Gauhati High Court
Kamal Kumar Saharia vs Commissioner Of Income-Tax on 4 February, 1994
Author: S.N. Phukan
Bench: S.N. Phukan
JUDGMENT M.K. Sharma, J.
1. In this reference at the instance of the assessee, the following question has been referred by the Tribunal under Section 256(1) of the Income-tax Act, 1961, for the opinion of this court for the assessment year 1982-83 :
" Has not the learned Appellate Tribunal committed an error on solely basing its judgment on book adjustment entries made on March 31, 1982 after the close of the previous year to find out the financial position of that year, when the payments were actually and really made on or after April 2, 1982 on the encashment of the cheque as found by the lower appellate authority and thereby confirming the addition of Rs. 3,43,014 without any corroborative evidence in the hands of the Department that the payments were made on or before March 31, 1982 ?"
2. The facts in this case are that the Assessing Officer added to the income of the assessee a sum of Rs. 3,43,014 "being the amount of cash brought into the books of the assessee as received from the executive engineer by cheque on March 31, 1982" within the previous year 1981-82 corresponding to the assessment year 1982-83, while the cheque was encashed only on April 2, 1982. He came to the conclusion that since the assessee had to incur expenses (as shown in his books) aggregating to Rs. 3,28,554, he brought in the amount of Rs. 3,43,014, in the "guise of the cheque" and added the amount as income from undisclosed sources.
3. The assessee's contention that the payments for the expenses though paid, encashment of the cheque on April 2, 1982, on different dates but recorded on March 31, 1982, as the cheque which was encashed actually on April 2, 1982, was recorded on March 31, 1982, as all the receipts and expenses relate to the accounting year 1981-82, though received or paid after the accounting year as per its method of accounting regularly employed, was not accepted. The assessee being aggrieved went before the Commissioner of Income-tax (Appeals) who held that the addition of Rs. 3,43,014 was not justified and, therefore, deleted the same.
4. In coming to the above decision, the Commissioner of Income-tax (Appeals) relied on the vouchers produced for some of the expenses and also the method of accounting regularly employed by the assessee and the totality of the aforesaid circumstances was considered acceptable by him. He also reproduced in his appellate order, the order of assessment to show that the assessee, in his cash book, has not shown any cash received on March 31, 1982. It was recorded that "a cheque was received for Rs. 3,16,000 on March 31, 1982". He has also referred to the evidence produced on behalf of the assessee to show that the expenses actually incurred on December 8, 1981 and February 6, 1982 were recorded on March 31, 1982.
5. The Revenue filed an appeal against the order of the Commissioner of Income-tax (Appeals) before the Income-tax Appellate Tribunal who reversed the order of the Commissioner of Income-tax (Appeals) and restored the order of the Assessing Officer in respect of the addition of Rs. 3,43,014 as income from undisclosed sources. In coming to the finding, the Tribunal relied upon the book entries of the assessee as the only acceptable evidence and held that no other subsidiary evidence such as vouchers, etc., could be relied upon, The Tribunal had not gone into the question of the method of accounting regularly employed by the assessee.
6. We are of the opinion, that the question referred to us as such is not a question of law but the following questions of law do arise out of the order of the Tribunal :
" (i) Whether the learned Tribunal had erred in law in not considering the subsidiary evidence such as payment vouchers and also in not considering the method of accounting regularly employed by the assessee ?
(ii) Whether the learned Tribunal had erred in law in sustaining the addition of Rs. 3,43,014 as income from undisclosed sources only on the basis of part of the accounts ?"
7. We have heard Dr. A. K. Saraf, learned counsel for the assessee, and also Mr. D. K. Talukdar, learned standing counsel representing the Revenue, on the aforesaid questions of law reframed by us. Dr. Saraf submits that the system of accounting which the assessee was following was the mercantile system of accounting. He further submits that there was no introduction of unaccounted money on March 31, 1982, and that the expenditure incurred has been shown as incurred on March 31, 1982 although in fact, actual payments were made after the cheque was actually encashed and that all such expenditure are supported by vouchers. According to learned counsel, the Income-tax Officer having accepted the expenses incurred as correct was not justified in coming to the conclusion that the expenses were made from some undisclosed sources. On the other hand, Mr. Talukdar submits that the cash book and other books maintained by the assessee are primary evidence, that payments have already been incurred by the assessee in respect of those specified items for specified amounts and that no other evidence was necessary and, accordingly, the Income-tax Officer was justified in making the addition of the amount. According to him, on the facts and circumstances of the case, the learned Tribunal was justified in reversing the findings of the Commissioner of Income-tax (Appeals) and restoring the order of the Income-tax Officer.
8. We have considered the rival submissions made by learned counsel for the parties. We have also been taken through the three orders relevant to the case on hand. Having perused the same and on hearing counsel, we feel that the learned Tribunal was not justified in upholding the order of the Income-tax Officer on the ground that the assessee had produced fabricated evidence in the form of vouchers inasmuch as the assessee has explained the delay in the production of the vouchers, which appear from the records of the case. Under such circumstances the finding of the Income-tax Officer that the assessee had produced fabricated evidence in the form of vouchers cannot be upheld. In that view of the matter, we are satisfied that no unaccounted money amounting to Rs. 3,43,014 was introduced in the books of the assessee on March 31, 1982. It may further be stated that neither the Tribunal nor the Income-tax Officer had gone into the aspect as to what is the system of accounting adopted by the assessee. It appears to us that the expenses should have been debited to the profit and loss account by creating the credit accounts to the creditors. But instead of showing liabilities for the expenses in the balance-sheet, the expenses were shown to have been paid on March 31, 1982 though actually paid later. The system adopted by the assessee may not be proper but the same, in any manner, dons not prove and establish any lack of bona fides on the part of the assessee. It appears to us that the finding's arrived at by the Income-tax Officer which had been upheld by the learned Tribunal to the effect that the vouchers produced by the assessee were not correct and were fabricated evidence are based on conjectures, surmises and suspicion and no relevant material could be pointed out by the said authorities for arriving at such a finding. We are, therefore, of the opinion that it would be too remote and far-fetched, on the facts and circumstances of the case, to hold that the vouchers produced by the assessee were not correct and that they were fabricated evidence and, accordingly, we hold that there is no direct nexus between the facts found and the conclusion therefrom.
9. It is settled law that tax authorities, having relied on one part of a transaction, cannot reject the other part of the same transaction. In the instant case, the expenditure shown to have been incurred by the assessee having been accepted by the income-lax authorities, there was no justification, on the facts and circumstances of the case, not to accept the receipt as disclosed by the assessee.
10. In view of the aforesaid findings, we answer the questions of law reframed by us in the affirmative, i.e., in favour of the assessee and against the Revenue. We, however, make no order as to costs.