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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 3265-3266 OF 2003
VIJAY KUMAR TALWAR -- APPELLANT
VERSUS
COMMISSIONER OF INCOME -- RESPONDENT
TAX, DELHI
JUDGMENT
D.K. JAIN, J.:
1. Challenge in these two appeals, by special leave, is to the orders dated
21st December, 2001 and 19th February, 2002 whereby the High Court of
Delhi dismissed : (i) the appeal filed by the appellant herein under Section
260-A of the Income Tax Act, 1961 (for short "the Act") in I.T.A. No.202 of
2001, holding that the order of the Income Tax Appellate Tribunal, New
Delhi (for short "the Tribunal") did not give rise to any substantial question
of law; and (ii) the review petition preferred by the appellant against order
dated 21st December, 2001, holding that the petition was not maintainable.
1
2. Shorn of unnecessary details, the facts material for adjudication of the
present appeals may be stated. These are :
The appellant (hereinafter referred to as "the assessee") was a partner
in a firm, named and styled as M/s Des Raj Tilak Raj, having its business at
Delhi, with a branch at Calcutta. The said partnership firm was dissolved
w.e.f. 1st April 1982. As per the dissolution deed, the assessee took over the
business of the Calcutta branch of the erstwhile firm. Thereafter, from 21st
October, 1982, the assessee started a proprietary concern by the name of M/s
Des Raj Vijay Kumar.
3. On 27th May, 1983, a search took place at the assessee's premises
during which certain incriminating documents were recovered and
seized. During the course of assessment proceedings for the
assessment year 1983-1984, for which the previous year ended on 31st
March 1983, the assessing officer examined the seized record. One of
the registers so examined, revealed cash receipts of `3,49,991/- in the
name of 15 persons, most of which were purportedly received during
the period of April, 1982 to October, 1982. When the assessing officer
sought an explanation from the assessee with regard to the said cash
credits in the register, the assessee merely stated that the cash receipts
were in the nature of realisations from the past debtors of the erstwhile
2
firm. In order to appreciate the said stand, the assessing officer called
for the account books of the Calcutta branch of the erstwhile firm for
the relevant period, but the assessee failed to produce them. The
assessing officer also examined the assessee's brother, a partner in the
erstwhile firm, who also stated that the account books were not
available.
4. Having noted that the outstanding realisations of the Calcutta branch
in the preceding years varied from `25,000/- to `30,000/-, the
assessing officer held that the assessee's submission that cash receipts
of `3,49,991/- related to earlier years was untenable. Therefore, vide
order dated 20th February, 1986, the assessing officer added a sum of
`3,49,991/- as assessee's income under the head "unexplained cash
receipts."
5. Aggrieved, the assessee appealed to the Commissioner of Income
Tax, (Appeals)-XV, New Delhi, who vide his order dated 6th
December 1989, dismissed the same and confirmed the addition made
by the assessing officer.
6. Being still aggrieved, the assessee carried the matter in appeal before
the Tribunal. Vide order dated 27th September, 1994, the Tribunal,
3
while partly allowing the appeal, remitted the matter back to the
assessing officer for de-novo adjudication. The Tribunal observed
that:
"We find that some of the entries pertained to the period when
the erstwhile firm was in existence whereas the assessee did not
conduct business at Calcutta in a proprietary capacity but was
only a partner in the erstwhile firm. The A.O. himself observed
in the assessment order that the cash receipts are from April
1982 to October, 1982 i.e. prior to the start of the assessee's
proprietary business in the name of M/s Desraj Vijay Kumar.
As against this, we find that some of the entries are dated prior
to April, 1982 when the erstwhile firm was in existence. Then
again, it is not known as to what happened to the income
between the period 1.4.1982 to October, 1982 as the erstwhile
firm is supposed to have been dissolved w.e.f 1.4.1982 and as
per the assessee's version the proprietary business was started
from October 1982. There is no information made available to
us as to whether the Department initiated any action u/s 148 to
subject the cash receipts aggregating Rs. 3,49,991/- in the hands
of the erstwhile firm...................................................
