B.P. Jeevan Reddy, C.J. - (1.) THESE two references arise from a common order of the Tribunal. The assessee is common. Income-tax Reference No. 104 of 1983 arises from assessment proceedings, while Income-tax Reference No. 290 of 1981 arises from penalty proceedings. They pertain to the assessment year 1974-75. The question referred in Income-tax Reference No. 104 of 1983 reads : "(1) Whether, on the facts and in the circumstances of the case, the assessee was entitled to the allowance of business loss of Rs. 35,000 incurred in dacoity ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in treating the sum of Rs. 15,000 as unexplained investment of the assessee ?"
(2.) IN INcome-tax Reference No. 290 of 1981, the questions referred are : "(1) Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in law in holding that the INcome-tax Officer had jurisdiction to impose penalty under Section 271(1)(c) of the INcome-tax Act, 1961, since the order was passed by him after April 1, 1976, the date with effect from which Section 274(2) was omitted from the Act ? (2) Whether, in the facts and circumstances of the case, the Appellate Tribunal was justified in law in taking the view that the Explanation to Section 271(1)(c) of the INcome-tax Act, 1961, was attracted in this case ?" We shall take up Income-tax Reference No. 104 of 1983 first. The assessee, Gopi Krishna and Co., is a registered firm. There is another firm, Bal Krishna and Co., operating from the same premises. Indeed, Gopi Krishna and Bal Krishna are brothers. Gopi Krishna died. His son, Vinod Kumar, is the main partner of the assessee-firm. The assessee-firm is a dealer in gold and silver ornaments and silver coins. In its return for the assessment year 1974-75, the assessee declared an income of Rs. 2,402. The assessment was, however, completed on a total income of Rs. 69,570. Three items were added, out of which two are relevant for the present purposes. One was the disallowance of the loss of Rs. 35,407 claimed by the assessee, being the value of the silver allegedly robbed from the munim of the assessee, and the other the disallowance of Rs. 15,000 alleged to have been paid by the assessee to Sri R.N. Mani, advocate, in lieu of 2,500 old silver coins handed over to the assessee for sale at Varanasi. The assessee's case was that Hari Narain Prasad was the munim of the assessee-firm. He was entrusted with silver bars weighing 3,092 bari and 2,500 old silver coins on June 18, 1973, for sale at Varanasi. While at the railway station at 9 p.m.,. he was robbed by three persons. An F. I. R. was lodged with the police in that connection. The silver bars were out of the assessee's stock, whereas the silver coins were entrusted by Sri R.N. Mani to the assessee-firm for sale. The Income-tax Officer examined the munim, Hari Narain Prasad, the main partner, Vinod Kumar, and the advocate, Sri R.N. Mani. On a consideration of their statements and other materials placed before him, the Income-tax Officer disbelieved the story of loss. He also disbelieved the payment of Rs. 15,000 to Sri R.N. Mani. It is on the said findings that he added the said two amounts to the income of the assessee. On appeal, the Appellate Assistant Commissioner was of the opinion that Hari Narain Prasad was not an employee of the assessee-firm at all, nor did the assessee deal in sale and purchase of coins on commission basis. He also disbelieved the evidence of Sri R.N. Mani that he handed over old silver coins to the assessee for sale. The assessee carried the matter in further appeal to the Tribunal. On a consideration of the material before it, the Tribunal came to the conclusion that Hari Narain Prasad was not the munim of the assessee-firm, though he had been representing the firm before the Income-tax Officer in connection with assessment proceedings. He was an employee of the sister firm, Bal Krishna and Co. The Tribunal further referred to the statement of Vinod Kumar (main partner in the assessee-firm) that he did not do commission business. It was not inclined to believe the story that Sri R.N. Mani handed over old silver coins to the assessee for sale and that there was an agreement to charge commission in that behalf. It also referred to the fact that, on the date of the alleged robbery, the assessee's account books showed only 825 silver coins. It also disbelieved the statement of R.N. Mani and found that as the trend of silver price was declining, he would not have handed over the silver coins to the assessee for sale, and also because he had no need for money at that time. It also observed that, while handing over the coins, no receipt was taken and there was no settlement of commission to be charged, nor was any receipt taken from R.N. Mani acknowledging payment of Rs. 15,000 to him. No other material was produced by the assessee to prove the payment of the said amount. So far as the silver bars are concerned, the Tribunal observed that the assessee had alleged that they were out of its stock but it was not possible to believe it. It found that both the transactions were outside the account books and there were no good reasons to differ from the finding of the Appellate Assistant Commissioner in that behalf. Accordingly, the Tribunal dismissed the appeal. Thereupon, the present reference was obtained.
(3.) SRI V.B. Upadhyaya, learned counsel for the assessee, contended that the findings of the Tribunal are vitiated by taking into consideration irrelevant and inadmissible material. He submitted that, on the day of the robbery, the assessee had 39 kgs. of silver in stock with him and what was handed over to the munim was less than that stock. The Tribunal mixed up the cases relating to silver coins and silver bars and just because it chose to disbelieve the case with respect to the entrustment of the silver coins to the assessee, the same reasoning was extended to the silver bars as well. The case relating to the silver bars and the case relating to silver coins are different, though both were handed over to the said munim for being taken to Varanasi. The rejection of the assessee's case regarding the entrustment of silver bars to the said munim is totally without any relevant reason, He further pointed out that the controversy whether Hari Narain Prasad was the munim of the assessee is not of much consequence. Whether he was the munim of the assessee-firm or of its sister firm is equally irrelevant so long as it was established that the assessee had entrusted the silver and the coins to him for being taken to Varanasi and the same was robbed at the Railway Station. His contention is that the finding of the Tribunal, particularly with respect to silver bars, is vitiated by taking into consideration irrelevant and inadmissible circumstances and the finding of the Tribunal must, therefore, be rejected. He relied upon the decisions of the Supreme Court in Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736 and CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. On the other hand, Sri Markandey Katju, learned standing counsel for the Revenue, urged that, in these references, the assessee cannot be allowed to question the finding of the Tribunal relating to the loss of silver or coins because the assessee had not chosen to raise a direct question disputing the correctness of the Tribunal's finding, nor has any such question been referred to this court. The question as framed does not take in or involve the correctness of the said findings. He further submitted that the findings of the Tribunal are factual in nature and are not vitiated in any manner.;