JUDGMENT
Susanta Chatterji, J.
1. Both the S. J. C. applications, i.e., S. J. C. Nos. 124 of 1990 and 125 of 1990, have been taken up together as agreed and suggested by the learned advocates for the assessee and the Revenue authorities. S. J. C. No. 124 of 1990 relates to the assessment year 1981-82, whereas S. J. C. No. 125 of 1990 relates to the assessment year 1979-80. The aforesaid references arise at the instance of the Commissioner of Income-tax, Orissa, raising the following questions :
S. J. C. No. 124 of 1990 :
“Whether the assessee discharged the onus placed under Section 68 of the Income-tax Act, 1961, in respect of the cash credits appearing in the name of Smt. Nirupama Mohanty ?” and
S. J. C. No. 125 of 1990 :
“Whether the assessee discharged the onus placed under Section 68 of the Income-tax Act, 1961, in respect of the cash credits appearing in the names of Shri Biswajit Mohanty and Shri Satyajit Mohanty ?”
2. The facts of the aforesaid cases reveal that for the assessment year 1979-80, the assessee had shown two cash credits in the names of his two minor sons, namely, Biswajit Mohanty and Satyajit Mohanty, to the tune of Rs. 40,000 each and for the assessment year 1981-82, the Income-tax Officer found that there was a cash credit of Rs. 20,000 in the name of Smt. Nirupama Mohanty, the wife of the assessee. These were added to the income of the assessee. However, the Commissioner of Income-tax (Appeals) held that the cash credits were proved and deleted the additions made by the Income-tax Officer. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals). The Tribunal took into consideration all the facts and circumstances of the case and thereafter made a reasoned order that the cash credits were proved. Hence, the present questions have been referred.
3. Mr. A.K. Ray, the learned advocate appearing for the Revenue authorities, has very strenuously argued the cases before us. He has mainly argued that the question as to whether the assessee has been able to discharge the onus as envisaged under Section 68 of the Income-tax Act is a question of law and the appreciation made by the Commissioner of Income-tax (Appeals) and the Tribunal is open to scrutiny by the High Court under reference. He has further developed his argument by submitting, inter alia, that whether the decision of the Tribunal on a finding of fact can be sustained or not would depend on the question at issue before the Tribunal. The materials which were required to be considered, the burden of proof lying on which party and how the Tribunal has assessed all the materials in the light of the proper approach are required to be scrutinised. According to him, though in isolation each point of evidence may appear to be of little weight, on an overall appreciation it would be permissible to consider the cumulative effect and decide one way or the other. Reference was made to Gordhandas Hargovandas v. CIT [1980], 126 ITR 560 (Bom) and Fakhri Automobiles v. CIT [1980] 126 ITR 417 (Raj).
4. Mr. Ray has further emphasised on the point that law is now settled that if in forming the opinion, the Tribunal and/or the forums below misdirect themselves in law or come to a conclusion which is perverse, one can succeed in persuading the court to hold that the order could not be passed on the materials on record and is thus erroneous in law. In the instant case, the assessee merely establishes the identity of the creditor and not the genuineness of the loan and, therefore, the taxing authority can treat it as cash credit within the mischief of Section 68. Reliance has been placed on CIT v. S. Kamaroja Pandian [1984] 150 ITR 703 (Mad). He has also very much relied on the decision in CIT v. Biju Patnaik [1986] 160 ITR 674 (SC). In particular, he has referred to the observation of the Supreme Court at page 680 of the decision which is as follows :
“After considering the materials, the Tribunal held that the Kalinga Foundation Trust came into existence in 1947 and continued after its registration in 1959 under the same name and style and the fund of the trust was built up by collection of donations from the public at large.
It may be pointed out and we are of the opinion that this is the core of the controversy in this case, i.e., whether there was no evidence, substantial or reliable, produced to indicate who were the persons who had contributed to the trust, how much they had contributed to the trust, the identity and the creditworthiness of the donors to the said trust.
