Patna High Court
Commissioner Of Income-Tax vs Thakur Ram Ganga Prasad (P.) Ltd. on 6 July, 1984
Equivalent citations: [1986]158ITR409(PATNA)
JUDGMENT
1. A statement of the case has been submitted by the Income-tax Appellate Tribunal Bench "A", Patna, under Section 256(2) of the Income-tax Act, 1961 (hereinafter to be called as "the said Act"), referring the following question for the opinion of this court:
"Whether, on the facts and in the circumstances of this case, the conclusion drawn by the Tribunal that investment of Rupees 90,000 (Rupees Ninety thousand only) in undeclared stock of paddy and rice, was covered by the two additions made in the earlier years on account of undeclared stocks of oil cakes and oil, was perverse, as being based on no evidence ?"
2. The relevant facts of the case can be culled out from the statement of the case. In the course of assessment for the assessment year 1961-62, the Income-tax Officer found discrepancies in the stock account of rice and paddy. He found the opening stock and production of rice up to March, 1960, to be only 5,041 maunds but the total sales recorded up to that period was shown at 5,267 maunds. Thus, an excess stock of 226 maunds was shown. This discrepancy was found after making reference to statements made by the assessee to the bank. The Income-tax Officer also looked into dhan kutai khata and discovered the discrepancy in the stock of rice and paddy. As there was no reasonable explanation for excess of sale of rice, the Income-tax Officer concluded that the assessee was having transactions outside the books and was making purchases which were not shown in the regular books of account.
3. According to the Income-tax Officer, the assessee had not disclosed the purchase of paddy of about 4,500 maunds up to March itself and this fact of suppression of paddy was further corroborated by the unaccounted sales detected in rice account at 226 maunds and considering the average purchase of paddy at the rate of Rs. 147.60 per maund, he concluded that the investment in purchase of paddy outside the books of account came to about Rs. 66,420. The Income-tax Officer estimated that apart from this, the assessee must have more investment after the month of March and he, therefore, calculated the total transaction outside the books of account at Rs. 90,000. The Income-tax Officer, therefore, made an addition of Rs. 90,000 as unaccounted for investment in purchase of paddy and estimated an additional profit of Rs. 10,000 in rice milling account. The order of the Income-tax Officer has been annexed and marked as annexure "A" forming part of the statement of the case.
4. In appeal before the Appellate Assistant Commissioner, the discrepancy of 4,500 maunds of paddy was admitted by the assessee. The plea of the assessee, however, was that the value of unexplained stock would come to only Rs. 66,420 and no further addition should have been made as in the immediately two preceding years, additions had been made in respect of the excess stock in other goods in which the assessee was dealing. According to the assessee's claim, the amount added in the earlier two years should have been taken as available to the assessee for being invested in the business outside the books and considering that no further amount of cash was required for the business carried on outside the books. The Appellate Assistant Commissioner did not accept this plea of the assessee and he came to the conclusion that the assessee was habitually carrying on business outside the books of account. He was also of the view that if the investment up to March itself was Rs. 66,000, then there could have been more investment outside the books after that month also. It is worthwhile to mention here that the accounting period of the assessee begins from January and ends in December of that year. The Appellate Assistant Commissioner, therefore, confirmed this estimate made by the Income-tax Officer and also confirmed the profit to the tune of Rs. 10,000. The first appellate order has been marked annexure "B" to the statement of the case.
5. On further appeal before the Appellate Tribunal, the discrepancy in the stocks was not challenged. It was further submitted that the transactions outside the books were Rs. 66,420 only and as against that, in the immediately preceding year, an addition of Rs. 65,000 had been made and it was held that this amount represented an additional investment made by the assessee in the business outside the books of account. It was also submitted that the amount invested in a particular business, namely, the business of dealing in oil cakes and oil became available to the assessee after the sales and, therefore, the money received from sale proceeds could have easily been invested by the assessee in the business outside the books. It was also pointed out that such additions made in the last two years were more than Rs. 90,000, but to be precise, it was Rs. 92,000 odd. There was nothing to show that this amount had been withdrawn or invested by the assessee in any other manner. It was, therefore, submitted that further addition of Rs. 90,000 in the relevant assessment year was not reasonable and the same should have been treated as covered by the additions made in the earlier years.
