K.S Paripoornan, J.:— The Revenue is the petitioner in both these original petitions. The same assessee is the respondent in both the cases. The matter arises under the Income-tax Act. Both the original petitions relate to the assessment year 1979-80. In these two original petitions filed under section 256(2) of the Income-tax Act, the Revenue prays that the Appellate Tribunal may be directed to refer the questions of law, formulated in the original petitions, for the decision of this court.

2. The respondent is an assessee to income-tax. He is a cashew exporter: He had open loan and key loan facilities with the State Bank of Travancore, Quilon Branch and South Indian Bank, Quilon Branch. In effecting the assessment for the year 1979-80, the Income-tax Officer made certain additions. The additions were made with reference to the loans which the assessee obtained from the State Bank of Travancore, Quilon Branch, and South Indian Bank, Quilon Branch.

3. We shall first deal with the transactions of the assessee with the State Bank of Travancore, Quilon Branch. The Income-tax Officer made an addition of Rs. 3,54,350 being the value of 650 bags of excess raw cashew nuts, under a key loan with the State Bank of Travancore, at the rate of Rs. 545 per bag. This was deleted in appeal by the Commissioner of Income-tax (Appeals). The Income-tax Officer also made an addition on account of excess raw nuts with the State Bank of Travancore being “yard loan” “stock difference” in quantum and quality like costlier, local and cheaper African nuts. The “difference” was between the account of the assessee and that of the State Bank of Travancore, Quilon Branch. The addition made by the Income-tax Officer was Rs. 17,45,090. In appeal, the Commissioner of Income-tax (Appeals) sustained it to the extent of Rs. 10,08,250. The deletion of Rs. 3,54,350 and the reduction of addition on the other account to Rs. 10,08,250 were both the subject-matter of an appeal by the Revenue before the Income-tax Appellate Tribunal in I.T.A No. 284 (Cochin) of 1983. The Appellate Tribunal sustained the deletion of Rs. 3,54,350 made by the Commissioner of Income-tax (Appeals) and further deleted Rs. 10,08,250 sustained by the Commissioner of Income-tax (Appeals). Another question that arose for consideration, at the instance of the Revenue, related to the allowance of weighted deduction under section 35B on office and other miscellaneous expenses. In appeal, the Commissioner of Income-tax (Appeals) allowed weighted deduction in the light of the decision of the Special Bench of the Appellate Tribunal in the case of/. Hemchand and Co. which was accepted by the Department. The Commissioner of Income-tax (Appeals) estimated the office and other miscellaneous expenses relatable to export and allowed weighted deduction on the same. The Appellate Tribunal sustained the estimate made by the Commissioner of Income-tax (Appeals).

4. In view of the adverse decision in the appeal filed by the Revenue, in I.T.A No. 284 (Cochin) of 1983, the Revenue filed R.A No. 379 (Cochin) of 1983 and prayed that the Appellate Tribunal may be pleased to refer certain questions of law which, according to the Revenue, arose out of the appellate order. The Tribunal declined the request of the Revenue, by order dated February 7, 1984. Thereafter, the Revenue has filed O.P No. 7667 of 1984 praying that the following questions of law, formulated in para 13 of the original petition, may be directed to be referred by the Appellate Tribunal to this court for decision:

“1 (a) Whether, on the facts and in the circumstances of the case, the Tribunal is right and justified in holding,—

(i) “it is not possible to act on such entries and fasten the assessee… with any liability,

(ii) the addition of 650 bags in excess as per bank account was rightly deleted by the Commissioner of Income-tax (Appeals)?

(b) In view of the above findings and also in view of the credibility attached to accounts of a bank and also the presumption for the same under the Banker's Books Evidence Act, 1891, should not the Tribunal have accepted and acted upon the accounts and confirmed the additions?

(c) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding:

(i)… register is only fictitious and unreal;

(ii) no evidentiary value can be placed on these figures…

(iii) it has no evidentiary value;

(iv) the entries therein are quite unreliable;

(v) they are only artificial entries;

(vi) goods not in existence are shown as pledge to avail of greater bank facilities and are not the above findings, irrational, against law, logic, inconsistent and based on surmises?”

2. Whether, on the facts and in the circumstances of the case and in view of the fact that the addition to be made to the closing stock being Rs. 1,37,73,010, the Commissioner of Income-tax (Appeals) is right (and the Tribunal in confirming) in directing to increase the value of the opening stock thereby reducing the income of the current year to the extent of Rs. 7,07,446?