.............................................................................
....................
11. In view of the aforesaid discussion, we although taking the
view that the onus on the facts and circumstances of the case
squarely lies on the assessee, hold that the material has to be re-
considered in light of the afore-said observations....."
7. Pursuant thereto, on 17th May, 1995, the assessing officer asked the
assessee to file confirmations of the 15 parties, in whose names cash
credit entries appeared in the register seized during the search. In his
reply dated 22nd May, 1995, the assessee stated that the said cash
receipts were realisations of the sales effected in the earlier years by
4
the erstwhile firm. Subsequently, the assessee was given three more
opportunities on 2nd June 1995, 16th June, 1995, and 3rd July, 1995 to
produce fresh evidence, which were not availed of by him. Vide letter
dated 28th July, 1995, the assessee was given a final opportunity to file
confirmations of the 15 parties, with their complete addresses. In his
reply, the assessee filed the confirmations of 7 parties, with the
address of 6 other parties. The assessing officer considered the two
remaining parties as non-existent. It is pertinent to note that all the
seven confirmations filed by the assessee were identical, and did not
contain either a date or the GIR No. of the confirming party; and
merely stated that the concerned party had dealings with the erstwhile
firm, and it had made purchases from them in the year ending 31st
March, 1982 and had made payments prior to October, 1982; and
since the matter was really old, the books of accounts of the firm were
not available.
8. When the assessing officer sent letters to the six parties, whose
addresses had been supplied, three did not respond, while two others
denied any relationship with the firm, and remaining one letter was
returned by the post office with remarks "not known." Similarly,
when letters were sent to parties who had filed confirmations, three of
5
those letters were returned by the post office marked "not known.",
and another one as "no claims." One of the parties denied any
relationship with the firm. In light of these circumstances, the
assessing officer, vide order dated 19th March, 1996, confirmed the
original assessment.
9. The assessee preferred an appeal before the Commissioner of Income
Tax, (Appeals)-III, which was dismissed vide order dated 16th
December, 1998. The Commissioner observed that:
"The contention of the appellant is apparently unacceptable.
Any business realisations of the partnership would have been
shared by the erstwhile partners. The cash receipts of
`3,49,991/- as per the seized material is, therefore, held to
belong to the appellant and assessable as unexplained receipts
in the hands of the appellant. The assessment of appellant's
income including the aforesaid receipt is, therefore, confirmed
and the appeal is dismissed."
10. Still not being satisfied, the assessee carried the matter in appeal
before the Tribunal. The Tribunal, vide order dated 23rd October,
2000, while partly allowing the appeal, held that the addition of
`3,49,991/- was correct. It observed that:
"We are also of the opinion that the confirmations filed by the
appellant are of no use because they have not been co-related
with the transactions alleged to have been found entered in the
register seized during the time of search if it represents the
realization of outstanding amount on sales, this could have been
6
proved with the cross reference to the entries in the register. We
cannot ignore the fact that the enquiry letters sent by the A.O.
remained unserved, unanswered and denial."
11. On 22nd February, 2001, the assessee moved an application under
Section 254(2) of the Act before the Tribunal for rectification of
mistakes in the order of the Tribunal dated 23rd October, 2000. It was
pleaded that the Tribunal had erred in observing that the assessee's
premises were raided due to heavy sales, and that cash amounting to
`3,49,991/- was seized; that the assessing officer had issued ITNS
150, which the assessee had filed before the Commissioner (Appeals);
and that the Tribunal did not take into consideration the arguments
and various judgments relied on by the assessee. Vide order dated 25th
September, 2001, the Tribunal rejected the rectification petition on the
ground that:- (i) the Tribunal had relied on the assessing officer's
order in relation to the factual position, and there was no reason to
interfere with the same; (ii) while it was true that cash amounting to
`3,49,991/- was not recovered, but the said amount was entered in the
register which was recovered; and therefore, this would not affect the
findings of the Tribunal; (iii) the remarks in relation to ITNS 150 were
not made by the Tribunal, but by the department's representative and
(iv) re-considering the judgments relied on, and the arguments made,
7
would tantamount to a review, which power the Tribunal is not
authorised to exercise under Section 254(2) of the Act.