6. On behalf of the Revenue, it was submitted that the assessee has been in the habit of having transactions outside the books of account and it was for this reason that the books of account were not produced. It was also submitted on behalf of the parties that there was nothing to show that the additions made in those years were available to the assessee in this year. The Tribunal held that the discrepancies in the paddy account and for the rice sales were clearly established which show that the transactions outside the books in paddy and rice accounts had been carried out by the assessee. The Tribunal also held that there were transactions outside the books. It was further held that the assessee must have invested Rs. 66,420. The Tribunal, however, was of the view that any further estimate, over and above this, could not be supported by any material. It was further found by the Tribunal that in the immediately preceding two years, additions, had been made in the assessment of the assessee to the extent of more than Rs. 90,000 as representing the additional investment in the business outside the books. Considering the facts and circumstances of the case, the Tribunal came to the conclusion that the amounts added in the earlier years were available to that extent for being invested in the paddy and rice business and, in that event, if there was some additional investment in the month of March, the same would be fully covered by the additions made in the two earlier years. On these facts, the addition of Rs. 90,000 was deleted. The appellate order of the Tribunal has been annexed and marked as annexure "C" to the statement of the case.
7. It would be pertinent to note here that the reasons given by the Tribunal in its appellate order are two-fold. Firstly, any estimate over and above the amount of Rs. 66,420 has been held to be without any basis and without any material on record. Thus, the amount given will justify that the additions have been made during the immediately preceding years which, admittedly, came to Rs. 66,000. In the second place, the Tribunal assuming that the estimate made by the Income-tax Officer was correct, has held that even if the estimated addition be taken at Rs. 90,000 as has been done the Tribunal, the amount during the immediately next two preceding years which we have already mentioned above, comes to Rs. 92,000 and odd.
8. The learned senior standing counsel for the Revenue could not place before us any material to show that the additions so made were in any other manner challenged by the assessee. He also admitted that even before the Tribunal there was no such material to induce it to come to an inference contrary to what it ought to have done. The Income-tax Officer in his assessment order (annexure "A") has himself observed that "the assessee made an investment in paddy a/c. of Rs. 66,420 out of funds kept outside the book of account". It is true that the paddy season ends by March and, therefore, the stock of paddy obtained by the assessee which has been kept out of the books is not likely to be large. "So, taking into consideration all the facts of the case, an addition of Rs. 90,000 is made on account of undisclosed purchase of paddy out of undisclosed fund." The Tribunal has taken special care to note that the money had come from undisclosed fund and has further recorded a finding of fact that such undisclosed fund was available to the assessee or might have been available to the assessee on account of additions made to the tune of Rs. 92,000 odd, out of which Rs. 65,000 had been added only in the just next (earlier) preceding year. The learned senior standing counsel vehemently contended that the money could not have been available to the assessee since there is nothing to show that the goods in relation to which additions have been made in the earlier years had already been sold. This argument, however, is fallacious since it had never been any one's case that those goods had not already been sold and funds did not come to the hands of the assessee. Since money had come, according to the assessing officer, out of the undisclosed fund and the Tribunal has held that such undisclosed fund was available to the petitioner, it becomes a pure question of fact.
