Kerala High Court
M.A. Unneeri Kutty vs Commissioner Of Income-Tax on 20 September, 1991
Equivalent citations: [1992]198ITR147(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Paripoornan, J.
1. The petitioner herein is an assessee to income-tax. This petition is filed under Section 256(2) of the Income-tax Act, 1961, to direct the Income-tax Appellate Tribunal to refer the following four questions of law, formulated in paragraph 15 of the original petition, for the decision of this court :
" 1. Whether, in a case where the creditor is identified and the creditworthiness of the creditor is established, the assessee has any burden to further establish the source of that creditor ?
2. Whether the Tribunal was not bound by its earlier order of remand and if so, whether the Tribunal was justified in ignoring the legal effect of the proved repayment of the credit to the creditor as ruled in its earlier order?
3. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the two cash credits of Rs. 75,000 in the name of Smt. K. Pathukutty Umma and Rs. 25,000 in the name of Sri V. Abdukutty were not genuine, but constituted the undisclosed income of the assessee ?
4. Whether the findings of the Tribunal referred to in question No. 3 supra were arrived at by ignoring an essential matter, namely, the repayment of the amount to the creditors and are, therefore, unsustainable ? "
2. The respondent is the Revenue. We are concerned with the assessment year 1972-73 for which the accounting period ended on March 31, 1972. The proceedings had a chequered history. The minimal facts to understand the scope of the present controversy are as follows :
The assessee's books of account showed receipt of cash amounting to Rs. 2,06,456 on January 5, 1972. It was a credit in the names of seven persons. Dissatisfied with the explanation offered by the assessee, the Income-tax Officer, by order dated August 23, 1975, added the said amount as " unexplained cash credits ". In the first appeal, the Appellate Assistant Commissioner of Income-tax deleted the said addition by order dated September 23, 1975. The Income-tax Officer had made an addition of Rs. 3,40,000 as investments in unaccounted purchases of copra. Out of the above, the Appellate Assistant Commissioner sustained Rs. 1,43,258. The Revenue as well as the assessee filed appeals against the order passed by the Appellate Assistant Commissioner of Income-tax dated September 23, 1975. The appeal filed by the Revenue was partly allowed. Some of the credits were directed to be examined afresh. The appeal filed by the assessee was dismissed. The said order is dated January 30, 1979. On the merits, the Commissioner of Income-tax (Appeals), by his order dated March 27, 1987, accepted the explanation of the assessee with regard to the two cash credits, but held that the two credits appearing in the names of Smt. Pathukutty Umma (Rs, 75,000) and Shri V. Abdukutty (Rs. 25,000) were not proved to be genuine loans. They were sustained. The assessee carried the matter by way of appeal before the Appellate Tribunal. By order dated January 27, 1988, the Appellate Tribunal sustained the two cash credits, Rs. 75,000 in the name of Smt. Pathukutty Umma and Rs. 25,000 in the name of Shri V. Abdukutty. It is thereafter that the assessee formulated the above four questions of law, in the application filed under Section 256(2) of the Act, for reference to this court. The Appellate Tribunal considered the matter exhaustively and, by order dated August 30, 1989, held that the two cash credits were not satisfactorily explained and that the same is a finding of fact and that no question of law can be said to arise out of the above findings of fact. It is thereafter that the assessee has filed this petition under Section 256(2) of the Income-tax Act.
3. We heard counsel for the petitioner, Mr. P. G. K. Wariyar, as also counsel for the respondent/Revenue, Mr. P. K. R. Menon. The petitioner's counsel, Mr. Wariyar, forcefully submitted that the approach made by the statutory authorities is to the effect that the assessee should prove the source in the case of cash credits and that this is unjustified in law. It was submitted that the Appellate Tribunal, in disposing of the appeal, by order dated January 27, 1988, did not bear in mind its earlier order dated January 30, 1979, and the directions contained therein. The questions formulated in the original petition are pure questions of law which deserve to be referred to this court for decision.
