TMI Blog1978 (9) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... se purchases, the firm did not obtain purchase voucher, but Shri Kalimuddin, partner of the applicant-firm, filed an affidavit to the effect that during samvat year 2026 the firm had purchased 18,000 litres diesel worth Rs. 14,025.75 from various private parties to meet the temporary scarcity in the area and the said purchases were recorded in one lump sum in the books of account of the firm on July 4, 1970 ; that no single purchase of diesel so recorded was of the value of Rs. 2,500 or more. The ITO did not accept the version of the assessee that the diesel was purchased by the firm in the manner indicated in the affidavit and observed that it has not been clarified by the assessee as to from whom the purchases were made and it was not possible in such small locality as Banswara to get such a huge quantity of diesel, about 90 drums, from private parties. He further observed that the assessee's explanation was not at all convincing. It was further observed that the purchases are not verifiable. It was also observed that the assessee has inflated the purchase of diesel by introducing a fictitious entry while actually no purchase has been made. He, therefore, held that the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the stock of 18,000 litres of diesel was there, for, without that, there could have been no sale of 18,000 litres of diesel. The subsequent sale which has not bee denied, in fact, proves the stock. But the question is, was this stock purchased on July 4,1970, as alleged by the assessee, or was it already lying with the assessee as suppressed stock as presumed by the Income-tax Officer. There are three pieces of evidence to support the version of the assessee : (i) entries in the stock book, (ii) entry in the cash book, and (iii) the affidavit of Shri Kalimuddin. The entries in the books are not only not supported by vouchers but do not indicate even the names of the sellers. The authorities below have indicated the factors which make the probability of purchase of 18,000 litres on one single day remote. The Appellate Assistant Commissioner points out that only a licence-holder could sell the diesel to the assessee and it is admitted by the assessee that the alleged purchases are not from the licence-holders. The Income-tax Officer has pointed out in his order that Banswara is such a small town that the procuring of 18,000 litres (i.e., 90 drums) from unlicensed sources is out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the aforesaid sum of Rs. 14,026 was liable to be included in the total income of the applicant-firm as 'income from undisclosed sources' ? 3. Whether the provisions of section 40A(3) of the Income-tax Act, 1961, were at all applicable to the purchases of diesel worth Rs. 14,026 recorded on July 4, 1970, when no single purchase was admittedly of the value exceeding Rs. 2,500 ? 4. Whether there was any material before the Tribunal in arriving at its conclusion that the payment of Rs 14,026 recorded on July 4, 1970, constituted only one payment so as to attract the provisions of sec. 40A(3) of the Income-tax Act, 1961 ? 5. Whether the Income-tax Appellate Tribunal was correct in holding that the purchases of diesel worth Rs. 14,026 recorded on July 4,1970, was 'an expenditure' within the meaning of sec. 40A(3) of the Income-tax Act, 1961 ?" The learned Tribunal, after hearing both the parties, rejected the application on February 14, 1975. Hence, the applicant-firm has presented this application under s. 256(2) of the Act praying for issuing a direction to the Tribunal to state the case and refer the same to this court on the question mentioned above for our an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not appear to be probable in the small town like Banswara. It was submitted that it is difficult to say to what extent the Tribunal's mind was affected by the surmises taken into consideration and as such questions Nos. 1 and 2 raise questions of law. In support of his contention the learned counsel placed reliance on the cases : Dirajlal Girdharilal v. CIT [1954] 26 ITR 736 (SC), Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 (SC), Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC), Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288; AIR 1959 SC 1295, Roshan Di Hatti v. CIT [1968] 68 ITR 177 (SC), CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) and CIT v. S. P. Jain [1973] 87 ITR 370 (SC). On the other hand, the learned counsel representing the department vehemently submitted that the Tribunal has arrived at the findings on the basis of evidence on record and not on surmises and conjectures. In order to arrive at the findings of facts, the probabilities can be considered as the purchases were not supported by the vouchers and the assessee failed to give out the names of his sellers so that the sales could be verified. It was proper and justified on the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon conjectures, surmises and suspicions not supported by any evidence on record or partly upon evidence and partly upon inadmissible material. Where the fact-finding authority acts without any evidence or upon a view of the facts which cannot reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law could have found, the Supreme Court is entitled to interfere. On no account whatever, should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures and surmises and if it does anything of the sort, its findings even though on questions of fact will be liable to be set aside by the Supreme Court. In Bai Velbai v. CIT [1963] 49 ITR 130 (SC), it was observed that : " A finding of fact does not alter its character as one of fact merely because it is itself an inference from other basic facts; but a finding on question of fact is open to attack under section 66 of the Indian Income-tax Act, 1922, as erroneous in law when there is no evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no evidence to support it or that it is perverse. Further, when a conclusion has been reached on an appreciation of a number of facts, whether that is sound or not must be determined, not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. When a court of fact acts on material partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises. Likewise, if the court of fact bases its decision partly on conjecture, surmises and suspicions and partly on evidence, in such a situation an issue of law arises. With regard to the appreciation of evidence by the Tribunal after reiterating the principle already enunciated in earlier decisions, their Lordships of the Supreme Court in CIT v. S. P. Jain [1973] 87 ITR 370, observed thus : "Any crystallization of the view of (the Supreme Court) and its reluctance to interfere with the findings of fact should not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness profits which are chargeable to tax and it was observed that the question whether a sum represents the price of family jewels sold, or whether it is concealed business profit is a question of fact which is open to attack in reference under s. 66, only if it could be shown that there is no evidence to support it or that it is perverse. From the consideration of the above cases, it would appear that finding of fact raises a question of law if it is based on no evidence or it is perverse or if there is no direct nexus between conclusion of fact and the primary fact upon which that conclusion is based, the conclusion of fact would be vitiated if extraneous or irrelevant consideration is made use of in arriving at the conclusion, for, it cannot be said to what extent the mind of the authority is influenced by such material. The probabilities can be taken into consideration, but if the court of fact bases its decision partly on conjectures, surmises and suspicions and partly on evidence and probabilities, in such a situation a question of law would arise. It would depend on the facts and circumstances of each case as to when the finding of fact would raise a question of law. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouchers and in the absence of names of the sellers, entries in the cash book and stock register and the affidavit cannot be believed and thus the purchases could not be verifiable, and the stock is taken to be past stock and its cost is an income from undisclosed sources, but the Tribunal had proceeded to consider the extraneous matters and to what extent the Tribunal's mind has thereby been affected, cannot be known, and so the finding of fact raises a question of law. We are in agreement with this contention of the learned counsel that the finding has been arrived at by the learned Tribunal, partly from inferences of the proved facts and partly it is based on surmises and conjectures. It was nothing but a guess or an assumption on the part of the Tribunal that at Banswara, being a small town, such a large quantity of diesel could not be available and the readiness of sellers and location of them by the assessee was not possible. Such and like considerations cannot be taken to be considerations of probabilities. Rather, such considerations only appear to conjectural. In our opinion by taking into consideration such extraneous matter, the Tribunal, to some extent, travelled in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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