RAJESH BALIA,J. - (1.) THIS application under section 256(2) of the Income Tax Act, 1961, has been filed by the Commissioner, Jaipur, requiring us to direct the Income Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal'), to state the case and refer the following questions, which are said to be questions of law, arising out of the Tribunal's order for the block period 1 -4 -1985 to 27 -9 -1995 in ITSSA No. 1894/Jp/1996 : 'Whether on the facts and in the circumstances of the case as well as in law, the Tribunal was justified in : (i) deleting the addition of Rs. 10,62,000 out of the addition of Rs. 11,03,000 observing that the addition in respect of regular credits were not warranted in as much as no material was available with the assessing officer justifying the addition and primary facts relating to these credits stood duly disclosed in the regular books notwithstanding the fact, that the assessee could not prove the genuineness of loans claim and recording of loans in regular books is not enough evidence for not making addition in view of specific provisions of section 158B(b)/158BB(1) and 158BB(2) of the Income Tax Act; (ii) not holding that in view of not proving the genuineness of the cash credits and provisions of section 158BB(2) of the Income Tax Act, provisions of sections 68, 69, 69A, 69B and 69C of the Income Tax Act were clearly applicable even while completing the block assessment under section 158BC of the Income Tax Act, and, therefore, the assessing officer was fully justified in making the addition of Rs. 10,62,000; (iii) not holding that in view of sections 158B(b)/158BB(1), there is no bar in considering and making additions on the basis of entries appearing in regular books/statement of affairs, bank account, etc., and in computing of total income in accordance with the provisions of Chapter IV and VI of the Income Tax Act on the basis of evidence found as a result of search or requisition of books or accounts or documents and other material or information as are available with the assessing officer and, therefore, the assessing officer was justified in making addition of Rs. 10,62,000; (iv) in setting aside the addition of Rs. 41,000 for examining the creditor on his affidavit notwithstanding the fact, that no affidavit of the creditor was filed during assessment proceedings, as contended before the Tribunal; (v) in reducing the addition of Rs. 1,27,61,240 to Rs. 20,47,562; (vi) in not holding that the assessee could not prove its case in regard to various additions, viz., Rs. 56,91,094, 10,43,562 and Rs. 50,30,667 made by the assessing officer and sought to rely on various evidence which were not produced/furnished before the assessing officer and, therefore, the matter required to be restored to the file of assessing officer for want of verification/cross -tally, and accordingly in not setting aside the assessment; (vii) in not holding that the contention raised on behalf of the assessee as mentioned in para 16 of the Tribunal's order that all the evidence related to loans were produced before the Commissioner was totally incorrect and in any case to examine such evidence, the matter required to be restored back to the file of the assessing officer; and (viii) in holding that although the assessing officer was right in adopting the status of the assessee as that of Association of Persons as against status of firm taken in regular assessment, but the entity was the same notwithstanding the fact that since both the assessments are in separate status no benefit under section 158BB of the Income Tax Act is available to the assessee but as allowed by the Tribunal while reducing income from Rs. 1, 27,61,260 to Rs. 20,47,562. '
(2.) THESE questions arise out of the block assessment made in the case of the assessee under section 158BC of the Income Tax Act, 1961, which is a special procedure provided for the assessment in such cases. For the aforesaid block period, the assessing officer has made an assessment of the income from undisclosed sources at Rs. 1,27,61,240. The assessment was made for the status of an association which was constituted of four persons. Respondent, M/s. Ambey Abhushan Bhandar was not assessed in the status of a firm as claimed by it, but was assessed in the status of Association of Persons, constituted of Hemraj Kasliwal, Rajendra Kasliwal, Kamlesh Kasliwal and Arvind Kasliwal, their income from undisclosed sources was assessed as opening capital of members of Association of Persons, the amount included profit for the period ending on 21 -5 -1995, profit for the period ending 22 -5 -1995 to 26 -9 -1995, creditors, cash and silver. This order was appealed against before the Tribunal by the assessee. The Tribunal after considering various aspects of the matter and after laying down foundation for consideration, reduced the income from undisclosed sources for the block period from Rs. 1,27,61,240 to Rs. 20,47,562. Apart from the above additions, an addition of Rs. 11,03,000 was also made on account of unexplained cash credits, out of which a sum of Rs. 10,62,000 was also deleted by the Tribunal by holding that the source of deposit has not been explained, but the provisions of section 68 cannot be invoked for assessment for the block period under section 158B and also held that the assessee could only be assessed in the status of a Association of Persons. The Tribunal agreeing with the findings of the assessing officer that the assessment in the status of Association of Persons was right, further held that since the members of the existing firm were also members of the Association of Persons, two independent assessment cannot be made against the firm and the Association of Persons while reducing the addition from Rs. 1,27,61,240 to Rs. 20,47,562. An application was moved before the Tribunal under section 256(1) of the Income Tax Act by the Commissioner for referring the aforesaid questions to this court for its opinion, which has been rejected by the Tribunal vide its order dated 28 -1 -1999, hence, this application.
(3.) HAVING heard learned counsel for the parties, we are of the opinion that since the Tribunal has proceeded on the basic premises that a particular amount can be considered in a block period only with some material with the assessing officer suggesting the same relates to undisclosed income and in the absence of any material and without primary facts relating to the transaction, any amount duly disclosed in the books, no addition is possible in block assessment, thus, declined to consider the effect of legal fictions enacted by the legislature under various provisions of the Income Tax Act, particularly, sections 68, 69, 69A, 69B and 69C of the Act, which have been made applicable to the proceedings of block assessment under section 158BB(2) of the Act. In the aforesaid circumstances, the central question that requires consideration while searching for answer to various questions which have been suggested by the revenue, is whether in resorting to block assessment, where an assessing officer finds in the books of assessee any cash credits which have not been explained or explanation furnished by the assessee is not found satisfactory, the deeming provision under section 68 can be invoked ? Or where the assessee has been found to be in possession of the assets and source of their acquisition is not satisfactorily explained, still the statutory presumption raised about such cash credit value of assets, found in the possession of assessee or investments found to have been made by the assessee to be income of a particular year of the assessee, can be raised or cannot be pressed into service ? This question needs consideration of various statutory provisions relating to the provisions for assessment, the legal fictions created by the statute and the effect of specific provisions of section 158BB and other provisions enacted in Chapter -XIV -B. These considerations, in our opinion, cannot be considered to be a question of fact. The construction of various provisions of an enactment always gives rise to a question of law and not question of fact, is a principle which need not to be elaborated. However, we are of the opinion that first seven questions suggested by the revenue are only different aspects of one question, which can be considered by reframing the question. The question No. 8 too, in our opinion, is not a question of fact but a question of law. In our opinion, the following two questions of law arise out of the Tribunal's order, which govern the entire controversy; '1. Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the legal fictions created under various provisions of the Act, specifically provided under section 158BB(2) are not applicable when assessment is made as block assessment under section 158B; if so, what is its effect on various deletions made by the Tribunal. (2) Whether in the facts and circumstances of the case, the Tribunal was justified in holding that once the assessment has been made in the status of Association of Persons constituting certain persons, a firm constituted of the same persons cannot be assessed as an independent unit ? The Tribunal's order rejecting application under section 256(1) is, therefore, erroneous. Accordingly, this application is allowed and we direct the Tribunal to state the case and refer the aforesaid two questions to this court for its opinion. No order as to costs.;