BOMIN PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is a private limited company having the business of manufacturing electric motors. The ITO worked out the business loss for the asst. year 1963 64 at Rs. 31,164, but added income from other sources, including Rs. 20,000, which represented, according to him, bogus hundi loans. On appeal by the assessee, the AAC set aside this order of the ITO, by his order dt. 15th May, 1971, and remanded the matter to the ITO for re examining the question about hundi loans after giving adequate opportunity to the assessee to produce oral as well as documentary evidence, as he may be advised. On remand, the ITO passed a fresh order on 25th March, 1974. In the fresh assessment which he made pursuant to remand, the ITO reduced the addition on account of unexplained hundi loans to Rs. 15,000 comprising three loans of Rs. 5,000 each, said to have been advanced by S/Shri Gokuldas Narsuman, Bhagwandas Nandlal and Tulsidas Bhojraj. The assessee carried the matter again in appeal challenging, inter alia, this addition of alleged three hundi loans. The AAC held that the assessee had failed to establish that these hundi loans were genuine and, therefore, confirmed the order of the ITO. On further appeal to the Tribunal, challenging, inter alia, this addition, the Tribunal made a consolidated order for the asst. yrs. 1963 64 and 1964 65. Before the Tribunal, it was contended on behalf of the assessee that he has obtained these loans through hundi brokers who had confirmed these loan transactions and that the receipt or the repayment of the loan was by cheques, the encashment of which were certified by the concerned banks. The ITO as well as the AAC could not have brushed aside this evidence on the short ground that since neither the persons advancing moneys nor the brokers could produce books of account, the transaction could not be held to be genuine. On behalf of the Department, these contentions were sought to be repelled by urging that these transactions were not genuine, though, admittedly, the transactions were more or less through banks, but this was merely a facade and the confirmation letters given by the brokers could not be relied upon since they were acting merely as conduit pipes to transfer the unaccounted moneys of the parties in their books of account. On appreciation of the relevant evidence produced before the ITO, documentary as well as oral, the Tribunal concluded that the loan advanced by Hirachand Laxmandas was a genuine transaction, since the loan amount has been received and repaid by cheques. However, as regards the loan said to have been advanced by Bhagwandas Nandlal, though the repayment was by cheque through a bank the encashment of which was certified by the bank concerned, the assessee failed to prove the receipt of the loan which was by cash, and, therefore, the loan was not established. The Tribunal, however, noted that summons were served on the party advancing the loan, which established, according to the Tribunal, merely the fact of the existence of such a party. But since neither the loaners nor the brokers had been able to lead any evidence in support of the letter of confirmation which they have passed confirming the loan transaction, the genuineness of the transaction is not established though the parties were genuine. In that view of the matter, the Tribunal upheld the addition of Rs. 5,000 as unaccounted cash credit transaction. As regards the loan said to have been advanced by Tulsidas Bhojraj, the Tribunal noted that the evidence led before the ITO showed that the loan amount was received by cheque, though the ITO as well as the AAC had treated this as a cash loan on the basis of the statement furnished by the assessee. The Tribunal, therefore, held that the assessee has failed to establish the genuineness of this transaction, since the Department had no opportunity to examine and controvert the evidence led by the assessee. The Tribunal did not think it fit to give any credit to the so called confessional statements made by the persons advancing loans, since the statements of these persons were not allowed to be subjected to cross examination. In that view of the matter, the Tribunal upheld the addition of Rs. 5,000 said to have been advanced by Tulsidas Bhojraj as unexplained cash credit. In effect, the Tribunal confirmed the addition of Rs. 10,000. The assessee, therefore, sought the reference from the Tribunal which accepted the prayer of the assessee and referred the following question to us for our advice :

(2.) AT the time of hearing of this reference, a preliminary point was raised on behalf of the Revenue that this Court has no jurisdiction to go into the findings of fact made by the Tribunal, since the assessee has not thought it fit to raise and seek a specific reference challenging such a finding of fact. It is, no doubt, a settled position in law that the primary facts found by the Tribunal and the factual inferences therefrom would not be open to review by the High Court, unless the party desiring to challenge the correctness of the finding given by the Tribunal either on the ground that the same is not supported by any evidence on record, or based on irrelevant or inadmissible evidence, or is unreasonable or perverse, seeks and obtains a specific reference raising any one of these grounds. The jurisdiction of the High Court on reference is only an advisory jurisdiction and it can pronounce its opinion only on questions referred to it. It cannot sit as an appellate Court from the decision of Tribunal [see Aluminium Corporation of India Ltd. vs. CIT (1972) 86 ITR 11 (SC) : TC54R.339]. When the question referred to the High Court speaks of "on the facts and in the circumstances of the case", it means on the facts and circumstances found by the Tribunal and not on facts and circumstances that may be found by the High Court on a reappraisal of the evidence, and in the absence of a question whether the findings were vitiated for any permissible reason, the High Court has no jurisdiction to go behind or question the statements of fact made by the Tribunal [see Karnani Properties Ltd. vs. CIT (1971) 82 ITR 547 (SC) : TC13R.820. It is well established that the High Court is not a Court of appeal in a reference and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Tribunal. The High Court should confine itself to the facts as found by the Tribunal and to answer the question of law referred to it in the context of those facts. A finding of fact may be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse, but it is not open to the assessee to challenge such a finding of fact unless he has applied for a reference of the specific question under the relevant section. It is the obligation of the party who applies for a reference to challenge those findings of fact by expressly raising the question about the validity of the findings of fact and if he has failed to do so, he is not entitled to urge before the High Court that the findings of the Tribunal are vitiated by any reason [see CIT vs. Greaves Cotton & Co. Ltd. (1968) 68 ITR 200 (SC) : TC54R.839].

(3.) WE are of the opinion that so far as the first two limbs of the contention made on behalf of the assessee are concerned, we do not think that they are well founded. The legal position is well settled and not capable of any debate. We are impressed with the first limb of contention emphasised on behalf of the assessee that in the present case, the question can be said to be a mixed question of law and fact and that the ultimate finding reached by the Tribunal was on application of some legal principle to an inference drawn from basic facts. It is no doubt true that in the question as has been referred to us, there is reference to S. 68 of the IT Act, 1961. We do not think that this mere reference to S. 68 necessarily involves application of any legal principle to the inferences drawn from facts established. Sec. 68 enjoins upon the assessee to offer an explanation about the nature and source of any sum found credited in the books of an assessee maintained for any previous year, and if there is no explanation or the explanation is unsatisfactory in the opinion of the ITO, the sum so credited is to be treated as income and brought to tax accordingly. The opinion of the ITO that the explanation submitted by the present assessee did not satisfy him is an inference drawn from the facts adduced before him. In reaching the conclusion of the explanation being satisfactory or otherwise, there is no question of any application of legal principle, much less any interpretation of the section or any legal principle for that matter. The first limb of the contention, therefore, does not impress us, for the aforesaid reasons.