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Commissioner Of Income-Tax v. Smt. Usha Jain.
Factual and Procedural Background
The respondent's books credited Messrs. Gupta and Co. with Rs. 48,476 and S. Surain Singh with Rs. 48,400. The respondent was constructing a building and the cost of material was debited to those accounts. The Income-tax Officer (ITO) concluded that Messrs. Gupta and Co. and S. Surain Singh did not exist and that the entries were fictitious, and he sought to apply section 68 of the Income-tax Act. The Commissioner of Income-tax (Appeals) held that section 68 was not applicable and remanded the matter to the ITO for further investigation, observing that sections 69, 69B or 69C might be relevant. The ITO appealed; the Tribunal observed that "section 68 deals specifically with sums credited in the books of the assessee on account of receipt of money." The petitioner's counsel disputed the Tribunal's view on the scope of section 68. The High Court considered the matter a pure question of law and directed the Tribunal to state a case referring a question of law to the Court. The respondent also contended that the reference was time-barred, which the Court rejected after examining the service and affidavit evidence.
Legal Issues Presented
- Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing that the additions made on account of unexplained cash credits would not be called unexplained cash credits under section 68 of the Act?
- Whether the reference/petition was barred by time (limitation) given the dates of the Tribunal's order and alleged date of receipt?
Arguments of the Parties
Petitioner's Arguments
- Section 68 refers only to sums being credited in the books of the assessee and does not specifically state that the section applies only when such credits are due to receipt of money. (Argument directed at the proper interpretation of section 68.)
Respondent's Arguments
- The reference is time-barred. It was contended that it is not possible that an order passed on May 14, 1986, was served only on February 27, 1987 (i.e., the respondent questioned the petition's averment about receipt/service date).
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court treated the principal dispute as a pure question of law concerning the correct interpretation of section 68 of the Income-tax Act and therefore directed that the Tribunal state a case referring that question to the High Court.
On the limitation objection, the Court examined the dates: the Tribunal's order was dated May 14, 1986, and the petition stated (in paragraph 24) that the order was received on February 27, 1987. That statement was supported by an affidavit of the Commissioner of Income-tax. The respondent's challenge was essentially speculative—that it was not possible for an order dated May 14, 1986 to have been served only on February 27, 1987—but the respondent did not place any evidence on record to rebut the Commissioner's affidavit or to demonstrate earlier service. The Court held that, in the absence of contrary material, it could not disbelieve the Commissioner's affidavit and therefore found the petition to have been filed within time.
The Court thus allowed the petition and directed the Tribunal to state the question of law for the Court's determination. The Court declined to order costs.
Holding and Implications
Petition allowed; the Tribunal is directed to state a case and refer the following question of law to this Court:
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing that the additions made on account of unexplained cash credits would not be called unexplained cash credits under section 68 of the Act?”
Implications:
- The direct effect is that the petition is held to have been filed within time and is allowed; the Tribunal must state and refer the specified question of law to the Court for determination.
- There will be no order as to costs.
- The opinion does not discuss any broader precedent or wider legal implications beyond the referral and the limitation ruling; no new precedent was declared in this opinion itself.
Kirpal, J.:— In the present case, the respondent had in her books of account credited one Messrs. Gupta and Co. with Rs. 48,476 and one S. Surain Singh with Rs. 48,400. The respondent was constructing a building and the cost of material was debited to the said accounts. The Income-tax Officer came to the conclusion that Messrs. Gupta and Co. and S. Surain Singh did not exist and that those entries were fictitious. He sought to apply section 68 of the Act. The Commissioner of Income-tax (Appeals) came to the conclusion that section 68 was not applicable and remanded the case to the Income-tax Officer for investigating further facts as, according to the Commissioner of Income-tax, if at all, it is only section 69 or section 69B or section 69C which would be applicable. The Income-tax Officer filed an appeal and the Tribunal held that “section 68 deals specifically with sums credited in the books of the assessee on account of receipt of money”. According to learned counsel for the petitioner, section 68 refers only to sums being credited in the books of the assessee and does not specifically state that the said section applies only on account of credits being there because of receipt of money. In our opinion, the question involved is a pure question of law as it pertains to the correct interpretation of section 68. We, therefore, direct the Tribunal to state the case and refer the following question of law to this court:
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing that the additions made on account of unexplained cash credits would not be called unexplained cash credits under section 68 of the Act?”
2. Before concluding, we might mention that learned counsel for the respondent states that the reference is barred by time.
3. We find no merit in this contention. The order of the Tribunal dismissing the application under section 256(1) is dated May 14, 1986. In paragraph 24 of the petition under section 256(2), it is stated that the said order of the Tribunal was received on February 27, 1987. This averment in the petition is supported by an affidavit of the Commissioner of Income-tax himself. Learned counsel for the respondent contends that it is not possible that an order passed on May 14, 1986, was served only on February 27, 1987. Merely on this conjecture, it is not possible for us to conclude that the order dated May 14, 1986, was not served on February 27, 1987. The affidavit of the Commissioner of Income-tax has not been rebutted by the respondent in any way. It was open to the respondent to have placed on record material to show that the service of the order dated May 14, 1986, was or must have been made prior to February 27, 1987. In the absence of any such averment, we see no reason to disbelieve the affidavit of the Commissioner of Income-tax which supports the averment in the petition to the effect that the said order of the Tribunal was received only on February 27, 1987. In our opinion, the petition has been filed within time. This petition is, accordingly, allowed in the aforesaid terms. There will be no order as to costs.
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