1986 (3) TMI 3 - SC - Income Tax

Assessee discharged onus by producing creditor details; revenue's failure to investigate precludes penalty appeal, appeals dismissed

Commissioner of Income-Tax, Orissa Versus Orissa Corporation Pvt. Limited

SC upheld the Tribunal's findings and dismissed the appeals. The Court found that the assessee had produced names and addresses of alleged creditors and, ... Additions made to the quantum of income disclosed by the assessee - imposition of penalty u/s 271(1)(c) read with section 274(2) - burden of prove - It was argued that in view of the provisions of section 68 of the Act, the onus in these types of cases was on the assessee and, in this case, the assessee had not discharged that onus and in the premises, questions of law as indicated above arose. HELD THAT:- In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It is common ground that the question on the penalty aspect depended on the quantum aspect. Appeals dismissed. Issues:Refusal to direct the Tribunal to state a case under section 256(2) of the Income tax Act, 1961 and to refer certain questions of law arising out of the appellate order of the Income-tax Appellate Tribunal for determination by the High Court.Analysis:The appeals arose from the decision of the Orissa High Court refusing to direct the Tribunal to state a case under section 256(2) of the Income tax Act, 1961, and to refer questions of law arising from the appellate order of the Income-tax Appellate Tribunal. The issues involved questions regarding the assessee's initial onus in proving confirmation letters and hundis, the deletion of income from undisclosed sources, the shifting of onus from the assessee to the Revenue, and the imposition of penalty under section 271(1)(c) read with section 274(2) of the Act. The Tribunal concluded that the Revenue was not justified in drawing adverse inferences against the assessee and deleting the penalty. The High Court and subsequently the Supreme Court upheld the Tribunal's decision, stating that no question of law arose in these cases. The High Court rightly refused to refer the questions sought for, leading to the dismissal of the appeals.The Income-tax Officer had observed inconsistencies in the confirmation letters provided by the assessee and expressed doubts about their authenticity. The assessee failed to produce the alleged creditors before the Income-tax Officer, leading to the addition of Rs. 1,50,000 as unproved cash credit to the assessee's income. The Tribunal noted that the creditors were income-tax assessees who admitted to allowing their names to be used without giving loans. The Tribunal concluded that the Revenue's adverse inference was unjustified and deleted the penalty. The Tribunal's decision was based on evidence and not considered unreasonable or perverse.The onus in such cases lies on the assessee under section 68 of the Income tax Act, 1961. The section allows unexplained cash credits to be charged as the assessee's income if not satisfactorily explained. Previous court decisions emphasized the need to consider all evidence fairly and avoid basing findings on conjectures or suspicions. The Tribunal's decision was found to be based on evidence and not on irrelevant considerations. The High Court rightly refused to refer the questions of law as no substantial legal issue arose from the Tribunal's decision.In conclusion, the Supreme Court upheld the decisions of the Tribunal and the High Court, stating that no question of law arose in the case. The Tribunal's findings were based on evidence, and the assessee had discharged the burden that lay on them. The High Court's refusal to refer the questions sought for was deemed appropriate, leading to the dismissal of the appeals.