9. It is true that as the Supreme Court has held in the case of CIT v. Jain [1973] 87 ITR 370, the High Court and the Supreme Court have always the jurisdiction to interfere with the findings of the Appellate Tribunal if it appears that either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory to it, or it has acted on materials partly relevant and partly irrelevant or where the Tribunal draws upon its own imagination and imports facts and circumstances not apparent from the record or bases its conclusions on mere conjectures or surmises or where no person judicially acting and properly instructed as to the relevant law could have come to the determination reached. In all such cases, the findings arrived at are vitiated. The learned senior standing counsel laid great stress on the portion underlined by us. No one takes exception to this proposition. Where, however, as in the instant case, the court has to judge as to whether a finding of fact arrived at by the Tribunal is perverse or not, only materials on record have to be looked into. In the instant case, as already mentioned above, it cannot be said that the Tribunal has acted upon its own imagination or has resorted to conjectures and surmises. It plainly confined itself to the materials on the record and has not overlooked any relevant material. In such circumstances, we are unable to hold that the findings of fact recorded by the Tribunal can in any way be said to be perverse.
10. The learned senior standing counsel referred to some decisions, namely, in the cases of CST v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271; 32 STC 77 (SC), Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC), Selh Kalekhan Mahomed Hanif v. CIT [1958] 34 ITR 669 (MP) and CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). These cases do not lay down any such proposition which can be said to apply to the facts and the circumstances of the instant case in order to test the perversity of the Tribunal's finding. It is, therefore, needless to go into the details of those cases.
11. Mr. K.N. Jain, learned counsel for the assessee, invited our attention to the cases of Dulichand Omprakash v. CIT [1978] 113 ITR 476 (Cal) and Premier Suppliers (P.) Ltd. v. CIT [1979] 120 ITR 633 (Cal), both the decisions being of the Calcutta High Court. These cases do lend support to the stand taken by the Tribunal taking into account the additions made during the previous years. The learned counsel for the assessee also invited our attention to the cases of CIT v. S. Nelliappan [1967] 66 ITR 722 (SC) and Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC). It is not necessary for us, for the purpose of decision in this case, to go into the facts or proposition laid down in Anantharam Veerasinghaiah & Co.'s case [1980] 123 ITR 457 (SC), because that was a case of cash credit and involved penalty proceeding under Section 271(1)(c) of the said Act. It would, however, be relevant to take a note of what the Supreme Court has observed in that case at page 463 which runs thus :
"Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case."
12. Each case, therefore, must be judged on its own merits and on the relevant materials on the record of the case. The learned senior standing counsel for the Revenue also invited our attention to the opinion in regard to that Supreme Court decision on that very page wherein it has been held that the Appellate Tribunal had erred in law in confining itself to the fact that an intangible addition had been made to the assessee's book profits for the earlier two years and that a part of that amount remained available to the assessee thereafter. He also pressed upon our attention to the following sentence from the Supreme Court judgment (p. 463):
"The High Court is right in departing from that limited approach and in insisting on a consideration of all the relevant facts and circumstances of the case relied on by the revenue for the purpose of determining whether the revenue has succeeded in discharging its burden."
13. We fail to see how this sentence helps the Revenue.
14. In the case of Anantharam [1980] 123 ITR 457 (SC), the Appellate Tribunal had confined itself only to an intangible addition which had already been made in the preceding year which ought to have been taken note of by the Tribunal. The High Court in that case took a note of all the relevant facts and did not confine itself to the additions made during the previous years to which entry alone the Appellate Tribunal had confined itself. It is too well-settled that all the relevant materials and evidence on the record must be considered before arriving at findings of facts. In the instant case, there is no material on record which has not been taken note of by the Tribunal nor has any irrelevant fact been taken into consideration by the Tribunal. In the case of Nelliappan [1967] 66 ITR 722, the Supreme Court again assessed a case of cash credits in relation to which a finding recorded by the Appellate Tribunal was held to be a finding of fact. We have already observed above that it is a pure question of fact and can be interfered with only if it is held to be perverse by applying any of the rules enunciated by the Supreme Court in the case of S.P. Jain [1973] 87 ITR 370 (SC).
15. In the result, therefore, we answer the question referred to us in the negative and hold that on the facts and in the circumstances of the case, the conclusion drawn by the Tribunal was not perverse and cannot be said to have been based on no material. The question is thus answered against the Revenue and in favour of the assessee. There shall, however, be no order as to costs.