TMI Blog1985 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ree loans of Rs. 5,000 each, said to have been advanced by S/Shri Gokuldas Narsuman, Bhagwandas Nandlal and Tulsidas Bhojraj. The assessee carried the matter again in appeal challenging, inter alia, this addition of alleged three hundi loans. The Appellate Assistant Commissioner held that the assessee bad failed to establish that these hundi loans were genuine and, therefore, confirmed the order of the Income-tax Officer. On further appeal to the Appellate Tribunal, challenging, inter alia, this addition, the Tribunal made a consolidated order for the assessment years 1963-64 and 1964-65. Before the Tribunal, it was contended on behalf of the assessee that he has obtained these loans through hundi brokers who had confirmed these loan transactions and that the receipt or the repayment of the loan was by cheques, the encashment of which were certified by the concerned banks. The Income-tax Officer as well as the Appellate Assistant Commissioner could not have brushed aside this evidence on the short ground that since neither the persons advancing moneys nor the brokers could produce books of account, the transaction could not be held to be genuine. On behalf of the Department, these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been advanced by Tulsidas Bhojraj as unexplained cash credit. In effect, the Tribunal confirmed the addition of Rs. 10,000. The assessee, therefore, sought the reference from the Tribunal which accepted the prayer of the assessee and referred the following question to us for our advice: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that (a) Rs. 5,000 in the name of Shri Bhagwandas Nandlal and (b) Rs. 5,000 in the name of Shri Tulsidas Bhojraj credited in the books of the assessee were taxable as income of the assessee under section 68 of the Income-tax Act, 1961 ? " At the time of hearing of this reference, a preliminary point was raised on behalf of the Revenue that this court has no jurisdiction to go into the findings of fact made by the Tribunal, since the assessee has not thought it fit to raise and seek a specific reference challenging such a finding of fact. It is, no doubt, a settled position in law that the primary facts found by the Tribunal and the factual inferences therefrom would not be open to review by the High Court, unless the party desiring to challenge the correctness of the finding given by the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om facts found is a mixed question of law and fact and such an inference is a question of law open to review by the court. (b) Where the final determination of the issue does not involve the application of any legal principle, an inference from facts is a pure inference of facts, though drawn from basic facts, (c) A pure inference of fact not being a mixed question of law and fact is not open to review unless it is challenged as erroneous, in the sense that there is no evidence to support it, or is perverse. The learned advocate appearing for the assessee, however, made an alternative submission. In the first place, he urged a three-fold contention. , Firstly, that the present case falls within the first principle enunciated in Shree Meenakshi Mills' case [1957] 31 ITR 28 (SC), since the ultimate finding that this is an unexplained cash credit is a finding on an issue by application of the legal principle contained in section 68 of the Income-tax Act to an inference drawn from basic facts. Secondly, he submitted that inasmuch as the departmental authorities and the Tribunal have not examined the merits of the assessee's case and had arbitrarily rejected the explanation given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, and if there is no explanation or the explanation is unsatisfactory in the opinion of the Income-tax Officer, the sum so credited is to be treated as income and brought to tax accordingly. The opinion of the Income-tax Officer that the explanation submitted by the present assessee did not satisfy him is an inference drawn from the facts adduced before him. In reaching the conclusion of the explanation being satisfactory or otherwise, there is no question of any application of legal principle, much less any interpretation of the section or any legal principle for that matter. The first limb of the contention, therefore, does not impress us, for the aforesaid reasons. The second limb of the contention that since the tax authorities and the Tribunal rejected the explanation without going into the merits of the same, the finding becomes arbitrary and, therefore, the High Court will have jurisdiction to go into it, is emphasised in the light of the decision of the Supreme Court in Kannan Kunhi's case [1973] 87 ITR 395. It is necessary to recall what were the facts before the Supreme Court in that case and what ultimately the Supreme Court did in that factual context. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not a fit and proper case where it should exercise its appellate jurisdiction under article 136. No doubt, the Supreme Court has said that the Tribunal had arbitrarily rejected the explanation given by the assessee. It is also true that on behalf of the Department, the contention about the want of jurisdiction to go into findings of fact by the High Court on the question as framed was raised. Even then, we are afraid, we could not read this judgment in the manner in which the learned advocate for the assessee wants us to read it. In his submission, the refusal by the Supreme Court to exercise the appellate jurisdiction after observing that the Tribunal had arbitrarily rejected the explanation given by the assessee is sufficient to indicate that the contention of the Department that the High Court had no jurisdiction to go into the finding of fact on the question as raised before it, which question is in pari materia with the question raised before us as to whether the addition of the amount as an income of the assessee from undisclosed source was valid and justified in law, is baseless. In the submission of the learned advocate, therefore, this is a typical illustrative cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were raised. The concerned parties so far as the two impugned transactions are concerned are Bhagwandas Nandlal and Tulsidas Bhojraj. The summons was served on Bhagwandas Nandlal. He, however, replied that he has no books of account to corroborate his confirmatory letters saying that he had advanced the amount of Rs. 5,000 to the assessee. The brokers, M/s. Mohanlal and Co., appeared and acknowledged the confirmatory letter saying that the loans were raised through them. They also produced some rough memorandum of accounts to show what brokerage they had charged for rendering the services. They, however, admitted that they were not maintaining regular books of account. Similarly, for the second impugned loan transaction of Rs. 5,000 from Tulsidas Bhojraj, the assessee led evidence before the Tribunal to show that the loan was received, in fact, by cheque, and the finding of the Income-tax Officer as well as the Appellate Assistant Commissioner noting that the amount was received in cash was not factually correct. On behalf of the Department, the departmental representative referred to various confessional statements to urge that the parties concerned had admitted that all the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confessional statements made by this person but the only evidence led by the assessee consists of confirmation letter through broker and as indicated by us earlier, we are unable to accept that it is adequate to establish the loan to be genuine. (Emphasis supplied). In our opinion with respect to the Tribunal, the Tribunal has not given due care and consideration to every fact for and against the assessee. It has failed to identify what points arose before it, what was the evidence pro and contra in regard to each of them and what are the findings thereon. The most important aspect of the matter which would have clinched the issue one way or the other is the bank evidence. In the case of Bhagwandas, the repayment of loan is by cheque. In the case of Tulsidas, the receipt of the loan amount is by cheque. The bank has given certificates saying that these cheques were encashed, credited and/or debited to the concerned account, as the case may be. It is no doubt true that in the confessional statement, the parties have stated that these transactions were carried through the bank with the ulterior motive of giving an appearance of genuineness to these transactions. These confessional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reading the relevant portion pertaining to this aspect, we find that the Tribunal has allowed the assessee to lead additional evidence. If the Tribunal was of the opinion that this evidence was not processed by the authorities below, the Tribunal could have given an opportunity by remanding the matter. But if the Tribunal was satisfied, as it was, as recorded by itself in its order in paragraph 15, that in fact the amount was advanced by cheque, it would not have stopped short by refusing to consider it on the ground that this would be to the prejudice of the lower authorities, since they had no opportunity to process this evidence. We are, therefore, of the opinion that the findings of the Tribunal are clearly vitiated, since it has not discharged its obligation which has been prescribed by law, as explained by the Supreme Court. The result is that there are no valid findings before us to answer the question which has been referred to us. In the circumstances, therefore, we decline to answer the question. This reference is accordingly disposed of. Having regard to the facts of the case, there would be no order as to costs. We hope and recommend that having regard to the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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