12. The assessee preferred an appeal before the High Court under Section
260-A of the Act. As already stated, the High Court, vide judgment
dated 21st December 2001, dismissed the appeal of the assessee,
observing that:
"To us it appears that the findings recorded by the
Commissioner of Income Tax as also the Income Tax Appellate
Tribunal are pure findings of fact. Appreciation of evidence
does not fall within the realm of this Court's jurisdiction under
section 260-A of the Income Tax Act..............................
...........................................................................
............................................
Having regard to the fact and circumstances of this case we are,
therefore, of the opinion that no question of law far less any
substantial question of law arises for consideration in this
appeal."
13. Thereafter, the assessee filed a review petition before the High Court,
which was also dismissed vide order dated 19th February, 2002.
14. Hence, the present appeals.
15. Mr. K.R. Manjani, learned counsel appearing on behalf of the
assessee, assailed the impugned orders on the ground that since the
Tribunal had taken into consideration irrelevant materials, its findings
8
were perverse and, therefore, the High Court has erred in holding that
there was no substantial question of law involved.
16. Per contra, Mr. R.P. Bhatt, learned senior counsel appearing on
behalf of the Revenue supported the view taken by the High Court and
asserted that the impugned orders deserve to be affirmed.
17. Before adverting to the rival submissions, it would be expedient to
refer to Section 260-A of the Act. The provisions, relevant for our
purpose, read thus:
"(1) An appeal shall lie to the High Court from every order
passed in appeal by the Appellate Tribunal, if the High Court is
satisfied that the case involves a substantial question of law...
.....................................
................................................................................
(3) Where the High Court is satisfied that a substantial question
of law is involved in any case, it shall formulate that question...
..........................................
............................................................................
............................................................................
(7) Save as otherwise provided in this Act, the provisions of the
Code of Civil Procedure, 1908 (5 of 1908), relating to appeals
to the High Court shall, as far as may be, apply in the case of
appeals under this section."
18. It is manifest from a bare reading of the Section that an appeal to the
High Court from a decision of the Tribunal lies only when a
substantial question of law is involved, and where the High Court
comes to the conclusion that a substantial question of law arises from
9
the said order, it is mandatory that such question(s) must be
formulated. The expression "substantial question of law" is not
defined in the Act. Nevertheless, it has acquired a definite
connotation through various judicial pronouncements. In Sir Chunilal
V. Mehta & Sons, Ltd. Vs. Century Spinning and Manufacturing
Co. Ltd.1, a Constitution Bench of this Court, while explaining the
import of the said expression, observed that:
"The proper test for determining whether a question of law
raised in the case is substantial would, in our opinion, be
whether it is of general public importance or whether it directly
and substantially affects the rights of the parties and if so
whether it is either an open question in the sense that it is not
finally settled by this Court or by the Privy Council or by the
Federal Court or is not free from difficulty or calls for
discussion of alternative views. If the question is settled by the
highest Court or the general principles to be applied in
determining the question are well settled and there is a mere
question of applying those principles or that the plea raised is
palpably absurd the question would not be a substantial
question of law."
19. Similarly, in Santosh Hazari Vs. Purushottam Tiwari28 a three judge
Bench of this Court observed that:
"A point of law which admits of no two opinions may be a
proposition of law but cannot be a substantial question of law.
To be "substantial" a question of law must be debatable, not
previously settled by law of the land or a binding precedent,
1
AIR 1962 SC 1314
2
(2001) 3 SCC 179
1
and must have a material bearing on the decision of the case, if
answered either way, insofar as the rights of the parties before it
are concerned. To be a question of law "involving in the case"
there must be first a foundation for it laid in the pleadings and
the question should emerge from the sustainable findings of fact
arrived at by court of facts and it must be necessary to decide
that question of law for a just and proper decision of the case.
