Commissioner of Income Tax vs Shri Ram Enterprises

The Income Tax Appellate Tribunal, Allahabad, has referred the following questions u/s 256(1)/(2) of the Income Tax Act, 1961 (''the Act''), for the opinion of this court:

Whether, on the facts and in the circumstances of the case, the hon''ble Income Tax Appellate Tribunal was justified in law in deleting the addition of Rs. 3,38,000 made u/s 68 of the Act and interest thereon of Rs. 52,493 on the ground that the assessee had discharged its onus of proving the genuineness of the deposits and had explained the nature and source of the deposits satisfactorily?

Whether, on the facts and in the circumstances of the case and keeping in view the provisions of Rule 29 of the Income Tax (Appellate Tribunal), Rules, 1963, the Income Tax Appellate Tribunal was justified in law in admitting the additional evidence produced by the assessee in terms of its letter dated April 24, 1995?

The reference relates to the assessment year 1990-91.

Briefly stated the facts which give rise to the appeal are as under:

The assessee-firm deals in purchase and sale of supari and kattha. A return of income was filed showing a total income of Rs. 16,430 on 7-11-1990, and the assessment was completed on a total income of Rs. 6,24,720 u/s 143(3) vide order dated 12-2-1993. During the course of assessment proceedings, the Assessing Officer observed that the goods of the assessee were seized by the Forest Department and the Sales tax Department, which were to be released on furnishing of bank guarantee in view of an order of the Hon''ble Allahabad High Court. The firm was not having adequate funds of its own. Therefore, the assessee-firm raised funds of Rs. 6,50,000 which were invested in FDRs. The Assessing Officer examined the source of funds raised and held that the source of these loans and advances was not proved. They were alleged to have been received from different persons whose status and creditworthiness could not be proved by the assessee although ample opportunity was given to the assessee for about two years from 18-2-1991 to 12-2-1993, during which period the case was under hearing. Therefore, he treated these deposits as unexplained credits u/s 68 of the Income Tax Act, made additions of Rs. 2,90,000, Rs. 50,000, Rs. 1,21,000 and Rs. 1,00,000 besides making other additions.

The assessee went in appeal against this assessment order and the learned Commissioner of Income Tax (Appeals) confirmed the addition of Rs. 2,90,000 standing in the name of seven persons which were received through pay orders prepared on a single day, le., 1-4-1989. The Commissioner of Income Tax (Appeals) also confirmed cash credit addition of Rs. 48,000 shown in the name of Shri Vinay Kumar Chaurasiya besides deciding other issues in appeal before him.

The assessee as well as the revenue preferred second appeal before the Tribunal. The Tribunal had allowed the appeal preferred by the assessee and had dismissed the appeal preferred by the revenue.

We have heard Sri R.K. Upadhyay, learned Counsel appearing for the revenue, and Shri R.S. Agrawal, learned Counsel for the respondent-assessee.

From the order of the Tribunal we find that the Tribunal has accepted the explanation offered by the assessee regarding the amount deposited by various persons. The source and the genuineness of the deposits has also been accepted. The finding of the Tribunal, in our opinion, are pure findings of fact based on appreciation of evidence and material on record and therefore, we are of the considered opinion that the assessee had discharged his onus proving genuineness, nature and source of the deposits satisfactorily.

Now, the question remains as to whether under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, the Tribunal could have admitted the additional evidence in terms of letter dated 24-4-1995, filed by the assessee or not? While permitting the letter dated 24-4-1995, to be brought on record the Tribunal had taken in view that letter was nothing but the facts which were already on record either in the case of the assessee or in the case of depositors and, therefore, strictly speaking it was not additional evidence but was additional information for which sufficient reasons have been given. Therefore, we do not find any legal infirmity in the order of the Tribunal.

Both the questions referred to us are decided in favour of the assessee and against the revenue.

There shall, however, be no order as to costs.