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TMI Blog1979 (11) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... at Golcha Cinema, Delhi and Maratha Mandir at Bombay in exchange for fixed weekly rentals. The cinema at Bombay was let out on a weekly rent of Rs. 13,000 to Madan's Bombay and the cinema at Delhi was let out on weekly rental of Rs. 9,500 to M/s. Dhartidhan Pvt. Ltd. The ITO, Central Circle I, Jaipur, held that the above contracts were not genuine and both Dhartidhan and Madans were contractors created on paper by the assessee, otherwise none of them had any role to play as contractors and cinemas in fact were managed and run by the assessee itself and the profits flowing from the exhibition of films at those two cinemas rightly belonged to the assessee. Aggrieved by the order of the ITO, the assessee went in appeal before the AAC. The AAC also came to the conclusion that these contracts were not genuine business contracts. On a further appeal by the assessee, the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated 29th June, 1976, while dealing with the assessment year 1965-66, upheld the contention of the assessee and came to the conclusion that an the basis of the evidence on record the department had not been able to make out the case that the contracts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on record and the Tribunal has given the finding upon its own imagination ? " As regards the question No. 2 mentioned above, Mr. Ranka, learned counsel for the assessee, raised an objection that this question was not formulated in the application under s. 256(1) of the Act submitted before the Tribunal and as such it cannot be called for under s. 256(2) of the Act. It is submitted that while dealing with a reference application, the High Court is bound to accept the findings of fact arrived at by the Appellate Tribunal and if a person wants to challenge such findings, he must do so by first moving an application under s. 256(1) and if he has failed to file an application under s. 256(1), expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the findings are vitiated for one reason or another. It is submitted that in a reference under s. 256 the High Court exercises advisory jurisdiction and does not function as a court of appeal. If a party accepted the Tribunal's conclusion on a question or in any event did not apply under sub-s. (1) of s. 256 to the Tribunal to refer that particular question to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contracts were not genuine. The ITO and the AAC, in their respective orders, had clearly brought out such circumstances and the Tribunal failed to make a mention of those circumstances and as such the Tribunal committed an error of law and a question of law arises out of the Tribunal's order. Reliance is placed on the following observations in Sir Sunder Singh Majithia v. CIT [1942] 10 ITR 457 (PC) at p. 461. "When a document purporting to be an instrument of partnership is tendered under section 26A on behalf of a firm and application is made for registration of the firm as constituted under such instrument, a question may arise whether the instrument is intended by the parties to have real effect as governing their rights and liabilities inter se in relation to the business or whether it has been executed by way of pretence in order to escape liability for tax and without intention that its provisions should in truth have effect as defining the rights of the parties as between themselves. To decide that an instrument is in this sense not genuine is to come to a finding of fact: whether there was evidence upon which it was open to the income-tax authority to come to such a dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dhanwate v. CIT [1968] 68 ITR 365, their Lordships of the Supreme Court held as under (p. 375): " It was finally contended on behalf of the appellant that the Appellate Tribunal had found that Shri V. D. Dhanwatey had earned the remuneration without any detriment to the family funds and the finding of the Appellate Tribunal on this point was a finding on a question of pure fact and the High Court could not, in a reference under section 66(1) of the Indian Income-tax Act, 1922, question the correctness or the validity of that finding. We are unable to accept the argument put forward on behalf of the appellant. It is true that the jurisdiction conferred on the High Court by section 66(1) of the Income-tax Act is limited to entertaining references on questions of law. In the present case, however, the conclusion reached by the Tribunal is not a conclusion on a question of pure fact but it is a conclusion on a mixed question of law and fact. In other words, though the conclusion of the Tribunal is no doubt based upon primary evidentiary facts, its ultimate form is determined by the application of the relevant legal principle of Hindu law which has been discussed in the course of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of view and that is to treat the final conclusion as one on a mixed question of law and fact. On this view the conclusion is not treated as one on h pure question of fact, and its validity is allowed to be impeached on the ground that it has been based on a misapplication of the true legal principles. It would thus be seen that whether we call the conclusion in question as one of fact or as one on a question of mixed law and fact, the application of legal principles which is an essential part in the process of reaching the said conclusion is undoubtedly a matter of law and if there has been an error in the application of the said principles it can be challenged as an error of law. The difference then is merely one of form and not substance and on the whole it is more convenient to describe the question involved as a mixed question of law and fact. That is the view expressed by this court in the case of Sree Meenakshi Mills [1957] 31 ITR 28 (SC), and in our opinion, it avoids any confusion of thought and simplifies the position by treating such questions as analogous to those falling under the category of question of law. " In Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, be set aside. On the facts of this case the High Court was justified in examining the correctness of the inference drawn by the Tribunal on the basis of the primary facts found by that Tribunal. " On the other hand, Mr. Ranka, learned counsel for the assessee, strenuously contended that the burden of proof to prove that the transaction is a benami or sham or unreal or not genuine is on the department. The finding recorded by the Appellate Tribunal on the point