Sethi Cotton Traders Vs. Income Tax Officer - Court Judgment

1. The appellant has approached this Court by way of filing the present appeals against a common order dt. 24th Feb., 2004 passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred as 'the Tribunal') in ITA Nos. 173/Asr/1996 and 274/Asr/1998 for the asst. yrs. 1991-92 and 1989-90, raising the following substantial questions of law. For convenience, the facts are being taken from the order pertaining to the asst. yr. 1991-92.

(i) Whether, in the facts and circumstances of the case and the evidence placed on record, the finding that Sh. Surinder Kumar had no identifiable source of income out of which he could advance the loan of Rs. 50,000 is sustainable in law?

(ii) Whether, in the facts and circumstances of the case, the provisions of Section 68 of IT Act, 1961 be invoked and it be held that the loans advanced by Surinder Kumar of Rs. 50,000 each in the relevant assessment years is to be treated as the income of the appellant ?

2. The assessee in the present case is engaged in the business of commission agent and sale/purchase of pesticides and fertilizers. During the year, the assessee introduced a sum of Rs. 50,000 in the name of Sh. Surinder Kumar son of Sh. Suraj Bhan, resident of Bishanpura, Tehsil Abohar as a deposit.

On consideration of the explanation offered by the assessee for the above referred cash credit, it was found as a fact by the AO that the alleged creditor was not in a capacity to deposit the loan with the assessee-firm and it was in fact an entry arranged by the assessee himself and routed through Sh. Surinder Kumar. It was further found that a sum of Rs. 50,000 was deposited in cash in the saving banks account of Sh. Surinder Kumar on 3rd Aug., 1990 and on the same day the cheque of the same amount was issued by Sh. Surinder Kumar in favour of the assessee. Keeping this fact in view, the amount of Rs. 50,000 shown as credit in the account of Sh. Surinder Kumar was treated as unexplained and addition to that effect was made under Section 68 of the IT Act, 1961 (hereinafter referred as 'the Act').

3. Having failed even before the CIT(A), the assessee approached the Tribunal. The Tribunal while considering various pleas raised by the assessee came to the conclusion that Sh. Surinder Kumar neither had the capacity nor identifiable source to advance loan of Rs. 50,000 to the assessee.

The order of CIT(A) was upheld by the Tribunal. It is against this order that the appellant is in appeal before this Court. The relevant para of the order of the Tribunal is reproduced as hereunder:

7. After hearing both the sides and considering the material on record, it is seen that the amount of Rs. 50,000 was deposited by Shri Madan Lal, accountant of the assessee-firm in the bank account of Shri Rajinder Kumar and after the deposit, the cheque was issued in the favour of assessee. It is not disputed that cheque was prepared by Shri Madan Lal and signature of Shri Surinder Kumar was obtained on the cheque issued to the assessee. It is also seen that Shri Dharam Pal, manager and brother (sic) of the assessee-firm has admitted that the bank account of Shri Surinder Kumar was opened on his introduction and the amount of Rs. 50,000 was deposited in the bank by Shri Dharam Pal, accountant of the assessee-firm and the cheque in favour of assessee-firm was also obtained by Shri Dharam Pal/Madan Lal. On examination of the documents furnished before the AO, it was found that Shri Surinder Kumar was obtaining account with M/s Sohan Lal Sethi & Sons, M/s Sheetal Trading Co. and M/s Sohan Lal Nathu Ram Sethi, none of which were having sufficient deposits and no amount was withdrawn to explain the source of deposit of Rs. 50,000. Moreover, the AO has also been able to establish that Shri Surinder Kumar was also not having the capacity to deposit Rs. 50,000 in his savings bank account out of which the cheque was issued in favour of the ' assessee as Shri Surinder Kumar has admitted to have spent Rs. 3 lakhs in construction of house. Though the AO has estimated that the at higher amount (sic) and has also taken the amount of Rs. 80,000 from the Bank of India for purchase of tractor out of which Rs. 10,000 was still outstanding at the time of the assessment. Since no fresh material or evidence has been adduced to prove that Shri Surinder Kumar has capacity or identifiable source to advance loan of Rs. 50,000 to the assesses, therefore, in our considered view the action of the learned CIT(A) in confirming the addition of Rs. 50,000 is justified and calls for no interference as the assessee has miserably failed to prove the creditworthiness of the creditor or definite source by adducing the necessary evidence. While upholding the action of the learned CIT(A), we dismiss the ground Nos. 1 to 3 of the assessee's appeal for the asst. yr. 1991-92.

