TMI Blog1985 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... its. The stand of the assessee in regard to the cash credits in respect of all but two items did not find favour with the Appellate Tribunal as well. The Tribunal, however, accepted the stand of the assessee in regard to loans of Rs. 20,598 and Rs. 8,247 (principal and interest) by Navjug Bidi Company and Ram Bidi Company, respectively. The Tribunal thus held that out of the credits in the assessment year 1968-69, the assessee had successfully explained the loans of Rs. 28,845 from Navjug Bidi Company and Ram Bidi Company both of Nepal. The transactions in regard to loans from individuals during the year 1967-68 were rejected without any modification. The finding of the Tribunal in regard to cash credits, therefore, was that the assessee had failed to explain the cash credits to the tune of Rs. 1,29,106 during the year 1967-68 and a sum of Rs. 85,356 during the year 1968-69. 1 have some difficulty in following the arithmetic of the Tribunal in regard to the unexplained sums, but that is not important. Suffice it to say that the case of cash credits was rejected by all the Revenue authorities. Thus far, there is no difficulty. The Tribunal, however, allowed " telescoping benefit " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed sources or other sources. In order to appreciate the contentions of the parties, it would be useful to set out some more facts. During the assessment year 1967-68, the assessee showed purchase in bidi leaves of the value of Rs. 13,67,856. The Income-tax Officer held that the purchase figures were inflated. He, therefore, cut down the purchase figure by Rs. 1,50,000. He took this figure as income of the assessee. The Income-tax Officer also found that the figure for shortage of 12,546 bags on conversion to 7,281 bags of bidi leaves was high. The shortage thus was about 72.6% as against 62% during the preceding year. This, in the view of the Income-tax Officer, was unusually high. He, therefore, added back Rs. 25,000 for excess shortage. The Income-tax Officer thus added Rs. 1,75,000 in the bidi leaves purchase account for the assessment year 1967-68 and Rs. 1,05,000 for the assessment year 1968-69 and Rs. 30,000 on account of conversion loss. The Income-tax Officer thus treated Rs. 1,35,000 as income of the assessee for the year 1968-69. The assessee during the assessment year 1967-68 had shown gross profit of Rs. 1,84, 519 which worked out to 11.72%. This was considered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned standing counsel for the Revenue has contended that there was no occasion for adjusting or setting off of additions in trading account against cash credits. It was submitted that all the cash credits were recorded in May, 1967, which would be the mid-season of the bidi account and, therefore, they could not be concealed profits earned during the assessment years. The Tribunal observed in respect of the previous assessment year (1966-67) that the cash credits may be deemed to have been covered by the additions made in the trading account. The orders of the Tribunal for the years under reference were passed on the same footing. The basis of the order of the Tribunal thus is that since there were unexplained cash credits, the additions to trading account must be related to those cash credits. I have some difficulty in accepting this bald proposition. There can be no presumption that whenever additions to profit or trading account are effected, they must be set off against cash credits unexplained by the assessee. It was never the case of the assessee that the cash credits were intangible additions of the previous assessment years. It was not the assessee's assertion that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account as cash credit. The assessee may try to cheat the Revenue not only by showing fake cash credits but also by suppressed profits. The Tribunal, therefore, had to consider whether the cash credits were profits or income earned during the respective assessment years. The assessee did not point to any circumstance or material indicating that the cash credits were profits earned by the assessee during the very same assessment year. Learned standing counsel for the Revenue brought to our notice the decision in CIT v. Manick Sons [1969] 74 ITR 1 (SC) in aid of his submission. We have considerable reservation about the efficacy of this decision in favour of the Revenue. The weight of a decision must depend upon its ratio. A decision is an authority only for what it actually decides and not the logical extension therefrom. [ Quinn v. Leathem [1901] AC 495 and Regional Manager v.PawanKumar Dubey, AIR [1976] SC 1766. In that case, the question was whether a Tribunal hearing an appeal may give direction for reopening of the assessment of an year to which the appeal does not relate. In that context, the Supreme Court observed that the Tribunal cannot give any direction to reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from his account books and the cash credit entries found therein and the conclusion that since additions were made to the book profits in excess of the amount of the cash credits, the addition of the cash credits becomes redundant, are findings of fact and no question of law can arise therefrom. " The question, however, before us is really within a very narrow compass. The question is whether the Tribunal has found any connection between the additions and the cash credits. If the Tribunal had held that there was such a connection, that would have been a finding of fact and would have closed all controversy. The situation in the instant case, however, is entirely different. The discussion in regard to this aspect of the matter is to be found in paragraph 21 of the order of the Appellate Tribunal. The Tribunal held that the additions to the profits must be held to be implicit in the claim of cash credits and as such a set-off had been conceded in the assessments in the assessment year 1966-67, the assessee was entitled to some rebate. The order of the Tribunal in regard to the assessment year 1966-67 shows that a set-off of Rs. 4,000 claimed to be cash credits was allowed, as it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o justification for confirming telescoping benefits upon the assessee. Learned counsel for the assessee brought to our notice a decision of this court in CIT v. Thakur Ram Ganga Prasad (P.) Ltd. [1986] 158 ITR 409 (Taxation Case No. 85 of 1975, disposed of on July 6, 1984). That case has no application to this case, as that proceeded upon an intangible addition in the past. It did not relate to cash credits and additions to profits during the assessment year itself. The other distinctive feature is that in that case their Lordships found that the matter was concluded by findings of fact. The Tribunal had held that the intangible additions of the past were available with the assessee howsoever inaccurate. That finding was binding upon the High Court. That is not the situation here. That case, therefore, has no relevance in the instant case. For the reasons stated above, I am of the view that the Tribunal was not correct in allowing telescoping benefit on account of intangible additions in the trading account claimed by the assessee during the same assessment year. The reference is thus answered in favour of the Revenue and against the assessee. In the circumstances of the case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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