4. On the other hand, counsel for the Revenue submitted that the plea urged by the assessee's counsel is purely academic and does not arise out of the appellate order passed by the Appellate Tribunal. Counsel for the Revenue submitted that, in the case of cash credits appearing in the books of account of the assessee, it is the duty of the assessee to establish the identity of the creditor and also his creditworthiness. In other words, the transactions should be established as genuine. In this case, it has not been done. The Appellate Tribunal has held so. That precise finding which is one of fact is not assailed by framing an appropriate question. After the remit by the Appellate Tribunal and in conformity with the directions given by it, in its order dated January 30, 1979, the first appellate authority considered the entire matter over again, accepted the cash credits with regard to the two transactions and held that the two other transactions in the names of Smt. Pathukutty Umma and Shri Abdukutty were not proved to be genuine loans. It is this decision which was taken in appeal by the assessee before the Appellate Tribunal and the Appellate Tribunal considered the matter on merits and found that no interference is called for with the order passed by the Commissioner of Income-tax (Appeals). No question of law arises out of the appellate order passed by the Tribunal.
5. Having considered the rival pleas advanced before us, we are satisfied that the plea of the assessee should fail. The following facts stand out prominently. The assessee had business connections with Shri Kunhaimu Haji, who advanced a sum of Rs. 2,06,456 in different names on a single day. The credits appeared in the books of account of the assessee. Smt. Pathukutty Umma is the wife of Shri Kunhaimu Haji and Shri Abdukutty is the son of Shri Kunhaimu Haji. The fact that the assessee and Shri Kunhaimu Haji had business transactions and that the two credits appeared in the names of near relations of Shri Haji are admitted. After considering the explanation offered by the assessee, the Appellate Tribunal held that Smt. Pathukutty Umma was putting forward different pleas regarding the availability of funds and so, what she stated in her confirmatory letter does not appear to be reliable, considered especially in the light of the fact that she had only three acres of land and the amount of Rs. 50,000 withdrawn by her from Vijaya Bank appears to be a manipulation. The Appellate Tribunal found that Smt. Pathukutty Umma does not have any creditworthiness and there was every possibility that the story regarding the advance of loan was cooked up by the assessee with the help of Shri Kunhaimu Haji, husband of the creditor. The Appellate Tribunal found that the assessee had established only the identity of the creditor but the creditworthiness of the creditor and the genuineness of the transactions have not been proved. The Appellate Tribunal further found that the credit in the name of Shri Abdukutty stands on the same footing as that of Smt. Pathukutty Umma and, in the light of the finding that the creditworthiness of the creditors have not been proved, the addition of Rs. 75,000 and Rs. 25,000 sustained by the Commissioner of Income-tax (Appeals) did not merit any interference in appeal.
6. We should state that the above findings entered by the Appellate Tribunal are pure findings of fact. It cannot be doubted that it is for the assessee to prove the identity of the creditor as also the creditworthiness. The genuineness of the transactions should be proved. The Appellate Tribunal has entered a definite finding that these vital aspects have not been proved. The above finding of fact is not assailed in the original petition by framing an appropriate question as to whether the above finding of fact is based on any material or otherwise vitiated or tainted. The above vital findings remain unchallenged. In so far as the findings of the Appellate Tribunal that the creditworthiness of the creditor has not been substantiated and the genuineness of the transactions have not been proved, no referable question of law can be said to arise out of the order passed by the Appellate Tribunal in the appeal dated January 27, 1988. What is more, the first question is really academic. This is not a case where the creditworthiness is established. The question proceeds on the basis that the creditworthiness of the creditor is established. Question No. 1 is really academic and hypothetical. The question as to whether the cash credits were genuine is a question of fact. So, question No. 3 is a pure question of fact and no question of law is involved therein. In arriving at the finding that the cash credits were not genuine and that the creditworthiness of the creditors were not established, the repayment of the amount to the creditors was also considered and it cannot be stated that any essential matter, as formulated in question No. 4, was ignored. Question No. 4 does not arise for consideration.
7. We were not invited to any specific instance whereby any specific direction or finding by the Appellate Tribunal in the earlier order dated January 30, 1979, was deviated or departed from. Indeed, the order passed by the Commissioner of Income-tax (Appeals) after remit is in accord with the directions given by the Appellate Tribunal in its order dated January 30, 1979, and it is the said order that was confirmed in appeal by the Appellate Tribunal. Question No. 2, formulated in the original petition, does not arise and the orders passed after the remit are in accord with the order of remand.
8. We are of the opinion that no referable question of law arises out of the appellate order passed by the Appellate Tribunal dated January 27, 1988.
9. The original petition is without merit. It is dismissed.