3. Whether, on the facts and in the circumstances of the case, the Tribunal is right,—

(i) in deleting the addition of Rs. 10,08,250 sustained by the Commissioner of Income-tax (Appeals)?

(ii) in holding that the entries are quite unreliable; it has no evidentiary value;

(iii) in deleting the addition to Rs. 13,39,132 made by the Commissioner of Income-tax (Appeals)?

4. Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under section 35B of the Income-tax Act on office and other miscellaneous expenses?

5. Whether, on the facts and in the circumstances of the case, and in view of the finding that the addition/enhancement is based solely and exclusively on the bank certificates based on godown and drawing power registers and also in view of the decision in Kapurchand Shrimal [1981] 131 ITR 451, should not the Tribunal have remitted the case for fresh consideration when the registers have been rejected by the Tribunal as fictitious and unreal?”

5. Original Petition No. 7668 of 1984 also relates to the same assessment year 1979-80. The respondent herein also is the same assessee. The matter relates to the dealings with the South Indian Bank, Quilon Branch. One of the additions made by the Income-tax Officer for the same assessment year was a sum of Rs. 8,17,500 under section 69A of the Act being value of excess stock of cashew kernels in key loan account with the South Indian Bank, Quilon Branch. The addition was sustained in appeal by the Commissioner of Income-tax (Appeals). The assessee filed I.T.A No. 167 (Cochin) of 1983 before the Appellate Tribunal and assailed the said addition. A certificate issued by the South Indian Bank to the effect that 2,500 tins of cashew kernels valued at Rs. 7,99,000 was pledged by the assessee with the bank was produced. It was stated that the cashew was of inferior quality and so the assessee showed the value of 60,000 lbs. of kernels at Re. 1 per lb. in the closing stock. Though the assessee assailed the entire addition, the Appellate Tribunal confirmed the addition, but held that the addition should be confined to the closing stock instead of an addition under section 69A of the Act. So, it was held that a sum of Rs. 60,000 already shown as closing stock by the assessee should be deducted. The Revenue filed R.A No. 378.Cochin of 1983 to refer certain questions of law which, according to it, arose out of the appellate order. By the common order dated February 7, 1984, the application filed by the Revenue was dismissed. The Appellate Tribunal passed a common order in R.A No. 378 (Coch) of 1983 and 379 (Coch) of 1983. The applications filed by the Revenue were dismissed. That resulted in the Revenue filing the above two orginal petitions praying that certain questions of law, detailed in the original petitions, may be directed to be referred to this court for decision. In Original Petition No. 7668 of 1984, the Revenue has prayed for referring the question of law formulated in paragraph 13 of the original petition. It is to the following effect:

“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the sum of Rs. 60,000 from the addition made under section 69A on the ground that this amount has already been disclosed by the assessee?”

6. We heard counsel for the Revenue, Mr. P.K.R Menon, as also counsel for the respondent/assessee, Mr. Panicker. The questions detailed by the Revenue in Original Petition No. 7667 of 1984 arise out of the transactions which the respondent/assessee had with the State Bank of Travancore, Quilon Branch. The Appellate Tribunal stated that the additions were made solely on the basis of certificates issued by the State Bank of Travancore, on the basis of summary of extracts prepared from two registers, known as “Godown Register” and “Drawing Power Register”. These registers were impounded by the Income-tax Officer. The Appellate Tribunal has stated that those registers were scrutinised by it in open court. It has observed that the registers disclose a sordid state of affairs. It opined that the total quantity of bags mentioned in the registers, relied on in the assessment, is a wrong figure arrived at by alterations, corrections, interlineations and interpolations. The certificates issued were wrong and the Commissioner of Income-tax (Appeals) accepted the assessee's plea that there have been overwritings and messing up of dates in bank registers and so the exact dates of all these entries cannot be determined with certainty. At pages 32, 33 and 34 of the Paper Book (in paragraphs 3, 4 and 5) the Appellate Tribunal observed as follows:

“3. We also examined the registers and were quite convinced of the existence of these alterations and erasures which has destroyed and will ordinarily destroy the evidentiary value of such registers. We are quite satisfied that these alterations, corrections and interlineations, interpolations and overwritings were made only in 1982 after the issue of first certificate of transactions which took place in 1978-79. If these erasures were there at the time of first certificate, that would not have been issued in that form. That is why we say so. So it is not possible to act on such entries and fasten the assessee or any one with any liability. The addition of 650 bags excess as per bank account was rightly deleted by the Commissioner of Income-tax (Appeals).

