Calcutta High Court
Crystal Networks (P) Ltd vs Commissioner Of Income Tax on 29 July, 2010
Author: Sengupta
Bench: Sengupta
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction
Original Side
Present :
The Hon'ble Justice Sengupta
And
The Hon'ble Justice Kanchan Chakraborty
29.07.2010
ITA 158 of 2002
Crystal Networks (P) Ltd.
Vs.
Commissioner of Income Tax
The Court :- This appeal was admitted by this Court on the following
substantial questions of law :-
"I. Whether on the facts and in the circumstances of the case the Tribunal is justified
in law in confirming the addition of Rs. 8,50,000/- as unexplained cash credit made by
the Assessing Officer solely relying on an entry made in the order sheet which has no
direct nexus with the present issue and while completely ignoring all the relevant
materials and evidence available ?
II. Whether the addition of Rs. 8,50,000/- to the income of the assessee as
unexplained cash credit by the Tribunal is sustainable in law and/or is not unreasonable
and perverse ?"
This appeal relates to Assessment Year 1994-95. The fact of the case is
summarised as follows :-
The assessee/appellant at the relevant point of time has been trading bidi and
as such used to sell and distribute to various customers situates at different parts of the
country. In course of business the assessee used to receive from time to time cash from
the customers by way of advance. In relevant Assessment Year in the return a sum of Rs.
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8,50,000/- was shown to have been received cash advances. As such the deduction of the
said sum from the income was sought for.
The ITO however did not accept the claim of the appellant rather added to
the income and so it was assessed. It was held by the ITO that the assessee under Section
68 of the Income-tax Act, 1961 failed to establish the identity of the creditors of this cash
advance. Initially the assessee was asked to bring those creditors who are alleged to have
advanced the amount of cash as against the supply of bidi. On failure of production of
those creditors the summons were issued under Section 131 by the ITO. Despite issuance
of summons none of the creditors turned up and even some cases summons returned back
with the endorsement made by the postal authority "no such person concerned was
found".
In view of such circumstances the ITO disbelieved the case of cash credit
under Section 68. Hence the claim of deduction was disallowed.
The matter was taken to appeal and the Commissioner of Income-tax
(Appeals) after going through the evidence and materials on record came to fact finding
that there are sufficient materials to hold that the said cash credit received by the assessee
was genuine and these were received as against the supply of bidi. During the same
Assessment Year or subsequent Assessment Year the necessary challans, vouchers and
other confirmatory letters were also considered by the CIT (Appeals). After analysing
everything the CIT (Appeals) accepted the explanation and also evidence of
creditworthiness of the creditors. Hence relief was granted.
Revenue being aggrieved by the said decision approached the learned
Tribunal who came to fact finding that the CIT (Appeal) has erroneously held that the
summons were issued after assessment was done. Only on that ground it was held that
the assessee could not establish by producing evidences that the credit was received from
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the various customers. As such the case of the appellant is that the cash credit was
received as against sale and supply of bidi was not accepted. Hence the order of the CIT
(Appeal) was reversed and order of the ITO was restored.
Despite notice no one appears for the respondent.
Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that ITO did not consider the material evidence showing credit worthiness and also other documents viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidi. These evidences were duly considered by the CIT (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the ITO. He further contended that when the Tribunal has relied on the entire judgment of the CIT (Appeals), therefore it was not proper to take up some portion of the judgment of the CIT (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the CIT (Appeals).
In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram Vs. Commissioner of Income-Tax, Bombay City reported in 66ITR 462 In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must in deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law.
We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before 4 assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT (Appeal) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the CIT (Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the CIT (Appeal) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows :-
"The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act. It is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law."
The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner 5 as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity.
Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the CIT (Appeals). We also found no single word has been spared to up set the fact finding of the CIT (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made.
Hence the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the CIT (Appeal). The appeal is allowed.
There will be no order as to costs.
Let xerox certified copy of this order be given to the parties, if applied for, upon compliance with all formalities.
(Sengupta, J.) (Kanchan Chakraborty, J.) ANC.