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TMI Blog2024 (6) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO under section 68 of the Income Tax, Act 1961 on account of unexplained cash credit, holding that the assessee is entitled for the telescopic benefit of the income surrendered during the year to the cash deposit of Rs. 7,34,79,097/- in Bank account treating the same as maturity proceeds of hundies during the year, particularly when no specific source of cash deposit were submitted by the assessee and assessee failed to produce the reliable and cogent evidence to establish the claim regarding source of cash?" 3. Learned Senior Counsel for the respondent has argued that the case does not involve any substantial question of law and the substantial question of law framed on 12.09.2021 is in fact not as such and is merely factual in nature. The Senior counsel has straight away drawn the attention of this Court to paras 55 to 58 of the ITAT's order to buttress the fact that no substantial question of law is involved in the case. 4. The Counsel for the appellant has on the other hand relied on the findings recorded by the CIT(A) to submit that the Tribunal has not taken into consideration the finding of CIT(A) before deciding the issue and the source of deposit of amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent asking the assesse to produce the persons to whom, the loans on Hundi were advanced in absence of which, the AO gave a notice to add the amount of loan recovered by the Appellant in cash, from recovery of loans lent on hundi, as unexplained cash credit u/s 68 of the IT Act. 10. The respondent filed a reply contending that the amount recovered in cash has been recorded in the books of account as and when recovered and is nothing but flow of funds from source which has already been offered to tax during the course of action u/s 133A and in subsequent Income tax return filed. Consequently, receiving the money in cash and deposit of the same in bank account is nothing but an application of an already offered income and counting the same again will amount to double counting and taxation of the same income. Relying on various judgments the respondent pointed out to the Assessing officer that he is entitled to telescopic set off of unexplained income surrendered as income against its subsequent application. 11. Thereafter the Assessing officer rejected the respondent's contention and vide assessment order dated 24.03.2015 passed under Section 143 (3) of the IT Act and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh was deposited during Financial Year 2011-12. There is no evidence on the record to substantiate this fact that assessee received any unaccounted income in the form of bribe for admission in medical college during financial year 2011-12. It seems that Ld. A.O merely on the basis of surmises and conjectures have taken this view. He ignored the fact that the assessee has surrendered Rs. 7 crores as unaccounted income during the year. This unaccounted income in cash was used in earning interest income by way of giving short term advance on hundis. Such hundis are normally issued through brokers. Only the name of person receiving the money, his signature, amount given as advance, rate of interest, date of entering into the hundi agreement and the maturity date of receiving the money are provided. When the assessee shows the original hundi he receives the principal and interest. The assessee had surrendered his income from other source as unexplained money which was not recorded in the books of accounts and the assessee failed to offer any explanation about the nature and source of acquisition of these unexplained money/income. The hundis were impounded during the course of survey whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-Sep-11 TOTAL 70000000 3479092 73479092 57. When the amount was recovered on belated dates as against the maturity dates mentioned in the show cause notice issued by Ld. A.O which included principal and interest, they were entered in the books and the cash in hand kept on increasing. Total of principal amount is Rs. 7 crores and Rs. 34,79,097/- being the interest received on various dates and the assessee had this amount as cash in hand which was deposited in the bank on various dates in February 2012 and March, 2012. Apparently there is a direct nexus of the cash so received on maturity of hundis with the cash deposited in the bank account. Whether the assessee is entitled to the telescoping benefit of the surrendered income with the cash deposited in the bank account needs to be analysed in light of following judicial pronouncements :- a. In Veerasinhaiah & co vs CIT (1980) 123 ITR 457 (SC), the Supreme court has clearly held that Secret profit/ Undisclosed income of an Appellant earned may constitute a fund, even though concealed from which the Appellant may draw subsequently... b. In CIT V.s. K.S.M. GuruswamyNadar& Sons (1984) 149 ITR 127 (Madras) it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings hundis of Rs. 23.65 crores were found out of which hundis of Rs. 7 crores were in the name of the assessee and hundis of Rs. 16.65 crores in the name of BHRC. Ld. Senior Counsel for the assessee stated that in the scrutiny proceedings u/s 143(3) of the Act carried out in the case of BHRC for Assessment Year 2012-13 the Ld. A.O has accepted the assessee's contention that the deposit in bank account of BHRC are out of the cash in hand as per the books of accounts of BHRC which in turn was built up on account of recovery of amount advanced as hundi loans against which income was surrendered during survey action. Hon'ble High Court of Punjab & Haryana in the case of Jaswant Rai (1977) 107 ITR 477 has held that "it was not open to department to adopt different yard sticks in the case of different assesses where the issue of addition to wealth pertained to the same common asset". Accordingly here also the hundi which were seized in one common survey account of one common parties office location i.e. in the case of assessee as well as BHRC of which the assessee is the partner the department should not have taken a different view. We, therefore respectfully following above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no discernible error of law. Moreover, the department has not highlighted or pointed out any factual inaccuracies or incorrect findings recorded by the ITAT. Consequently, the entitlement of the assessee to the telescopic benefit does not constitute any question of law, as the benefits of telescoping must be judged and allowed based on the facts and circumstances of the case, which has already been thoroughly examined by the ITAT. 19. The benefit of telescoping has been approved in Principal Commissioner of Income-tax v. Aliasgar Anvarali Varteji reported in [2018] 96 taxmann.com 231 (Gujarat) wherein it was held that, when the entire unaccounted income discovered during the search was included in the overall disclosure, and the negative balance in the books of account was due to payments made from this unaccounted income, the assessee should not be denied the benefit of telescoping of the initial disclosure. It was held : 3. We have heard Mrs. Mauna Bhatt, learned advocate appearing on behalf of the revenue. At the outset, it is required to be noted that the learned Assessing Officer made the addition of Rs. 2,27,86,693/- on account of peak of negative cash in the books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the final authority for fact-finding, and to challenge such findings, there must be substantial evidence indicating a perverse finding of fact by the Tribunal. In the absence of any such substantial question having been raised to point out perversity in the order of the ITAT, it cannot be asserted that any question of law arises for consideration, let alone a substantial question of law, as envisaged under Section 260A of the Income Tax Act. 22. As per Section 260A of the Income Tax Act, it is apparent that an appeal to this Court from an order of the ITAT is permissible only if a "substantial question of law" arises for consideration. In Shri Chunilal V. Mehta and Sons Ltd. v. Century Spinning and Mfg. Co. Ltd., reported in AIR 1962 SC 1314, Constitution Bench of the Supreme Court held as follows:- "18. The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this court or by the Privy Council or by the Fed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which- (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) [Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.] [Inserted by Act 27 of 1999, Section 87 (w.e.f. 1.6.1999).] 25. The Supreme Court in Santosh Hazari v. Purushottam Tiwari reported in [2001] 3 SCC 179 has made the following observations:- "A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be 'substantial' a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amed by the High Court. The Revenue did not seek the framing of any such question. In this regard, reference may be made to K. Ravindranathan Nair v. CIT [2001] 247 ITR 178/114 taxman 53 (SC) wherein it was observed: "The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact-finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of act reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it." 20. Accordingly, we hold that the High Court was not justified in upsetting a finding of fact arrived at by the Tribunal, particularly in the absence of a substantial question of law being framed in this regard. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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