4. ……the erasures and alterations over this 650 bags itself is suffi cient to discredit this register…. The stock in open loan is seen only in drawing power register. But this is not a register at all. It is not main tained in the way in which it should be or is prescribed to be maintained. It is not even initialled by any manager or any employee of the bank. It appears to us only as a scribbling pad where various particulars are jotted down. On what basis or on what authority those figures are arrived at or entered is not ascertainable. Supporting documents like declarations, if any, made by the assessee about the stock and records of the physical verification, if any, are not traceable. The open loan stock in the yard, it appears, is in Tamil Nadu at Kaliakavilai Village, whereas the bank is in Quilon (see question 10 and answer given by the branch manager). That makes it ordinarily impossible to a Quilon branch to know what is happening in the Tamil Nadu yard. All these go to support the explanation of the assessee that this stock figures in open loan reflected in the drawing power register is only fictitious and unreal, meant only to back up the advance… So this is a clear instance where goods not in existence are shown as pledged to avail of greater bank facilities. The Income-tax Officer, the Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals) were aware of these and were convinced about the fact that it is only shown for facility for greater credit. That is why those authorities did not ask for the explanation of the assessee under section 69A of the Income-tax Act, 1961, to show the source for these alleged investments of raw nuts and kernels in trust, etc. It is only before the Tribunal that the Department has raised a ground for the first time that these are unexplained purchases and closing stock (without even allowing purchase price) should be made. The Commissioner of Income-tax (Appeals) at one stage observes that as regards the books of account of the State Bank of Travancore, matters are different from that of the South Indian Bank and those registers showed certain discrepancies in dates. At another place in para 13, he states that, therefore, if anything, the appellant has had a definite advantage as a result of the bank not maintaining proper accounts and quantity details. So, on the basis of this drawing power register, which is no register at all but only a rough scribbling pad, it would be quite unwise to saddle anyone with any liability. It has no evidentiary value. The entries therein are quite unreliable. Entries for some dates like 9th February are not at all posted. In fact, that omission is recorded in a pencil entry. The pledge of nuts in trust fully support the view point of the assessee that the figures are meant only to support and buttress the drawing power. Therefore, the conversion from the yard to the key loan said to have been done in April and on which so much stress is made to show that the goods in open loan account exist, to enable the bank to convert it into key loan is thoroughly unreliable. Those are only artificial entries to support the stand and to buttress the drawing power. Those goods do not exist. So we are of the view that there is abso lutely no material to think that the assessee had any real stock of 3,200 bags or any portion of it in open loan yard account. So, even the addition of Rs. 10,08,250 sustained by the Commissioner of Income-tax (Appeals) has to be deleted.

5. So it follows from the finding of unreliability of godown and drawing power registers on account of the many defects pointed out by us and the resultant very low and poor quality evidentiary value and consequential unwillingness to act on those, that the addition of Rs. 13,39,132 in full also should be deleted. The addition of Rs. 6,13,421 or, as the case may be, Rs. 8,37,781 by the Inspecting Assistant Commissioner is also based on bank certificates but not on quantity but on quality (sic).”

7. From the above findings of the Appellate Tribunal, it is evident that the entire additions made were based on totally unreliable data. The additions made on such basis were found to be totally unsustainable and unreasonable. The findings entered by the Appellate Tribunal are pure findings of fact. The questions formulated in para 13 in Original Petition No. 7667 of 1984 are pure questions of fact and, in the light of the findings of fact arrived at by the Tribunal which are based on valid and cogent material, they are not open to any attack. We decline to refer questions Nos. 1 to 3 and 5 detailed in paragraph 13 of the original petition.

8. The only other question is whether the assessee is entitled to weighted deduction under section 35B of the Income-tax Act on office and other miscellaneous expenses. The Commissioner of Income-tax (Appeals) allowed weighted deduction in the light of the Special Bench decision of the Tribunal in the case of/. Hemchand and Co., which was accepted by the Department. The estimate was found to be correct by the Tribunal. No referable question of law arose out of the said finding of the Appellate Tribunal. We decline to refer question No. 4, specified in para 13 of Original Petition No. 7667 of 1984. No other question is posed or arises for consideration in Original Petition No. 7667 of 1984.

