1995 (8) TMI 61 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee discharged the onus under section 68 of the Income-tax Act, 1961, regarding cash credits in the names of Smt. Nirupama Mohanty, Shri Biswajit Mohanty, and Shri Satyajit Mohanty.

Issue-wise Detailed Analysis:

Issue 1: Discharge of Onus under Section 68 of the Income-tax Act, 1961

Facts:
For the assessment year 1979-80, the assessee showed cash credits of Rs. 40,000 each in the names of his minor sons, Biswajit Mohanty and Satyajit Mohanty. For the assessment year 1981-82, a cash credit of Rs. 20,000 was shown in the name of Smt. Nirupama Mohanty, the wife of the assessee. These amounts were added to the assessee's income by the Income-tax Officer. However, the Commissioner of Income-tax (Appeals) held that the cash credits were proved and deleted the additions. The Income-tax Appellate Tribunal confirmed this order.

Arguments by Revenue:
Mr. A. K. Ray, representing the Revenue, argued that whether the assessee discharged the onus under section 68 is a question of law. He contended that the Tribunal's appreciation of facts is open to scrutiny by the High Court. He emphasized that merely establishing the identity of the creditor is insufficient; the genuineness of the loan must also be proved. He relied on precedents such as CIT v. S. Kamaraja Pandian and CIT v. Biju Patnaik to argue that the Tribunal's findings could be erroneous in law if they misdirected themselves or reached perverse conclusions.

Arguments by Assessee:
Mr. Ratho, representing the assessee, argued that the questions relate to facts and that the High Court should not interfere as it does not act as an appellate authority under sections 256 or 257 of the Income-tax Act. He cited the Supreme Court decision in CIT v. S. P. Jain to argue that the High Court should only intervene if the Tribunal's findings are based on no evidence, irrelevant evidence, or are arbitrary or perverse. He also argued that the income in question had already been assessed in the hands of the creditors and could not be taxed twice, citing Dayabai (Smt.) v. CIT and Sri Krishna Das v. Town Area Committee.

Court's Analysis:
The court examined section 68 of the Income-tax Act, which requires the assessee to satisfactorily explain the nature and source of any sum credited in their books. The explanation must satisfy the Assessing Officer. In this case, the Commissioner of Income-tax (Appeals) and the Tribunal found that the assessee had successfully discharged this onus. The court noted that both findings were based on facts and could not be re-evaluated in a reference under section 256 of the Income-tax Act.

The court referred to CIT v. S. P. Jain, where the Supreme Court held that the High Court could intervene if the Tribunal misunderstood statutory language, made findings based on no evidence, or acted on irrelevant or contradictory evidence. However, the court found that the Tribunal's findings in this case were reasonable and based on relevant facts.

Conclusion:
The court concluded that the Tribunal's findings regarding the genuineness of the transactions were not perverse and were based on a proper appreciation of facts. Therefore, the court answered the questions in the affirmative, in favor of the assessee and against the Revenue. The S. J. Cs. were disposed of accordingly.

Separate Judgments:
D. M. Patnaik J. concurred with the judgment.