1978 (2) TMI 69 - HC - Income Tax

Summary

Issues Involved:
1. Whether the loans in question were genuine or represented the assessee's income from undisclosed sources.
2. Whether the Tribunal's conclusion that the loans were genuine was perverse.

Summary of Judgment:

Issue 1: Whether the loans in question were genuine or represented the assessee's income from undisclosed sources.

The assessee, a private limited company, had shown loans amounting to Rs. 80,000 from four parties in its account books. The ITO did not accept the assessee's explanation that these were genuine hundi loans, citing reasons such as unserved summons and the involvement of a known bogus name-lender. Consequently, the ITO added back the entire amount as the assessee's income from undisclosed sources. The AAC confirmed this addition, emphasizing the lack of evidence to prove the creditors' capacity to lend the amounts. However, the Tribunal, upon further appeal, found the loans to be genuine based on confirmation letters, transactions by cheques, and other evidence, and deleted the additions.

Issue 2: Whether the Tribunal's conclusion that the loans were genuine was perverse.

The Tribunal's decision was challenged on the grounds that it was perverse, i.e., no reasonable person could have arrived at such a conclusion based on the materials on record. The High Court examined whether the Tribunal had misunderstood the statutory language or made findings inconsistent with the evidence. The Court noted that the Tribunal had relied on confirmation letters, cheque transactions, and the income-tax file numbers of the creditors. The revenue did not verify the financial status of the creditors from their income-tax records. The Court held that the Tribunal's reliance on the materials was not improper and that the Tribunal had not acted perversely. The Court emphasized that the onus was on the assessee to prove the genuineness of the loans, which the Tribunal found to be sufficiently discharged.

Conclusion:

The High Court answered the referred question in the negative, holding that the Tribunal's conclusion was not perverse and was in favor of the assessee. The parties were ordered to bear their own costs.