An entirely new point raised for the first time before the High
Court is not a question involved in the case unless it goes to the
root of the matter. It will, therefore, depend on the facts and
circumstance of each case whether a question of law is a
substantial one and involved in the case, or not; the paramount
overall consideration being the need for striking a judicious
balance between the indispensable obligation to do justice at all
stages and impelling necessity of avoiding prolongation in the
life of any lis."
20. In Hero Vinoth (Minor) Vs. Seshammal3, this Court has observed
that:
"The general rule is that High Court will not interfere with the
concurrent findings of the courts below. But it is not an
absolute rule. Some of the well-recognised exceptions are
where (i) the courts below have ignored material evidence or
acted on no evidence; (ii) the courts have drawn wrong
inferences from proved facts by applying the law erroneously;
or (iii) the courts have wrongly cast the burden of proof. When
we refer to "decision based on no evidence", it not only refers
to cases where there is a total dearth of evidence, but also refers
to any case, where the evidence, taken as a whole, is not
reasonably capable of supporting the finding."
21. A finding of fact may give rise to a substantial question of law, inter
alia, in the event the findings are based on no evidence and/or while
arriving at the said finding, relevant admissible evidence has not been
3
(2006) 5 SCC 545
1
taken into consideration or inadmissible evidence has been taken into
consideration or legal principles have not been applied in appreciating
the evidence, or when the evidence has been misread. (See: Madan
Lal Vs. Mst. Gopi & Anr.4; Narendra Gopal Vidyarthi Vs. Rajat
Vidyarthi5; Commissioner of Customs (Preventive) Vs. Vijay
Dasharath Patel6; Metroark Ltd. Vs. Commissioner of Central
Excise, Calcutta7; West Bengal Electricity Regulatory Commission
Vs. CESC Ltd.8)
22. Examined on the touch-stone of the afore-noted legal principles, we
are of the opinion that in the instant case the High Court has correctly
concluded that no substantial question of law arises from the order of
the Tribunal. All the authorities below, in particular the Tribunal,
have observed in unison that the assessee did not produce any
evidence to rebut the presumption drawn against him under Section 68
of the Act, by producing the parties in whose name the amounts in
question had been credited by the assessee in his books of account. In
the absence of any cogent evidence, a bald explanation furnished by
the assessee about the source of the credits in question viz., realisation
4
(1980) 4 SCC 255
5
(2009) 3 SCC 287
6
(2007) 4 SCC 118
7
(2004) 12 SCC 505
8
(2002) 8 SCC 715
1
from the debtors of the erstwhile firm, in the opinion of the assessing
officer, was not satisfactory. It is well settled that in view of Section
68 of the Act, where any sum is found credited in the books of the
assessee for any previous year, the same may be charged to income
tax as the income of the assessee of that previous year, if the
explanation offered by the assessee about the nature and source
thereof is, in the opinion of the assessing officer, not satisfactory.
(See: Sumati Dayal Vs. Commissioner of Income Tax, Bangalore9
and Commissioner of Income Tax Vs. P. Mohanakala10). We are of
the opinion that on a conspectus of the factual scenario, noted above,
the conclusion of the Tribunal to the effect that the assessee has failed
to prove the source of the cash credits cannot be said to be perverse,
giving rise to a substantial question of law. The Tribunal being a final
fact finding authority, in the absence of demonstrated perversity in its
finding, interference therewith by this Court is not warranted.
23. For the foregoing reasons, we have no hesitation in holding that no
question of law, much less any substantial question of law arises from
the order of the Tribunal requiring consideration of the High Court.
9
1995 Supp (2) SCC 453
10
(2007) 6 SCC 21
1
There is no merit in the appeals. Both the appeals are dismissed
accordingly with costs, quantified at `20,000/-.
..........................................
(D.K. JAIN, J.)
...........................................
(T.S. THAKUR, J.)
NEW DELHI;
DECEMBER 6, 2010.
RS 1
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