Commissioner Of Income Tax, Bihar, Patna v. Ram Prasad Ram Bhagat, Singhbhum

Uday Sinha, J.:— In this reference under section 256(1) of the Income-tax Act (hereinafter called ‘the Act’) we are concerned with the assessment year 1968-1969. The assessee is the Hindu Undivided Family (hereinafter called ‘the H.U.F’) with Ram Kumar Agrawal as Karta. The firm of this H.U.F carried on business in Kirana and food-grains.

2. The facts calling for the reference in brief are as hereinafter stated. In the books of the assessee were entered loans of Rs. 10,000 each from Shrimati Bimla Devi and Shrimati Geeta Devi. When called upon to explain the cash credits, the assesses asserted that these were sums of the two ladies and in respect of which they had made declarations under section 24 of Finance Act 2, 1965 under which they had paid Income-tax of Rs. 750 each. The stand of the assessee was supported by confirmatory letters sent by the two ladies. The Income-tax Officer (hereinafter called ‘the I.T.O’) did not accept the version of the assessee. He did not accept that they were genuine deposits of the two ladies, as they had never been assessed to income-tax. He, therefore, after rejecting the stand of the assessee treated these sums aggregating to Rs. 20,000 as income of the assessee from “other sources”.

3. In the appeal before the Appellate Assistant Commissioner (to be described as ‘the A.A.C’), the assessee challenged the jurisdiction of the I.T.O to include the sum of Rs. 20,000 as income of the assessee. The A.A.C accepted the stand of the assessee. He held as follows:

“Thus the deposits of Rs. 10,000 in the business of the appellant—H.U.F by the two ladies are explained properly.”

4. Upon that finding the A.A.C holding that the additions were uncalled for deleted them.

5. The Department filed appeal to the Tribunal and contested the finding and the order of the A.A.C in regard to the deletion of the said sum of Rs. 20,000. The Tribunal held as follows:

“After hearing both the parties, I am of the view, that the assessee's case is well placed. The ladies made the voluntary disclosure and the Department accepted it. They stated that the amount was available with them for deposit and the Department has not been able to prove that the amount has been invested elsewhere. In such circumstances, the availability of the amount cannot be denied.”

6. With this finding recorded in favour of the assessee the appeal of the Revenue was dismissed by the Tribunal.

7. The Revenue being aggrieved by the order of the Tribunal has got this reference made to this Court under section 256(1) of the Act. The question referred to us is:—

“Whether on the facts and in the circumstances of the case the Tribunal was justified in confirming the order of the A.A.C deleting the addition of Rs. 20,000 made by the I.T.O”

8. Mr. Rajgarhia, learned Senior Standing Counsel submitted that the A.A.C and the Tribunal erred in law in deleting the sum of Rs. 20,000 treating then as genuine investments of the two ladies. It was submitted that the two ladies were no other than the wives of the two partners. Mr. Rajgarhia contended that the decision of the Tribunal was in the teeth of two decisions of the Supreme Court, namely, Jamna Prasad Kanhaiyalal v. Commissioner of Income-tax, M.P(1) and Income-tax Officer, New Delhi v. Rattan Lal(2). It was submitted on behalf of the Revenue that a voluntary disclosure in terms of section 24 of the Finance Act 2, 1965 only provided immunity to the declarant and not to third parties. That being the law, the Tribunal had erred in deleting the addition of Rs. 20,000. Thus contended Counsel for the Revenue. Having heard Counsel for the parties, I am of the view that the submission urged on behalf of the Revenue is untenable. The decisions of the Supreme Court relied upon by the Revenue can be of no avail. Those were cases where the Revenue had not accepted the stand of the assessee that the sums alleged to have been paid by the declarants were genuine payments. The findings in those cases were that they were really income of the assessee itself. In the case of Jamna Prasad Kanhaiyalal (supra) the appellate Tribunal had held that having regard to the statement of the assessee Kanhaiyalal and having regard to the age of the creditor and the fact that none of them had any source of income at any time, the I.T.O was justified in holding that the assessee had failed to discharge the burden of proof under section 68 of the Act. Thus in that case the finding of fact was that the assessee had failed to establish that the sums credited in the books of the assessee were credits/advances from different individuals. On that finding the submission on behalf of the assessee was that disclosures having been made and the declarants having been assessed upon those amounts, the Revenue was bound to treat the sums disclosed as their separate property. That submission was upheld and the Supreme Court held that the fact that disclosures had been accepted and assessments made did not preclude the Revenue while assessing the third party to test the correctness of the sources of credits. In the case of Income-tax Officer, New Delhi v. Rattan Lal and others (supra), the Supreme Court followed the decision of Jamna Prasad Kanhaiyalal (supra). The situation in the instant case is reverse. In this case the A.A.C as well as the Tribunal had found that the deposits belonged to the two ladies. That is a finding of fact. This Court in a reference under section 256(1) of the Act is not empowered to challenge the findings of fact recorded by the Tribunal. The decisions of the Supreme Court thus do not help the Revenue.

9. Learned Counsel for the Revenue submitted that the Tribunal had erred in placing the onus upon the Department to show that the amounts had not been invested elsewhere by the two ladies. I find that the I.T.O rejected the assessee's case on the ground that the ladies had not been produced for recording their statements on oath. I do not consider it to be a very valid ground for rejecting the assessee's case. It was open to the I.T.O to summon the two ladies specially when they had granted confirmatory letters. Further, I find that the two ladies had filed affidavits to the effect that these amounts were their personal property. Thus there was some basis for the A.A.C and the Tribunal to have found facts as detailed. The finding of fact having been recorded against the Revenue, it is not permissible for this Court to disturb that finding. If the Revenue intended to challenge that finding, a more pointed reference was called for. I may state that if the Revenue intended to challenge the bass of the finding of fact, the question suggested by the Commissioner of Income-tax and which was referred to this Court was absolutely vague. In my view, a more pointed reference was called for. As things are, upon the finding that the amounts shown as deposits with the assessee were theirs, there is no escane from the position that the Tribunal was justified in confirming the order of the A.A.C

10. For the reasons, stated above, I am of the view that on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of the A.A.C in deleting the addition of Rs. 20,000. This reference is thus answered in favour of the assessee and against the Revenue. There shall, however, be no order as to costs.

11. Nazir Ahmad, J.:— I agree.