It was contended on behalf of the assessee that the said trust which came into existence was a separate and distinct entity and the assessee was only holding an executive post in that trust. It was held by the Tribunal that seven persons who were designated by the Income-tax Officer as benamidars of the assessee for the purchase of the shares of Kalinga Tubes Ltd. were not benamidars and the money required for the purchase of these shares had been raised by themselves. The Tribunal held that the investments made by the trust in the assessee’s group of industries or with the assessee were from its own resources and funds and such investments were guided by business expediency and prudence. The finding of the Tribunal is that the trust was comprised of persons of public repute and the control and management of the trust styled as ‘Kalinga Foundation Trust’ were under the effective control of the board of trustees comprised of persons of public reputation. The Tribunal accordingly held that the income from interest, dividend or any other usufruct arising out of the investments made by the trust in the various concerns and the investments of the trust which were included in the assessments of the assessee in the years under reference should be excluded as appertaining to a separate and distinct entity and, therefore, directed the Income-tax Officer to exclude these amounts from the assessments of the assessee in all these three years. The Revenue did not accept the findings of the Tribunal as correct as mentioned hereinbefore and has sought reference to the High Court on several questions.
Before the questions involved in these appeals are considered, it is necessary to bear in mind the scope of the jurisdiction of the High Court in directing a reference on a question of law where the decision rests primarily on appreciation of facts. This question has from time to time troubled the courts – both the High Courts and this court–and several decisions have laid down the guiding principles in such a situation. Though not exhaustive, these may be referred to as illustrations. ”
5. At page 681 of the decision, the following position emerges :
“(i) When the point for determination was a pure question of law, such as construction of a statute or document of title, the decision of the Tribunal was open to reference to the court.
(ii) When the point for determination was a mixed question of law and fact, while the finding of the Tribunal on, the facts found was final, its decision as to the legal effect of those findings was a question of law which could be reviewed by the court.
(iii) A finding on a question of fact was open to attack under reference under the relevant Act as erroneous in law when there was no evidence to support it or if it was perverse.
(iv) When the finding was one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.”
6. Our attention has been drawn to the case in CIT v. S.P. Jain [1973] 87 ITR 370 (SC).
7. By drawing our attention to the ratio of the cases in Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 (SC) and S.P. Mohan Singh v. ITO [1983] 141 ITR 440 (P & H), Mr. Ray has emphasised that there has been an observation at page 447 of the later decision :
“It is thus clear that in a case where the facts stated or disclosed by the assessee are either found to be bogus or non-existent, he cannot forestall the reassessment on the plea that he had fully and truly disclosed all the material facts. Where is the question of truthfulness about a fact or a material fact, which, to the knowledge of the assessee, was non-existent or not there at all ? Further, I am of the considered opinion that the facts or the material placed by the petitioner-concern before the Income-tax Officer at the time of its initial assessment does not amount to any ‘disclosure’ in the light of the Explanation to Section 147 of the Act. This Explanation reads :
‘Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.’
For the reasons recorded above, I find no merit in these two petitions and dismiss the same with costs, which I determine at Rs. 300 in each case. ”
9. In essence, the entire spirit of the argument of Mr. Ray, on behalf of the Revenue authorities, is that looking at the facts of the cases in depth and detail and considering the background of the cases, the approach of the Tribunal is absolutely bad in law and merely because there is an assessment made in the names of the wife and minor sons of the assessee, there is no successful discharge of the onus as demanded under Section 68 of the Income-tax Act. The questions should be considered by this court on reference and the court may be pleased to conclude that there was failure on the part of the assessee to discharge the onus.
10. Mr. Ratho, appearing for the assessee, has mainly argued that the aforesaid questions relate to facts and this court, in view of the settled position of law, may be pleased to decline to answer the same and the Department has missed the bus, inasmuch as if properly the questions could have been framed, there might be necessity for the court to go into the same whether at all the Department is immuned from considering the genuineness of the transaction notwithstanding the assessment made at Calcutta in the names of the wife and the minor sons of the assessee. But, however, on the questions as framed and considered by this court under reference, there is no scope to consider the facts of the cases unless there is any involvement of any question of law. The argument made on behalf of the Revenue is alleged to be fallacious.
