunal lies only when a substantial question of law is
involved, and where the High Court comes to the conclusion that a substantial
question of law arises from the said order, it is mandatory that such questions
must be formulated. The expression ‘substantial question of law’ is not defined
in the Act. Nevertheless, it has acquired a definite connotation through various
judicial pronouncements. The Supreme Court referred to its decisions in Sir
Chunilal V. Mehta and Sons Ltd. v. Century Spinning and Manufacturing Co. Ltd.,
AIR 1962 SC 1311, Santosh Hazari v. Purushottam Tiwari, (2001) 3 SCC 179,
Hero Vinoth. (Minor) v. Seshammal, (2006) 5 SCC 545, Madan Lal v. Mst.
Gopi, (1980) 4 SCC 255 and Ors., in this regard.
Examining on the touch-stone of the principles laid down in the aforesaid decisions, the Supreme Court was of the opinion that in the instant case the High Court had correctly concluded that no substantial question of law arose from the order of the Tribunal. The Supreme Court observed that all the authorities below, in particular the Tribunal, had observed in unison that the assessee did not produce any evidence to rebut the presumption drawn against him u/s.68 of the Act, by producing the parties in whose name the amounts in question had been credited by the assessee in his books of account. In the absence of any evidence, a bald explanation furnished by the assessee about the source of the credits in question viz. realisation from the debtors of the erstwhile firm, in the opinion of the Assessing Officer, was not satisfactory. The Supreme Court held that it was well settled that in view of S. 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year, if the explanation offered by the assessee about the nature and source thereof is in the opinion of the Assessing Officer, not satisfactory. The Supreme Court was of the opinion that on a conspectus of the factual scenario, the conclusion of the Tribunal to the effect that the assessee had failed to prove the source of the cash credits could not be said to be perverse, giving rise to a substantial question of law. The Tribunal being the final fact finding authority, in the absence of demonstrated perversity in its finding, interference therewith by the Supreme Court was not warranted.
[Note : The decisions referred to in the judgment explains as to what is a substantial question of law and when findings of fact gives rise to question of law.]
