Nawal Bihari Lal Goel vs Commissioner of Income Tax

D.K. Kapur, J.—There are four applications u/s 256(2) of the income tax Act, 1961, before the court. They are income tax Cs. Nos. 39 of 1980 and 75 to 77 of 1980. These relate to the assessment years 1963-64, 1964-65, 1966-67 and 1967-68. The four appeals out of these references were decided together by the income tax Appellate Tribunal on 15th January, 1979. The assessee then filed four applications u/s 256(1) of the Act before the Tribunal seeking a reference concerning the following questions :

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not engaged in genuine money-lending business ?

Whether there was any evidence before the Tribunal to hold that the assessee did not carry on any money-lending business ? and

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in disregarding the solemn affirmation made by the assessee before the authorities and in holding that he did not carry on any money-lending business ?

These four applications were dismissed by an order of the Tribunal passed on 18th July, 1979.

The assessee then filed an application being I.T.C. No. 39 of 1980 u/s 256(2) of the Act on 12th February, 1980. When the matter came before the court, it appears that there were some objections by the Bench hearing the case to the effect that only one reference application had been filed and not four. The assessee then filed three new applications being I.T.Cs. Nos. 75 to 77 of 1980, along with an affidavit and three applications for the condonation of delay. It is common ground before us that these three applications were filed late and thus only one of the applications was within time. However, there is an application in each of the three belated applications seeking a condonation of the delay. The application is to the effect that because there was a consolidated order by the Tribunal for the four years, the assessee was under an erroneous belief that only one application was required. These applications for the condonation of delay were strenuously opposed by the learned counsel for the Department. But the learned counsel for the petitioner raises the plea that if there is a mistake by counsel or party bona fide arising out of the fact that only one application was to be filed, the court should condone the delay. We are not inclined to condone the delay in the circumstances of this case. The assessee had himself filed four applications u/s 256(1) although there was one order of the Tribunal in appeal. There should, therefore, be no mistake by the assessee regarding the necessity of filing four applications u/s 256(2). However, the mere rejection of the application for condonation of delay would bring us back to the point that if the questions of law do arise, or any of them, they would arise out of the same order for all the years in question. We are not inclined at present to hold that only one application u/s 256(2) can be filed if there is only one appellate order by the Tribunal regarding the several years. This has become a part of the settled practice of the court. It is clearly understood that each assessment year is separate from every other assessment year. Therefore, there is a requirement to file a separate application for each year. However, as the second point is not free from difficulty, we might have been forced to condone the delay on the footing that it is not possible to select which year is relevant to the application which was actually within time.

We would, therefore, leave the question of delay partly undecided in this case, but would like to state without reservation that the assessee or the Department, whoever is the party moving the court, has got to file a separate application u/s 256(2) for each year and no consolidated application can be filed.

Turning now to the question whether a reference can be made in the circumstances of the present case, it clearly appears to us that the questions sought to be raised are pure questions of fact. The facts of the case show that the assessee had submitted returns for the four assessment years in question showing income from name-lending business. This name-lending business consisted of issuing fictitious loans on a commission. In other words, there was no genuine money-lending, but money was shown as lent in the books and commission was charged for this purpose. The books as produced before the ITO were rejected on the footing that the entire business was non-genuine; the assessee was assessed as if he was only carrying on the business of name-lending. This decision was affirmed on appeal by the AAC as well as by the Tribunal. In appeal, the claim of the assessee was that some of the transactions in his books were genuine money-lending transactions. But, this fact was not accepted by the AAC on the ground that he (the assessee) had not produced the books of account of M/s. Laxminarayan Atmaram, which was a firm in which the petitioner was a partner before he started the name-lending business.

It was submitted by the learned counsel for the assessee that though the finding might be of little effect qua the assessee''s income, it had serious repercussions qua some of the genuine parties who had taken loans and whose evidence had been recorded by the ITO. It may be mentioned that the assessment was made by an ITO belonging to the Special Circle-V in Calcutta, and he had recorded quite a number of statements from parties who had stated that they had taken genuine loans from the petitioner. Apparently, the Department rejected all these loans and even the existence of the money-lending business on the footing that the assessee did not have any capital, which he could have lent out. However, as there is a period of five years involved in the four assessment years, which had been dealt with by the common judgment of the income tax Appellate Tribunal, there is some possibility that the applicant may have built up some capital during the course of these years. Learned counsel also tried to show that there was some evidence about the existence of genuine loans. As we see it, this controversy is out of place in this court. We have not to decide whether some of the businesses are name-lending businesses and some of the businesses are genuine. As soon as the assessee made a statement that his business was that of name-lending, i.e., giving false loans or paper loans, for which he charged commission, every one of the transactions would become suspect. It may be that in this way, some genuine transactions might also be treated as being non-genuine. This is the risk that a person has to take if he is indulging in running what is essentially a business of deceit and fiction. Both learned counsel were good enough to explain the nature of the business which is called name-lending business to us. If a person, say A, wants to introduce an amount, say X, in his books, he gets a document which shows that one B has lent that sum to him. The person who creates this fiction is the name-lender. In the books of the businessman concerned, the amount is shown as having been lent by the aforementioned lender or some other false or fictitious person. For these services, the name-lender gets a commission of 1.5 per cent. This enables the businessman A to utilise the sum in his business as if it was lent by B. Actually, this is his unaccounted or concealed money from some other source. The name-lender, who creates these false credits and debits, may at the same time have lent and there is a risk that that money may also be treated as being false and not genuine as if that person has utilised secreted funds. Learned counsel for the assessee urges that the result of the assessment of the petitioner may have serious repercussions on quite genuine parties who have taken quite genuine loans from the petitioner. Having stated the facts, we would say that it would be for that genuine party to establish this question of genuineness in his own genuine case. As far as we are concerned, the question seems to be clearly a question of fact, and we see no ground for directing a reference of any of the questions sought to be raised. All the four applications are dismissed. The applications for condonation of delay are also dismissed. We make no order as to costs.