11. In support of his contention, he has said that the High Court or the Supreme Court certainly does not exercise jurisdiction as an appellate authority either under Section 256 or 257 of the Income-tax Act. According to him, the questions posed in these references are basically questions of fact. A similar question was called for under Section 256(2) in the assessment year 1983-84 relating to the self-same assessee. This court, relying on the decision of the Supreme Court in CIT v. S.P. Jain [1973] 87 ITR 370, proceeded to examine whether the findings of the Tribunal can be said to be based on no evidence or based on irrelevant evidence, or are arbitrary or perverse, i.e., illogical or unnatural. The issue is whether on the basis of the facts proved, uncontroverted or which have become final, can it be said that no reasonable man properly instructed in the relevant law could have come to the conclusion as the Tribunal has concluded in these cases. In the aforesaid assessment year 1983-84, this court did not find any infirmity in the order of the Tribunal. However, he has further submitted that the amount in question has already been assessed in the hands of the creditors. It was within the power of the Department under Section 263 of the Income-tax Act to annul that assessment, but it has not been done. A particular income cannot be taxed twice and reliance is placed in this respect on Dayabai (Smt.) v. CIT [1985] 154 ITR 248 (MP) and Sri Krishna Das v. Town Area Committee [1990] 183 ITR 401 (SC). Suspicion, according to Mr. Ratho, however strong it may be, cannot be treated as evidence. The Assessing Officer may act on evidence, direct or circumstantial, but not on mere suspicion, gossip or rumour. The normal presumption is in favour of good faith and this presumption applies to the bona fides of the assessee’s transactions as well as his accounts.
12. Considering the submissions made on behalf of the assessee as well as for the Revenue authorities, we find that Section 68 of the Income-tax Act lays down :
“Where any sum is found credited in the books of an assessee maintained 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 Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.”
13. The explanation to be given by the assessee has to be to the satisfaction of the Assessing Officer. In the instant case, the order of the Income-tax Officer was not appreciated by the Commissioner of Income-tax (Appeals). The appellate authority on appreciation of the facts has concluded that unless the assessment made at Calcutta is reopened, it could not be said that the assessee has not been able to discharge his onus- The finding of fact as to successful discharge of the onus by the assessee made by the Commissioner of Income-tax (Appeals) has been fully confirmed by the Tribunal. Both the findings of the Commissioner of Income-tax (Appeals) and the Tribunal are on the facts. If both these forums have conclusively held that the assessee has discharged his onus, this finding of fact certainly cannot be gone into in a reference before the High Court under Section 256 of the Income-tax Act. Certainly, the reference court is not sitting in appeal. By its advisory jurisdiction, it has to answer the questions as referred.
14. In CIT v. S.P. Jam [1973] 87 ITR 370 (SC), it has been held (at page 381) :
“In our view, the High Court and this court have always the jurisdiction to intervene if it appears that either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory of it, or it has acted on material partly relevant and partly irrelevant or where the Tribunal draws upon its own imagination, imports facts and circumstances not apparent from the record, or bases its conclusions on mere conjectures or surmises, or where no person judicially acting and properly instructed as to the relevant law could have come to the determination reached. …”
15. The Supreme Court in unequivocal terms has set down the principle on which the finding of fact arrived at by the Tribunal would be justified. Being aware of the ratio of the aforesaid case and looking at the materials on record, we are not in a position to accept the contention of Mr. A.K. Ray, learned standing counsel (Income-tax), that the finding of the Tribunal with regard to the genuineness of the transactions cannot be said to be a finding of a reasonable man, nor can we hold that the finding of the Tribunal is a perverse one. The Tribunal has recorded the finding after considering all the relevant facts on record and under such circumstances we answer the questions in the affirmative, i.e., in favour of the assessee and against the Revenue. The S. J. Cs. are disposed of
D.M. Patnaik, J.
I agree.