Urvashi Talkies vs Commissioner of Income Tax, Agra

The income tax Appellate Tribunal, Delhi has referred the following true questions of law u/s 256(1)(2) of the income tax Act, 1961, hereinafter referred to as the Act, for the opinion of this Court.

"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that there was no mistake in its order apparent from the record which could be rectified u/s 254(2) of the Act?

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the facts in the cited cases were distinguishable without discussing them?

The reference relates to the assessment year 1985-86".

Briefly stated facts giving rise to the present case are as follows:-

The assessee which is a registered firm runs a cinema hall at Firozabad. Searches were conducted in the premises of the assessee on 12-8-1986. Certain account books were seized from the premises of M/s. Shanti Glass Works, Firozabad a sister concern of the assessee. On the basis of the information as found in the seized material the addition was made at Rs. 1 lakh. This was toward the unexplained investment made in the from of M/s. Shanti Glass Works. For the inclusion of the aforesaid amount in the income of the assessee the penalty proceedings u/s 271(1)(c) of the Act were initiated. The penalty was levied and it was confirmed by the learned Commissioner (Appeals). The Tribunal after hearing both sides at length, decided the issue against the assessee with the following observations:-

"We have considered the rival submission in the light of the material as placed before us. The surrender of Rs. 1,00,000 by the assessee is to be examined in the light of the arguments advanced and evidences as produced. On facts we find that during the course of searches, a diary was seized from the premises of M/s. Shanti Glass Works sister concerns of the assessee. As per this diary, there was a balance sheet struck on 31-8-1994 which reflected an entry of Rs. 2,00,000 under the head ''Amanat Khata''. As per the aforesaid entry Rs. 1,00,000 was stated to belong to ''Uvashi''. When asked to explain the entries in the aforesaid balance sheet, vide letter dated 21-12-1986, Smt. Kamla Devi, a partner of the aforesaid firm, during the relevant period of time, explained the entry of Amanant Khata as under:-

''Amanat Khata A/c: In this account two lakhs of rupees which have been written in the above note boo as on 31-8-1994 was payable by our firm to other parties. On seeing this notebook you will be able to know that Rs. 34,338 was returned to Shyam Baboo on 15/17-9-1984 under the same account and in the same way of Rs. 65,751 was returned to Baadshah Khan and Arvind on 4/5.4. As it is clear on seeing this entry this total money is of indebtedness''.

The aforesaid letter of the part explained the nature of business carried on by the firm. As per the letter, M/s. Shanti Glass Works, Firozabad, manufactures glass bungles. Material which the bangles are made is handed over to various contractors who, in turn, converts them into bangles as per specifications. The sales on credit basis are reflected in the name of Rambabu and the amounts recoverable in respect of the same in the name of Shanti Prasad. These entries find place in the balance sheet at Sl. No. 2 on the liability side. It was also explained that an entry of Rs. 1,72,748.90 at Sl. No. 1 on the balance sheet (again on the liability side) is in her name. the nature of the same was specified. The amounts of Rs. 1,16,667.90 and Rs. 8,40,955 were also explained. The former related to the liabilities payable by the assessee and the latter to the stock of bungles. Explanation was also rendered in regard to the cash in hand. The aforesaid letter, which is dated 21-12-1986, thus, explains in detail the nature of entries as reflected in the balance sheet. Thus, not only the balance sheet was owned up by Smt. Kamla Devi to be pertaining to M/s. Shanti Devi Works but the entries were also found to be factually correct. This apart, in his statement Shri Pradhuman Kumar Jain s/o late Bhanu Kumar Jain admitted that the books of accounts, regularly maintained did not reflect the entire receipts. Nowhere in its explanation, the assessee ever tried to rebut the statement of Smt. Kamla Devi, who is the wife of Shri Shanti Prasad Gupta partner in the assessee''s firm. On the other hand, at the first opportunity, it made a surrender of Rs. 1,00,000 though subject to the condition that no penalty should be levied. On the facts and in the circumstances as explained above, the assessee''s contention of entry reflected in the books of third party is devoid of any force. On the other hands, there is a force in the argument that normally a party would not acknowledge entries on the document which have adverse bearing on the person who is intimately connected. The assessee also rendered no evidence to support its contention that the amount did not pertain to it. Thus, it is clear that the surrender made by the assessee cannot be termed as a voluntary one. On the other hand, as the surrender was made, no further investigation could have been carried out by the department in this respect. In the circumstances, the plea taken that no specifies queries were asked from the assessee in regard to a sum of Rs. 1,00,000 has no force. Thus, on the facts, we find that the penalty was exigible and hence was rightly levied. As to the reliance placed on various judgments cited by both sides, we find that they are distinguishable on facts, as such, we find it unnecessary to go into the facts of each and every one of the cases. On facts as discussed, we would uphold the order of the learned CIT(S)."

Then the assessee has moved Misc. application wherein we held as under:-

"2. We have considered the submissions on both sides. We find that the facts have been discussed in detail by the Tribunal in para 2 of the order which we need not repeat. The decision as given in para 3 of the order is based on these facts. As to the various decisions not discussed, it has been mentioned in the order that the facts available in the cases cited are distinguishable. Before us it was not shown by Shri K.P. Bhatnagar that the facts available in the case of any one of the decisions are similar to the ones under consideration for which the ratio laid down therein was applicable. In the circumstances, finding no mistake in the order, we dismiss the petition as filed."

We have heard Shri Pawan Shri Agrawal, learned counsel for the assessee and Shri R.K. Upadhyaya, learned Standing Counsel for the revenue. Shri Pawan Shri Agarwal submitted that the Tribunal has proceeded on wrong assumption of facts and has also not discussed various case laws cited by its counsel. An application u/s 254(2) of the Act was rightly made and the Tribunal ought to have recalled its earlier order deciding the appeal and should have corrected the mistake which were apparent on the record.

Shri R.K. Upadhyaya, learned Standing Counsel on the other hand submitted that in the earlier order while deciding the main appeal, the Tribunal has discussed all pros and cons of the issues involved therein and had held that the case law cited by the assessee was not applicable and were distinguishable. The application filed u/s 254(2) was, in fact, an attempt to get the order of the Tribunal reviewed, which was not permissible under law.

After taking into consideration, various points raised by the learned counsel for the parties, we find that the Tribunal has considered the entire issues in great detail while deciding the appeal as would be seen from the order of the Tribunal is reproduced herein before.

The application u/s 245(2) filed by the assessee was nothing but in fact seeking a review of the earlier order passed by the Tribunal on merits, which was not permissible under law. The Tribunal has rightly rejected the application. We, accordingly, answer both the questions referred to us in the affirmative, i.e., in favour of the revenue and against the assessee. There shall be no order as to costs.