whether a contract was made benami or not is one of fact and even if such finding is based upon some evidence it will have to be accepted by the High Court in a reference. The High Court cannot go into the question of sufficiency of evidence. Thus the inference from the facts of this case by the Tribunal that the transaction could not be proved to be benami by the department did not involve any question of law and this being purely a question of fact there was no occasion for calling for any reference. It is submitted that the Tribunal had considered the entire facts and circumstances brought out by the ITO and the AAC and have given elaborate reasons for not accepting the reasons advanced by these authorities and has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars that there was no evidence before the Tribunal upon which they, as reasonable men, could come to the conclusion to which they have come; and this is so even though the High Court would on the evidence have come to a conclusion entirely different from that of the Tribunal. In other words, such finding can be reviewed only on the ground that there is no evidence to support it or that it is perverse. Further, when a conclusion has been reached on an appreciation of a number of facts, whether that is sound or not must be determined, not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. " Reliance is also placed on Rai Bahadur Mohan Singh Oberoi v. CIT [1973] 88 ITR 53 (SC) in which it was observed as under : " A finding recorded by the Appellate Tribunal on the point whether a purchase was made benami or not is one of fact. Such a finding based upon some evidence would have to be accepted by the High Court in reference under section 66(1) of the Income-tax Act, 1922." In Jaydayal Poddar v. Mst. Bibi Hazra, AIR 1974 SC 171, it was observed as follows (p. 172, col. 2) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or the finding was perverse which no reasonable man could have arrived at. The High Court will not interfere even though it would have come to a different conclusion from that of the Tribunal on the appreciation of the evidence. Reliance in this connection is placed on the following observations in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349, 357, 360, 361 (SC) "Findings on questions of pure fact arrived at by the Tribunal are not to be disturbed by the High Court on a reference unless it appears that there was no evidence before the Tribunal upon which they, as reasonable men, could come to the conclusion to which they have come ; and this is so, even though the High Court would on the evidence have come to a conclusion entirely different from that of the Tribunal... The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent-firm even though the receipt had been issued in the name of Biswanath, the burden lay on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not fallen into any error. Thus, after having taken into consideration the evidence produced by the assessee and the entirety of circumstances, it has come to the conclusion that in the absence of positive evidence from the side of the revenue that the amount of Rs. 17,000 was derived from an undisclosed source, no penalty can be imposed. It is sufficient to point cut that the finding of fact arrived at by the Tribunal after correct application of the principles of law, cannot give rise to a substantial question of law for which reference may be called. To believe or not to believe certain evidence was perfectly within the jurisdiction of the Tribunal." We have given careful consideration to the arguments advanced by learned counsel for both the parties. We have no hesitation in accepting the contention of Mr. Ranka, learned counsel for the assessee, that the onus of establishing that a transaction is benami is on the person asserting that the apparent purchaser is not the real owner and that a finding of fact arrived at by the Tribunal is binding on the High Court in a reference application. It is also true that this court cannot go into the question of sufficiency or insuffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO observed that it was not possible for him to judge as to on whose initiative the films were booked for the two cinemas of the company. Past record also showed that these films were always booked by the assessee-company itself. (4) From the assessee's own books of account it was proved that the assessee-company had been booking pictures and dealing with the distributors in a manner suggestive of complete non-existence of its so-called contractors. (5) At Golcha Cinema, Delhi, the picture " Sanjh-Savera " was booked by the assessee-company and it was the assessee which had made advances of Rs. 60,000 to Pandav Pictures, who were the distributors of this picture. (6) Agreement for release of the picture " Rajkumar " was entered into by the assessee-company on making an advance of Rs. 1,10,000; if Madans were genuine contractors this advance of Rs. 1,10,000 should have been made by Madans and not by the assessee. (7) The Picture " Pyar Kiya to Darna Kya " was run against the wishes of Pandav pictures at Golcha Cinema, Delhi, beyond the 4th week and it was the assessee-company which had been dealing with Pandav Pictures as there was no account of Dhartidhan in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive averment it was apparently for the department to substantiate and prove its averment. The Tribunal further held that the case of benamiship could not be made out merely on the basis of certain inferences and presumptions and there must be some positive evidence to show that the income of the contractors was in fact the income of the assessee. It has observed that there was nothing on the record to prove that there was no evidence in the present case on the basis of which it could be held that the transactions were benami. In arriving at this conclusion, in our view, the Tribunal took a wrong approach. The Tribunal was wrong in taking the view that in such cases the department has to bring some positive evidence. On the basis of primary facts proved on record, the Tribunal should have arrived at a finding whether the transactions were genuine or not. In this view of the matter when the Tribunal has committed an error in taking a wrong approach of the case and in holding that the department must prove by positive evidence the case of benamiship and ignored the primary facts proved on record. In other words, the Tribunal committed an error of law in taking the view that such burde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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