4. We have heard Shri Avneesh Jhingan, advocate appearing for the appellant and with his assistance have gone through the orders passed by the authorities carefully.

5. Section 68 of the Act, is the relevant provision, relying upon which, the addition has been made in the income of the assessee, the same reads as under:

68. Where any sum is found credited in the books of an assessee maintainable for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

A perusal of the concurrent findings recorded by all the authorities below reveals that it is a case where the assessee was unable to prove the genuineness of the credit standing in the name of Sh. Surinder Kumar. The assessee was further unable to prove not only his capacity but also identifiable source to advance the loan of Rs. 50,000 to the assessee. The assessee could not lead any evidence to the satisfaction of the AO to prove genuineness of the credit shown in the name of Sh. Surinder Kumar. In spite of a clear-cut finding of fact recorded by all the authorities, the appellant has sought to challenge the same by raising the substantial questions of law as has been referred to above.

6. It has been held in R.B. Mittal v. CIT : [2000]246ITR283(AP) that the Tribunal is the final fact-finding authority under the Act and findings of fact so recorded are not liable to be interfered with unless, in a case it is shown that a finding of fact recorded by it was perverse or based on 'no evidence'. Only if a finding of fact recorded by the Tribunal was perverse or based on 'no evidence', a substantial question of law would arise warranting interference by this Court in exercise of powers under Section 260A of the Act.

In R.B. Mittal's case (supra), it has further been held that the assessee was expected to establish the proof of his creditors, the capacity of his creditors to advance money and the genuineness of the transactions in order to discharge the onus imposed on him under Section 68 of the Act.

7. Similar view has been expressed by a Division Bench of Kerala High Court in Oceanic Products Exporting Co. v. CIT : [2000]241ITR497(Ker) , wherein also it was reiterated that such a finding recorded by the Tribunal is essentially a finding of fact. A Division Bench of Delhi High Court in IT Appeal No. 478 of 2003 declared on 2nd Dec., 2003 in the case of Prem Nath Goel & Co. v. CIT (2004) 186 CTR (Delhi) 660 : (2004) 25 ITR 124, has taken a view that for cash credit under Section 68 of the Act, the onus is on the assessee to establish the genuineness of the credit entries by proving (i) the identity of the creditor, (ii) capacity of the creditor to advance the money, and (iii) genuineness of the transaction, i.e., the circumstances and the reasons for such deposits.

8. Substantial questions of law which are sought to be raised by the appellant in the present appeal, in our opinion, strictly speaking, fall within the realm of re-appreciation of the evidence, which this Court will not like to enter in exercise of its appellate jurisdiction conferred under Section 260A of the Act, where the jurisdiction vested in this Court is only to examine a substantial question of law arising out of an order passed by the Tribunal.

9. The guiding principles, which are to be kept in view, while entertaining an appeal under Section 260A of the Act are well defined in a catena of judgments of Hon'ble the Supreme Court and this Court. The same being as under :

(a) An appeal under Section 260A of the Act cannot be entertained unless a substantial question of law arises for consideration by the High Court.

(b) To be substantial, a question of law must be debatable and must have a material bearing on the decision of the case and the rights of the parties. Where a question of law is fairly arguable or where there is a difference of opinion on the question of law, the same has to be treated as a substantial question of law.

(c) A point of law which admits of no two opinions may be a proposition of law but cannot be treated as a substantial question of law.

(d) If the question raised in the appeal is already settled by the highest Court of the country or the jurisdictional High Court, then the same cannot be regarded as a substantial question of law. Similarly, if the general principles to be applied in determining the question are well settled and the only issue relates to application of those principles to the particular facts of the case, then no substantial question of law can be said to arise in the appeal.

(e) If the conclusions recorded by the Tribunal in the particular facts of the case are plausible, then it would not be a case of substantial question of law.

(f) The finding of fact recorded by the AO or the first appellate authority or the Tribunal cannot be disturbed by the High Court in exercise of powers under Section 260A of the Act unless such finding is perverse or is such which no person of reasonable prudence could arrive at in the given facts of the case.

[See CIT v. Ms. Monica Oswal ].

10. Examining the case of the appellant on the above guiding principles, we do not find that the issues raised by the appellant in the appeal fall in any of such parameters. The findings are clearly findings of fact recorded concurrently by all the authorities. Issues raised by the appellant are not even the questions of law, what to term these substantial questions of law.

In view of above, we do not find any merit in the appeals and dismiss the same as such.