1981 (11) TMI 37 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal erred in law or acted without evidence in finding that the sum of Rs. 2 lakhs and interest of Rs. 1,649 were genuine and not the assessee's income.
2. Whether the Tribunal misdirected itself in law by ignoring or overlooking material evidence on record, thereby vitiating its decision.

Detailed Analysis:

Issue 1: Tribunal's Error in Law or Lack of Evidence

The core issue was whether the Tribunal erred in law or acted without evidence in determining that the sum of Rs. 2 lakhs and the interest of Rs. 1,649 were genuine and did not represent the assessee's income for the assessment year 1963-64. The Tribunal concluded that the loans were genuine based on the following observations:
- The assessee maintained accounts in the regular course of business and had receipts showing the repayment of the money.
- The creditor-firm's cash book and ledger were produced and examined by the ITO.
- The Tribunal accepted the affidavit of Shri Bhudharmal Khaitan, a partner of the creditor-firm, who appeared before the ITO with the books of account.
- The Tribunal noted that the creditor-firm had been doing business in jute and money-lending for many years on a substantial scale and had been assessed on large amounts.
- The Tribunal held that the assessee discharged the initial burden of proving the genuineness of the transaction and the creditor's capacity to advance the loan.

However, the High Court found that the Tribunal failed to consider relevant facts and materials, such as:
- The creditor was primarily engaged in name-lending at a fantastic scale, as found by the AAC.
- The ITO and AAC's findings that the creditor had no resources to advance the loan and acted mainly as a name-lender were overlooked.
- The discrepancy in the date of the advance found by the ITO and the refusal of the creditor to produce account books despite repeated requests.

Issue 2: Tribunal's Misdirection in Law

The second issue was whether the Tribunal misdirected itself in law by ignoring or overlooking material evidence, thereby vitiating its decision. The High Court noted that:
- The Tribunal overlooked the fact that various parties admitted that the loans shown in the creditor's books were their own money, not advanced by the creditor.
- The Tribunal ignored the ITO's finding that the creditor's cash book up to August 3, 1962, was fictitious, raising doubts about the creditor's ability to advance loans in subsequent years.
- The Tribunal did not consider the AAC's observation that the creditor-firm's partner failed to provide details on how the cash was obtained for the loans.
- The Tribunal misdirected itself by not addressing the specific finding that the creditor's main income was from name-lending, not business.

Conclusion:

The High Court concluded that the Tribunal had indeed ignored and/or overlooked relevant materials and findings of the ITO and AAC. Consequently, the Tribunal erred and misdirected itself in law in determining the genuineness of the loan transaction. The High Court answered both questions in the affirmative, in favor of the Revenue, and ruled that there would be no order as to costs.