9. With regard to Original Petition No. 7668 of 1984, it deals with the transactions of the assessee with the South Indian Bank, Quilon Branch. The Appellate Tribunal, while sustaining the principle of addition, held that the addition should be confined to the closing stock instead of being an addition under section 69A of the Act as, otherwise, the assessee may lose the benefit of treating the same as opening stock in the subsequent assessment year. Having accepted such a position and in sustaining the addition, the Appellate Tribunal held that a sum of Rs. 60,000 already shown as closing stock by the assessee should be deducted. In our opinion, this is a pure finding of fact, and no referable question of law arises out of the appellate order of the Tribunal.

10. In the result, we decline to refer the questions of law, formulated in both the original petitions, for being referred to this court for decision. The original petitions are dismissed.

11. Before closing the case, one aspect deserves to be noticed. When these original petitions came up before us for hearing, we were distressed to note the observations of the Income-tax Appellate Tribunal regarding the over-writings and messing up of dates in bank registers and the alterations and erasures which has destroyed and will destroy the evidentiary value of the registers kept by the bank. We passed an order on June 23, 1987, holding that the observations made by the Appellate Tribunal disclose a very unsatisfactory and sorry state of affairs regarding the keeping of the registers by an associate of the State Bank of India. We felt that the observations made by the Appellate Tribunal are likely to impair the confidence of the public in a well-known associate of the State Bank of India and since the matter is one of great public importance with far-reaching consequences, we wanted to ascertain whether the higher-ups in the bank are in the know of things and as to whether any step or proceeding has been taken in the light of the facts disclosed in the order of the Tribunal. So as to prevent the recurrence of such things in future, we issued notices to the managing director and the general manager of the State Bank of Travan-core, Head Office, Trivandrum, and we also desired the presence of the Advocate-General and the Commissioner of Income-tax, Trivandrum. Accordingly, the officers of the bank, the learned Advocate-General and the Commissioner of Income-tax, Trivandrum, were present in court. We heard them. A statement has been filed by the managing director of the State Bank of Travancore dated July 6, 1987, stating that after enquiry, appropriate action will be taken for lapses committed by the officers of the bank.-A further statement dated July 11, 1987, by the managing director of the State Bank of Travancore was also filed. A report of the chief inspector of the bank, who inspected the documents of the Bank's Quilon (Main) Branch with reference to the photostat copies of the godown register and drawing power register perused by the said officer is produced. It is stated in the report dated July 11, 1987, that there has been lapses on the part of the officers and, for such lapses, appropriate action under the State Bank of Travancore (Officers) Service Regulations, 1979, is being initiated. Along with a memo dated August 11, 1987, five sets of memos issued to various officers have also been produced. Memos have been issued to Shri C.G Sahasranamam, Shri S.L Hariharan, Shri K.A Varghese, Shri P. Krishna Kumar and Shri N. Venkiteswara Iyer. It is evident from the memos that disciplinary action has been taken against those officers. We are not informed about the further developments in the matter. However, we are of the view that the observations contained in paragraphs 2 to 5 of the appellate order of the Income-tax Appellate Tribunal dated August 30, 1983, deserve serious notice and further follow-up action by the State Bank of Travancore in public interest. We have our own doubts as to whether the serious lapses found by the Appellate Tribunal in the above order are only isolated instances. Serious and grave consequences may ensue if such state of affairs existed in other transactions also or if they are allowed to be repeated. In public interest, a very detailed probe is necessary. The appropriate authorities, including the Reserve Bank of India and the Ministry of Finance, Government of India, should address themselves to the matter and take appropriate action. It is to be considered whether an enquiry by the Central Board of Investigation will not be more desirable or effective.

12. Therefore, we direct that a copy of this judgment shall be forwarded, by the Registrar of this court to the Officer-in-charge, Reserve Bank of India, Trivandrum, and also to the Secretary, Ministry of Finance, Government of India, New Delhi, for appropriate action as they deem fit and necessary in the light of the facts disclosed in the case.

13. Photostat or carbon copies of this judgment may be furnished to the Revenue, respondent-assessee and the State Bank of Travancore, Trivandrum or their counsel, on usual terms.