WADHWA RAM PROP. MODERN PLASTIC HOUSE vs COMMISSIONER OF INCOME TAX.

G. S. SINGHVI, J. :

This is a petition filed under s. 256(2) of the IT Act, 1961 for directing the Tribunal, Chandigarh Bench, Chandigarh to refer the following questions of law to the High Court for its opinion :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining the addition of Rs. 1,95,000 on account of unexplained investment on the purchase of drafts ?

Whether, on the facts and in the circumstances of the case, the addition of Rs. 1,95,000 sustained by the Tribunal is legally justified especially when the cash flow statement produced by the assessee showed that sufficient cash money was available ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining the addition of peak amount of Rs. 1,95,000 on account of unexplained investment on the purchase of drafts on the basis of suspicion whereas the said addition is against the evidence and material on record ?

Brief facts :

For the year 1989-90 the petitioner filed its return declaring an income of Rs. 29,260. However, the assessing authority made assessment on a total income of Rs. 5,34,424.

The appeal filed by the petitioner against the order of assessment came to be dismissed by the CIT(A) on 16th October, 1991. On a further appeal filed by it, the Tribunal Chandigarh Bench, Chandigarh sustained the addition of Rs. 1,95,000 as peak amount of unexplained investment on the purchase of drafts but deleted the rest of the additions. Thereafter, the petitioner filed an application under s. 256(1) of the Act of 1961 for reference of the questions of law to this Court. The Tribunal declined the request of the petitioner and dismissed the application by an order dt. 14th November, 1995.

After hearing Shri Mittal, learned Counsel for the petitioner and Shri Gupta, learned counsel for the Revenue, we are satisfied that no question of law arises in this case which requires adjudication by the High Court.

Shri Mittal made strenuous efforts to persuade us to hold that once the Tribunal accepted that money had been paid by the assessee for meeting the custom duty as well as demurrage charges for the imported goods and the goods were released on payment of such charges, the addition of Rs. 1,95,000 should be treated as without jurisdiction and unjustified. Learned counsel argued that the entire money invested in the drafts purchased by the petitioner must be treated as money in hands of the assessee and, therefore, there was no ground to sustain the addition of Rs. 1,95,000. Shri Mittal heavily relied on Cash Flow Statement marked as Annexure P6. On the other hand, Shri Gupta submitted that Cash Flow Statement was not produced by the assessee either before the assessing authority and the Tribunal has rightly held that the entire amount of drafts cannot be treated as available in the hands of the assessee. Shri Gupta submitted that there was a clear intention to evade the tax because the assessee did not produce any evidence before the assessing authority or the appellate authority disclosing the source from which it got money for purchase of drafts. Shri Gupta pointed out that the books of accounts, vouchers and other documents of purchase and sales were deliberately withheld by the assessee by concocting the story of having lost the same and, therefore, the finding recorded by the Tribunal that the assessee has failed to explain the source of income cannot but be treated as per finding of fact and no question of law arises in this case. He placed reliance on Om Parkash Vs. Commissioner of Income Tax, and Ashok Kumar Vs. Commissioner of Income Tax, .

A look at the order passed by the assessing authority shows that while dealing with the issue of purchase of drafts, the assessing authority recorded the statement of assessee regarding the source of purchase of the drafts amounting to Rs. 4,49,527 and observed that the assessee has stated that he purchased the drafts from the cash available during the normal business transactions but later on he stated that the books of accounts, vouchers, documents of purchase and sale etc. have been lost. The assessing authority observed that the assessee had made credit sales to almost all the parties whose accounts were obtained under s. 133(6) of the Act of 1961 and, therefore, the possibility of the assessee having heavy cash in hands is ruled out. On that premise, the AO treated the amount of Rs. 4,49,527 as investment out of unexplained source and added back to the assessees total income. The appellate authority concurred with the AO. While dealing with this issue, the Tribunal observed :

"We are, however, in agreement with the learned counsel that the money had been paid for meeting the customs duty as well as demurrage charges for imported goods. Whenever an instalment was paid, goods were released and the assessee, out of sale proceeds of those goods, again made the payment. The learned counsel has submitted in the alternative, that there are in all five bank drafts and the peak of Rs. 1,95,000 could, at the most, be treated to be the money representing unexplained investment. Two drafts one for Rs. 55,000 on 7th November, 1988 and the other for Rs. 1,40,000 on 8th November, 1988 had been obtained by the assessee. These two drafts could be treated to represent the peak amount available with the assessee. We are in agreement with the learned counsel that when the assessee was doing very good business in garments and had also daily sale proceeds, the goods released by the customs authorities were indeed available for the sale and the assessee did utilise sale proceeds for making remittance to the Customs Collector, Madras, for releasing more goods. The entire amount of Rs. 4,49,527, representing the five drafts cannot be said to be available in the hands of the assessee at a time. The drafts had been sent during the course of four months. After the first draft was sent on 12th July, 1988, certain goods were received from the Customs and sold by the assessee. Thereafter, second draft was sent on 29th August, 1988. Similarly, the money must have rotated and, in that light, it is appropriate to adopt the peak amount. We are in agreement with the learned counsel that, by way of an alternative plea, the peak amount may, at best be treated as money available from unexplained sources. Looking to the entire facts, we are of the view that the only addition, which is called for, is Rs. 1,95,000 representing unexplained investment on the purchase of drafts".

After having carefully perused the orders passed by the assessing authority, appellate authority and the Tribunal, we are convinced that the Tribunal has recorded cogent reasons for holding that a sum of Rs. 1,95,000 represents the unexplained investment. Shri Mittal wanted us to re-appreciate the material placed on record and substitute the findings of the Tribunal with those of ours. We do not find any justification to adopt that procedure. The question whether the Tribunal has correctly appreciated the case set up by the parties and the findings recorded by it by accepting or not accepting the explanation given by the assessee are pure findings of fact. Learned counsel has not been able to show that the findings recorded by the Tribunal are not based on any evidence and no reasonable man could have arrived at those findings on the basis of the appreciation of the material placed before him.

In Om Parkash vs. CIT (supra), a Division Bench of this Court held :

"...... The acceptance or rejection of any piece of evidence by the Tribunal would squarely fall within the ambit of appreciation of evidence and ordinarily would not give rise to a question of law. The Tribunal for valid reasons rejected the affidavit furnished by the assessees grandmother-in-law and assessed the amount as the assessees income from undisclosed sources. The finding of the Tribunal was a finding of fact and no question of law arose for reference".

In Ashok Kumar vs. CIT (supra), a Division Bench of Madhya Pradesh High Court held :

"...... The question whether the assessees explanation was acceptable or not, on the facts of the case, was purely one of fact. The Tribunal had found that the assessee was the owner of the unaccounted cash found in his possession and hence, the Tribunal was justified in upholding the addition of the amount as the assessees income under s. 69A of the IT Act, 1961".

We are in respectful agreement with the view expressed in the aforementioned judgments and in our considered opinion no question of law arises in this case.

Consequently, the petition is dismissed.